MCLEAN, Va. - May 09, 2014 - (BUSINESS WIRE) - Hilton Worldwide Holdings Inc. ("Hilton," "Hilton Worldwide" or the "Company") (NYSE: HLT) today reported its first quarter 2014 results and raised its full year 2014 outlook. Highlights include:
For the three months ended March 31, 2014, earnings per share ("EPS") was $0.12 compared to $0.03 for the three months ended March 31, 2013 and EPS, adjusted for special items, was $0.13 for the three months ended March 31, 2014 compared to $0.03 for the three months ended March 31, 2013. Adjusted EBITDA increased 22 percent to $544 million for the three months ended March 31, 2014, compared to $447 million for the three months ended March 31, 2013 and net income attributable to Hilton stockholders was $123 million for the three months ended March 31, 2014 compared to $34 million for the three months ended March 31, 2013.
In the first quarter of 2014, there was one special item that resulted in a positive adjustment to net income attributable to Hilton stockholders of $13 million related to share-based compensation prior to and in connection with the initial public offering, which was included in general, administrative and other expenses.
Christopher J. Nassetta, President & Chief Executive Officer of Hilton Worldwide, said, "We had a strong first quarter that significantly exceeded our expectations. We are very optimistic about the remainder of 2014, and as a result we have increased our RevPAR, EPS and Adjusted EBITDA outlook for the year.
"We continue to increase the global presence of our industry-leading brands, with over 9,000 new rooms opening during the first quarter. We remain #1 in rooms under construction in every major region of the world, with over an 18 percent share of all rooms under construction globally. At the end of the first quarter, we had 510 hotels and 101,000 rooms under construction that will further grow our system.
"We also continue to mine value enhancement opportunities in our iconic real estate portfolio, most recently announcing our planned retail platform repositioning and the creation of additional timeshare inventory at our Hilton New York property. Our capital allocation strategy remains disciplined and simple and we remain committed to building equity value through debt repayments, which totaled $200 million in the first quarter.
"For 2014, we expect to see strong global RevPAR growth with system-wide comparable RevPAR increasing 5.5 percent to 7.0 percent and we have increased our full year outlook for EPS adjusted for special items to between $0.64 and $0.67 and Adjusted EBITDA to between $2,415 million and $2,465 million. As a result, the new midpoint of our outlook for full year 2014 Adjusted EBITDA is above the top end of our previous guidance."
Management and franchise fees were $331 million in the first quarter of 2014, an increase of 17 percent compared to the same period in 2013. Excluding $6 million of affiliate management fees that are not comparable year over year as a result of a modification to certain affiliate management agreements, management and franchise fees increased 15 percent. RevPAR at comparable managed and franchised hotels in the first quarter increased 6.8 percent on a currency neutral basis (a 6.3 percent increase in actual dollars) compared to the same period in 2013, including an increase in RevPAR from comparable managed and franchised hotels in the focused-service group of 6.7 percent.
Revenues from the ownership segment were $952 million in the first quarter of 2014, an increase of 3 percent from the same period in 2013. Ownership segment Adjusted EBITDA for the first quarter of 2014 was $179 million. Ownership segment Adjusted EBITDA increased 13 percent(1) from the same period in 2013 and Adjusted EBITDA margin increased 172 basis points(1). RevPAR at comparable hotels in the ownership segment increased 5.1 percent on a currency neutral basis (a 5.7 percent increase in actual dollars) in the first quarter of 2014 compared to the same period in 2013, led by an increase in ADR of 3.7 percent at comparable ownership segment hotels in the United States. Outside of the United States, RevPAR at comparable ownership segment hotels increased by 5.4 percent on a currency neutral basis (a 6.7 percent increase in actual dollars).
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Hilton Worldwide continues to make progress executing on value enhancement opportunities embedded in its owned portfolio. At the Hilton New York, a complete repositioning of the 6th Avenue frontage of the property is planned, which will create a retail platform with over 10,000 square feet of prime, street level space. Additional timeshare inventory is also planned, including two floors in addition to underutilized penthouse space.
Timeshare segment Adjusted EBITDA for the first quarter of 2014 was $85 million, a 44 percent increase compared to the same period in 2013. Timeshare revenues increased 13 percent to $279 million in the first quarter of 2014 compared to the same period in 2013, led by a $23 million increase in timeshare sales revenue, including a $5 million increase in revenue from sales of timeshare units developed by third parties. During the first quarter of 2014, 57 percent of intervals sold were developed by third parties, a 14 percentage point increase from the same period in the prior year. Revenue from resort operations also increased $11 million compared to the first quarter of 2013.
Hilton Worldwide opened 51 hotels with over 9,000 rooms in the first quarter of 2014, all of which were within the management and franchise segment, and achieved net unit growth of over 8,000 rooms. Of the new rooms added, 14 percent were conversions from non-Hilton Worldwide brands.
As of March 31, 2014, Hilton Worldwide had the largest rooms pipeline in the lodging industry, according to Smith Travel Research, Inc. ("STR"), with approximately 200,000 rooms at 1,165 hotels throughout 76 countries and territories, of which 58 percent, or over 115,000 rooms, were located outside of the United States. Approximately half of the development pipeline, or over 101,000 rooms, were under construction. According to STR, Hilton Worldwide has the largest supply of rooms under construction in every major region of the world, as illustrated in the table below:
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During the first quarter of 2014, Hilton made $200 million of voluntary prepayments on the senior secured term loan facility and reduced its interest rate spread on its $5.8 billion senior secured term loan facility by 25 basis points. The interest rate spread and the unused commitment fee percentage on the Company's senior secured revolving credit facility were also reduced by 25 basis points and 12.5 basis points, respectively. As of March 31, 2014, Hilton had $11.6 billion of outstanding indebtedness with a weighted average interest rate of 4.1 percent, excluding $959 million of non-recourse debt.
Total cash and cash equivalents were $722 million as of March 31, 2014, including $287 million of restricted cash and cash equivalents. No borrowings were outstanding under the $1.0 billion revolving credit facility as of March 31, 2014.
Hilton Worldwide will host a conference call to discuss first quarter 2014 results on May 9, 2014 at 10:00 a.m. Eastern Time. Participants may listen to the live webcast by logging onto the Hilton Worldwide Investor Relations website at http://ir.hilton.com/investors/events-and-presentations. A replay and transcript of the webcast will be available within 24 hours after the live event at http://ir.hilton.com/investors/financial-reporting/quarterly-results.
Alternatively, participants may listen to the live call by dialing 1-877-201-0168 in the United States or 1-647-788-4901 internationally. Please use the conference ID 25981567. 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 1-855-859-2056 using the Conference ID 25981567.
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. 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. You can identify these forward-looking statements 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 those described under the section entitled "Part I —Item 1A. Risk Factors" of the Annual Report on Form 10-K for the fiscal year ended December 31, 2013, 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 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.
The Company refers to certain non-GAAP financial measures in this press release, including net income and EPS, adjusted for special items, Adjusted EBITDA and Adjusted EBITDA margins and Net Debt. Please see the schedules to the press release for additional information and reconciliations of such non-GAAP financial measures.
Hilton Worldwide is a leading global hospitality company, spanning the lodging sector from luxury and full-service hotels and resorts to extended-stay suites and focused-service hotels. For nearly 100 years, Hilton Worldwide has been dedicated to continuing its tradition of providing exceptional guest experiences. The Company’s portfolio of 10 world-class global brands is comprised of 4,155 managed, franchised, owned and leased hotels and timeshare properties, with 686,790 rooms in 92 countries and territories, including Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Hilton Hotels & Resorts, DoubleTree by Hilton, Embassy Suites Hotels, Hilton Garden Inn, Hampton Hotels, Homewood Suites by Hilton, Home2 Suites by Hilton and Hilton Grand Vacations. The Company also manages an award-winning customer loyalty program, Hilton HHonors®.
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Earnings before interest expense, taxes and depreciation and amortization ("EBITDA"), presented herein, is a financial measure not recognized under generally accepted accounting principles in the United States ("U.S. GAAP") that reflects net income attributable to Hilton stockholders, excluding interest expense, a provision for income taxes and depreciation and amortization. The Company considers EBITDA to be a useful measure of operating performance, due to the significance of the Company's long-lived assets and level of indebtedness.
Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment losses; (v) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements; (vi) reorganization costs; (vii) share-based and certain other compensation expenses prior to and in connection with the Company's initial public offering; (viii) severance, relocation and other expenses; and (ix) other items.
Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of total revenues, excluding other revenues from managed and franchised properties.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, the Company's definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similarly titled measures of other companies.
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) EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin 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) EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin 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.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss), cash flow or other methods of analyzing results as reported under U.S. GAAP.
Net income and EPS, adjusted for special items, are not recognized terms under U.S. GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, the Company's definition of Net income and EPS, adjusted for special items, may not be comparable to similarly titled measures of other companies.
Net income and 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.
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; (ii) non-recourse debt, including current maturities and excluding amounts secured by timeshare financing receivables; (iii) the Company's share of investments in affiliate debt; reduced by (iv) cash and cash equivalents; and (v) restricted cash and cash equivalents.
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 should not be considered as a substitute to debt presented in accordance with U.S. GAAP. Net debt may not be comparable to a similarly titled measure of other companies.
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 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 4,112 hotels in the Company's system as of March 31, 2014, 3,626 were classified as comparable hotels. The 486 non-comparable hotels included 24 properties, or less than one 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 represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels. 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 ("ADR") levels as demand for hotel rooms increases or decreases.
ADR represents hotel room revenue divided by total number of room nights sold in 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 have a different effect on overall revenues and incremental profitability than changes in occupancy, as described above.
The Company calculates RevPAR by dividing hotel room revenue by 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 Hilton hotels: 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 (all periods use the same exchange rates), unless otherwise noted.
Christian Charnaux
Investor Relations
+1 703 883 5205
Aaron Radelet
Media Relations
+1 703 883 5804
Hilton Worldwide (NYSE: HLT) is a leading global hospitality company, spanning the lodging sector from luxury and full-service hotels and resorts to extended-stay suites and focused-service hotels.