Host Hotels & Resorts(HST) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter and year-to-date periods ended June 30, 2022 Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for both Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. for the quarterly and year-to-date periods ended June 30, 2022, and 2021, including balance sheets, statements of operations, comprehensive income, cash flows, and accompanying notes Host Hotels & Resorts, Inc. Financial Statements This section presents the unaudited condensed consolidated balance sheets, statements of operations, comprehensive income, and cash flows for Host Hotels & Resorts, Inc., showing a significant turnaround from a net loss in 2021 to net income in 2022 driven by strong revenue recovery Host Inc. Key Financials (Q2 2022 vs Q2 2021) | Metric | Q2 2022 (in millions) | Q2 2021 (in millions) | YTD 2022 (in millions) | YTD 2021 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,381 | $649 | $2,455 | $1,048 | | Operating Profit (Loss) | $327 | $(68) | $449 | $(234) | | Net Income (Loss) Attributable to Host Inc. | $256 | $(60) | $372 | $(212) | | Diluted EPS | $0.36 | $(0.09) | $0.52 | $(0.30) | Host Inc. Balance Sheet Summary | Metric | June 30, 2022 (in millions) | Dec 31, 2021 (in millions) | | :--- | :--- | :--- | | Total Assets | $12,044 | $12,352 | | Total Debt | $4,212 | $4,891 | | Total Equity | $6,782 | $6,446 | - Net cash provided by operating activities for the six months ended June 30, 2022, was $708 million, a significant improvement from the $40 million used in the same period in 2021[25] Host Hotels & Resorts, L.P. Financial Statements This section presents the unaudited condensed consolidated financial statements for Host Hotels & Resorts, L.P., which are nearly identical to Host Inc.'s, reflecting the operational structure where Host Inc. operates through Host L.P. - The assets, liabilities, revenues, and expenses of Host L.P. are substantially the same as Host Inc., as Host Inc.'s sole significant asset is its investment in Host L.P[10][11] Host L.P. Key Financials (Q2 2022 vs Q2 2021) | Metric | Q2 2022 (in millions) | Q2 2021 (in millions) | YTD 2022 (in millions) | YTD 2021 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,381 | $649 | $2,455 | $1,048 | | Operating Profit (Loss) | $327 | $(68) | $449 | $(234) | | Net Income (Loss) Attributable to Host L.P. | $261 | $(61) | $378 | $(214) | Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures supporting the financial statements, covering organization, portfolio composition, revenue disaggregation, property dispositions, equity, capital structure, dividend policy, and fair value measurements Consolidated Hotel Portfolio as of June 30, 2022 | Country | Number of Hotels | | :--- | :--- | | United States | 73 | | Brazil | 3 | | Canada | 2 | | Total | 78 | - In Q2 2022, the company sold the Sheraton New York Times Square Hotel for $373 million and the YVE Hotel Miami for $50 million, also providing a $250 million bridge loan to the Sheraton buyer[79] - On May 4, 2022, the Board declared a quarterly cash dividend of $0.06 per share, paid on July 15, 2022, and subsequently authorized a Q3 dividend of $0.12 per share on August 3, 2022[77][78] Total Revenues by Geographic Area (YTD ended June 30) | Region | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | | United States | $2,428 | $1,043 | | Brazil | $7 | $2 | | Canada | $20 | $3 | | Total | $2,455 | $1,048 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results of operations, highlighting a significant operational recovery in Q2 2022 driven by strong demand, improved liquidity, reinstated dividends, and an optimistic yet cautious outlook amidst macroeconomic headwinds Operating Results and Outlook This section details the strong operational performance in Q2 2022, with total revenues increasing 112.8% year-over-year and Total RevPAR exceeding pre-pandemic Q2 2019 levels, while projecting full-year 2022 RevPAR between $191 and $195 despite inflation and economic slowdown risks Key Operating Metrics (Q2 2022 vs Q2 2021) | Metric | Q2 2022 (in millions) | Q2 2021 (in millions) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $1,381 | $649 | 112.8% | | Net Income (Loss) | $260 | $(61) | N/M | | Adjusted EBITDAre | $500 | $110 | 354.5% | | Adjusted FFO per diluted share | $0.58 | $0.12 | 383.3% | - All Owned Hotel Total RevPAR for Q2 2022 increased 107.8% compared to Q2 2021 and exceeded pre-pandemic levels from Q2 2019[101][102] - The company projects full-year 2022 RevPAR between $191 and $195, representing a 62.5% to 65.9% increase from 2021 and a decrease of only 2.5% to 4.5% from 2019[108] Strategic Initiatives The company details its capital allocation strategy, including two hotel dispositions in Q2 2022, projected full-year 2022 capital expenditures between $500 million and $575 million, and the 91% completion of the multi-year Marriott transformational capital program - Dispositions in Q2 2022 included the Sheraton New York Times Square Hotel for $373 million and the YVE Hotel Miami for $50 million[111] - Full-year 2022 capital expenditures are expected to be $500 million to $575 million, including $320 million to $355 million for Return on Investment (ROI) projects[112] - The Marriott transformational capital program is 91% complete as of June 30, 2022, with substantial completion expected by year-end 2022[115] Results of Operations This section provides a detailed analysis of the statement of operations, breaking down significant year-over-year increases in revenues across all categories, and analyzing property-level operating expenses which grew slower than revenues, leading to margin expansion and a strong resurgence in group demand Revenue Breakdown (YTD ended June 30) | Category | 2022 (in millions) | 2021 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Rooms | $1,505 | $680 | 121.3% | | Food and beverage | $702 | $214 | 228.0% | | Other | $248 | $154 | 61.0% | | Total revenues | $2,455 | $1,048 | 134.3% | - Group business showed a strong recovery in Q2 2022, with room nights down only 8.5% compared to the same period in 2019, driving a 195.6% year-over-year increase in F&B revenues for the quarter[120][149] - Property-level operating costs increased at a lower rate than revenues, partly due to a lag in hiring, which has been challenged by the tight labor environment[103][124] Liquidity and Capital Resources Management outlines the company's strong liquidity position and capital structure, with $699 million in cash and $1.5 billion available under its credit facility as of June 30, 2022, compliance with all financial covenants, no significant debt maturities until 2024, and an increased share repurchase authorization to $1 billion - As of June 30, 2022, total liquidity included $699 million of cash and cash equivalents and $1.5 billion available under the revolver portion of the credit facility[157] - Total debt was $4.2 billion with a weighted average interest rate of 3.7% and a weighted average maturity of 5 years, with 76% of the debt having a fixed interest rate[169] Credit Facility Covenant Compliance (as of June 30, 2022) | Covenant | Actual Ratio | Requirement | | :--- | :--- | :--- | | Leverage ratio | 2.8x | Max 8.00x | | Fixed charge coverage ratio | 10.2x | Min 1.25x | | Unsecured interest coverage ratio | 9.6x | Min 1.75x | - On August 3, 2022, the Board of Directors increased the company's share repurchase program authorization to $1 billion[159] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the company's exposure to market risks, primarily interest rate and foreign currency exchange rate fluctuations, managed through a high proportion of fixed-rate debt and the use of forward contracts for international operations - As of June 30, 2022, 76% of the company's outstanding debt carried a fixed interest rate, mitigating exposure to interest rate volatility[207] - The company has foreign currency exchange risk from its hotels in Brazil and Canada, which it hedges using forward contracts with a notional amount of CAD 99 million[208] Item 4. Controls and Procedures Management, including the CEO and CFO for both Host Inc. and Host L.P., concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective[211][213] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[212][214] PART II. OTHER INFORMATION This section covers equity repurchase activities and lists the exhibits filed with the Form 10-Q Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's equity repurchase activities, noting no common stock repurchases during Q2 2022, but an increased share repurchase program authorization to $1 billion on August 3, 2022 - On August 3, 2022, the Board of Directors increased the authorization under the share repurchase program to $1 billion[216] Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Number of Common Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining (in millions) | | :--- | :--- | :--- | :--- | | April 2022 | 0 | $0 | $371 | | May 2022 | 0 | $0 | $371 | | June 2022 | 0 | $0 | $371 | | Total | 0 | $0 | $371 | Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications as required by the Sarbanes-Oxley Act of 2002, and interactive data files - The exhibits filed with this report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 for both Host Inc. and Host L.P.[220]