Hilton Reports Third Quarter Results

Hilton Reports Third Quarter 2019 Results. (Graphic: Hilton)

MCLEAN, Va.--()--Hilton Worldwide Holdings Inc. ("Hilton" or the "Company") (NYSE: HLT) today reported its third quarter 2019 results. Highlights include:

  • Diluted EPS was $1.00 for the third quarter, an 85 percent increase from the same period in 2018, and diluted EPS, adjusted for special items, was $1.05, a 13 percent increase from the same period in 2018
  • Net income for the third quarter was $290 million, a 77 percent increase from the same period in 2018
  • Adjusted EBITDA for the third quarter was $605 million, a 9 percent increase from the same period in 2018
  • System-wide comparable RevPAR increased 0.4 percent on a currency neutral basis for the third quarter from the same period in 2018
  • Approved 25,200 new rooms for development during the third quarter, growing Hilton's development pipeline to 379,000 rooms as of September 30, 2019
  • Opened 17,400 rooms in the third quarter, contributing to 15,600 net additional rooms, on track to deliver approximately 6.5 percent net unit growth for the full year
  • Repurchased 4.5 million shares of Hilton common stock during the third quarter, bringing total capital return, including dividends, to approximately $465 million for the quarter and $1.2 billion year to date through September
  • Full year 2019 system-wide comparable RevPAR is expected to increase approximately 1.0 percent on a currency neutral basis compared to 2018; full year net income is projected to be between $923 million and $937 million; full year Adjusted EBITDA is projected to be between $2,285 million and $2,305 million
  • Full year 2019 capital return is projected to be between $1.6 billion and $1.8 billion
  • For full year 2020, system-wide comparable RevPAR is expected to be flat to 1.0 percent growth on a currency neutral basis compared to 2019; net unit growth is expected to be 6.0 percent to 7.0 percent

Overview

Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, "Despite the overall slowing macro environment, we are pleased to deliver strong bottom-line results for the third quarter. Adjusted EBITDA was towards the high end of guidance and diluted EPS, adjusted for special items, exceeded our expectations, driven by strong net unit growth. Additionally, we continue to achieve market share gains across all brands and regions year to date."

For the three months ended September 30, 2019, system-wide comparable RevPAR grew 0.4 percent driven by increased occupancy. For the nine months ended September 30, 2019, system-wide comparable RevPAR grew 1.2 percent driven by increases in both ADR and occupancy. Management and franchise fee revenues increased 6 percent during the three months ended September 30, 2019 due to RevPAR growth of 0.3 percent at comparable managed and franchised hotels. During the nine months ended September 30, 2019, management and franchise fee revenues increased 8 percent as a result of RevPAR growth at comparable managed and franchised hotels of 1.2 percent. Additionally, management and franchise fee revenues increased due to increased licensing and other fees and the addition of new properties to Hilton's portfolio.

For the three months ended September 30, 2019, diluted EPS was $1.00 and diluted EPS, adjusted for special items, was $1.05 compared to $0.54 and $0.93, respectively, for the three months ended September 30, 2018. Net income and Adjusted EBITDA were $290 million and $605 million, respectively, for the three months ended September 30, 2019, compared to $164 million and $557 million, respectively, for the three months ended September 30, 2018. During the three months ended September 30, 2019, the Company completed the sale of the Hilton Odawara Resort & Spa and subsequently entered into a 30-year management contract with the purchaser of the hotel. As a result of the sale, the Company recognized a pre-tax gain of $81 million.

For the nine months ended September 30, 2019, diluted EPS was $2.42 and diluted EPS, adjusted for special items, was $2.90 compared to $1.76 and $2.48, respectively, for the nine months ended September 30, 2018. Net income and Adjusted EBITDA were $710 million and $1,722 million, respectively, for the nine months ended September 30, 2019, compared to $544 million and $1,557 million, respectively, for the nine months ended September 30, 2018.

Development

In the third quarter of 2019, Hilton opened 118 new hotels totaling approximately 17,400 rooms and achieved net unit growth of 15,600 rooms, contributing to 7 percent net unit growth from September 30, 2018.

As of September 30, 2019, Hilton's development pipeline totaled more than 2,530 hotels consisting of nearly 379,000 rooms throughout 111 countries and territories, including 35 countries and territories where Hilton does not currently have any open hotels. Additionally, of the rooms in the development pipeline, 205,000 rooms were located outside the U.S., and 198,000 rooms, or more than half, were under construction.

Hilton remains on track to grow its luxury portfolio by 17 percent in 2019, with the re-branding of the Conrad New York Midtown and openings in the third quarter of the Conrad Tianjin, the Conrad Shenyang, the Waldorf Astoria Los Cabos Pedregal and the Biltmore Mayfair, LXR.

Balance Sheet and Liquidity

As of September 30, 2019, Hilton had $7.9 billion of long-term debt outstanding, excluding deferred financing costs and discount, with a weighted average interest rate of 4.47 percent. Excluding finance lease liabilities and other debt of Hilton's consolidated variable interest entities, Hilton had $7.6 billion of long-term debt outstanding with a weighted average interest rate of 4.42 percent.

Total cash and cash equivalents were $809 million as of September 30, 2019, including $90 million of restricted cash and cash equivalents. No amounts were outstanding under the $1.75 billion senior secured revolving credit facility as of September 30, 2019.

During the third quarter of 2019, Hilton repurchased 4.5 million shares of its common stock at a cost of approximately $422 million and an average price per share of $94.72. During the nine months ended September 30, 2019, Hilton repurchased 12.5 million shares of its common stock at a cost of approximately $1.1 billion and an average price per share of $88.11. Since the inception of Hilton's stock repurchase program in March 2017, Hilton has repurchased approximately 50.7 million shares of its common stock for approximately $3.8 billion at an average price per share of $75.28. The amount remaining under Hilton's current stock repurchase program is approximately $853 million.

In September 2019, Hilton paid a quarterly cash dividend of $0.15 per share on shares of its common stock, for a total of $43 million, bringing year to date dividends to $130 million. In October 2019, 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 27, 2019 to holders of record of its common stock as of the close of business on November 8, 2019.

Adoption of New Accounting Standard

On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") No. 2016-02 Leases (Topic 842) ("ASU 2016-02"). As permitted, the Company has applied this ASU at the adoption date; therefore, the presentation of financial information for all periods prior to January 1, 2019 remains unchanged and in accordance with Leases (Topic 840). For additional information on the effect of this ASU, refer to Hilton's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, which is expected to be filed on or about the date of this press release.

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 2019

  • System-wide comparable RevPAR is expected to increase approximately 1.0 percent on a currency neutral basis compared to 2018.
  • Diluted EPS, before special items, is projected to be between $3.16 and $3.21.
  • Diluted EPS, adjusted for special items, is projected to be between $3.81 and $3.86.
  • Net income is projected to be between $923 million and $937 million.
  • Adjusted EBITDA is projected to be between $2,285 million and $2,305 million.
  • Management and franchise fee revenue is projected to increase between 7 percent and 8 percent compared to 2018.
  • Contract acquisition costs and capital expenditures, excluding amounts indirectly reimbursed by hotel owners, are expected to be between $175 million and $200 million.
  • Capital return is projected to be between $1.6 billion and $1.8 billion.
  • General and administrative expenses are projected to be between $430 million and $440 million.
  • Net unit growth is expected to be approximately 6.5 percent.

Fourth Quarter 2019

  • System-wide comparable RevPAR is expected to be roughly flat on a currency neutral basis compared to the fourth quarter of 2018.
  • Diluted EPS, before special items, is projected to be between $0.74 and $0.79.
  • Diluted EPS, adjusted for special items, is projected to be between $0.91 and $0.96.
  • Net income is projected to be between $213 million and $227 million.
  • Adjusted EBITDA is projected to be between $563 million and $583 million.
  • Management and franchise fee revenue is projected to increase between 3 percent and 5 percent compared to the fourth quarter of 2018.

Conference Call

Hilton will host a conference call to discuss third quarter 2019 results on October 23, 2019 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/quarterly-results/2019.

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 3302196. 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 10135197.

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 performance of Hilton's business, financial results, liquidity and capital resources and other non-historical statements, including the statements in the "Outlook" section of this press release. 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, 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. 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, 2018, filed with the Securities and Exchange Commission ("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.

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, adjusted for special items; diluted EPS, adjusted for special items; 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 17 world-class brands comprising nearly 6,000 properties with more than 954,000 rooms, in 117 countries and territories. Dedicated to fulfilling its mission to be the world's most hospitable company, Hilton earned a spot on the 2019 world's best workplaces list, and has welcomed more than 3 billion guests during its 100-year history. Through the award-winning guest loyalty program Hilton Honors, nearly 99 million members who book directly with Hilton can earn Points for hotel stays and experiences money can't buy, plus enjoy instant benefits, including digital check-in with room selection, Digital Key and Connected Room. Visit newsroom.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

Non-GAAP Financial Measures Reconciliations

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,

 

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Franchise and licensing fees

 

$

 

443

 

 

$

 

407

 

 

$

 

1,269

 

 

$

 

1,142

 

Base and other management fees

 

 

80

 

 

 

80

 

 

 

249

 

 

 

241

 

Incentive management fees

 

 

54

 

 

 

57

 

 

 

167

 

 

 

171

 

Owned and leased hotels

 

 

361

 

 

 

373

 

 

 

1,060

 

 

 

1,099

 

Other revenues

 

 

23

 

 

 

27

 

 

 

75

 

 

 

72

 

 

 

 

961

 

 

 

944

 

 

 

2,820

 

 

 

2,725

 

Other revenues from managed and franchised properties

 

 

1,434

 

 

 

1,309

 

 

 

4,263

 

 

 

3,893

 

Total revenues

 

 

2,395

 

 

 

2,253

 

 

 

7,083

 

 

 

6,618

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

Owned and leased hotels

 

 

310

 

 

 

331

 

 

 

942

 

 

 

1,003

 

Depreciation and amortization

 

 

86

 

 

 

81

 

 

 

256

 

 

 

242

 

General and administrative

 

 

107

 

 

 

109

 

 

 

327

 

 

 

328

 

Other expenses

 

 

11

 

 

 

10

 

 

 

46

 

 

 

36

 

 

 

 

514

 

 

 

531

 

 

 

1,571

 

 

 

1,609

 

Other expenses from managed and franchised properties

 

 

1,443

 

 

 

1,337

 

 

 

4,284

 

 

 

3,939

 

Total expenses

 

 

1,957

 

 

 

1,868

 

 

 

5,855

 

 

 

5,548

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of assets, net

 

 

81

 

 

 

 

 

81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

519

 

 

 

385

 

 

 

1,309

 

 

 

1,070

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(105

)

 

 

(99

)

 

 

(304

)

 

 

(277

)

Gain (loss) on foreign currency transactions

 

 

7

 

 

 

(6

)

 

 

4

 

 

 

(7

)

Other non-operating income (loss), net

 

 

 

 

