Hilton(US:HLT)2024-04-24 14:02PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2024, detailing balance sheets, operations, and cash flows, with total assets reaching $15.9 billion and net income at $268 million Condensed Consolidated Balance Sheets As of March 31, 2024, total assets increased to $15.93 billion, driven by higher cash, while total liabilities rose to $18.75 billion due to increased long-term debt, resulting in a $2.83 billion stockholders' deficit Balance Sheet Summary (in millions) | Balance Sheet Items | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $15,932 | $15,401 | | Cash and cash equivalents | $1,346 | $800 | | Total Liabilities | $18,749 | $17,748 | | Long-term debt | $10,135 | $9,157 | | Total Stockholders' Deficit | ($2,833) | ($2,360) | Condensed Consolidated Statements of Operations Total revenues for Q1 2024 increased to $2.57 billion from $2.29 billion, with net income attributable to Hilton stockholders rising to $265 million, or $1.04 per diluted share Q1 2024 vs. Q1 2023 Performance (in millions, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $2,573 | $2,293 | | Operating Income | $533 | $498 | | Net Income (to Hilton Stockholders) | $265 | $206 | | Diluted EPS | $1.04 | $0.77 | | Dividends per share | $0.15 | $0.15 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $346 million, investing activities used $27 million, and financing activities provided $238 million, primarily due to $1.2 billion in new debt issuance offset by $666 million in share repurchases Cash Flow Summary (in millions) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $346 | $330 | | Net cash used in investing activities | ($27) | ($85) | | Net cash provided by (used in) financing activities | $238 | ($547) | Note 2: Acquisitions Hilton expanded its brand portfolio through acquisitions, signing an agreement to acquire Graduate Hotels for $210 million and completing the acquisition of a controlling interest in Sydell Group's NoMad brand - Signed a purchase agreement to acquire the Graduate Hotels brand for $210 million in cash, expected to close in Q2 202421 - Completed an all-cash acquisition of a controlling financial interest in the Sydell Group, owner of the NoMad brand, in April 202421 Note 6: Debt Total long-term debt increased to $10.14 billion, following the issuance of $1 billion in new Senior Notes in March 2024, with proceeds used for debt repayment and general corporate purposes - In March 2024, issued $550 million of 5.875% Senior Notes due 2029 and $450 million of 6.125% Senior Notes due 203233 - As of March 31, 2024, no amounts were outstanding under the Revolving Credit Facility, which had an available borrowing capacity of $1,913 million32 Note 12: Business Segments The Management and Franchise segment remained the primary profitability driver, with operating income increasing to $765 million, while the Ownership segment improved to an operating income of $2 million in Q1 2024 Segment Operating Income (in millions) | Segment | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Management and franchise | $765 | $667 | | Ownership | $2 | ($7) | | Total Segment Operating Income | $767 | $660 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 performance to continued travel demand growth, particularly internationally, with system-wide RevPAR up 2.0%, net unit growth of 5.6%, Adjusted EBITDA reaching $750 million, and $662 million returned to shareholders via share repurchases - As of March 31, 2024, Hilton's portfolio included 7,626 properties with 1,197,329 rooms in 126 countries and territories67 - The Hilton Honors guest loyalty program grew by 18% year-over-year to 188 million members67 Reconciliation of Net Income to Adjusted EBITDA (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income | $268 | $209 | | EBITDA | $532 | $455 | | Adjusted EBITDA | $750 | $641 | System Growth and Development Pipeline Hilton expanded its fee-based business in Q1 2024 with net additions of 94 hotels and 14,200 rooms, achieving 5.6% net unit growth, while maintaining a robust development pipeline of 3,375 hotels and 472,300 rooms Development Activity - Q1 2024 | Metric | Hotels | Rooms | | :--- | :--- | :--- | | Openings | 106 | 16,800 | | Net Additions | 94 | 14,200 | | Development Pipeline (End of Period) | 3,375 | 472,300 | - Of the total rooms in the development pipeline, 229,700 were under construction and 267,900 were located outside of the U.S.73 Hotel Operating Statistics System-wide comparable RevPAR increased by 2.0% in Q1 2024, driven by ADR and occupancy gains, with strong international growth offsetting a slight RevPAR decline in the U.S. Comparable Hotel Operating Statistics by Region (Q1 2024 vs. Q1 2023) | Region | Occupancy Change (pts) | ADR Change (%) | RevPAR Change (%) | | :--- | :--- | :--- | :--- | | System-wide | 0.2 | 1.7% | 2.0% | | U.S. | (0.6) | 0.5% | (0.4)% | | Americas (ex-U.S.) | 1.4 | 5.0% | 7.3% | | Europe | 3.1 | 4.5% | 9.7% | | MEA | 2.4 | 11.0% | 14.8% | | Asia Pacific | 1.3 | 5.7% | 7.9% | Revenues Analysis Franchise and licensing fees increased 12.4% to $571 million, driven by strategic partnerships, while management fees rose 21.4% to $176 million due to RevPAR increases and net managed hotel additions - Franchise and licensing fees increased 12.4% due to growth in license fees from co-branded credit cards and HGV89 - Management fees increased 21.4%, primarily due to an 8.2% RevPAR increase at comparable managed hotels and the addition of 31 net managed hotels since January 202391 Liquidity and Capital Resources As of March 31, 2024, Hilton held $1.42 billion in cash and $1.91 billion in available credit, having used $662 million for share repurchases and issued $1.0 billion in new Senior Notes to bolster liquidity - Repurchased approximately 3.4 million shares of common stock for $662 million in Q1 2024108 - As of March 31, 2024, approximately $3.1 billion remained available for share repurchases under the current program108 - Total indebtedness was approximately $10.3 billion as of March 31, 2024, with no material debt maturing before May 2025117118 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks stem from SOFR changes on variable-rate debt and foreign currency fluctuations, partially hedged by derivatives, with no material change from 2023 Form 10-K disclosures - Primary market risks are changes in one-month SOFR and foreign currency exchange rates120 - The company's exposure to market risk has not materially changed from what was previously disclosed in the 2023 Form 10-K120 Item 4. Controls and Procedures As of March 31, 2024, the CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period121 - There were no material changes in the company's internal control over financial reporting during the most recent fiscal quarter122 PART II OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various ordinary course legal proceedings, with management believing adequate reserves are in place and no material adverse effect on financial position or results is expected - The company does not expect the ultimate resolution of pending litigation to have a material adverse effect on its financial position or results124 Item 1A. Risk Factors No material changes were reported from the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - No material changes from the risk factors disclosed in the 2023 Form 10-K were reported as of March 31, 2024125 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2024, Hilton repurchased 3,377,029 shares of common stock for approximately $662 million at an average price of $196.17 per share under its stock repurchase program Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | 1,281,038 | $185.26 | | February 2024 | 988,846 | $197.32 | | March 2024 | 1,107,145 | $207.76 | | Total | 3,377,029 | $196.17 | - The stock repurchase program has an authorized total of $11 billion, with repurchases allowed through open market purchases or privately-negotiated transactions127 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None128 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable128 Item 5. Other Information No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement during Q1 2024 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement in Q1 2024129 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, debt indentures, award agreements, and CEO/CFO certifications - Exhibits filed include the Indenture for the new 5.875% and 6.125% Senior Notes, forms of 2024 employee award agreements, and Sarbanes-Oxley certifications130