Marriott International(MAR) - 2023 Q2 - Quarterly Report

Part I. Financial Information (Unaudited) Presents Marriott International, Inc.'s unaudited condensed consolidated financial statements and related notes Item 1. Financial Statements Presents unaudited condensed consolidated financial statements, showing improved net income, revenue growth, and robust operating cash flow Condensed Consolidated Statements of Income Details the company's revenues, expenses, and net income for the three and six months ended June 30, 2023 and 2022 Net Income and EPS (Unaudited) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $726 million | $678 million | $1,483 million | $1,055 million | | Earnings per share – basic | $2.39 | $2.06 | $4.84 | $3.21 | | Earnings per share – diluted | $2.38 | $2.06 | $4.81 | $3.20 | Revenue Growth (Unaudited) | Revenue Type | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | YoY Change (%) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | YoY Change (%) | | :-------------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Base management fees | $318 million | $269 million | 18.2% | $611 million | $482 million | 26.8% | | Franchise fees | $739 million | $669 million | 10.5% | $1,378 million | $1,169 million | 17.9% | | Incentive management fees | $193 million | $135 million | 43.0% | $394 million | $237 million | 66.2% | | Gross fee revenues | $1,250 million | $1,073 million | 16.5% | $2,383 million | $1,888 million | 26.2% | | Total Revenues | $6,075 million | $5,338 million | 13.8% | $11,690 million | $9,537 million | 22.6% | Condensed Consolidated Statements of Comprehensive Income Presents net income and other comprehensive income components, including foreign currency translation adjustments, for the specified periods Comprehensive Income (Unaudited) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $726 million | $678 million | $1,483 million | $1,055 million | | Foreign currency translation adjustments | $(77) million | $(327) million | $7 million | $(313) million | | Total other comprehensive income (loss) | $(69) million | $(323) million | $13 million | $(309) million | | Comprehensive income | $657 million | $355 million | $1,496 million | $746 million | Condensed Consolidated Balance Sheets Provides a snapshot of assets, liabilities, and stockholders' equity as of June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (Unaudited) | Metric | June 30, 2023 (in millions) | December 31, 2022 (in millions) | | :-------------------------------- | :-------------------------- | :---------------------------- | | ASSETS | | | | Current assets | $3,444 | $3,313 | | Property and equipment, net | $1,560 | $1,585 | | Intangible assets | $17,845 | $17,619 | | Total Assets | $25,087 | $24,815 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current liabilities | $7,520 | $7,339 | | Long-term debt | $10,403 | $9,380 | | Liability for guest loyalty program | $3,413 | $3,280 | | Total Liabilities | $25,311 | $24,241 | | Stockholders' equity | $(224) | $568 | Condensed Consolidated Statements of Cash Flows Outlines cash flows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (Unaudited) | Activity | Six Months Ended June 30, 2023 (in millions) | Six Months Ended June 30, 2022 (in millions) | | :------------------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net cash provided by operating activities | $1,538 | $1,048 | | Net cash used in investing activities | $(243) | $(91) | | Net cash used in financing activities | $(1,241) | $(1,811) | | Increase (decrease) in cash, cash equivalents, and restricted cash | $54 | $(854) | | Cash, cash equivalents, and restricted cash, end of period | $579 | $567 | - Significant financing outflows in the 2023 first half included $2,046 million for the purchase of treasury stock and $281 million for dividends paid[14][102] Notes to Condensed Consolidated Financial Statements Provides detailed disclosures and explanations supporting the condensed consolidated financial statements NOTE 1. BASIS OF PRESENTATION Explains the basis for preparing the unaudited condensed financial statements and the use of management estimates - The financial statements are unaudited and condensed, and should be read in conjunction with the 2022 Form 10-K[19][20] - Management makes estimates and assumptions, and interim results may not be indicative of fiscal year performance due to seasonal and short-term variations[20] NOTE 2. EARNINGS PER SHARE Details the calculation of basic and diluted earnings per share for the reported interim periods Earnings Per Share (Unaudited) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic earnings per share | $2.39 | $2.06 | $4.84 | $3.21 | | Diluted earnings per share | $2.38 | $2.06 | $4.81 | $3.20 | NOTE 3. STOCK-BASED COMPENSATION Discusses stock-based awards