13

 

 

 

(8

)

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

421

 

 

 

293

 

 

 

1,001

 

 

 

812

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

(131

)

 

 

(129

)

 

 

(291

)

 

 

(268

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

290

 

 

 

164

 

 

 

710

 

 

 

544

 

Net income attributable to noncontrolling interests

 

 

(2

)

 

 

(2

)

 

 

(4

)

 

 

(4

)

Net income attributable to Hilton stockholders

 

$

 

288

 

 

$

 

162

 

 

$

 

706

 

 

$

 

540

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

285

 

 

 

297

 

 

 

289

 

 

 

305

 

Diluted

 

 

288

 

 

 

300

 

 

 

292

 

 

 

307

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 

1.01

 

 

$

 

0.55

 

 

$

 

2.44

 

 

$

 

1.77

 

Diluted

 

$

 

1.00

 

 

$

 

0.54

 

 

$

 

2.42

 

 

$

 

1.76

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

 

0.15

 

 

$

 

0.15

 

 

$

 

0.45

 

 

$

 

0.45

 

     

HILTON WORLDWIDE HOLDINGS INC.

COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS

BY REGION

(unaudited)

     

 

 

Three Months Ended September 30,

 

 

Occupancy

 

ADR

 

RevPAR

 

 

2019

 

vs. 2018

 

2019

 

vs. 2018

 

2019

 

vs. 2018

U.S.

 

79.4

%

 

0.3

 

%

pts.

 

$

149.12

 

 

%

 

$

118.37

 

0.4

 

%

Americas (excluding U.S.)

 

74.8

 

 

(0.1

)

 

 

 

 

122.65

 

(0.2

)

 

 

 

91.77

 

(0.4

)

 

Europe

 

84.0

 

 

1.6

 

 

 

 

 

143.12

 

0.5

 

 

 

 

120.27

 

2.4

 

 

Middle East & Africa

 

71.6

 

 

1.5

 

 

 

 

 

141.95

 

(2.3

)

 

 

 

101.57

 

(0.2

)

 

Asia Pacific

 

75.4

 

 

(0.2

)

 

 

 

 

120.55

 

(2.4

)

 

 

 

90.92

 

(2.7

)

 

System-wide

 

79.1

 

 

0.4

 

 

 

 

 

145.11

 

(0.1

)

 

 

 

114.78

 

0.4

 

 

     

 

 

Nine Months Ended September 30,

 

 

Occupancy

 

ADR

 

RevPAR

 

 

2019

 

vs. 2018

 

2019

 

vs. 2018

 

2019

 

vs. 2018

U.S.

 

77.6

%

 

0.4

 

%

pts.

 

$

149.84

 

0.6

 

%

 

$

116.27

 

1.1

 

%

Americas (excluding U.S.)

 

71.3

 

 

0.6

 

 

 

 

 

123.12

 

1.4

 

 

 

 

87.74

 

2.3

 

 

Europe

 

78.0

 

 

1.2

 

 

 

 

 

140.42

 

2.0

 

 

 

 

109.50

 

3.5

 

 

Middle East & Africa

 

72.5

 

 

2.2

 

 

 

 

 

145.34

 

(5.0

)

 

 

 

105.38

 

(2.0

)

 

Asia Pacific

 

72.2

 

 

0.8

 

 

 

 

 

123.85

 

(1.0

)

 

 

 

89.47

 

0.1

 

 

System-wide

 

76.8

 

 

0.6

 

 

 

 

 

145.81

 

0.5

 

 

 

 

111.98

 

1.2

 

 

   

HILTON WORLDWIDE HOLDINGS INC.

COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS

BY BRAND

(unaudited)

   

 

 

Three Months Ended September 30,

 

 

Occupancy

 

ADR

 

RevPAR

 

 

2019

 

vs. 2018

 

2019

 

vs. 2018

 

2019

 

vs. 2018

Waldorf Astoria Hotels & Resorts

 

67.8

%

 

0.1

 

%

pts.

 

$

353.40

 

3.7

 

%

 

$

239.67

 

3.9

 

%

Conrad Hotels & Resorts

 

76.8

 

 

0.9

 

 

 

 

 

259.13

 

(2.5

)

 

 

 

198.89

 

(1.4

)

 

Hilton Hotels & Resorts

 

79.4

 

 

0.2

 

 

 

 

 

170.83

 

0.5

 

 

 

 

135.70

 

0.8

 

 

Curio Collection by Hilton

 

72.7

 

 

(1.9

)

 

 

 

 

198.14

 

0.9

 

 

 

 

144.00

 

(1.7

)

 

DoubleTree by Hilton

 

78.0

 

 

0.3

 

 

 

 

 

130.69

 

(0.7

)

 

 

 

101.90

 

(0.4

)

 

Embassy Suites by Hilton

 

80.4

 

 

0.4

 

 

 

 

 

164.00

 

0.3

 

 

 

 

131.83

 

0.9

 

 

Hilton Garden Inn

 

79.3

 

 

0.4

 

 

 

 

 

132.94

 

(0.7

)

 

 

 

105.37

 

(0.2

)

 

Hampton by Hilton

 

78.4

 

 

0.4

 

 

 

 

 

125.00

 

(0.3

)

 

 

 

97.98

 

0.2

 

 

Tru by Hilton

 

77.8

 

 

4.7

 

 

 

 

 

115.33

 

1.4

 

 

 

 

89.70

 

8.0

 

 

Homewood Suites by Hilton

 

83.9

 

 

0.4

 

 

 

 

 

143.00

 

(0.2

)

 

 

 

120.04

 

0.3

 

 

Home2 Suites by Hilton

 

82.0

 

 

2.4

 

 

 

 

 

118.99

 

0.3

 

 

 

 

97.53

 

3.3

 

 

System-wide

 

79.1

 

 

0.4

 

 

 

 

 

145.11

 

(0.1

)

 

 

 

114.78

 

0.4

 

 

   

 

 

Nine Months Ended September 30,

 

 

Occupancy

 

ADR

 

RevPAR

 

 

2019

 

vs. 2018

 

2019

 

vs. 2018

 

2019

 

vs. 2018

Waldorf Astoria Hotels & Resorts

 

71.2

%

 

0.9

 

%

pts.

