Host Hotels & Resorts(US:HST)2024-08-02 19:04PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements for Host Inc. and Host L.P. for Q2 and YTD June 30, 2024 Financial Statements for Host Hotels & Resorts, Inc. Host Inc. reported $1,466 million in Q2 2024 total revenues, a 5.2% increase, with net income of $239 million and diluted EPS of $0.34 Host Inc. Condensed Consolidated Balance Sheet (in millions) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $805 | $1,144 | | Property and equipment, net | $10,017 | $9,624 | | Total Assets | $12,407 | $12,243 | | Liabilities & Equity | | | | Total debt | $4,396 | $4,209 | | Total liabilities | $5,418 | $5,417 | | Total equity | $6,817 | $6,637 | | Total Liabilities & Equity | $12,407 | $12,243 | Host Inc. Condensed Consolidated Statement of Operations (in millions, except EPS) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,466 | $1,393 | $2,937 | $2,774 | | Operating Profit | $292 | $249 | $583 | $497 | | Net Income Attributable to Host Inc. | $239 | $210 | $507 | $497 | | Diluted EPS | $0.34 | $0.29 | $0.72 | $0.70 | Host Inc. Condensed Consolidated Statement of Cash Flows (YTD, in millions) | Cash Flow Activity | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $818 | $820 | | Net cash used in investing activities | ($775) | ($275) | | Net cash used in financing activities | ($353) | ($396) | | Net (decrease) increase in cash | ($314) | $151 | Financial Statements for Host Hotels & Resorts, L.P. Host L.P. financial statements are similar to Host Inc.'s, reporting $242 million net income in Q2 2024 - Assets and liabilities for Host Inc. and Host L.P. are substantially the same, differing primarily in the equity/partners' capital section78 Host L.P. Condensed Consolidated Statement of Operations (in millions) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,466 | $1,393 | $2,937 | $2,774 | | Operating Profit | $292 | $249 | $583 | $497 | | Net Income Attributable to Host L.P. | $242 | $213 | $514 | $504 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, recent acquisitions, debt, revenue, share repurchases, dividends, and insurance contingencies - As of June 30, 2024, the company's portfolio comprised 79 hotels, mostly luxury and upper upscale, with 74 in the U.S.27 - In Q2 2024, the company acquired 1 Hotel Nashville and Embassy Suites Nashville for $530 million, followed by 1 Hotel Central Park for $265 million and Turtle Bay Resort for $680 million post-quarter56 - The company repaid $400 million of 3⅞% Series G senior notes and issued $600 million of 5.700% Series K senior notes in Q2 20243738 - Q2 2024 saw $56 million in gains from insurance settlements, including Hurricane Ian and Maui wildfires636490 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2024 financial performance, noting a 5.2% revenue increase and minimal full-year RevPAR growth due to moderating leisure demand and Maui recovery Operating Results and Outlook Q2 2024 total revenues grew 5.2% to $1.47 billion, with operating profit up 17.3%; comparable hotel RevPAR was flat at 0.1% due to mixed demand Q2 2024 Key Operating Metrics vs. Q2 2023 | Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $1,466M | $1,393M | +5.2% | | Net income | $242M | $214M | +13.1% | | Adjusted EBITDAre | $476M | $446M | +6.7% | | Diluted EPS | $0.34 | $0.29 | +17.2% | | Comparable hotel RevPAR | $224.29 | $224.02 | +0.1% | - Full-year 2024 comparable hotel RevPAR is projected between (1.0)% and 1.0%, impacted by slower Maui recovery and moderating leisure demand82 - Strong performance in Denver, Northern Virginia, Boston, and New York was offset by declines in Atlanta, New Orleans, Orlando, and a 21.4% drop in Maui/Oahu RevPAR77 Strategic Initiatives The company acquired three properties for $1.475 billion, repaid $400 million in senior notes, and issued $600 million in new 'green bond' senior notes - Acquired 1 Hotel Nashville and Embassy Suites Nashville for $530 million in Q2, followed by 1 Hotel Central Park for $265 million and Turtle Bay Resort for $680 million post-quarter8485 - Repaid $400 million of 3⅞% Series G senior notes and issued $600 million of 5.700% Series K senior notes, repaying revolver borrowings86 - Full-year 2024 capital expenditures are projected at $500 million to $600 million, with $220 million to $260 million for ROI projects89 Results of Operations Q2 2024 total revenues rose 5.2% due to acquisitions and group business, while operating expenses increased 7.5% from wages and insurance premiums - Food and beverage revenues increased 7.7% in Q2 and 8.7% YTD, driven by recovering group demand in banquet and audio-visual services9294 - Wages and employee benefits, 57% of departmental expenses, increased approximately 5% per available room in H1 202497 - Comparable hotel group business revenue rose 7.7% in Q2, while transient revenue declined 5.0%, reflecting moderating leisure demand and Maui wildfire impacts115116 Liquidity and Capital Resources The company maintains strong liquidity with $805 million cash and $1.5 billion credit facility availability, drawing $525 million post-quarter for acquisitions - As of June 30, 2024, the company held $805 million in cash and $1.5 billion available under its credit facility revolver119 Financial Covenant Compliance (as of June 30, 2024) | Covenant | Actual Ratio | Requirement | | :--- | :--- | :--- | | Leverage ratio | 2.1x | Maximum 7.25x | | Fixed charge coverage ratio | 6.4x | Minimum 1.25x | | Unsecured interest coverage ratio | 8.4x | Minimum 1.75x | - A quarterly cash dividend of $0.20 per share was declared on June 13, 2024, and paid in July 2024138 Non-GAAP Financial Measures This section defines and reconciles key non-GAAP measures; Q2 2024 Adjusted EBITDAre was $476 million, and Adjusted FFO per diluted share was $0.57 Reconciliation of Net Income to Adjusted EBITDAre (in millions) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income | $242 | $214 | $514 | $505 | | EBITDAre | $502 | $446 | $1,006 | $890 | | Adjusted EBITDAre | $476 | $446 | $959 | $890 | Reconciliation of Diluted EPS to Adjusted FFO per Share | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $0.34 | $0.29 | $0.72 | $0.70 | | NAREIT FFO per diluted share | $0.57 | $0.53 | $1.17 | $1.07 | | Adjusted FFO per diluted share | $0.57 | $0.53 | $1.17 | $1.08 | Item 3. Quantitative and Qualitative Disclosures about Market Risk The company faces interest rate and foreign currency risks; 77% of debt had fixed rates as of June 30, 2024, mitigating interest rate exposure - As of June 30, 2024, 77% of the company's outstanding debt carried a fixed interest rate168 - Foreign currency exchange risk exists from hotels in Brazil and Canada, with CAD 99 million in forward contracts maturing August 2024169 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures for Host Inc. and Host L.P. were effective as of quarter-end - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the reporting period end170172 - No material changes to internal control over financial reporting occurred during the most recent fiscal quarter171173 PART II. OTHER INFORMATION Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details Q2 2024 share repurchase activity, with Host Inc. repurchasing 2.8 million shares for $50 million under its $1 billion program Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased | Average Price Paid | Value (in millions) | | :--- | :--- | :--- | :--- | | April 2024 | — | — | — | | May 2024 | 1,687,015 | $17.78 | ~$30 | | June 2024 | 1,120,197 | $17.86 | ~$20 | | Total Q2 | 2,807,212 | $17.81 | $50 | - As of June 30, 2024, approximately $742 million remained available under the share repurchase program176 Item 5. Other Information No director or officer adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the period - No director or officer adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter180 Item 6. Exhibits This section lists exhibits for the Form 10-Q, including indentures, contracts, and certifications, with a cautionary note on representations and warranties