Hilton Reports Second Quarter 2021 Results

Hilton Worldwide Holdings Inc. (NYSE: HLT) today reported its second quarter 2021 results. The following results reflect the material impact that the novel coronavirus pandemic has had on Hilton's business. Highlights include:

• Diluted EPS was $0.46 for the second quarter, and diluted EPS, adjusted for special items, was $0.56

• Net income was $128 million for the second quarter

• Adjusted EBITDA was $400 million for the second quarter

• System-wide comparable RevPAR increased 233.8 percent on a currency neutral basis for the second quarter from the same period in 2020

• Approved 25,900 new rooms for development during the second quarter, bringing Hilton's development pipeline to 401,000 rooms as of June 30, 2021

• Added 19,800 rooms to Hilton's system in the second quarter, contributing to 17,800 net additional rooms during the period and approximately 7.0 percent annualized net unit growth from June 30, 2020

• Fully repaid the $1,190 million outstanding debt balance on the Revolving Credit Facility during the second quarter

• As of July 21, 2021, 99 percent of Hilton's system-wide hotels were open

• Full year 2021 net unit growth is expected to be between 5.0 percent and 5.5 percent

Overview

Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, "We are excited about our strong second quarter performance, which reflects our ongoing recovery from the negative effects of the COVID-19 pandemic. The broader distribution of vaccinations and the easing of travel and other restrictions have allowed for renewed interest in travel and tourism, with families embarking on long-delayed trips, and businesses scheduling in-person meetings again. While the pace of recovery varies by region, particularly with the uncertainty surrounding coronavirus variants, we expect continued strength in leisure demand and further upticks in business travel to drive continued resurgence in the back half of the year. We are also increasingly optimistic on our development, with net unit growth for the full year expected to be between 5.0 percent and 5.5 percent."

The negative impact of the COVID-19 pandemic affected the Asia Pacific region beginning in January 2020, before spanning to the Americas and Europe, Middle East and Africa regions in mid-March 2020. Therefore, the results for the six months ended June 30, 2021 and 2020 for these regions are less comparable than the Asia Pacific region and reflect less improvement, if any, in RevPAR between the two periods, as those regions were not affected for the entirety of the six months ended June 30, 2020. The operations of approximately 300 hotels, primarily located in the U.S. and Europe, were suspended for some period of time during the six months ended June 30, 2021, as compared to approximately 1,205 hotels during the six months ended June 30, 2020. As of June 30, 2021, all but approximately 100 of Hilton's system-wide hotels were open.

For the three months ended June 30, 2021, system-wide comparable RevPAR increased 233.8 percent, compared to the same period in 2020, due to increases in both occupancy and ADR, and fee revenues increased 220 percent. For the six months ended June 30, 2021, system-wide comparable RevPAR increased 23.2 percent, compared to the same period in 2020, due to an increase in occupancy, partially offset by a decrease in ADR, and fee revenues increased 28 percent. These increases reflect the global recovery from the COVID-19 pandemic and the related upward trend in travel and tourism during 2021, particularly during the three months ended June 30, 2021.

For the three months ended June 30, 2021, diluted EPS was $0.46 and diluted EPS, adjusted for special items, was $0.56 compared to $(1.55) and $(0.61), respectively, for the three months ended June 30, 2020. Net income (loss) and Adjusted EBITDA were $128 million and $400 million, respectively, for the three months ended June 30, 2021, compared to $(432) million and $51 million, respectively, for the three months ended June 30, 2020.

For the six months ended June 30, 2021, diluted EPS was $0.08 and diluted EPS, adjusted for special items, was $0.58 compared to $(1.49) and $0.13, respectively, for the six months ended June 30, 2020. Net income (loss) and Adjusted EBITDA were $19 million and $598 million, respectively, for the six months ended June 30, 2021, compared to $(414) million and $414 million, respectively, for the six months ended June 30, 2020.

Development

In the second quarter of 2021, Hilton opened 119 new hotels totaling over 19,800 rooms and achieved net unit growth of 17,800 rooms. In June 2021, the Resorts World Las Vegas opened, Hilton's largest multi-brand property, which includes three premium brands, Hilton Hotels & Resorts, Conrad Hotels & Resorts and LXR Hotels & Resorts. Also during the quarter, Hilton celebrated Tru by Hilton's 5-year anniversary with the opening of the brand's 200th hotel. Hilton had a record amount of conversion signings during the quarter and, in July 2021, opened its first hotel under the Signia by Hilton brand, the Signia by Hilton Orlando Bonnet Creek, re-branded from a Hilton Hotels & Resorts property.