 

$

375.42

 

2.3

 

%

 

$

267.26

 

3.5

 

%

Conrad Hotels & Resorts

 

75.6

 

 

3.1

 

 

 

 

 

268.29

 

(0.2

)

 

 

 

202.90

 

4.1

 

 

Hilton Hotels & Resorts

 

77.2

 

 

0.4

 

 

 

 

 

172.37

 

1.1

 

 

 

 

133.07

 

1.6

 

 

Curio Collection by Hilton

 

72.7

 

 

(0.9

)

 

 

 

 

210.54

 

2.6

 

 

 

 

153.12

 

1.3

 

 

DoubleTree by Hilton

 

75.4

 

 

0.3

 

 

 

 

 

132.15

 

(0.2

)

 

 

 

99.58

 

0.2

 

 

Embassy Suites by Hilton

 

79.7

 

 

0.7

 

 

 

 

 

165.56

 

0.8

 

 

 

 

131.93

 

1.7

 

 

Hilton Garden Inn

 

77.0

 

 

0.6

 

 

 

 

 

132.71

 

0.1

 

 

 

 

102.21

 

0.9

 

 

Hampton by Hilton

 

75.4

 

 

0.4

 

 

 

 

 

123.29

 

0.2

 

 

 

 

92.91

 

0.8

 

 

Tru by Hilton

 

71.5

 

 

3.4

 

 

 

 

 

108.61

 

3.0

 

 

 

 

77.63

 

8.2

 

 

Homewood Suites by Hilton

 

81.8

 

 

0.4

 

 

 

 

 

142.07

 

0.3

 

 

 

 

116.18

 

0.9

 

 

Home2 Suites by Hilton

 

80.3

 

 

3.1

 

 

 

 

 

118.30

 

0.7

 

 

 

 

95.04

 

4.8

 

 

System-wide

 

76.8

 

 

0.6

 

 

 

 

 

145.81

 

0.5

 

 

 

 

111.98

 

1.2

 

 

   

HILTON WORLDWIDE HOLDINGS INC.

COMPARABLE AND CURRENCY NEUTRAL SYSTEM-WIDE HOTEL OPERATING STATISTICS

BY SEGMENT

(unaudited)

   

 

 

Three Months Ended September 30,

 

 

Occupancy

 

ADR

 

RevPAR

 

 

2019

 

vs. 2018

 

2019

 

vs. 2018

 

2019

 

vs. 2018

Management and franchise

 

79.0

%

 

0.4

%

pts.

 

$

144.08

 

(0.2

)

%

 

$

113.82

 

0.3

%

Ownership(1)

 

83.7

 

 

1.1

 

 

 

 

189.00

 

1.3

 

 

 

 

158.17

 

2.6

 

System-wide

 

79.1

 

 

0.4

 

 

 

 

145.11

 

(0.1

)

 

 

 

114.78

 

0.4

 

 

 

 

Nine Months Ended September 30,

 

 

Occupancy

 

ADR

 

RevPAR

 

 

2019

 

vs. 2018

 

2019

 

vs. 2018

 

2019

 

vs. 2018

Management and franchise

 

76.8

%

 

0.6

%

pts.

 

$

144.83

 

0.4

 

%

 

$

111.17

 

1.2

%

Ownership(1)

 

78.6

 

 

0.4

 

 

 

 

188.98

 

3.3

 

 

 

 

148.52

 

3.8

 

System-wide

 

76.8

 

 

0.6

 

 

 

 

145.81

 

0.5

 

 

 

 

111.98

 

1.2

 

____________

(1)

Includes owned and leased hotels, as well as hotels owned or leased by entities in which Hilton owns a noncontrolling financial interest.

 

HILTON WORLDWIDE HOLDINGS INC.

PROPERTY SUMMARY

As of September 30, 2019

 

 

Owned / Leased(1)

 

Managed

 

Franchised

 

Total

 

Properties

 

Rooms

 

Properties

 

Rooms

 

Properties

 

Rooms

 

Properties

 

Rooms

Waldorf Astoria Hotels & Resorts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

15

 

6,164

 

 

 

15

 

6,164

Americas (excluding U.S.)

 

 

2

 

261

 

 

 

2

 

261

Europe

2

 

463

 

4

 

898

 

 

 

6

 

1,361

Middle East & Africa

 

 

5

 

1,224

 

 

 

5

 

1,224

Asia Pacific

 

 

5

 

1,017

 

 

 

5

 

1,017

LXR Hotels & Resorts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

 

 

1

 

307

 

 

 

1

 

307

Middle East & Africa

 

 

 

 

1

 

234

 

1

 

234

Conrad Hotels & Resorts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

5

 

1,649

 

1

 

228

 

6

 

1,877

Americas (excluding U.S.)