granted, related compensation expense, and deferred compensation costs - The company granted 1.0 million restricted stock units (RSUs) and 0.1 million performance-based RSUs (PSUs) in the 2023 first half, with a weighted average grant-date fair value of $166 per unit[23][24] - Stock-based compensation expense was $49 million in Q2 2023 and $82 million in H1 2023[24] - Deferred compensation costs for unvested awards totaled $267 million at June 30, 2023, up from $179 million at December 31, 2022[24] NOTE 4. INCOME TAXES Provides information on effective tax rates, unrecognized tax benefits, and cash paid for income taxes - The effective tax rate increased to 24.7% for Q2 2023 (vs. 22.8% in Q2 2022) due to a shift in earnings to higher tax rate jurisdictions[25] - For H1 2023, it decreased to 18.0% (vs. 22.1% in H1 2022) primarily due to the release of tax reserves, partially offset by the shift in earnings[25] - Unrecognized tax benefit balance decreased by $98 million to $157 million at June 30, 2023, mainly due to the completion of a prior year tax audit[26] - Cash paid for income taxes, net of refunds, was $406 million in H1 2023, compared to $125 million in H1 2022[27] NOTE 5. COMMITMENTS AND CONTINGENCIES Details various guarantees, contingent obligations, and ongoing legal proceedings and investigations Guarantees Outlines the company's financial guarantees, including debt service and operating profit guarantees Guarantees (in millions, June 30, 2023) | Guarantee Type | Maximum Amount of Future Potential Fundings | Recorded Liability for Guarantees | | :------------- | :------------------------------------------ | :-------------------------------- | | Debt service | $57 | $6 | | Operating profit | $174 | $91 | | Other | $18 | $4 | | Total | $249 | $101 | - Operating profit guarantees include $58 million that will not be in effect until the underlying properties open or certain other events occur[30] Contingent Purchase Obligation Describes a specific contingent purchase obligation for a property, including the put option and recorded liability - The company has a contingent purchase obligation for the Sheraton Grand Chicago, with a put option for $300 million exercisable in the 2024 first half[30] - An additional $200 million option exists for the underlying land[30] - The recorded liability for the put option was $300 million at June 30, 2023[30] Starwood Data Security Incident Provides an update on the 2018 data security incident involving the Starwood reservations database - On November 30, 2018, the company announced a data security incident involving unauthorized access to the Starwood reservations database, which was discontinued for business operations at the end of 2018[31] Litigation, Claims, and Government Investigations Discusses ongoing lawsuits and governmental inquiries related to the data security incident and estimated loss contingencies - Approximately 100 lawsuits and various governmental inquiries are ongoing related to the Data Security Incident[32][33][34] - The company has an accrual for an estimated loss contingency (not material) but cannot reasonably estimate losses in excess of recorded amounts due to the early stage of proceedings and unresolved issues[33][34] NOTE 6. LONG-TERM DEBT Details long-term debt balances, recent issuances, and the revolving credit facility with its financial covenants Long-Term Debt Balances (in millions) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Total long-term debt | $11,297 | $10,064 | | Less: Current portion | $(894) | $(684) | | Long-term debt (net of current portion) | $10,403 | $9,380 | - In March 2023, the company issued $800 million of 4.9% Series KK Notes due April 15, 2029, generating approximately $783 million in net proceeds for general corporate purposes[37] - The company has a $4.5 billion multicurrency revolving credit agreement (Credit Facility) expiring December 14, 2027, which supports its commercial paper program and general corporate needs[39][100] - It contains a financial covenant limiting maximum leverage (Adjusted Total Debt to EBITDA) to 4.5 to 1.0[100] - Cash paid for interest, net of amounts capitalized, was $196 million in H1 2023, up from $179 million in H1 2022[36] NOTE 7. ACQUISITION Reports on the acquisition of the City Express brand portfolio and the allocation of its purchase cost - On May 1, 2023, the company acquired the City Express brand portfolio for $100 million, adding 149 properties (17,300 rooms) in Mexico, Costa Rica, Colombia, and Chile to its franchise portfolio[40][70] - The cost was allocated to an indefinite-lived brand asset ($85 million) and franchise contract assets ($21 million)[70] NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS Presents the fair values of noncurrent financial assets and liabilities compared to their carrying amounts - The fair values of current assets and liabilities approximate their reported carrying amounts[41] Noncurrent Financial Assets and Liabilities (in millions, June 30, 2023) | Metric | Carrying Amount | Fair Value | | :-------------------------------- | :-------------- | :--------- | | Senior, mezzanine, and other loans | $140 | $131 | | Senior Notes | $(8,579) | $(7,991) | | Commercial paper | $(1,641) | $(1,641) | | Other long-term debt | $(56) | $(49) | | Other noncurrent liabilities | $(381) | $(381) | NOTE 9. ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS' EQUITY Provides details on changes in accumulated other comprehensive loss and components of stockholders' equity Accumulated Other Comprehensive Loss (in millions) | Metric | December 31, 2022 | June 30, 2023 | | :-------------------------------- | :---------------- | :------------ | | Balance at year-end | $(729) | $(716) | Stockholders' Equity (in millions) | Metric | December 31, 2022 | June 30, 2023 | | :-------------------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $568 | $(224) | | Treasury stock, at cost | $(17,015) | $(19,009) | | Common Shares Outstanding | 310.6 | 299.6 | NOTE 10. CONTRACTS WITH CUSTOMERS Discusses changes in the guest loyalty program liability and deferred revenue from customer contracts - The liability for guest loyalty program increased by $191 million to $6,785 million at June 30, 2023, primarily due to an increase in points earned by members[49] - Deferred revenue decreased by $48 million to $1,283 million at June 30, 2023, mainly due to revenue recognized in H1 2023 and reclassification to the guest loyalty program liability[50] NOTE 11. BUSINESS SEGMENTS Presents financial information for the U.S. & Canada and International segments, including revenues and segment profits - The company operates in two reportable segments: U.S. & Canada and International[51] - Segment performance is evaluated using 'segment profits,' which excludes corporate expenses, income taxes, and certain other costs[52] Segment Revenues (in millions, Unaudited) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | YoY Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | YoY Change (%) | | :-------------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------------------- | :----------------------------- | :------------- | | U.S. & Canada | $4,502 | $4,117 | 9.4% | $8,780 | $7,388 | 19.0% | | International | $1,124 | $875 | 28.5% | $2,132 | $1,550 | 37.5% | | Total reportable segment revenue | $5,626 | $4,992 | 12.7% | $10,912 | $8,938 | 22.1% | Segment Profits (in millions, Unaudited) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | YoY Change (%) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | YoY Change (%) | | :-------------------------- | :------------------------------- | :------------------------------- | :------------- | :----------------------------- | :----------------------------- | :------------- | | U.S. & Canada | $756 | $727 | 4.0% | $1,413 | $1,181 | 19.6% | | International | $295 | $210 | 40.5% | $547 | $341 | 60.4% | | Unallocated corporate and other | $54 | $30 | 80.0% | $100 | $9 | 1011.1% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of financial condition and results, highlighting RevPAR improvement, system growth, and liquidity Cautionary Statement Warns that the report contains forward-looking statements subject to risks and uncertainties, with no obligation to update - The report contains forward-looking statements that are not guarantees of future performance and are subject to numerous evolving risks and uncertainties[58][59] - The company undertakes no obligation to publicly update or revise these statements[59] BUSINESS AND OVERVIEW Provides an overview of the company's business model, operations, and key performance measures Overview Describes Marriott's asset-light business model as a global operator, franchisor, and licensor of lodging properties - Marriott International operates as a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties under 31 brand names, primarily utilizing an asset-light business model[62] - Operations are discussed in two reportable segments: U.S. & Canada and International[62] - Management fees include base management fees (percentage of property-level revenue) and incentive management fees (percentage of hotel profitability)[63] - Franchise fees are based on property-level revenue or intellectual property use (e.g., co-branded credit cards)[63] Performance Measures Defines key performance indicators such as RevPAR, occupancy, and Average Daily Rate for comparable properties - Key performance indicators include Revenue per Available Room (RevPAR), occupancy, and Average Daily Rate (ADR)[64] - RevPAR measures period-over-period change in room revenues for comparable properties, defined as those open since January 1, 2022, without significant changes[65] Business Trends Discusses trends in worldwide, international, and U.S. & Canada RevPAR, reflecting recovery in lodging demand - Worldwide RevPAR increased 13.5% in Q2 2023 and 22.4% in H1 2023 compared to the same periods in 2022, driven by robust leisure demand and strengthening group and business transient demand[66] - International RevPAR improved 39.1% in Q2 2023 and 49.5% in H1 2023, significantly boosted by strengthening demand and the lifting of travel restrictions, particularly in Greater China[68] - U.S. & Canada RevPAR improved 6.0% in Q2 2023 and 14.3% in H1 2023, with demand beginning to normalize year over year in Q2[67] Starwood Data Security Incident Addresses the financial impact and ongoing expenses related to the 2018 Starwood Data Security Incident - The company is unable to reasonably estimate the full financial impact of the 2018 Data Security Incident beyond recorded expenses[69] - Significant future expenses are expected, primarily related to legal proceedings and regulatory investigations, and insurance coverage may not be sufficient[69] System Growth and Pipeline Details the company's property and room count, development pipeline, and projected net rooms growth - At June 30, 2023, the system had 8,590 properties (1,565,258 rooms), an increase from 8,288 properties (1,525,407 rooms) at year-end 2022[70] - Gross additions in H1 2023 included 149 properties (17,300 rooms) from the City Express acquisition[70] - The development pipeline includes nearly 547,000 hotel rooms, with over 240,000 under construction[71] - Over half of the pipeline rooms are outside U.S. & Canada[71] - Full-year 2023 net rooms growth is expected to be approximately 6.4% to 6.7%, including a 2.4% increase from the MGM Resorts International agreement[71] Properties and Rooms Provides a detailed breakdown of properties and rooms by segment and type as of June 30, 2023 Properties and Rooms by Segment (June 30, 2023) | Segment | Managed Properties | Managed Rooms | Franchised/Licensed Properties | Franchised/Licensed Rooms | Owned/Leased Properties | Owned/Leased Rooms | Residential Properties | Residential Rooms | Total Properties | Total Rooms | | :---------------- | :----------------- | :------------ | :----------------------------- | :------------------------ | :---------------------- | :----------------- | :--------------------- | :---------------- | :--------------- | :---------- | | U.S. & Canada | 632 | 216,276 | 5,192 | 744,050 | 14 | 4,656 | 68 | 7,199 | 5,906 | 972,181 | | International | 1,384 | 351,187 | 1,117 | 204,600 | 38 | 9,209 | 51 | 5,187 | 2,590 | 570,183 | | Timeshare | — | — | 93 | 22,745 | — | — | — | — | 93 | 22,745 | | Yacht | — | — | 1 | 149 | — | — | — | — | 1 | 149 | | Total | 2,016 | 567,463 | 6,403 | 971,544 | 52 | 13,865 | 119 | 12,386 | 8,590 | 1,565,258 | Lodging Statistics Presents worldwide, international, and Greater China lodging statistics for comparable properties Worldwide Systemwide Lodging Statistics (Comparable Properties, Unaudited) | Metric | Three Months Ended June 30, 2023 | YoY Change vs. 2022 | Six Months Ended June 30, 2023 | YoY Change vs. 2022 | | :---------------- | :------------------------------- | :------------------ | :----------------------------- | :------------------ | | RevPAR | $132.17 | 13.5% | $124.38 | 22.4% | | Occupancy | 71.9% | 4.7 pts | 68.7% | 8.0 pts | | Average Daily Rate | $183.79 | 6.0% | $181.11 | 8.1% | International Systemwide Lodging Statistics (Comparable Properties, Unaudited) | Metric | Three Months Ended June 30, 2023 | YoY Change vs. 2022 | Six Months Ended June 30, 2023 | YoY Change vs. 2022 | | :---------------- | :------------------------------- | :------------------ | :----------------------------- | :------------------ | | RevPAR | $119.21 | 39.1% | $114.17 | 49.5% | | Occupancy | 68.2% | 12.4 pts | 66.1% | 15.4 pts | | Average Daily Rate | $174.91 | 13.7% | $172.71 | 14.6% | Greater China Systemwide Lodging Statistics (Comparable Properties, Unaudited) | Metric | Three Months Ended June 30, 2023 | YoY Change vs. 2022 | Six Months Ended June 30, 2023 | YoY Change vs. 2022 | | :---------------- | :------------------------------- | :------------------ | :----------------------------- | :------------------ | | RevPAR | $84.99 | 125.2% | $81.68 | 100.6% | | Occupancy | 68.5% | 28.5 pts | 66.0% | 26.1 pts | | Average Daily Rate | $124.03 | 31.5% | $123.72 | 21.3% | CONSOLIDATED RESULTS Summarizes the company's consolidated financial performance, including fee revenues and operating expenses - Consolidated results for Q2 and H1 2023 improved significantly compared to 2022, driven by the continued recovery in lodging demand from the impacts of COVID-19[79] Fee Revenues Analyzes changes in base management, franchise, and incentive management fees for the reported periods Net Fee Revenues (in millions, Unaudited) | Period | 2023 | 2022 | Change (%) | | :-------------------- | :--- | :--- | :--------- | | Three Months Ended June 30 | $1,228 | $1,054 | 17% | | Six Months Ended June 30 | $2,340 | $1,845 | 27% | - Increases in base management fees primarily reflected higher RevPAR[81] - Franchise fees increased due to higher RevPAR, unit growth ($25 million in Q2, $43 million in H1), and higher co-branded credit card fees ($7 million in Q2, $27 million in H1)[81] - Incentive management fees increased due to higher profits at many managed hotels[81] Owned, Leased, and Other Discusses net revenues from owned, leased, and other properties, including impacts from prior-year subsidies Owned, Leased, and Other, Net (in millions, Unaudited) | Period | 2023 | 2022 | Change (%) | | :-------------------- | :--- | :--- | :--------- | | Three Months Ended June 30 | $103 | $83 | 24% | | Six Months Ended June 30 | $178 | $148 | 20% | - The increases were primarily due to stronger results at owned and leased properties[83][84] - The H1 2023 increase was partially offset by $29 million in subsidies received in H1 2022 under German government COVID-19 assistance programs[84] Cost Reimbursements Explains fluctuations in net cost reimbursements due to timing differences and program activities Cost Reimbursements, Net (in millions, Unaudited) | Period | 2023 | 2022 | Change (%) | | :-------------------- | :--- | :--- | :--------- | | Three Months Ended June 30 | $91 | $93 | (2)% | | Six Months Ended June 30 | $102 | $60 | 70% | - Net cost reimbursements vary due to timing differences between costs incurred for centralized programs and services and related reimbursements[85][86] - The Q2 decrease reflected higher insurance program expenses and lower net revenues for centralized programs, partially offset by Loyalty Program activity[86] - The H1 increase reflected Loyalty Program activity and higher net revenues for centralized programs, partially offset by higher insurance program expenses[86] Other Operating Expenses Details merger-related charges and other operating expenses, including costs from the Data Security Incident Merger-Related Charges and Other (in millions, Unaudited) | Period | 2023 | 2022 | Change (%) | | :-------------------- | :--- | :--- | :--------- | | Three Months Ended June 30 | $38 | $— | nm* | | Six Months Ended June 30 | $39 | $9 | 333% | - The increase in merger-related charges and other expenses was primarily due to costs associated with the Data Security Incident[87] Non-Operating Income (Expense) Covers interest expense and equity in earnings, highlighting factors influencing their changes Interest Expense Explains the increase in interest expense due to higher debt balances and interest rates Interest Expense (in millions, Unaudited) | Period | 2023 | 2022 | Change (%) | | :-------------------- | :----- | :--- | :--------- | | Three Months Ended June 30 | $(140) | $(95) | (47)% | | Six Months Ended June 30 | $(266) | $(188) | (41)% | - Interest expense increased due to higher debt balances from Senior Notes issuances and higher average borrowings and interest rates related to commercial paper and the Credit Facility program[89] Equity in Earnings Discusses the decrease in equity in earnings, primarily due to prior-year property sale gains Equity in Earnings (in millions, Unaudited) | Period | 2023 | 2022 | Change (%) | | :-------------------- | :--- | :--- | :--------- | | Three Months Ended June 30 | $7 | $15 | (53)% | | Six Months Ended June 30 | $8 | $17 | (53)% | - Equity in earnings decreased primarily due to gains recorded in the prior year on the sale of properties held by equity method investees[90] Income Taxes Analyzes the provision for income taxes, effective tax rates, and the impact of tax reserve releases Provision for Income Taxes (in millions, Unaudited) | Period | 2023 | 2022 | Change (%) | | :-------------------- | :----- | :----- | :--------- | | Three Months Ended June 30 | $(238) | $(200) | (19)% | | Six Months Ended June 30 | $(325) | $(299) | (9)% | - The Q2 increase was primarily due to higher operating income and a shift in earnings to jurisdictions with higher tax rates[91] - The H1 increase was due to higher operating income and earnings shift, partially offset by a $103 million release of tax reserves from a prior year tax audit[91][92] BUSINESS SEGMENTS Provides a detailed breakdown of revenues and profits for the U.S. & Canada and International business segments Segment Revenues and Profits (in millions, Unaudited) | Segment | Q2 2023 Revenues | Q2 2022 Revenues | Q2 YoY Change (%) | Q2 2023 Profit | Q2 2022 Profit | Q2 YoY Change (%) | | :---------------- | :--------------- | :--------------- | :---------------- | :------------- | :------------- | :---------------- | | U.S. & Canada | $4,502 | $4,117 | 9% | $756 | $727 | 4% | | International | $1,124 | $875 | 28% | $295 | $210 | 40% | | Segment | H1 2023 Revenues | H1 2022 Revenues | H1 YoY Change (%) | H1 2023 Profit | H1 2022 Profit | H1 YoY Change (%) | | :---------------- | :--------------- | :--------------- | :---------------- | :------------- | :------------- | :---------------- | | U.S. & Canada | $8,780 | $7,388 | 19% | $1,413 | $1,181 | 20% | | International | $2,132 | $1,550 | 38% | $547 | $341 | 60% | Properties and Rooms by Segment (Unaudited) | Segment | June 30, 2023 Properties | June 30, 2022 Properties | YoY Change (%) | June 30, 2023 Rooms | June 30, 2022 Rooms | YoY Change (%) | | :---------------- | :----------------------- | :----------------------- | :------------- | :------------------ | :------------------ | :------------- | | U.S. & Canada | 5,906 | 5,790 | 2% | 972,181 | 958,025 | 1% | | International | 2,590 | 2,238 | 16% | 570,183 | 520,018 | 10% | U.S. & Canada Details the factors contributing to changes in segment profit for the U.S. & Canada region - Q2 2023 segment profit increased primarily due to $68 million higher gross fee revenues (driven by higher comparable systemwide RevPAR and unit growth), partially offset by $40 million lower net cost reimbursement revenue[95] - H1 2023 segment profit increased primarily due to $251 million higher gross fee revenues (from higher RevPAR, managed hotel profits, and unit growth) and $25 million higher net owned, leased, and other revenue, partially offset by $36 million lower net cost reimbursement revenue[95] International Explains the drivers of segment profit changes for the International region, including RevPAR and foreign exchange - Q2 2023 segment profit increased primarily due to $102 million higher gross fee revenues (from higher managed hotel profits and RevPAR across all regions), partially offset by $15 million lower net cost reimbursement revenue[96] - H1 2023 segment profit increased primarily due to $216 million higher gross fee revenues (from higher RevPAR, managed hotel profits, and unit growth, partially offset by unfavorable foreign exchange rates) and $13 million lower general, administrative, and other expenses[97] - This was partially offset by $20 million lower net cost reimbursement revenue and $10 million lower net owned, leased, and other revenue (due to prior-year COVID-19 subsidies)[97] LIQUIDITY AND CAPITAL RESOURCES Discusses the company's liquidity sources, uses of cash, capital expenditures, and share repurchase programs - The company's long-term financial objectives include maintaining diversified financing sources, optimizing the mix and maturity of long-term debt, and reducing working capital[98] - At June 30, 2023, long-term debt had a weighted average interest rate of 4.3% and a weighted average maturity of approximately 5.5 years[98] Sources of Liquidity Identifies the primary sources of liquidity, including the revolving credit facility and capital markets access - Primary liquidity sources include a $4.5 billion multicurrency revolving Credit Facility (expiring December 14, 2027) and access to capital markets[99][100] - The company currently satisfies all covenants, including the leverage covenant (Adjusted Total Debt to EBITDA not more than 4.5 to 1.0), and expects adequate liquidity[100] - The ability to issue commercial paper is subject to market demand, but the Credit Facility provides backup borrowing capacity[101] Uses of Cash Outlines the significant cash inflows and outflows, including operating activities, share repurchases, and dividends - Cash, cash equivalents, and restricted cash increased by $54 million to $579 million at June 30, 2023, driven by net cash from operating activities ($1,538 million), commercial paper borrowings ($736 million), and Senior Notes issuances ($493 million)[102] - These inflows were partially offset by share repurchases ($2,046 million), dividends paid ($281 million), capital and technology expenditures ($194 million), and the City Express acquisition ($102 million)[102] - Net cash provided by operating activities increased by $490 million in H1 2023 compared to H1 2022, primarily due to higher net income and working capital changes[103] - The ratio of current assets to current liabilities was 0.5 to 1.0 at June 30, 2023[104] Capital Expenditures and Other Investments Details capital and technology expenditures and projections for full-year 2023 investments - Capital and technology expenditures were $194 million in H1 2023, up from $119 million in H1 2022[104] - Full-year 2023 capital expenditures and other investments are projected to be $900 million to $1 billion, including approximately $200 million for maintenance capital spending and higher technology spending expected to be reimbursed[104] Share Repurchases and Dividends Reports on common stock repurchases and declared cash dividends, indicating future capital return plans - The company repurchased 5.2 million shares for $903 million in Q2 2023[105] - Year-to-date through July 28, 2023, 13.6 million shares were repurchased for $2.3 billion[105] - Quarterly cash dividends of $0.40 per share (Q1) and $0.52 per share (Q2) were declared in 2023[105] - The company expects to continue returning cash to stockholders through share repurchases and cash dividends[105] Material Cash Requirements Confirms no material changes to cash requirements and details projected Deemed Repatriation Transition Tax payments - There have been no material changes to cash requirements since the 2022 Form 10-K[105][106] - Projected Deemed Repatriation Transition Tax payments total $245 million, with $111 million payable within the next 12 months from June 30, 2023[106] CRITICAL ACCOUNTING POLICIES AND ESTIMATES States that there have been no material changes to critical accounting policies or estimates since the last annual report - There have been no material changes to the critical accounting policies or the methodologies and assumptions applied since the 2022 Form 10-K[107] Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk exposure remains materially unchanged since December 31, 2022, with no new significant disclosures - The company's exposure to market risk has not materially changed since December 31, 2022[108] Item 4. Controls and Procedures Confirms effective disclosure controls and procedures, with no material changes in internal control over financial reporting Disclosure Controls and Procedures Management's conclusion on the effectiveness of disclosure controls and procedures for timely and accurate reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the reporting period, providing reasonable assurance for timely and accurate financial reporting[110] Changes in Internal Control Over Financial Reporting Reports no material changes in internal control over financial reporting during the second quarter of 2023 - No changes in internal control over financial reporting occurred during the 2023 second quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[111] Part II. Other Information Presents additional information not covered in the financial statements, including legal, risk, and equity matters Item 1. Legal Proceedings Refers to Note 5 for legal proceedings, noting other ordinary course matters are not expected to materially harm financial position - Refers to the 'Litigation, Claims, and Government Investigations' caption in Note 5 for details on legal proceedings[113] - Other ordinary course legal proceedings are not expected to materially harm the company's financial position, cash flows, or overall trends in results of operations[113] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's 2022 Form 10-K - There are no material changes to the risk factors discussed in the company's 2022 Form 10-K[114] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details common stock repurchases made during the second quarter of 2023 under publicly announced programs Issuer Purchases of Equity Securities Provides a table detailing common stock repurchases, average price, and remaining authorization under programs Issuer Purchases of Equity Securities (in millions, except per share amounts) | Period | Total Number of Shares Purchased | Average Price per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | | :------------------------- | :------------------------------- | :---------------------- | :------------------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | April 1, 2023 - April 30, 2023 | 1.5 | $167.80 | 1.5 | 17.3 | | May 1, 2023 - May 31, 2023 | 1.5 | $172.15 | 1.5 | 15.8 | | June 1, 2023 - June 30, 2023 | 2.2 | $176.93 | 2.2 | 13.6 | Item 5. Other Information No directors or Section 16 officers adopted or terminated Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements - No director or Section 16 officer adopted or terminated any Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements during the 2023 second quarter[117] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including organizational documents, incentive plans, and certifications - Exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, 2023 Stock and Cash Incentive Plan, and certifications from the Chief Executive Officer and Chief Financial Officer[120] - Financial statements are submitted in Inline XBRL format[120] Signature Contains the official signature block for the Form 10-Q, confirming due authorization for the filing - The report was signed on August 1, 2023, by Felitia O. Lee, Controller and Chief Accounting Officer, as a duly authorized officer[122]