Marriott International, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited results. Marriott operates, franchises, and licenses lodging brands, with U.S. & Canada and International as reportable segments; it owns relatively few properties.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $5.338 billion | $3.149 billion | $9.537 billion | $5.465 billion |
| Net fee revenue | $1.054 billion | $624 million | $1.845 billion | $1.052 billion |
| Operating income | $950 million | $486 million | $1.508 billion | $570 million |
| Net income | $678 million | $422 million | $1.055 billion | $411 million |
| Diluted EPS | $2.06 | $1.28 | $3.20 | $1.25 |
| Operating cash flow | Not provided quarterly | Not provided quarterly | $1.048 billion | $126 million |
- Q2 revenue increased 69% year over year and operating income 95%; first-half revenue increased 74% and operating income 164%. Total revenue includes cost reimbursements that are substantially offset by reimbursed expenses; Q2 reimbursement revenue was $3.920 billion against $3.827 billion of expenses.
- Worldwide systemwide comparable RevPAR rose 70.6% year over year in Q2 and 80.5% in the first half. Q2 worldwide RevPAR was 2.9% below Q2 2019; U.S. & Canada was 1.3% above 2019, while International was 14.1% below. Greater China remained weak.
- Cash and equivalents were $546 million at June 30, 2022, versus $1.393 billion at year-end 2021. Total debt was $8.788 billion, down from $10.138 billion; long-term debt weighted-average interest rate was 3.7%, with an approximately 6.6-year weighted-average maturity. Credit Facility availability was $4.2 billion; Marriott reported compliance with its covenants.
- The current ratio was 0.5 to 1.0. First-half cash flow from operations was $1.048 billion; investing cash outflow was $91 million and financing cash outflow was $1.811 billion. Capital and technology spending was $119 million.
- First-half dividends were $98 million and share repurchases were $300 million. Stockholders’ equity was $1.772 billion at quarter-end.
Material changes and drivers
- Recovery in travel demand lifted fees, owned and leased hotel results, and segment profits. Q2 segment profit increased 111% in U.S. & Canada and 166% Internationally; first-half increases were 143% and 509%, respectively.
- Q2 fee revenue growth reflected higher RevPAR and hotel profits; franchise fees also benefited from co-brand card fees and property growth. First-half results included higher incentive fees and improved owned/leased operations.
- Prior-year tax benefits from favorable resolution of Legacy-Starwood tax audits contributed to the comparison: Q2 2021 included a $118 million reserve release. The 2022 Q2 effective tax rate was 22.8%, versus a tax benefit in the prior-year quarter.
- Foreign currency translation reduced first-half comprehensive income by $313 million; accumulated other comprehensive loss was $651 million at June 30.
Outlook, risks, and contingencies
- Management expected 2022 gross rooms growth to approach 5% and net rooms growth of 3.0%–3.5%, including the impact of suspending operations in Russia. The development pipeline exceeded 495,000 rooms.
- Expected full-year 2022 capital expenditures and other investments were approximately $600–$650 million, including about $200 million for maintenance capital and the new headquarters. Management expected to continue dividends and share repurchases during the remainder of 2022.
- Management said COVID-19 effects remained uncertain and could continue to weigh on results; labor shortages were challenging hiring in some U.S. markets. Recovery was led by leisure and improving group demand, while business transient demand improved more moderately.
- The Starwood data-security incident remains subject to consumer litigation and regulatory investigations. Marriott said additional losses are reasonably possible but could not estimate any amount beyond costs already incurred; it expects further legal, regulatory, cybersecurity, and compliance expenses. The Fourth Circuit granted Marriott permission to appeal a U.S. class-certification ruling in July 2022.
- Guarantees had a maximum potential funding amount of $267 million and a recorded liability of $123 million. A separate $300 million recorded guarantee relates to the Sheraton Grand Chicago put option, exercisable in the first half of 2024; a related closing is expected in Q4 2024 if exercised.
- Projected Deemed Repatriation Transition Tax payments totaled $306 million, including $80 million due within 12 months. Marriott reported no material changes to its previously disclosed risk factors or material cash requirements.
Important facts for investors to verify
- Whether travel recovery, especially in Greater China and other international markets, continues to support RevPAR and fee growth.
- Debt repayment, covenant headroom, liquidity, and the effect of revolving-credit borrowing costs and maturities.
- Actual capital spending, room growth, dividends, and repurchases versus management’s stated expectations.
- Future costs and outcomes of the Starwood litigation and regulatory investigations, for which the filing provides no clear loss estimate.
- How much reported revenue growth reflects underlying fees and hotel economics versus reimbursed costs, and how seasonal or short-term factors affect interim results.