What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-21 compared with 2023-02-22 · 219 added, 211 removed, 335 unchanged (56% 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.

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 includes our Wyndham Destinations business line.

• Travel and Membership — operates a variety of travel businesses, including 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 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.

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 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.

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 business continues to leverage demand for leisure travel, as consumers have prioritized leisure travel following COVID-19.

While we are experiencing the benefits of current demand levels, recent inflationary pressures, higher interest rates, and risk of recession inherently result in uncertainty in business trends and consumer behavior.

Since the peak of COVID-19, we have experienced trends of increased gross VOI sales, including sales to new owners, volume per guest (“VPG”), and tours.

With the strength in travel demand, we are once again focusing on increasing the mix of new owner sales in order to expand our pipeline of potential future owner upgrade sales.

As expected with this strategic shift, we are beginning to see our VPGs moderate, however they remain above pre-pandemic levels.

In addition to the new owner impact on our VPGs, during 2023 we saw a modest softening of close rates, which we believe reflects demand stabilization after the release of pent-up travel demand that benefited us in the prior year.

Despite this modest softening of close rates during the year, they still remain above pre-pandemic levels.

During the pandemic we made changes 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 (“VOCR”) portfolio.

As a result of these changes we have seen an overall improvement in delinquencies, although we saw some normalization of delinquency rates during 2023, they remain below 2019 levels.

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.

Higher interest rates negatively impacted our interest expense during 2023 as well as the reporting periods since COVID-19 and, if interest rates remain elevated, we would expect this trend to continue.

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

During 2023, our Travel and Membership segment saw a decrease in transactions due to an increasing mix of exchange members with a club affiliation, who have a lower transaction propensity.

This is a trend we expect to continue into 2024.

Transactions were also impacted by a slower than expected ramp-up of our travel clubs.

The decrease in transactions was partially offset by an improvement in revenue per transaction.

While our Vacation Ownership business is benefited by the fact that the majority of our owners do not have loans and are therefore less dependent on economic conditions when making travel decisions, this 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 ” contained in Part I, Item 1A of our Annual Report on Form 10-K.

Inflation Reduction Act

On August 16, 2022, the United States (“U.S.”) enacted the Inflation Reduction Act.

Among other provisions, this new law imposes a 15% minimum tax rate for large corporations with an average of 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 became 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 and during 2023 have incurred $3 million of excise tax related to share repurchases, which is expected to be paid in April 2024.

This excise tax is included within Treasury stock on the Consolidated Balance Sheets.

The Organization for Economic Co-operation and Development (“OECD”), continues to put forth various initiatives, including Pillar Two rules which include the introduction of a global minimum tax at a rate of 15%.

European Union member states agreed to implement the OECD’s Pillar Two rules with effective dates of January 1, 2024 and January 1, 2025, for different

aspects of the directive and most have already enacted legislation.

A number of other countries are also implementing similar legislation.

These changes may increase our taxes in the applicable jurisdictions or cause us to change the way we operate our business and result in increased taxation of our international earnings.

We are currently in the process of evaluating the impact these changes will have on our consolidated financial statements, and are closely monitoring other countries that may enact similar legislation.

Playbook365 Acquisition

On January 3, 2023, we acquired the Playbook365 business for $13 million, comprised of $6 million of cash paid at closing and contingent consideration with a fair market value of $7 million, which can range to $24 million, based on the achievement of certain financial metrics.

Playbook365 is a youth and amateur sports management platform.

This platform was integrated with Alliance Reservations Network’s (“ARN”) event lodging management platform to create an all-in-one solution in the youth sports market.

This acquisition was made to broaden the products and services offered by ARN, and is included within the Travel and Membership segment.

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

Sports Illustrated Resorts Agreement

On September 11, 2023, we entered into an agreement to acquire the rights to the vacation ownership business of Sports Hospitality Ventures, LLC (“SHV”), a hotel and resorts licensee for the Sports Illustrated brand.

Together with SHV, we introduced a new concept for a network of sports-themed resort and lifestyle complexes in popular college towns and leisure destinations.

The new resorts are anticipated to be developed using an asset-light development financing model.

The first resort in the new business line is expected to open in Tuscaloosa, Alabama, in late 2025.

This new business line is included within the Vacation Ownership segment.

There is no immediate earnings impact for us, but we expect this business to drive incremental growth starting in the second half of 2025.

SEGMENT OVERVIEW

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In connection with entering into a VOI sale, we may provide our customers with certain non-cash incentives, such as credits for future stays at our resorts.

For those VOI sales, we bifurcate the sale and allocate the sales price between the VOI sale and the non-cash incentive.

Non-cash incentives generally have expiration periods of 18 months or less and are recognized at a point in time upon transfer of control.

For those VOI sales, we allocate the sales price between the VOI sale and the non-cash incentive.

Non-cash incentives generally have expiration periods of two years or less and are recognized at a point in time upon transfer of control.

We provide day-to-day property management services including oversight of housekeeping services, maintenance, and certain accounting and administrative services for property owners’ associations and clubs.

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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).

We reduce our management fees for amounts paid to the property owners’ association that reflect maintenance fees for VOIs for which we retain ownership, as we have concluded that such payments are consideration payable to a customer.

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).

We reduce our management fees revenue for amounts paid to the property owners’ association that reflect maintenance fees for VOIs for which we retain ownership, as we have concluded that such payments are consideration payable to a customer.

Property management fee revenues and reimbursable 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.

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

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Travel and Membership

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.

We derive 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.

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.

We recognize revenues from membership dues paid by the member on a straight-line basis over the membership period as the performance obligations are fulfilled through delivery of publications, if applicable, and by providing access to travel-related products and services.

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For additional fees, members have the right to exchange their intervals for intervals at other properties affiliated with our vacation exchange networks and, for certain members, for other leisure-related services and products.

We also derive revenue from facilitating bookings of travel accommodations for both members and non-members.

We also derive revenue from facilitating bookings of travel accommodations that were acquired from various sources.

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

Our vacation exchange business also derives revenues from programs with affiliated resorts, club servicing, and loyalty programs;

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.

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

Revenues from 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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(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;

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

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

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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.

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

We define Adjusted EBITDA as net income 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, asset impairments/recoveries, 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 & Resorts, Inc.

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

(“Wyndham Hotels”) and Cendant Corporation (“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, we believe 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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Refer to “The Year Ended December 31, 2023 vs.

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

The Year Ended December 31, 2022” section for a discussion of how these operating statistics affected our business for the periods presented.

Year Ended December 31,

2022 2021 % Change (i)

2023 2022 % Change (h)

Vacation Ownership

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

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

$ 2,149 $ 1,982 8.4

Tours (in 000s) (b)

Volume Per Guest (“VPG”) (c)

Volume per guest (c)

$ 3,128 $ 3,426 (8.7)

Travel and Membership (d)

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

Transactions (in 000s) (e)

Exchange 959 1,022 (6.2)

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Total transactions 1,638 1,731 (5.4)

Revenue per transaction (f) (g)

Revenue per transaction (f)

Exchange $ 357 $ 341 4.8

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Total revenue per transaction $ 305 $ 300 1.6

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

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

3,515 3,524 (0.2)

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(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):

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

(f) Represents transaction revenue divided by transactions.

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

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

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

Year Ended December 31,

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Fee-for-Service commission revenues were $131 million and $116 million for the years ended December 31, 2023 and 2022.

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

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

THE YEAR ENDED DECEMBER 31, 2023 VS.

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Expenses 3,028 2,914 (114)

Loss on sale of business 2 — (2)

Operating income 720 653 67

Interest expense 251 195 (56)

Interest (income) (6) (3) 3

Other (income), net (3) (22) (19)

Interest (income) (13) (6) 7

Income before income taxes 485 486 (1)

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Net income from continuing operating 391 356 35

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

Gain on disposal of discontinued business, net of income taxes 5 1 4

Net income attributable to Travel + Leisure Co.

shareholders $ 396 $ 357 $ 39

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 $183 million during 2023 compared with 2022.

This increase was unfavorably impacted by foreign currency of $7 million (0.2%).

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.

Excluding the impacts of foreign currency, the increase in net revenues was primarily due to:

• $212 million of increased revenues at our Vacation Ownership segment primarily due to an increase in gross VOI sales, net of Fee-for-Service sales as a result of increased tours, partially offset by an increase in our provision for loan losses associated with these sales;

higher property management revenues resulting from higher property management fees and reimbursable revenues;

increased other revenues due to higher VOI travel package and incentive revenues;

an increase in consumer financing revenues primarily due to a higher average portfolio balance;

and increased commission revenues due to higher volume of VOI Fee-for-Service sales;

partially offset by

• $23 million of decreased revenues at our Travel and Membership segment primarily due to lower transactions, partially offset by increased revenue per transaction.

Expenses increased $114 million during 2023 compared with 2022.

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;

This increase in expenses, excluding immaterial foreign currency impacts, was primarily the result of:

• $56 million increase in marketing costs mainly in support of increased tour flow and new owner mix at our Vacation Ownership business;

• $45 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;

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

• $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.

• $32 million increase in consumer financing interest expense primarily due to an increased weighted average coupon rate;

• $31 million increase in sales and commission expenses at the Vacation Ownership segment due to higher gross VOI sales, net of Fee-for-Service sales;

• $12 million increase in restructuring costs as we focused on enhancing organizational efficiency and rationalizing operations.

These increases were partially offset by a $25 million decrease in general and administrative expenses driven by lower professional fees and employee costs;

$24 million decrease in the cost of VOIs sold primarily due to estimated recoveries associated with the aforementioned provision increase and product mix;

and a $10 million decrease due to asset impairments recorded in the prior year.

We recognized a loss on sale of business of $2 million during 2023 resulting from the sale of the Love Home Swap business.

Interest expense increased $56 million during 2023 compared with 2022 primarily due to increased borrowing activity under the revolving credit facility, the issuance of the 2022 Incremental Term Loan B facility in the fourth quarter of 2022, and higher interest rates on variable borrowings in 2023.

Other income, net of other expense decreased $19 million during 2023 compared with 2022, primarily due to a $10 million benefit in the prior year, related to a reduction in the fair value of contingent consideration associated with a business acquisition.

Interest income increased $7 million during 2023 compared with 2022 primarily due to higher interest rates.

Our effective tax rates were 19.4% and 26.7% for the years ended December 31, 2023 and 2022.

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.

Our effective tax rate for 2023 is lower primarily due to the partial reversal of the valuation allowance related to our foreign tax credits based on our determination that it is more likely than not that the benefit will be realized.

Gain on disposal of discontinued business, net of income taxes increased $4 million during 2023 compared with 2022 primarily resulting from the release of an expired guarantee related to the sale of the European vacation rentals business in 2023.

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

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shareholders $ 396 $ 357

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

Provision for income taxes 130 116

Depreciation and amortization 119 124

Gain on disposal of discontinued business, net of income taxes

Interest expense 251 195

Interest (income) (13) (6)

Provision for income taxes 94 130

Depreciation and amortization 112 119

Stock-based compensation 36 42

Restructuring (b)

Asset impairments/(recoveries), net (c)

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

COVID-19 related costs (d)

Legacy items 8 1

Loss on sale of business 2 —

Asset impairments, net (c)

Loss on equity investment

COVID-19 related costs (d)

Fair value change in contingent consideration — (10)

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(a) Includes the elimination of transactions between segments.

(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).

(b) Includes $2 million and $3 million of stock-based compensation expense for the years ended December 31, 2023 and 2022 associated with the 2023 and 2022 restructuring plans.

(c) Includes $1 million of inventory impairments for the years ended December 31, 2023 and 2022, included in Cost of vacation ownership interests on the Consolidated Statements of Income.

(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 $206 million and Adjusted EBITDA increased $64 million during 2023 compared with 2022.

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:

• $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;

The net revenue growth was unfavorably impacted by foreign currency of $6 million (0.2%) and Adjusted EBITDA growth was unfavorably impacted by foreign currency of $3 million (0.5%).

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

• $149 million increase in gross VOI sales, net of Fee-for-Service sales, due to increased tours, partially offset by a decrease in VPG due to higher mix of new owner tours (52% in the current year compared to 45% in the same period of 2022) which generally produce lower sales volume and lower close rates;

• $52 million increase in property management revenues primarily due to higher management fees and reimbursable revenues;

• $22 million increase in other revenues due to higher VOI travel package and incentive revenues;

• $21 million increase in consumer financing revenues primarily due to a higher average portfolio balance;

• $15 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:

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

These increases were partially offset by a $47 million increase in our provision for loan losses primarily due to higher gross VOI sales, net of Fee-for-Service sales.

