What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-22 compared with 2022-02-23 · 251 added, 332 removed, 295 unchanged (66% of the section changed)

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• Vacation Ownership — develops, markets and sells vacation ownership interests (“VOIs”) to individual consumers, provides consumer financing in connection with the sale of VOIs, and provides property management services at resorts.

• Travel and Membership — operates a variety of travel businesses, including three vacation exchange brands, a home exchange network, travel technology platforms, travel memberships, and direct-to-consumer rentals.

This segment is wholly comprised of our Wyndham Destinations business line.

• Travel and Membership — operates a variety of travel businesses, including three vacation exchange brands, travel technology platforms, travel memberships, and direct-to-consumer rentals.

This segment is comprised of our Exchange and Travel Club business lines.

Inflation Reduction Act

On August 16, 2022, the United States enacted the Inflation Reduction Act.

Among other provisions, this new law imposes a 15% minimum tax rate for large corporations with more than $1.0 billion of adjusted financial statement income over a three-year period, and a 1% excise tax on stock buybacks.

These changes will become effective for the 2023 tax year.

We do not currently expect to be subject to the minimum tax, but we will continue to monitor as this could change.

We are subject to the 1% excise tax to the extent of future share repurchases.

We are still evaluating the impact of the other provisions on our business.

Travel + Leisure Brand Acquisition

On January 5, 2021, Wyndham Destinations, Inc.

acquired the Travel + Leisure brand and related assets from Meredith Corporation (“Meredith”) for $100 million, of which $55 million was paid during 2021.

The remaining payments are to be completed by June 2024.

acquired the Travel + Leisure brand and related assets from Dotdash Meredith (formerly Meredith Corporation) for $100 million, of which $55 million was paid during 2021 and $20 million paid during 2022.

The remaining payments will be completed by June 2024.

This acquisition included Travel + Leisure branded travel clubs and members.

We acquired the Travel + Leisure brand to accelerate our strategic plan to broaden our reach with the launch of new travel services, expand our membership travel business, and amplify the global visibility of our leisure travel products.

Meredith will continue to operate and monetize Travel + Leisure branded multi-platform media assets across multiple channels under a 30-year royalty-free, renewable licensing relationship.

Dotdash Meredith will continue to operate and monetize Travel + Leisure branded multi-platform media assets across multiple channels under a 30-year royalty-free, renewable licensing relationship.

In connection with this acquisition, on February 17, 2021, Wyndham Destinations, Inc.

was renamed Travel + Leisure Co.

and continues to trade on the New York Stock Exchange under the new ticker symbol TNL.

In connection with the Travel + Leisure brand acquisition we updated the names and composition of our reportable segments to better align with how they are managed.

We created the Travel + Leisure Group which falls under the Travel and Membership segment along with the Panorama business line.

With the formation of the Travel + Leisure Group, we decided that the operations of our Extra Holidays business, which focuses on direct-to-consumer bookings, better aligns with the operations of this new business line and therefore transitioned the management of our Extra Holidays business to the Travel and Membership segment.

As such, we reclassified the results of our Extra Holidays business, which were previously reported within the Vacation Ownership segment, into the Travel and Membership segment.

Impact of COVID-19 on Our Business

The results of operations for the years ended December 31, 2021 and 2020 include impacts related to the novel coronavirus global pandemic (“COVID-19”), which have been significantly negative for the travel industry, our company, our customers, and our employees.

Our response to COVID-19 initially focused on the health and safety of our owners, members, guests, and employees when we closed the majority of our resorts and sales centers in early 2020.

As a result, we significantly reduced our workforce and furloughed thousands of employees at that time.

As of December 31, 2021, we had reopened all of the resorts and sales offices in North America that we expect to reopen.

The remaining closed resorts and sales offices that we intend to reopen are located in the South Pacific and are expected to reopen in 2022, contingent upon the lifting of government imposed travel restrictions.

As a result of reopening substantially all of our resorts, the majority of furloughed employees have returned to work.

Given the significant impacts of COVID-19 on our business, our revenues have been negatively impacted.

While revenues are continuing to recover, not all product and service lines have yet reached pre-pandemic levels, and we believe that COVID-19 will continue to have an adverse effect on our financial condition and results of operations in the near term.

Despite some volatility with recent spikes in COVID-19 case-counts as a result of variants, in general, we are seeing a broad increase in consumer confidence as well as a reduction in travel restrictions.

These factors combined with progress in the roll-out of vaccinations have continued to help travel sentiment improve.

Assuming travel sentiment continues to improve, we expect increases in both VOI sales and new owner mix in 2022.

We also expect an increase in the percentage of financed VOI sales, which would impact our allowance for loan losses.

During the year ended December 31, 2021, we reversed $61 million of COVID-19 charges, compared to $385 million of charges incurred in 2020.

The $61 million of net reversals during 2021 included the release of $91 million of the COVID-19 related allowance for loan losses.

and trades on the New York Stock Exchange under the ticker symbol TNL.

Economic Conditions and Key Business Trends

The results of operations for the years ended December 31, 2022, 2021, and 2020 include impacts related to the novel coronavirus global pandemic (“COVID-19”).

While significantly negative for the travel industry, our company, our customers, and our employees during its earlier stages, COVID-19 had a substantially lower impact on our results of operations during 2022.

See Note 24— COVID-19 Related Items to the Consolidated Financial Statements for additional details on the impact COVID-19 had on our business.

Included in the $385 million of COVID-19 related charges for the year ended December 31, 2020, was a $225 million COVID-19 related loan loss provision recorded during the first quarter as a result of our evaluation of the impact of COVID-19

on our owners’ ability to repay their vacation ownership contract receivables (“VOCRs”).

As we began to see an improvement in net new defaults and lower than expected unemployment rates, we reduced this provision by $20 million in the fourth quarter of 2020.

Since the time the COVID-19 related allowance was established in March 2020, we have reversed $111 million of the initial $225 million provision.

After considering write-offs and the allowance for remaining likely defaults associated with loans that were granted payment deferrals, we have no COVID-19 related allowances as of December 31, 2021.

As a precautionary measure to enhance liquidity during the pandemic, in the first quarter of 2020, we drew down our $1.0 billion revolving credit facility and suspended share repurchase activity.

In the third quarter of 2020, we amended the credit agreement governing our revolving credit facility and term loan B (“First Amendment”), which provided financial covenant flexibility during the relief period that commenced on July 15, 2020 and was scheduled to end on April 1, 2022 (the “Relief Period”).

During the Relief Period we were prohibited from using cash for share repurchases but maintained our ability to pay dividends and make investments in our business.

During 2021 we repaid the $1.0 billion revolving credit facility, the $250 million 5.625% secured notes due March 2021, and the $650 million 4.25% secured notes due March 2022.

On October 22, 2021, we renewed the credit agreement governing our revolving credit facility and term loan B (“Second Amendment”), which terminated the Relief Period, established new thresholds for our financial covenant ratios and eliminated the restrictions regarding share repurchases, dividends, and acquisitions established by the First Amendment.

In connection with entering the Second Amendment, we resumed share repurchases during the fourth quarter of 2021.

As part of our reopening strategy, we focused on higher margin owner business by leveraging our owner upgrade pipeline.

Prior to the pandemic, just under 40% of our sales transactions were to lower margin new owners as compared to 28% during 2021.

We also raised our credit standards and directed our marketing efforts towards higher Fair Isaac Corporation (“FICO”) scores, which we expect will continue to strengthen our receivables portfolio going forward.

Additionally, we closed certain unprofitable marketing and sales locations and shifted marketing channels and resources to our most productive channels.

All of these changes were designed to result in higher volume per guest (“VPG”), which is a measure of sales efficiency and is strongly correlated to profitability.

For certain of the events, uncertainties, trends, and risks associated with the impact of the COVID-19 pandemic on our future results and financial condition, see “ Risks Related to the COVID-19 Pandemic ” included in Part I, Item 1A of this Annual Report filed on Form 10-K.

Alliance Reservations Network Acquisition

On August 7, 2019, we acquired Alliance Reservations Network (“ARN”) for $102 million ($97 million net of cash acquired).

ARN provides private-label travel booking technology solutions.

This acquisition was undertaken for the purpose of accelerating growth at Travel and Membership by increasing the offerings available to its members and affiliates.

See Note 5— Acquisitions to the Consolidated Financial Statements for additional details.

ARN is reported within the Travel and Membership segment.

North American Vacation Rentals Business Sale

During 2019 we closed on the sale of our North American vacation rentals business for $162 million.

This business did not meet the criteria to be classified as a discontinued operation;

therefore, the results of operations are reflected within continuing operations on the Consolidated Statements of Income/(Loss) through the date of sale.

Although our business saw strong demand for leisure travel as we continued to recover from the impacts of COVID-19, recent inflationary pressures, rising interest rates, and risk of recession inherently result in uncertainty in business trends and consumer behavior.

We have experienced trends of increased gross VOI sales, including sales to new owners, tours, and volume per guest (“VPG”).

In addition to the demand for leisure travel, VPG also benefited from changes we made to our consumer credit quality marketing criteria.

These changes are intended to strengthen sales efficiencies as well as the performance of our vacation ownership contract receivables portfolio.

As we seek to increase the mix of new owner sales and expand our pipeline of potential future owner upgrade sales, we would expect VPG levels to moderate.

Our current VOI inventory levels are expected to be sufficient to support sales during the near term, which limits our exposure to increased inventory costs due to the potential effects of inflation.

Higher interest rates negatively impacted our interest expense in 2022 and, if interest rates remain elevated, we expect this trend to continue.

Although we are not currently seeing meaningful signs of a slowdown in leisure travel demand, we are monitoring economic conditions.

Our vacation ownership business and to a greater extent, our travel and membership businesses, are highly dependent on the health of the travel industry and we are subject to the other risks and uncertainties discussed in “Risk Factors” in Part I, Item 1A of this Annual Report filed on Form 10-K.

SEGMENT OVERVIEW

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Fees for property management services typically approximate 10% of budgeted operating expenses.

We are entitled to consideration for reimbursement of costs incurred on behalf of the property owners’ association in providing the management services (“reimbursable revenue”).

We are entitled to consideration for reimbursement of costs incurred on behalf of the property owners’ association in providing management services (“reimbursable revenue”).

These reimbursable costs principally relate to the payroll costs for management of the associations, club and resort properties where we are the employer and are reflected as a component of Operating expenses on the Consolidated Statements of Income/(Loss).

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Property management fee revenues are recognized when the services are performed and are recorded as a component of Service and membership fees on the Consolidated Statements of Income/(Loss).

Property management revenues, which are comprised of management fee revenue and reimbursable revenue, for the years ended December 31, were (in millions) (a) :

2021 2020 2019

Management fee revenue $ 358 $ 331 $ 365

Reimbursable revenues 313 252 307

Property management revenues $ 671 $ 583 $ 672

(a) Reflects the impact of reclassifying the Extra Holidays business line from the Vacation Ownership segment to Travel and Membership.

One of the associations that we manage paid our Travel and Membership segment $30 million for exchange services during 2021, $27 million during 2020, and $29 million during 2019.

Within our Vacation Ownership segment, we measure operating performance using the following key operating statistics:

(i) gross VOI sales including Fee-for-Service sales before the effect of loan loss provisions, (ii) tours, which represents the number of tours taken by guests in our efforts to sell VOIs, and (iii) VPG, which represents revenue per guest and is calculated by dividing the gross VOI sales (excluding tele-sales upgrades, which are non-tour upgrade sales) by the number of tours.

(i) gross VOI sales including sales under our Fee-for-Service program before the effect of loan loss provisions, (ii) tours, which represents the number of tours taken by guests in our efforts to sell VOIs, and (iii) volume per guest, which measures the efficiency of this business’ tour selling efforts, is calculated by dividing the gross VOI sales (excluding telesales and virtual sales) by the number of tours.

We have excluded non-tour sales in the calculation of VPG because they are generated by a different marketing channel.

Travel and Membership

Travel and Membership derives a majority of revenues from membership dues and fees for facilitating members’ trading of their intervals.

We are primarily a fee-for-service business deriving a majority of our revenues from membership dues and fees for facilitating members’ trading of their timeshare intervals.

Revenues from membership dues represent the fees paid by members or affiliated clubs on their behalf.

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Revenue is recognized when these transactions have been confirmed, net of expected cancellations.

except in certain transactions where we have a performance obligation that is not satisfied until the time of stay.

As a provider of vacation exchange services, we enter into affiliation agreements with developers of vacation ownership properties to allow owners of VOIs to trade their intervals for intervals at other properties affiliated with our vacation exchange network and, for some members, for other leisure-related services and products.

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and additional exchange-related products that provide members with the ability to protect trading power or points, extend the life of deposits, and combine two or more deposits for the opportunity to exchange into intervals with higher trading power.

Other vacation exchange-related product fees are deferred and recognized as revenue upon the occurrence of a future exchange, event, or other related transaction.

Revenues for other vacation exchange-related product fees are deferred and recognized upon the occurrence of a future exchange, event, or other related transaction.

We earn revenue from our RCI Elite Rewards co–branded credit card program, which is primarily generated by cardholder spending and the enrollment of new cardholders.

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Total contract consideration is estimated and recognized on a straight-line basis over the contract term.

Prior to the sale of our vacation rental businesses, our vacation rental brands derived revenue from fees associated with the rental of vacation properties we managed and marketed on behalf of independent owners.

We remitted the rental fee received from the renter to the independent owner, net of our agreed-upon fee.

The related revenue from such fees, net of expected refunds, was recognized over the renter’s stay.

Our vacation rental brands also derived revenues from additional services delivered to independent owners, vacation rental guests, and property owners’ associations which were generally recognized when the service was delivered.

Within our Travel and Membership segment, we measure operating performance using the following key operating statistics:

(i) average number of exchange members, which represents paid members in our vacation exchange programs who are considered to be in good standings, (ii) transactions, which represents the number of vacation bookings recognized as revenue during the period, net of cancellations, provided in two categories;

Exchange, which is primarily RCI, and non-Exchange, and (iii) revenue per transaction, which represents transactional revenue divided by transactions, provided in two categories;

Exchange, which is primarily RCI, and non-Exchange.

We record property management services revenues and RCI Elite Rewards revenues for our Vacation Ownership and Travel and Membership segments in accordance with the guidance for reporting revenues gross as a principal versus net as an agent, which requires that these revenues be recorded on a gross basis.

Discussed below are our consolidated results of operations and the results of operations for each of our reportable segments.

These reportable segments represent our operating segments for which discrete financial information is available and which are utilized on a regular basis by our chief operating decision maker to assess performance and to allocate resources.

In identifying the reportable segments, we also consider the nature of services provided by our operating segments.

(i) average number of exchange members, which represents paid members in our vacation exchange programs who are considered to be in good standing;

(ii) transactions, which represents the number of exchanges and travel club bookings recognized as revenue during the period, net of cancellations;

and (iii) revenue per transaction, which represents transaction revenue divided by transactions.

Transactions and revenue per transaction are provided in two categories:

Exchange, which is primarily RCI, and Travel Club.

We record property management service revenues for our Vacation Ownership segment and RCI Elite Rewards revenues for our Travel and Membership segment gross as a principal.

RESULTS OF OPERATIONS

We have two reportable segments:

Vacation Ownership and Travel and Membership.

Due to changes in organizational structure in the second quarter of 2022, the management of the Extra Holidays business was transitioned to the Vacation Ownership segment.

As such, we reclassified the results of the Extra Holidays business, which was previously reported within the Travel and Membership segment, into the Vacation Ownership segment.

Prior period segment information has been updated to reflect this change.

The reportable segments presented below are those for which discrete financial information is available and which are utilized on a regular basis by the chief operating decision maker to assess performance and to allocate resources.

In identifying our reportable segments, we also consider the nature of services provided by the operating segments.

Management uses net revenues and Adjusted EBITDA to assess the performance of the reportable segments.

We define Adjusted EBITDA as Net income/(loss) from continuing operations before depreciation and amortization, interest expense (excluding consumer financing interest), early extinguishment of debt, interest income (excluding consumer financing revenues) and income taxes.

Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, legacy items, transaction costs for acquisitions and divestitures, impairments, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent.

Legacy items include the resolution of and adjustments to certain contingent assets and liabilities related to acquisitions of continuing businesses and dispositions, including the separation of Wyndham Hotels, Inc.

Adjusted EBITDA also excludes stock-based compensation costs, separation and restructuring costs, legacy items, transaction costs for acquisitions and divestitures, asset impairments/recoveries, gains and losses on sale/disposition of business, and items that meet the conditions of unusual and/or infrequent.

(“Wyndham Hotels”) and Cendant, and the sale of the vacation rentals businesses.

We believe that Adjusted EBITDA is a useful measure of performance for our segments which, when considered with generally accepted accounting principles in the U.S.

(“GAAP”) measures, gives a more complete understanding of our operating performance.

We believe that Adjusted EBITDA is a useful measure of performance for our segments which, when considered with generally accepted accounting principles in the United States (“GAAP”) measures, gives a more complete understanding of our operating performance.

Our presentation of Adjusted EBITDA may not be comparable to similarly-titled measures used by other companies.

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These operating statistics are the drivers of our revenues and therefore provide an enhanced understanding of our businesses.

Refer to the Results of Operations section for a discussion on how these operating statistics affected our business for the periods presented.

Refer to The Year Ended December 31, 2022 vs.

the Year Ended December 31, 2021 section for a discussion on how these operating statistics affected our business for the periods presented.

Year Ended December 31,

2021 2020 % Change (h)

2022 2021 % Change (i)

Vacation Ownership

Gross VOI sales (in millions) (a) (i)

Gross VOI sales (in millions) (a) (j)

$ 1,982 $ 1,491 33.0

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Travel and Membership (d)

Transactions (in 000s) (e)

Transactions (in 000s) (e) (f)

Exchange 1,022 1,064 (3.9)

Non-exchange 778 458 69.8

Travel Club 709 624 13.6

Total transactions 1,731 1,688 2.5

Revenue per transaction (f)

Revenue per transaction (f) (g)

Exchange $ 341 $ 325 4.9

Non-exchange $ 205 $ 148 38.0

Travel Club $ 241 $ 252 (4.6)

Total revenue per transaction $ 300 $ 298 0.6

Average number of exchange members (in 000s) (g)

Average number of exchange members (in 000s) (h)

3,524 3,721 (5.3)

(a) Represents total sales of VOIs, including sales under the Fee-for-Service program before the effect of loan loss provisions.

We believe that Gross VOI sales provide an enhanced understanding of the performance of our vacation ownership business because it directly measures the sales volume of this business during a given reporting period.

We believe that Gross VOI sales provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the sales volume of this business during a given reporting period.

(b) Represents the number of tours taken by guests in our efforts to sell VOIs.

(c) VPG is calculated by dividing Gross VOI sales (excluding tele-sales upgrades, which are non-tour upgrade sales) by the number of tours.

We have excluded non-tour sales in the calculation of VPG because they are generated by a different marketing channel.

We believe that VPG provides an enhanced understanding of the performance of our Vacation Ownership business because it directly measures the efficiency of this business’ tour selling efforts during a given reporting period.

(d) Includes the impact from acquisitions from the acquisition dates forward

(e) Represents the number of vacation bookings recognized as revenue during the period, net of cancellations.

(f) Represents transactional revenue divided by transactions.

(g) Represents paid members in our vacation exchange programs who are considered to be in good standing.

(h) Percentage of change may not calculate due to rounding.

(i) The following table provides a reconciliation of Vacation ownership interest sales, net to Gross VOI sales for the years ended December 31, (in millions):

(d) Includes the impact of acquisitions from the acquisition dates forward.

(e) Represents the number of exchanges and travel club bookings recognized as revenue during the period, net of cancellations.

In 2022, the Travel and Membership segment determined that the presentation of this performance measure for Travel Club would be more reflective of how members use the club if it included add-on vacation travel bookings, such as car rentals.

This update is reflected in all periods presented.

(f) In 2022, the Travel and Membership segment determined that certain rental transactions for travelers that were not RCI members are more closely aligned with Travel Club transactions (previously “Non-exchange”).

Prior period results reflect the reclassification of this activity from Exchange to Travel Club.

(g) Represents transaction revenue divided by transactions.

(h) Represents paid members in our vacation exchange programs who are considered to be in good standing.

(i) Percentage change may not calculate due to rounding.

(j) The following table provides a reconciliation of Vacation ownership interest sales, net to Gross VOI sales (in millions):

Year Ended December 31,

Vacation ownership interest sales, net $ 1,484 $ 1,176

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These commissions are reported within Service and membership fees on the Consolidated Statements of Income/(Loss).

The closures of our resorts and suspension of our sales and marketing operations in response to COVID-19 in 2020 resulted in lower tours which negatively impacted gross VOI sales at our Vacation Ownership segment.

In our Travel and Membership segment, affiliate resort closures and regional travel restrictions contributed to decreased bookings and increased cancellations, which resulted in lower transactions and revenue per transaction during 2020.

In 2021, we experienced significant improvements in VOI sales, tours, VPG, the number of Travel and Membership transactions, and revenue per transaction;

however, not all product and service lines have yet returned to pre-pandemic levels.

We expect the impact of COVID-19 on our operating statistics to continue into 2022;

however we do not expect to incur the same level of COVID-19 impact on our revenues or the level of COVID-19 expenses that we did in 2020.

RESULTS OF OPERATIONS

Our consolidated results for the years ended December 31, 2021, versus December 31, 2020, are as follows (in millions):

THE YEAR ENDED DECEMBER 31, 2022 VS.

THE YEAR ENDED DECEMBER 31, 2021

Our consolidated results are as follows (in millions):

Year Ended December 31,

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Expenses 2,914 2,516 (398)

Operating income/(loss) 618 (105) 723

Operating income 653 618 35

Interest expense 195 198 3

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Other (income), net (22) (6) 16

Income/(loss) before income taxes 429 (276) 705

Provision/(benefit) for income taxes 116 (23) (139)

Net income/(loss) from continuing operations 313 (253) 566

Loss on disposal of discontinued business, net of income taxes (5) (2) (3)

Net income/(loss) attributable to Travel + Leisure Co.

Income before income taxes 486 429 57

Provision for income taxes 130 116 (14)

Net income from continuing operating 356 313 43

Gain/(loss) on disposal of discontinued business, net of income taxes 1 (5) 6

Net income attributable to Travel + Leisure Co.

shareholders $ 357 $ 308 $ 49

During 2020 we evaluated the potential impact of COVID-19 on our owners’ ability to repay their contract receivable and as a result of current and anticipated unemployment rates at that time, we recorded a $205 million COVID-19 related provision, which negatively impacted revenues, and a corresponding $48 million benefit to Cost of vacation ownership interests, representing estimated recoveries related to this provision.

These adjustments negatively impacted prior year Adjusted EBITDA by $157 million.

During 2021 we analyzed the adequacy of the COVID-19 related allowance consistent with past methodology, resulting in a $91 million release, which positively impacted revenues, and a corresponding $33 million increase in Cost of vacation ownership interests, representing the associated reduction in estimated recoveries.

The net positive impact of the COVID-19 related allowance release on Adjusted EBITDA was $58 million for the year ended December 31, 2021.

During 2021 we analyzed the adequacy of the COVID-19 related allowance consistent with past methodology, and as a result of improvements in net new defaults, we reduced this allowance resulting in a $91 million increase in revenues with a corresponding $33 million increase in Cost of vacation ownership interests representing the associated reduction in estimated recoveries.

The net positive impact of the COVID-19 related allowance release on Adjusted EBITDA was $58 million for 2021.

Net revenues increased $433 million during 2022 compared with 2021.

This increase was favorably impacted by foreign currency of $11 million (0.5%).

Excluding the impacts of foreign currency and the COVID-19 related provision adjustments discussed above, the increase in net revenues was primarily the result of:

• $475 million of increased revenues at our Vacation Ownership segment primarily due to an increase in gross VOI sales, higher property management and commission revenues as a result of the ongoing recovery of our operations from the impact of COVID-19;

partially offset by a decrease in consumer financing revenues due to a lower average portfolio balance;

• $196 million increased revenues at our Travel and Membership segment driven by higher transaction revenues as we continue to recover from the impacts of COVID-19, partially offset by a decrease in subscription revenues driven by lower new owner sales in the timeshare industry.

Expenses increased $251 million during 2021 compared with 2020.

This increase was unfavorably impacted by foreign currency of $15 million (0.5%).

Excluding the impacts of foreign currency, and the Cost of vacation ownership interest related to the COVID-19 provision adjustments discussed above the increase in expenses was the result of:

• $97 million increase in cost of sales and other operating costs in support of higher Travel and Membership revenues;

Excluding the impacts of foreign currency and the COVID-19 related allowance adjustments discussed above, the increase in net revenues was primarily the result of:

• $512 million of increased revenues at our Vacation Ownership segment primarily due to an increase in net VOI sales as a result of increased tours due to the ongoing recovery of our operations from the impact of COVID-19 and higher VPG, along with higher property management revenues due to higher property management fees and reimbursable revenues;

• $27 million increased revenues at our Travel and Membership segment driven by higher transaction revenues and subscription revenues as a result of increased marketing and business development efforts, as well as the continued recovery from the impacts of COVID-19.

Expenses increased $398 million during 2022 compared with 2021.

This increase was favorably impacted by foreign currency of $11 million (0.4%).

Excluding the impacts of foreign currency and the Cost of vacation ownership interest related to the COVID-19 allowance adjustments discussed above the increase in expenses was the result of:

• $128 million increase in sales and commission expenses at the Vacation Ownership segment due to higher gross VOI sales, net of Fee-for-Service sales;

• $90 million increase in marketing costs in support of increased tour flow, new owner mix and Travel Club transactions;

• $59 million increase in property management expenses due to higher reimbursable resort operating costs and expenses;

• $45 million increase in general and administrative expenses primarily due to higher employee-related costs and legal fees;

• $34 million increase in the cost of VOIs sold primarily due to higher gross VOI sales;

• $66 million increase in property management expenses due to higher management fees and reimbursable expenses;

• $52 million increase in commission expense as a result of higher Fee-for-Service VOI sales;

• $51 million increase in sales and commission expenses at the Vacation Ownership segment primarily due to higher gross VOI sales;

• $36 million increase in general and administrative expenses primarily due to higher employee-related costs;

• $34 million increase in marketing costs in support of increased revenue;

• $28 million increase in maintenance fees on unsold inventory;

These increases were partially offset by:

• $230 million decrease in COVID-19 related costs including employee compensation related costs ($84 million);

impairments ($62 million);

the write-down of exchange inventory ($48 million) and restructuring charges ($37 million);

• $20 million decrease in consumer financing interest expense primarily due to a lower average non-recourse debt balance.

Other income, net of other expense decreased $8 million during 2021 compared with 2020, primarily due to lower business interruption recoveries in 2021 and value added tax provision releases;

partially offset by an unrealized gain from our equity stake in Vacasa, LLC (“Vacasa”) in 2021 and an unfavorable tax settlement in 2020.

Interest expense increased $6 million during 2021 compared with 2020 primarily due to a higher average outstanding balance in 2021.

• $18 million increase in cost of sales at the Travel and Membership segment in support of higher Travel Club transaction revenue;

• $15 million increase in impairments primarily due to the loss on sale of property in the current year and asset recoveries recognized in the prior year;

• $15 million increase in restructuring charges driven by the elimination of certain positions which were made redundant based upon changes to the organizational structure;

• $11 million increase in sales and commission expenses as a result of the mix of VOI Fee-for-Service sales;

• $9 million increase in other operating costs at the Travel and Membership segment in support of the new travel club launches.

Interest expense decreased $3 million during 2022 compared with 2021 primarily due to lower average outstanding debt balance in 2022.

Interest income increased $3 million during 2022 compared with 2021 primarily due to higher interest rates on short-term investments.

Other income, net of other expense increased $16 million during 2022 compared with 2021, primarily due to a $10 million reduction of contingent consideration associated with a business acquisition.

Our effective tax rates were 26.7% and 27.0% for the years ended December 31, 2022 and 2021.

Our effective tax rate in 2020 was significantly impacted by COVID-19, leading to a mix of earnings in higher tax rate jurisdictions and losses in lower tax rate jurisdictions that reduced our overall effective tax rate.

Loss on disposal of discontinued business, net of income taxes was $5 million during 2021 resulting from entering into a settlement agreement for post-closing adjustment claims related to the sale of the European vacation rentals business, contingent upon regulatory approval;

and $2 million during 2020 resulting from a tax audit related to the European vacation rentals business.

These losses were net of Wyndham Hotels’ one-third share.

Our effective tax rate for 2022 is slightly lower primarily due to a reduction in state income taxes, partially offset by a reversal of a prior year tax receivable due to a statute of limitation expiration and a tax deficiency from stock-based compensation in the current year.

During 2022, we recognized a gain on disposal of discontinued business, net of income taxes of $1 million driven by tax refunds related to the sale of the European vacation rentals business.

During 2021 we recognized a loss on disposal of discontinued business, net of income taxes of $5 million resulting from a settlement agreement for post-closing adjustment claims related to this sale.

As a result of these items, Net income attributable to Travel + Leisure Co.

shareholders was $308 million in 2021 as compared with a Net loss attributable to Travel + Leisure Co.

shareholders of $255 million in 2020.

Following is a discussion of the 2021 results of each of our segments compared to 2020 (in millions):

shareholders increased $49 million in 2022 as compared with 2021.

The tables below present our segment information, followed by a discussion of each segment’s 2022 results compared to 2021 (in millions):

Year Ended December 31,

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Reconciliation of Net income to Adjusted EBITDA 2022 2021

Net income/(loss) attributable to Travel + Leisure Co.

Net income attributable to Travel + Leisure Co.

shareholders $ 357 $ 308

Loss on disposal of discontinued business, net of income taxes 5 2

Provision/(benefit) for income taxes 116 (23)

(Gain)/loss on disposal of discontinued business, net of income taxes (1) 5

Provision for income taxes 130 116

Depreciation and amortization 119 124

2 unchanged sentences

Stock-based compensation 42 32

Restructuring (b)

Asset impairments/(recoveries), net (c)

Loss/(gain) on equity investment 5 (3)

COVID-19 related costs (d)

Legacy items 1 4

COVID-19 related costs (b)

Exchange inventory write-off — 48

Restructuring (1) 39

Unrealized gain on equity investment (c)

Asset impairments/(recovery) (d)

Fair value change in contingent consideration (10) —

Adjusted EBITDA $ 859 $ 778

7 unchanged sentences

(a) Includes the elimination of transactions between segments.

(b) Reflects severance and other employee costs associated with layoffs due to the COVID-19 workforce reduction offset in part by employee retention credits received in connection with the U.S.

Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, American Rescue Plan Act of 2021, and similar international programs for wages paid to certain employees despite having operations suspended.

This amount does not include costs associated with idle pay.

(c) Represents the unrealized gain associated with Vacasa equity acquired as part of the consideration for the sale of North America vacation rentals.

The total amount of unrealized gain on this investment was $9 million for the year ended December 31, 2021, of which $6 million is included in Asset impairments/(recovery) on the Consolidated Statements of Income/(Loss) to offset the 2020 impairment recognized on this investment.

(d) Includes $5 million of bad debt expense related to a note receivable for the year ended December 31, 2020, included in Operating expenses on the Consolidated Statements of Income/(Loss).

(b) Includes $3 million of stock-based compensation expense for the year ended December 31, 2022 associated with the 2022 restructuring plans.

(c) Includes $1 million of inventory impairments for the year ended December 31, 2022, included in Cost of vacation ownership interests on the Consolidated Statements of Income/(Loss).

(d) Includes expenses related to COVID-19 testing and other expenses associated with our return-to-work program in 2022.

In 2021, this includes severance and other employee costs associated with layoffs due to the COVID-19 workforce reduction;

offset in part by U.S.

and international government employee retention credits.

Vacation Ownership

Net revenues increased $412 million and Adjusted EBITDA increased $96 million during 2022 compared with 2021.

The net revenue increase was favorably impacted by foreign currency of $7 million (0.4%) and the Adjusted EBITDA increase was favorably impacted by foreign currency of $2 million (1.7%).

The net revenue increase was unfavorably impacted by foreign currency of $9 million (0.4%) and the Adjusted EBITDA increase was unfavorably impacted by foreign currency of $3 million (0.5%).

The net revenue increase excluding the impact of foreign currency was primarily driven by:

• $382 million increase in gross VOI sales, net of Fee-for-Service sales, due to the ongoing recovery of our operations from the impact of COVID-19;

• $286 million decrease in our provision for loan losses primarily due to the COVID-19 related allowance adjustments ($205 million provision recorded during 2020 and $91 million release during 2021);

• $486 million increase in gross VOI sales, net of Fee-for-Service sales, due to increased tours associated with the ongoing recovery of our operations from the impact of COVID-19 and higher VPG due to strong close rates and higher quality tours;

• $68 million increase in property management revenues primarily due to higher management fees and reimbursable revenues;

• $78 million increase in commission revenues as a result of higher Fee-for-Service VOI sales.

These increases were partially offset by a $63 million decrease in consumer financing revenues primarily due to a lower average portfolio balance.

• $17 million increase in commission revenues due to the volume of VOI Fee-for-Service sales;

• $14 million increase in other revenues due to higher VOI travel package and incentive revenue.

These increases were partially offset by a $173 million increase in our provision for loan losses primarily due to higher gross VOI sales, a 300 basis point increase in sales financed compared to the prior year, and the absence of the prior year $91 million partial release of the COVID-19 related allowance.

The increase in percentage of sales financed is in line with our strategic decision to grow our portfolio in pursuit of higher consumer financing revenue in exchange for the incremental increase in the provision for loan losses associated with incremental vacation ownership contract receivable (“VOCR”) originations.

In addition to the drivers above, Adjusted EBITDA excluding the impact of foreign currency was further impacted by:

• $154 million increase in the cost of VOIs sold primarily due to higher gross VOI sales, the absence of a $48 million benefit recorded in 2020 representing estimated recoveries related to the COVID-19 related provision, and a $33 million reduction in estimated recoveries related to the release of our COVID-19 related allowance during 2021;

• $66 million increase in property management expenses primarily due to higher management fees and reimbursable expenses;

• $52 million increase in commission expense as a result of higher Fee-for-Service VOI sales;

• $51 million increase in sales and commission expenses due to higher gross VOI sales;

• $22 million increase in marketing costs in support of increased revenue;

• $17 million increase in general and administrative expenses primarily due to higher employee-related costs;

• $128 million increase in sales and commission expenses due to higher gross VOI sales, net of Fee-for-Service sales;

• $88 million increase in marketing costs in support of increased tour flow and new owner mix;

• $59 million increase in property management expenses due to higher reimbursable resort operating costs and expenses;

• $28 million increase in maintenance fees on unsold inventory;

These increased expenses were partially offset by:

• $30 million decrease in COVID-19 related costs associated with workforce reductions;

• $20 million decrease in consumer financing interest expense primarily due to a lower average non-recourse debt balance.

• $21 million increase in general and administrative expenses primarily due to higher employee-related costs;

• $11 million increase in sales and commission expenses as a result of the mix of VOI Fee-for-Service sales;

• $1 million increase in the cost of VOIs sold primarily due to higher gross VOI sales partially offset by the absence of the $33 million reduction in estimated recoveries related to the release of the COVID-19 related allowance in the prior year.

Travel and Membership

Net revenues increased $200 million and Adjusted EBITDA increased $91 million during 2021 compared with 2020.

The net revenue increase was favorably impacted by foreign currency of $4 million (0.7%) and the Adjusted EBITDA increase was favorably impacted by foreign currency of $1 million (0.5%).

Net revenues increased $21 million and Adjusted EBITDA decreased $3 million during 2022 compared with 2021.

The net revenue increase was unfavorably impacted by foreign currency of $6 million (0.8%) and the Adjusted EBITDA decrease was unfavorably impacted by foreign currency of $1 million (0.4%).

Increases in net revenues excluding the impact of foreign currency were primarily driven by:

• $202 million increase in transaction revenue driven by a 61% increase in transactions and a 7% increase in revenue per transaction;

partially offset by

• $6 million decrease in subscription revenue due to a 1% decrease in average number of exchange members driven by lower new owner sales in the timeshare industry.

In addition to the revenue changes explained above, Adjusted EBITDA excluding the impact of foreign currency was further impacted by the following operational costs in support of increased revenues:

• $86 million increase in cost of sales;

• $12 million increase in marketing expense;

• $11 million increase in operational expenses.

These increased expenses were partially offset by a $3 million decrease in general and administrative expenses resulting from staff reductions and cost savings initiatives implemented after the first quarter of 2020.

• $20 million increase in transaction revenue driven by higher Travel Club transactions as a result of increased marketing and business development efforts, as well as the ongoing recovery from COVID-19.

This increase was achieved despite some loss of supply for certain RCI affiliate locations where units had to be placed out of service due to damages sustained from Hurricane Ian in the fourth quarter of 2022;

• $10 million increase in subscription revenue primarily due to the lessening impact of coupons issued during COVID-19.

This increase was achieved despite a lower average exchange member count as a result of lower new owner enrollments due to COVID-19, industry consolidation, and lower renewals.

We anticipate that the industry-wide decline in new owner enrollments as a result of COVID-19 will continue to have an impact on the level of exchange transactions into the first half of 2023.

In addition to the revenue change explained above, Adjusted EBITDA excluding the impact of foreign currency was further impacted by:

• $18 million increase in cost of sales primarily due to increased Travel Club transaction revenue;

• $11 million increase in marketing and other costs, primarily in support of the new travel club launches.

Corporate and other

Corporate and other Adjusted EBITDA decreased $9 million (17.0%) during 2021 compared with 2020 and was not materially impacted by foreign currency.

The decrease in Adjusted EBITDA was primarily due to higher employee-related costs.

For a comparative review of our consolidated results of operations and the results of operations of our reportable segments for the fiscal years ended December 31, 2020 and 2019, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 24, 2021.

Adjusted EBITDA decreased $12 million (19.4%) during 2022 compared with 2021 and was not materially impacted by foreign currency.

The decrease in Adjusted EBITDA was primarily due to higher legal fees and employee-related costs.

For a comparative review of our consolidated results of operations and those of our reportable segments for the fiscal years ended December 31, 2021 and 2020, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 23, 2022.

DISCONTINUED OPERATIONS

We recognized a loss on disposal of discontinued business, net of income taxes of $5 million during 2021 resulting from entering into a settlement agreement regarding post-closing adjustment claims related to the sale of the European vacation rentals business, contingent upon regulatory approval.

See Note 29— Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for additional information.

During 2020, we recognized a $2 million loss on disposal of discontinued business, net of income taxes resulting from a tax audit related to the European vacation rentals business.

During 2019, we recognized an additional $18 million gain on the sale of our European vacation rentals business, related to $12 million of tax benefits associated with additional foreign tax credit utilization and lower than anticipated state income taxes, as well as $6 million in returned escrow deposits associated with expired guarantees.

SEPARATION AND TRANSACTION COSTS

During 2019, we incurred $45 million of expenses in connection with the spin-off of our hotel business completed on May 31, 2018, which are reflected within continuing operations.

These separation costs were related to stock compensation, severance and other employee costs, as well as impairment charges as a result of abandoning portions of our administrative offices in New Jersey.

This decision was part of our continued focus on rationalizing existing facilities in order to reduce our corporate footprint.

These expenses also include additional impairment charges related to the early termination of an operating lease in Chicago, Illinois, partially offset by an indemnification receivable from Wyndham Hotels.

Refer to Note 13— Leases to the Consolidated Financial Statements for additional detail regarding these impairments.

During 2022 we recognized a $1 million gain on disposal of discontinued business, net of income taxes.

During 2021 and 2020 we recognized losses on disposal of discontinued business, net of income taxes of $5 million and $2 million.

During both 2022 and 2020 we had $5 million of Net cash used in investing activities from discontinued operations on the Consolidated Statements of Cash Flows.

We had no cash flow activity related to discontinued operations during 2021.

See Note 6— Discontinued Operations to the Consolidated Financial Statements for additional information.

RESTRUCTURING PLANS

During 2020, we recorded $37 million of charges related to restructuring initiatives, $36 million of which were COVID-19 related.

Due to the impact of COVID-19, we decided in the second quarter of 2020 to abandon the remaining portion of our administrative offices in New Jersey.

We were also notified in the second quarter of 2020 that Wyndham Hotels exercised its early termination rights under the sublease agreement.

As a result, we recorded $22 million of restructuring charges associated with non-lease components of the office space and $24 million of impairment charges associated with the write-off of right-of-use assets and furniture, fixtures and equipment at our Travel and Membership segment.

We also recognized $12 million of lease-related charges due to the renegotiation of an agreement and $2 million of facility-related restructuring charges associated with closed sales centers at our Vacation Ownership segment.

We additionally recognized $1 million in employee-related expenses associated with the consolidation of a shared service center within our Travel and Membership segment.

We reduced the 2020 restructuring liability by $5 million and $12 million of cash payments during 2021 and 2020.

During 2021 we also reversed $1 million of expense related to the reimbursement of prepaid licensing fees that were previously written-off, and increased the liability by $3 million of cash reimbursements at our Vacation Ownership segment.

The remaining 2020 restructuring liability of $22 million is expected to be paid by the end of 2029.

During 2019, we recorded $5 million of charges related to restructuring initiatives, most of which are personnel-related resulting from a reduction of approximately 100 employees.

This action was primarily focused on enhancing organizational efficiency and rationalizing operations.

The charges consisted of (i) $2 million at our Vacation Ownership segment, (ii) $2 million at our Travel and Membership segment, and (iii) $1 million at our corporate operations.

During 2020, we incurred an additional $1 million of restructuring expenses at both our Travel and Membership segment and our corporate operations.

We reduced the restructuring liability by less than $1 million, $5 million, and $1 million of cash payments during 2021, 2020, and 2019.

As of December 31, 2021 the 2019 restructuring liability has been paid off.

During 2022 and 2020, we incurred $14 million and $39 million of restructuring charges.

During 2021, we reversed $1 million of the restructuring charges incurred in 2020.

See Note 26— Restructuring to the Consolidated Financial Statements for additional details of our restructuring activities.

FINANCIAL CONDITION

(In millions) December 31,

2021 December 31,

As of December 31,

(In millions) 2022 2021 Change

Total assets $ 6,757 $ 6,588 $ 169

1 unchanged sentence

Total deficit (904) (794) (110)

Total assets decreased $1.03 billion from December 31, 2020 to December 31, 2021, due to:

• $827 million decrease in Cash and cash equivalents primarily due to net debt repayments, including the revolving credit facility, notes, and non-recourse debt;

dividend payments;

property and equipment additions;

payments associated with the acquisition of the Travel + Leisure brand;

and treasury share repurchases;

partially offset by net cash provided by operating activities.

• $173 million decrease in Vacation ownership contract receivables, net, driven by principal collections and allowance for loan losses, partially offset by net VOI originations;

• $131 million decrease in Inventory driven by VOI sales and lower estimated VOI recoveries, partially offset by purchases;

• $48 million decrease in Other assets primarily due to the receipt of employee retention credits earned in connection with the CARES Act in 2020, as well as decreases in tax receivables, right-of-use assets, and deferred costs, partially offset by an increase in marketable securities.

These decreases were partially offset by an $88 million increase in Other intangibles, net primarily related to the acquisition of the Travel + Leisure brand from Meredith;

a $23 million increase in Prepaid expenses;

and a $23 million increase in Property and equipment, net.

Total liabilities decreased $1.2 billion from December 31, 2020 to December 31, 2021, due to:

• $65 million decrease in Deferred income due to increased usage of deferred VOI trial packages, VOI incentives, and subscription revenue as a result of owners and members returning to vacation as COVID-19 travel restrictions lifted;

• $300 million decrease in Non-recourse vacation ownership debt primarily due to net repayments;

• $805 million decrease in Debt due to net repayments of the revolving credit facility, early payoff of the $650 million notes due March 2022, and the repayment of the $250 million notes due March 2021;

partially offset by the issuance of $650 million notes due December 2029;

• $39 million decrease in Deferred income taxes due to installment sales partially offset by the allowance for bad debt.

Total deficit decreased $174 million from December 31, 2020 to December 31, 2021, due to $308 million of Net income attributable to Travel + Leisure Co.

shareholders;

and $32 million due to changes in stock based compensation;

partially offset by $111 million of dividends;

$32 million of unfavorable currency translation adjustments driven by fluctuations in the exchange rates, primarily of the Australian dollar, the Danish krone, and the Euro;

and $26 million of share repurchases.

Total assets increased $169 million from December 31, 2021 to December 31, 2022, due to:

• $181 million increase in Cash and cash equivalents primarily due to net cash provided by operating activities and net proceeds on debt and non-recourse debt;

partially offset by share repurchases, dividends to shareholders, property and equipment additions, and payments associated with the acquisition of the Travel + Leisure brand;

• $29 million increase in Trade receivables, net driven by increased VOI trial package receivables and increased receivables associated with property management fees and reimbursable revenue;

• $61 million increase in Vacation ownership contract receivables, net, driven by VOI originations, partially offset by principal collections and allowance for loan losses.

These increases were partially offset by:

• $23 million decrease in Inventory driven by VOI sales and the net transfer of completed unregistered VOI inventory to property and equipment, partially offset by purchases of completed inventory and inventory recoveries;

• $25 million decrease in Prepaid expenses driven by the timing of prepaid maintenance fees;

• $31 million decrease in Property and equipment, net, driven by depreciation, partially offset by capital additions and the net transfer of completed VOI inventory to property and equipment;

• $15 million decrease in Other assets due to amortization of right-of-use operating lease assets and the sale of our equity investment in Vacasa LLC, partially offset by an increase in derivative assets.

Total liabilities increased $279 million from December 31, 2021 to December 31, 2022, due to:

• $39 million increase in Non-recourse vacation ownership debt primarily due to net borrowings;

• $290 million increase in Debt driven by an incremental term loan B borrowing.

These increases were partially offset by a $63 million decrease in Accrued expenses and other liabilities driven by right-of-use operating lease liability payments, a decrease in income taxes payable, payment associated with the acquisition of the Travel + Leisure brand, payment of payroll taxes previously deferred under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, and a reduction in contingent consideration associated with a business acquisition, partially offset by an increase in inventory obligations and derivative liabilities.

Total deficit increased $110 million from December 31, 2021 to December 31, 2022, primarily due to $352 million of share repurchases;

$136 million of dividends;

and $31 million of unfavorable currency translation adjustments driven by fluctuations in exchange rates, primarily the British pound sterling, Australian dollar, Danish krone, and the Euro;

partially offset by $357 million of Net income attributable to Travel + Leisure Co.

shareholders and a $50 million increase in additional paid-in capital, primarily due to stock-based compensation.

LIQUIDITY AND CAPITAL RESOURCES

We believe that we have sufficient liquidity to meet our ongoing cash needs for the next year and beyond, including capital expenditures, operational and/or strategic opportunities, and expenditures for human capital, intellectual property, contractual obligations, off-balance sheet arrangements, and other such requirements.

Our net cash from operations and cash and cash equivalents are key sources of liquidity to meet our ongoing cash needs.

In addition to these sources, we also rely on access to our revolving credit facilities, bank conduit facilities, and continued access to debt markets.

We believe that we have sufficient sources of liquidity to meet our expected ongoing short-term and long-term cash needs, including capital expenditures, operational and/or strategic opportunities, and expenditures for human capital, intellectual property, contractual obligations, off-balance sheet arrangements, and other such requirements.

Our net cash from operations and cash and cash equivalents are key sources of liquidity along with our revolving credit facilities, bank conduit facilities, and continued access to debt markets.

We believe these anticipated sources of liquidity are sufficient to meet our expected ongoing short-term and long-term cash needs, including the repayment of our $400 million notes due in March 2023.

Our discussion below highlights these sources of liquidity and how they have been utilized to support our cash needs.

Cash and Cash Equivalents

As of December 31, 2022, we had $550 million of Cash and cash equivalents, which includes highly-liquid investments with an original maturity of three months or less.

$1.0 Billion Revolving Credit Facility

We generally utilize our revolving credit facility to finance our short-term to medium-term business operations, as needed.

As a precautionary measure at the onset of the global pandemic, in March 2020 we fully drew down our $1.0 billion revolving credit facility.

Based on the ongoing recovery of our business to date, our strong liquidity position and ability to access secured debt capital markets, we fully repaid the remaining outstanding revolver balance as of December 31, 2021, and had $998 million of available capacity on our revolving credit facility, net of letters of credit.

On July 15, 2020, we entered into the First Amendment governing our revolving credit facility and term loan B.

The First Amendment established a Relief Period with respect to our secured revolving credit facility, which commenced on July 15,

2020, and was scheduled to end on April 1, 2022.

Among other changes, the First Amendment added a new minimum liquidity covenant, tested quarterly until the end of the Relief Period, of (i) $250 million plus (ii) 50% of the aggregate amount of dividends paid after the effective date of the First Amendment and on or prior to the last day of the relevant fiscal quarter.

On October 22, 2021, we entered into the Second Amendment governing our revolving credit facility and term loan B which resulted in the termination of this Relief Period and extended the commitment period for the revolving credit facility from May 2023 to October 2026.

The facility expires in October 2026 and had $1.0 billion of available capacity as of December 31, 2022.

The revolving credit facility and term loan B are subject to covenants including the maintenance of specific financial ratios as defined in the credit agreement.

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The first lien leverage ratio is calculated by dividing consolidated first lien debt (as defined in the credit agreement) as of the measurement date by consolidated EBITDA (as defined in the credit agreement) as measured on a trailing 12-month basis preceding the measurement date.

The Second Amendment stipulates a first lien leverage ratio financial covenant not to exceed 4.75 to 1.0 commencing with the December 31, 2021 period through June 30, 2022, after which time it will return to 4.25 to 1.0, the level in existence prior to the effective date of the First Amendment.

It also reestablished the interest coverage ratio (as defined in the credit agreement) of no less than 2.5 to 1.0, the level existing prior to the effective date of the First Amendment.

Additionally, the Second Amendment reestablished the annual interest rate in existence prior to the effective date of the First Amendment which is equal to, at our option, either a base rate plus a margin ranging from 0.75% to 1.25% or the London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 1.75% to 2.25%, in either case based upon our first lien leverage ratio.

The Second Amendment also includes customary LIBOR replacement language providing for alternative interest rate option upon the cessation of LIBOR publication.

As of December 31, 2021, our first lien leverage ratio was 3.99 to 1.0 and our interest coverage ratio was 4.00 to 1.0.

During 2021, we entered into a second amendment to the credit agreement governing our revolving credit facility and term loan B (“Second Amendment”) which resulted in the termination of the relief period restrictions adopted in the July 15, 2020 first amendment as a result of the COVID-19 pandemic.

The Second Amendment also included customary London Interbank Offered Rate (“LIBOR”) replacement language providing for alternative interest rate options upon the cessation of LIBOR publication.

It is our intention to resolve our remaining LIBOR exposures in the first quarter of 2023 by early adopting the Term Secured Overnight Financing Rate (“SOFR”) on our revolving credit facility and Term Loan B facility.

As of December 31, 2022, our interest coverage ratio was 4.83 to 1.0 and our first lien leverage ratio was 3.54 to 1.0.

These ratios do not include interest expense or indebtedness related to any qualified securitization financing (as defined in the credit agreement).

As of December 31, 2022, we were in compliance with the financial covenants described above.

Secured Notes and Term Loan B

We generally utilize borrowing under our secured notes to meet our long-term financing needs.

During 2020 we issued $650 million senior secured notes due 2026 with an interest rate of 6.625% and during 2021, we issued $650 million of senior secured notes due 2029 with an interest rate of 4.50%.

These transactions positively impacted our liquidity and reinforce our expectation that we will maintain adequate liquidity for the next year and beyond.

During 2021, we repaid our $250 million 5.625% secured notes due March 2021 and our $650 million 4.25% secured notes due March 2022.

As of December 31, 2021, we had $3.37 billion outstanding of secured notes and Term Loan B, with maturities ranging from 2023 to 2030.

Secured Notes, and Term Loan B facilities

We generally utilize borrowing via secured note issuances to meet our long-term financing needs.

During 2021, we issued $650 million of senior secured notes due 2029 with an interest rate of 4.50% and during 2022 we amended the credit agreement governing our revolving credit facility and term loan B (“Third Amendment”) which provided for an incremental term loan B borrowing of $300 million due 2029.

We expect to use the net proceeds from the incremental term loan B borrowing toward the repayment of our $400 million notes due in March 2023.

These transactions reinforce our expectation that we will maintain adequate liquidity for the next year and beyond.

As of December 31, 2022, we had $3.66 billion of outstanding borrowings under our secured notes and Term Loan B facilities with maturities ranging from 2023 to 2030.

Non-recourse Vacation Ownership Debt

Our Vacation Ownership business finances certain of its VOCRs through (i) asset-backed conduit facilities and (ii) term asset-backed securitizations, all of which are non-recourse to us with respect to principal and interest.

For the securitizations, we pool qualifying VOCRs and sell them to bankruptcy-remote entities, all of which are consolidated into the accompanying Consolidated Balance Sheets as of December 31, 2021.

For the securitizations, we pool qualifying VOCRs and sell them to bankruptcy-remote entities, all of which are consolidated into the accompanying Consolidated Balance Sheets.

We plan to continue using these sources to finance certain VOCRs.

We believe that our USD bank conduit facility with a term through October 2022, which we expect to extend prior to its expiration, and our AUD/NZD bank conduit facility, with a term through April 2023, amounting to a combined capacity of $1.02 billion ($698 million available as of December 31, 2021), along with our ability to issue term asset-backed securities, provide sufficient liquidity to finance the sale of VOIs beyond the next year.

We closed on securitization financings of $850 million in 2021 and $900 million in 2020.

On March 4, 2022 we renewed our USD bank conduit facility, extending its term through July 2024.

This renewal included a reduction of the USD borrowing capacity from $800 million to $600 million.

On December 21, 2022 we renewed our AUD/NZD bank conduit facility, extending its term through December 2024.

The renewal included a reduction of the AUD borrowing capacity from A$250 million to A$200 million and a reduction of the NZD borrowing capacity from NZ$48 million to NZ$25 million.

These capacity reductions were made in an effort to reduce fees associated with unused capacity.

We believe that our USD bank conduit facility and our AUD/NZD bank conduit facility, amounting to a combined capacity of $752 million ($324 million available as of December 31, 2022), along with our ability to issue term asset-backed securities, provides sufficient liquidity to finance the sale of VOIs beyond the next year.

We closed on securitization financings of $800 million, $850 million, and $900 million during 2022, 2021, and 2020.

These transactions positively impacted our liquidity and reinforce our expectation that we will maintain adequate liquidity for the next year and beyond.

6 unchanged sentences

We may, from time to time, depending on market conditions and other factors, repurchase our outstanding indebtedness, whether or not such indebtedness trades above or below its face amount, for cash and/or in exchange for other securities or other consideration, in each case in open market purchases and/or privately negotiated transactions.

For additional details regarding our credit facilities, term loan B, and non-recourse debt see Note 16— Debt to the Consolidated Financial Statements.

For additional details regarding our credit facilities, term loan B facilities, and non-recourse debt see Note 15— Debt to the Consolidated Financial Statements.

Material Cash Requirements

The following table summarizes material future contractual obligations of our continuing operations (in millions).

We plan to fund these obligations along with our other cash requirements with net cash from operations, cash and cash equivalents as well as access to our revolving credit facilities, bank conduit facilities, and continued access to debt markets.

We plan to fund these obligations along with our other cash requirements, with net cash from operations, cash and cash equivalents, and through the use of our revolving credit facilities, bank conduit facilities, and continued access to debt markets.

2023 2024 2025 2026 2027 Thereafter Total

Debt $ 7 $ 407 $ 303 $ 625 $ 643 $ 1,394 $ 3,379

Non-recourse debt (a)

$ 411 $ 309 $ 636 $ 654 $ 403 $ 1,285 $ 3,698

Interest on debt (b)

Non-recourse debt (b)

226 224 514 215 201 611 1,991

Purchase commitments (c)

Interest on debt (c)

286 261 220 157 107 154 1,185

Purchase commitments (d)

177 146 136 129 86 88 762

Operating leases 31 29 24 14 13 21 132

Inventory sold subject to conditional repurchase (d)

Inventory sold subject to conditional repurchase (e)

30 — — — — — 30

$ 1,161 $ 969 $ 1,530 $ 1,169 $ 810 $ 2,159 $ 7,798

(a) Represents debt that is securitized through bankruptcy-remote special purpose entities the creditors of which have no recourse to us for principal and interest.

(b) Includes interest on both debt and non-recourse debt;

(a) Represents required principal payments on notes, term loans, and finance leases.

(b) Represents required principal payments on debt that is securitized through bankruptcy-remote special purpose entities;

the creditors of which have no recourse to us for principal and interest.

estimated using the stated interest rates.

(c) Includes (i) $656 million for marketing related activities, (ii) $61 million relating to the development of vacation ownership properties, and (iii) $45 million for information technology activities.

(d) Represents obligations to repurchase completed vacation ownership properties from third-party developers (see Note 11— Inventory to the Consolidated Financial Statements for further detail) of which $13 million is included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

(e) Excludes a $38 million liability for unrecognized tax benefits since it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities.

(d) Includes $575 million for marketing related activities and $112 million for information technology activities.

(e) Represents obligations to repurchase completed vacation ownership properties from third-party developers (see Note 10— Inventory to the Consolidated Financial Statements for further detail) which was included within Accrued expenses and other liabilities on the Consolidated Balance Sheets.

(f) Excludes a $33 million liability for unrecognized tax benefits as it is not reasonably estimable to determine the periods in which such liability would be settled with the respective tax authorities.

In addition to the amounts shown in the table above and in connection with our separation from Cendant, we entered into certain guarantee commitments with Cendant (pursuant to our assumption of certain liabilities and our obligation to indemnify Cendant, Realogy, and Travelport for such liabilities) and guarantee commitments related to deferred compensation arrangements with Cendant and Realogy.

We also entered into certain guarantee commitments related to the sale of our European vacation rentals business.

We also entered into certain guarantee commitments and indemnifications related to the sale of our vacation rentals businesses.

For information on matters related to our former parent and subsidiaries see Note 27— Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements.

In addition to the key contractual obligation and separation related commitments mentioned above, we have the following other commercial commitments and off-balance sheet arrangements:

In addition to the key contractual obligation and separation related commitments described above, we have the following other commercial commitments and off-balance sheet arrangements.

We enter into agreements that contain standard guarantees and indemnities whereby we indemnify another party for specified breaches of, or third-party claims relating to, an underlying agreement.

Such underlying agreements are typically entered into by one of our subsidiaries.

The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, access to credit facilities, derivatives, and issuances of debt securities.

The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of vacation ownership properties, customer data safeguards, access to credit facilities, derivatives, and issuances of debt securities.

We also provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits.

While a majority of these guarantees

and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement.

While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement.

We are not able to estimate the maximum potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable.

In certain cases we maintain insurance coverage that may mitigate any potential payments.

In certain cases we receive offsetting indemnifications from third-parties and/or maintain insurance coverage that may mitigate any potential payments.

Our vacation ownership business provides guarantees to certain owners’ associations for funds required to operate and maintain vacation ownership properties in excess of assessments collected from owners of the VOIs.

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We generally utilize letters of credit to support the securitization of VOCR fundings, certain insurance policies, and development activities in our Vacation Ownership business.

As of December 31, 2021, we had $36 million of irrevocable standby letters of credit outstanding, of which $2 million were under our revolving credit facilities.

As of December 31, 2022, we had $34 million of irrevocable standby letters of credit outstanding, none of which were under our revolving credit facilities.

As of December 31, 2021, we had $36 million of irrevocable standby letters of credit outstanding, of which $2 million were under our revolving credit facilities.

Such letters of credit issued during 2020 included a $48 million letter of credit for guarantees related to the sale of the European vacation rentals business in which Wyndham Hotels and Travel + Leisure Co.

were required to maintain certain credit ratings.

This letter of credit was released during 2021, see Note 29— Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for additional details.

We primarily utilize surety bonds in our vacation ownership business for sales and development transactions in order to meet regulatory requirements of certain states.

We also utilize surety bonds in our Vacation Ownership business for sales and development transactions in order to meet regulatory requirements of certain states.

In the ordinary course of our business, we have assembled commitments from 12 surety providers in the amount of $2.3 billion, of which we had $455 million outstanding as of December 31, 2022.

The availability, terms and conditions, and pricing of bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity, and our corporate credit rating.

availability, terms and conditions, and pricing of bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity, and our corporate credit rating.

If the bonding capacity is unavailable or, alternatively, the terms and conditions and pricing of the bonding capacity are unacceptable to us, our Vacation Ownership business could be negatively impacted.

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Refer to the Proxy Statement for our 2023 Annual Meeting of Shareholders under the captions “Compensation of Directors,” “Executive Compensation” and “Committees of the Board” for additional details regarding executive compensation.

Our secured debt is rated Ba3 with a “negative outlook” by Moody’s Investors Service, BB- with a “stable outlook” by

Our secured debt is rated Ba3 with a “stable outlook” by Moody’s Investors Service, Inc., BB- with a “stable outlook” by

Standard & Poor’s Rating Services, and BB+ with a “negative outlook” by Fitch Rating Agency.

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For information regarding the impact of changes to our credit rating and the credit rating of Wyndham Hotels, see Note 27— Transactions with Former Parent and Former Subsidiaries — Matters Related to the European Vacation Rentals Business to the Consolidated Financial Statements.

We are currently evaluating the impact of the transition from LIBOR as an interest rate benchmark to other potential alternative reference rates, including but not limited to the Secured Overnight Financing Rate (“SOFR”).

Currently, we have debt and derivative instruments in place that reference LIBOR-based rates.

Although certain of these LIBOR based obligations provide for alternative methods of calculating the related interest rate payable (including transition to an alternative benchmark rate) if LIBOR is not reported, uncertainty as to the extent and manner of future changes may result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

The transition from LIBOR based benchmark rates is expected to begin January 1, 2022 and be completed when USD LIBOR rates are phased out by June 30, 2023.

Management will continue to actively assess the related opportunities and risks involved in this transition.

We adopted appropriate LIBOR replacement rate transition language into the agreements for the renewal of our USD bank conduit facility in 2020 and the renewal of the credit agreement governing the revolving credit facility and term loan B which closed on October 22, 2021.

These agreements represented our largest exposure to LIBOR.

Currently, we have debt instruments in place that reference LIBOR-based rates.

Although certain of these LIBOR based obligations provide for alternative methods of calculating the related interest rate payable (including transition to an alternative benchmark rate) if LIBOR is not reported, it may result in interest rates and/or payments that are higher than, lower than, or that do not otherwise correlate over time with the interest rates and/or payments that would have been made on our obligations if LIBOR was available in its current form.

In the first quarter of 2023, we expect to exercise our option under our credit agreement to replace LIBOR with Term SOFR, subject to lender approval, as the benchmark rate governing our revolving credit facility and Term Loan B, which would eliminate our largest exposure to LIBOR based interest rates.

The following table summarizes the changes in cash, cash equivalents, and restricted cash between 2022 and 2021 (in millions).

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Year Ended December 31,

Cash provided by/(used in) 2021 2020 Change

Cash provided by/(used in):

2022 2021 Change

Operating activities $ 442 $ 568 $ (126)

$ 568 $ 374 $ 194

Investing activities

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Financing activities (196) (1,288) 1,092

(1,288) 502 (1,790)

Effects of changes in exchange rates on cash and cash equivalents (5) (7) 2

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Net cash provided by operating activities was $442 million for the year ended December 31, 2022, compared to $568 million in the prior year.

This $194 million increase in 2021 was primarily driven by a $563 million increase in net income from continuing operations;

partially offset by a $281 million decrease in non-cash add-back items, mainly lower provision for loan losses, and a $91 million increase in cash utilized for working capital.

This $126 million decrease in 2022 was primarily driven by a $403 million increase in cash utilized for working capital, partially offset by a $234 million increase in non-cash add-back items, mainly a higher provision for loan losses, and a $49 million increase in net income from continuing operations.

Investing Activities

Net cash used in investing activities from continuing operations was $93 million for the year ended December 31, 2021, compared to $60 million in the prior year.

This increase in cash used was primarily driven by $37 million of cash payments for the acquisition of the Travel + Leisure brand in 2021 ;

partially offset by $12 million lower property and equipment additions in 2021 .

Net cash used in investing activities from discontinued operations was $5 million for the year ended December 31, 2020, which was related to the sale of the European vacation rentals business.

Net cash used in investing activities from continuing operations decreased $48 million during the year ended December 31, 2022 This decrease was primarily driven by $35 million of cash payments for the acquisition of the Travel + Leisure brand in the prior year;

and $8 million of proceeds from the sale of investments in the current year.

Net cash used in investing activities from discontinued operations was $5 million for the year ended December 31, 2022, primarily related to the settlement of post-closing adjustment claims associated with the sale of the European vacation rentals business.

Financing Activities

Net cash used in financing activities was $1.29 billion for the year ended December 31, 2021, compared to net cash provided of $502 million in the prior year.

The variance was primarily due to higher net repayments in 2021 due to the early payoff of our $650 million notes due March 2022, the net payoff of our secured revolving credit facility of $547 million, and payoff of our $250 million notes due March 2021, partially offset by the issuance of $650 million notes due December 2029;

compared to prior year proceeds from the issuance of $650 million notes and $547 million of net proceeds from borrowings under our secured revolving credit facility.

The variance was also due to $103 million of decreased share repurchase activity in 2021 compared to 2020.

Net cash used in financing activities decreased $1.09 billion during the year ended December 31, 2022.

This decrease was primarily due to $812 million of net repayments on debt and notes in the prior year compared to $284 million of net proceeds in the current year, $294 million of net repayments on non-recourse debt in the prior year compared to net proceeds of $47 million in the current year;

partially offset by $326 million of higher share repurchases in the current year.

Capital Deployment

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We intend to continue to invest in select capital and technological improvements across our business.

We may also seek to strategically grow the business through merger and acquisition activities.

As part of our merger and acquisition strategy, we have made, and expect to continue to make, acquisition proposals and enter into non-binding letters of intent, allowing us to conduct due diligence on a confidential basis.

We may also seek to strategically grow the business through merger, acquisition, and other strategic transaction activities.

As part of this strategy, we have made, and expect to continue to make, proposals and enter into non-binding letters of intent, allowing us to conduct due diligence on a confidential basis.

A potential transaction contemplated by a letter of intent may never reach the point where we enter into a definitive agreement, nor can we predict the timing of such a potential transaction.

Finally, we intend to continue to return value to shareholders through the repurchase of common stock and payment of dividends.

All future declarations of quarterly cash dividends are subject to final approval by the Board.

On October 22, 2021, we renewed the credit agreement governing our revolving credit facility and term loan B.

The renewal eliminated the Relief Period restrictions on share repurchases, among other changes, and we resumed share repurchases during the fourth quarter of 2021.

All future declarations of quarterly cash dividends are subject to final approval by the Board of Directors.

During 2022, we spent $144 million on vacation ownership development projects (inventory).

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After factoring in the anticipated additional average annual spending, we expect to have adequate inventory to support vacation ownership sales through at least the next four to five years.

During 2021, we invested $57 million on capital expenditures, primarily on information technology and sales center improvement projects.

During 2022, we anticipate investing $60 million to $65 million on capital expenditures.

During 2022, we spent $52 million on capital expenditures, primarily for information technology and sales center improvement projects.

During 2023, we anticipate spending between $60 million and $65 million on capital expenditures, primarily for continuation of information technology digital initiatives, travel club enablement, and sales center/resort improvements.

In connection with our focus on optimizing cash flow, we are continuing our asset-light efforts in vacation ownership by seeking opportunities with financial partners whereby they make strategic investments to develop assets on our behalf.

We refer to this as Just-in-Time.

The partner may invest in new ground-up development projects or purchase from us, for cash, existing in-process inventory which currently resides on our balance sheet.

The partner may invest in new ground-up development projects or purchase from us, for cash, existing in-process inventory which currently resides on our Consolidated Balance Sheets.

The partner will complete the development of the project and we may purchase finished inventory at a future date as needed or as obligated under the agreement.

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Share Repurchase Program

On August 20, 2007, our Board authorized a share repurchase program that enables us to purchase our common stock.

The Board has since increased the capacity of the program eight times, most recently in October 2017 by $1.0 billion, bringing the total authorization under the current program to $6.0 billion.

Proceeds received from stock option exercises increased our repurchase capacity by $81 million since the inception of this program.

On August 20, 2007, our Board of Directors authorized a share repurchase program that enables us to purchase our common stock.

As of December 31, 2022, the Board of Directors has increased the capacity of the program nine times, most recently in April 2022 by $500 million, bringing the total authorization under the current program to $6.5 billion.

We had $477 million of remaining availability in our program as of December 31, 2022.

Under our current share repurchase program, we repurchased 8.2 million shares at an average price of $42.97 for a cost of $351 million during the year ended December 31, 2022.

The amount and timing of specific repurchases are subject to market conditions, applicable legal requirements and other factors, including capital allocation priorities.

The amount and timing of specific repurchases are subject to market

conditions, applicable legal requirements and other factors, including capital allocation priorities.

Repurchases may be conducted in the open market or in privately negotiated transactions.

We suspended share repurchase activity in March 2020 due to uncertainty associated with COVID-19.

On July 15, 2020, we entered into the First Amendment to the credit agreement governing our revolving credit facility and term loan B.

Among other changes, the First Amendment placed us into a Relief Period from July 15, 2020 through April 1, 2022 that prohibited the use of cash for share repurchases during this period.

On October 22, 2021, we entered into the Second Amendment which renewed the credit agreement governing our revolving credit facility and term loan B.

This Second Amendment eliminated the Relief Period restrictions on share repurchases, among other changes.

In connection with this Second Amendment we resumed share repurchases during the fourth quarter of 2021.

We paid cash dividends of $0.40 per share for all four quarters of 2022.

During 2021, we paid cash dividends of $0.30 per share for the first, second, and third quarters, and $0.35 per share for the fourth quarter.

During 2020, we paid cash dividends of $0.50 per share for the first and second quarters, and $0.30 per share for the third and fourth quarters.

We paid cash dividends of $0.45 per share for all four quarters of 2019.

The aggregate of dividends paid to shareholders for 2021, 2020, and 2019, were $109 million, $138 million, and $166 million.

The First Amendment, which we entered into on July 15, 2020, among other changes, established a Relief Period which added a new minimum liquidity covenant, tested quarterly until the end of the Relief Period, of (i) $250 million plus (ii) 50% of the aggregate amount of dividends paid after the effective date of the First Amendment and on or prior to the last day of the relevant fiscal quarter.

Additionally, the First Amendment limited the payout of dividends during the Relief Period to not exceed $0.50 per share, the rate in effect prior to the First Amendment.

The Second Amendment, which was entered into on October 22, 2021, renewed the credit agreement governing our revolving credit facility and term loan B and terminated the Relief Period which, among other changes, eliminated the restrictions on dividends and the Relief Period minimum liquidity covenant established by the First Amendment.

Although our quarterly dividend was previously reduced due to the impacts of COVID-19, we were able to increase our dividend in the fourth quarter of 2021 and our long-term expectation is to grow our dividend at the rate of growth of our earnings at a minimum.

The declaration and payment of future dividends to holders of our common stock are at the discretion of our Board and depend upon many factors, including our financial condition, earnings, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant.

The aggregate dividends paid to shareholders for 2022, 2021, and 2020, were $135 million, $109 million, and $138 million.

Our long-term plan is to grow our dividend at the rate of growth of our earnings at a minimum.

The declaration and payment of future dividends to holders of our common stock are at the discretion of our Board of Directors and depend upon many factors, including our financial condition, earnings, capital requirements of our business, covenants associated with certain debt obligations, legal requirements, regulatory constraints, industry practice and other factors that our Board of Directors deems relevant.

There is no assurance that a payment of a dividend or a dividend at current levels will occur in the future.

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Revenues from vacation exchange fees are generally highest in the first quarter, which is generally when members of our vacation exchange business book their vacations for the year.

Our seasonality has been and could continue to be impacted by COVID-19.

The seasonality of our business may cause fluctuations in our quarterly operating results.

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Based upon improved performance in our portfolio (lower net new defaults) and improved unemployment rates, we reversed $111 million of the initial $225 million provision recorded in March 2020.

After considering write-offs and the allowance for remaining likely defaults associated with loans that were granted payment deferrals, we have no COVID-19 related allowances as of December 31, 2021.

After considering write-offs and the allowance for remaining likely defaults associated with loans that were granted payment deferrals, we have not had a COVID-19 related allowance since December 31, 2021.

The allowance for loan losses is our most significant and complex estimate.

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Such underlying agreements are typically entered into by one of our subsidiaries.

The various underlying agreements generally govern purchases, sales or outsourcing of products or services, leases of real estate, licensing of software and/or development of

vacation ownership properties, access to credit facilities, derivatives and issuances of debt securities.

Also in the ordinary course of business, we provide corporate guarantees for our operating business units relating to merchant credit-card processing for prepaid customer stays and other deposits.

While a majority of these guarantees and indemnifications extend only for the duration of the underlying agreement, some survive the expiration of the agreement.

We are not able to estimate the maximum potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable.

We are not able to estimate the maximum

potential amount of future payments to be made under these guarantees and indemnifications as the triggering events are not predictable.

In certain cases, we maintain insurance coverage that may mitigate any potential payments.

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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-K

Item 7. Management’s Discussion and Analysis