Hilton Reports Third Quarter 2022 Results

Hilton Worldwide Holdings Inc. (NYSE: HLT) today reported its third quarter 2022 results. Highlights include:

• Diluted EPS was $1.26 for the third quarter, and diluted EPS, adjusted for special items, was $1.31

• Net income was $346 million for the third quarter, exceeding the high end of guidance

• Adjusted EBITDA was $732 million for the third quarter, exceeding the high end of guidance

• System-wide comparable RevPAR increased 29.9 percent, on a currency neutral basis, for the third quarter compared to the same period in 2021

• System-wide comparable RevPAR increased 5.0 percent, on a currency neutral basis, for the third quarter compared to the same period in 2019

• Approved 19,900 new rooms for development during the third quarter, bringing Hilton's development pipeline to 416,000 rooms as of September 30, 2022

• Added 12,900 rooms to Hilton's system in the third quarter, contributing to 12,100 net additional rooms in Hilton's system during the period

• Repurchased 4.0 million shares of Hilton common stock during the third quarter, bringing total capital return, including dividends, to $538 million for the quarter and $1,324 million year to date through October

• Full year 2022 system-wide comparable RevPAR is expected to increase between 40 percent and 43 percent, on a currency neutral basis, compared to 2021; full year net income is projected to be between $1,219 million and $1,240 million; full year Adjusted EBITDA is projected to be between $2,500 million and $2,530 million

• Full year 2022 capital return is projected to be between $1.5 billion and $1.9 billion

Overview

Christopher J. Nassetta, President & Chief Executive Officer of Hilton, said, "The third quarter marked an important milestone in our recovery as system-wide RevPAR exceeded the same period in 2019 for the first time since the pandemic began. Our diluted EPS, adjusted for special items and Adjusted EBITDA exceeded the high end of our guidance. Improved performance reflected the continued strength in leisure travel, as well as recovering business transient and group demand. We expect these strong trends to continue throughout the fourth quarter with system-wide RevPAR once again exceeding prior peaks."

For the three months ended September 30, 2022, system-wide comparable RevPAR increased 29.9 percent compared to the same period in 2021, due to increases in both occupancy and ADR, and fee revenues increased 33 percent. For comparison to pre-pandemic results, system-wide comparable RevPAR for the three months ended September 30, 2022 was up 5.0 percent compared to the same period in 2019.

For the nine months ended September 30, 2022, system-wide comparable RevPAR increased 49.6 percent compared to the same period in 2021, due to increases in both occupancy and ADR, and fee revenues increased 51 percent. For comparison to pre-pandemic results, system-wide comparable RevPAR for the nine months ended September 30, 2022 was down 4.0 percent compared to the same period in 2019.

For the three months ended September 30, 2022, diluted EPS was $1.26 and diluted EPS, adjusted for special items, was $1.31 compared to $0.86 and $0.78, respectively, for the three months ended September 30, 2021. Net income and Adjusted EBITDA were $346 million and $732 million, respectively, for the three months ended September 30, 2022, compared to $240 million and $519 million, respectively, for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, diluted EPS was $3.32 and diluted EPS, adjusted for special items, was $3.31 compared to $0.94 and $1.36, respectively, for the nine months ended September 30, 2021. Net income and Adjusted EBITDA were $924 million and $1,859 million, respectively, for the nine months ended September 30, 2022, compared to $259 million and $1,117 million, respectively, for the nine months ended September 30, 2021.

Development

In the third quarter of 2022, Hilton opened 80 new hotels contributing 12,900 additional rooms to Hilton's system and achieved net unit growth of 12,100 rooms. During the quarter, Hilton opened the 25,000th room under the Curio Collection by Hilton brand and the 600th Hilton Hotels & Resorts property. Further, Hilton continued to expand its luxury portfolio with the opening of the Waldorf Astoria Kuwait, the brand's first property in the country.

As of September 30, 2022, Hilton's development pipeline totaled more than 2,810 hotels representing nearly 416,000 rooms throughout 112 countries and territories, including 29 countries and territories where Hilton does not currently have any existing hotels. Additionally, of the rooms in the development pipeline, 204,200 of the rooms were under construction and 242,600 of the rooms were located outside the U.S.

Balance Sheet and Liquidity

As of September 30, 2022, Hilton had $8.8 billion of long-term debt outstanding, excluding the deduction for deferred financing costs and discount, with a weighted average interest rate of 4.29 percent. Further 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 4.28 percent and no scheduled maturities until 2025. No debt amounts were outstanding under Hilton's $1.75 billion senior secured revolving credit facility as of September 30, 2022, which had an available borrowing capacity of $1,690 million after considering $60 million of outstanding letters of credit. Total cash and cash equivalents were $1,362 million as of September 30, 2022, including $80 million of restricted cash and cash equivalents.

During the third quarter of 2022, Hilton repurchased 4.0 million shares of its common stock at a cost of $497 million and an average price per share of $124.85. During the nine months ended September 30, 2022, Hilton repurchased 8.5 million shares of its common stock at a cost of $1,107 million and an average price per share of $130.47. Year-to-date through October 2022, Hilton repurchased 9.6 million shares of its common stock for $1,242 million and the amount remaining under Hilton's stock repurchase program was $994 million.

In September 2022, Hilton paid a quarterly cash dividend of $0.15 per share of common stock, for a total of $41 million. In October 2022, Hilton's board of directors authorized a regular quarterly cash dividend of $0.15 per share of common stock to be paid on or before December 30, 2022 to holders of record of its common stock as of the close of business on November 10, 2022.

Outlook

Share-based metrics in Hilton's outlook include actual share repurchases to date, but do not include the effect of potential share repurchases hereafter.

Full Year 2022

• System-wide comparable RevPAR, on a currency neutral basis, is expected to increase between 40 percent and 43 percent compared to 2021, and to be down between 1 percent and 3 percent from 2019.
• Diluted EPS is projected to be between $4.40 and $4.48.
• Diluted EPS, adjusted for special items, is projected to be between $4.46 and $4.54.
• Net income is projected to be between $1,219 million and $1,240 million.
• Adjusted EBITDA is projected to be between $2,500 million and $2,530 million.
• Contract acquisition costs and capital expenditures, excluding amounts indirectly reimbursed by hotel owners, are expected to be between $250 million and $275 million.
• Capital return is projected to be between $1.5 billion and $1.9 billion.
• General and administrative expenses are projected to be between $380 million and $400 million.
• Net unit growth is expected to be approximately 5.0 percent.

Fourth Quarter 2022

• System-wide comparable RevPAR, on a currency neutral basis, is expected to increase between 19 percent and 23 percent compared to the fourth quarter of 2021, and to increase between 2 percent and 6 percent from the fourth quarter of 2019.
• Diluted EPS is projected to be between $1.08 and $1.15.
• Diluted EPS, adjusted for special items, is projected to be between $1.15 and $1.23.
• Net income is projected to be between $295 million and $316 million.
• Adjusted EBITDA is projected to be between $641 million and $671 million.

About Hilton

Hilton (NYSE: HLT) is a leading global hospitality company with a portfolio of 18 world-class brands comprising more than 7,000 properties and more than 1.1 million rooms, in 123 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 September 30, 2022, which is calculated as the nine months ended September 30, 2022 plus the year ended December 31, 2021 less the nine months ended September 30, 2021. 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 pandemic had an adverse impact on certain of the Company's results for the TTM period ended September 30, 2022 when compared to periods prior to the onset of the pandemic. While the Company has experienced strong signs of economic recovery since early 2021, this TTM period, as well as upcoming periods, are not considered comparable, and no periods affected by the pandemic are expected to be comparable to future periods. 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 expenses. 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 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's 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 expenses, 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 accounting purposes. 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 depreciation of such capitalized assets is reported within depreciation and amortization expenses; (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 debt 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, either in isolation or as a substitute, for net income (loss) or other measures of financial performance or liquidity, including cash flows, derived in accordance with GAAP. Further, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools, may not be comparable to similarly titled measures of other companies and should not be considered as other methods of analyzing the Company's results as reported under GAAP.

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: long-term debt, including current maturities and excluding the deduction for unamortized deferred financing costs and discount; reduced by: (i) cash and cash equivalents and (ii) restricted cash and cash equivalents. Beginning as of March 31, 2022, the Company has modified its definition of net debt to no longer include Hilton's share of unconsolidated affiliate debt. Since this debt is not consolidated by the Company, the modified definition more accurately reflects how the Company and the Company's investors evaluate Hilton's financial leverage, as well as its indebtedness.

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 between 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 6,988 hotels in the Company's system as of September 30, 2022, 5,847 hotels were classified as comparable hotels. The 1,141 non-comparable hotels included 260 hotels, or less than four percent of the total hotels in the Company's system, that were removed from the comparable group during the last twelve months because they have sustained substantial property damage, business interruption, undergone 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 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"), if they would have otherwise been included, reflects the underlying results of the business for the three and nine months ended September 30, 2022 and 2021.

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 the 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 occupancy, ADR and RevPAR throughout this press release are presented on a comparable basis, based on the comparable hotels as of September 30, 2022, and references to ADR and RevPAR are presented on a currency neutral basis, unless otherwise noted. As such, comparisons of these hotel operating statistics for the three and nine months ended September 30, 2022 and 2021 or 2019, use the foreign currency exchange rates used to translate the results of the Company's foreign operations within its unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022, respectively.