MARRIOTT VACATIONS WORLDWIDE Corp 10-Q

Item 1. Financial Statements MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) (Unaudited) Three Months Ended March 31, 2022 March 31, 2021 REVENUES Sale of vacation ownership products $ 310 $ 163 Management and exchange 222 193 Rental 133 89 Financing 71 59 Cost reimbursements 316 255 TOTAL REVENUES 1,052 759 EXPENSES Cost of vacation ownership products 60 40 Marketing and sales 182 109 Management and exchange 127 117 Rental 81 82 Financing 21 21 General and administrative 61 46 Depreciation and amortization 33 41 Litigation charges 3 3 Royalty fee 27 25 Cost reimbursements 316 255 TOTAL EXPENSES 911 739 Gains and other income, net 4 6 Interest expense ( 27 ) ( 43 ) Transaction and integration costs ( 28 ) ( 19 ) INCOME (LOSS) BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 90 ( 36 ) (Provision for) benefit from income taxes ( 32 ) 11 NET INCOME (LOSS) 58 ( 25 ) Net income attributable to noncontrolling interests — ( 3 ) NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 58 $ ( 28 ) EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS Basic $ 1.36 $ ( 0.68 ) Diluted $ 1.23 $ ( 0.68 ) CASH DIVIDENDS DECLARED PER SHARE $ 0.62 $ — See Notes to Interim Consolidated Financial Statements 1 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) (Unaudited) Three Months Ended March 31, 2022 March 31, 2021 NET INCOME (LOSS) $ 58 $ ( 25 ) Foreign currency translation adjustments 4 ( 3 ) Derivative instrument adjustment, net of tax 16 6 OTHER COMPREHENSIVE GAIN, NET OF TAX 20 3 Net income attributable to noncontrolling interests — ( 3 ) Other comprehensive income attributable to noncontrolling interests — — COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS — ( 3 ) COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 78 $ ( 25 ) See Notes to the Interim Consolidated Financial Statements 2 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED BALANCE SHEETS (In millions, except share and per share data) Unaudited March 31, 2022 December 31, 2021 ASSETS Cash and cash equivalents $ 354 $ 342 Restricted cash (including $ 78 and $ 139 from VIEs, respectively) 296 461 Accounts receivable, net (including $ 12 and $ 12 from VIEs, respectively) 234 279 Vacation ownership notes receivable, net (including $ 1,661 and $ 1,662 from VIEs, respectively) 2,030 2,045 Inventory 693 719 Property and equipment, net 1,162 1,136 Goodwill 3,142 3,150 Intangibles, net 978 993 Other (including $ 74 and $ 76 from VIEs, respectively) 614 488 TOTAL ASSETS $ 9,503 $ 9,613 LIABILITIES AND EQUITY Accounts payable $ 212 $ 265 Advance deposits 194 160 Accrued liabilities (including $ 2 and $ 2 from VIEs, respectively) 347 345 Deferred revenue 507 453 Payroll and benefits liability 214 201 Deferred compensation liability 136 142 Securitized debt, net (including $ 1,799 and $ 1,877 from VIEs, respectively) 1,779 1,856 Debt, net 2,751 2,631 Other 206 224 Deferred taxes 333 350 TOTAL LIABILITIES 6,679 6,627 Contingencies and Commitments (Note 11) Preferred stock — $ 0.01 par value; 2,000,000 shares authorized; none issued or outstanding — — Common stock — $ 0.01 par value; 100,000,000 shares authorized; 75,721,548 and 75,519,049 shares issued, respectively 1 1 Treasury stock — at cost; 33,971,376 and 33,235,671 shares, respectively ( 1,474 ) ( 1,356 ) Additional paid-in capital 3,945 4,072 Accumulated other comprehensive loss 4 ( 16 ) Retained earnings 338 275 TOTAL MVW SHAREHOLDERS' EQUITY 2,814 2,976 Noncontrolling interests 10 10 TOTAL EQUITY 2,824 2,986 TOTAL LIABILITIES AND EQUITY $ 9,503 $ 9,613 The abbreviation VIEs above means Variable Interest Entities. See Notes to Interim Consolidated Financial Statements 3 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three Months Ended March 31, 2022 March 31, 2021 OPERATING ACTIVITIES Net income (loss) $ 58 $ ( 25 ) Adjustments to reconcile net income (loss) to net cash, cash equivalents and restricted cash provided by (used in) operating activities: Depreciation and amortization of intangibles 33 41 Amortization of debt discount and issuance costs 5 11 Vacation ownership notes receivable reserve 29 14 Share-based compensation 8 8 Deferred income taxes 18 15 Net change in assets and liabilities: Accounts receivable 45 51 Vacation ownership notes receivable originations ( 205 ) ( 108 ) Vacation ownership notes receivable collections 188 165 Inventory 28 ( 26 ) Other assets ( 134 ) ( 138 ) Accounts payable, advance deposits and accrued liabilities 12 ( 30 ) Deferred revenue 54 102 Payroll and benefit liabilities 13 31 Deferred compensation liability ( 7 ) ( 2 ) Other liabilities ( 3 ) 5 Deconsolidation of certain Consolidated Property Owners' Associations — ( 71 ) Purchase of vacation ownership units for future transfer to inventory ( 12 ) ( 99 ) Other, net ( 1 ) ( 4 ) Net cash, cash equivalents and restricted cash provided by (used in) operating activities 129 ( 60 ) INVESTING ACTIVITIES Capital expenditures for property and equipment (excluding inventory) ( 9 ) ( 7 ) Purchase of company owned life insurance ( 4 ) ( 1 ) Dispositions, net 3 — Net cash, cash equivalents and restricted cash used in investing activities ( 10 ) ( 8 ) Continued See Notes to Interim Consolidated Financial Statements 4 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (In millions) (Unaudited) Three Months Ended March 31, 2022 March 31, 2021 FINANCING ACTIVITIES Borrowings from securitization transactions 102 — Repayment of debt related to securitization transactions ( 178 ) ( 159 ) Proceeds from debt 30 561 Repayments of debt ( 30 ) ( 100 ) Purchase of convertible note hedges — ( 100 ) Proceeds from issuance of warrants — 70 Finance lease payment ( 2 ) — Payment of debt issuance costs ( 4 ) ( 2 ) Repurchase of common stock ( 119 ) — Payment of dividends ( 49 ) — Payment of withholding taxes on vesting of restricted stock units ( 22 ) ( 15 ) Net cash, cash equivalents and restricted cash (used in) provided by financing activities ( 272 ) 255 Effect of changes in exchange rates on cash, cash equivalents and restricted cash — ( 1 ) Change in cash, cash equivalents and restricted cash ( 153 ) 186 Cash, cash equivalents and restricted cash, beginning of period 803 992 Cash, cash equivalents and restricted cash, end of period $ 650 $ 1,178 SUPPLEMENTAL DISCLOSURES Non-cash transfer from property and equipment to inventory $ 2 $ 3 Non-cash transfer from inventory to property and equipment 31 2 Non-cash transfer of other assets to property and equipment 13 22 Non-cash issuance of debt in connection with asset acquisition 11 — Non-cash issuance of treasury stock for employee stock purchase plan 1 — Interest paid, net of amounts capitalized 30 53 Income tax refunds, net of income taxes paid ( 7 ) ( 30 ) See Notes to Interim Consolidated Financial Statements 5 MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In millions) (Unaudited) Common Stock Issued Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity 75.5 BALANCE AT DECEMBER 31, 2021 $ 1 $ ( 1,356 ) $ 4,072 $ ( 16 ) $ 275 $ 2,976 $ 10 $ 2,986 — Impact of adoption of ASU 2020-06 — — ( 111 ) — 31 ( 80 ) — ( 80 ) 75.5 OPENING BALANCE 2022 1 ( 1,356 ) 3,961 ( 16 ) 306 2,896 10 2,906 — Net income — — — — 58 58 — 58 — Foreign currency translation adjustments — — — 4 — 4 — 4 — Derivative instrument adjustment — — — 16 — 16 — 16 0.2 Share-based compensation plans — 1 ( 16 ) — — ( 15 ) — ( 15 ) — Repurchase of common stock — ( 119 ) — — — ( 119 ) — ( 119 ) — Dividends — — — — ( 26 ) ( 26 ) — ( 26 ) 75.7 BALANCE AT MARCH 31, 2022 $ 1 $ ( 1,474 ) $ 3,945 $ 4 $ 338 $ 2,814 $ 10 $ 2,824 Common Stock Issued Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity 75.3 BALANCE AT DECEMBER 31, 2020 $ 1 $ ( 1,334 ) $ 3,760 $ ( 48 ) $ 272 $ 2,651 $ 31 $ 2,682 — Net (loss) income — — — — ( 28 ) ( 28 ) 3 ( 25 ) — Foreign currency translation adjustments — — — ( 3 ) — ( 3 ) — ( 3 ) — Derivative instrument adjustment — — — 6 — 6 — 6 0.2 Share-based compensation plans — — ( 4 ) — — ( 4 ) — ( 4 ) — Equity component of convertible notes, net of issuance costs — — 117 — — 117 — 117 — Purchase of convertible note hedges — — ( 100 ) — — ( 100 ) — ( 100 ) — Issuance of warrants — — 70 — — 70 — 70 — Deconsolidation of certain Consolidated Property Owners' Associations — — — — — — ( 5 ) ( 5 ) 75.5 BALANCE AT MARCH 31, 2021 $ 1 $ ( 1,334 ) $ 3,843 $ ( 45 ) $ 244 $ 2,709 $ 29 $ 2,738 See Notes to Interim Consolidated Financial Statements 6 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The Interim Consolidated Financial Statements present the results of operations, financial position and cash flows of Marriott Vacations Worldwide Corporation (referred to in this report as (i) “we,” “us,” “Marriott Vacations Worldwide,” “MVW” or “the Company,” which includes our consolidated subsidiaries except where the context of the reference is to a single corporate entity, or (ii) “MVWC,” which shall refer only to Marriott Vacations Worldwide Corporation, without its consolidated subsidiaries). In order to make this report easier to read, we refer throughout to (i) our Interim Consolidated Financial Statements as our “Financial Statements,” (ii) our Interim Consolidated Statements of Income as our “Income Statements,” (iii) our Interim Consolidated Balance Sheets as our “Balance Sheets,” and (iv) our Interim Consolidated Statements of Cash Flows as our “Cash Flows.” In addition, references throughout to numbered “Footnotes” refer to the numbered Notes in these Notes to Interim Consolidated Financial Statements, unless otherwise noted. Capitalized terms used and not specifically defined herein have the same meanings given those terms in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report”). We use certain other terms that are defined within these Financial Statements. The Financial Statements presented herein and discussed below include 100 % of the assets, liabilities, revenues, expenses, and cash flows of Marriott Vacations Worldwide, all entities in which Marriott Vacations Worldwide has a controlling voting interest (“subsidiaries”), and those variable interest entities (“VIEs”) for which Marriott Vacations Worldwide is the primary beneficiary in accordance with consolidation accounting guidance. References in these Financial Statements to net income or loss attributable to common shareholders and MVW shareholders’ equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non-wholly owned entities and are reported separately. Intercompany accounts and transactions between consolidated entities have been eliminated in consolidation. These Financial Statements reflect our financial position, results of operations, and cash flows as prepared in conformity with United States Generally Accepted Accounting Principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates include, but are not limited to, revenue recognition, allocations of the purchase price paid in business combinations, cost of vacation ownership products, inventory valuation, goodwill and intangibles valuation, accounting for acquired vacation ownership notes receivable, vacation ownership notes receivable reserves, income taxes, and loss contingencies. The uncertainty created by the COVID-19 pandemic, and the ongoing efforts to mitigate it, has made it more challenging to make these estimates. Accordingly, ultimate results could differ from our estimates, and such differences may be material. In our opinion, our Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position, the results of our operations, and cash flows for the periods presented. Interim results may not be indicative of fiscal year performance because of, among other reasons, the impact of the COVID-19 pandemic and seasonal and short-term variations. These Financial Statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP. Although we believe our footnote disclosures are adequate to make the information presented not misleading, the Financial Statements in this report should be read in conjunction with the consolidated financial statements and notes thereto in our 2021 Annual Report. Acquisition of Welk On April 1, 2021, we completed the acquisition of Welk Hospitality Group, Inc. (“Welk”) through a series of transactions (the “Welk Acquisition”), after which Welk became our indirect wholly-owned subsidiary. We refer to the business and brands that we acquired as “Legacy-Welk.” See Footnote 3 “Acquisitions” for more information on the Welk Acquisition. 2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS New Accounting Standards Accounting Standards Update 2020-06 – “ Debt — Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”) In the first quarter of 2022, we adopted accounting standards update (“ASU”) 2020-06, using the modified retrospective method. Under ASU 2020-06, we no longer separate our convertible notes into liability and equity components, 7 Table of Contents and we are required to calculate the impact of our convertible notes on diluted earnings per share using the “if-converted” method, regardless of intent to settle or partially settle the debt in cash. Under the “if-converted” method, diluted earnings per share would generally be calculated assuming that all of our convertible notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive. The application of the “if- converted” method reduces our reported diluted earnings per share. The impacts of the adoption were recorded as a cumulative effect in the opening balance of retained earnings and the conversion feature related to our convertible notes was reclassified from equity to liabilities. In addition, we eliminated the related equity adjustment associated with the deferred tax liability. The adoption of ASU 2020-06 on January 1, 2022 resulted in an increase in debt of $ 107 million, a decrease in additional paid-in capital of $ 111 million, and a decrease in deferred taxes of $ 27 million, as well as a cumulative effect adjustment to the opening balance of retained earnings of $ 31 million. The remaining debt issuance costs will continue to be amortized over the term of our convertible notes. The prior period consolidated financial statements have not been retrospectively restated and continue to be reported under the accounting standards in effect for those periods. Accounting Standards Update 2021-08 - “ Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”) In the first quarter of 2022, we adopted ASU 2021-08, which amended ASC 805 to require entities to apply ASC 606 to recognize and measure contract assets and contract liabilities from contracts with customers in a business combination. The adoption of ASU 2021-08 on January 1, 2022 did not have a material impact on our financial statements and disclosure. In the event that we complete business combinations in the future, the application of ASU 2021-08 could result in higher acquired deferred revenue. Future Adoption of Accounting Standards Accounting Standards Update 2020-04 – “ Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting ” (“ASU 2020-04”) In March 2020, the FASB issued ASU 2020-04, as amended, which provides optional expedients and exceptions to existing guidance on contract modifications and hedge accounting in an effort to ease the financial reporting burdens related to the expected market transition from the LIBOR and other interbank offered rates to alternative reference rates. This update was effective upon issuance and issuers may generally elect to adopt the optional expedients and exceptions over time through December 31, 2022. As of March 31, 2022, the interest rate applicable to borrowings under our existing Term Loan (as defined in Footnote 13 “Debt”) and Warehouse Credit Facility (as defined in Footnote 12 “Securitized Debt”) generally continue to reference LIBOR, as do certain interest rate swaps and collars. These instruments have not yet discontinued the use of LIBOR. To the extent these instruments are amended to reference a different benchmark interest rate, we may elect to utilize the relief available in ASU 2020-04. When we renew or amend our remaining existing debt instruments, we will determine a replacement rate for LIBOR. We have not adopted any of the optional expedients or exceptions as of March 31, 2022, but will continue to evaluate their adoption during the effective period as circumstances evolve. Accounting Standards Update 2022-02 – “ Financial Instruments – Credit Losses (Topic 326) - Troubled Debt Restructurings and Vintage Disclosures ” (“ASU 2022-02”) In March 2022, the FASB issued ASU 2022-02, which eliminates the recognition and measurement guidance applicable to troubled debt restructurings for creditors and enhances disclosure requirements with respect to loan modifications for borrowers experiencing financial difficulty. ASU 2022-02 also requires disclosure of current-period gross write-offs by year of origination to be presented in the vintage disclosures for financing receivables. This update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. We are evaluating the impact that adoption of ASU 2022-02, including the timing of implementation, will have on our financial statements and disclosures; however, we do not expect adoption to have a material effect on our financial statements or disclosures other than disclosure changes related to vintage disclosures for financing receivables. 8 Table of Contents 3. ACQUISITIONS Welk Acquisition On April 1, 2021 (the “Welk Acquisition Date”), we completed the Welk Acquisition. The following table presents the fair value of each type of consideration transferred at the Welk Acquisition Date, as finalized at March 31, 2022. (in millions, except per share amounts) Equivalent shares of Marriott Vacations Worldwide common stock issued 1.4 Marriott Vacations Worldwide common stock price per share as of Welk Acquisition Date $ 174.18 Fair value of Marriott Vacations Worldwide common stock issued 248 Cash consideration to Welk, net of cash and restricted cash acquired of $ 48 million 157 Total consideration transferred, net of cash and restricted cash acquired $ 405 Fair Values of Assets Acquired and Liabilities Assumed We accounted for the Welk Acquisition as a business combination, which required us to record the assets acquired and liabilities assumed at fair value as of the Welk Acquisition Date. The values attributed to Vacation ownership notes receivable, Inventory, Property and equipment, Intangible assets, and Securitized debt from VIEs are based on valuations prepared using Level 3 inputs and assumptions in accordance with ASC Topic 820, “ Fair Value Measurements ” (“ASC 820”). The value attributed to Debt is based on Level 2 inputs in accordance with ASC 820. During the first quarter of 2022, we finalized our allocation of the purchase price to the acquired assets and liabilities. The following table presents the fair values of the assets that we acquired and the liabilities that we assumed in connection with the business combination as previously reported at December 31, 2021, and as finalized at March 31, 2022. During the first quarter of 2022, we refined our valuation models related to certain acquired assets and liabilities as follows: ($ in millions) April 1, 2021 (as reported at December 31, 2021) Adjustments April 1, 2021 (as finalized at March 31, 2022) Vacation ownership notes receivable, net $ 255 $ — $ 255 Inventory 111 — 111 Property and equipment 83 — 83 Intangible assets 102 — 102 Other assets 19 — 19 Deferred taxes ( 32 ) 8 ( 24 ) Debt ( 189 ) — ( 189 ) Securitized debt ( 184 ) — ( 184 ) Other liabilities ( 93 ) — ( 93 ) Net assets acquired 72 8 80 Goodwill (1) 333 ( 8 ) 325 $ 405 $ — $ 405 _________________________ (1) Goodwill is calculated as total consideration transferred, net of cash acquired, less identified net assets acquired. It represents the value that we expect to obtain from growth opportunities from our combined operations and is not deductible for tax purposes. Pro Forma Results of Operations The following unaudited pro forma information presents the combined results of operations of Marriott Vacations Worldwide and Welk as if we had completed the Welk Acquisition on December 31, 2019, the last day of our 2019 fiscal year, but using the fair values of assets and liabilities as of the Welk Acquisition Date set forth above. As required by GAAP, these unaudited pro forma results do not reflect any synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the Welk Acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations. 9 Table of Contents There were no Welk Acquisition-related costs included in the unaudited pro forma results below for the three months ended March 31, 2021. Three Months Ended ($ in millions, except per share data) March 31, 2021 Revenues $ 806 Net loss $ ( 12 ) Net loss attributable to common shareholders $ ( 15 ) LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS Basic $ ( 0.36 ) Diluted $ ( 0.36 ) Welk Results of Operations The following table presents the results of Welk operations included in our Income Statement for the three months ended March 31, 2022. ($ in millions) Three Months Ended March 31, 2022 Revenue $ 51 Net income $ 8 Other Acquisitions Bali During the first quarter of 2022, we acquired 88 completed vacation ownership units, as well as a sales center, located in Bali, Indonesia for $ 36 million. The transaction was accounted for as an asset acquisition with the purchase price allocated to Property and equipment. As consideration for the acquisition, we paid $ 12 million in cash and issued a non-interest bearing note payable for $ 11 million. Further, we reclassified $ 13 million of previous deposits associated with the project from Other assets to Property and equipment. 4. REVENUE AND RECEIVABLES Sources of Revenue by Segment The following tables detail the sources of revenue by segment for the time periods presented. Three Months Ended March 31, 2022 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Sale of vacation ownership products $ 310 $ — $ — $ 310 Ancillary revenues 54 1 — 55 Management fee revenues 42 10 ( 3 ) 49 Exchange and other services revenues 30 53 35 118 Management and exchange 126 64 32 222 Rental 122 11 — 133 Cost reimbursements 327 9 ( 20 ) 316 Revenue from contracts with customers 885 84 12 981 Financing 71 — — 71 Total Revenues $ 956 $ 84 $ 12 $ 1,052 10 Table of Contents Three Months Ended March 31, 2021 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Sale of vacation ownership products $ 163 $ — $ — $ 163 Ancillary revenues 28 — — 28 Management fee revenues 38 5 ( 6 ) 37 Exchange and other services revenues 28 55 45 128 Management and exchange 94 60 39 193 Rental 77 12 — 89 Cost reimbursements 268 14 ( 27 ) 255 Revenue from contracts with customers 602 86 12 700 Financing 59 — — 59 Total Revenues $ 661 $ 86 $ 12 $ 759 Timing of Revenue from Contracts with Customers by Segment The following tables detail the timing of revenue from contracts with customers by segment for the time periods presented. Three Months Ended March 31, 2022 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Services transferred over time $ 517 $ 38 $ 12 $ 567 Goods or services transferred at a point in time 368 46 — 414 Revenue from contracts with customers $ 885 $ 84 $ 12 $ 981 Three Months Ended March 31, 2021 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Services transferred over time $ 408 $ 37 $ 12 $ 457 Goods or services transferred at a point in time 194 49 — 243 Revenue from contracts with customers $ 602 $ 86 $ 12 $ 700 Sale of Vacation Ownership Products Revenue recognized during the first quarter of 2022 due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods was $ 1 million. 11 Table of Contents Receivables from Contracts with Customers, Contract Assets, & Contract Liabilities The following table shows the composition of our receivables from contracts with customers and contract liabilities. We had no contract assets at either March 31, 2022 or December 31, 2021. ($ in millions) At March 31, 2022 At December 31, 2021 Receivables from Contracts with Customers Accounts receivable $ 140 $ 172 Vacation ownership notes receivable, net 2,030 2,045 $ 2,170 $ 2,217 Contract Liabilities Advance deposits $ 194 $ 160 Deferred revenue 507 453 $ 701 $ 613 Revenue recognized during the first quarter of 2022 that was included in our contract liabilities balance at December 31, 2021 was $ 126 million. Remaining Performance Obligations Our remaining performance obligations represent the expected transaction price allocated to our contracts that we expect to recognize as revenue in future periods when we perform under the contracts. At March 31, 2022, approximately 86 % of this amount is expected to be recognized as revenue over the next two years . Accounts Receivable Accounts receivable is comprised of amounts due from customers, primarily owners’ associations, resort developers and members, credit card receivables, interest receivables, amounts due from taxing authorities, indemnification assets, and other miscellaneous receivables. The following table shows the composition of our accounts receivable balances: ($ in millions) At March 31, 2022 At December 31, 2021 Receivables from contracts with customers $ 140 $ 172 Interest receivable 14 14 Tax receivable 34 48 Indemnification assets 21 22 Employee tax credit receivable 17 19 Other 8 4 $ 234 $ 279 5. INCOME TAXES Our provision for income taxes is calculated using an estimated annual effective tax rate, based upon expected annual income, less losses in certain jurisdictions, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate. However, discrete items related to prior year tax items are treated separately. Our interim effective tax rate was 35.6 % and 29.8 % for the three months ended March 31, 2022 and March 31, 2021, respectively. The change in the effective tax rate is predominately attributable to an increase in pre-tax income and an increase in the reserve for uncertain tax benefits. 12 Table of Contents Unrecognized Tax Benefits The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the three months ended March 31, 2022. These unrecognized tax benefits relate to uncertain income tax positions, which would affect the effective tax rate if recognized. ($ in millions) Unrecognized Tax Benefits Balance at December 31, 2021 $ 26 Increases related to tax positions taken during a prior period 2 Balance at March 31, 2022 $ 28 The total amount of gross interest and penalties accrued was $ 45 million at March 31, 2022 and $ 42 million at December 31, 2021. We anticipate $ 14 million of unrecognized tax benefits, including interest and penalties, to be indemnified pursuant to a Tax Matters Agreement dated May 11, 2016 by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc., and consequently have recorded a corresponding indemnification asset. The unrecognized tax benefits, including accrued interest and penalties, are included in Other liabilities on our Balance Sheet. Our income tax returns are subject to examination by relevant tax authorities. Certain of our returns are being audited in various jurisdictions for tax years 2007 through 2019. The amount of the unrecognized tax benefit may increase or decrease as a result of audits or audit settlements. 6. VACATION OWNERSHIP NOTES RECEIVABLE The following table shows the composition of our vacation ownership notes receivable balances, net of reserves. March 31, 2022 December 31, 2021 ($ in millions) Originated Acquired Total Originated Acquired Total Securitized $ 1,345 $ 316 $ 1,661 $ 1,308 $ 354 $ 1,662 Non-securitized Eligible for securitization (1) 102 1 103 96 1 97 Not eligible for securitization (1) 249 17 266 267 19 286 Subtotal 351 18 369 363 20 383 $ 1,696 $ 334 $ 2,030 $ 1,671 $ 374 $ 2,045 _________________________ (1) Refer to Footnote 7 “Financial Instruments” for a discussion of eligibility of our vacation ownership notes receivable for securitization. We reflect interest income associated with vacation ownership notes receivable in our Income Statements in the Financing revenues caption. The following table summarizes interest income associated with vacation ownership notes receivable. Three Months Ended ($ in millions) March 31, 2022 March 31, 2021 Interest income associated with vacation ownership notes receivable — securitized $ 59 $ 48 Interest income associated with vacation ownership notes receivable — non-securitized 10 9 Total interest income associated with vacation ownership notes receivable $ 69 $ 57 13 Table of Contents Acquired Vacation Ownership Notes Receivable Acquired vacation ownership notes receivable represent vacation ownership notes receivable acquired as part of the ILG Acquisition and the Welk Acquisition. The following table shows future contractual principal payments, net of reserves, and interest rates for our acquired vacation ownership notes receivable at March 31, 2022. Acquired Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total 2022, remaining $ 2 $ 52 $ 54 2023 2 47 49 2024 2 47 49 2025 2 44 46 2026 2 39 41 Thereafter 8 87 95 Balance at March 31, 2022 $ 18 $ 316 $ 334 Weighted average stated interest rate 13.8 % 14.2 % 14.1 % Range of stated interest rates 0.0 % to 21.9 % 0.0 % to 21.9 % 0.0 % to 21.9 % The following table summarizes activity related to our acquired vacation ownership notes receivable reserve. Acquired Vacation Ownership Notes Receivable Reserve ($ in millions) Non-Securitized Securitized Total Balance at December 31, 2021 $ 47 $ 23 $ 70 Write-offs ( 11 ) — ( 11 ) Recoveries 7 — 7 Defaulted vacation ownership notes receivable repurchase activity (1) 8 ( 8 ) — (Decrease) increase in vacation ownership notes receivable reserve ( 5 ) 5 — Balance at March 31, 2022 $ 46 $ 20 $ 66 _________________________ (1) Reflects the change attributable to the transfer of the reserve from the securitized vacation ownership notes receivable reserve to the non-securitized vacation ownership notes receivable reserve when we voluntarily repurchase securitized vacation ownership notes receivable. Originated Vacation Ownership Notes Receivable Originated vacation ownership notes receivable represent vacation ownership notes receivable originated by Legacy-ILG and Legacy-Welk subsequent to each respective acquisition date and all Legacy-MVW vacation ownership notes receivable. The following table shows future principal payments, net of reserves, and interest rates for our originated vacation ownership notes receivable at March 31, 2022. Originated Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total 2022, remaining $ 45 $ 97 $ 142 2023 29 130 159 2024 27 132 159 2025 27 135 162 2026 27 140 167 Thereafter 196 711 907 Balance at March 31, 2022 $ 351 $ 1,345 $ 1,696 Weighted average stated interest rate 12.8 % 12.9 % 12.9 % Range of stated interest rates 0.0 % to 20.9 % 0.0 % to 19.9 % 0.0 % to 20.9 % 14 Table of Contents For originated vacation ownership notes receivable, we record the difference between the vacation ownership note receivable and the variable consideration included in the transaction price for the sale of the related vacation ownership product as a reserve on our vacation ownership notes receivable. The following table summarizes the activity related to our originated vacation ownership notes receivable reserve. Originated Vacation Ownership Notes Receivable Reserve ($ in millions) Non-Securitized Securitized Total Balance at December 31, 2021 $ 193 $ 140 $ 333 Increase in vacation ownership notes receivable reserve 25 4 29 Securitizations (1) ( 21 ) 21 — Write-offs ( 19 ) — ( 19 ) Defaulted vacation ownership notes receivable repurchase activity (2) 15 ( 15 ) — Balance at March 31, 2022 $ 193 $ 150 $ 343 _________________________ (1) Reflects the change attributable to the transfer of the reserve from the non-securitized vacation ownership notes receivable reserve to the securitized vacation ownership notes receivable reserve, when MVW 2021-2 LLC purchased the remaining vacation ownership notes receivable that were securitized during the fourth quarter of 2021, and when we securitized vacation ownership notes receivable under our Warehouse Credit Facility (as defined in Footnote 12 “Securitized Debt”) during the first quarter of 2022. (2) Reflects the change attributable to the transfer of the reserve from the securitized vacation ownership notes receivable reserve to the non-securitized vacation ownership notes receivable reserve when we voluntarily repurchase securitized vacation ownership notes receivable. Credit Quality of Vacation Ownership Notes Receivable Legacy-MVW Vacation Ownership Notes Receivable For both Legacy-MVW non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of 6.71 % as of March 31, 2022, and 6.74 % as of December 31, 2021. A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 6 million as of both March 31, 2022 and December 31, 2021. We use the aging of the vacation ownership notes receivable as the primary credit quality indicator for our Legacy-MVW vacation ownership notes receivable, as historical performance indicates that there is a relationship between the default behavior of borrowers and the age of the receivable associated with the vacation ownership interest. The following table shows our recorded investment in non-accrual Legacy-MVW vacation ownership notes receivable, which are vacation ownership notes receivable that are 90 days or more past due. Legacy-MVW Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total Investment in vacation ownership notes receivable on non-accrual status at March 31, 2022 $ 84 $ 9 $ 93 Investment in vacation ownership notes receivable on non-accrual status at December 31, 2021 $ 88 $ 8 $ 96 15 Table of Contents The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-MVW vacation ownership notes receivable as of March 31, 2022 and December 31, 2021. Legacy-MVW Vacation Ownership Notes Receivable As of March 31, 2022 As of December 31, 2021 ($ in millions) Non-Securitized Securitized Total Non-Securitized Securitized Total 31 – 90 days past due $ 6 $ 18 $ 24 $ 6 $ 20 $ 26 91 – 150 days past due 3 9 12 4 8 12 Greater than 150 days past due 81 — 81 84 — 84 Total past due 90 27 117 94 28 122 Current 163 1,042 1,205 180 1,027 1,207 Total vacation ownership notes receivable $ 253 $ 1,069 $ 1,322 $ 274 $ 1,055 $ 1,329 The following table details the origination year of our Legacy-MVW vacation ownership notes receivable as of March 31, 2022. Legacy-MVW Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total Year of Origination 2022 $ 83 $ 16 $ 99 2021 37 349 386 2020 19 151 170 2019 42 226 268 2018 26 145 171 2017 & Prior 46 182 228 $ 253 $ 1,069 $ 1,322 Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable At March 31, 2022 and December 31, 2021, the weighted average FICO score within our consolidated Legacy-ILG and Legacy-Welk vacation ownership notes receivable pools was 708 and 707 , respectively, based upon the FICO score of the borrower at the time of origination. The average estimated rate for all future defaults for our Legacy-ILG and Legacy-Welk consolidated outstanding pool of vacation ownership notes receivable was 17.14 % as of March 31, 2022 and 17.33 % as of December 31, 2021. A 0.5 percentage point increase in the estimated default rate on the Legacy-ILG and Legacy-Welk vacation ownership notes receivable would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 4 million as of both March 31, 2022 and December 31, 2021. We use the origination of the vacation ownership notes receivable by brand (Westin, Sheraton, Hyatt, Welk) and the FICO scores of the customer as the primary credit quality indicators for our Legacy-ILG and Legacy-Welk vacation ownership notes receivable, as historical performance indicates that there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership interest they have acquired, supplemented by the FICO scores of the customers. Vacation ownership notes receivable with no FICO score in the tables below primarily relate to non-U.S. resident borrowers. The following table shows our recorded investment in non-accrual Legacy-ILG and Legacy-Welk vacation ownership notes receivable, which are vacation ownership notes receivable that are 90 days or more past due. Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total Investment in vacation ownership notes receivable on non-accrual status at March 31, 2022 $ 115 $ 9 $ 124 Investment in vacation ownership notes receivable on non-accrual status at December 31, 2021 $ 114 $ 10 $ 124 16 Table of Contents The following table shows the aging of the recorded investment in principal, before reserves, in Legacy-ILG and Legacy-Welk vacation ownership notes receivable as of March 31, 2022 and December 31, 2021. Legacy-ILG and Legacy-Welk Vacation Ownership Notes Receivable As of March 31, 2022 As of December 31, 2021 ($ in millions) Non-Securitized Securitized Total Non-Securitized Securitized Total 31 – 90 days past due $ 11 $ 21 $ 32 $ 16 $ 24 $ 40 91 – 120 days past due 4 5 9 4 6 10 Greater than 120 days past due 111 4 115 110 4 114 Total past due 126 30 156 130 34 164 Current 229 732 961 219 735 954 Total vacation ownership notes receivable $ 355 $ 762 $ 1,117 $ 349 $ 769 $ 1,118 The following tables show the Legacy-ILG and Legacy-Welk acquired vacation ownership notes receivable, before reserves, by brand and FICO score. Acquired Vacation Ownership Notes Receivable as of March 31, 2022 ($ in millions) 700 + 600 - 699 < 600 No Score Total Westin $ 48 $ 30 $ 3 $ 7 $ 88 Sheraton 49 43 7 19 118 Hyatt 7 5 1 — 13 Welk 102 71 1 2 176 Other 1 1 — 2 4 $ 207 $ 150 $ 12 $ 30 $ 399 Acquired Vacation Ownership Notes Receivable as of December 31, 2021 ($ in millions) 700 + 600 - 699 < 600 No Score Total Westin $ 52 $ 32 $ 3 $ 8 $ 95 Sheraton 54 48 8 23 133 Hyatt 8 6 1 — 15 Welk 115 79 1 2 197 Other 2 — — 2 4 $ 231 $ 165 $ 13 $ 35 $ 444 17 Table of Contents The following tables detail the origination year of our Legacy-ILG and Legacy-Welk acquired vacation ownership notes receivable by brand and FICO score as of March 31, 2022. Acquired Vacation Ownership Notes Receivable 2018 & Prior ($ in millions) Westin Sheraton Hyatt & Other Total 700 + $ 48 $ 49 $ 8 $ 105 600 - 699 30 43 6 79 < 600 3 7 1 11 No Score 7 19 2 28 $ 88 $ 118 $ 17 $ 223 Acquired Vacation Ownership Notes Receivable - Welk ($ in millions) 2021 2020 2019 2018 & Prior Total 700 + $ 8 $ 22 $ 26 $ 46 $ 102 600 - 699 4 13 19 35 71 < 600 — 1 — — 1 No Score — — 1 1 2 $ 12 $ 36 $ 46 $ 82 $ 176 The following tables show the Legacy-ILG and Legacy-Welk originated vacation ownership notes receivable, before reserves, by brand and FICO score. Originated Vacation Ownership Notes Receivable as of March 31, 2022 ($ in millions) 700 + 600 - 699 < 600 No Score Total Westin $ 148 $ 68 $ 9 $ 40 $ 265 Sheraton 138 98 20 46 302 Hyatt 23 11 1 — 35 Welk 79 34 1 1 115 $ 388 $ 211 $ 31 $ 87 $ 717 Originated Vacation Ownership Notes Receivable as of December 31, 2021 ($ in millions) 700 + 600 - 699 < 600 No Score Total Westin $ 143 $ 66 $ 8 $ 34 $ 251 Sheraton 136 94 20 46 296 Hyatt 22 11 — — 33 Welk 65 27 1 1 94 $ 366 $ 198 $ 29 $ 81 $ 674 18 Table of Contents The following tables detail the origination year of our Legacy-ILG and Legacy-Welk originated vacation ownership notes receivable by brand and FICO score as of March 31, 2022. Originated Vacation Ownership Notes Receivable - Westin ($ in millions) 2022 2021 2020 2019 2018 Total 700 + $ 21 $ 61 $ 20 $ 38 $ 8 $ 148 600 - 699 6 29 9 20 4 68 < 600 1 3 2 2 1 9 No Score 18 9 4 8 1 40 $ 46 $ 102 $ 35 $ 68 $ 14 $ 265 Originated Vacation Ownership Notes Receivable - Sheraton ($ in millions) 2022 2021 2020 2019 2018 Total 700 + $ 17 $ 56 $ 21 $ 35 $ 9 $ 138 600 - 699 8 43 14 25 8 98 < 600 1 9 4 5 1 20 No Score 5 11 8 18 4 46 $ 31 $ 119 $ 47 $ 83 $ 22 $ 302 Originated Vacation Ownership Notes Receivable - Hyatt ($ in millions) 2022 2021 2020 2019 2018 Total 700 + $ 5 $ 9 $ 3 $ 5 $ 1 $ 23 600 - 699 3 4 1 2 1 11 < 600 — 1 — — — 1 No Score — — — — — — $ 8 $ 14 $ 4 $ 7 $ 2 $ 35 Originated Vacation Ownership Notes Receivable - Welk ($ in millions) 2022 2021 2020 2019 2018 Total 700 + $ 24 $ 55 $ — $ — $ — $ 79 600 - 699 11 23 — — — 34 < 600 — 1 — — — 1 No Score 1 — — — — 1 $ 36 $ 79 $ — $ — $ — $ 115 19 Table of Contents 7. FINANCIAL INSTRUMENTS The following table shows the carrying values and the estimated fair values of financial assets and liabilities that qualify as financial instruments, determined in accordance with the authoritative guidance for disclosures regarding the fair value of financial instruments. Considerable judgment is required in interpreting market data to develop estimates of fair value. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts. The table excludes Cash and cash equivalents, Restricted cash, Accounts receivable, deposits included in Other assets, Accounts payable, Advance deposits, and Accrued liabilities, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments. At March 31, 2022 At December 31, 2021 ($ in millions) Carrying Amount Fair Value Carrying Amount Fair Value Vacation ownership notes receivable $ 2,030 $ 2,091 $ 2,045 $ 2,102 Other assets 74 74 76 76 Total financial assets $ 2,104 $ 2,165 $ 2,121 $ 2,178 Securitized debt, net $ ( 1,779 ) $ ( 1,745 ) $ ( 1,856 ) $ ( 1,900 ) 2025 Notes, net ( 248 ) ( 257 ) ( 248 ) ( 261 ) 2028 Notes, net ( 346 ) ( 338 ) ( 346 ) ( 362 ) 2029 Notes, net ( 493 ) ( 474 ) ( 493 ) ( 505 ) Term Loan, net ( 777 ) ( 763 ) ( 776 ) ( 784 ) 2022 Convertible Notes, net (1) ( 229 ) ( 265 ) ( 224 ) ( 280 ) 2026 Convertible Notes, net (1) ( 563 ) ( 632 ) ( 461 ) ( 682 ) Non-interest bearing note payable, net ( 11 ) ( 11 ) — — Total financial liabilities $ ( 4,446 ) $ ( 4,485 ) $ ( 4,404 ) $ ( 4,774 ) _________________________ (1) Prior period amounts have not been adjusted due to our adoption of ASU 2020-06 under the modified retrospective method. See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for information on our adoption of ASU 2020-06. Vacation Ownership Notes Receivable At March 31, 2022 At December 31, 2021 ($ in millions) Carrying Amount Fair Value Carrying Amount Fair Value Vacation ownership notes receivable Securitized $ 1,661 $ 1,715 $ 1,662 $ 1,712 Eligible for securitization 103 110 97 104 Not eligible for securitization 266 266 286 286 Non-securitized 369 376 383 390 $ 2,030 $ 2,091 $ 2,045 $ 2,102 We estimate the fair value of our vacation ownership notes receivable that have been securitized using a discounted cash flow model. We believe this is comparable to the model that an independent third party would use in the current market. Our model uses default rates, prepayment rates, coupon rates, and loan terms for our securitized vacation ownership notes receivable portfolio as key drivers of risk and relative value to determine the fair value of the underlying vacation ownership notes receivable. We concluded that this fair value measurement should be categorized within Level 3. Due to factors that impact the general marketability of our vacation ownership notes receivable that have not been securitized, as well as current market conditions, we bifurcate our non-securitized vacation ownership notes receivable at each balance sheet date into those eligible and not eligible for securitization using criteria applicable to current securitization transactions in the ABS market. Generally, vacation ownership notes receivable are considered not eligible for securitization if any of the following attributes are present: (1) payments are greater than 30 days past due; (2) the first payment has not been received; or (3) the collateral is located in Asia or Europe. In some cases, eligibility may also be determined based on 20 Table of Contents the credit score of the borrower, the remaining term of the loans and other similar factors that may reflect investor demand in a securitization transaction or the cost to effectively securitize the vacation ownership notes receivable. The table above shows the bifurcation of our vacation ownership notes receivable that have not been securitized into those eligible and not eligible for securitization based upon the aforementioned eligibility criteria. We estimate the fair value of the portion of our vacation ownership notes receivable that have not been securitized that we believe will ultimately be securitized in the same manner as vacation ownership notes receivable that have been securitized. We value the remaining vacation ownership notes receivable that have not been securitized at their carrying value, rather than using our pricing model. We believe that the carrying value of these particular vacation ownership notes receivable approximates fair value because the stated, or otherwise imputed, interest rates of these loans are consistent with current market rates and the reserve for these vacation ownership notes receivable appropriately accounts for risks in default rates, prepayment rates, discount rates, and loan terms. We concluded that this fair value measurement should be categorized within Level 3. Other Assets Other assets include $ 74 million of company owned insurance policies (the “COLI policies”), acquired on the lives of certain participants in the Marriott Vacations Worldwide Deferred Compensation Plan, that are held in a rabbi trust. The carrying value of the COLI policies is equal to their cash surrender value (Level 2 inputs). Securitized Debt We generate cash flow estimates by modeling all bond tranches for our active vacation ownership notes receivable securitization transactions, with consideration for the collateral specific to each tranche. The key drivers in our analysis include default rates, prepayment rates, bond interest rates, and other structural factors, which we use to estimate the projected cash flows. In order to estimate market credit spreads by rating, we obtain indicative credit spreads from investment banks that actively issue and facilitate the market for vacation ownership securities and determine an average credit spread by rating level of the different tranches. We then apply those estimated market spreads to swap rates in order to estimate an underlying discount rate for calculating the fair value of the active bonds payable. We concluded that this fair value measurement should be categorized within Level 3. Senior Notes We estimate the fair value of our 2025 Notes, 2028 Notes, and 2029 Notes (each as defined in Footnote 13 “Debt”) using quoted market prices as of the last trading day for the quarter; however these notes have only a limited trading history and volume, and as such this fair value estimate is not necessarily indicative of the value at which these notes could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 2. Term Loan We estimate the fair value of our Term Loan (as defined in Footnote 13 “Debt”) using quotes from securities dealers as of the last trading day for the quarter; however this loan has only a limited trading history and volume, and as such this fair value estimate is not necessarily indicative of the value at which the Term Loan could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 3. Convertible Notes We estimate the fair value of our 2022 Convertible Notes and 2026 Convertible Notes (each as defined in Footnote 13 “Debt” and referred to collectively as our “convertible notes”) using quoted market prices as of the last trading day for the quarter; however these notes have only a limited trading history and volume, and as such this fair value estimate is not necessarily indicative of the value at which the convertible notes could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 2. The difference between the carrying value and the fair value is primarily attributed to the underlying conversion feature and the spread between the conversion price and the market value of the shares underlying the convertible notes. Non-Interest Bearing Note Payable The carrying value of our non-interest bearing note payable issued in connection with the acquisition of vacation ownership units located in Bali, Indonesia approximates fair value, because the imputed interest rate used to discount this note payable is consistent with current market rates. We concluded that this fair value measurement should be categorized within Level 3. 21 Table of Contents 8. EARNINGS PER SHARE Basic earnings or loss per common share attributable to common shareholders is calculated by dividing net income or loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding. Diluted earnings or loss per common share attributable to common shareholders is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period, except in periods when there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. The dilutive effect of outstanding equity-based compensation awards is reflected in diluted earnings or loss per common share applicable to common shareholders by application of the treasury stock method using average market prices during the period. We adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method. ASU 2020-06 was applicable to our convertible notes outstanding as of adoption and requires us to calculate the impact of our convertible notes on diluted earnings per share using the “if-converted” method, regardless of our intent to settle or partially settle the debt in cash. Under the “if-converted” method, shares issuable upon conversion of our convertible notes are assumed to be converted into common stock at the beginning of the period, to the extent dilutive. Earnings per share for the three months ended March 31, 2021 have not been retrospectively restated and continue to be reported under the accounting standards in effect for that period. The shares issuable on exercise of the warrants sold in connection with the issuance of our convertible notes will not impact the total dilutive weighted average shares outstanding unless and until the price of our common stock exceeds the respective strike price. If and when the price of our common stock exceeds the respective strike price of either of the warrants, we will include the dilutive effect of the additional shares that may be issued upon exercise of the warrants in total dilutive weighted average shares outstanding, which we calculate using the treasury stock method. The convertible note hedges purchased in connection with each issuance of convertible notes are considered to be anti-dilutive and do not impact our calculation of diluted earnings per share attributable to common shareholders for any periods presented herein. See Footnote 13 “Debt” for further information on our convertible notes. The table below illustrates the reconciliation of the earnings or loss and number of shares used in our calculation of basic and diluted earnings or loss per share attributable to common shareholders. Three Months Ended (in millions, except per share amounts) March 31, 2022 (1) March 31, 2021 Computation of Basic Earnings (Loss) Per Share Attributable to Common Shareholders Net income (loss) attributable to common shareholders $ 58 $ ( 28 ) Shares for basic earnings (loss) per share 42.4 41.4 Basic earnings (loss) per share $ 1.36 $ ( 0.68 ) Computation of Diluted Earnings (Loss) Per Share Attributable to Common Shareholders Net income (loss) attributable to common shareholders $ 58 $ ( 28 ) Add back of interest expense related to convertible notes subsequent to the adoption of ASU 2020-06, net of tax 1 — Numerator used to calculate diluted EPS $ 59 $ ( 28 ) Shares for basic earnings (loss) per share 42.4 41.4 Effect of dilutive shares outstanding (2) Employee SARs 0.2 — Restricted stock units 0.3 — 2022 Convertible Notes ($ 230 million of principal) 1.6 — 2026 Convertible Notes ($ 575 million of principal) 3.4 — Shares for diluted earnings (loss) per share 47.9 41.4 Diluted earnings (loss) per share $ 1.23 $ ( 0.68 ) _______________________________ (1) The computation of diluted earnings per share attributable to common shareholders excludes approximately 300,000 shares of common stock, the maximum number of shares issuable as of March 31, 2022, upon the vesting of certain performance-based awards, because the performance conditions required to be met for the shares subject to such awards to vest were not achieved by the end of the reporting period. 22 Table of Contents (2) For the first quarter of 2021, the following potentially dilutive securities were excluded from the above calculation of diluted net loss per share attributable to common shareholders during the periods presented, as the effects of including these securities would have been anti-dilutive. Three Months Ended (in millions) March 31, 2021 Employee SARs 0.2 Restricted stock units 0.5 2022 Convertible Notes ($ 230 million of principal) 0.1 0.8 In accordance with the applicable accounting guidance for calculating earnings per share, for the first quarter of 2022, we excluded from our calculation of diluted earnings per share 126,169 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise price of $ 173.88 of such SARs was greater than the average market price for the applicable period. 9. INVENTORY The following table shows the composition of our inventory balances: ($ in millions) At March 31, 2022 At December 31, 2021 Real estate inventory (1) $ 684 $ 710 Other 9 9 $ 693 $ 719 _________________________ (1) Represents completed inventory that is registered for sale as vacation ownership interests and vacation ownership inventory expected to be reacquired pursuant to estimated future foreclosures. We value vacation ownership products at the lower of cost or fair market value less costs to sell, in accordance with applicable accounting guidance, and we record operating supplies at the lower of cost (using the first-in, first-out method) or net realizable value. Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 7 million during the first quarter of 2022 and by $ 1 million during the first quarter of 2021. In addition to the above, at March 31, 2022 and December 31, 2021, we had $ 496 million and $ 460 million, respectively, of completed vacation ownership units which are classified as a component of Property and equipment, net until the time at which they are available and legally registered for sale as vacation ownership products. 10. GOODWILL AND INTANGIBLES Goodwill The following table details the carrying amount of our goodwill at March 31, 2022 and December 31, 2021, and reflects goodwill attributed to the ILG Acquisition and the Welk Acquisition. ($ in millions) Vacation Ownership Reporting Unit Exchange & Third-Party Management Reporting Unit Total Consolidated Balance at December 31, 2021 $ 2,778 $ 372 $ 3,150 Measurement period adjustments ( 8 ) — ( 8 ) Balance at March 31, 2022 $ 2,770 $ 372 $ 3,142 23 Table of Contents Intangible Assets The following table details the composition of our intangible asset balances: ($ in millions) At March 31, 2022 At December 31, 2021 Definite-lived intangible assets Member relationships $ 671 $ 671 Management contracts 452 452 1,123 1,123 Accumulated amortization ( 209 ) ( 194 ) 914 929 Indefinite-lived intangible assets Trade names 64 64 $ 978 $ 993 11. CONTINGENCIES AND COMMITMENTS Commitments and Letters of Credit As of March 31, 2022, we had the following commitments outstanding: • We have various contracts for the use of information technology hardware and software that we use in the normal course of business. Our aggregate commitment under these contracts was $ 97 million, of which we expect $ 43 million, $ 30 million, $ 13 million, $ 8 million, and $ 3 million will be paid in the remainder of 2022, 2023, 2024, 2025, and 2026 and thereafter, respectively. • We have a commitment to acquire real estate for use in our Vacation Ownership segment via our involvement with a VIE. Refer to Footnote 16 “Variable Interest Entities” for additional information and our activities relating to the VIE involved in this transaction. • We have commitments to acquire inventory from our managed owners’ associations in the remainder of 2022 for $ 79 million. Surety bonds issued as of March 31, 2022 totaled $ 120 million, the majority of which were requested by federal, state, or local governments in connection with our operations. As of March 31, 2022, we had $ 2 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”). In addition, as of March 31, 2022, we had $ 2 million in letters of credit outstanding related to and in lieu of reserves required for several vacation ownership notes receivable securitization transactions outstanding. These letters of credit are not issued pursuant to, nor do they impact our borrowing capacity under, the Revolving Corporate Credit Facility. Guarantees Certain of our rental management agreements in our Exchange & Third-Party Management segment provide for owners of properties we manage to receive specified percentages of rental revenue or guaranteed amounts generated under our management. In these cases, the operating expenses for the rental operations are paid from the revenue generated by the rentals, the owners are then paid their contractual percentages or guaranteed amounts, and our vacation rental business either retains the balance (if any) as its fee or makes up the deficit. At March 31, 2022, our maximum exposure under fixed dollar guarantees was $ 8 million, of which $ 1 million, $ 2 million, $ 2 million, $ 1 million, $ 1 million, and $ 1 million relate to the remainder of 2022, 2023, 2024, 2025, 2026, and thereafter, respectively. We have a commitment to an owners’ association that we manage to pay for any shortfall between the actual expenses incurred by the owners’ association and the income received by the owners’ association, in lieu of maintenance fees for unsold inventory. The agreement will terminate on the earlier of: 1) sale of 95 % of the total ownership interests in the owners’ association; or 2) written notification of termination by either party. At March 31, 2022, our expected commitment for the remainder of 2022 is $ 10 million, which will ultimately be recorded as a component of rental expense on our income statement. 24 Table of Contents Loss Contingencies In February 2019, the owners’ association for the St. Regis Residence Club, New York filed a lawsuit in the Supreme Court for the State of New York, New York County, Commercial Division against ILG and several of its subsidiaries and certain third parties. The operative complaint alleges that the defendants breached their fiduciary duties related to sale and rental practices, aided and abetted certain breaches of fiduciary duty, engaged in self-dealing as the sponsor and manager of the club, tortiously interfered with the management agreement, were unjustly enriched, and engaged in anticompetitive conduct. The plaintiff is seeking unspecified damages, punitive damages and disgorgement of payments under the management and purchase agreements. In February 2022, the Court granted our motion to dismiss the complaint and dismissed with prejudice all claims except one, with respect to which the plaintiff was granted leave to amend its complaint. The plaintiff has filed an amended complaint and has appealed the dismissal of the other claims. In April 2019, a purported class-action lawsuit was filed by Alan and Marjorie Helman and others against us in the Superior Court of the Virgin Islands, Division of St. Thomas alleging that their fractional interests were devalued by the affiliation of The Ritz-Carlton Club, St. Thomas and other Ritz-Carlton Clubs with our MVCD program. The lawsuit was subsequently removed to the U.S. District Court for the District of the Virgin Islands. The plaintiffs are seeking unspecified damages, disgorgement of profits, fees and costs. We believe we have meritorious defenses to the claims in each of the above matters and intend to vigorously defend each matter. In the ordinary course of our business, various claims and lawsuits have been filed or are pending against us. A number of these lawsuits and claims may exist at any given time. Additionally, the COVID-19 pandemic may give rise to various claims and lawsuits from owners, members and other parties. We record and accrue for legal contingencies when we determine that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, we evaluate, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, our ability to make a reasonable estimate of loss. We review these accruals each reporting period and make revisions based on changes in facts and circumstances. We have not accrued for any of the pending matters described above and we cannot estimate a range of the potential liability associated with these pending matters, if any, at this time. We have accrued for other claims and lawsuits, but the amount accrued is not material individually or in the aggregate. For matters not requiring accrual, we do not believe that the ultimate outcome of such matters, individually or in the aggregate, will materially harm our financial position, cash flows, or overall trends in results of operations based on information currently available. However, legal proceedings are inherently uncertain, and while we believe that our accruals are adequate and/or we have valid defenses to the claims asserted, unfavorable rulings could occur that could, individually or in the aggregate, have a material adverse effect on our business, financial condition, or operating results. Leases That Have Not Yet Commenced During 2020, we entered into a finance lease arrangement, which was then amended in 2021, for our new global headquarters office building, which is being constructed in Orlando, Florida. The initial lease term is approximately 16 years with total lease payments of $ 137 million for the aforementioned period. We expect the new office building to be completed in 2023. Upon commencement of the lease term, a right-of-use asset and corresponding liability will be recorded on our balance sheet. 25 Table of Contents 12. SECURITIZED DEBT The following table provides detail on our securitized debt, net of unamortized debt discount and issuance costs. ($ in millions) At March 31, 2022 At December 31, 2021 Vacation ownership notes receivable securitizations, gross (1) $ 1,698 $ 1,877 Unamortized debt discount and issuance costs ( 19 ) ( 21 ) 1,679 1,856 Warehouse Credit Facility, gross 101 — Unamortized debt issuance costs (2) ( 1 ) — 100 — $ 1,779 $ 1,856 _________________________ (1) Interest rates as of March 31, 2022 range from 1.5 % to 4.4 %, with a weighted average interest rate of 2.3 %. (2) Excludes $ 2 million of unamortized debt issuance costs as of December 31, 2021, as no cash borrowings were outstanding on the Warehouse Credit Facility at that time. All of our securitized debt is non-recourse to MVWC. See Footnote 16 “Variable Interest Entities” for a discussion of the collateral for the non-recourse debt associated with our securitized debt. The following table shows scheduled future principal payments for our securitized debt as of March 31, 2022. Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility Total ($ in millions) Payments Year 2022, remaining $ 135 $ 3 $ 138 2023 182 5 187 2024 185 93 278 2025 185 — 185 2026 183 — 183 Thereafter 828 — 828 $ 1,698 $ 101 $ 1,799 Vacation Ownership Notes Receivable Securitizations Each of the securitized vacation ownership notes receivable transactions contains various triggers relating to the performance of the underlying vacation ownership notes receivable. If a pool of securitized vacation ownership notes receivable fails to perform within the pool’s established parameters (default or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess spread we would otherwise receive from that pool (attributable to the interests we retained) to accelerate the principal payments to investors (taking into account the subordination of the different tranches to the extent there are multiple tranches) until the performance trigger is cured. During the first quarter of 2022, and as of March 31, 2022, we had 14 securitized vacation ownership notes receivable pools outstanding, none of which were out of compliance with their respective established parameters. As the contractual terms of the underlying securitized vacation ownership notes receivable determine the maturities of the non-recourse debt associated with them, actual maturities may occur earlier than shown above due to prepayments by the vacation ownership notes receivable obligors. Warehouse Credit Facility Our warehouse credit facility (the “Warehouse Credit Facility”), which has a borrowing capacity of $ 350 million, allows for the securitization of vacation ownership notes receivable on a revolving non-recourse basis. During the first quarter of 2022, we securitized vacation ownership notes receivable under our Warehouse Credit Facility. The carrying amount of the vacation ownership notes receivable securitized was $ 125 million. The average advance rate was 81 %, which resulted in gross proceeds of $ 102 million. Net proceeds were $ 101 million due to the funding of reserve accounts of $ 1 million. 26 Table of Contents 13. DEBT The following table provides detail on our debt balances, net of unamortized debt discount and issuance costs. ($ in millions) At March 31, 2022 At December 31, 2021 Senior Secured Notes 2025 Notes $ 250 $ 250 Unamortized debt discount and issuance costs ( 2 ) ( 2 ) 248 248 Senior Unsecured Notes 2028 Notes 350 350 Unamortized debt discount and issuance costs ( 4 ) ( 4 ) 346 346 2029 Notes 500 500 Unamortized debt discount and issuance costs ( 7 ) ( 7 ) 493 493 Corporate Credit Facility Term Loan 784 784 Unamortized debt discount and issuance costs ( 7 ) ( 8 ) 777 776 Convertible Notes 2022 Convertible Notes 230 230 Unamortized debt discount and issuance costs ( 1 ) ( 6 ) 229 224 2026 Convertible Notes 575 575 Unamortized debt discount and issuance costs ( 12 ) ( 114 ) 563 461 Non-interest bearing note payable 11 — Finance Leases 84 83 $ 2,751 $ 2,631 The following table shows scheduled future principal payments for our debt, excluding finance leases, as of March 31, 2022. ($ in millions) 2025 Notes 2028 Notes 2029 Notes Term Loan 2022 Convertible Notes 2026 Convertible Notes Non-Interest Bearing Note Payable Total Payments Year 2022, remaining $ — $ — $ — $ — $ 230 $ — $ — $ 230 2023 — — — — — — 7 7 2024 — — — — — — 4 4 2025 250 — — 784 — — — 1,034 2026 — — — — — 575 — 575 Thereafter — 350 500 — — — — 850 $ 250 $ 350 $ 500 $ 784 $ 230 $ 575 $ 11 $ 2,700 27 Table of Contents Senior Notes Our senior notes include: • $ 500 million aggregate principal amount of 6.125 % Senior Secured Notes due 2025 issued in the second quarter of 2020 with a maturity date of September 15, 2025 (the “2025 Notes”), of which $ 250 million of principal was outstanding as of March 31, 2022. • $ 350 million aggregate principal amount of 4.750 % Senior Unsecured Notes due 2028 issued in the fourth quarter of 2019 with a maturity date of January 15, 2028 (the “2028 Notes”). • $ 500 million aggregate principal amount of 4.500 % Senior Unsecured Notes due 2029 issued in the second quarter of 2021 with a maturity date of June 15, 2029 (the “2029 Notes”). Corporate Credit Facility Our corporate credit facility (“Corporate Credit Facility”), which provides support for our business, including ongoing liquidity and letters of credit, includes a $ 900 million term loan facility (the “Term Loan”), which matures on August 31, 2025, and bears interest at LIBOR plus 1.75 %, and a revolving credit facility (the “Revolving Corporate Credit Facility”) that includes a letter of credit sub-facility of $ 75 million. During the first quarter of 2022, we entered into an amendment to the Revolving Corporate Credit Facility (the “Amendment”), which increased the borrowing capacity of the existing revolving credit facility from $ 600 million to $ 750 million and extended the maturity date from August 31, 2023 to March 31, 2027. The Amendment modified the interest rate applicable to borrowings under the Revolving Corporate Credit Facility to reference the Secured Overnight Financing Rate (“SOFR”) and to be based on “Adjusted Term SOFR,” which is calculated as Term SOFR (as defined in the Amendment), plus a 0.10 % adjustment, subject to a 0.00 % floor. Interest rates for other select non-U.S. dollar borrowings were also amended to be based on updated variable rate indices. The applicable margins with respect to the Revolving Corporate Credit Facility were amended to be based on leverage-based measures instead of credit ratings-based measures. The Amendment made no other material changes to the Corporate Credit Facility. Prior to 2020, we entered into $ 250 million of interest rate swaps under which we pay a fixed rate of 2.9625 % and receive a floating interest rate through September 2023 and $ 200 million of interest rate swaps under which we pay a fixed rate of 2.2480 % and receive a floating interest rate through April 2024, in each case to hedge a portion of our interest rate risk on the Term Loan. We also entered into a $ 100 million interest rate collar with a cap strike rate of 2.5000 % and a floor strike rate of 1.8810 % through April 2024 to further hedge our interest rate risk on the Term Loan. Both the interest rate swaps and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and recorded in Other liabilities on our Balance Sheet as of March 31, 2022 and December 31, 2021. We characterize payments we make in connection with these derivative instruments as interest expense and a reclassification of accumulated other comprehensive income for presentation purposes. The following table reflects the activity in accumulated other comprehensive loss related to our derivative instruments during the first quarters of 2022 and 2021. There were no reclassifications to the Income Statement for either of the periods presented below. ($ in millions) 2022 2021 Derivative instrument adjustment balance, January 1 $ ( 18 ) $ ( 39 ) Other comprehensive gain before reclassifications 16 6 Derivative instrument adjustment balance, March 31 $ ( 2 ) $ ( 33 ) Convertible Notes 2022 Convertible Notes During 2017, we issued $ 230 million of aggregate principal amount of convertible senior notes (the “2022 Convertible Notes”) that bear interest at a rate of 1.50 %, payable in cash semi-annually. The 2022 Convertible Notes mature on September 15, 2022, unless repurchased or converted in accordance with their terms prior to that date. The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of March 31, 2022 to 6.8402 shares of common stock per $1,000 principal amount of 2022 Convertible Notes (equivalent to a conversion price of $ 146.19 per share of our common stock), as a result of the dividends we declared since issuance of the 2022 Convertible Notes that were greater than the quarterly dividend we paid when the 2022 Convertible Notes were issued. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our 28 Table of Contents common stock, or a combination of cash and shares of our common stock, at our election. As of March 31, 2022, the effective interest rate was 2.19 %. The following table shows the net carrying value of the 2022 Convertible Notes. ($ in millions) At March 31, 2022 At December 31, 2021 Liability component Principal amount $ 230 $ 230 Unamortized debt discount (1) — ( 5 ) Unamortized debt issuance costs ( 1 ) ( 1 ) Net carrying amount of the liability component $ 229 $ 224 Carrying amount of equity component, net of issuance costs (1) $ — $ 33 ________________________ (1) As a result of the adoption of ASU 2020-06 during the first quarter of 2022, we no longer account for the liability and equity components of the convertible notes separately, and we reclassified the conversion feature related to the 2022 Convertible Notes from equity to liabilities. Prior period amounts have not been adjusted due to our adoption of ASU 2020-06 under the modified retrospective method. See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for information on our adoption of ASU 2020-06. The following table shows interest expense information related to the 2022 Convertible Notes. Three Months Ended ($ in millions) March 31, 2022 March 31, 2021 Contractual interest expense $ 1 $ 1 Amortization of debt discount — 2 $ 1 $ 3 2022 Convertible Note Hedges and Warrants In connection with the offering of the 2022 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions: convertible note hedge transactions with respect to our common stock (“2022 Convertible Note Hedges”), covering a total of approximately 1.6 million shares of our common stock, and warrant transactions (“2022 Warrants”), whereby we sold to the counterparties to the 2022 Convertible Note Hedges warrants to acquire approximately 1.6 million shares of our common stock. As of March 31, 2022, the strike prices of the 2022 Convertible Note Hedges and the 2022 Warrants were subject to adjustment to approximately $ 148.29 and $ 176.80 , respectively, and no 2022 Convertible Note Hedges or 2022 Warrants have been exercised. 2026 Convertible Notes During 2021, we issued $ 575 million aggregate principal amount of convertible senior notes (the “2026 Convertible Notes”) that bear interest at a rate of 0.00 %. The 2026 Convertible Notes mature on January 15, 2026, unless repurchased or converted in accordance with their terms prior to that date. The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of March 31, 2022 to 5.9122 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 169.14 per share of our common stock), as a result of the dividends we declared since issuance of the 2026 Convertible Notes that were greater than the quarterly dividend we paid when the 2026 Convertible Notes were issued. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. As of March 31, 2022, the effective interest rate was 0.55 %. 29 Table of Contents The following table shows the net carrying value of the 2026 Convertible Notes. ($ in millions) At March 31, 2022 At December 31, 2021 Liability component Principal amount $ 575 $ 575 Unamortized debt discount (1) — ( 104 ) Unamortized debt issuance costs ( 12 ) ( 10 ) Net carrying amount of the liability component $ 563 $ 461 Carrying amount of equity component, net of issuance costs (1) $ — $ 117 ________________________ (1) As a result of adoption of ASU 2020-06 during the first quarter of 2022, we no longer account for the liability and equity components of the convertible notes separately, and we reclassified the conversion feature related to the 2026 Convertible Notes from equity to liabilities. Prior period amounts have not been adjusted due to our adoption of ASU 2020-06 under the modified retrospective method. See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” for information on our adoption of ASU 2020-06. The following table shows interest expense information related to the 2026 Convertible Notes. Three Months Ended ($ in millions) March 31, 2022 March 31, 2021 Amortization of debt discount $ — $ 5 Amortization of debt issuance costs 1 — $ 1 $ 5 2026 Convertible Note Hedges and Warrants In connection with the offering of the 2026 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions: convertible note hedge transactions with respect to our common stock (“2026 Convertible Note Hedges”), covering a total of approximately 3.4 million shares of our common stock, and warrant transactions (“2026 Warrants”), whereby we sold to the counterparties to the 2026 Convertible Note Hedges, warrants to acquire approximately 3.4 million shares of our common stock. As of March 31, 2022, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 169.14 and $ 211.43 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised. Security and Guarantees Amounts borrowed under the Corporate Credit Facility and the 2025 Notes, as well as obligations with respect to letters of credit issued pursuant to the Corporate Credit Facility, are secured by a perfected first priority security interest in substantially all of the assets of the borrowers under, and guarantors of, that facility (which include MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy remote special purpose subsidiaries), in each case including inventory, subject to certain exceptions. In addition, the Corporate Credit Facility, the 2026 Convertible Notes, the 2025 Notes, the 2028 Notes, and the 2029 Notes are guaranteed by MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding bankruptcy remote special purpose subsidiaries . Non-Interest Bearing Note Payable During the first quarter of 2022, we issued a non-interest bearing note payable in connection with the acquisition of vacation ownership units located in Bali, Indonesia. See Footnote 3 “Acquisitions” for additional information on this transaction. 14. SHAREHOLDERS’ EQUITY Marriott Vacations Worldwide has 100,000,000 authorized shares of common stock, par value of $ 0.01 per share. At March 31, 2022, there were 75,721,548 shares of Marriott Vacations Worldwide common stock issued, of which 41,750,172 shares were outstanding and 33,971,376 shares were held as treasury stock. At December 31, 2021, there were 75,519,049 shares of Marriott Vacations Worldwide common stock issued, of which 42,283,378 shares were outstanding and 33,235,671 shares were held as treasury stock. Marriott Vacations Worldwide has 2,000,000 authorized shares of preferred stock, par value of $ 0.01 per share, none of which were issued or outstanding as of March 31, 2022 or December 31, 2021. 30 Table of Contents Share Repurchase Program During the third quarter of 2021, our Board of Directors authorized a share repurchase program under which we may purchase shares of our common stock for an aggregate purchase price not to exceed $ 250 million, prior to December 31, 2022. Share repurchases may be made through open market purchases, privately negotiated transactions, block transactions, tender offers, or otherwise. The specific timing, amount and other terms of the repurchases will depend on market conditions, corporate and regulatory requirements, contractual restrictions, and other factors. Acquired shares of our common stock are held as treasury shares carried at cost in our Financial Statements. In connection with the repurchase program, we are authorized to adopt one or more plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the first quarter of 2022, our Board of Directors authorized the repurchase of up to an additional $ 300 million of our common stock, as well as the extension of the term of our existing share repurchase program to March 31, 2023. As of March 31, 2022, $ 353 million remained available for repurchase under the share repurchase program approved by the Board of Directors. The authorization for the current share repurchase program may be suspended, terminated, increased or decreased by our Board of Directors at any time without prior notice. The following table summarizes share repurchase activity under our share repurchase programs: ($ in millions, except per share amounts) Number of Shares Repurchased Cost of Shares Repurchased Average Price Paid per Share As of December 31, 2021 17,681,395 $ 1,418 $ 80.17 For the first quarter of 2022 764,824 119 $ 156.50 As of March 31, 2022 18,446,219 $ 1,537 $ 83.34 Dividends We declared cash dividends to holders of common stock during the quarter ended March 31, 2022 as follows. Any future dividend payments will be subject to the restrictions imposed under the agreements covering our debt, and Board approval. There can be no assurance that we will pay dividends in the future. Declaration Date Shareholder Record Date Distribution Date Dividend per Share February 18, 2022 March 3, 2022 March 17, 2022 $ 0.62 Noncontrolling Interests - Owners’ Associations We consolidate certain owners’ associations. Noncontrolling interests represent the portion of the owners’ associations related to third-party vacation ownership interest owners. Noncontrolling interests of $ 10 million as of both March 31, 2022 and December 31, 2021 are included on our Balance Sheets as a component of equity. 15. SHARE-BASED COMPENSATION We maintain the Marriott Vacations Worldwide Corporation 2020 Equity Incentive Plan (the “MVW Equity Plan”) for the benefit of our officers, directors, and employees. Under the MVW Equity Plan, we are authorized to award: (1) restricted stock units (“RSUs”) of our common stock, (2) stock appreciation rights (“SARs”) relating to our common stock, and (3) stock options to purchase our common stock. A total of 1.8 million shares are authorized for issuance pursuant to grants under the MVW Equity Plan. As of March 31, 2022, approximately 1.0 million shares were available for grants under the MVW Equity Plan. The following table details our share-based compensation expense related to award grants to our officers, directors, and employees: Three Months Ended ($ in millions) March 31, 2022 March 31, 2021 Service-based RSUs $ 7 $ 6 Performance-based RSUs — 1 7 7 SARs 1 1 $ 8 $ 8 31 Table of Contents The following table details our deferred compensation costs related to unvested awards: ($ in millions) At March 31, 2022 At December 31, 2021 Service-based RSUs $ 51 $ 33 Performance-based RSUs 10 — 61 33 SARs 5 2 $ 66 $ 35 Restricted Stock Units We granted 165,392 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 153.25 , to our employees and non-employee directors during the first quarter of 2022. During the first quarter of 2022, we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management. A maximum of 135,012 RSUs may be earned under the performance-based RSU awards granted during the first quarter of 2022. Stock Appreciation Rights We granted 77,037 SARs, with a weighted average grant-date fair value of $ 59.68 and a weighted average exercise price of $ 159.27 , to members of management during the first quarter of 2022. We use the Black-Scholes model to estimate the fair value of the SARs granted. The expected stock price volatility was calculated based on the average of the historical and implied volatility of our stock price. The average expected life was calculated using the simplified method, as we have insufficient historical information to provide a basis for estimating average expected life. The risk-free interest rate was calculated based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The dividend yield assumption listed below is based on the expectation of future payouts. The following table outlines the assumptions used to estimate the fair value of grants during the first quarter of 2022: Expected volatility 42.86 % Dividend yield 1.53 % Risk-free rate 1.77 % Expected term (in years) 6.25 16. VARIABLE INTEREST ENTITIES Variable Interest Entities Related to Our Vacation Ownership Notes Receivable Securitizations We periodically securitize, without recourse, through bankruptcy remote special purpose entities, notes receivable originated in connection with the sale of vacation ownership products. These vacation ownership notes receivable securitizations provide funding for us and transfer the economic risks and substantially all the benefits of the consumer loans we originate to third parties. In a vacation ownership notes receivable securitization, various classes of debt securities issued by a special purpose entity are generally collateralized by a single tranche of transferred assets, which consist of vacation ownership notes receivable. With each vacation ownership notes receivable securitization, we may retain a portion of the securities, subordinated tranches, interest-only strips, subordinated interests in accrued interest and fees on the securitized vacation ownership notes receivable or, in some cases, overcollateralization and cash reserve accounts. We created these bankruptcy remote special purpose entities to serve as a mechanism for holding assets and related liabilities, and the entities have no equity investment at risk, making them VIEs. We continue to service the vacation ownership notes receivable, transfer all proceeds collected to these special purpose entities, and retain rights to receive benefits that are potentially significant to the entities. Accordingly, we concluded that we are the entities’ primary beneficiary and, therefore, consolidate them. There is no noncontrolling interest balance related to these entities and the creditors of these entities do not have general recourse to us. 32 Table of Contents The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at March 31, 2022: ($ in millions) Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility Total Consolidated Assets Vacation ownership notes receivable, net of reserves $ 1,552 $ 109 $ 1,661 Interest receivable 11 1 12 Restricted cash 73 5 78 Total $ 1,636 $ 115 $ 1,751 Consolidated Liabilities Interest payable $ 1 $ 1 $ 2 Securitized Debt 1,698 101 1,799 Total $ 1,699 $ 102 $ 1,801 The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first quarter of 2022: ($ in millions) Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility Total Interest income $ 57 $ 2 $ 59 Interest expense to investors $ 10 $ — $ 10 Debt issuance cost amortization $ 2 $ — $ 2 The following table shows cash flows between us and the vacation ownership notes receivable securitization VIEs: Three Months Ended ($ in millions) March 31, 2022 March 31, 2021 Cash Inflows Principal receipts $ 139 $ 130 Interest receipts 58 50 Reserve release (1) 57 — Total 254 180 Cash Outflows Principal to investors ( 155 ) ( 129 ) Voluntary repurchases of defaulted vacation ownership notes receivable ( 23 ) ( 30 ) Interest to investors ( 11 ) ( 11 ) Total ( 189 ) ( 170 ) Net Cash Flows $ 65 $ 10 _________________________ (1) Relates to the release of funds when MVW 2021-2 LLC purchased the remaining vacation ownership notes receivable that were securitized during the fourth quarter of 2021. Under the terms of our vacation ownership notes receivable securitizations, we have the right to substitute loans for, or repurchase, defaulted loans at our option, subject to certain limitations. Our maximum exposure to potential loss relating to the special purpose entities that purchase, sell and own these vacation ownership notes receivable is the overcollateralization amount (the difference between the loan collateral balance and the balance of the outstanding vacation ownership notes receivable), plus cash reserves and any residual interest in future cash flows from collateral. 33 Table of Contents The following table shows cash flows between us and the Warehouse Credit Facility VIE: Three Months Ended ($ in millions) March 31, 2022 March 31, 2021 Cash Inflows Proceeds from vacation ownership notes receivable securitizations $ 102 $ — Principal receipts 4 — Interest receipts 1 — Total 107 — Cash Outflows Funding of restricted cash ( 1 ) — Total ( 1 ) — Net Cash Flows $ 106 $ — Other Variable Interest Entities We have a commitment to purchase a property located in Waikiki, Hawaii, which we assigned to a third party during 2020. The property is held by a VIE for which we are not the primary beneficiary. Accordingly, we have not consolidated the VIE. As of March 31, 2022, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of less than $ 1 million. We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 1 million as of March 31, 2022. Subsequent to the end of the first quarter of 2022, we extended a loan to the VIE for $ 47 million and amended the terms of this commitment. As a result of the amended commitment, if we are unable to negotiate a capital efficient inventory arrangement under which a third party will purchase the property and agree to resell it to us at a later date, we are committed to purchase the property, in its then current form, for $ 80 million in the fourth quarter of 2022, unless it has been sold to another party. The loan extended to the VIE is due in full upon the earlier of sale of the property, including a sale to us, or an amendment and restatement of our purchase commitment. In the latter case, the existing loan of $ 47 million would be repaid to us as part of that revised purchase commitment on the part of MVW. Deferred Compensation Plan We consolidate the liabilities of the Marriott Vacations Worldwide Deferred Compensation Plan and the related assets, which consist of the COLI policies held in the rabbi trust. The rabbi trust is considered a VIE. We are considered the primary beneficiary of the rabbi trust because we direct the activities of the trust and are the beneficiary of the trust. At March 31, 2022, the value of the assets held in the rabbi trust was $ 74 million, which is included in the Other line within assets on our Balance Sheets. 17. BUSINESS SEGMENTS We define our reportable segments based on the way in which the chief operating decision maker (“CODM”), currently our chief executive officer, manages the operations of the Company for purposes of allocating resources and assessing performance. We operate in two operating and reportable business segments: • Vacation Ownership includes a diverse portfolio of resorts that includes some of the world’s most iconic brands licensed under exclusive, long-term relationships. We are the exclusive worldwide developer, marketer, seller, and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club, and Hyatt Residence Club brands, as well as under Marriott Vacation Club Pulse, an extension to the Marriott Vacation Club brand. We are also the exclusive worldwide developer, marketer, and seller of vacation ownership and related products under The Ritz-Carlton Destination Club brand, we have the non-exclusive right to develop, market, and sell whole ownership residential products under The Ritz-Carlton Residences brand and have a license to use the St. Regis brand for specified fractional ownership resorts. • Our Vacation Ownership segment generates most of its revenues from four primary sources: selling vacation ownership products; managing vacation ownership resorts, clubs, and owners’ associations; financing consumer purchases of vacation ownership products; and renting vacation ownership inventory. • Exchange & Third-Party Management includes exchange networks and membership programs, as well as provision of management services to other resorts and lodging properties. We provide these services through a variety of brands including Interval International, Trading Places International (“TPI”), Vacation Resorts International (“VRI”), and Aqua-Aston. Exchange & Third-Party Management revenue generally is fee-based 34 Table of Contents and derived from membership, exchange and rental transactions, owners’ association management, and other related products and services. Our CODM evaluates the performance of our segments based primarily on the results of the segment without allocating corporate expenses or income taxes. We do not allocate corporate interest expense or indirect general and administrative expenses to our segments. We include interest income specific to segment activities within the appropriate segment. We allocate depreciation, other gains and losses, equity in earnings or losses from our joint ventures, and noncontrolling interest to each of our segments as appropriate. Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to consolidated owners’ associations, as our CODM does not use this information to make operating segment resource allocations. Our CODM uses Adjusted EBITDA to evaluate the profitability of our operating segments, and the components of net income or loss attributable to common shareholders excluded from Adjusted EBITDA are not separately evaluated. Adjusted EBITDA is defined as net income or loss attributable to common shareholders, before interest expense (excluding consumer financing interest expense associated with securitization transactions), income taxes, depreciation and amortization, excluding share-based compensation expense and adjusted for certain items that affect the comparability of our operating performance. Our reconciliation of the aggregate amount of Adjusted EBITDA for our reportable segments to consolidated net income or loss attributable to common shareholders is presented below. Revenues Three Months Ended ($ in millions) March 31, 2022 March 31, 2021 Vacation Ownership $ 956 $ 661 Exchange & Third-Party Management 84 86 Total segment revenues 1,040 747 Corporate and other 12 12 $ 1,052 $ 759 Adjusted EBITDA and Reconciliation to Net Income or Loss Attributable to Common Shareholders Three Months Ended ($ in millions) March 31, 2022 March 31, 2021 Adjusted EBITDA Vacation Ownership $ 199 $ 68 Adjusted EBITDA Exchange & Third-Party Management 43 41 Reconciling items: Corporate and other ( 54 ) ( 40 ) Interest expense ( 27 ) ( 43 ) Tax (provision) benefit ( 32 ) 11 Depreciation and amortization ( 33 ) ( 41 ) Share-based compensation expense ( 8 ) ( 8 ) Certain items ( 30 ) ( 16 ) Net income (loss) attributable to common shareholders $ 58 $ ( 28 ) Assets ($ in millions) At March 31, 2022 At December 31, 2021 Vacation Ownership $ 7,946 $ 7,897 Exchange & Third-Party Management 903 911 Total segment assets 8,849 8,808 Corporate and other 654 805 $ 9,503 $ 9,613 We conduct business globally, and our operations outside the United States represented approximately 11 % and 9 % of our revenues, excluding cost reimbursements, for the three months ended March 31, 2022 and March 31, 2021, respectively . 35 Table of Contents 18. SUBSEQUENT EVENT In April 2022, we disposed of the VRI and TPI after determining that these businesses did not meet our future growth strategy and operating model, for net proceeds of approximately $ 60 million. Both of these businesses are components of our Exchange and Third-Party Management segment. 36 Table of Contents