Hilton Worldwide Holdings Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, future financial results, liquidity and capital resources and other non-historical statements. In some cases, you can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "forecasts," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties including, among others, risks inherent to the hospitality industry; macroeconomic factors beyond our control, such as inflation, changes in interest rates, challenges due to labor shortages or disputes and supply chain disruptions; competition for hotel guests and management and franchise contracts; risks related to doing business with third-party hotel owners; performance of our information technology systems; growth of reservation channels outside of our system; risks of doing business outside of the U.S.; risks associated with conflicts in Eastern Europe and the Middle East and other geopolitical events; and our indebtedness. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include, but are not limited to, those described under "Part I—Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. Overview Our Business Hilton is one of the largest global hospitality companies, with 7,626 properties comprising 1,197,329 rooms in 126 countries and territories as of March 31, 2024. Our premier brand portfolio includes luxury, lifestyle, full service, focused service and all-suites hotel brands, as well as timeshare brands. As of March 31, 2024, we had 188 million members in our award-winning guest loyalty program, Hilton Honors, an increase of 18 percent from March 31, 2023. Segments and Regions We analyze our operations and business by both operating segments and geographic regions. Our operations consist of two reportable segments that are based on similar products and services: (i) management and franchise and (ii) ownership. The management and franchise segment provides services, including hotel management and licensing of our IP. Revenues from this segment include: (i) management and franchise fees charged to third-party hotel owners; (ii) licensing fees from our strategic partners, including co-branded credit card providers, and HGV; and (iii) fees for managing the hotels in our ownership segment. As a manager of hotels, we typically are responsible for supervising or operating the hotel in exchange for management fees. As a franchisor of hotels, we charge franchise fees in exchange for the use of one of our brand names and/or related commercial services, such as our reservations system, marketing and information technology services, while a third party manages or operates such franchised hotels. The ownership segment primarily derives revenues from nightly hotel room sales, food and beverage sales and other services at our consolidated owned and leased hotels. We conduct business in three distinct geographic regions: (i) the Americas; (ii) Europe, Middle East and Africa ("EMEA"); and (iii) Asia Pacific. The Americas region includes North America, South America and Central America, including all Caribbean nations. Although the U.S., which represented 67 percent of our system-wide hotel rooms as of March 31, 2024, is included in the Americas region, it is often analyzed separately and apart from the Americas region and, as such, it is presented separately within our hotel operating statistics in "—Results of Operations." The EMEA region includes Europe, which represents the western-most peninsula of Eurasia stretching from Iceland in the west to Russia in the east, and the Middle East and Africa ("MEA"), which represents the Middle East region and all African nations, including the Indian Ocean island nations. Europe and MEA are often analyzed separately and, as such, are presented separately within our hotel operating 15 statistics in "—Results of Operations." The Asia Pacific region includes the eastern and southeastern nations of Asia, as well as India, Australia, New Zealand and the Pacific Island nations. System Growth and Development Pipeline Our strategic objectives include the continued expansion of our global hotel network, in particular our fee-based business. As we enter into new management and franchise contracts and enter into strategic agreements to complement our hotel portfolio, we expand our business with limited or no capital investment by us as the manager, franchisor or licensor, since the capital required to build, renovate and maintain hotels is typically provided by the third-party owners with whom we contract to provide management services or license our IP. Prior to approving the addition of new hotels to our management and franchise development pipeline, we evaluate the economic viability of the hotel based on its geographic location, the credit quality of the third-party owner and other factors. By increasing the number of management and franchise contracts with third-party owners, over time we expect to increase revenues, overall return on invested capital and cash available to support our business needs. See further discussion on our cash management policy in "—Liquidity and Capital Resources." The current economic environment, including elevated levels of inflation and interest rates, has posed certain challenges to the execution of our growth strategy, which have included and may continue to include delays in openings and new development. In addition to our current hotel portfolio, we are focused on the growth of our business by expanding our global hotel network through our development pipeline, which represents hotels that we expect to add to our system in the future. The following table summarizes our development activity: As of or for the Three Months Ended March 31, 2024 Hotels Rooms (1) Hotel system Openings 106 16,800 Net additions (2) 94 14,200 Development pipeline Additions 234 29,800 Count as of period end (3)(4) 3,375 472,300 ____________ (1) Rounded to the nearest hundred. (2) Represents room additions, net of rooms removed from our system. Net unit growth from March 31, 2023 to March 31, 2024 was 5.6 percent. (3) The hotels in our development pipeline were under development throughout 119 countries and territories, including 31 countries and territories where we had no existing hotels. (4) Of the total rooms in the development pipeline, 229,700 were under construction and 267,900 were located outside of the U.S. Nearly all of the rooms in our development pipeline will be in our management and franchise segment upon opening. We do not consider any individual development project to be material to us. Key Business and Financial Metrics Used by Management Comparable Hotels We define our comparable hotels as those that: (i) were active and operating in our 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 undergone large-scale capital projects, sustained substantial property damage, encountered business interruption or for which comparable results were not available. Of the 7,532 hotels in our system as of March 31, 2024, 6,347 hotels were classified as comparable hotels. Our 1,185 non-comparable hotels as of March 31, 2024 included 421 hotels, or less than six percent of the total hotels in our system, that were removed from the comparable group during the last twelve months because they underwent large-scale capital projects, sustained substantial property damage, encountered business interruption or comparable results were otherwise not available. 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 available capacity at a hotel or group of hotels. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also 16 help management determine achievable Average Daily Rate ("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 we use ADR to assess pricing levels that we are 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. Revenue per Available Room ("RevPAR") RevPAR is calculated by dividing hotel room revenue by the total number of room nights available to guests for a given period. We consider RevPAR to be a meaningful indicator of our 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 are presented on a comparable basis, based on the comparable hotels as of March 31, 2024, 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 months ended March 31, 2024 and 2023 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 months ended March 31, 2024. EBITDA and Adjusted EBITDA EBITDA reflects net income (loss), excluding interest expense, a provision for income tax benefit (expense) and depreciation and amortization expenses. Adjusted EBITDA 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 our cost reimbursement revenues and expenses included in other revenues and other expenses from managed and franchised properties; and (x) other items. We believe that EBITDA and Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) these measures are among the measures used by our management team to evaluate our 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 our industry. Additionally, these measures exclude certain items that can vary widely across different industries and among competitors within our 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 assigned to those depreciating or amortizing assets for accounting purposes. For Adjusted EBITDA, we also exclude 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; and (iii) other items that are not reflective of our operating performance, such as amounts related to debt restructurings and debt retirements and reorganization and related severance costs, to enhance period-over-period comparisons of our ongoing operations. Further, Adjusted EBITDA excludes the net effect of our cost reimbursement revenues and expenses, as we contractually do not operate the related programs to generate a profit over the terms of the respective contracts. The direct reimbursements from hotel owners are typically reimbursed as the costs are incurred and have no net effect on net income (loss). The fees we recognize related to the indirect reimbursements may be recognized before or after the related expenses are incurred, causing timing differences between the costs incurred and the related reimbursement from hotel owners, with the net effect impacting net income (loss) in the reporting period. However, the expenses incurred related to the indirect reimbursements are expected to equal the revenues earned from the indirect reimbursements over time, and, therefore, the net 17 effect of our cost reimbursement revenues and expenses is not used by our management team to evaluate our operating performance or make day-to-day operating decisions. EBITDA and Adjusted EBITDA 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 and Adjusted EBITDA have limitations as analytical tools, including: • EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; • EBITDA and Adjusted EBITDA do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness; • EBITDA and Adjusted EBITDA do not reflect income tax expenses or the cash requirements to pay our taxes; • EBITDA and Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; • EBITDA and Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations; • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and • other companies in our industry may calculate EBITDA and Adjusted EBITDA differently, limiting their usefulness as comparative measures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business, return to our stockholders through share repurchases and dividends or as measures of cash that will be available to us to meet our obligations. 18 Results of Operations The hotel operating statistics by region for our system-wide comparable hotels were as follows: Three Months Ended Change March 31, 2024 2024 vs. 2023 System-wide Occupancy 67.2 % 0.2 % pts. ADR $ 154.91 1.7 % RevPAR $ 104.16 2.0 % U.S. Occupancy 67.7 % (0.6) % pts. ADR $ 161.67 0.5 % RevPAR $ 109.53 (0.4) % Americas (excluding U.S.) Occupancy 65.8 % 1.4 % pts. ADR $ 157.60 5.0 % RevPAR $ 103.67 7.3 % Europe Occupancy 64.9 % 3.1 % pts. ADR $ 141.99 4.5 % RevPAR $ 92.14 9.7 % MEA Occupancy 73.6 % 2.4 % pts. ADR $ 193.22 11.0 % RevPAR $ 142.23 14.8 % Asia Pacific Occupancy 65.2 % 1.3 % pts. ADR $ 114.90 5.7 % RevPAR $ 74.95 7.9 % System-wide RevPAR increased during the three months ended March 31, 2024, primarily due to an increase in ADR in all regions, which included the impact of inflation, and increases in occupancy across international regions. The decrease in RevPAR in the U.S. was driven by challenging comparisons due to weather and timing of holidays. The Americas region, excluding the U.S., saw improvement resulting from an increase in inbound leisure travel in Mexico and the Caribbean and Latin America. The RevPAR increase in Europe was driven by continued growth in international travel. Both MEA and Asia Pacific benefited from increased holiday travel, conferences and special events in the regions. 19 The table below provides a reconciliation of net income to EBITDA and Adjusted EBITDA: Three Months Ended March 31, 2024 2023 (in millions) Net income $ 268 $ 209 Interest expense 131 116 Income tax expense 97 93 Depreciation and amortization expenses 36 37 EBITDA 532 455 Gain on sales of assets, net (7) — Loss on foreign currency transactions 1 — Loss on investments in unconsolidated affiliate (1) — 92 Loss on debt guarantees (2) 47 — FF&E replacement reserves 11 8 Share-based compensation expense 41 33 Amortization of contract acquisition costs 12 10 Net other expenses from managed and franchised properties 109 38 Other adjustments (3) 4 5 Adjusted EBITDA $ 750 $ 641 ____________ (1) Amount includes losses recognized related to equity and debt financing that we had previously provided to an unconsolidated affiliate with underlying investments in certain hotels that we manage or franchise; refer to Note 5: "Loss on Investments in Unconsolidated Affiliate" in our unaudited condensed consolidated financial statements for additional information. (2) Amount includes losses on debt guarantees for certain hotels that we manage; refer to Note 13: "Commitments and Contingencies" in our unaudited condensed consolidated financial statements for additional information. (3) Amount for the three months ended March 31, 2024 primarily relates to transaction costs incurred for acquisitions. Amounts for both periods include net losses (gains) related to certain of Hilton's investments in unconsolidated affiliates, other than the loss included separately in "loss on investments in unconsolidated affiliate," severance and other items. Revenues Three Months Ended Percent March 31, Change 2024 2023 2024 vs. 2023 (in millions) Franchise and licensing fees $ 571 $ 508 12.4 Base and other management fees $ 106 $ 80 32.5 Incentive management fees 70 65 7.7 Total management fees $ 176 $ 145 21.4 Franchise and licensing fees increased due to an increase in license fees from our strategic partnerships, primarily attributable to new cardholder acquisitions and increased cardholder spend under our co-branded credit card arrangements. Licensing fees from HGV also increased as a result of increased timeshare revenues, inclusive of the impact of adding new timeshare properties to our system between the periods, including those acquired by HGV from third-party companies. During the three months ended March 31, 2024, RevPAR at our comparable franchised hotels decreased 0.2 percent due to a decrease in occupancy of 0.7 percentage points, which was partially offset by an increase in ADR of 0.8 percent. However, franchise fees increased during the period due to the addition of 417 franchised hotels on a net basis, resulting in an additional 58,100 rooms from new development and ownership type transfers between January 1, 2023 to March 31, 2024. The increase in management fees was primarily the result of an increase in RevPAR at our comparable managed hotels as well as termination fees received from hotels that exited our system. During the three months ended March 31, 2024, RevPAR at our comparable managed hotels increased 8.2 percent, due to increased occupancy of 3.1 percentage points, and increased ADR of 3.3 percent. The increase in managed hotels in our system between the periods also contributed to the increase in management fees. Including new development and ownership type transfers, from January 1, 2023 to March 31, 2024, we added 31 managed hotels on a net basis, providing an additional 9,300 rooms to our management hotel portfolio. 20 Incentive management fees increased as they are based on hotels' operating profits, which generally have improved from the prior period as increased consumer demand drove higher revenues, elevated margins and, ultimately, higher managed hotel profits. Three Months Ended Percent March 31, Change 2024 2023 2024 vs. 2023 (in millions) Owned and leased hotels revenues $ 255 $ 248 2.8 The $7 million increase in owned and leased hotels revenues included a $9 million currency neutral increase, partially offset by a $2 million decrease resulting from unfavorable fluctuations in foreign currency exchange rates. Revenues from our comparable owned and leased hotels increased $20 million, on a currency neutral basis, due to the increase in RevPAR at our comparable owned and leased hotels of 12.4 percent. The increase in RevPAR was due to increases in occupancy of 3.9 percentage points and ADR of 6.0 percent. The $11 million currency neutral decrease in revenues from our non-comparable owned and leased hotels included decreases related to hotels undergoing renovations during the period and the business interruption that occurred at our leased hotel in Israel due to the ongoing military conflict. Three Months Ended Percent March 31, Change 2024 2023 2024 vs. 2023 (in millions) Other revenues $ 50 $ 35 42.9 The increase in other revenues was primarily due to increased procurement volume and vendor rebates for purchases made by properties that participate in our purchasing programs, including properties outside of our system. Operating Expenses Three Months Ended Percent March 31, Change 2024 2023 2024 vs. 2023 (in millions) Owned and leased hotels expenses $ 247 $ 251 (1.6) Expenses from our comparable owned and leased hotels increased $5 million, on a currency neutral basis, as a result of increased occupancy and cost inflation both driving higher labor costs and other operating expenses, partially offset by decreases in utilities and property taxes. The $9 million net decrease in owned and leased hotels expenses, on a currency neutral basis, from our non-comparable owned and leased hotels is primarily driven by the business interruption that occurred at our leased hotel in Israel. Three Months Ended Percent March 31, Change 2024 2023 2024 vs. 2023 (in millions) Depreciation and amortization expenses $ 36 $ 37 (2.7) General and administrative expenses 104 91 14.3 Other expenses 30 21 42.9 The decrease in depreciation and amortization expenses during three months ended March 31, 2024 was primarily due to a decrease in amortization expense, driven by certain intangible assets that became fully amortized during the three months ended December 31, 2023. This decrease in amortization expense was mostly offset by an increase related to software and corporate and hotel assets placed in service between the periods. 21 The increase in general and administrative expenses was primarily due to increases in costs related to payroll and other compensation costs, as well as transaction costs incurred for acquisitions. The increase in other expenses was primarily due to costs associated with higher procurement volume from our purchasing operations, including for properties outside of our system that participate in our purchasing programs. Non-operating Income and Expenses Three Months Ended Percent March 31, Change 2024 2023 2024 vs. 2023 (in millions) Interest expense $ (131) $ (116) 12.9 Loss on foreign currency transactions (1) — NM (1) Loss on investments in unconsolidated affiliate — (92) NM (1) Other non-operating income (loss), net (36) 12 NM (1) Income tax expense (97) (93) 4.3 ____________ (1) Fluctuation in terms of percentage change is not meaningful. In November 2023, we amended the credit agreement governing the Term Loans to convert $1.0 billion of the outstanding Term Loans to a new tranche with an interest rate of the Secured Overnight Financing Rate ("SOFR") plus 185 basis points and $1.6 billion of the outstanding Term Loans, along with $500 million of new aggregate principal amount, into a new tranche with an interest rate of SOFR plus 210 basis points. The increase in interest expense was primarily driven by both the increase to the weighted average fixed spread on the overall variable rate on the Term Loans and the increase in the outstanding balance by $500 million. The increase in interest expense also resulted from an increase in one-month SOFR, the benchmark for the Term Loans' interest rate, as well as an increase in variable rent for our finance leases, which is generally based on a percentage of hotel revenues or profits, which increased as discussed in "— Revenues." These increases were partially offset by a decrease in interest expense due to interest rate swaps used to mitigate floating interest rate risk, including an increase in the amortization of net gains from accumulated other comprehensive loss from a designated interest rate swap and a decrease in the release of net losses from accumulated other comprehensive loss related to a previous interest rate swap that was dedesignated in a prior period. The net gains and losses on foreign currency transactions are the result of changes in foreign currency exchange rates, including on certain intercompany financing arrangements, such as short-term cross-currency intercompany loans, as well as transactions denominated in foreign currencies. The loss on investments in unconsolidated affiliate for the three months ended March 31, 2023 included: (i) a $44 million other-than-temporary impairment loss on our investment in the Fund and (ii) $48 million of credit losses on financing receivables provided to the Fund. See Note 5: "Loss on Investments in Unconsolidated Affiliate" in our unaudited condensed consolidated financial statements for additional information. Other non-operating income (loss), net consists of interest income, equity in earnings (losses) from unconsolidated affiliates, certain components of net periodic pension cost or credit related to our employee defined benefit pension plans and other non-operating gains and losses. The net change during the period was primarily driven by an increase in losses on debt guarantees for hotels that Hilton manages. See Note 13: "Commitments and Contingencies" in our unaudited condensed consolidated financial statements for additional information. The increase in income tax expense was primarily attributable to the increase in income before income taxes, partially offset by a valuation allowance provided on a deferred tax asset during the three months ended March 31, 2023. Segment Results As of March 31, 2024, our management and franchise segment included 809 managed and 6,766 franchised properties consisting of 1,179,837 total rooms, and our ownership segment included 51 hotels consisting of 17,492 total rooms. Refer to Note 12: "Business Segments" in our unaudited condensed consolidated financial statements for reconciliations of revenues for our reportable segments to consolidated total revenues and of segment operating income to consolidated income before income taxes. 22 For the three months ended March 31, 2024, refer to "—Revenues" for further discussion of the increases in our franchise and licensing fees and total management fees, which reflect our management and franchise segment revenues and segment operating income, as well as for further discussion of the increase in revenues from our owned and leased hotels, which reflect our ownership segment revenues. In addition, refer to "—Operating Expenses" for further discussion of the decrease in operating expenses at our owned and leased hotels, which, when netted with ownership segment revenues and management fees charged by our management and franchise segment, results in our ownership segment operating income (loss). Liquidity and Capital Resources Overview As of March 31, 2024, we had total cash and cash equivalents of $1,420 million, including $74 million of restricted cash and cash equivalents. The majority of our restricted cash and cash equivalents is related to cash collateral and cash held for FF&E reserves. Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating and other expenditures, including: (i) costs associated with the management and franchising of hotels; (ii) corporate expenses; (iii) payroll and compensation costs; (iv) taxes and compliance costs; (v) scheduled debt maturities and interest payments on our outstanding indebtedness; (vi) lease payments under our finance and operating leases; (vii) costs, other than compensation and lease payments that are noted separately, associated with the operations of owned and leased hotels, including, but not limited to, utilities and operating supplies; (viii) committed contract acquisition costs; (ix) capital and maintenance expenditures for required renovations and maintenance at the hotels within our ownership segment; (x) dividends as declared; (xi) share repurchases; and (xii) costs related to the acquisition of the Graduate Hotels brand and the associated contracts and the acquisition of a controlling financial interest in the Sydell Group. Our known long-term liquidity requirements primarily consist of funds necessary to pay for: (i) scheduled debt maturities and interest payments on our outstanding indebtedness; (ii) lease payments under our finance and operating leases; (iii) committed contract acquisition costs; (iv) capital improvements to the hotels within our ownership segment; (v) corporate capital and information technology expenditures; (vi) dividends as declared; (vii) share repurchases; and (viii) commitments to owners in our management and franchise segment made in the normal course of business for which we are reimbursed by these owners through Hilton Honors and program fees to operate our Hilton Honors program, marketing, sales and brands programs and shared services. In March 2024, we issued a total of $1.0 billion of 5.875% 2029 Senior Notes and 6.125% 2032 Senior Notes and used $200 million of the net proceeds to repay the outstanding balance under the Revolving Credit Facility. We intend to use the remaining net proceeds for general corporate purposes, which may include investments and acquisitions. Refer to Note 6: "Debt" in our unaudited condensed consolidated financial statements for additional information. We expect that interest payments on our outstanding indebtedness will increase compared to the prior year as a result of the amendment and increase to the amount outstanding under the Term Loans in November 2023 and the issuance of the 5.875% 2029 Senior Notes and the 6.125% 2032 Senior Notes in March 2024. Except for the issuance of the 5.875% 2029 Senior Notes and the 6.125% 2032 Senior Notes, there were no material changes to our contractual obligations from what we previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. During the three months ended March 31, 2024, we repurchased approximately 3.4 million shares of our common stock for $662 million. As of March 31, 2024, approximately $3.1 billion remained available for share repurchases under our stock repurchase program. In circumstances where we have the opportunity to support our strategic objectives, we may provide guarantees or other commitments, as necessary, to owners of hotels that we currently or in the future will manage or franchise or other third parties. See Note 13: "Commitments and Contingencies" in our unaudited condensed consolidated financial statements for additional information on our commitments that were outstanding as of March 31, 2024. We have a long-term investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments and returning available capital to stockholders through dividends and share repurchases. Within the framework of our investment policy, we intend to finance our business activities primarily with cash on our balance sheet as of March 31, 2024, cash generated from our operations and, as needed, the use of the available capacity of our Revolving Credit Facility. Additionally, we have continued access to debt markets and expect to be able to obtain financing as a source of liquidity as required and to extend maturities of existing borrowings, if necessary. 23 After considering our approach to liquidity and our available sources of cash, we believe that our cash position and sources of liquidity will meet anticipated requirements for operating and other expenditures, including corporate expenses, payroll and other compensation costs, taxes and compliance costs and other commitments for the foreseeable future based on current conditions. The objectives of our cash management policy are maintaining the availability of liquidity and minimizing operational costs. We may from time to time issue or incur or increase our capacity to incur new debt and/or purchase our outstanding debt through underwritten offerings, open market transactions, privately negotiated transactions or otherwise. Issuances or incurrence of new debt (or an increase in our capacity to incur new debt) and/or purchases or retirements of outstanding debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Sources and Uses of Our Cash and Cash Equivalents The following table summarizes our net cash flows: Three Months Ended Percent March 31, Change 2024 2023 2024 vs. 2023 (in millions) Net cash provided by operating activities $ 346 $ 330 4.8 Net cash used in investing activities (27) (85) (68.2) Net cash provided by (used in) financing activities 238 (547) NM (1) ____________ (1) Fluctuation in terms of percentage change is not meaningful. Operating Activities Cash flows from operating activities were primarily generated from management, franchise and licensing fee revenue and operating income from our owned and leased hotels. The increase during the period was primarily due to the increase in cash inflows generated from our management and franchise segment, largely as a result of a net increase in the number of hotels in our system between the periods and an increase in RevPAR at our comparable managed hotels, and a $68 million decrease in payments of contract acquisition costs due to the timing of certain strategic hotel developments supporting our growth. The increase in cash provided by operating activities were partially offset by a $43 million increase in the net cash outflows related to income tax payments, due to income tax refunds received during the three months ended March 31, 2023, and an outflow of $62 million for debt guarantee payments during the three months ended March 31, 2024. Investing Activities Net cash used in investing activities primarily included cash flows related to: (i) capitalized software costs that were related to various systems initiatives for the benefit of both our hotel owners and our overall corporate operations and (ii) capital expenditures for property and equipment related to corporate property and the renovation of certain hotels in our ownership segment, which decreased between the periods due to the timing of certain corporate and hotel capital expenditure projects. Additionally, our investing activities include the net cash inflows and outflows related to our undesignated derivative financial instruments that we have in place to hedge against the impact of fluctuations in foreign currency exchange rates on certain of our intercompany loan and cash balances, which were primarily the result of changes in the exchange rates for the Pound Sterling to the U.S. dollar during the three months ended March 31, 2023. Financing Activities The increase in cash provided by financing activities was primarily attributable to a $1.0 billion increase in cash inflows from the issuances of the 5.875% 2029 Senior Notes and the 6.125% 2032 Senior Notes. These increases were partially offset by a $214 million increase in cash outflows for the return of capital to shareholders, which includes dividends and share repurchases. 24 Debt and Borrowing Capacity As of March 31, 2024, our total indebtedness, excluding the deduction for unamortized deferred financing costs and discounts, was approximately $10.3 billion. No debt amounts were outstanding under the Revolving Credit Facility as of March 31, 2024, which had an available borrowing capacity of $1,913 million after considering $87 million of outstanding letters of credit. For additional information on our total indebtedness and guarantees on our debt, refer to Note 6: "Debt" in our unaudited condensed consolidated financial statements. If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to reduce capital expenditures or issue additional equity securities. We do not have any material indebtedness outstanding that matures prior to May 2025, and we believe that we have sufficient sources of liquidity and access to debt financing to address the debt maturing in May 2025 prior to its maturity date. Our ability to make scheduled principal payments and to pay interest on our debt depends on our future operating performance, which is subject to general conditions in or affecting the hospitality industry that may be beyond our control. Critical Accounting Estimates The preparation of our unaudited condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed the estimates and assumptions that we believe are critical because they involve a higher degree of judgment in their application and are based on information that is inherently uncertain in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and, during the three months ended March 31, 2024, there were no material changes to those critical accounting estimates that were previously disclosed.