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Item 2. Management’s Discussion and Analysis

2021-05-07 compared with 2020-11-05 · 254 added, 584 removed, 473 unchanged (64% of the section changed)

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We make forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q, based on our management’s beliefs and assumptions and on information currently available to our management.

Forward-looking statements include, among other things, the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition, and the ongoing effect of the COVID-19 pandemic and actions we or others may take in response to the pandemic.

Forward-looking statements include, among other things, the information concerning:

our possible or assumed future results of operations;

business strategies, such as our plans to increase focus on sales to first-time buyers;

financing plans;

competitive position;

potential growth opportunities;

potential operating performance improvements, including expectations that contract sales and rental occupancies will continue to improve throughout 2021;

the effects of competition;

and the ongoing effect of the COVID-19 pandemic and actions we or others may take in response to the COVID-19 pandemic.

Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms or similar expressions.

The Company cautions you that these statements are not guarantees and are subject to numerous risks and uncertainties, such as:

the effects of the COVID-19 pandemic, including reduced demand for vacation ownership and exchange products and services, volatility in the international and national economy and credit markets, worker absenteeism, quarantines or other travel or health-related restrictions;

the length and severity of the COVID-19 pandemic;

the pace of recovery following the COVID-19 pandemic;

The Company cautions you that these statements are not guarantees of future performance and are subject to numerous and evolving risks and uncertainties that we may not be able to predict or assess, such as:

the length and severity of the COVID-19 pandemic, including its short and longer-term impact on the demand for travel and on consumer confidence;

the impact of the availability and distribution of effective vaccines on the demand for travel and consumer confidence;

the pace of recovery following the COVID-19 pandemic or as effective treatments or vaccines become widely available;

competitive conditions;

the availability of capital to finance growth, and other matters referred to under the heading “Risk Factors” contained herein and also in our most recent Annual Report on Form 10-K filed March 2, 2020, our Current Report on Form 8-K filed May 6, 2020, our Quarterly Report on Form 10-Q filed on May 22, 2020, and our Quarterly Report on Form 10-Q filed August 5, 2020, in each case with the U.S.

Securities and Exchange Commission (the “SEC”), any of which could cause actual results to differ materially from those expressed in or implied in this press release.

We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

The risk factors discussed in “Risk Factors” in our most recent Annual Report on Form 10-K filed March 2, 2020, our Current Report on Form 8-K filed May 6, 2020, our Quarterly Report on Form 10-Q filed May 22, 2020, our Quarterly Report on Form 10-Q filed on August 5, 2020, and which may be discussed in subsequent Quarterly Reports on Form 10-Q or other filings with the SEC could cause our results to differ materially from those expressed in forward-looking statements.

the availability of capital to finance growth;

the effects of steps we have taken and may continue to take to reduce operating costs and/or enhance health and cleanliness protocol at our resorts due to the COVID-19 pandemic;

political or social strife, and other matters referred to under the heading “Risk Factors” contained herein and also in our most recent Annual Report on Form 10-K, and which may be discussed in our periodic filings with the U.S.

Securities and Exchange Commission (the “SEC”), any of which could cause actual results to differ materially from those expressed or implied herein.

There may be other risks and uncertainties that we cannot predict at this time or that we currently do not expect will have a material adverse effect on our financial position, results of operations or cash flows.

Any such risks could cause our results to differ materially from those we express in forward-looking statements.

We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Our Financial Statements (as defined below), which we discuss below, reflect our historical financial condition, results of operations and cash flows.

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COVID-19 Pandemic Update

The COVID-19 pandemic (as discussed further in Footnote 1 “Basis of Presentation” of the Financial Statements) has caused significant disruptions in international and U.S.

The COVID-19 pandemic has caused significant disruptions in international and U.S.

economies and markets.

We discuss the COVID-19 pandemic and its current and potential future implications in this report;

however, the COVID-19 pandemic is evolving and its potential impact on our business in the future remains uncertain.

As a result of the COVID-19 pandemic, on September 10, 2020, the Company approved a workforce reduction plan, which is currently expected to impact approximately 3,000 associates.

In connection with this plan, the Company estimates that it will incur approximately $25 to $30 million in restructuring and related charges primarily related to employee severance and benefit costs, including a portion that is included in cost reimbursements.

however, the COVID-19 pandemic, and any recovery therefrom, is evolving and its potential impact on our business in the future remains uncertain.

Significant Accounting Policies Used in Describing Results of Operations

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For each project, we expense real estate inventory costs in the same proportion as the revenue recognized.

costs in that period to those that would have been recorded historically if the revised estimates had been used.

Consistent with the applicable accounting guidance, to the extent there is a change in the estimated sales revenues or inventory costs for the project in a period, a non-cash adjustment is recorded on our income statements to true-up costs in that period to those that would have been recorded historically if the revised estimates had been used.

These true-ups, which we refer to as product cost true-up activity, can have a positive or negative impact on our income statements.

We refer to revenues from the sale of vacation ownership products less the cost of vacation ownership products and marketing and sales costs as development margin.

Development margin percentage is calculated by dividing development margin by revenues from the sale of vacation ownership products.

We refer to revenues from the sale of vacation ownership products less the cost of vacation ownership products and marketing and sales costs as Development profit.

Development profit margin is calculated by dividing Development profit by revenues from the sale of vacation ownership products.

We previously used the term Development margin to refer to revenues from the Sale of vacation ownership products less the Cost of vacation ownership products and marketing and sales costs.

Beginning in the first quarter of 2021, we now refer to this financial measure as Development profit.

While the calculation remains unchanged, we believe the revised term better depicts the financial results being presented.

Management and Exchange

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citizens or residents who financed a vacation ownership purchase was as follows:

Nine Months Ended

September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Average FICO score 732 739

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We do not include resales contract sales in the financing propensity calculation.

Financing propensity was 43 percent in the third quarter of 2020 and 66 percent in the third quarter of 2019;

the lower financing propensity in the third quarter of 2020 is due primarily to the various sales programs that incented cash purchases over financed purchases in the quarter, in response to the COVID-19 pandemic.

We do not expect these cash purchase incentives to continue at the same level going forward.

Financing propensity was 46 percent in the first quarter of 2021 and 57 percent in the first quarter of 2020;

the lower financing propensity in the first quarter of 2021 is due to a higher percentage of sales during this period to existing owners, who tend to have a lower financing propensity.

Going forward, we expect to shift back to an increased focus on sales to first-time buyers, which should increase propensity and increase interest income as new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

In the event of a default, we generally have the right to foreclose on or revoke the underlying VOI.

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Historical default rates, which represent defaults as a percentage of each year’s beginning gross vacation ownership notes receivable balance, were as follows:

Nine Months Ended

September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Historical default rates 1.3% 1.3%

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Interest expense consists of all interest expense other than consumer financing interest expense, which is included within Financing expense.

Transaction Costs

Transaction costs represent costs related to the acquisitions of ILG and Welk, primarily for financial advisory, legal, and other professional service fees, as well as certain tax related accruals.

Transaction costs also include charges for employee retention, severance and other termination related benefits, fees paid to change management consultants and technology-related costs related to the integration and transformation of ILG and Welk.

We measure operating performance using the following key metrics:

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• Consolidated contract sales exclude contract sales from the sale of vacation ownership products for non-consolidated joint ventures

• Development margin percentage;

• Development profit margin;

• Volume per guest (“VPG”), which we calculate by dividing consolidated vacation ownership contract sales, excluding fractional sales, telesales, resales, joint venture sales and other sales that are not attributed to a tour at a sales location, by the number of tours at sales locations in a given period (which we refer to as “tour flow”).

We believe that this operating metric is valuable in evaluating the effectiveness of the sales process as it combines the impact of average contract price with the number of touring guests who make a purchase;

• Average revenue per member, which we calculate by dividing membership fee revenue, transaction revenue and other member revenue for the Interval International network by the monthly weighted average number of Interval International network active members during the applicable period;

• Total active members, which is the number of Interval International network active members at the end of the applicable period;

Consolidated Results

Three Months Ended Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Sale of vacation ownership products $ 163 $ 258

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Management and exchange 117 151

Rental 74 92 245 269

Financing 21 38

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Litigation charges 3 2

Restructuring 20 — 20 —

Royalty fee 25 26

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TOTAL EXPENSES 739 1,060

(Losses) gains and other (expense) income, net — (5) (42) 5

Gains (losses) and other income (expense), net 6 (56)

Interest expense (43) (33)

ILG acquisition-related costs (11) (32) (44) (94)

Other — 1 (3) 1

(LOSS) INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS (72) 3 (316) 116

Benefit (provision) for income taxes 14 (10) 91 (50)

NET (LOSS) INCOME (58) (7) (225) 66

Transaction costs (19) (24)

LOSS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS (36) (163)

Benefit from income taxes 11 58

NET LOSS (25) (105)

Net income attributable to noncontrolling interests (3) (1)

NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (62) $ (9) $ (238) $ 64

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (28) $ (106)

Operating Statistics

2020 Third Quarter

2021 First Quarter

Three Months Ended

(Contract sales $ in millions) September 30, 2020 September 30, 2019 Change % Change

Vacation Ownership

Total contract sales $ 141 $ 401 $ (260) (65%)

Consolidated contract sales $ 140 $ 390 $ (250) (64%)

Exchange & Third-Party Management

Total active members at end of period (000's) (1)

1,536 1,701 (165) (10%)

Average revenue per member (1)

$ 36.76 $ 40.89 $ (4.13) (10%)

_______________

(1) Only includes members of the Interval International exchange network.

2020 First Three Quarters

Nine Months Ended

(Contract sales $ in millions) September 30, 2020 September 30, 2019 Change % Change

(Contract sales $ in millions) March 31, 2021 March 31, 2020 Change % Change

Vacation Ownership

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Consolidated contract sales $ 226 $ 306 $ (80) (26%)

Joint venture contract sales $ 6 $ 9 $ (3) (30%)

Exchange & Third-Party Management

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(1) Only includes members of the Interval International exchange network.

2020 Third Quarter

The following table presents our revenues for the third quarter of 2020 compared to the third quarter of 2019.

2021 First Quarter

The following table presents our revenues for the first quarter of 2021 compared to the first quarter of 2020.

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Vacation Ownership $ 571 $ 940 $ (369) (39%)

Exchange & Third-Party Management 71 111 (40) (36%)

Total Segment Revenues 642 1,051 (409) (39%)

Consolidated Property Owners’ Associations 7 15 (8) (61%)

Total Revenues $ 649 $ 1,066 $ (417) (39%)

2020 First Three Quarters

The following table presents our revenues for the first three quarters of 2020 compared to the first three quarters of 2019.

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Vacation Ownership $ 661 $ 908 $ (247) (27%)

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Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA

EBITDA, a financial measure that is not prescribed by GAAP, is defined as earnings, or net income attributable to common shareholders, before interest expense (excluding consumer financing interest expense associated with term loan securitization transactions), income taxes, depreciation and amortization.

EBITDA, a financial measure that is not prescribed by GAAP, is defined as earnings, or net income or loss attributable to common shareholders, before interest expense (excluding consumer financing interest expense associated with term loan securitization transactions), income taxes, depreciation and amortization.

Adjusted EBITDA reflects additional adjustments for certain items described below, and excludes share-based compensation expense to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted.

We evaluate Adjusted EBITDA as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of the excluded items.

Together, EBITDA and Adjusted EBITDA facilitate our comparison of results from our on-going core operations before the impact of these items with results from other vacation ownership companies, and we believe this makes these figures helpful for investors.

For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense because we consider it to be an operating expense of our business.

We consider EBITDA and Adjusted EBITDA to be indicators of operating performance, which we use to measure our ability to service debt, fund capital expenditures and expand our business.

We also use EBITDA and Adjusted EBITDA, as do analysts, lenders, investors and others, because these measures exclude certain items that can vary widely across different industries or among companies within the same industry.

For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense associated with term loan securitization transactions because we consider it to be an operating expense of our business.

We consider Adjusted EBITDA to be an indicator of operating performance, which we use to measure our ability to service debt, fund capital expenditures and expand our business.

We also use Adjusted EBITDA, as do analysts, lenders, investors and others, because this measure excludes certain items that can vary widely across different industries or among companies within the same industry.

For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings.

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These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

We believe Adjusted EBITDA is useful as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of the excluded items.

Adjusted EBITDA also facilitates comparison by us, analysts, investors, and others, of results from our on-going core operations before the impact of these items with results from other vacation companies.

EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do or may not calculate them at all, limiting their usefulness as comparative measures.

The table below shows our EBITDA and Adjusted EBITDA calculation and reconciles these measures with Net (loss) income attributable to common shareholders, which is the most directly comparable GAAP financial measure.

2020 Third Quarter

The table below shows our EBITDA and Adjusted EBITDA calculation and reconciles these measures with Net loss attributable to common shareholders, which is the most directly comparable GAAP financial measure.

2021 First Quarter

Three Months Ended Change

($ in millions) September 30, 2020 September 30, 2019

($ in millions) March 31, 2021 March 31, 2020 % Change

Net loss attributable to common shareholders $ (28) $ (106) $ 78 73%

Interest expense 43 33 10 29%

Tax (benefit) provision (14) 10 (24)

Depreciation and amortization 30 33 (3)

EBITDA (9) 65 (74)

Share-based compensation expense 11 9 2

Certain items 33 116 (83)

Adjusted EBITDA $ 35 $ 190 $ (155)

Certain items for the third quarter of 2020 consisted of $20 million of restructuring costs, $11 million of ILG acquisition-related costs, a $5 million loss and other expense related to the disposition of a formerly consolidated subsidiary, $2 million of purchase price adjustments, $2 million of litigation charges, $2 million of asset impairment charges, and $1 million of foreign currency translation losses, partially offset by $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado and $4 million related to the change in accrual for health and welfare costs for furloughed associates.

Certain items for the third quarter of 2019 consisted of $73 million of asset impairment charges, $33 million of acquisition charges (including $32 million of ILG acquisition-related costs and $1 million of other acquisition costs), $5 million of losses and other expense, $3 million of litigation charges, and $2 million of purchase price adjustments.

2020 First Three Quarters

Nine Months Ended Change

($ in millions) September 30, 2020 September 30, 2019

Net (loss) income attributable to common shareholders $ (238) $ 64 $ (302)

Interest expense 112 100 12

Tax (benefit) provision (91) 50 (141)

Benefit from income taxes (11) (58) 47 81%

Depreciation and amortization 41 32 9 30%

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Adjusted EBITDA $ 69 $ 138 $ (69) (50%)

Certain items for the first three quarters of 2020 consisted of $98 million of impairment charges, $44 million of ILG acquisition-related costs, $44 million of other charges (including $37 million related to the net sales reserve adjustment and $7 million related to an accrual for the health and welfare costs for furloughed associates), $42 million of losses and other expense, $20 million of restructuring costs, $4 million of purchase accounting adjustments, $4 million related to the charge for VAT penalties and interest (see offset included in indemnification below), $4 million of litigation charges, and $3 million of transaction costs related to our asset light inventory arrangements.

The $42 million of losses and other expense included $32 million related to a true-up to a Marriott International indemnification receivable upon settlement (the true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line), $25 million related to foreign currency translation, and a $5 million loss related to the disposition of a formerly consolidated subsidiary, partially offset by $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado, a $6 million receivable related to indemnification from Marriott International for certain VAT charges, $4 million related to net insurance proceeds from the final settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane, $3 million related to other insurance proceeds, and $1 million of miscellaneous gains and other income.

The reduction in share-based compensation expense in the first three quarters of 2020 includes a $4 million true-up for projected expense associated with our performance based share awards based upon the projected impact of the COVID-19 pandemic on financial metrics for the program.

Certain items for the first three quarters of 2019 consisted of $99 million of asset impairment charges, $95 million of acquisition costs (including $94 million of ILG acquisition-related costs and $1 million of other acquisition costs), $7 million of purchase price adjustments, $5 million of litigation charges, and $1 million of other severance costs, partially offset by $5 million of miscellaneous gains and other income.

Certain items for the first quarter of 2021 consisted of $19 million of transaction costs (including $17 million of ILG acquisition and integration related costs and $2 million of Welk acquisition related costs) and $3 million of litigation charges, partially offset by $4 million of foreign currency translation gains, and $2 million of miscellaneous gains and other income.

Certain items for the first quarter of 2020 consisted of $95 million of asset impairment charges, $56 million of losses and other expense, $54 million of other charges, $24 million of transaction costs, $2 million of purchase price adjustments, and $2 million of litigation charges.

The $54 million of other charges included $37 million related to a net sales reserve adjustment due primarily to the impact of the COVID-19 pandemic, $11 million related to an accrual for certain health and welfare costs for furloughed associates, and $6 million related to VAT charges.

Segment Adjusted EBITDA

2020 Third Quarter

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change

Vacation Ownership $ 28 $ 195 $ (167)

Exchange & Third-Party Management 31 45 (14)

Segment adjusted EBITDA 59 240 (181)

General and administrative (27) (50) 23

Consolidated property owners’ associations 3 — 3

Adjusted EBITDA $ 35 $ 190 $ (155)

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Vacation Ownership $ 68 $ 147 $ (79) (54%)

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Vacation Ownership

2020 Third Quarter

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change

Segment adjusted EBITDA $ 28 $ 195 $ (167)

Depreciation and amortization (18) (16) (2)

Share-based compensation expense (2) (2) —

Certain items (9) (77) 68

Segment financial results $ (1) $ 100 $ (101)

Certain items in the Vacation Ownership segment for the third quarter of 2020 consisted of $11 million of restructuring costs, $2 million of litigation charges, a $1 million asset impairment charge, and $1 million of purchase accounting adjustments, partially offset by $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado.

Certain items in the Vacation Ownership segment for the third quarter of 2019 consisted of $73 million of asset impairment charges, $2 million of purchase accounting adjustments, $2 million of litigation charges, and $1 million of acquisition costs, partially offset by $1 million of gains and other income.

2020 First Three Quarters

Nine Months Ended Change

($ in millions) September 30, 2020 September 30, 2019

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Segment adjusted EBITDA $ 68 $ 147 $ (79) (54%)

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Segment financial results $ 44 $ 78 $ (34) (45%)

Certain items in the Vacation Ownership segment for the first three quarters of 2020 consisted of $37 million related to the net sales reserve adjustment, $11 million of restructuring costs, $6 million of asset impairment charges, $4 million of litigation charges, $3 million related to transaction costs associated with our asset light inventory arrangements, and $3 million of purchase accounting adjustments, partially offset by $12 million of gains and other income, including $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado and $4 million related to net insurance proceeds from the final settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane.

Certain items in the Vacation Ownership segment for the first three quarters of 2019 consisted of $99 million of asset impairment charges, $7 million of purchase accounting adjustments, $4 million of litigation charges, and $1 million of acquisition costs, partially offset by $9 million of gains and other income.

Certain items in the Vacation Ownership segment for the first quarter of 2021 consisted of $3 million of litigation charges and $1 million of restructuring costs.

Certain items in the Vacation Ownership segment for the first quarter of 2020 consisted of $37 million related to a net sales reserve adjustment due primarily to the impact of the COVID-19 pandemic, $4 million of asset impairment charges, $2 million of purchase accounting adjustments, $2 million of litigation charges, and $3 million of acquisition costs, partially offset by $1 million of gains and other income.

Exchange & Third-Party Management

2020 Third Quarter

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Segment adjusted EBITDA $ 41 $ 41 $ — 1%

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Segment financial results $ 21 $ (59) $ 80 136%

Certain items in the Exchange & Third-Party Management segment for the third quarter of 2020 consisted of a $5 million loss and other expense related to the disposition of a formerly consolidated subsidiary, $3 million of restructuring costs, $1 million of purchase accounting adjustments, and $1 million of asset impairment charges.

Certain items in the Exchange & Third-Party Management segment for the third quarter of 2019 consisted of $1 million of gains and other income.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change

Segment adjusted EBITDA $ 91 $ 145 $ (54)

Depreciation and amortization (14) (36) 22

Non-cash share-based compensation expense (1) (2) 1

Certain items (101) — (101)

Segment financial results $ (25) $ 107 $ (132)

Certain items in the Exchange & Third-Party Management segment for the first three quarters of 2020 consisted of $92 million of impairment charges (primarily Goodwill and Indefinite-Lived Intangibles as discussed further in Footnote 10 “Goodwill and Intangibles” of the Financial Statements), a $5 million loss and other expense related to the disposition of a formerly consolidated subsidiary, $3 million of restructuring costs, and $1 million of purchase accounting adjustments.

Certain items in the Exchange & Third-Party Management segment for the first three quarters of 2019 consisted of $1 million of purchase accounting adjustments, offset by $1 million of gains and other income.

Certain items in the Exchange & Third-Party Management segment for the first quarter of 2020 consisted primarily of $91 million of impairment charges related to Goodwill and certain trademarks resulting from the impact of the COVID-19 pandemic.

Business Segments

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Vacation Ownership

Three Months Ended Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Sale of vacation ownership products $ 163 $ 258

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Gains and other income, net — 1

Other — 1 (3) 1

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS (1) 102 46 413

Net income attributable to noncontrolling interests — (2) — (1)

Transaction costs — (3)

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 44 $ 78

Contract Sales

2020 Third Quarter

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Total consolidated contract sales $ 140 $ 390 $ (250) (64%)

Joint venture contract sales 1 11 (10) (89%)

Total contract sales $ 141 $ 401 $ (260) (65%)

2020 First Three Quarters

Nine Months Ended

September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Total consolidated contract sales $ 226 $ 306 $ (80) (26%)

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Sale of Vacation Ownership Products

2020 Third Quarter

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Total contract sales $ 232 $ 315 $ (83) (26%)

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(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.

Sale of vacation ownership products decreased $243 million due to $244 million of lower contract sales volumes and a $16 million favorable change in revenue reportability, partially offset by $23 million of lower sales reserve activity.

Lower contract sales performance was primarily due to the impact of the COVID-19 pandemic.

In March 2020, all of our sales centers were closed in response to the pandemic.

We began opening sales centers throughout the second and third quarters and, by the end of the third quarter, with the exception of our sales centers in Hawaii that remain closed as a result of government restrictions, only a handful of our smaller and key urban sales centers remain unopened.

Revenue reportability was negative in the third quarter of 2020 as a result of contract sales late in the third quarter of 2020 that will be recognized as revenue in the fourth quarter.

However, given the low sales volumes in June 2020 due to the impact of the COVID-19 pandemic, we did not benefit from the shift of revenues from sales late in the second quarter into the third quarter.

The lower sales reserve recorded in the third quarter of 2020 reflects the lower overall contract sales in the quarter.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Total contract sales $ 486 $ 1,164 $ (678) (58%)

Less resales contract sales (9) (23) 14

Less joint venture contract sales (10) (34) 24

Consolidated contract sales, net of resales 467 1,107 (640)

Settlement revenue 12 19 (7)

Resales revenue 6 10 (4)

Revenue recognition adjustments:

Reportability 48 (40) 88

Sales reserve (90) (79) (11)

Sale of vacation ownership products $ 409 $ 975 $ (566) (58%)

_______________

(1) Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.

Sale of vacation ownership products decreased $566 million due to $640 million of lower contract sales volumes and $11 million of higher sales reserve activity, partially offset by an $88 million favorable change in revenue reportability.

The lower contract sales performance as well as the higher sales reserve activity were primarily due to the response to the COVID-19 pandemic.

Contract sales and VPG as of March 13, 2020 were 10 percent and 11 percent higher, respectively, than the same period during the first quarter of 2019.

However, as the virus continued to spread throughout the United States and as we began closing our sales centers during the second half of March, contract sales volumes declined significantly.

In the second quarter of 2020, only eight of our sales centers were open and, by the end of the third quarter, with the exception of our sales centers in Hawaii that remain closed as a result of government restrictions, only a handful of our smaller and key urban sales centers remain unopened.

The higher sales reserve recorded in the first three quarters of 2020 reflects an estimate of future default activity to the extent our vacation ownership notes receivable portfolio performs similar to how it performed during the financial crisis of 2009 and 2010, offset partially by the lower contract sales in the first three quarters of 2020.

We will continue to evaluate our estimate of future default activity and compare it to actual activity as we proceed throughout the year and may adjust our sales reserve based on changes in actual default activity and other factors.

Revenue reportability was significantly positive in the first three quarters of 2020 as a result of contract sales late in the fourth quarter of 2019 that we recognized as revenue in 2020.

However, it was not fully offset by the shift of revenues from sales late in the third quarter into the fourth quarter, given the low sales volumes in September 2020 due to the impact of the COVID-19 pandemic.

Development Margin

2020 Third Quarter

Sale of vacation ownership products decreased $95 million due primarily to $78 million of lower consolidated contract sales volume net of resales and a $70 million unfavorable change in revenue reportability, partially offset by $57 million of lower sales reserve activity .

Lower contract sales performance was primarily due to the ongoing impact of the COVID-19 pandemic.

However, with the reopening of many of our sales centers throughout 2020 and so far in 2021, our contract sales volumes have continued to improve on a sequential basis each quarter and we expect that improvement to continue through the remainder of 2021.

Revenue reportability was negative in the first quarter of 2021.

While we benefited from contract sales in the fourth quarter of 2020 being recognized as revenue in the first quarter of 2021, given the increasing sales volumes due to our recovery from the COVID-19 pandemic, we saw a higher shift of contract sales late in the first quarter of 2021 into the second quarter for revenue recognition.

In contrast, revenue reportability was significantly positive in the first quarter of 2020.

The first quarter of 2020 benefited from the contract sales from late in the fourth quarter of 2019 that were recognized as revenue in 2020.

However, it was not impacted by an offsetting shift of revenues into the second quarter, given the low sales volumes in March 2020 from the impact of the COVID-19 pandemic.

The lower sales reserve recorded in the first quarter of 2021 reflects the prior year increase made to the sales reserve to take into account higher expected default and delinquency activity as a result of the COVID-19 pandemic .

Development Profit

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Sale of vacation ownership products $ 98 $ 341 $ (243) (71%)

Cost of vacation ownership products (27) (89) 62 70%

Marketing and sales (78) (170) 92 54%

Development margin $ (7) $ 82 $ (89) (109%)

Development margin decreased $89 million year-over-year.

The change in margin reflected $82 million of lower sales volumes and lower marketing and sales spending due to the impact of the COVID-19 pandemic and $10 million of unfavorable

revenue reportability year over year, partially offset by $3 million of favorable product cost true-up activity as compared to the prior year period.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Sale of vacation ownership products $ 163 $ 258 $ (95) (37%)

1 unchanged sentence

Marketing and sales (109) (170) 61 36%

Development margin $ 2 $ 199 $ (197) (99%)

Development margin decreased $197 million year-over-year.

The change in margin reflected $217 million of lower sales volumes and lower marketing and sales spending due to the impact of the COVID-19 pandemic and $55 million of higher sales reserve activity due primarily to higher estimated defaults as a result of the COVID-19 pandemic.

These declines were partially offset by $61 million of favorable revenue reportability compared to the first three quarters of 2019 and $14 million of lower product costs, primarily due to lower revenue as a result of the sales reserve adjustment as well as a favorable mix of inventory being sold compared to the first three quarters of 2019.

Resort Management and Other Services Revenues, Expenses and Margin

2020 Third Quarter

Development profit $ 14 $ 28 $ (14) (50%)

Development profit decreased $14 million year-over-year.

The change reflected $49 million of unfavorable revenue reportability compared to the first quarter of 2021, $7 million of lower product cost related mainly to more favorable product cost true-up activity in the prior year first quarter, and $3 million related to lower sales volumes as compared to the prior year period.

These declines were partially offset by $25 million related to lower marketing and sales spending and $20 million related to lower sales reserve activity.

Resort Management and Other Services Revenues, Expenses and Profit

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Management fee revenues $ 37 $ 35 $ 2 4%

Ancillary revenues 17 57 (40) (70%)

Other management and exchange revenues 28 28 — 3%

Resort management and other services revenues 82 120 (38) (32%)

Resort management and other services expenses (27) (57) 30 53%

Resort management and other services margin $ 55 $ 63 $ (8) (12%)

Resort management and other services margin percentage 67.2% 51.8% 15.4 pts

Resort management and other services revenues reflected lower ancillary revenues, including revenues from food and beverage and golf offerings, as a result of resort and ancillary outlet closings due to the COVID-19 pandemic, partially offset by higher management fees resulting from the cumulative increase in the number of vacation ownership products sold and higher operating costs across the system.

The decrease in resort management and other services margin reflected the decrease in resort management and other services revenues partially offset by lower ancillary expenses as a result of the lower ancillary revenues mentioned above.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Management fee revenues $ 38 $ 38 $ — (1%)

3 unchanged sentences

Resort management and other services expenses (35) (56) 21 37%

Resort management and other services margin $ 162 $ 195 $ (33) (17%)

Resort management and other services margin percentage 60.8% 52.8% 8.0 pts

Resort management and other services revenues reflected lower ancillary revenues, including revenues from food and beverage and golf offerings, and lower other revenues earned in conjunction with our exchange programs, all as a result of resort and ancillary outlet closings due to the COVID-19 pandemic.

These declines were partially offset by higher management fees resulting from the cumulative increase in the number of vacation ownership products sold and higher operating costs across the system.

The decrease in the resort management and other services margin reflected the decrease in resort management and other services revenues partially offset by lower ancillary expenses as a result of the lower ancillary revenues mentioned above.

Rental Revenues, Expenses and Margin

2020 Third Quarter

Resort management and other services profit $ 59 $ 56 $ 3 5%

Resort management and other services profit margin 63.0% 50.5% 12.5 pts

Resort management and other services revenues reflected lower ancillary revenues, including revenues from food and beverage and golf offerings, as a result of the continued impact of the COVID-19 pandemic.

While resort occupancies have continued to increase as an increasing number of resorts that were closed at the start of the COVID-19 pandemic have reopened, given the ongoing effects of the pandemic, ancillary activity remains below prior year levels.

The increase in resort management and other services profit reflected the decrease in resort management and other services revenues partially offset by lower ancillary expenses as a result of the lower ancillary revenues mentioned above, as well as lower customer services expenses compared to the prior year period.

Rental Revenues, Expenses and Profit

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Rental revenues $ 77 $ 122 $ (45) (37%)

Rental expenses (96) (107) 11 10%

Rental margin $ (40) $ 24 $ (64) (265%)

Rental margin percentage NM 19.7%

Rental profit $ (19) $ 15 $ (34) (227%)

Rental profit margin NM 12.4%

Three Months Ended

September 30, 2020 September 30, 2019 Change % Change

Transient keys rented (1)

237,749 604,949 (367,200) (61%)

Average transient key rate $ 198.84 $ 220.28 $ (21.44) (10%)

Resort occupancy 24.5% 87.7% (63.2 pts)

_________________________

(1) Transient keys rented exclude those occupied through the use of plus points and preview stays.

The decline in rental margin resulted from a decline in keys rented and a decline in average transient rate due to the COVID-19 pandemic.

In response to quickly evolving travel restrictions and restrictions on business operations, beginning March 25, 2020, we closed our resorts for rental guests with stays at our branded North America vacation ownership resorts.

In late May, as many government restrictions were beginning to be relaxed, we began reopening resorts to rental guests.

Since the end of the second quarter, we have reopened more resorts to rental guests and expect rental revenues to continue to increase from current levels.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Rental revenues $ 180 $ 384 $ (204) (53%)

Rental expenses (280) (285) 5 2%

Rental margin $ (100) $ 99 $ (199) (200%)

Rental margin percentage NM 25.9%

Nine Months Ended

September 30, 2020 September 30, 2019 Change % Change

March 31, 2021 March 31, 2020 Change % Change

Transient keys rented (1)

4 unchanged sentences

(1) Transient keys rented exclude those occupied through the use of plus points and preview stays.

The decline in rental margin resulted from a decline in keys rented due to the COVID-19 pandemic.

Rental margin as of the end of February 2020 was nearly $4 million higher than the comparable period of 2019.

In late May, as many government restrictions were beginning to be relaxed, we began reopening resorts to rental guests.

Since the end of the second quarter, we have reopened more resorts to rental guests and expect rental revenues to continue to increase from current levels.

Financing Revenues, Expenses and Margin

2020 Third Quarter

The decline in rental profit resulted from a decline in keys rented and a decline in average transient rate due to the COVID-19 pandemic and higher inventory carry costs due to low sales volumes in the first quarter of 2020 and into the first quarter of 2021, as well as the acquisition of new inventory in the first quarter of 2021.

As the majority of the governmental restrictions in response to the pandemic that caused rental activity to decline, such as travel restrictions and quarantine requirements, either were lifted by the end of the first quarter of 2021 or shortly thereafter, we expect rental occupancies to continue to increase throughout 2021.

Financing Revenues, Expenses and Profit

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Financing revenues 59 71 (12) (17%)

1 unchanged sentence

Consumer financing interest expense (13) (15) 2 17%

Financing margin $ 40 $ 49 $ (9) (17%)

Financing profit $ 38 $ 34 $ 4 13%

Financing propensity 46% 57%

Financing revenues decreased due to a $391 million decrease in the average net vacation ownership notes receivable balance resulting from the continued pay-down of the existing vacation ownership notes receivable portfolio without a corresponding increase from new loan originations.

Financing expenses decreased due to lower salaries and wages associated with the furlough and reduced work week programs implemented as a result of the COVID-19 pandemic.

Higher consumer financing interest expense resulted from higher overall securitized debt balances .

The lower financing propensity in the third quarter of 2020 reflected the impact of the sales programs that incented cash purchases over financed purchases in the quarter.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Financing revenues 204 206 (2) (1%)

Financing expenses (40) (24) (16) (66%)

Consumer financing interest expense (44) (40) (4) (10%)

Financing margin $ 120 $ 142 $ (22) (16%)

Financing propensity 51.0% 63.4%

Financing revenues decreased due to higher plus point finance incentive costs in the first nine months related to financing incentive programs we offered prior to the COVID-19 pandemic.

The higher financing expenses included $16 million related to the higher reserve on the acquired vacation ownership notes receivable balance due primarily to higher estimated defaults as result of the COVID-19 pandemic and higher technology related costs year over year, partially offset by lower salaries and wages associated with the furlough and reduced work week programs in the current year.

Higher consumer financing interest expense resulted from higher overall securitized debt balances .

Litigation Charges

2020 Third Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Litigation charges $ 2 $ 2 $ — (27%)

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Litigation charges $ 4 $ 4 $ — (5%)

2020 Third Quarter

Financing expenses decreased due to lower bad debt expense associated with acquired vacation ownership notes receivable in the current year quarter and the benefit of synergy savings and lower salaries and wages associated with the furlough, reduced work week and workforce reduction programs implemented as a result of the COVID-19 pandemic.

Lower consumer financing interest expense resulted from the continued pay-down of securitized debt balances.

The lower financing propensity in the first quarter of 2021 is due to a higher percentage of sales during this period to existing owners, who tend to have a lower financing propensity.

Going forward, we expect to shift back to an increased focus on first-time buyers, which should increase propensity and increase interest income as new originations of vacation ownership notes receivable outpace the decline in principal of existing vacation ownership notes receivable.

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Royalty fee $ 23 $ 27 $ (4) (15%)

Royalty fee expense declined in the third quarter of 2020 as a result of lower contract closings due to the lower contract sales compared to the prior year quarter.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Royalty fee $ 25 $ 26 $ (1) (5%)

Royalty fee expense declined in the first three quarters of 2020 as a result of lower contract closings due to the lower contract sales compared to the prior year comparable period.

Depreciation and Amortization

2020 Third Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Depreciation and amortization $ 18 $ 16 $ 2 8%

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Depreciation and amortization $ 54 $ 50 $ 4 6%

2020 Third Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Impairment $ 1 $ 73 $ (72) (98%)

During the third quarter of 2020, we recorded a non-cash impairment of $1 million related to our Asia Pacific inventory as a result of the COVID-19 pandemic.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Impairment $ 6 $ 99 $ (93) (94%)

During the first three quarters of 2020, we recorded a non-cash impairment of $6 million related to our Asia Pacific inventory as a result of the COVID-19 pandemic.

During the first three quarters of 2019, we recorded a non-cash impairment of $26 million as a result of entering into a contract to sell land and land improvements associated with a future phase of an existing resort located in Orlando, Florida for which the book value of the assets to be sold exceeded the sales price.

This contract was subsequently terminated.

As a result of the ILG Acquisition, we performed a comprehensive review to evaluate the strategic fit of the land holdings and operating hotels in our Vacation Ownership segment.

During the third quarter of 2019, we completed our evaluation and identified several assets for disposition.

As a result of the change in our development strategy, we recorded a non-cash impairment charge of $72 million during the third quarter of 2019.

We also recorded a non-cash impairment of $1 million related to an ancillary asset located at a Vacation Ownership segment property in Europe.

Cost Reimbursements

2020 Third Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Cost reimbursements $ 281 $ 286 $ (5) (1%)

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Cost reimbursements $ 824 $ 835 $ (11) (1%)

Gains / Losses and Other Income / Expense

2020 Third Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Gains and other income, net $ 6 $ 1 $ 5 936%

In the third quarter of 2020, we recorded $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Gains and other income, net $ 12 $ 9 $ 3 30%

In the first three quarters of 2020, we recorded $12 million of gains and other income including $6 million of gains and other income related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado and $4 million of net insurance proceeds related to the settlement of Legacy-MVW business interruption insurance claims arising from a prior year hurricane.

In the first three quarters of 2019, we recorded $9 million of gains and other income related to net insurance proceeds from the settlement of Legacy-MVW business interruption insurance claims arising from prior year hurricanes.

Royalty fee expense declined in the first quarter of 2021 as a result of lower contract closings compared to the prior year quarter.

Exchange & Third-Party Management

Three Months Ended Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Management and exchange $ 60 $ 72

Rental 10 14 29 48

Financing — 1

1 unchanged sentence

TOTAL REVENUES 86 107

Marketing and sales 4 14 25 41

Management and exchange 31 40

Rental 2 5 8 22

Financing — 1

Depreciation and amortization 20 9

Restructuring 3 — 3 —

Impairment — 91

1 unchanged sentence

TOTAL EXPENSES 65 167

(Losses) gains and other (expense) income, net (5) 1 (5) 1

Gains and other income, net — 1

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 21 $ (59)

Management and Exchange Margin

2020 Third Quarter

Management and Exchange Profit

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Management and exchange revenue $ 49 $ 74 $ (25) (33%)

Management and exchange expense (23) (25) 2 6%

Management and exchange margin $ 26 $ 49 $ (23) (47%)

Management and exchange margin percentage 53.0% 66.8% (13.8 pts)

The decline in management and exchange revenue and margin reflected lower management fees, exchange activity and lower average exchange transaction fees at Interval International, primarily due to the closure of a large number of affiliated resorts, and the fact that additional resorts stopped taking reservations, in response to the COVID-19 pandemic.

In addition, Aqua-Aston was negatively impacted by travel restrictions that significantly impacted the majority of their properties in Hawaii.

Lower management and exchange expense reflected lower costs associated with the furlough and reduced work week programs and lower print and postage costs.

While exchange revenues were down in the quarter, exchange transactions increased 1 percent as compared to the prior year quarter reflecting customers’ more recent desire to travel and pent up demand.

More than 90 percent of Interval International’s affiliated resorts had reopened as of the end of the third quarter (compared to the second quarter when nearly 1,300 resorts were either closed or not taking reservations).

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Management and exchange revenue $ 60 $ 72 $ (12) (16%)

Management and exchange expense (31) (40) 9 23%

Management and exchange margin $ 92 $ 155 $ (63) (41%)

Management and exchange margin percentage 57.2% 66.9% (9.7 pts)

The decline in management and exchange revenue and margin reflected lower exchange revenues and lower average exchange transaction fees at Interval International, primarily due to the closure of a large number of affiliated resorts, and the fact that additional resorts stopped taking reservations, in response to the COVID-19 pandemic.

Management and exchange profit $ 29 $ 32 $ (3) (9%)

Management and exchange profit margin 48.0% 43.9% 4.1 pts

The decline in management and exchange revenue and profit reflected lower management fees and membership revenue due primarily to the ongoing impact of the COVID-19 pandemic.

In addition, Aqua-Aston was negatively impacted by travel restrictions that significantly impacted the majority of their properties in Hawaii.

Lower management and exchange expense reflected lower costs associated with the furlough and reduced work week programs and lower print and postage costs.

While exchange revenues were down in the first nine months, exchange transactions increased 1 percent in the third quarter as compared to the prior year quarter reflecting customers’ more recent desire to travel and pent up demand.

More than 90 percent of Interval International’s affiliated resorts had reopened as of the end of the third quarter.

Rental Revenues, Expenses and Margin

2020 Third Quarter

These declines were partially offset by higher exchange activity and average exchange transaction fees at Interval International, reflecting customers’ more recent desire to travel and pent up demand, as well as lower management and exchange expense which reflected lower costs associated with the furlough, reduced work week and workforce reduction programs, and lower marketing and sales, print and postage costs.

Exchange transactions increased 17 percent year-over-year.

Rental Revenues, Expenses and Profit

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Rental revenues $ 10 $ 14 $ (4) (28%)

Rental expenses (2) (5) 3 65%

Rental margin $ 8 $ 9 $ (1) (11%)

Rental margin percentage 78.1% 54.9% 23.2 pts

The decline in rental revenue reflected lower Getaways program transactions and lower average Getaways program transaction fees driven by supply challenges in certain markets and fewer bookings into purchased inventory as well as cancellations and resort closures in response to the COVID-19 pandemic.

The decline in rental margin reflected the declines in rental revenue, partially offset by a reduction in space procurement costs resulting from fewer bookings into purchased inventory and adjustments for cancellations and resorts closing for rental stays in response to the COVID-19 pandemic.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Rental revenues $ 12 $ 13 $ (1) (6%)

Rental expenses — (5) 5 (100%)

Rental margin $ 21 $ 26 $ (5) (19%)

Rental margin percentage 72.8% 53.4% 19.4 pts

The decline in rental revenue reflected lower Getaways program transactions and lower average Getaways program transaction fees as a result of resort closures in response to the COVID-19 pandemic.

2020 Third Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Impairment $ 1 $ — $ 1 NM

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Impairment $ 92 $ — $ 92 NM

During the first three quarters of 2020, we recorded a non-cash impairment charge of $92 million primarily related to a decrease in the fair value of Goodwill and certain trademarks resulting from the impact of the COVID-19 pandemic.

See Footnote 10 “Goodwill and Intangibles” to our Financial Statements for additional information.

Gains / Losses and Other Income / Expense

2020 Third Quarter

Rental profit $ 12 $ 8 $ 4 43%

Rental profit margin 100.0% 65.8% 34.2 pts

The increase in rental profit reflected a 26 percent increase in Getaway program transactions reflecting customers’ desire to travel and pent up demand and the benefit of cost savings initiatives.

Late in the first quarter of 2021, we also introduced Getaway rentals of less than seven nights, providing members more opportunities to use their membership in ways that better fit their lifestyle.

Depreciation and Amortization

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

(Losses) gains and other (expense) income, net $ (5) $ 1 $ (6) NM

In the third quarter of 2020, we recorded a $5 million loss and other expense related to the disposition of a previously consolidated subsidiary.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

(Losses) gains and other (expense) income, net $ (5) $ 1 $ (6) NM

In the third quarter of 2020, we recorded a $5 million loss and other expense related to the disposition of a previously consolidated subsidiary.

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Depreciation and amortization $ 20 $ 9 $ 11 122%

Increase in depreciation expense relates to a true-up made to accelerate depreciation on a technology asset.

Corporate and Other

Corporate and Other consists of results that are not allocable to our segments, including company-wide general and administrative costs, corporate interest expense, ILG acquisition-related costs and provision for income taxes.

Corporate and Other consists of results that are not allocable to our segments, including company-wide general and administrative costs, corporate interest expense, transaction costs and benefit from income taxes.

In addition, Corporate and Other includes the revenues and expenses from the Consolidated Property Owners’ Associations.

Three Months Ended Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Resort management and other services $ 39 $ 43

Rental — (1) — —

Financing — — — —

Cost reimbursements (27) (48)

4 unchanged sentences

Depreciation and amortization 2 2

Litigation charges — 1 — 1

Restructuring (1) —

1 unchanged sentence

TOTAL EXPENSES 57 65

Losses and other expense, net (1) (7) (49) (5)

Gains (losses) and other income (expense), net 6 (58)

Interest expense (43) (33)

ILG acquisition-related costs (11) (32) (44) (94)

Transaction costs (19) (21)

FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS (101) (182)

Benefit (provision) for income taxes 14 (10) 91 (50)

FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS (73) (143) (246) (454)

Benefit from income taxes 11 58

Net income attributable to noncontrolling interests (3) (1)

1 unchanged sentence

Consolidated Property Owners’ Associations

The following table illustrates the impact of the Consolidated Property Owners’ Associations of the acquired Legacy-ILG vacation ownership properties under the voting interest model, which represents the portion related to individual or third-party VOI owners.

Three Months Ended Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

The following table illustrates the impact of certain Consolidated Property Owners’ Associations under the relevant accounting guidance, which represents the portion related to individual or third-party VOI owners.

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Resort management and other services $ 39 $ 43

Rental — (1) — —

Cost reimbursements (27) (48)

4 unchanged sentences

TOTAL EXPENSES 10 (7)

Gains and other income, net 2 —

FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS 4 2

1 unchanged sentence

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 1 $ 1

Pursuant to a change in control of certain consolidated property owners’ associations, we recorded a non-cash loss of less than $1 million, which is recorded in Gains (losses) and other income (expense), net on our Income Statement for the three months ended March 31, 2021.

We continue to act as manager for these property owners’ associations pursuant to existing management contracts and retain membership interests via our ownership of vacation ownership interests.

General and Administrative

2020 Third Quarter

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

General and administrative $ 32 $ 57 $ (25) (42%)

General and administrative expenses decreased $25 million due to $13 million of savings related to synergy efforts and lower costs associated with the furlough and reduced work week programs, $3 million related to lower bonus expense, a $5 million credit related to the incentive under the CARES Act for companies to continue paying associates' benefit costs while they are not working, and $4 million of lower net overall spending across the business on technology, travel, training and other costs that we have deferred due to the COVID-19 pandemic.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

General and administrative $ 46 $ 70 $ (24) (35%)

General and administrative expenses decreased $67 million due to $24 million of savings related to synergy efforts and lower costs associated with the furlough and reduced work week programs, $21 million related to lower bonus expense, an $11 million credit related to the incentive under the CARES Act for companies to continue paying associates' benefit costs while they are not working, and $18 million of lower net overall spending across the business on technology, travel, training and other costs that we have deferred due to the COVID-19 pandemic, partially offset by a $7 million accrual for health and welfare costs for furloughed associates.

Depreciation and Amortization

2020 Third Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Depreciation and amortization $ 7 $ 5 $ 2 30%

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Depreciation and amortization $ 25 $ 20 $ 5 24%

General and administrative expenses decreased $24 million due to $25 million of savings related to synergy efforts and lower costs associated with the furlough, reduced work week and workforce reduction programs, $6 million of lower net overall spending across the business on technology, travel, training and other costs that we have deferred due to the COVID-19 pandemic, and a $2 million credit related to incentives under the CARES Act for companies to continue paying associates' benefit costs while they are not working, partially offset by $9 million of higher bonus expense.

Gains / Losses and Other Income / Expense

2020 Third Quarter

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Losses and other expense, net $ (1) $ (7) $ 6 87%

In the third quarter of 2020, we recorded a loss of $1 million driven mainly by foreign currency translation.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Losses and other expense, net $ (49) $ (5) $ (44) 840%

In the first three quarters of 2020, we recorded a loss of $49 million, including $32 million for the true-up to an indemnification receivable from Marriott International as a result of the settlement of the indemnified liability with a taxing authority (the true-up to the offsetting accrual is included in the Benefit (provision) for income taxes line) and $24 million related to foreign currency translation, partially offset by $6 million of other income related to an indemnification from Marriott International for VAT penalties and interest.

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Gains (losses) and other income (expense), net $ 6 $ (58) $ 64 110%

In the first quarter of 2021, we recorded a gain of $6 million driven mainly by foreign currency translation.

In the first quarter of 2020, we recorded a loss of $58 million, including $33 million for the true-up to an indemnification receivable from Marriott International as a result of the settlement of an indemnified liability with a taxing authority (the true-up to the offsetting accrual is included in the Benefit from income taxes line) and $31 million related to foreign currency translation, offset partially by $6 million of other income related to an indemnification from Marriott International for VAT penalties and interest.

Interest Expense

2020 Third Quarter

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Interest expense $ (37) $ (31) $ (6) (22%)

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Interest expense $ (43) $ (33) $ (10) (29%)

ILG Acquisition-Related Costs

2020 Third Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

ILG acquisition-related costs $ (11) $ (32) $ 21 64%

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

ILG acquisition-related costs $ (44) $ (94) $ 50 53%

ILG acquisition-related costs include transaction costs, employee termination costs and integration costs.

Transaction costs represent costs related to the planning and execution of the ILG Acquisition, primarily for financial advisory, legal, and other professional service fees, as well as certain tax related accruals.

Employee termination costs represent charges for employee severance, retention and other termination related benefits.

Acquisition and integration costs primarily represent integration employee salaries and share-based compensation, fees paid to change management consultants and technology-related costs.

As a result of the COVID-19 pandemic, we have scaled back spending on integration efforts.

2020 Third Quarter

Interest expense increased $10 million, including $8 million of higher interest expense associated with the 2025 Notes that were issued in the second quarter of 2020 and $5 million higher non-cash interest expense associated with the 2026 Convertible Notes that were issued in the first quarter of 2021;

partially offset by $3 million of lower interest expense associated with various other debt facilities.

Transaction Costs

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Benefit (provision) for income taxes $ 14 $ (10) $ 24 248%

The change in the Benefit (provision) for income taxes is predominately attributable to benefits of the CARES Act and a pre-tax loss for the three months ended September 30, 2020 compared to pre-tax income for the three months ended September 30, 2019.

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Benefit (provision) for income taxes $ 91 $ (50) $ 141 281%

The increase in the Benefit (provision) for income taxes is predominately attributable to a pre-tax loss, a reduction in uncertain tax benefits predominately related to a settlement with a taxing authority (for which an offset of $32 million relating to an indemnification asset from Marriott International is recorded in Losses and other expense, net), and benefits of the CARES Act.

Noncontrolling Interest

2020 Third Quarter

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Transaction costs $ (19) $ (21) $ 2 10%

In the first quarter of 2021, Transaction costs included $17 million of ILG acquisition and integration related costs and $2 million of costs associated with the acquisition of Welk Resorts that was completed subsequent to the end of the quarter.

In the first quarter of 2020, Transaction costs included $21 million of ILG acquisition-related costs.

2021 First Quarter

Three Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Net income attributable to noncontrolling interests $ (4) $ — $ (4) (1,483%)

2020 First Three Quarters

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019 Change % Change

Net income attributable to noncontrolling interests $ (13) $ (1) $ (12) (877%)

Recent Accounting Pronouncements

See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” to our Financial Statements for a discussion of recently issued accounting pronouncements, including information on new accounting standards and the future adoption of such standards.

($ in millions) March 31, 2021 March 31, 2020 Change % Change

Benefit from income taxes $ 11 $ 58 $ (47) (81%)

The change in the Benefit from income taxes is predominately attributable to a decrease in pre-tax loss and a release in provisions on uncertain tax benefits for the three months ended March 31, 2020.

Liquidity and Capital Resources

Typically, our capital needs are supported by cash on hand ($660 million at the end of the third quarter of 2020), cash generated from operations, our ability to raise capital through securitizations in the ABS market and, to the extent necessary, funds available under the Warehouse Credit Facility and the Revolving Corporate Credit Facility with a borrowing capacity of $600 million.

As a precautionary measure to provide additional liquidity for a sustained period, during the second quarter of 2020, we issued $500 million in aggregate principal amount of senior secured notes and we amended our Warehouse Credit Facility to temporarily increase the borrowing capacity by approximately $181 million, bringing the total capacity to approximately $531 million.

During the third quarter of 2020, we terminated the additional $181 million capacity of the Warehouse Credit Facility.

We also entered into the Waiver to suspend the requirement to comply with the leverage covenant in our Revolving Corporate Credit Facility for up to four quarters, commencing with the fiscal quarter ending June 30, 2020.

See Footnote 13 “Debt” to our Financial Statements for further information on the Waiver.

In addition, during the second quarter of 2020, we repaid $596 million, the entire amount outstanding at March 31, 2020, on the Revolving Corporate Credit Facility.

We took proactive measures to help increase our liquidity position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

Measures currently in place include:

◦ Reducing executive and senior leadership team salaries;

◦ Furloughing, in the second quarter, approximately 65% of our associates and reducing work weeks by roughly 25%, on average, for our remaining associates.

As of the end of the third quarter, approximately 45% of our associates remain on furlough or have a reduced work week or reduced pay.

◦ Deferring inventory and other investments, substantially reducing other operating costs, and temporarily suspending share repurchases and dividends, all of which is expected to save up to $300 million of cash in 2020;

◦ Approving a workforce reduction plan, which is currently expected to impact approximately 3,000 associates.

We began reopening our sales centers and allowing rentals / transient occupancy at our vacation ownership resorts in the second quarter of 2020 and have continued to do so to date.

We believe these actions will enable us to generate additional revenue as we continue throughout 2020.

However, even if we are required to close sales centers and limit rentals / transient occupancy at our resorts again, we believe we have adequate liquidity to fund our operations and debt service payments through at least 2021.

At September 30, 2020, we had $4.5 billion of total gross debt outstanding, which included $1.8 billion of non-recourse debt associated with vacation ownership notes receivable securitizations, $1.1 billion of senior unsecured notes, $0.9 billion of debt under our Corporate Credit Facility, $500 million of senior secured notes, $230 million of Convertible Notes and $9 million related to finance lease obligations.

At September 30, 2020, we had $751 million of completed real estate inventory on hand.

Typically, our capital needs are supported by cash on hand ($643 million at the end of the first quarter of 2021), cash generated from operations, our ability to raise capital through securitizations in the ABS market, our ability to issue debt and, to the extent necessary, funds available under the Warehouse Credit Facility and the Revolving Corporate Credit Facility with a borrowing capacity of $600 million.

At March 31, 2021, we had $4.6 billion of total gross debt outstanding, which included $1.4 billion of non-recourse debt associated with vacation ownership notes receivable securitizations, $1.1 billion of senior unsecured notes, $0.8 billion of debt under our Corporate Credit Facility, $0.8 billion of convertible notes, $0.5 billion of senior secured notes, and $7 million related to finance lease obligations.

At March 31, 2021, we had $776 million of completed real estate inventory on hand.

In addition, we had $291 million of completed vacation ownership units that have been classified as a component of Property and equipment until the time at which they are legally registered and held for sale as vacation ownership products.

The following table summarizes the changes in cash, cash equivalents and restricted cash:

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Cash, cash equivalents and restricted cash provided by (used in):

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In addition, our cash from operations varies due to the timing of our owners’ repayment of vacation ownership notes receivable, the closing or recording of sales contracts for vacation ownership products, financing propensity and cash outlays for inventory acquisition and development.

In the first three quarters of 2020, we had $158 million of cash inflows for operating activities, compared to $180 million in the first three quarters of 2019.

Excluding the impact of changes in net (loss) income and adjustments for non-cash items, the change in cash flows from operations reflected lower operational expenses combined with lower sales and rentals deposits due to the COVID-19 pandemic, partially offset by lower inventory spending and higher collections of outstanding vacation ownership notes receivable.

In addition to net (loss) income and adjustments for non-cash items, the following operating activities are key drivers of our cash flow from operating activities:

Inventory Spending (In Excess of) Less Than Cost of Sales

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019

In the first quarter of 2021, we had $60 million of cash outflows for operating activities, compared to $122 million in the first quarter of 2020.

Excluding the impact of changes in net loss and adjustments for non-cash items, severance and benefit payments related to cost management activities, and higher inventory spending, partially offset by higher operational expense accruals and higher sales and rental deposits due to the partial recovery from the COVID-19 pandemic.

In addition to net loss and adjustments for non-cash items, the following operating activities are key drivers of our cash flow from operating activities:

Inventory Spending In Excess of Cost of Sales

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Inventory spending $ (57) $ (54)

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Inventory costs 31 49

Inventory spending (in excess of) less than cost of sales $ (63) $ 10

Inventory spending in excess of cost of sales $ (125) $ (66)

Our Vacation Ownership segment product offerings allow us to utilize our inventory efficiently.

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We measure our real estate inventory capital efficiency by comparing the cash outflow for real estate inventory spending (a cash item) to the amount of real estate inventory costs charged to expense on our Income Statements related to sale of vacation ownership products (a non-cash item).

Our spending for real estate inventory in the first three quarters of 2020 was higher than the amount of real estate inventory costs given the timing of payments to satisfy our remaining commitments to purchase vacation ownership units.

Our spending for real estate inventory in the first quarter of 2021 was higher than the amount of real estate inventory costs given the timing of payments to satisfy our remaining commitments to purchase vacation ownership units and the slowdown in sales pace as a result of the COVID-19 pandemic.

We entered into these commitments in prior periods as part of our capital efficient strategy to limit our up-front capital investment and purchase finished inventory closer to the time it is needed for sale.

See Footnote 11 “Contingencies and Commitments” to our Financial Statements for additional information regarding our remaining commitments.

Given the impact of the COVID-19 pandemic, we significantly reduced our planned inventory spending beginning in the second quarter of 2020.

Through our existing vacation ownership interest repurchase program, we proactively buy back previously sold vacation ownership interests at lower costs than would be required to develop new inventory.

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However, given the impact of the COVID-19 pandemic, we have temporarily discontinued the majority of this repurchase activity.

Vacation Ownership Notes Receivable Collections In Excess of (Less Than) Originations

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019

Vacation Ownership Notes Receivable Collections In Excess of Originations

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Vacation ownership notes receivable collections — non-securitized $ 42 $ 88

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Vacation ownership notes receivable originations (108) (174)

Vacation ownership notes receivable collections in excess of (less than) originations $ 222 $ (219)

Vacation ownership notes receivable collections in excess of originations $ 57 $ —

Vacation ownership notes receivable collections include principal from non-securitized and securitized vacation ownership notes receivable.

Vacation ownership notes receivable collections increased during the first three quarters of 2020, as compared to the first three quarters of 2019, due to an increase in the portfolio of outstanding vacation ownership notes receivable.

Vacation ownership notes receivable originations in the first three quarters of 2020 decreased due to lower sales in the first three quarters of 2020 due to the COVID-19 pandemic and a lower financing propensity.

Financing propensity declined to 51 percent for the first three quarters of 2020 compared to 63 percent for the first three quarters of 2019 as a result of the various sales programs that incented cash purchases over financed purchases in the quarter, in response to the COVID-19 pandemic.

Vacation ownership notes receivable collections decreased during the first quarter of 2021, as compared to the first quarter of 2020, due to a decrease in the portfolio of outstanding vacation ownership notes receivable.

Vacation ownership notes receivable originations in the first quarter of 2021 decreased due to lower sales in the first quarter of 2021 due to the COVID-19 pandemic and a lower financing propensity.

Financing propensity declined to 46 percent for the first quarter of 2021 compared to 57 percent for the first quarter of 2020 due to a higher percentage of sales during this period to existing owners, who tend to have a lower financing propensity.

Cash from Investing Activities

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Capital expenditures for property and equipment (excluding inventory) $ (7) $ (17)

Proceeds from collection of notes receivable — 38

Purchase of company owned life insurance (1) (4)

Dispositions, net 15 —

Net cash, cash equivalents and restricted cash (used in) provided by investing activities $ (24) $ 1

Net cash, cash equivalents and restricted cash used in investing activities $ (8) $ (21)

Capital Expenditures for Property and Equipment

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Additionally, it includes spending related to maintenance of buildings and equipment used in common areas at some of our resorts.

In the first three quarters of 2020, capital expenditures for property and equipment of $36 million included $33 million to support business operations (including $21 million for ancillary and other operations assets and $12 million for sales locations) and $3 million for technology spending.

Given the impact of the COVID-19 pandemic, we significantly reduced our planned spending for property and equipment beginning with the second quarter of 2020.

In the first three quarters of 2019, capital expenditures for property and equipment of $32 million included $19 million to support business operations (including $9 million for ancillary and other operations assets and $10 million for sales locations) and $13 million for technology spending.

Proceeds from Collection of Notes Receivable

During the first three quarters of 2019, we collected $23 million of notes receivable related to the disposition of our interest in VRI Europe in the fourth quarter of 2018.

In addition, we collected a $15 million note receivable acquired in the ILG Acquisition.

In the first quarter of 2021, capital expenditures for property and equipment of $7 million included $5 million to support business operations (including $3 million for ancillary and other operations assets and $2 million for sales locations) and $2 million for technology spending.

Given the impact of the COVID-19 pandemic, we significantly reduced our spending for property and equipment beginning in the second quarter of 2020.

However, during the first quarter of 2021, we began to add back business critical spending with long term strategic impacts to our operations.

In the first quarter of 2020, capital expenditures for property and equipment of $17 million included $14 million to support business operations (including $9 million for ancillary and other operations assets and $5 million for sales locations) and $3 million for technology spending.

Purchase of Company Owned Life Insurance

To support our ability to meet a portion of our obligations under the Marriott Vacations Worldwide Corporation Deferred Compensation Plan (the “Deferred Compensation Plan”), we acquired company owned insurance policies on the lives of certain participants in the Deferred Compensation Plan, the proceeds of which are intended to be aligned with the investment alternatives elected by plan participants.

We paid $3 million to acquire these policies during the first three quarters of 2020 and $5 million during the first three quarters of 2019.

Dispositions, net

Dispositions of $15 million during the first three quarters of 2020 related to the disposition of excess land parcels in Orlando, Florida and Steamboat Springs, Colorado as part of our strategic decision to reduce holdings in markets where we have excess supply.

See discussion included in Footnote 3 “Acquisitions and Dispositions” to our Financial Statements for additional information.

We did not have any significant dispositions of property and assets during the first three quarters of 2019.

We paid $1 million to acquire these policies during the first quarter of 2021 but we paid $4 million during the first quarter of 2020.

Cash from Financing Activities

Nine Months Ended

($ in millions) September 30, 2020 September 30, 2019

Three Months Ended

($ in millions) March 31, 2021 March 31, 2020

Borrowings from securitization transactions $ — $ 202

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Repayments of debt (100) (102)

Purchase of convertible note hedges (100) —

Proceeds from issuance of warrants 70 —

Finance lease payment — (9)

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Payment of withholding taxes on vesting of restricted stock units (15) (14)

Other, net — 1

Net cash, cash equivalents and restricted cash provided by (used in) financing activities $ 195 $ (290)

Net cash, cash equivalents and restricted cash provided by financing activities $ 255 $ 468

Borrowings from / Repayment of Debt Related to Securitization Transactions

We reflect proceeds from securitizations of vacation ownership notes receivable, including draw downs on the Warehouse Credit Facility, as “Borrowings from securitization transactions.” We reflect repayments of bonds associated with vacation ownership notes receivable securitizations and repayments on the Warehouse Credit Facility (including vacation ownership notes receivable repurchases) as “Repayment of debt related to securitization transactions.”

As of September 30, 2020, $62 million of gross vacation ownership notes receivable were eligible for securitization.

During the first three quarters of 2020, we securitized vacation ownership notes receivable under our Warehouse Credit Facility.

The total carrying amount of the vacation ownership notes receivable securitized was $372 million.

The average advance rate was 85 percent, which resulted in total gross proceeds of $315 million.

Total net proceeds were $313 million due to the funding of reserve accounts of $2 million.

During the third quarter of 2020, we completed the securitization of a pool of $383 million of vacation ownership notes receivable.

In connection with the securitization, investors purchased in a private placement $375 million in vacation ownership loan backed notes from the 2020-1 LLC.

Four classes of vacation ownership loan backed notes were issued by the 2020-1 LLC:

$238 million of Class A Notes, $72 million of Class B Notes, $44 million of Class C Notes, and $21 million of Class D Notes.

The Class A Notes have an interest rate of 1.74 percent, the Class B Notes have an interest rate of 2.73 percent, the Class C Notes have an interest rate of 4.21 percent, and the Class D Notes have an interest rate of 7.14 percent, for an overall weighted average interest rate of 2.53 percent.

Of the $375 million in proceeds from the transaction, $300 million was used to repay all outstanding amounts previously drawn under the Warehouse Credit Facility, $7 million was used to pay transaction expenses and fund required reserves, and the remainder will be used for general corporate purposes.

During the second quarter of 2019, we completed the securitization of a pool of $459 million of vacation ownership notes receivable.

In connection with the securitization, investors purchased $450 million in vacation ownership loan backed notes from the 2019-1 LLC in a private placement.

Three classes of vacation ownership loan backed notes were issued by the 2019-1 LLC:

$350 million of Class A Notes, $67 million of Class B Notes, and $33 million of Class C Notes.

The Class A Notes have an interest rate of 2.89 percent, the Class B Notes have an interest rate of 3.00 percent, and the Class C Notes have an interest rate of 3.33 percent, for an overall weighted average interest rate of 2.94 percent.

During the first three quarters of 2019, we also securitized vacation ownership notes receivable under our Warehouse Credit Facility.

The carrying amount of the vacation ownership notes receivable securitized was $213 million.

The advance rate was 85 percent, which resulted in gross proceeds of $181 million.

Net proceeds were $180 million due to the funding of reserve accounts of $1 million.

As of March 31, 2021, $240 million of gross vacation ownership notes receivable were eligible for securitization.

Proceeds from / Repayments of Debt

Borrowings from / Repayment of Corporate Credit Facility

During the first three quarters of 2020, we borrowed an additional $666 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs and to increase our cash position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

We later repaid $696 million during the first three quarters of 2020 and had no amounts outstanding as of September 30, 2020.

During the first three quarters of 2020, we also repaid $7 million of the amount outstanding under the Term Loan, which is part of our Corporate Credit Facility.

In the second quarter of 2020, we issued the 2025 Notes, as discussed in Footnote 13 “Debt” to our Financial Statements.

The 2025 Notes are pari passu with and secured by the same collateral as our Corporate Credit Facility.

After deducting offering expenses and the underwriting discount, we received net proceeds of approximately $493 million from the offering of the 2025 Notes, which we used to repay all amounts outstanding at that time on our Revolving Corporate Credit Facility.

During the first three quarters of 2019, we borrowed $495 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs, $270 million of which was repaid during the first three quarters of 2019, and we had $225 million outstanding as of September 30, 2019.

During the first three quarters of 2019, we also repaid $7 million of the amount outstanding under the Term Loan.

During the first quarter of 2021, we repaid $100 million of the amount outstanding under the Term Loan, which is part of our Corporate Credit Facility.

We had no borrowings or repayments under our Revolving Corporate Credit Facility during the first quarter of 2021 and also had no amounts outstanding as of March 31, 2021.

During the first quarter of 2020, we borrowed $666 million under our Revolving Corporate Credit Facility to facilitate the funding of our short-term working capital needs and to increase our cash position and preserve financial flexibility in light of the impact on global markets resulting from the COVID-19 pandemic.

We later repaid $100 million during the first quarter of 2020 and had $596 million outstanding as of March 31, 2020.

During the first quarter of 2020, we also repaid $2 million of the amount outstanding under the Term Loan.

See Footnote 13 “Debt” to our Financial Statements for additional information regarding our Corporate Credit Facility that includes our Revolving Corporate Credit Facility and the Term Loan.

Proceeds from Convertible Notes

During the first quarter of 2021, we issued $575 million of convertible notes, the 2026 Convertible Notes, as discussed further in Footnote 13 “Debt” to our Financial Statements.

We received net proceeds from the offering of approximately $530 million after adjusting for debt issuance costs, including the discount to the initial purchasers, the cost of the 2026 Convertible Note Hedges, and proceeds from the 2026 Warrants.

We used, or expect to use, the net proceeds from the 2026 Convertible Notes to (i) complete the acquisition of Welk Resorts, (ii) repay a portion of our term loan and (iii) in each case, pay transaction expenses and other fees in connection therewith, and to the extent of any remaining proceeds, for other general corporate purposes.

Purchase of Convertible Note Hedges / Proceeds from Issuance of Warrants

In connection with the issuance of the 2026 Convertible Notes, we entered into the 2026 Convertible Note Hedges with respect to our common stock with certain counterparties, covering a total of 3.4 million shares of our common stock at a cost of $100 million.

Concurrently with the entry into the 2026 Convertible Note Hedges, we separately entered into the 2026 Warrants, whereby we sold to the counterparties to the 2026 Convertible Note Hedges warrants to acquire, collectively, subject to anti-dilution adjustments, approximately 3.4 million shares of our common stock at an initial strike price of $213.76 per share.

We received aggregate proceeds of $70 million from the sale of the 2026 Warrants to the counterparties.

See Footnote 13 “Debt” to our Financial Statements for additional information regarding the issuance of the 2026 Convertible Notes, including the 2026 Convertible Note Hedges and the 2026 Warrants.

As of March 31, 2021, no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

Finance Lease Payment

During the first three quarters of 2020, in conjunction with the acquisition of the 57 completed vacation ownership units at our Marriott Vacation Club Pulse, New York City property, we made finance lease payments of $7 million related to the purchase of the accompanying ancillary and office space.

During the first quarter of 2020, in conjunction with the acquisition of the 57 completed vacation ownership units at our Marriott Vacation Club Pulse, New York City property, we made finance lease payments of $7 million related to the purchase of the accompanying ancillary and office space.

Additionally, we paid $2 million related to our finance lease obligations for technology and business operations equipment.

During the first three quarters of 2019, in conjunction with the acquisition of the 78 completed vacation ownership units at our Marriott Vacation Club Pulse, San Francisco property, we acquired the accompanying sales gallery for $10 million.

Debt Issuance Costs

During the first three quarters of 2020, we paid $14 million of debt issuance costs, which included $7 million associated with the 2025 Notes, $5 million associated with the 2020-1 vacation ownership notes receivable securitization, $1 million associated with the Waiver and $1 million associated with the amendment of our Warehouse Credit Facility.

During the first three quarters of 2019, we paid $11 million of debt issuance costs, which included $6 million associated with the 2019-1 vacation ownership notes receivable securitization and $5 million associated with the issuance of the 2028 Notes on October 1, 2019, subsequent to the third quarter of 2019.

Repayment of Other Debt

During the first three quarters of 2019, we paid the remaining balance of $31 million on the non-interest bearing note payable related to the acquisition of 112 completed vacation ownership units located on the Big Island of Hawaii in 2017.

Share Repurchase Program

The following table summarizes share repurchase activity under our current share repurchase program:

($ in millions, except per share amounts) Number of Shares Repurchased Cost of Shares Repurchased Average Price Paid per Share

As of December 31, 2019 16,418,950 $ 1,258 $ 76.60

For the first three quarters of 2020 769,935 82 106.60

As of September 30, 2020 17,188,885 $ 1,340 $ 77.95

See Footnote 14 “Shareholders' Equity” to our Financial Statements for further information related to our share repurchase program.

Due to the impact of the COVID-19 pandemic, we temporarily suspended repurchasing shares of our common stock.

Future share repurchases will be subject to the restrictions imposed under the Waiver.

We distributed cash dividends to holders of common stock during the first three quarters of 2020 as follows:

Declaration Date Shareholder Record Date Distribution Date Dividend per Share

December 9, 2019 December 23, 2019 January 6, 2020 $0.54

February 14, 2020 February 27, 2020 March 12, 2020 $0.54

Given the impact of the COVID-19 pandemic, we temporarily suspended cash dividends.

During the first quarter of 2021, we paid $2 million of debt issuance costs, which included $1 million associated with the 2026 Convertible Notes and $1 million associated with the extension of the Waiver associated with the Revolving Corporate Credit Facility .

Given the impact of the COVID-19 pandemic, we have temporarily suspended cash dividends.

In addition, our Corporate Credit Facility and the indentures governing our senior notes contain restrictions on our ability to pay dividends.

Future dividend payments will also be subject to both the restrictions imposed under the Waiver and Board approval, which will depend on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice and other business considerations that our Board of Directors considers relevant.

The payment of certain cash dividends may also result in an adjustment to the conversion rate of the Convertible Notes in a manner adverse to us.

Future dividend payments will also be subject to both the restrictions imposed under the Waiver and Board approval, which will depend on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory and contractual constraints, industry practice and other business considerations that our Board of Directors considers relevant.

The payment of certain cash dividends may also result in an adjustment to the conversion rate of our convertible notes in a manner adverse to us.

Accordingly, there can be no assurance that we will pay dividends in the future at the same rate or at all.

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The guarantees of the Senior Notes Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions.

The following tables present consolidating financial information as of September 30, 2020 and for the nine months ended September 30, 2020 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVW and MVW on a consolidated basis.

The following tables present consolidating financial information as of March 31, 2021 and for the three months ended March 31, 2021 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVW, and MVW on a consolidated basis.

Condensed Consolidating Balance Sheet

As of September 30, 2020

As of March 31, 2021

Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated

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Condensed Consolidating Statements of Income

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Issuers Senior Notes Guarantors Non-Guarantor Subsidiaries Total Eliminations MVW Consolidated

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Equity in net (loss) income of subsidiaries (25) 18 — — 7 —

Net income (loss) (238) (193) (118) 81 243 (225)

Net income attributable to noncontrolling interests — — — (13) — (13)

Net income (loss) attributable to common shareholders $ (238) $ (193) $ (118) $ 68 $ 243 $ (238)

Net (loss) income (28) (15) 7 4 7 (25)

Net loss attributable to noncontrolling interests — — — (3) — (3)

Net (loss) income attributable to common shareholders $ (28) $ (15) $ 7 $ 1 $ 7 $ (28)

Contractual Obligations and Off-Balance Sheet Arrangements

The following table summarizes our contractual obligations as of September 30, 2020:

The following table summarizes our contractual obligations as of March 31, 2021:

Payments Due by Period

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(4) Primarily relates to future guaranteed purchases of rental inventory, operational support services, marketing related benefits, membership fulfillment benefits, and other commitments.

In the normal course of our resort management business, we enter into purchase commitments on behalf of property owners’ associations to manage the daily operating needs of our resorts.

Since we are reimbursed for these commitments from the cash flows of the resorts, these obligations have minimal impact on our net income and cash flow.

Leases That Have Not Yet Commenced

During the first quarter of 2020, we entered into a finance lease arrangement for a new corporate office building in Orlando, Florida.

The new Orlando corporate office building is currently expected to be completed in 2023, at which time the lease term will commence and a right-of-use asset and corresponding liability will be recorded on our balance sheet.

The initial lease term is approximately 16 years with total lease payments of $ 129 million for the aforementioned period.

See Footnote 11 “Contingencies and Commitments” to our Financial Statements for additional information on this lease, including additional arrangements made as a result of the COVID-19 pandemic.

Recent Accounting Pronouncements

Critical Accounting Policies and Estimates

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We have discussed those policies and estimates that we believe are critical and require the use of complex judgment in their application in our most recent Annual Report on Form 10-K.

Since the date of our most recent Annual Report on Form 10-K, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them, except those resulting from Accounting for acquired vacation ownership notes receivable , which is discussed in Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” and Footnote 6 “Vacation Ownership Notes Receivable” to our interim consolidated financial statements presented in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk has not changed materially from that disclosed in Part I, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2019.

Since the date of our most recent Annual Report on Form 10-K, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis