What changed in this filing

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Item 1. Financial Statements

2023-05-02 compared with 2022-11-03 · 90 added, 148 removed, 265 unchanged (47% of the section changed)

3 unchanged sentences

(in millions, except per share amounts)

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Three Months Ended

March 31, 2023 March 31, 2022

Base management fees $ 293 $ 213

6 unchanged sentences

Cost reimbursement revenue 4,147 3,146

5,313 3,946 14,850 9,411

OPERATING COSTS AND EXPENSES

2 unchanged sentences

General, administrative, and other 202 208

Restructuring, merger-related charges, and other 2 4 11 8

Merger-related charges and other 1 9

Reimbursed expenses 4,136 3,179

4,355 3,401 12,384 8,296

OPERATING INCOME 951 558

Gains and other income, net 3 4

Loss on extinguishment of debt — ( 164 ) — ( 164 )

Interest expense ( 126 ) ( 93 )

Interest income 15 5

Equity in earnings (losses) 1 ( 4 ) 18 ( 24 )

Equity in earnings 1 2

INCOME BEFORE INCOME TAXES 844 476

8 unchanged sentences

(in millions)

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Three Months Ended

March 31, 2023 March 31, 2022

Net income $ 757 $ 377

Other comprehensive income (loss):

Other comprehensive income

Foreign currency translation adjustments 84 14

Other adjustments, net of tax ( 2 ) —

Total other comprehensive income (loss), net of tax ( 339 ) ( 138 ) ( 648 ) ( 197 )

Total other comprehensive income, net of tax 82 14

Comprehensive income $ 839 $ 391

3 unchanged sentences

(in millions)

September 30,

2022 December 31,

March 31, 2023 December 31, 2022

Current assets

38 unchanged sentences

(in millions)

Nine Months Ended

September 30, 2022 September 30, 2021

Three Months Ended

March 31, 2023 March 31, 2022

OPERATING ACTIVITIES

6 unchanged sentences

Contract acquisition costs ( 58 ) ( 26 )

Restructuring, merger-related charges, and other ( 1 ) ( 5 )

Merger-related charges and other — 7

Working capital changes ( 96 ) ( 230 )

Loss on extinguishment of debt

Deferred revenue changes and other 19 ( 95 )

Net cash provided by operating activities 887 398

1 unchanged sentence

Capital and technology expenditures ( 95 ) ( 49 )

Dispositions — 8

Loan advances ( 1 ) —

Loan collections 31 7

Other 53 ( 3 )

Net cash used in investing activities ( 59 ) ( 23 )

FINANCING ACTIVITIES

Credit Facility, net ( 1,050 ) ( 150 )

Commercial paper/Credit Facility, net 117 ( 250 )

Issuance of long-term debt 783 —

Repayment of long-term debt ( 328 ) ( 401 )

Issuance of Class A Common Stock — 2

Debt extinguishment costs — ( 155 )

Dividends paid ( 124 ) —

1 unchanged sentence

Stock-based compensation withholding taxes ( 72 ) ( 78 )

Other ( 23 ) —

Net cash used in financing activities ( 782 ) ( 729 )

DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ( 353 ) ( 97 )

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 46 ( 354 )

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)

1 unchanged sentence

$ 571 $ 1,067

(1) The 2022 amounts include beginning restricted cash of $ 28 million at December 31, 2021, and ending restricted cash of $ 23 million at September 30, 2022, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.

(1) The 2023 amounts include beginning restricted cash of $ 18 million at December 31, 2022, and ending restricted cash of $ 17 million at March 31, 2023, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.

See Notes to Condensed Consolidated Financial Statements.

12 unchanged sentences

Preparation of financial statements that conform with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities.

The uncertainty created by the coronavirus pandemic (“COVID-19”) has made such estimates more difficult and subjective.

Accordingly, ultimate results could differ from those estimates.