 

 

2

 

402

 

 

 

2

 

402

Europe

 

 

4

 

1,155

 

 

 

4

 

1,155

Middle East & Africa

1

 

614

 

2

 

993

 

 

 

3

 

1,607

Asia Pacific

1

 

164

 

20

 

6,050

 

1

 

654

 

22

 

6,868

Canopy by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

 

 

7

 

1,181

 

7

 

1,181

Europe

 

 

 

 

2

 

263

 

2

 

263

Asia Pacific

 

 

1

 

150

 

 

 

1

 

150

Hilton Hotels & Resorts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

65

 

47,915

 

177

 

54,433

 

242

 

102,348

Americas (excluding U.S.)

1

 

405

 

26

 

9,455

 

21

 

7,096

 

48

 

16,956

Europe

50

 

13,843

 

46

 

14,792

 

39

 

10,791

 

135

 

39,426

Middle East & Africa

5

 

1,998

 

43

 

13,300

 

3

 

1,609

 

51

 

16,907

Asia Pacific

5

 

2,994

 

97

 

35,199

 

7

 

2,599

 

109

 

40,792

Curio Collection by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

5

 

2,335

 

39

 

8,022

 

44

 

10,357

Americas (excluding U.S.)

 

 

1

 

59

 

8

 

1,110

 

9

 

1,169

Europe

 

 

3

 

270

 

14

 

1,617

 

17

 

1,887

Middle East & Africa

 

 

2

 

255

 

1

 

356

 

3

 

611

Asia Pacific

 

 

3

 

663

 

2

 

248

 

5

 

911

DoubleTree by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

33

 

11,215

 

326

 

75,734

 

359

 

86,949

Americas (excluding U.S.)

 

 

1

 

172

 

29

 

5,970

 

30

 

6,142

Europe

 

 

12

 

3,249

 

96

 

16,246

 

108

 

19,495

Middle East & Africa

 

 

11

 

3,025

 

6

 

718

 

17

 

3,743

Asia Pacific

 

 

63

 

17,443

 

3

 

1,072

 

66

 

18,515

Tapestry Collection by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

 

 

24

 

3,255

 

24

 

3,255

Embassy Suites by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

42

 

11,115

 

204

 

46,000

 

246

 

57,115

Americas (excluding U.S.)

 

 

3

 

667

 

5

 

1,336

 

8

 

2,003

Hilton Garden Inn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

6

 

641

 

675

 

93,480

 

681

 

94,121

Americas (excluding U.S.)

 

 

11

 

1,561

 

41

 

6,379

 

52

 

7,940

Europe

 

 

21

 

3,940

 

53

 

8,898

 

74

 

12,838

Middle East & Africa

 

 

14

 

2,887

 

2

 

271

 

16

 

3,158

Asia Pacific

 

 

29

 

6,261

 

 

 

29

 

6,261

Hampton by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

45

 

5,495

 

2,173

 

213,100

 

2,218

 

218,595

Americas (excluding U.S.)

 

 

13

 

1,685

 

99

 

11,925

 

112

 

13,610

Europe

 

 

18

 

2,956

 

69

 

10,670

 

87

 

13,626

Middle East & Africa

 

 

2

 

573

 

 

 

2

 

573

Asia Pacific

 

 

 

 

98

 

16,591

 

98

 

16,591

Tru by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

 

 

96

 

9,238

 

96

 

9,238

Americas (excluding U.S.)

 

 

 

 

1

 

90

 

1

 

90

Homewood Suites by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

16

 

1,734

 

459

 

52,393

 

475

 

54,127

Americas (excluding U.S.)

 

 

3

 

406

 

22

 

2,456

 

25

 

2,862

Home2 Suites by Hilton

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

2

 

198

 

341

 

35,637

 

343

 

35,835

Americas (excluding U.S.)

 

 

 

 

7

 

753

 

7

 

753

Other

 

 

4

 

2,193

 

2

 

876

 

6

 

3,069

Hotels

65

 

20,481

 

706

 

221,929

 

5,154

 

703,529

 

5,925

 

945,939

Hilton Grand Vacations

 

 

 

 

55

 

8,916

 

55

 

8,916

Total

65

 

20,481

 

706

 

221,929

 

5,209

 

712,445

 

5,980

 

954,855

____________

(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)

 

2019

 

2018

 

$

 

%

Capital expenditures for property and equipment(1)

$

20

 

$

23

 

 

(3

)

 

(13.0

)

Capitalized software costs(2)

 

35

 

 

24

 

 

11

 

 

45.8

 

Total capital expenditures

 

55

 

 

47

 

 

8

 

 

17.0

 

Contract acquisition costs

 

6

 

 

44

 

 

(38

)

 

(86.4

)

Total capital expenditures and contract acquisition costs

$

61

 

$

91

 

 

(30

)

 

(33.0

)

 

 

Nine Months Ended

 

 

 

September 30,

 

Increase / (Decrease)

 

2019

 

2018

 

$

 

%

Capital expenditures for property and equipment(1)

$

66

 

$

51

 

 

15

 

 

29.4

 

Capitalized software costs(2)

 

79

 

 

62

 

 

17

 

 

27.4

 

Total capital expenditures

 

145

 

 

113

 

 

32

 

 

28.3

 

Contract acquisition costs

 

49

 

 

82

 

 

(33

)

 

(40.2

)

Total capital expenditures and contract acquisition costs

$

194

 

$

195

 

 

(1

)

 

(0.5

)

____________

(1)

Includes expenditures for hotels, corporate and other property and equipment, of which $3 million and $4 million were indirectly reimbursed by hotel owners for the three months ended September 30, 2019 and 2018, respectively, and $9 million and $8 million were indirectly reimbursed for the nine months ended September 30, 2019 and 2018, respectively. Excludes expenditures for furniture, fixtures and equipment ("FF&E") replacement reserves of $13 million and $12 million for the three months ended September 30, 2019 and 2018, respectively, and $42 million and $39 million for the nine months ended September 30, 2019 and 2018, respectively.

(2)

Includes $28 million and $22 million of expenditures that were indirectly reimbursed by hotel owners for the three months ended September 30, 2019 and 2018, respectively, and $64 million and $47 million for the nine months ended September 30, 2019 and 2018, respectively.

       

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

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,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Net income attributable to Hilton stockholders, as reported

$

288

 

 

$

162

 

 

$

706

 

 

$

540

 

Diluted EPS, as reported

$

1.00

 

 

$

0.54

 

 

$

2.42

 

 

$

1.76

 

Special items:

 

 

 

 

 

 

 

 

 

 

Net other expenses from managed and franchised properties

$

9

 

 

$

28

 

 

$

21

 

 

$

46

 

Purchase accounting amortization(1)

 

50

 

 

 

50

 

 

 

152

 

 

 

153

 

FF&E replacement reserves

 

13

 

 

 

12

 

 

 

42

 

 

 

39

 

Asset dispositions(2)

 

(80

)

 

 

1

 

 

 

(79

)

 

 

4

 

Financing transactions(3)

 

3

 

 

 

 

 

11

 

 

 

7

 

Tax-related adjustments(4)

 

 

 

52

 

 

 

 

 

41

 

Other adjustments(5)

 

3

 

 

 

(6

)

 

 

12

 

 

 

(12

)

Total special items before tax

 

(2

)

 

 

137

 

 

 

159

 

 

 

278

 

Income tax expense on special items

 

15

 

 

 

(20

)

 

 

(20

)

 

 

(58

)

Total special items after tax

$

13

 

 

$

117

 

 

$

139

 

 

$

220

 

 

 

 

 

 

 

 

 

 

 

 

Net income, adjusted for special items

$

301

 

 

$

279

 

 

$

845

 

 

$

760

 

Diluted EPS, adjusted for special items

$

1.05

 

 

$

0.93

 

 

$

2.90

 

 

$

2.48

 

____________

(1)

Represents the amortization of intangible assets that were recorded at their fair value in October 2007 when the Company became a wholly owned subsidiary of affiliates of The Blackstone Group Inc. (formerly known as The Blackstone Group L.P.) (the "Merger").

(2)

The three and nine months ended September 30, 2019 include the gain on sale of the Hilton Odawara Resort & Spa, which was recognized in gain on sale of assets, net. All periods include severance costs related to the 2015 sale of the Waldorf Astoria New York that were recognized in general and administrative expenses.

(3)

Includes expenses recognized in connection with the June 2019 and April 2018 refinancings and repayments of the senior secured credit facilities that were recognized in other non-operating income (loss), net.

(4)

Includes adjustments to the provisional amount recognized in relation to the Tax Cuts and Jobs Act enacted in December 2017, as well as deferred tax expense recognized in connection with a distribution of stock out of one of Hilton's controlled foreign corporations, none of which had an effect on cash paid for taxes in the period.

(5)

The three and nine months ended September 30, 2019 include a loss on the disposal of a real estate investment recognized in other non-operating income (loss), net and, for the nine months ended September 30, 2019, also includes impairment losses. The three and nine months ended September 30, 2018 include a gain on the early repayment of a loan Hilton issued that financed the construction of a hotel that Hilton manages and, for the nine months ended September 30, 2018, also includes a gain on the refinancing of that loan.

     

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

(unaudited, dollars in millions)

     

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Net income

$

290

 

 

$

164

 

 

$

710

 

 

$

544

 

Interest expense

 

105

 

 

 

99

 

 

 

304

 

 

 

277

 

Income tax expense

 

131

 

 

 

129

 

 

 

291

 

 

 

268

 

Depreciation and amortization

 

86

 

 

 

81

 

 

 

256

 

 

 

242

 

EBITDA

 

612

 

 

 

473

 

 

 

1,561

 

 

 

1,331

 

Gain on sale of assets, net

 

(81

)

 

 

 

 

(81

)

 

 

Loss (gain) on foreign currency transactions

 

(7

)

 

 

6

 

 

 

(4

)

 

 

7

 

FF&E replacement reserves

 

13

 

 

 

12

 

 

 

42

 

 

 

39

 

Share-based compensation expense

 

42

 

 

 

35

 

 

 

123

 

 

 

103

 

Amortization of contract acquisition costs

 

7

 

 

 

6

 

 

 

21

 

 

 

20

 

Net other expenses from managed and franchised properties

 

9

 

 

 

28

 

 

 

21

 

 

 

46

 

Other adjustment items(1)

 

10

 

 

 

(3

)

 

 

39

 

 

 

11

 

Adjusted EBITDA

$

605

 

 

$

557

 

 

$

1,722

 

 

$

1,557

 
____________

(1)

Includes adjustments for expenses recognized in connection with the refinancings and repayments of the senior secured credit facilities for the three and nine months ended September 30, 2019 and the nine months ended September 30, 2018; and severance and other items for all periods.

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

Total revenues, as reported

$

2,395

 

 

$

2,253

 

 

$

7,083

 

 

$

6,618

 

Add: amortization of contract acquisition costs

 

7

 

 

 

6

 

 

 

21

 

 

 

20

 

Less: other revenues from managed and franchised properties

 

(1,434

)

 

 

(1,309

)

 

 

(4,263

)

 

 

(3,893

)

Total revenues, as adjusted

$

968

 

 

$

950

 

 

$

2,841

 

 

$

2,745

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

605

 

 

$

557

 

 

$

1,722

 

 

$

1,557

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

 

62.5

%

 

 

58.6

%

 

 

60.6

%

 

 

56.7

%

 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

NET DEBT AND NET DEBT TO ADJUSTED EBITDA RATIO

(unaudited, dollars in millions)

 

 

September 30,

 

December 31,

 

 

2019

 

 

 

2018

 

Long-term debt, including current maturities

$

7,805

 

 

$

7,282

 

Add: unamortized deferred financing costs and discount

 

86

 

 

 

79

 

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

 

7,891

 

 

 

7,361

 

Add: Hilton's share of unconsolidated affiliate debt, excluding unamortized deferred financing costs

 

2

 

 

 

15

 

Less: cash and cash equivalents

 

(719

)

 

 

(403

)

Less: restricted cash and cash equivalents

 

(90

)

 

 

(81

)

Net debt

$

7,084

 

 

$

6,892

 

 

Nine Months Ended

 

Year Ended

 

TTM(1)

 

September 30,

 

December 31,

 

September 30,

 

 

2019

 

 

2018

 

2018

 

 

2019

 

Net income

$

710

 

 

$

544

 

 

$

769

 

 

$

935

 

Interest expense

 

304

 

 

 

277

 

 

 

371

 

 

 

398

 

Income tax expense

 

291

 

 

 

268

 

 

 

309

 

 

 

332

 

Depreciation and amortization

 

256

 

 

 

242

 

 

 

325

 

 

 

339

 

EBITDA

 

1,561

 

 

 

1,331

 

 

 

1,774

 

 

 

2,004

 

Gain on sale of assets, net

 

(81

)

 

 

 

 

 

 

(81

)

Loss (gain) on foreign currency transactions

 

(4

)

 

 

7

 

 

 

11

 

 

 

FF&E replacement reserves

 

42

 

 

 

39

 

 

 

50

 

 

 

53

 

Share-based compensation expense

 

123

 

 

 

103

 

 

 

127

 

 

 

147

 

Amortization of contract acquisition costs

 

21

 

 

 

20

 

 

 

27

 

 

 

28

 

Net other expenses from managed and franchised properties

 

21

 

 

 

46

 

 

 

85

 

 

 

60

 

Other adjustment items(2)

 

39

 

 

 

11

 

 

 

27

 

 

 

55

 

Adjusted EBITDA

$

1,722

 

 

$

1,557

 

 

$

2,101

 

 

$

2,266

 

 

 

 

 

 

 

 

 

 

 

 

Net debt

 

 

 

 

 

 

 

 

$

7,084

 

 

 

 

 

 

 

 

 

 

 

 

Net debt to Adjusted EBITDA ratio

 

 

 

 

 

 

 

 

 

3.1

 

____________

(1)

Trailing twelve months ("TTM") September 30, 2019 is calculated as the nine months ended September 30, 2019 plus the year ended December 31, 2018 less the nine months ended September 30, 2018.

(2)

Includes adjustments for expenses recognized in connection with the refinancings and repayments of the senior secured credit facilities, severance and other items.

 

HILTON WORLDWIDE HOLDINGS INC.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

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

FORECASTED 2019

(unaudited, in millions, except per share data)

 

 

Three Months Ending

 

December 31, 2019

 

Low Case

 

High Case

Net income attributable to Hilton stockholders, before special items

$

211

 

 

$

225

 

Diluted EPS, before special items(1)

$

0.74

 

 

$

0.79

 

Special items(2):

 

 

 

Purchase accounting amortization

$

51

 

 

$

51

 

FF&E replacement reserves

 

16

 

 

 

16

 

Total special items before tax

 

67

 

 

 

67

 

Income tax expense on special items

 

(18

)

 

 

(18

)

Total special items after tax

$

49

 

 

$

49

 

 

 

 

 

Net income, adjusted for special items

$

260

 

 

$

274

 

Diluted EPS, adjusted for special items(1)

$

0.91

 

 

$

0.96

 

 

 

Year Ending

 

December 31, 2019

 

Low Case

 

High Case

Net income attributable to Hilton stockholders, before special items

$

917

 

 

$

931

 

Diluted EPS, before special items(1)

$

3.16

 

 

$

3.21

 

Special items(2):

 

 

 

Net other expenses from managed and franchised properties

$

21

 

 

$

21

 

Purchase accounting amortization

 

203

 

 

 

203

 

FF&E replacement reserves

 

58

 

 

 

58

 

Asset dispositions

 

(79

)

 

 

(79

)

Financing transactions

 

11

 

 

 

11

 

Other adjustments

 

12

 

 

 

12

 

Total special items before tax

 

226

 

 

 

226

 

Income tax expense on special items

 

(38

)

 

 

(38

)

Total special items after tax

$

188

 

 

$

188

 

 

 

 

 

Net income, adjusted for special items

$

1,105

 

 

$

1,119

 

Diluted EPS, adjusted for special items(1)

$

3.81

 

 

$

3.86

 

____________

(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.

NON-GAAP FINANCIAL MEASURES RECONCILIATIONS

OUTLOOK: ADJUSTED EBITDA

FORECASTED 2019

(unaudited, in millions)

 

 

Three Months Ending

 

December 31, 2019

 

Low Case

 

High Case

Net income

$

213

 

 

$

227

 

Interest expense

 

110

 

 

 

110

 

Income tax expense

 

90

 

 

 

96

 

Depreciation and amortization

 

88

 

 

 

88

 

EBITDA

 

501

 

 

 

521

 

FF&E replacement reserves

 

16

 

 

 

16

 

Share-based compensation expense

 

30

 

 

 

30

 

Amortization of contract acquisition costs

 

7

 

 

 

7

 

Other adjustment items(1)

 

9

 

 

 

9

 

Adjusted EBITDA

$

563

 

 

$

583

 

 

 

Year Ending

 

December 31, 2019

 

Low Case

 

High Case

Net income

$

923

 

 

$

937

 

Interest expense

 

414

 

 

 

414

 

Income tax expense

 

381

 

 

 

387

 

Depreciation and amortization

 

344

 

 

 

344

 

EBITDA

 

2,062

 

 

 

2,082

 

Gain on sale of assets, net

 

(81

)

 

 

(81

)

Gain on foreign currency transactions

 

(4

)

 

 

(4

)

FF&E replacement reserves

 

58

 

 

 

58

 

Share-based compensation expense

 

153

 

 

 

153

 

Amortization of contract acquisition costs

 

28

 

 

 

28

 

Net other expenses from managed and franchised properties

 

21

 

 

 

21

 

Other adjustment items(1)

 

48

 

 

 

48

 

Adjusted EBITDA

$

2,285

 

 

$

2,305

 

____________
(1)

Includes adjustments for severance and other items and, for the year ended December 31, 2019, expenses recognized in connection with the refinancings and repayments of the senior secured facilities.

HILTON WORLDWIDE HOLDINGS INC.
DEFINITIONS

Trailing Twelve Month Financial Information

This press release includes certain unaudited financial information for the TTM period ended September 30, 2019, which is calculated as the nine months ended September 30, 2019 plus the year ended December 31, 2018 less the nine months ended September 30, 2018. 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.

Net Income 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.

Beginning with the first quarter of 2019, the Company modified the definition of net income (loss), adjusted for special items, and diluted EPS, adjusted for special items, as previously calculated, to exclude: (i) FF&E replacement reserves required under certain lease agreements and (ii) the amortization of intangible assets that were recorded at their fair value at the time of the Merger.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

Earnings before interest expense, taxes and depreciation and amortization ("EBITDA"), presented herein, reflects net income (loss), excluding interest expense, a provision for income taxes and depreciation and amortization.

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 equity investments; (ii) foreign currency transactions; (iii) debt restructurings and retirements; (iv) FF&E replacement reserves; (v) reorganization costs; (vi) share-based compensation expense; (vii) non-cash impairment losses; (viii) severance, relocation and other expenses; (ix) amortization of contract acquisition costs; (x) the net effect of reimbursable costs included in other revenues and expenses from managed and franchised properties; and (xi) 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 and its 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 the provision for 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, 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 Adjusted EBITDA, the Company also excludes items such as: (i) FF&E replacement reserves to be consistent with the treatment of FF&E for owned hotels where it is capitalized and depreciated over the life of the FF&E; (ii) share-based compensation expense, 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 that are not core to the Company's operations and are not reflective of the Company's performance. The Company does not include a future estimate of the net effect of cost reimbursement revenues and reimbursed expenses within the Company's outlook.

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under GAAP and should not be considered as alternatives, in isolation or as a substitute, to net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP. The Company's definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similarly titled measures of other companies and may have limitations as analytical tools.

Net Debt

Net debt, presented herein, is a non-GAAP financial measure that the Company uses to evaluate its financial leverage. Net debt is calculated as: (i) long-term debt, including current maturities and excluding unamortized deferred financing costs and discount and (ii) the Company's share of unconsolidated affiliate debt, excluding unamortized deferred financing costs; reduced by: (a) cash and cash equivalents and (b) restricted cash and cash equivalents. Net debt should not be considered as a substitute to debt presented in accordance with GAAP. Net debt may not be comparable to a similarly titled measure of other companies.

The Company believes net debt provides useful information about its indebtedness to investors as it is frequently used by securities analysts, investors and other interested parties to compare the indebtedness of companies.

Net Debt to Adjusted EBITDA Ratio

Net debt to Adjusted EBITDA ratio, presented herein, is a non-GAAP financial measure and is included as it is frequently used by securities analysts, investors and other interested parties to compare the financial condition of companies. Net debt to Adjusted EBITDA ratio should not be considered as an alternative to measures of financial condition derived in accordance with GAAP, and it may not be comparable to a similarly titled measure of other 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 are not available.

Of the 5,925 hotels in the Company's system as of September 30, 2019, 4,633 hotels were classified as comparable hotels. The 1,292 non-comparable hotels included 236 hotels, or approximately four percent of the total hotels in the system, that were removed from the comparable group during the last twelve months because they sustained substantial property damage, business interruption, underwent large-scale capital projects or comparable results were not available.

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 average daily rate pricing levels as demand for hotel rooms increases or decreases.

Average Daily Rate ("ADR")

ADR represents hotel room revenue divided by the total number of room nights sold for a given period. ADR measures 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 a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.

Revenue per Available Room ("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 RevPAR, ADR and occupancy throughout this press release are presented on a comparable basis, and references to RevPAR and ADR 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, 2019 and 2018 use the exchange rates for the three and nine months ended September 30, 2019, respectively.

Contacts

Investor Contact
Jill Slattery
+1 703 883 6043

Media Contact
Nigel Glennie
+1 703 883 5262

Contacts

Investor Contact
Jill Slattery
+1 703 883 6043

Media Contact
Nigel Glennie
+1 703 883 5262