In addition to the revenue change explained above, Adjusted EBITDA was further impacted by:

• $61 million increase in marketing costs in support of increased tour flow and new owner mix;

• $45 million increase in property management expenses due to higher reimbursable resort operating costs and expenses;

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

• $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.

• $32 million increase in consumer financing interest expense primarily due to an increased weighted average coupon rate;

• $31 million increase in sales and commission expenses due to higher gross VOI sales, net of Fee-for-Service sales;

• $8 million increase in other operating expenses due to higher VOI travel package and incentive expenses.

These increases were partially offset by a $24 million decrease in the cost of VOIs sold primarily due to estimated recoveries associated with the aforementioned provision increase and product mix, and a $19 million decrease in general and administrative expenses due to lower professional fees and employee related costs.

Travel and Membership

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:

• $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.

Net revenues decreased $24 million and Adjusted EBITDA decreased $21 million during 2023 compared with 2022.

The net revenue decrease was unfavorably impacted by foreign currency of $1 million (0.1%) and the Adjusted EBITDA decrease was unfavorably impacted by foreign currency of $5 million (1.9%).

The decrease in net revenues excluding the impact of foreign currency was primarily driven by lower transactions, partially offset by increased revenue per transaction.

Transactions were impacted by an increasing mix of exchange members with a club affiliation.

who have a lower transaction propensity.

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.

• $7 million decrease in cost of sales primarily associated with lower transactions;

partially offset by heavier weighting of rentals in Exchange’s revenue mix;

• $5 million decrease in marketing costs;

partially offset by a

• $5 million increase in other operating costs primarily related to business development activities.

Corporate and other

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.

Corporate and other revenue increased $1 million during 2023 compared with 2022 primarily due to $5 million of fees charged for managing an insurance program on behalf of homeowners associations;

partially offset by a $4 million increase in eliminated transactions between segments.

Adjusted EBITDA increased $6 million (8.1%) during 2023 compared with 2022 and was not materially impacted by foreign currency.

The growth in Adjusted EBITDA was primarily due to $5 million of fees charged for managing an insurance program on behalf of homeowners associations.

For a comparative review of our consolidated results of operations and those of our reportable segments for the fiscal years ended December 31, 2022 and 2021, refer to Part II, Item 7 of our Annual Report on Form 10-K filed with the SEC on February 22, 2023.

DISCONTINUED OPERATIONS

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.

During 2023 and 2022, we recognized $5 million and $1 million Gains on disposal of discontinued business, net of income taxes.

During 2021, we recognized a Loss on disposal of discontinued business, net of income taxes of $5 million.

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

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

RESTRUCTURING PLANS

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.

2023 Restructuring Plan

We incurred $26 million of restructuring charges during the year ended December 31, 2023.

These actions were primarily focused on enhancing organizational efficiency and rationalizing operations.

These charges included personnel-related costs resulting from a reduction of approximately 250 employees and other expenses.

As part of this restructuring plan, we also decided to decrease our facilities by closing our owned office in Indianapolis, Indiana, and exiting other leased locations.

The charges consisted of (i) $11 million of personnel-related costs at the Travel and Membership segment, (ii) $9 million of personnel-related costs and $1 million of lease costs at the Vacation Ownership segment, and (iii) $5 million of personnel-related costs at our corporate operations.

These restructuring charges included $2 million of accelerated stock-based compensation expense.

Substantially all initiative and related expenses have been incurred as of December 31, 2023.

2022 Restructuring Plan

We incurred $14 million of restructuring charges during the year ended December 31, 2022.

These charges were associated with certain positions that were made redundant based upon changes to our organizational structure, primarily within the Travel and Membership segment.

The charges consisted of (i) $9 million of personnel costs at the Travel and Membership segment, (ii) $3 million of lease and personnel-related costs at the Vacation Ownership segment, and (iii) $2 million of personnel-related costs at our corporate operations.

These restructuring charges included $3 million of accelerated stock-based compensation expense.

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

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Total deficit $ (917) $ (904) $ (13)

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:

Total assets decreased $19 million from December 31, 2022 to December 31, 2023, due to:

• $268 million decrease in Cash and cash equivalents primarily driven by $400 million repayment of the 3.90% secured notes during the first quarter of 2023, $309 million of payments for share repurchases, $136 million of dividend payments, $74 million of property and equipment additions, $22 million of payments relating to debt issuances/modifications, and $15 million payment associated with the acquisition of the Travel + Leisure brand partially offset by $350 million of net cash provided by operating activities, proceeds from $300 million of borrowings on the 2023 Incremental Term Loan B facility, and $103 million of net proceeds from non-recourse debt;

• $58 million decrease in Inventory driven by the sale of $133 million of VOI inventory and $16 million of net transfers of completed unregistered VOI inventory to property and equipment;

partially offset by $88 million of inventory additions.

These decreases were partially offset by:

• $38 million increase in Restricted cash driven by a $14 million increase in escrow deposits, $13 million increase in restricted cash for securitizations, and $11 million increase in funds on deposit related to our insurance program;

• $19 million increase in Trade receivables, net driven by increased receivables associated with property management fees and reimbursable expenses;

• $157 million increase in Vacation ownership contract receivables, net, driven by $1.43 billion of VOI originations, partially offset by $924 million of principal collections and net provision for loan losses of $348 million;

• $27 million increase in Prepaid expenses driven by $17 million increase in prepaid marketing costs and $9 million increase in prepaid travel credits;

• $70 million increase in Other assets driven by increases of $49 million of tax receivables;

$19 million in non-trade receivables, $9 million in capitalized contract costs, $9 million increase in deferred costs, and a $7 million increase in assets held-for-sale, partially offset by $16 million of amortization of right-of-use assets and the release of $12 million of collateral assets.

Total liabilities decreased $6 million from December 31, 2022 to December 31, 2023, primarily due to:

• $69 million decrease in Accrued expenses and other liabilities primarily due to a $30 million decrease due to the relief of the inventory obligation in Las Vegas, Nevada, a $24 million decrease in lease liabilities, a $17 million decrease in accrued payroll and related costs primarily employee bonus and commissions, and a $15 million decrease in tax liabilities, partially offset by an $10 million increase in funds on deposit related to our insurance program;

• $94 million decrease in Debt driven by $400 million repayment of the 3.90% secured notes during the first quarter of 2023;

partially offset by $300 million of borrowings on the 2023 Incremental Term Loan B facility.

These decreases were partially offset by a:

• $43 million increase in Deferred income driven primarily by deferred VOI trial package and incentive revenues;

• $98 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;

Total deficit increased $13 million from December 31, 2022 to December 31, 2023, primarily due to $307 million of share repurchases and $137 million of dividends;

partially offset by $396 million of Net income attributable to Travel + Leisure Co.

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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 net cash from operations and cash and cash equivalents are key sources of liquidity along with our revolving credit facility, 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 $300 million notes due in April 2024.

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

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

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.

The financial ratio covenants consist of a minimum interest coverage ratio and a maximum first lien leverage ratio.

The facility expires in October 2026 and had $998 million of available capacity as of December 31, 2023.

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

The financial ratio covenants consist of a minimum interest coverage ratio of no less than 2.50 to 1.0 as of the measurement date and a maximum first lien leverage ratio not to exceed 4.25 to 1.0 as of the measurement date.

The interest coverage ratio is calculated by dividing consolidated EBITDA (as defined in the credit agreement) by consolidated interest expense (as defined in the credit agreement), both as measured on a trailing 12-month basis preceding the measurement date.

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.

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.

Our first lien leverage ratio determines the interest rate spread on revolver borrowings and fees associated with letters of credit, which subjects them to fluctuation.

As of December 31, 2023, our interest coverage ratio was 4.23 to 1.0 and our first lien leverage ratio was 3.40 to 1.0.

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As of December 31, 2023, we were in compliance with the financial covenants described above.

On March 30, 2023, we entered into the fourth amendment to the credit agreement governing our revolving credit facility and term loan B facilities.

Through this amendment we exercised our early opt-in election to change the benchmark rate on the revolving credit facility and 2018 Term Loan B Facility due May 2025 from the USD London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”).

This change became effective on March 31, 2023, for both new borrowings and rollovers of then existing USD LIBOR based borrowings (except Base Rate borrowings) and eliminated our exposure to LIBOR.

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.

During 2022, we entered into the third amendment to the credit agreement governing our revolving credit facility and the original 2018 Term Loan B Facility which provided for the 2022 Incremental Term Loan B Facility of $300 million due 2029.

On December 20, 2023 we further amended the credit agreement governing our revolving credit facility and term loan B facilities (“Fifth Amendment”).

The Fifth Amendment refinanced $298 million of outstanding borrowings under the 2022 Incremental Term Loan B facility and included additional borrowings of $300 million.

This new 2023 Incremental Term Loan B facility matures on December 14, 2029.

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

During 2023, we used net proceeds from the 2022 Incremental Term Loan B Facility, along with cash on hand, and borrowings under our revolving credit facility, to repay our $400 million notes which came due in March 2023.

We expect to use net proceeds from the 2023 Incremental Term Loan B Facility, together with available cash on hand and revolving credit facility borrowings to repay our outstanding $300 million 5.65% secured notes due April 2024 and pay related fees and expenses.

As of December 31, 2023, we had $3.56 billion of outstanding borrowings under our secured notes and term loan B facilities with maturities ranging from 2024 to 2030.

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

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.

On September 26, 2023, we renewed our USD bank conduit facility, extending its term through September 2025.

We believe that our USD bank conduit facility and our AUD/NZD bank conduit facility, with a term through December 2024, amounting to a combined capacity of $752 million ($388 million available as of December 31, 2023), 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 $1.09 billion, $800 million, and $850 million during 2023, 2022, and 2021.

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

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Operating leases 29 24 14 13 10 11 101

Inventory sold subject to conditional repurchase (e)

$ 1,151 $ 1,593 $ 1,227 $ 967 $ 606 $ 2,251 $ 7,795

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

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

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(d) Includes $533 million for marketing related activities and $133 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.

(e) Excludes a $31 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 (now Anywhere Real Estate Inc.), and Travelport for such liabilities) and guarantee commitments related to deferred compensation arrangements with Cendant and Realogy.

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

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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, 2023, we had $47 million of irrevocable standby letters of credit outstanding, $2 million of which 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.

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 $504 million outstanding as of December 31, 2023.

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.

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.

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 2024 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 “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.

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 “stable outlook” by Fitch Rating Agency.

A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal by the assigning rating organization.

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Any reference to a credit rating is not intended to be any guarantee or assurance of, nor should there be any undue reliance upon, any credit rating or change in credit rating, nor is any such reference intended as any inference concerning future performance, future liquidity or any future credit rating.

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.

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.

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 in 2021.

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 2023 and 2022 (in millions).

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Net cash provided by operating activities was $350 million for the year ended December 31, 2023, compared to $442 million in the prior year.

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.

This $92 million decrease in 2023 was primarily attributable to an increase in cash utilized for working capital, including the impacts of the Sports Illustrated agreement and continued growth in our loan portfolio.

Investing Activities

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.

Net cash used in investing activities from continuing operations increased $35 million during the year ended December 31, 2023.

This increase was primarily driven by $22 million of higher property and equipment additions and $8 million of proceeds from the sale of investments in 2022.

Net cash used in investing activities from discontinued operations was $5 million during 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 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.

Net cash used in financing activities increased $304 million during the year ended December 31, 2023.

This increase was primarily due to the $400 million repayment of the 3.90% secured notes during the first quarter of 2023 partially offset by higher net proceeds on non-recourse debt and decreased 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, acquisition, and other strategic transaction activities.

We also regularly consider a wide array of potential acquisitions and other strategic transactions, including acquisitions of businesses and real property, joint ventures, business combinations, strategic investments, and dispositions.

Any of these transactions could be material to our business.

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.

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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 of Directors.

All future declarations of quarterly cash dividends and increases to the capacity of our share repurchase program are subject to final approval by the Board of Directors (“Board”).

During 2023, we spent $100 million on vacation ownership development projects (inventory).

We believe that our Vacation Ownership business currently has adequate finished inventory to support vacation ownership sales for several years.

The average inventory spend on vacation ownership development projects for the five-year period from 2023 through 2027 is expected to be between $130 million and $150 million annually.

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.

As such, we expect to remain below historical levels of spending for vacation ownership development projects in 2024 with anticipated spending between $105 million and $125 million.

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

During 2023, we spent $74 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.

During 2024, we anticipate spending between $80 million and $90 million on capital expenditures, primarily for continuation of information technology digital initiatives, sales center facility and related system enhancements and 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.

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Share Repurchase 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.

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

As of December 31, 2023, the Board 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.

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

We had $170 million of remaining availability in our program as of December 31, 2023.

Under our current share repurchase program, we repurchased 7.8 million shares at an average price of $39.11 for a cost of $307 million during the year ended December 31, 2023.

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

We paid cash dividends of $0.45 per share for all four quarters of 2023 and $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.

The aggregate dividends paid to shareholders for 2023, 2022, and 2021 were $136 million, $135 million, and $109 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.

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.

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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We experience seasonal fluctuations in our net revenues and net income from sales of VOIs and vacation exchange fees.

Revenues from sales of VOIs are generally higher in the third quarter than in other quarters due to increased leisure travel.

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.

Revenue from sales of VOIs is generally higher in the third quarter than in other quarters due to increased leisure travel.

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

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

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From time to time, we are involved in claims, legal and regulatory proceedings, and governmental inquiries related to our business, none of which, in the opinion of management, is expected to have a material effect on our results of operations or financial condition.

See Note 19— Commitments and Contingencies to the Consolidated Financial Statements for a description of claims and legal actions arising in the ordinary course of our business along with our guarantees and indemnifications and Note 27— Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for a description of our obligations regarding Cendant contingent litigation, matters related to Wyndham Hotels, matters related to the European vacation rentals business, and matters related to the North American vacation rentals business.

See Note 19— Commitments and Contingencies to the Consolidated Financial Statements for a description of claims and legal actions arising in the ordinary course of our business along with our guarantees and indemnifications and Note 27— Transactions with Former Parent and Former Subsidiaries to the Consolidated Financial Statements for a description of our obligations regarding Cendant contingent litigation, matters related to Wyndham Hotels, and matters related to the vacation rentals businesses.

CRITICAL ACCOUNTING ESTIMATES

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There were no changes to the assumptions used in this model in 2023.

In March 2020, as a result of the COVID-19 pandemic’s impact on our owners’ ability to repay their contract receivables, we added an additional model that increased the allowance for loan losses by $225 million, representing 6% of gross VOCRs as of March 31, 2020.

This additional model was based upon historical data on the relationship between unemployment rates and net new defaults.

The model provided for the full estimated impact of a recession (approximately 15-20 months from the peak of unemployment) based on our historical data from the recession in 2008.

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 not had a COVID-19 related allowance since December 31, 2021.

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

Over the past five years, the year-end allowance as a percentage of gross VOCRs has ranged from 18.1% to 19.5% with the exception of 2020 which was 21.8% as a result of the impact of COVID-19.

See Note 9— Vacation Ownership Contract Receivables to the Consolidated Financial Statements for additional details of changes in the COVID-19 estimates and impacts to the financial statements.

Changes in our estimates of uncollectible amounts could result in a material impact to our allowance for loan losses.

A one percent change in projected losses would increase our allowance for loan losses by approximately $6 million.

Vacation Ownership Contract Receivables to the Consolidated Financial Statements for additional details of our allowance for loan losses.

We use the relative sales value method of costing and relieving our VOI inventory.

This method requires us to make estimates subject to significant uncertainty, including future sales prices and volumes as well as credit losses and related inventory recoveries.

The impact of any changes in estimates under the relative sales value method is recorded in Cost of vacation ownership interests on the Consolidated Statements of Income/(Loss) in order to retrospectively adjust the margin previously recorded subject to those estimates.

The impact of any changes in estimates under the relative sales value method is recorded in Cost of vacation ownership interests on the Consolidated Statements of Income in order to retrospectively adjust the margin previously recorded subject to those estimates.

There were no changes in these assumptions during 2023.

8 unchanged sentences

We account for business combinations in accordance with the guidance for business combinations and related literature.

Accordingly, we allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the date of purchase, with the exception of contract assets and contract liabilities with a customer acquired in a business combination, for business combinations that occurred in 2022 or later.

For these transactions we recognize and measure those contracts as though we had entered into the agreement with the customer as of the same date as the acquiree.

This generally will result recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date.

The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.

9 unchanged sentences

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.

6 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis