Hilton Worldwide Reports Q2 2014 Net Income of $209 million: RevPAR Increased 6.7%
August 1, 2014 12:03pm
For the three months ended June 30, 2014, earnings per share ("EPS") was $0.21 compared to $0.17 for the three months ended June 30, 2013. Adjusted EBITDA increased over 10 percent to $651 million for the three months ended June 30, 2014, compared to $590 million for the three months ended June 30, 2013 and net income attributable to Hilton stockholders was $209 million for the three months ended June 30, 2014 compared to $155 million for the three months ended June 30, 2013.
For the six months ended June 30, 2014, EPS was $0.34 compared to $0.20 for the six months ended June 30, 2013. Adjusted EBITDA increased 15 percent to $1,195 million for the six months ended June 30, 2014, compared to $1,037 million for the six months ended June 30, 2013 and net income attributable to Hilton stockholders was $332 million for the six months ended June 30, 2014 compared to $189 million for the six months ended June 30, 2013.
Christopher J. Nassetta, President & Chief Executive Officer of Hilton Worldwide, said, "We had another great quarter led by a 6.7 percent increase in system-wide RevPAR, and as a result, we are increasing our Adjusted EBITDA and EPS outlook for the year.
"This quarter, we further expanded and diversified our brand portfolio with the launch of our newest brand, Curio - A Collection by Hilton," Nassetta added. "We continue to increase the global presence of our industry-leading brands, with over 8,000 new rooms opening during the second quarter. We also remain #1 in rooms under construction in every major region of the world, with an 18 percent share of all rooms under construction globally, totaling 542 hotels and 106,000 rooms.
"I am particularly proud that Hilton Worldwide continues to innovate to better serve our guests. For the first time in the industry, our guests can check-in, using their Hilton HHonors account on a mobile device, tablet or computer, and choose their exact room from digital floor plans before arriving at their hotel. This capability will be available at U.S.-based Hilton Worldwide properties across six of our brands by the end of the summer, and by the end of 2014, guests at more than 4,000 properties in 80-plus countries can experience this new technology. Moving forward, we will give guests even more choice and control with the ability to use their smart phones as a room key and are pleased to announce that by the end of 2015, all U.S. hotels across four brands will have this capability, with the entire global portfolio of brands following soon after."
Management and Franchise
Management and franchise fees were $371 million in the second quarter of 2014, an increase of 14 percent compared to the same period in 2013. Excluding $3 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 13 percent. RevPAR at comparable managed and franchised hotels in the second quarter increased 7.0 percent on a currency neutral basis (a 6.8 percent increase in actual dollars) compared to the same period in 2013.
Revenues from the ownership segment were $1,126 million in the second quarter of 2014, an increase of 4 percent from the same period in 2013. Ownership segment Adjusted EBITDA for the second quarter of 2014 was $291 million. Ownership segment Adjusted EBITDA increased 8 percent(1) from the same period in 2013 and Adjusted EBITDA margin increased approximately 100 basis points(1). RevPAR at comparable hotels in the ownership segment increased 4.8 percent on a currency neutral basis (a 5.9 percent increase in actual dollars) in the second quarter of 2014 compared to the same period in 2013, led by an increase in ADR of 4.6 percent at comparable ownership segment hotels in the United States. Outside of the United States, RevPAR at comparable ownership segment hotels increased by 2.4 percent on a currency neutral basis (a 5.0 percent increase in actual dollars).
(1) Excluding $3 million of affiliate management fees in the second quarter of 2014 that are not comparable year over year as a result of a modification to certain affiliate management agreements. Ownership segment Adjusted EBITDA margin is calculated as ownership segment Adjusted EBITDA divided by ownership segment revenues.
Timeshare segment Adjusted EBITDA for the second quarter of 2014 was $69 million, a 15 percent increase compared to the same period in 2013. Timeshare revenues increased 6 percent to $276 million in the second quarter of 2014 compared to the same period in 2013, led by an $8 million increase in revenue from resort operations compared to the second quarter of 2013, as well as a $4 million increase in timeshare sales revenue, including a $3 million increase in revenue from sales of timeshare units developed by third parties. During the second quarter of 2014, 57 percent of intervals sold were developed by third parties. Our supply of third-party developed timeshare intervals was approximately 88,000, or 82 percent of our total supply, as of June 30, 2014.
Hilton Worldwide opened 56 hotels with over 8,000 rooms in the second quarter of 2014 and achieved net unit growth of over 7,000 rooms. On May 16, 2014, Hilton Worldwide entered a new country with the opening of the Hilton Garden Inn Astana, Kazakhstan, increasing Hilton Worldwide's global presence to 93 countries and territories.
On June 2, 2014, Hilton Worldwide launched a new brand: Curio - A Collection by Hilton. Created for travelers who seek local discovery and experiences, Curio will consist of a carefully selected collection of hotels that will retain their unique identity but are expected to deliver the many benefits of Hilton Worldwide's system, including the Hilton HHonors guest loyalty program. As of June 30, 2014, nine Curio properties comprising more than 4,100 rooms, including the SLS Las Vegas Hotel & Casino, were either in the pipeline or had signed letters of intent to be included in the collection.
As of June 30, 2014, Hilton Worldwide had the largest rooms pipeline in the lodging industry, according to Smith Travel Research, Inc. ("STR"), with approximately 210,000 rooms at 1,230 hotels throughout 75 countries and territories, of which 56 percent, or over 117,000 rooms, were located outside of the United States. Over half of the development pipeline, or over 106,000 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:
Balance Sheet and Liquidity
During the second quarter of 2014, Hilton made $250 million of voluntary prepayments on its senior secured term loan facility. In July 2014, an additional $150 million voluntary prepayment was made, bringing the total voluntary prepayments to $600 million through July 2014.
In June 2014, Hilton completed a securitization of approximately $357 million of gross timeshare financing receivables and issued approximately $304 million of 1.77 percent notes and approximately $46 million of 2.07 percent notes, which have a stated maturity date in November 2026. The proceeds from the asset-backed notes were used to reduce the outstanding balance on the non-recourse timeshare financing receivables credit facility (the "Timeshare Facility").
As of June 30, 2014, Hilton had $11.3 billion of outstanding indebtedness with a weighted average interest rate of 4.0 percent, excluding $997 million of non-recourse debt.
On June 27, 2014, the Company completed a successful secondary offering of 103,500,000 shares of Hilton Worldwide common stock by certain selling stockholders affiliated with The Blackstone Group L.P. at a price to the public of $22.50, resulting in gross proceeds of over $2.3 billion. Hilton Worldwide did not offer any shares of common stock or receive any proceeds from the sale of shares in this offering. In addition, none of Hilton Worldwide's officers or directors sold any shares of common stock beneficially owned by them in this offering. This offering nearly doubled the available public float of Hilton Worldwide common stock.
Total cash and cash equivalents were $829 million as of June 30, 2014, including $284 million of restricted cash and cash equivalents. No borrowings were outstanding under the $1.0 billion revolving credit facility as of June 30, 2014.
Full Year 2014
Hilton Worldwide will host a conference call to discuss second quarter 2014 results on August 1, 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 67361605. 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 67361605.
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q2 2014 results
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