MARRIOTT INTERNATIONAL INC /MD/ 10-Q

Item 1 . Financial Statements MARRIOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 REVENUES Base management fees $ 330 $ 318 $ 643 $ 611 Franchise fees 818 739 1,506 1,378 Incentive management fees 195 193 404 394 Gross fee revenues 1,343 1,250 2,553 2,383 Contract investment amortization ( 27 ) ( 22 ) ( 50 ) ( 43 ) Net fee revenues 1,316 1,228 2,503 2,340 Owned, leased, and other revenue 395 390 752 746 Cost reimbursement revenue 4,728 4,457 9,161 8,604 6,439 6,075 12,416 11,690 OPERATING COSTS AND EXPENSES Owned, leased, and other - direct 296 287 582 568 Depreciation, amortization, and other 47 48 92 92 General, administrative, and other 248 240 509 442 Merger-related charges and other 8 38 16 39 Reimbursed expenses 4,645 4,366 9,146 8,502 5,244 4,979 10,345 9,643 OPERATING INCOME 1,195 1,096 2,071 2,047 Gains and other income, net 4 2 8 5 Interest expense ( 173 ) ( 140 ) ( 336 ) ( 266 ) Interest income 9 ( 1 ) 19 14 Equity in earnings 5 7 5 8 INCOME BEFORE INCOME TAXES 1,040 964 1,767 1,808 Provision for income taxes ( 268 ) ( 238 ) ( 431 ) ( 325 ) NET INCOME $ 772 $ 726 $ 1,336 $ 1,483 EARNINGS PER SHARE Earnings per share – basic $ 2.70 $ 2.39 $ 4.64 $ 4.84 Earnings per share – diluted $ 2.69 $ 2.38 $ 4.62 $ 4.81 See Notes to Condensed Consolidated Financial Statements. 3 Table of Contents MARRIOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (Unaudited) Three Months Ended Six Months Ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Net income $ 772 $ 726 $ 1,336 $ 1,483 Other comprehensive (loss) income Foreign currency translation adjustments ( 114 ) ( 77 ) ( 271 ) 7 Other adjustments, net of tax 3 8 13 6 Total other comprehensive (loss) income, net of tax ( 111 ) ( 69 ) ( 258 ) 13 Comprehensive income $ 661 $ 657 $ 1,078 $ 1,496 See Notes to Condensed Consolidated Financial Statements. 4 Table of Contents MARRIOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) (Unaudited) June 30, 2024 December 31, 2023 ASSETS Current assets Cash and equivalents $ 349 $ 338 Accounts and notes receivable, net 2,847 2,712 Prepaid expenses and other 304 261 3,500 3,311 Property and equipment, net 1,558 1,581 Intangible assets Brands 5,818 5,907 Contract acquisition costs and other 3,445 3,283 Goodwill 8,783 8,886 18,046 18,076 Equity method investments 304 308 Notes receivable, net 146 138 Deferred tax assets 644 673 Operating lease assets 875 929 Other noncurrent assets 667 658 $ 25,740 $ 25,674 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Current portion of long-term debt $ 960 $ 553 Accounts payable 826 738 Accrued payroll and benefits 1,136 1,390 Liability for guest loyalty program 3,383 3,328 Accrued expenses and other 1,978 1,753 8,283 7,762 Long-term debt 12,183 11,320 Liability for guest loyalty program 3,942 3,678 Deferred tax liabilities 219 209 Deferred revenue 1,052 1,018 Operating lease liabilities 825 887 Other noncurrent liabilities 1,327 1,482 Stockholders’ deficit Class A Common Stock 5 5 Additional paid-in-capital 6,030 6,051 Retained earnings 15,844 14,838 Treasury stock, at cost ( 23,065 ) ( 20,929 ) Accumulated other comprehensive loss ( 905 ) ( 647 ) ( 2,091 ) ( 682 ) $ 25,740 $ 25,674 See Notes to Condensed Consolidated Financial Statements. 5 Table of Contents MARRIOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (Unaudited) Six Months Ended June 30, 2024 June 30, 2023 OPERATING ACTIVITIES Net income $ 1,336 $ 1,483 Adjustments to reconcile to cash provided by operating activities: Depreciation, amortization, and other 142 135 Stock-based compensation 110 93 Income taxes ( 2 ) ( 80 ) Liability for guest loyalty program 319 131 Contract acquisition costs ( 121 ) ( 105 ) Merger-related charges and other 15 32 Working capital changes ( 274 ) ( 215 ) Other 26 64 Net cash provided by operating activities 1,551 1,538 INVESTING ACTIVITIES Capital and technology expenditures ( 234 ) ( 194 ) Asset acquisition — ( 102 ) Dispositions 1 — Loan advances ( 8 ) ( 17 ) Loan collections 8 33 Other 8 37 Net cash used in investing activities ( 225 ) ( 243 ) FINANCING ACTIVITIES Commercial paper/Credit Facility, net 342 736 Issuance of long-term debt 1,468 783 Repayment of long-term debt ( 554 ) ( 330 ) Issuance of Class A Common Stock 33 — Dividends paid ( 330 ) ( 281 ) Purchase of treasury stock ( 2,156 ) ( 2,046 ) Stock-based compensation withholding taxes ( 125 ) ( 79 ) Other — ( 24 ) Net cash used in financing activities ( 1,322 ) ( 1,241 ) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 4 54 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1) 366 525 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1) $ 370 $ 579 (1) The 2024 amounts include beginning restricted cash of $ 28 million at December 31, 2023, and ending restricted cash of $ 21 million at June 30, 2024, 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. 6 Table of Contents MARRIOTT INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. BASIS OF PRESENTATION The condensed consolidated financial statements present the results of operations, financial position, and cash flows of Marriott International, Inc. and subsidiaries (referred to in this report as “we,” “us,” “Marriott,” or the “Company”). In order to make this report easier to read, we also refer throughout to (1) our Condensed Consolidated Financial Statements as our “Financial Statements,” (2) our Condensed Consolidated Statements of Income as our “Income Statements,” (3) our Condensed Consolidated Balance Sheets as our “Balance Sheets,” (4) our Condensed Consolidated Statements of Cash Flows as our “Statements of Cash Flows,” (5) our properties, brands, or markets in the United States and Canada as “U.S. & Canada,” and (6) our properties, brands, or markets in our Caribbean & Latin America, Europe, Middle East & Africa, Greater China, and Asia Pacific excluding China regions, as “International.” In addition, references throughout to numbered “Notes” refer to these Notes to Condensed Consolidated Financial Statements, unless otherwise stated. These Financial Statements have not been audited. We have condensed or omitted certain information and disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial statements in this report should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“2023 Form 10-K”). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our 2023 Form 10-K. 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. 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 June 30, 2024 and December 31, 2023, the results of our operations for the three and six months ended June 30, 2024 and June 30, 2023, and cash flows for the six months ended June 30, 2024 and June 30, 2023. Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations. We have eliminated all material intercompany transactions and balances between entities consolidated in these Financial Statements. NOTE 2. EARNINGS PER SHARE 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 Six Months Ended (in millions, except per share amounts) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Computation of Basic Earnings Per Share Net income $ 772 $ 726 $ 1,336 $ 1,483 Shares for basic earnings per share 285.8 303.6 288.1 306.6 Basic earnings per share $ 2.70 $ 2.39 $ 4.64 $ 4.84 Computation of Diluted Earnings Per Share Net income $ 772 $ 726 $ 1,336 $ 1,483 Shares for basic earnings per share 285.8 303.6 288.1 306.6 Effect of dilutive securities Stock-based compensation 0.9 1.4 1.0 1.4 Shares for diluted earnings per share 286.7 305.0 289.1 308.0 Diluted earnings per share $ 2.69 $ 2.38 $ 4.62 $ 4.81 7 Table of Contents NOTE 3. STOCK-BASED COMPENSATION We granted 0.8 million restricted stock units (“RSUs”) during the 2024 first half 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 2024 first half 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 2026 adjusted EBITDA performance and relative total stockholder return over the 2024 to 2026 performance period. RSUs, including PSUs, granted in the 2024 first half had a weighted average grant-date fair value of $ 226 per unit. We recorded stock-based compensation expense for RSUs and PSUs of $ 49 million in the 2024 second quarter, $ 49 million in the 2023 second quarter, $ 94 million in the 2024 first half, and $ 82 million in the 2023 first half. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $ 272 million at June 30, 2024 and $ 171 million at December 31, 2023. NOTE 4. INCOME TAXES Our effective tax rate increased to 25.8 percent for the 2024 second quarter compared to 24.7 percent for the 2023 second quarter, primarily due to a shift in earnings to jurisdictions with higher tax rates. Our effective tax rate increased to 24.4 percent for the 2024 first half compared to 18.0 percent for the 2023 first half, primarily due to the prior year release of tax reserves and a shift in earnings to jurisdictions with higher tax rates. We paid cash for income taxes, net of refunds, of $ 433 million in the 2024 first half and $ 406 million in the 2023 first half. NOTE 5. COMMITMENTS AND CONTINGENCIES Guarantees 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 June 30, 2024 in the following table: (in millions) Guarantee Type Maximum Potential Amount of Future Fundings Recorded Liability for Guarantees Debt service $ 57 $ 6 Operating profit 150 75 Other 19 4 $ 226 $ 85 Our maximum potential guarantees listed in the preceding table include $ 64 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 Sheraton Grand Chicago . In 2017, we granted the owner a one-time right to require us to purchase the leasehold interest in the land and the hotel for $ 300 million in cash (the “put option”). In the 2021 third quarter, we entered into an amendment with the owner to move the exercise period of the put option from the 2022 first half to the 2024 first half. In January 2024, the owner exercised the put option, and we exercised our 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, resulting in an expected total cash payment of approximately $ 500 million. The closing is expected to occur in the 2024 fourth quarter. We account for the put option as a guarantee, and our recorded liability (reflected in the “Accrued expenses and other” caption of our Balance Sheets) was $ 300 million at June 30, 2024 and December 31, 2023. 8 Table of Contents Starwood Data Security Incident Description of Event On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). Working with leading security experts, we determined that there was unauthorized access to the Starwood network since 2014 and that an unauthorized party had copied information from the Starwood reservations database and taken steps towards removing it. We discontinued use of t he Starwood reservations database for business operations at the end of 2018 . Litigation, Claims, and Government Investigations Following our announcement of the Data Security Incident, approximately 100 lawsuits were filed by consumers and others against us in U.S. federal, U.S. state and Canadian courts related to the incident. The plaintiffs in the cases that remain pending, who generally purport to represent various classes of consumers, generally claim to have been harmed by alleged actions and/or omissions by the Company in connection with the Data Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief. The active U.S. cases are consolidated in the U.S. District Court for the District of Maryland (the “District Court”), pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). The District Court granted in part and denied in part class certification of various U.S. groups of consumers. In August 2023, the U.S. Court of Appeals for the Fourth Circuit (the “Fourth Circuit”) vacated the District Court’s class certification decision because the District Court failed to first consider the effect of a class-action waiver signed by all putative class members. On remand, after briefing, the District Court issued an order reinstating the same classes that had previously been certified. We promptly petitioned the Fourth Circuit, seeking leave to appeal that ruling. The Fourth Circuit granted that petition on January 18, 2024, but has not yet set a date for oral argument. 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. We dispute the allegations in these lawsuits and are vigorously defending against such claims. In addition, various U.S. federal, U.S. state and foreign governmental authorities made inquiries, opened investigations, or requested information and/or documents related to the Data Security Incident and related matters. Most of these matters have been resolved, are expected to be resolved in the near future, or no longer appear to be active. We believe we have reached a resolution with the Federal Trade Commission, and we are continuing to progress in our discussions with the Attorney General offices from 49 states and the District of Columbia. Based on this progress, we believe it is probable that we will incur losses, and as of June 30, 2024, we have an accrual for an estimated loss contingency, which is not material to our Financial Statements. 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 unresolved 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: (1) in the case of the above described MDL proceedings, the current stage of these proceedings, the absence of specificity as to alleged damages, the uncertainty as to the certification of a class or classes and the size of any certified class, and the lack of resolution of significant factual and legal issues, and (2) uncertainty regarding unresolved inquiries, investigations, or requests for information and/or documents. 9 Table of Contents NOTE 6. 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 June 30, 2024 and year-end 2023: (in millions) June 30, 2024 December 31, 2023 Senior Notes: Series P Notes, interest rate of 3.8 %, face amount of $ 350 , maturing October 1, 2025 (effective interest rate of 4.0 %) $ 349 $ 349 Series R Notes, interest rate of 3.1 %, face amount of $ 750 , maturing June 15, 2026 (effective interest rate of 3.3 %) 748 748 Series V Notes, interest rate of 3.8 %, face amount of $ 318 , maturing March 15, 2025 (effective interest rate of 2.8 %) 320 321 Series W Notes, interest rate of 4.5 %, face amount of $ 278 , maturing October 1, 2034 (effective interest rate of 4.1 %) 288 288 Series X Notes, interest rate of 4.0 %, face amount of $ 450 , maturing April 15, 2028 (effective interest rate of 4.2 %) 447 447 Series AA Notes, interest rate of 4.7 %, face amount of $ 300 , maturing December 1, 2028 (effective interest rate of 4.8 %) 298 298 Series CC Notes, interest rate of 3.6 %, face amount of $ 550 , matured April 15, 2024 (effective interest rate of 3.9 %) — 545 Series EE Notes, interest rate of 5.8 %, face amount of $ 600 , maturing May 1, 2025 (effective interest rate of 6.0 %) 599 598 Series FF Notes, interest rate of 4.6 %, face amount of $ 1,000 , maturing June 15, 2030 (effective interest rate of 4.8 %) 990 990 Series GG Notes, interest rate of 3.5 %, face amount of $ 1,000 , maturing October 15, 2032 (effective interest rate of 3.7 %) 988 988 Series HH Notes, interest rate of 2.9 %, face amount of $ 1,100 , maturing April 15, 2031 (effective interest rate of 3.0 %) 1,092 1,091 Series II Notes, interest rate of 2.8 %, face amount of $ 700 , maturing October 15, 2033 (effective interest rate of 2.8 %) 695 694 Series JJ Notes, interest rate of 5.0 %, face amount of $ 1,000 , maturing October 15, 2027 (effective interest rate of 5.4 %) 989 987 Series KK Notes, interest rate of 4.9 %, face amount of $ 800 , maturing April 15, 2029 (effective interest rate of 5.3 %) 786 785 Series LL Notes, interest rate of 5.5 %, face amount of $ 450 , maturing September 15, 2026 (effective interest rate of 5.9 %) 446 445 Series MM Notes, interest rate of 5.6 %, face amount of $ 700 , maturing October 15, 2028 (effective interest rate of 5.9 %) 692 691 Series NN Notes, interest rate of 4.9 %, face amount of $ 500 , maturing May 15, 2029 (effective interest rate of 5.3 %) 490 — Series OO Notes, interest rate of 5.3 %, face amount of $ 1,000 , maturing May 15, 2034 (effective interest rate of 5.6 %) 979 — Commercial paper 1,763 1,421 Credit Facility — — Finance lease obligations 128 131 Other 56 56 $ 13,143 $ 11,873 Less current portion ( 960 ) ( 553 ) $ 12,183 $ 11,320 We paid cash for interest, net of amounts capitalized, of $ 303 million in the 2024 first half and $ 196 million in the 2023 first half. In February 2024, we issued $ 500 million aggregate principal amount of 4.875 percent Series NN Notes due May 15, 2029 (the “Series NN Notes”) and $ 1.0 billion aggregate principal amount of 5.300 percent Series OO Notes due May 15, 2034 (the “Series OO Notes”). We pay interest on the Series NN Notes and Series OO Notes in May and November of each year. We received net proceeds of approximately $ 1.468 billion from the offering of the Series NN Notes and Series OO Notes, after deducting the underwriting discount and expenses, which were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness. 10 Table of Contents We are party to a $ 4.5 billion multicurrency revolving credit agreement (as amended, the “Credit Facility”). Available borrowings under the Credit Facility support our commercial paper program and general corporate needs. U.S. dollar borrowings under the Credit Facility 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 (which generally have short-term maturities of 45 days or less) 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. NOTE 7. 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 amounts and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments in the following table: June 30, 2024 December 31, 2023 (in millions) Carrying Amount Fair Value Carrying Amount Fair Value Notes receivable $ 146 $ 142 $ 138 $ 131 Total noncurrent financial assets $ 146 $ 142 $ 138 $ 131 Senior Notes $ ( 10,277 ) $ ( 9,841 ) $ ( 9,720 ) $ ( 9,393 ) Commercial paper ( 1,763 ) ( 1,763 ) ( 1,421 ) ( 1,421 ) Total noncurrent financial liabilities $ ( 12,040 ) $ ( 11,604 ) $ ( 11,141 ) $ ( 10,814 ) See Note 12. Fair Value of Financial Instruments and the “Fair Value Measurements” caption of Note 2. Summary of Significant Accounting Policies of our 2023 Form 10-K for more information on the input levels we use in determining fair value. NOTE 8. ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS’ DEFICIT The following tables detail the accumulated other comprehensive loss activity for the 2024 first half and 2023 first half: (in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss Balance at year-end 2023 $ ( 654 ) $ 7 $ ( 647 ) Other comprehensive (loss) income before reclassifications (1) ( 271 ) 17 ( 254 ) Reclassification adjustments — ( 4 ) ( 4 ) Net other comprehensive (loss) income ( 271 ) 13 ( 258 ) Balance at June 30, 2024 $ ( 925 ) $ 20 $ ( 905 ) (in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss Balance at year-end 2022 $ ( 740 ) $ 11 $ ( 729 ) Other comprehensive income before reclassifications (1) 7 4 11 Reclassification adjustments — 2 2 Net other comprehensive income 7 6 13 Balance at June 30, 2023 $ ( 733 ) $ 17 $ ( 716 ) (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 $ 21 million for the 2024 first half and losses of $ 14 million for the 2023 first half. 11 Table of Contents The following tables detail the changes in common shares outstanding and stockholders’ deficit for the 2024 first half and 2023 first half: (in millions, except per share amounts) Common Shares Outstanding Total Class A Common Stock Additional Paid-in-Capital Retained Earnings Treasury Stock, at Cost Accumulated Other Comprehensive Loss 290.5 Balance at year-end 2023 $ ( 682 ) $ 5 $ 6,051 $ 14,838 $ ( 20,929 ) $ ( 647 ) — Net income 564 — — 564 — — — Other comprehensive loss ( 147 ) — — — — ( 147 ) — Dividends ($ 0.52 per share) ( 151 ) — — ( 151 ) — — 1.3 Stock-based compensation plans ( 36 ) — ( 73 ) — 37 — ( 4.8 ) Purchase of treasury stock ( 1,164 ) — — — ( 1,164 ) — 287.0 Balance at March 31, 2024 $ ( 1,616 ) $ 5 $ 5,978 $ 15,251 $ ( 22,056 ) $ ( 794 ) — Net income 772 — — 772 — — — Other comprehensive loss ( 111 ) — — — — ( 111 ) — Dividends ($ 0.63 per share) ( 179 ) — — ( 179 ) — — — Stock-based compensation plans 53 — 52 — 1 — ( 4.1 ) Purchase of treasury stock ( 1,010 ) — — — ( 1,010 ) — 282.9 Balance at June 30, 2024 $ ( 2,091 ) $ 5 $ 6,030 $ 15,844 $ ( 23,065 ) $ ( 905 ) Common Shares Outstanding Total Class A Common Stock Additional Paid-in-Capital Retained Earnings Treasury Stock, at Cost Accumulated Other Comprehensive Loss 310.6 Balance at year-end 2022 $ 568 $ 5 $ 5,965 $ 12,342 $ ( 17,015 ) $ ( 729 ) — Net income 757 — — 757 — — — Other comprehensive income 82 — — — — 82 — Dividends ($ 0.40 per share) ( 124 ) — — ( 124 ) — — 0.9 Stock-based compensation plans ( 34 ) — ( 59 ) — 25 — ( 6.8 ) Purchase of treasury stock ( 1,109 ) — — — ( 1,109 ) — 304.7 Balance at March 31, 2023 $ 140 $ 5 $ 5,906 $ 12,975 $ ( 18,099 ) $ ( 647 ) — Net income 726 — — 726 — — — Other comprehensive loss ( 69 ) — — — — ( 69 ) — Dividends ($ 0.52 per share) ( 157 ) — — ( 157 ) — — 0.1 Stock-based compensation plans 48 — 46 — 2 — ( 5.2 ) Purchase of treasury stock ( 912 ) — — — ( 912 ) — 299.6 Balance at June 30, 2023 $ ( 224 ) $ 5 $ 5,952 $ 13,544 $ ( 19,009 ) $ ( 716 ) NOTE 9. CONTRACTS WITH CUSTOMERS Our current and noncurrent liability for guest loyalty program increased by $ 319 million, to $ 7,325 million at June 30, 2024, from $ 7,006 million at December 31, 2023, primarily reflecting an increase in points earned by members. The increase was partially offset by $ 1,645 million of revenue recognized in the 2024 first half, that was deferred as of December 31, 2023. Our allowance for credit losses was $ 207 million at June 30, 2024 and $ 197 million at December 31, 2023. NOTE 10. BUSINESS SEGMENTS Beginning in the 2024 first quarter, we modified our segment structure as a result of a change in the way our chief operating decision maker (“CODM”) evaluates performance and allocates resources within the Company, resulting in the following four reportable business segments: (1) U.S. & Canada, (2) Europe, Middle East & Africa (“EMEA”), (3) Greater China, and (4) Asia Pacific excluding China (“APEC”). Our Caribbean & Latin America (“CALA”) operating segment does not meet the applicable accounting criteria for separate disclosure as a reportable business segment, and as such, we include its results in “Unallocated corporate and other.” We revised the prior period amounts shown in the tables below to conform to our current presentation. 12 Table of Contents 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 charges and other expenses. 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, as well as results of our CALA operating segment. Our CODM 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 2024 second quarter, 2023 second quarter, 2024 first half, and 2023 first half: Three Months Ended June 30, 2024 (in millions) U.S. & Canada EMEA Greater China APEC Total Gross fee revenues $ 798 $ 154 $ 59 $ 74 $ 1,085 Contract investment amortization ( 21 ) ( 4 ) — ( 1 ) ( 26 ) Net fee revenues 777 150 59 73 1,059 Owned, leased, and other revenue 111 157 6 36 310 Cost reimbursement revenue 3,877 322 75 123 4,397 Total reportable segment revenue $ 4,765 $ 629 $ 140 $ 232 $ 5,766 Unallocated corporate and other 673 Total revenues $ 6,439 Three Months Ended June 30, 2023 (in millions) U.S. & Canada EMEA Greater China APEC Total Gross fee revenues $ 751 $ 133 $ 68 $ 63 $ 1,015 Contract investment amortization ( 17 ) ( 3 ) — ( 1 ) ( 21 ) Net fee revenues 734 130 68 62 994 Owned, leased, and other revenue 116 151 5 37 309 Cost reimbursement revenue 3,652 307 81 100 4,140 Total reportable segment revenue $ 4,502 $ 588 $ 154 $ 199 $ 5,443 Unallocated corporate and other 632 Total revenues $ 6,075 Six Months Ended June 30, 2024 (in millions) U.S. & Canada EMEA Greater China APEC Total Gross fee revenues $ 1,480 $ 272 $ 124 $ 161 $ 2,037 Contract investment amortization ( 38 ) ( 7 ) — ( 2 ) ( 47 ) Net fee revenues 1,442 265 124 159 1,990 Owned, leased, and other revenue 219 275 13 68 575 Cost reimbursement revenue 7,594 600 151 239 8,584 Total reportable segment revenue $ 9,255 $ 1,140 $ 288 $ 466 $ 11,149 Unallocated corporate and other 1,267 Total revenues $ 12,416 13 Table of Contents Six Months Ended June 30, 2023 (in millions) U.S. & Canada EMEA Greater China APEC Total Gross fee revenues $ 1,423 $ 238 $ 125 $ 130 $ 1,916 Contract investment amortization ( 33 ) ( 6 ) — ( 2 ) ( 41 ) Net fee revenues 1,390 232 125 128 1,875 Owned, leased, and other revenue 233 264 9 67 573 Cost reimbursement revenue 7,157 563 151 197 8,068 Total reportable segment revenue $ 8,780 $ 1,059 $ 285 $ 392 $ 10,516 Unallocated corporate and other 1,174 Total revenues $ 11,690 Segment Profits Three Months Ended Six Months Ended (in millions) June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 U.S. & Canada $ 787 $ 756 $ 1,412 $ 1,413 EMEA 153 132 234 210 Greater China 47 59 98 105 APEC 62 57 134 113 Unallocated corporate and other 155 101 206 219 Interest expense, net of interest income ( 164 ) ( 141 ) ( 317 ) ( 252 ) Provision for income taxes ( 268 ) ( 238 ) ( 431 ) ( 325 ) Net income $ 772 $ 726 $ 1,336 $ 1,483