As of June 30, 2021, Hilton's development pipeline totaled nearly 2,590 hotels representing 401,000 rooms throughout 115 countries and territories, including 30 countries and territories where Hilton does not currently have any existing hotels. Additionally, of the rooms in the development pipeline, 247,000 rooms were located outside the U.S., and 203,000 rooms were under construction.

Balance Sheet and Liquidity

As of June 30, 2021, Hilton had $8.9 billion of long-term debt outstanding, excluding deferred financing costs and discount, with a weighted average interest rate of 4.00 percent. Excluding finance lease liabilities and other debt of Hilton's consolidated variable interest entities, Hilton had $8.6 billion of long-term debt outstanding with a weighted average interest rate of 3.95 percent and no scheduled maturities until 2025. During the three months ended June 30, 2021, Hilton fully repaid the $1,190 million outstanding debt balance on its $1.75 billion senior secured revolving credit facility (the "Revolving Credit Facility"), resulting in an available borrowing capacity of $1,690 million as of June 30, 2021, after considering $60 million of outstanding letters of credit. Total cash and cash equivalents were $1,127 million as of June 30, 2021, including $83 million of restricted cash and cash equivalents.

About Hilton

Hilton (NYSE: HLT) is a leading global hospitality company with a portfolio of 18 world-class brands comprising more than 6,600 properties and more than 1 million rooms in 119 countries and territories.

HILTON WORLDWIDE HOLDINGS INC.

DEFINITIONS

Trailing Twelve Month Financial Information

This press release includes certain unaudited financial information for the trailing twelve months ("TTM") ended June 30, 2021, which is calculated as the six months ended June 30, 2021 plus the year ended December 31, 2020 less the six months ended June 30, 2020. This presentation is not in accordance with GAAP. However, the Company believes that this presentation provides useful information to investors regarding its recent financial performance, and it views this presentation of the four most recently completed fiscal quarters as a key measurement period for investors to assess its historical results. In addition, the Company's management uses TTM information to evaluate the Company's financial performance for ongoing planning purposes.

The COVID-19 pandemic had a material adverse impact on the Company's results for the TTM period ended June 30, 2021 when compared to periods prior to the onset of the pandemic in early 2020, and the Company expects it will continue to have a significant adverse impact on the Company's results of operations in the near term. As such, this interim period, as well as upcoming periods, are unlikely to be comparable to periods prior to the onset of the pandemic or to other periods affected by the pandemic, and are not indicative of future performance. As such, TTM information may not be useful for projecting future operating results.

Net Income (Loss), Adjusted for Special Items, and Diluted EPS, Adjusted for Special Items

Net income (loss), adjusted for special items, and diluted earnings (loss) per share ("EPS"), adjusted for special items, are not recognized terms under GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP. In addition, the Company's definition of net income (loss), adjusted for special items, and diluted EPS, adjusted for special items, may not be comparable to similarly titled measures of other companies.

Net income (loss), adjusted for special items, and diluted EPS, adjusted for special items, are included to assist investors in performing meaningful comparisons of past, present and future operating results and as a means of highlighting the results of the Company's ongoing operations.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

EBITDA, presented herein, reflects net income (loss), excluding interest expense, a provision for income tax benefit (expense) and depreciation and amortization. Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude certain items, including gains, losses, revenues and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated equity investments; (ii) foreign currency transactions; (iii) debt restructurings and retirements; (iv) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements; (v) share-based compensation; (vi) reorganization, severance, relocation and other expenses; (vii) non-cash impairment; (viii) amortization of contract acquisition costs; (ix) the net effect of reimbursable costs included in other revenues and other expenses from managed and franchised properties; and (x) other items.

Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenues, adjusted to exclude the amortization of contract acquisition costs and other revenues from managed and franchised properties.

The Company believes that EBITDA, Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors about the Company and its financial condition and results of operations for the following reasons: (i) these measures are among the measures used by the Company's management team to evaluate its operating performance and make day-to-day operating decisions and (ii) these measures are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in the industry. Additionally, these measures exclude certain items that can vary widely across different industries and among competitors within the Company's industry. For instance, interest expense and income taxes are dependent on company specifics, including, among other things, capital structure and operating jurisdictions, respectively, and, therefore, could vary significantly across companies. Depreciation and amortization, as well as amortization of contract acquisition costs, are dependent upon company policies, including the method of acquiring and depreciating assets and the useful lives that are used. For Adjusted EBITDA, the Company also excludes items such as: (i) FF&E replacement reserves for leased hotels to be consistent with the treatment of capital expenditures for property and equipment, where it is capitalized and depreciated over the life of the FF&E; (ii) share-based compensation, as this could vary widely among companies due to the different plans in place and the usage of them; (iii) the net effect of the Company's cost reimbursement revenues and reimbursed expenses, as the Company contractually does not operate the related programs to generate a profit over the terms of the respective contracts; and (iv) other items, such as amounts related to debt restructurings and retirements and reorganization and related severance costs, that are not core to the Company's operations and are not reflective of the Company's operating performance.

EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not recognized terms under GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with GAAP. The Company's definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin may not be comparable to similarly titled measures of other companies and may have limitations as analytical tools.

Net Debt and Net Debt to Adjusted EBITDA Ratio

Net debt and net debt to Adjusted EBITDA ratio, presented herein, are non-GAAP financial measures that the Company uses to evaluate its financial leverage. Net debt is calculated as: (i) long-term debt, including current maturities and excluding unamortized deferred financing costs and discount, and (ii) the Company's share of unconsolidated affiliate debt; reduced by: (a) cash and cash equivalents and (b) restricted cash and cash equivalents. Net debt should not be considered as a substitute to debt presented in accordance with GAAP, and net debt to Adjusted EBITDA ratio should not be considered as an alternative to measures of financial condition derived in accordance with GAAP. Net debt and net debt to Adjusted EBITDA ratio may not be comparable to similarly titled measures of other companies.

The Company believes net debt and net debt to Adjusted EBITDA ratio provide useful information about its indebtedness to investors as they are frequently used by securities analysts, investors and other interested parties to compare the indebtedness of companies.

Comparable Hotels

The Company defines comparable hotels as those that: (i) were active and operating in the Company's system for at least one full calendar year as of the end of the current period, and open January 1st of the previous year; (ii) have not undergone a change in brand or ownership type during the current or comparable periods reported; and (iii) have not sustained substantial property damage, business interruption, undergone large-scale capital projects or for which comparable results were not available. Of the 6,619 hotels in the Company's system as of June 30, 2021, 5,617 hotels were classified as comparable hotels. The 1,002 non-comparable hotels included 43 hotels, or less than one percent of the total hotels in the system, that were removed from the comparable group during the last twelve months because they sustained substantial property damage, business interruption, underwent large-scale capital projects or comparable results were otherwise not available.

When considering business interruption in the context of the Company's definition of comparable hotels, no hotel that had completely or partially suspended operations on a temporary basis at any time as a result of the COVID-19 pandemic was excluded from the definition of comparable hotels on that basis alone. Despite these temporary suspensions of hotel operations, the Company believes that including these hotels within the hotel operating statistics of occupancy, average daily rate ("ADR") and revenue per available room ("RevPAR"), reflects the underlying results of the business for the three and six months ended June 30, 2021 and 2020.

Occupancy

Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels for a given period. Occupancy measures the utilization of the hotels' available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help management determine achievable ADR pricing levels as demand for hotel rooms increases or decreases.

ADR

ADR represents hotel room revenue divided by the total number of room nights sold for a given period. ADR measures average room price attained by a hotel, and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the industry, and management uses ADR to assess pricing levels that the Company is able to generate by type of customer, as changes in rates charged to customers have different effects on overall revenues and incremental profitability than changes in occupancy, as described above.

RevPAR

RevPAR is calculated by dividing hotel room revenue by the total number of room nights available to guests for a given period. Management considers RevPAR to be a meaningful indicator of the Company's performance as it provides a metric correlated to two primary and key drivers of operations at a hotel or group of hotels, as previously described: occupancy and ADR. RevPAR is also a useful indicator in measuring performance over comparable periods for comparable hotels.

References to RevPAR, ADR and occupancy throughout this press release are presented on a comparable basis, and references to RevPAR and ADR are presented on a currency neutral basis, unless otherwise noted. As such, comparisons of these hotel operating statistics for the three and six months ended June 30, 2021 and 2020 use the exchange rates for the three and six months ended June 30, 2021, respectively.