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 Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 REVENUES Base management fees $ 312 $ 306 $ 955 $ 917 Franchise fees 812 748 2,318 2,126 Incentive management fees 159 143 563 537 Gross fee revenues 1,283 1,197 3,836 3,580 Contract investment amortization ( 26 ) ( 23 ) ( 76 ) ( 66 ) Net fee revenues 1,257 1,174 3,760 3,514 Owned, leased, and other revenue 381 363 1,133 1,109 Cost reimbursement revenue 4,617 4,391 13,778 12,995 6,255 5,928 18,671 17,618 OPERATING COSTS AND EXPENSES Owned, leased, and other - direct 300 293 882 861 Depreciation, amortization, and other 45 46 137 138 General, administrative, and other 276 239 785 681 Restructuring and merger-related charges 9 13 25 52 Reimbursed expenses 4,681 4,238 13,827 12,740 5,311 4,829 15,656 14,472 OPERATING INCOME 944 1,099 3,015 3,146 Gains and other income, net 7 28 15 33 Interest expense ( 179 ) ( 146 ) ( 515 ) ( 412 ) Interest income 11 7 30 21 Equity in earnings 3 1 8 9 INCOME BEFORE INCOME TAXES 786 989 2,553 2,797 Provision for income taxes ( 202 ) ( 237 ) ( 633 ) ( 562 ) NET INCOME $ 584 $ 752 $ 1,920 $ 2,235 EARNINGS PER SHARE Earnings per share – basic $ 2.08 $ 2.52 $ 6.71 $ 7.36 Earnings per share – diluted $ 2.07 $ 2.51 $ 6.69 $ 7.32 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 Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Net income $ 584 $ 752 $ 1,920 $ 2,235 Other comprehensive income (loss) Foreign currency translation adjustments 209 ( 139 ) ( 62 ) ( 132 ) Other adjustments, net of tax ( 18 ) 6 ( 5 ) 12 Total other comprehensive income (loss), net of tax 191 ( 133 ) ( 67 ) ( 120 ) Comprehensive income $ 775 $ 619 $ 1,853 $ 2,115 See Notes to Condensed Consolidated Financial Statements. 4 Table of Contents MARRIOTT INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions) (Unaudited) September 30, 2024 December 31, 2023 ASSETS Current assets Cash and equivalents $ 394 $ 338 Accounts and notes receivable, net 2,920 2,712 Prepaid expenses and other 259 261 3,573 3,311 Property and equipment, net 1,624 1,581 Intangible assets Brands 5,902 5,907 Contract acquisition costs and other 3,595 3,283 Goodwill 8,890 8,886 18,387 18,076 Equity method investments 307 308 Notes receivable, net 144 138 Deferred tax assets 629 673 Operating lease assets 879 929 Other noncurrent assets 666 658 $ 26,209 $ 25,674 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Current portion of long-term debt $ 960 $ 553 Accounts payable 807 738 Accrued payroll and benefits 1,288 1,390 Liability for guest loyalty program 3,402 3,328 Accrued expenses and other 2,061 1,753 8,518 7,762 Long-term debt 12,671 11,320 Liability for guest loyalty program 3,969 3,678 Deferred tax liabilities 185 209 Deferred revenue 1,064 1,018 Operating lease liabilities 831 887 Other noncurrent liabilities 1,392 1,482 Stockholders’ deficit Class A Common Stock 5 5 Additional paid-in-capital 6,125 6,051 Retained earnings 16,251 14,838 Treasury stock, at cost ( 24,088 ) ( 20,929 ) Accumulated other comprehensive loss ( 714 ) ( 647 ) ( 2,421 ) ( 682 ) $ 26,209 $ 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) Nine Months Ended September 30, 2024 September 30, 2023 OPERATING ACTIVITIES Net income $ 1,920 $ 2,235 Adjustments to reconcile to cash provided by operating activities: Depreciation, amortization, and other 213 204 Stock-based compensation 173 147 Income taxes ( 96 ) ( 107 ) Liability for guest loyalty program 365 109 Contract acquisition costs ( 256 ) ( 134 ) Restructuring and merger-related charges 24 42 Working capital changes ( 162 ) ( 141 ) Other 250 64 Net cash provided by operating activities 2,431 2,419 INVESTING ACTIVITIES Capital and technology expenditures ( 408 ) ( 318 ) Asset acquisition — ( 102 ) Dispositions 4 61 Loan advances ( 10 ) ( 77 ) Loan collections 10 35 Other 15 38 Net cash used in investing activities ( 389 ) ( 363 ) FINANCING ACTIVITIES Commercial paper/Credit Facility, net ( 648 ) 100 Issuance of long-term debt 2,948 1,918 Repayment of long-term debt ( 556 ) ( 332 ) Issuance of Class A Common Stock 73 29 Dividends paid ( 506 ) ( 435 ) Purchase of treasury stock ( 3,176 ) ( 2,988 ) Stock-based compensation withholding taxes ( 127 ) ( 105 ) Other — ( 25 ) Net cash used in financing activities ( 1,992 ) ( 1,838 ) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 50 218 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1) 366 525 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1) $ 416 $ 743 (1) The 2024 amounts include beginning restricted cash of $ 28 million at December 31, 2023, and ending restricted cash of $ 22 million at September 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 September 30, 2024 and December 31, 2023, the results of our operations for the three and nine months ended September 30, 2024 and September 30, 2023, and cash flows for the nine months ended September 30, 2024 and September 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 Nine Months Ended (in millions, except per share amounts) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Computation of Basic Earnings Per Share Net income $ 584 $ 752 $ 1,920 $ 2,235 Shares for basic earnings per share 281.5 298.6 285.9 303.9 Basic earnings per share $ 2.08 $ 2.52 $ 6.71 $ 7.36 Computation of Diluted Earnings Per Share Net income $ 584 $ 752 $ 1,920 $ 2,235 Shares for basic earnings per share 281.5 298.6 285.9 303.9 Effect of dilutive securities Stock-based compensation 0.9 1.5 1.0 1.4 Shares for diluted earnings per share 282.4 300.1 286.9 305.3 Diluted earnings per share $ 2.07 $ 2.51 $ 6.69 $ 7.32 7 Table of Contents NOTE 3. STOCK-BASED COMPENSATION We granted 0.8 million restricted stock units (“RSUs”) during the 2024 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 2024 first three quarters 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 three quarters had a weighted average grant-date fair value of $ 226 per unit. We recorded stock-based compensation expense for RSUs and PSUs of $ 54 million in the 2024 third quarter, $ 47 million in the 2023 third quarter, $ 148 million in the 2024 first three quarters, and $ 129 million in the 2023 first three quarters. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $ 224 million at September 30, 2024 and $ 171 million at December 31, 2023. NOTE 4. INCOME TAXES Our effective tax rate increased to 25.7 percent for the 2024 third quarter compared to 23.9 percent for the 2023 third quarter, primarily due to a shift in earnings to jurisdictions with higher tax rates. Our effective tax rate increased to 24.8 percent for the 2024 first three quarters compared to 20.1 percent for the 2023 first three quarters, 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 $ 729 million in the 2024 first three quarters and $ 669 million in the 2023 first three quarters. 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 September 30, 2024 in the following table: (in millions) Guarantee Type Maximum Potential Amount of Future Fundings Recorded Liability for Guarantees Debt service $ 62 $ 6 Operating profit 146 91 Other 20 4 $ 228 $ 101 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 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 September 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 the 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, oral argument was held on November 1, 2024, and we await a decision. 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 or no longer appear to be active. In October 2024, we reached final resolutions with the Federal Trade Commission and the Attorney General offices from 49 states and the District of Columbia (the “AG Offices”). Among other terms, the resolution with the AG Offices includes a $ 52 million monetary payment, which we have fully accrued for as of September 30, 2024, and which is not material to our Financial Statements. We do not expect the terms of these resolutions to have a material impact on our current or ongoing operations. 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 in excess of the amounts recorded 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. Other Legal Proceedings During the 2024 third quarter, we recorded certain expenses related to settled and ongoing claims brought against the Company regarding the use of copyrighted music. These amounts are not material to our Financial Statements. While we believe it is reasonably possible that we may incur losses in excess of the amounts already recorded for the unresolved claims, we are currently unable to reasonably estimate the amount of losses or range of 9 Table of Contents loss in excess of the amounts recorded. At this time, we do not expect these claims or resolutions to have a material impact on the Company’s financial position or operations. 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 September 30, 2024 and year-end 2023: (in millions) September 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 %) 319 321 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 %) 991 990 Series GG Notes, interest rate of 3.5 %, face amount of $ 1,000 , maturing October 15, 2032 (effective interest rate of 3.7 %) 989 988 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 %) 787 785 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 %) 491 — Series OO Notes, interest rate of 5.3 %, face amount of $ 1,000 , maturing May 15, 2034 (effective interest rate of 5.6 %) 979 — Series PP Notes, interest rate of 4.8 %, face amount of $ 500 , maturing March 15, 2030 (effective interest rate of 5.0 %) 495 — Series QQ Notes, interest rate of 5.4 %, face amount of $ 1,000 , maturing March 15, 2035 (effective interest rate of 5.5 %) 986 — Commercial paper 769 1,421 Credit Facility — — Finance lease obligations 126 131 Other 56 56 $ 13,631 $ 11,873 Less current portion ( 960 ) ( 553 ) $ 12,671 $ 11,320 We paid cash for interest, net of amounts capitalized, of $ 350 million in the 2024 first three quarters and $ 266 million in the 2023 first three quarters. In August 2024, we issued $ 500 million aggregate principal amount of 4.800 percent Series PP Notes due March 15, 2030 (the “Series PP Notes”) and $ 1.0 billion aggregate principal amount of 5.350 percent Series QQ 10 Table of Contents Notes due March 15, 2035 (the “Series QQ Notes”). We will pay interest on the Series PP Notes and Series QQ Notes in March and September of each year, commencing in March 2025. Net proceeds from the offering of the Series PP Notes and Series QQ Notes were approximately $ 1.480 billion, after deducting the underwriting discount and expenses, and were made available for general corporate purposes, including working capital, capital expenditures, acquisitions, stock repurchases, or repayment of outstanding indebtedness. 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. Net proceeds from the offering of the Series NN Notes and Series OO Notes were approximately $ 1.468 billion, after deducting the underwriting discount and expenses, and 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 (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: September 30, 2024 December 31, 2023 (in millions) Carrying Amount Fair Value Carrying Amount Fair Value Notes receivable $ 144 $ 142 $ 138 $ 131 Total noncurrent financial assets $ 144 $ 142 $ 138 $ 131 Senior Notes $ ( 11,762 ) $ ( 11,720 ) $ ( 9,720 ) $ ( 9,393 ) Commercial paper ( 769 ) ( 769 ) ( 1,421 ) ( 1,421 ) Total noncurrent financial liabilities $ ( 12,531 ) $ ( 12,489 ) $ ( 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 three quarters and 2023 first three quarters: (in millions) Foreign Currency Translation Adjustments Other Adjustments Accumulated Other Comprehensive Loss Balance at year-end 2023 $ ( 654 ) $ 7 $ ( 647 ) Other comprehensive loss before reclassifications ( 62 ) ( 2 ) ( 64 ) Reclassification adjustments — ( 3 ) ( 3 ) Net other comprehensive loss ( 62 ) ( 5 ) ( 67 ) Balance at September 30, 2024 $ ( 716 ) $ 2 $ ( 714 ) 11 Table of Contents (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 ( 129 ) 11 ( 118 ) Reclassification adjustments ( 3 ) 1 ( 2 ) Net other comprehensive (loss) income ( 132 ) 12 ( 120 ) Balance at September 30, 2023 $ ( 872 ) $ 23 $ ( 849 ) The following tables detail the changes in common shares outstanding and stockholders’ deficit for the 2024 first three quarters and 2023 first three quarters: (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 ) — Net income 584 — — 584 — — — Other comprehensive income 191 — — — — 191 — Dividends ($ 0.63 per share) ( 177 ) — — ( 177 ) — — 0.2 Stock-based compensation plans 101 — 95 — 6 — ( 4.5 ) Purchase of treasury stock ( 1,029 ) — — — ( 1,029 ) — 278.6 Balance at September 30, 2024 $ ( 2,421 ) $ 5 $ 6,125 $ 16,251 $ ( 24,088 ) $ ( 714 ) 12 Table of Contents 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 ) — Net income 752 — — 752 — — — Other comprehensive loss ( 133 ) — — — — ( 133 ) — Dividends ($ 0.52 per share) ( 154 ) — — ( 154 ) — — 0.4 Stock-based compensation plans 56 — 44 — 12 — ( 4.8 ) Purchase of treasury stock ( 958 ) — — — ( 958 ) — 295.2 Balance at September 30, 2023 $ ( 661 ) $ 5 $ 5,996 $ 14,142 $ ( 19,955 ) $ ( 849 ) NOTE 9. CONTRACTS WITH CUSTOMERS Our current and noncurrent liability for guest loyalty program increased by $ 365 million, to $ 7,371 million at September 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 $ 2,410 million of revenue recognized in the 2024 first three quarters, that was deferred as of December 31, 2023. Our allowance for credit losses was $ 207 million at September 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. 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 certain restructuring and merger-related charges. 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, certain restructuring and merger-related charges, 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. 13 Table of Contents Segment Revenues The following tables present our revenues disaggregated by segment and major revenue stream for the 2024 third quarter, 2023 third quarter, 2024 first three quarters, and 2023 first three quarters: Three Months Ended September 30, 2024 (in millions) U.S. & Canada EMEA Greater China APEC Total Gross fee revenues $ 747 $ 153 $ 62 $ 82 $ 1,044 Contract investment amortization ( 19 ) ( 3 ) — ( 2 ) ( 24 ) Net fee revenues 728 150 62 80 1,020 Owned, leased, and other revenue 95 169 5 30 299 Cost reimbursement revenue 3,773 316 75 120 4,284 Total reportable segment revenue $ 4,596 $ 635 $ 142 $ 230 $ 5,603 Unallocated corporate and other 652 Total revenues $ 6,255 Three Months Ended September 30, 2023 (in millions) U.S. & Canada EMEA Greater China APEC Total Gross fee revenues $ 690 $ 143 $ 71 $ 69 $ 973 Contract investment amortization ( 16 ) ( 4 ) — ( 1 ) ( 21 ) Net fee revenues 674 139 71 68 952 Owned, leased, and other revenue 94 155 6 28 283 Cost reimbursement revenue 3,565 309 83 103 4,060 Total reportable segment revenue $ 4,333 $ 603 $ 160 $ 199 $ 5,295 Unallocated corporate and other 633 Total revenues $ 5,928 Nine Months Ended September 30, 2024 (in millions) U.S. & Canada EMEA Greater China APEC Total Gross fee revenues $ 2,227 $ 425 $ 186 $ 243 $ 3,081 Contract investment amortization ( 57 ) ( 10 ) — ( 4 ) ( 71 ) Net fee revenues 2,170 415 186 239 3,010 Owned, leased, and other revenue 314 444 18 98 874 Cost reimbursement revenue 11,367 916 226 359 12,868 Total reportable segment revenue $ 13,851 $ 1,775 $ 430 $ 696 $ 16,752 Unallocated corporate and other 1,919 Total revenues $ 18,671 Nine Months Ended September 30, 2023 (in millions) U.S. & Canada EMEA Greater China APEC Total Gross fee revenues $ 2,113 $ 381 $ 196 $ 199 $ 2,889 Contract investment amortization ( 49 ) ( 10 ) — ( 3 ) ( 62 ) Net fee revenues 2,064 371 196 196 2,827 Owned, leased, and other revenue 327 419 15 95 856 Cost reimbursement revenue 10,722 872 234 300 12,128 Total reportable segment revenue $ 13,113 $ 1,662 $ 445 $ 591 $ 15,811 Unallocated corporate and other 1,807 Total revenues $ 17,618 14 Table of Contents Segment Profits Three Months Ended Nine Months Ended (in millions) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 U.S. & Canada $ 617 $ 707 $ 2,029 $ 2,120 EMEA 152 144 386 354 Greater China 46 60 144 165 APEC 66 58 200 171 Unallocated corporate and other 73 159 279 378 Interest expense, net of interest income ( 168 ) ( 139 ) ( 485 ) ( 391 ) Provision for income taxes ( 202 ) ( 237 ) ( 633 ) ( 562 ) Net income $ 584 $ 752 $ 1,920 $ 2,235 NOTE 11. RESTRUCTURING CHARGES Earlier this year, we launched a comprehensive initiative to enhance our effectiveness and efficiency across the Company. In connection with these efforts, in the 2024 third quarter, we recorded an immaterial amount of charges for voluntary retirement benefits relating to our above-property organization in the “Restructuring and merger-related charges” and “Reimbursed expenses” captions of our Income Statements. We anticipate total charges of approximately $ 100 million for employee termination benefits relating to our above-property organization. We expect to substantially complete this initiative by the end of the 2025 first quarter and expect the above-described charges to be recorded primarily in the 2024 fourth quarter.