Hilton Worldwide Holdings Inc. — Q1 2022 Form 10-Q
Period: Three months ended March 31, 2022; comparisons are with Q1 2021 unless noted. Hilton operates managed, franchised, owned and leased hotels. At quarter-end, its system comprised 6,892 hotels and resorts with 1,082,728 rooms in 122 countries and territories.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $1.721 billion | $874 million |
| Revenue excluding managed/franchised property reimbursements | $670 million | $353 million |
| Operating income | $369 million | $21 million |
| Net income attributable to Hilton stockholders | $212 million; diluted EPS $0.75 | Net loss $108 million; diluted EPS $(0.39) |
| Adjusted EBITDA | $448 million | $198 million |
| Operating cash flow | $195 million | $(171) million |
| Cash and cash equivalents | $1.432 billion | $1.427 billion at Dec. 31, 2021 |
| Total debt, excluding unamortized financing costs and discount | Approximately $8.8 billion | Approximately $8.9 billion at Dec. 31, 2021 |
Total revenue includes $1.051 billion of revenue from managed and franchised properties, substantially offset by related expenses; these reimbursements are not equivalent to fee revenue. Reported operating margin was approximately 21.4% of total revenue, but is affected by these pass-through amounts. The management and franchise segment generated $512 million of segment operating income; the ownership segment recorded a $37 million operating loss.
- System-wide comparable RevPAR rose 80.5% year over year to $80.84, with occupancy of 58.1% and ADR of $139.17. Versus Q1 2019, RevPAR remained 17.0% lower, occupancy 11.4 percentage points lower, and ADR 0.7% lower.
- Fee growth reflected stronger demand and hotel performance, higher licensing fees from strategic partnerships and HGV, and system additions. Net additions were 55 hotels and 7,800 rooms; the pipeline totaled 2,730 hotels and 410,400 rooms.
- Cash used in investing was $26 million; cash used in financing was $167 million, including $121 million of cash outflow for repurchases and $55 million of share-based compensation tax withholdings. Cash, including restricted cash, ended at $1.510 billion.
Liquidity, capital allocation and outlook
Hilton had $1.690 billion of available capacity on its $1.75 billion revolving credit facility after $60 million of letters of credit. The company stated that cash and available sources of liquidity should meet anticipated requirements for the foreseeable future under current conditions. It reported no material debt maturities before May 2025.
Hilton resumed repurchases in March, buying approximately 907,000 shares for $130 million; approximately $2.1 billion remained authorized. In May 2022, the board authorized a $0.15-per-share quarterly dividend for Q2 and said it expected regular quarterly dividends to continue. The filing provides no quantified earnings or RevPAR guidance.
Management said the hospitality recovery materially improved results, while cautioning that pandemic-affected periods are not necessarily comparable with one another or indicative of future performance. Hilton expected pre-sold Hilton Honors points to be used by the end of Q2 2022, after which American Express point purchases were expected to resume and support operating cash flow.
Material risks, contingencies and unusual items
- COVID-19 variants, renewed restrictions and uneven travel recovery remain risks; China restrictions and lockdowns restrained Asia Pacific RevPAR improvement.
- The Russia-Ukraine conflict did not materially affect Q1 results, and the company’s hotel exposure in the two countries was less than 1% of managed and franchised hotels. Hilton warned that broader effects—including higher costs, weaker travel demand, supply disruption, cyberattacks and market volatility—could adversely affect the business.
- Other identified risks include labor shortages, supply-chain disruption, competition, third-party owner performance, international operations, foreign exchange and interest-rate exposure, and indebtedness.
- At quarter-end, potential cash outlays included $9 million under hotel performance guarantees and $61 million under debt guarantees and letters of credit to hotel owners. Hilton said pending claims and litigation were not expected to have a material adverse effect, though an unfavorable resolution could affect a particular period.
- Q1 2021 included a $69 million debt-extinguishment loss; Q1 2022 included an $11 million gain from remeasurement of investments in unconsolidated affiliates. Q1 2022 tax expense was $80 million, versus a $35 million tax benefit in Q1 2021.
Important facts for investors to verify
- Whether RevPAR recovery and fee growth persist across regions, particularly Asia Pacific, and how results compare with pre-pandemic levels.
- Whether the development pipeline converts to openings on schedule amid labor, supply-chain and financing constraints.
- Cash generation after the expected end of the Honors points pre-sale balance, alongside repurchases, dividends and debt service.
- The effect of the Russia-Ukraine conflict, pandemic developments and broader cost inflation on travel demand and hotel-owner economics.
- Debt, lease and guarantee obligations, and the assumptions underlying management’s liquidity assessment.