The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of September 30, 2022 and December 31, 2021, the results of our operations for the three and nine months ended September 30, 2022 and September 30, 2021, and cash flows for the nine months ended September 30, 2022 and September 30, 2021.

The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of March 31, 2023 and December 31, 2022 and the results of our operations and cash flows for the three months ended March 31, 2023 and March 31, 2022.

Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations, as well as the impact of COVID-19.

1 unchanged sentence

EARNINGS PER SHARE

The table below presents the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share:

Three Months Ended Nine Months Ended

(in millions, except per share amounts) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

The table below illustrates the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share, the latter of which uses the treasury stock method to calculate the dilutive effect of the Company’s potential common stock:

Three Months Ended

(in millions, except per share amounts) March 31, 2023 March 31, 2022

Computation of Basic Earnings Per Share

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STOCK-BASED COMPENSATION

We granted 1.1 million restricted stock units (“RSUs”) during the 2022 first three quarters to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date.

We also granted 0.1 million performance-based RSUs (“PSUs”) in the 2022 first three quarters to certain executives, which are earned, subject to continued employment and the satisfaction of certain performance and market conditions, generally based on the degree of achievement of pre-established targets for 2024 adjusted EBITDA performance and relative total stockholder return over the 2022 to 2024 performance period.

RSUs, including PSUs, granted in the 2022 first three quarters had a weighted average grant-date fair value of $ 169 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of $ 45 million in the 2022 third quarter, $ 40 million in the 2021 third quarter, $ 136 million in the 2022 first three quarters, and $ 130 million in the 2021 first three quarters.

Deferred compensation costs for unvested awards for RSUs and PSUs totaled $ 223 million at September 30, 2022 and $ 189 million at December 31, 2021.

Our effective tax rate was 27.5 percent for the 2022 third quarter compared to 21.1 percent for the 2021 third quarter.

The increase in our effective tax rate was primarily due to the current year tax expense from the completion of prior years’ tax audits.

Our effective tax rate was 24.2 percent for the 2022 first three quarters compared to 0.2 percent for the 2021 first three quarters.

The increase in our effective tax rate was primarily due to the prior year tax benefit from the release of tax reserves due to the favorable resolution of Legacy-Starwood tax audits, as well as the current year tax expense from the completion of prior years’ tax audits.

We paid cash for income taxes, net of refunds, of $ 341 million in the 2022 first three quarters and $ 293 million in the 2021 first three quarters.

We granted 1.0 million restricted stock units (“RSUs”) during the 2023 first quarter to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date.

We also granted 0.1 million performance-based RSUs (“PSUs”) in the 2023 first quarter to certain executives, which are earned subject to continued employment and the satisfaction of certain performance and market conditions based on the degree of achievement of pre-established targets for 2025 adjusted EBITDA performance and relative total stockholder return over the 2023 to 2025 performance period.

RSUs, including PSUs, granted in the 2023 first quarter had a weighted average grant-date fair value of $ 167 per unit.

We recorded stock-based compensation expense for RSUs and PSUs of $ 33 million in the 2023 first quarter and $ 42 million in the 2022 first quarter.

Deferred compensation costs for unvested awards for RSUs and PSUs totaled $ 315 million at March 31, 2023 and $ 179 million at December 31, 2022.

Our effective tax rate decreased to 10.3 percent for the 2023 first quarter compared to 20.7 percent for the 2022 first quarter, primarily due to the current year release of tax reserves.

Our unrecognized tax benefit balance decreased by $ 99 million to $ 156 million at March 31, 2023 from $ 255 million at December 31, 2022, primarily due to the completion of a prior year tax audit.

Our unrecognized tax benefit balance included $ 145 million at March 31, 2023 and $ 241 million at December 31, 2022 of tax positions that, if recognized, would impact our effective tax rate.

It is reasonably possible that within the next 12 months we will reach resolution of income tax examinations in one or more jurisdictions.

The actual amount of any change to our unrecognized tax benefits could vary depending on the timing and nature of the settlement.

Therefore, an estimate of the change cannot be provided.

We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world.

Internal Revenue Service (“IRS”) has examined our federal income tax returns, and as of March 31, 2023, we have settled all issues for tax years through 2019.

Our 2020 through 2023 tax year audits are currently ongoing.

Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.

We paid cash for income taxes, net of refunds, of $ 68 million in the 2023 first quarter and $ 38 million in the 2022 first quarter.

COMMITMENTS AND CONTINGENCIES

We present the maximum potential amount of our future guarantee fundings and the carrying amount of our liability for our debt service, operating profit, and other guarantees (excluding contingent purchase obligations) for which we are the primary obligor at September 30, 2022 in the following table:

(in millions)

3 unchanged sentences

Operating profit 182 98

Our maximum potential guarantees listed in the preceding table include $ 42 million of guarantees that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur.

Our maximum potential guarantees listed in the preceding table include $ 58 million of operating profit guarantees that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur.

Contingent Purchase Obligation

3 unchanged sentences

If the owner exercises the put option, the closing is expected to occur in the 2024 fourth quarter, and we have the option to purchase, at the same time the put transaction closes, the fee simple interest in the underlying land for an additional $ 200 million in cash.

We account for the put option as a guarantee, and our recorded liability was $ 300 million at September 30, 2022 and December 31, 2021.

We account for the put option as a guarantee, and our recorded liability was $ 300 million at March 31, 2023 and December 31, 2022.

Starwood Data Security Incident

12 unchanged sentences

Judicial Panel on Multidistrict Litigation (the “MDL”).

On May 3, 2022, the District Court granted in part and denied in part class certification of various U.S.

groups of consumers.

We appealed the District Court’s decision, and on July 14, 2022, the U.S.

Court of Appeals for the Fourth Circuit granted our petition to appeal.

On September 8, 2022, the District Court held that the City of Chicago (which brought claims against us that are consolidated in the MDL proceeding) could not pursue injunctive claims but could pursue monetary claims.

The District Court granted in part and denied in part class certification of various U.S.

groups of consumers, and our appeal of this decision is pending in the U.S.

Court of Appeals for the Fourth Circuit.

A case brought by the City of Chicago (which is consolidated in the MDL proceeding) also remains pending.

The Canadian cases have effectively been consolidated into a single case in the province of Ontario.

5 unchanged sentences

We are in discussions with the Attorney General offices from 49 states and the District of Columbia and the Federal Trade Commission.

Based on the ongoing discussions, we believe it is probable that we will incur losses and have recorded an accrual in the 2022 third quarter for an estimated loss contingency;

Based on the ongoing discussions, we believe it is probable that we will incur losses, and we recorded an accrual in 2022 for an estimated loss contingency;

the amount of this accrual is not material to our Financial Statements.

We are also in discussion with the regulatory authority in Australia to resolve its investigation and requests.

While we believe it is reasonably possible that we may incur losses in excess of the amounts recorded associated with the above described MDL proceedings and regulatory investigations related to the Data Security Incident, it is not possible to reasonably estimate the amount of such losses or range of loss that might result from adverse judgments, settlements, fines, penalties or other resolution of these proceedings and investigations based on:

2 unchanged sentences

LONG-TERM DEBT

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of September 30, 2022 and year-end 2021:

($ in millions) September 30,

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of March 31, 2023 and year-end 2022:

(in millions) March 31,

2023 December 31,

Senior Notes:

Series L Notes, interest rate of 3.3 %, face amount of $ 173 , redeemed June 15, 2022

(effective interest rate of 3.4 %)

Series P Notes, interest rate of 3.8 %, face amount of $ 350 , maturing October 1, 2025

(effective interest rate of 4.0 %)

Series Q Notes, interest rate of 2.3 %, face amount of $ 399 , matured January 15, 2022

(effective interest rate of 2.5 %)

Series R Notes, interest rate of 3.1 %, face amount of $ 750 , maturing June 15, 2026

(effective interest rate of 3.3 %)

Series U Notes, interest rate of 3.1 %, face amount of $ 291 , maturing February 15, 2023

Series U Notes, interest rate of 3.1 %, face amount of $ 291 , matured February 15, 2023

(effective interest rate of 3.1 %)

11 unchanged sentences

(effective interest rate of 3.9 %)

Series DD Notes, interest rate of 2.1 %, face amount of $ 224 , matured October 3, 2022

(effective interest rate of 1.2 %)

Series EE Notes, interest rate of 5.8 %, face amount of $ 600 , maturing May 1, 2025

10 unchanged sentences

(effective interest rate of 5.4 %)

Series KK Notes, interest rate of 4.9 %, face amount of $ 800 , maturing April 15, 2029

(effective interest rate of 5.3 %)

Commercial paper 1,002 871

Credit Facility — —

3 unchanged sentences

$ 10,299 $ 9,380

We paid cash for interest, net of amounts capitalized, of $ 203 million in the 2022 first three quarters and $ 251 million in the 2021 first three quarters.

In September 2022, we issued $ 1.0 billion aggregate principal amount of 5.000 percent Series JJ Notes due October 15, 2027 (the “Series JJ Notes”).

We will pay interest on the Series JJ Notes in April and October of each year, commencing in April 2023.

We received net proceeds of approximately $ 983 million from the offering of the Series JJ Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases or repayment of outstanding indebtedness.

In June 2022, we redeemed all $ 173 million aggregate principal amount of our outstanding Series L Notes due in September 2022.

We are party to a multicurrency revolving credit agreement (as amended, the “Credit Facility”) that provides for up to $ 4.5 billion of aggregate borrowings for general corporate needs, including working capital, capital expenditures, letters of credit, acquisitions, and to support our commercial paper program if and when we resume issuing commercial paper.

Borrowings under the Credit Facility generally bear interest at LIBOR (the London Interbank Offered Rate) plus a spread, based on our public debt rating.

We paid cash for interest, net of amounts capitalized, of $ 15 million in the 2023 first quarter and $ 29 million in the 2022 first quarter.

In March 2023, we issued $ 800 million aggregate principal amount of 4.9 percent Series KK Notes due April 15, 2029 (the “Series KK Notes”).

We will pay interest on the Series KK Notes in April and October of each year, commencing in October 2023.

We received net proceeds of approximately $ 783 million from the offering of the Series KK Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness.

We are party to a $ 4.5 billion multicurrency revolving credit agreement (the “Credit Facility”).

Available borrowings under the Credit Facility support our commercial paper program and general corporate needs.

Borrowings under the Credit Facility generally bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our public debt rating.

We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating.

We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings (if any) as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis.

The Credit Facility expires on June 28, 2024.

We entered into amendments to the Credit Facility in April 2020 and January 2021 (the “Credit Facility Amendments”).

The debt leverage covenant in the Credit Facility, which is tested each quarter and was waived pursuant to the Credit Facility Amendments through and including the fourth quarter of 2021, resumed beginning with the quarter that ended March 31, 2022.

The Credit Facility Amendments adjusted the required leverage levels for this covenant starting at 5.50 to 1.00 for the test period that ended on March 31, 2022 and gradually stepping down to 4.00 to 1.00 over the succeeding five fiscal quarters, as further described in the Credit Facility.

The Credit Facility Amendments also amended certain other terms of the Credit Facility, including reducing the rate floor for the LIBOR Daily Floating Rate and the Eurocurrency Rate.

In the 2022 fourth quarter, we announced that we reached an agreement with Hoteles City Express, S.A.B.

to acquire the City Express brand portfolio for $ 100 million.

As of October 19, 2022, the portfolio included 152 mid-scale hotels ( 17,356 rooms) located in Mexico, Costa Rica, Colombia, and Chile.

Upon closing of the transaction, which is subject to regulatory approval and other customary closing conditions, City Express will become our 31 st brand and the City Express hotels will become part of our franchise system.

We expect the transaction could close between the end of 2022 and the first half of 2023.

We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis.

The Credit Facility expires on December 14, 2027.

On May 1, 2023, we completed the acquisition of the City Express brand portfolio from Hoteles City Express, S.A.B.

for $ 100 million.

As a result of the transaction, we added approximately 150 properties located in Mexico, Costa Rica, Colombia, and Chile to our franchise portfolio.

FAIR VALUE OF FINANCIAL INSTRUMENTS

We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts.

We present the carrying values and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments in the following table:

September 30, 2022 December 31, 2021

We present the carrying amounts and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments in the following table:

March 31, 2023 December 31, 2022

(in millions) Carrying Amount Fair Value Carrying Amount Fair Value

2 unchanged sentences

Senior Notes $ ( 9,112 ) $ ( 8,646 ) $ ( 8,322 ) $ ( 7,627 )

Credit Facility — — ( 1,050 ) ( 1,050 )

Commercial paper ( 1,002 ) ( 1,002 ) ( 871 ) ( 871 )

Other long-term debt ( 56 ) ( 49 ) ( 56 ) ( 49 )

4 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS’ EQUITY

The following tables detail the accumulated other comprehensive loss activity for the 2022 first three quarters and 2021 first three quarters:

The following tables detail the accumulated other comprehensive loss activity for the 2023 first quarter and 2022 first quarter:

(in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss

Balance at year-end 2022 $ ( 740 ) $ 11 $ ( 729 )

Other comprehensive (loss) income before reclassifications (1)

( 653 ) 9 ( 644 )

Other comprehensive income (loss) before reclassifications (1)

Reclassification adjustments — 1 1

Net other comprehensive (loss) income ( 653 ) 5 ( 648 )

Balance at September 30, 2022 $ ( 1,004 ) $ 14 $ ( 990 )

Net other comprehensive income (loss) 84 ( 2 ) 82

Balance at March 31, 2023 $ ( 656 ) $ 9 $ ( 647 )

(in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss

Balance at year-end 2021 $ ( 351 ) $ 9 $ ( 342 )

Other comprehensive loss before reclassifications (1)

( 197 ) — ( 197 )

Other comprehensive income before reclassifications (1)

Reclassification adjustments — — —

Net other comprehensive loss ( 197 ) — ( 197 )

Balance at September 30, 2021 $ ( 336 ) $ 4 $ ( 332 )

(1) Other comprehensive (loss) income before reclassifications for foreign currency translation adjustments includes intra-entity foreign currency transactions that are of a long-term investment nature, which resulted in gains of $ 76 million for the 2022 first three quarters and $ 30 million for the 2021 first three quarters.

The following tables detail the changes in common shares outstanding and stockholders’ equity for the 2022 first three quarters and 2021 first three quarters:

Net other comprehensive income 14 — 14

Balance at March 31, 2022 $ ( 337 ) $ 9 $ ( 328 )

(1) Other comprehensive income before reclassifications for foreign currency translation adjustments includes intra-entity foreign currency transactions that are of a long-term investment nature, which resulted in losses of $ 12 million for the 2023 first quarter and gains of $ 12 million for the 2022 first quarter.

The following tables detail the changes in common shares outstanding and stockholders’ equity for the 2023 first quarter and 2022 first quarter:

(in millions, except per share amounts)

3 unchanged sentences

— Other comprehensive income 82 — — — — 82

1.0 Stock-based compensation plans ( 33 ) — ( 61 ) — 28 —

327.3 Balance at March 31, 2022

$ 1,772 $ 5 $ 5,831 $ 10,682 $ ( 14,418 ) $ ( 328 )

— Net income 678 — — 678 — —

— Other comprehensive loss ( 323 ) — — — — ( 323 )

— Dividends ($ 0.40 per share)

2 unchanged sentences

( 6.8 ) Purchase of treasury stock ( 1,109 ) — — — ( 1,109 ) —

325.4 Balance at June 30, 2022

$ 1,772 $ 5 $ 5,872 $ 11,262 $ ( 14,716 ) $ ( 651 )

— Net income 630 — — 630 — —

— Other comprehensive loss ( 339 ) — — — — ( 339 )

— Dividends ($ 0.30 per share)

( 97 ) — — ( 97 ) — —

0.1 Stock-based compensation plans 47 — 47 — — —

( 6.2 ) Purchase of treasury stock ( 950 ) — — — ( 950 ) —

319.3 Balance at September 30, 2022

304.7 Balance at March 31, 2023

$ 140 $ 5 $ 5,906 $ 12,975 $ ( 18,099 ) $ ( 647 )

1 unchanged sentence

326.3 Balance at year-end 2021 $ 1,414 $ 5 $ 5,892 $ 10,305 $ ( 14,446 ) $ ( 342 )

— Net loss ( 11 ) — — ( 11 ) — —

— Other comprehensive loss ( 155 ) — — — — ( 155 )

1.2 Stock-based compensation plans ( 30 ) — ( 64 ) — 34 —

325.6 Balance at March 31, 2021

$ 234 $ 5 $ 5,787 $ 9,195 $ ( 14,463 ) $ ( 290 )

— Net income 377 — — 377 — —

1 unchanged sentence

1.0 Stock-based compensation plans ( 33 ) — ( 61 ) — 28 —

325.6 Balance at June 30, 2021

327.3 Balance at March 31, 2022

$ 1,772 $ 5 $ 5,831 $ 10,682 $ ( 14,418 ) $ ( 328 )

— Net income 220 — — 220 — —

— Other comprehensive loss ( 138 ) — — — — ( 138 )

0.1 Stock-based compensation plans 40 — 39 — 1 —

325.7 Balance at September 30, 2021 $ 918 $ 5 $ 5,869 $ 9,838 $ ( 14,462 ) $ ( 332 )

CONTRACTS WITH CUSTOMERS

Our current and noncurrent liability for guest loyalty program increased by $ 175 million, to $ 6,646 million at September 30, 2022, from $ 6,471 million at December 31, 2021, primarily reflecting an increase in points earned by members.

This includes a $ 191 million reclassification from deferred revenue to the liability for guest loyalty program primarily due to points that were earned during the period by members using our U.S.-issued co-brand credit cards, which were prepaid by the financial institutions in 2020.

The increase was partially offset by $ 2,025 million of revenue recognized in the 2022 first three quarters, that was deferred as of December 31, 2021.

The current portion of our liability for guest loyalty program increased compared to December 31, 2021, due to higher estimated redemptions in the short-term.

Current and noncurrent deferred revenue decreased by $ 162 million, to $ 1,365 million at September 30, 2022, from $ 1,527 million at December 31, 2021, primarily as a result of $ 256 million of revenue recognized in the 2022 first three quarters that was deferred as of December 31, 2021, as well as the reclassification from deferred revenue to the liability for guest loyalty program, which we discuss above .

The decrease was partially offset by deferred revenue related to our co-brand credit cards, gift cards, certain centralized programs and services fees, and franchise application and relicensing fees.

Our allowance for credit losses increased to $ 195 million at September 30, 2022 from $ 187 million at December 31, 2021, primarily reflecting our provision for credit losses, partially offset by write-offs of amounts deemed uncollectible.

In the 2022 third quarter, we recorded a $ 6 million net reversal of our provision for credit losses.

In the 2022 first three quarters, we recorded a $ 27 million provision for credit losses.

Our current and noncurrent liability for guest loyalty program increased by $ 137 million, to $ 6,731 million at March 31, 2023, from $ 6,594 million at December 31, 2022, primarily reflecting an increase in points earned by members.

This includes a $ 30 million reclassification from deferred revenue to the liability for guest loyalty program primarily due to points that were earned during the period by members using our U.S.-issued co-branded credit cards, which were prepaid by the financial institutions in 2020.

The increase was partially offset by $ 745 million of revenue recognized in the 2023 first quarter, that was deferred as of December 31, 2022.

current portion of our liability for guest loyalty program increased compared to December 31, 2022, due to higher estimated redemptions in the short-term.

Our allowance for credit losses was $ 194 million at March 31, 2023 and $ 191 million at December 31, 2022 .

BUSINESS SEGMENTS

We discuss our operations in the following two operating segments, both of which meet the applicable criteria for separate disclosure as a reportable business segment:

We discuss our operations in the following two operating segments, both of which meet the applicable accounting criteria for separate disclosure as a reportable business segment:

& Canada and (2) International.

We evaluate the performance of our operating segments using “segment profit/loss” which is based largely on the results of the segment without allocating corporate expenses, income taxes, indirect general, administrative, and other expenses, merger-related costs, or most above-property restructuring charges.

We assign gains and losses, equity in earnings or losses, direct general, administrative, and other expenses, and other restructuring charges to each of our segments.

“Unallocated corporate and other” includes a portion of our revenues (including license fees we receive from our credit card programs and fees from vacation ownership licensing agreements), revenues and expenses for our Loyalty Program, general, administrative, and other expenses, restructuring, merger-related

charges, and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments.

We evaluate the performance of our operating segments using “segment profits” which is based largely on the results of the segment without allocating corporate expenses, income taxes, indirect general, administrative, and other expenses, or merger-related costs.

We assign gains and losses, equity in earnings or losses, and direct general, administrative, and other expenses to each of our segments.

“Unallocated corporate and other” includes a portion of our revenues (such as fees we receive from our credit card programs and vacation ownership licensing agreements), revenues and expenses for our Loyalty Program, general, administrative, and other expenses, merger-related charges and other expenses, equity in earnings or losses, and other gains or losses that we do not allocate to our segments.

Our chief operating decision maker monitors assets for the consolidated Company but does not use assets by operating segment when assessing performance or making operating segment resource allocations.

Segment Revenues

The following tables present our revenues disaggregated by segment and major revenue stream for the 2022 third quarter, 2021 third quarter, 2022 first three quarters, and 2021 first three quarters:

Three Months Ended September 30, 2022 Three Months Ended September 30, 2021

($ in millions) U.S.

& Canada International Total U.S.

& Canada International Total

Gross fee revenues $ 649 $ 241 $ 890 $ 478 $ 156 $ 634

Contract investment amortization ( 16 ) ( 6 ) ( 22 ) ( 15 ) ( 6 ) ( 21 )

Net fee revenues 633 235 868 463 150 613

Owned, leased, and other revenue 114 205 319 93 134 227

Cost reimbursement revenue 3,253 468 3,721 2,450 337 2,787

Total reportable segment revenue $ 4,000 $ 908 $ 4,908 $ 3,006 $ 621 $ 3,627

Unallocated corporate and other

Total revenue

$ 5,313 $ 3,946

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021

The following table presents our revenues disaggregated by segment and major revenue stream for the 2023 first quarter and 2022 first quarter:

Three Months Ended March 31, 2023 Three Months Ended March 31, 2022

(in millions) U.S.

10 unchanged sentences

$ 5,615 $ 4,199

Segment Profit

Three Months Ended Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Segment Profits

Three Months Ended

(in millions) March 31, 2023 March 31, 2022

& Canada $ 657 $ 454

1 unchanged sentence

Unallocated corporate and other

83 ( 194 ) 92 ( 181 )

Interest expense, net of interest income ( 111 ) ( 88 )

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements