What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-04 · 284 added, 631 removed, 668 unchanged (58% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Three Months Ended

March 31, 2023 March 31, 2022

Sale of vacation ownership products $ 375 $ 310

16 unchanged sentences

TOTAL EXPENSES 1,015 911

(Losses) gains and other (expense) income, net ( 2 ) ( 31 ) 39 ( 27 )

Interest expense ( 34 ) ( 41 ) ( 91 ) ( 128 )

Gains and other income, net 21 4

Interest expense, net ( 34 ) ( 27 )

Transaction and integration costs ( 13 ) ( 28 )

Other ( 1 ) 1 — 2

INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 128 90

Provision for income taxes ( 41 ) ( 32 )

NET INCOME (LOSS) 110 11 303 ( 6 )

NET INCOME 87 58

Net income attributable to noncontrolling interests — —

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 109 $ 10 $ 303 $ ( 12 )

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 87 $ 58

EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic $ 2.32 $ 1.36

1 unchanged sentence

CASH DIVIDENDS DECLARED PER SHARE $ 0.72 $ 0.62

See Notes to Interim Consolidated Financial Statements

See Interim Condensed Notes to Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

1 unchanged sentence

(In millions)

Three Months Ended Nine Months Ended

September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

NET INCOME (LOSS) $ 110 $ 11 $ 303 $ ( 6 )

Three Months Ended

March 31, 2023 March 31, 2022

NET INCOME $ 87 $ 58

Foreign currency translation adjustments 6 4

Reclassification of foreign currency translation adjustments realized upon disposition of entities — — ( 10 ) —

Derivative instrument adjustment, net of tax ( 3 ) 16

OTHER COMPREHENSIVE GAIN (LOSS), NET OF TAX 7 ( 1 ) 22 9

OTHER COMPREHENSIVE GAIN, NET OF TAX 3 20

Net income attributable to noncontrolling interests — —

Other comprehensive income attributable to noncontrolling interests — — — —

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS — —

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 116 $ 9 $ 325 $ ( 3 )

See Notes to the Interim Consolidated Financial Statements

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 90 $ 78

See Interim Condensed Notes to Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

1 unchanged sentence

(In millions, except share and per share data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash and cash equivalents $ 306 $ 524

31 unchanged sentences

Additional paid-in capital 3,937 3,941

Accumulated other comprehensive loss 6 ( 16 )

Accumulated other comprehensive income 18 15

Retained earnings 654 593

4 unchanged sentences

The abbreviation VIEs above means Variable Interest Entities.

See Notes to Interim Consolidated Financial Statements

See Interim Condensed Notes to Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

1 unchanged sentence

(In millions)

Nine Months Ended

September 30, 2022 September 30, 2021

Three Months Ended

March 31, 2023 March 31, 2022

OPERATING ACTIVITIES

Net income (loss) $ 303 $ ( 6 )

Adjustments to reconcile net income (loss) to net cash, cash equivalents and restricted cash provided by operating activities:

Net income $ 87 $ 58

Adjustments to reconcile net income to net cash, cash equivalents and restricted cash (used in) provided by operating activities:

Depreciation and amortization of intangibles 32 33

3 unchanged sentences

Impairment charges 3 —

Gains and other income, net ( 48 ) —

Deferred income taxes 6 18

10 unchanged sentences

Other liabilities 16 ( 3 )

Deconsolidation of certain Consolidated Property Owners' Associations ( 48 ) ( 87 )

Purchase of vacation ownership units for future transfer to inventory — ( 12 )

Other, net ( 5 ) ( 1 )

Net cash, cash equivalents and restricted cash provided by operating activities 380 303

Net cash, cash equivalents and restricted cash (used in) provided by operating activities ( 50 ) 129

INVESTING ACTIVITIES

Acquisition of a business, net of cash and restricted cash acquired — ( 157 )

Proceeds from disposition of subsidiaries, net of cash and restricted cash transferred 94 —

Capital expenditures for property and equipment (excluding inventory) ( 37 ) ( 9 )

Issuance of note receivable to VIE ( 47 ) —

Proceeds from collection of note receivable from VIE 47 —

Purchase of company owned life insurance — ( 4 )

Other, net — 3

Net cash, cash equivalents and restricted cash provided by (used in) investing activities 49 ( 187 )

See Notes to Interim Consolidated Financial Statements

Net cash, cash equivalents and restricted cash used in investing activities ( 37 ) ( 10 )

See Interim Condensed Notes to Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

1 unchanged sentence

(In millions)

Nine Months Ended

September 30, 2022 September 30, 2021

Three Months Ended

March 31, 2023 March 31, 2022

FINANCING ACTIVITIES

3 unchanged sentences

Repayments of debt ( 461 ) ( 30 )

Purchase of convertible note hedges — ( 100 )

Proceeds from issuance of warrants — 70

Finance lease incentive 10 —

Finance lease payment ( 2 ) ( 2 )

11 unchanged sentences

Non-cash issuance of treasury stock for employee stock purchase plan 1 1

Non-cash issuance of treasury stock in connection with Welk Acquisition — 248

Non-cash transfer from inventory to property and equipment 3 31

Non-cash transfer from property and equipment to inventory 43 2

Non-cash transfer of other assets to property and equipment 15 22

Dividends payable 24 23

Non-cash transfer from other assets to property and equipment — 13

Non-cash transfer from property and equipment to other assets 2 —

Right-of-use asset obtained in exchange for finance lease obligation 80 —

Non-cash issuance of debt in connection with finance lease 97 —

Interest paid, net of amounts capitalized 44 30

Income taxes paid, net of refunds (income tax refunds, net of income taxes paid) 56 ( 7 )

See Notes to Interim Consolidated Financial Statements

See Interim Condensed Notes to Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

4 unchanged sentences

Stock Additional

Capital Accumulated Other Comprehensive (Loss) Income Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity

Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity

75.7 BALANCE AT DECEMBER 31, 2022 $ 1 $ ( 2,054 ) $ 3,941 $ 15 $ 593 $ 2,496 $ 2 $ 2,498

— 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 — — — — 87 87 — 87

5 unchanged sentences

75.8 BALANCE AT MARCH 31, 2023 $ 1 $ ( 2,132 ) $ 3,937 $ 18 $ 654 $ 2,478 $ 2 $ 2,480

— Net income (loss) — — — — 136 136 ( 1 ) 135

— Foreign currency translation adjustments — — — ( 2 ) — ( 2 ) — ( 2 )

— Reclassification of foreign currency translation adjustments realized upon disposition of entities — — — ( 10 ) — ( 10 ) — ( 10 )

— Derivative instrument adjustment — — — 7 — 7 — 7

— Adjustment for 2022 Convertible Note Hedges — — 6 — — 6 — 6

— Share-based compensation plans — 1 12 — — 13 — 13

— Repurchase of common stock — ( 193 ) — — — ( 193 ) — ( 193 )

— Deconsolidation of certain Consolidated Property Owners' Associations — — — — — — ( 8 ) ( 8 )

— Dividends — — — — ( 26 ) ( 26 ) — ( 26 )

75.7 BALANCE AT JUNE 30, 2022 1 ( 1,666 ) 3,963 ( 1 ) 448 2,745 1 2,746

— Net income — — — — 109 109 1 110

— Foreign currency translation adjustments — — — ( 1 ) — ( 1 ) — ( 1 )

— Derivative instrument adjustment — — — 8 — 8 — 8

— Tax effect on equity, convertible notes — — ( 1 ) — — ( 1 ) — ( 1 )

— Share-based compensation plans — — 5 — — 5 — 5

— Repurchase of common stock — ( 216 ) — — — ( 216 ) — ( 216 )

— Dividends — — — — ( 24 ) ( 24 ) — ( 24 )

— Employee stock plan issuance — — 1 — — 1 — 1

75.7 BALANCE AT SEPTEMBER 30, 2022 $ 1 $ ( 1,882 ) $ 3,968 $ 6 $ 533 $ 2,626 $ 2 $ 2,628

See Notes to Interim Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions)

Issued Common

3 unchanged sentences

75.5 BALANCE AT DECEMBER 31, 2021 $ 1 $ ( 1,356 ) $ 4,072 $ ( 16 ) $ 275 $ 2,976 $ 10 $ 2,986

— 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

— Net income — — — — 6 6 2 8

— Welk Acquisition — 55 193 — — 248 — 248

— Foreign currency translation adjustments — — — 4 — 4 — 4

— Derivative instrument adjustment — — — 3 — 3 — 3

— Share-based compensation plans — 1 9 — — 10 — 10

— Deconsolidation of certain Consolidated Property Owners' Associations — — — — — — ( 1 ) ( 1 )

— Employee stock plan issuance — — 2 — — 2 — 2

75.5 BALANCE AT JUNE 30, 2021 1 ( 1,278 ) 4,047 ( 38 ) 250 2,982 30 3,012

— 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

4 unchanged sentences

— Dividends — — — — ( 26 ) ( 26 ) — ( 26 )

— Employee stock plan issuance — — 1 — — 1 — 1

75.5 BALANCE AT SEPTEMBER 30, 2021 $ 1 $ ( 1,282 ) $ 4,056 $ ( 39 ) $ 237 $ 2,973 $ 31 $ 3,004

See Notes to Interim Consolidated Financial Statements

75.7 BALANCE AT MARCH 31, 2022 $ 1 $ ( 1,474 ) $ 3,945 $ 4 $ 338 $ 2,814 $ 10 $ 2,824

See Interim Condensed Notes to Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

2 unchanged sentences

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.

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 the Interim Condensed Notes to 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, 2022 (the “2022 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.

We also 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 VIEs for which Marriott Vacations Worldwide is the primary beneficiary, as determined 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.

Pursuant to a change in control of certain consolidated owners’ associations during the second quarter of 2022, we recorded non-cash losses of $ 3 million in (Losses) gains and other (expense) income, net on our Income Statement for the nine months ended September 30, 2022 and deconsolidated $ 110 million of assets, inclusive of $ 48 million of restricted cash, and $ 99 million of liabilities, resulting in a decrease in Noncontrolling interests of $ 8 million during the first three quarters of 2022.

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

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 uncertainties created by the COVID-19 pandemic, macroeconomic inflationary pressures, and the uncertainty of the success of ongoing efforts to mitigate the effects of the COVID-19 pandemic and inflationary pressures in the general macroeconomic environment, have made it more challenging to make these estimates.

Such estimates include, but are not limited to, revenue recognition, 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 uncertainties in the broader macroeconomic environment, including inflationary pressures, as well as any effects of the recent COVID-19 pandemic have made it more challenging to make these estimates.

Actual 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, inflationary pressures, general macroeconomic conditions, rising interest rates, and seasonal and short-term variations.

Interim results may not be indicative of fiscal year performance because of, among other reasons, general macroeconomic conditions, including inflationary pressures, rising interest rates, and seasonal and short-term variations, as well as any effects of the recent COVID-19 pandemic.

These Financial Statements have not been audited.

1 unchanged sentence

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 2022 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 and Dispositions” for more information on the Welk Acquisition.

Disposition of VRI Americas

Our Financial Statements reflect the disposition of the Vacation Resorts International (“VRI”) and Trading Places International (“TPI”) businesses (together, the “VRI Americas” business) on April 29, 2022.

See Footnote 3 “Acquisitions and Dispositions” for more information on the disposition of VRI Americas.

We refer to the business and brands that we acquired in the acquisition of Welk Hospitality Group, Inc.

(“Welk”) in 2021 (the “Welk Acquisition”) as “Legacy-Welk.” We refer to the business and brands that we acquired in the acquisition of ILG, LLC, formerly known as ILG, Inc.

(“ILG”), in 2018 (the “ILG Acquisition”) as “Legacy-ILG.” We refer to the business we conducted, and the associated brands, prior to the ILG Acquisition as “Legacy-MVW.”

The businesses acquired from ILG that we currently operate as part of our Vacation Ownership segment include Vistana Signature Experiences, which includes vacation ownership products branded as Sheraton or Westin, and Hyatt Vacation Ownership.

The businesses acquired from ILG that we currently operate as part of our Exchange & Third-Party Management business include Interval International and Aqua-Aston Hospitality.

As part of the ILG Acquisition, we also acquired the Vacation Resorts International (“VRI”) and Trading Places International (“TPI”) businesses (together, the “VRI Americas” business), which was part of our Exchange & Third-Party Management segment prior to our disposal of VRI Americas during the second quarter of 2022.

SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS

Launch of Abound by Marriott Vacations

In the third quarter of 2022, in connection with the affiliation of the Marriott-, Sheraton-, and Westin-branded vacation ownership products through Abound by Marriott Vacations, we modified our business practices and the terms of our Marriott-branded vacation ownership interest (“VOI”) sales contracts to be consistent with the existing terms of our Sheraton- and Westin-branded VOI sales contracts.

As a result of these modifications, control of Marriott-branded vacation ownership products is now transferred to the customer upon expiration of the statutory rescission period, consistent with the current method for Sheraton- and Westin-branded vacation ownership products, resulting in earlier revenue recognition than the historical timing for Marriott-branded VOIs.

Marriott-branded VOI sales contracts executed prior to these modifications will continue to be accounted for with transfer of control of the VOI occurring at closing, as described in our 2021 Annual Report.

In addition, in the third quarter of 2022, we combined and aligned our accounting methodology to calculate our estimates for the reserve on vacation ownership notes receivable for these brands, as we expect our future customers to represent a blend of the historical Marriott-, Sheraton- and Westin-brand customers.

We now use the origination of vacation ownership notes receivable by the combined Marriott-, Sheraton-, and Westin-brands (“Combined Marriott”) and the FICO scores of the customer as the primary credit quality indicators, 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.

See Footnote 6 “Vacation Ownership Notes Receivable” for further information.

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.

Upon adoption of ASU 2020-06, our convertible notes were no longer separated into liability and equity components, 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 is generally calculated assuming that all of our convertible notes are 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 respective terms 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.

See Footnote 13 “Debt” for further information on accounting for the 2022 Convertible Notes and the 2022 Convertible Note Hedges (as defined in Footnote 13 “Debt”), subsequent to the adoption of ASU 2020-06.

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, Revenue from Contracts with Customers , 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 or disclosures.

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 September 30, 2022, the interest rate applicable to borrowings under our existing Term Loan (as defined in Footnote 13 “Debt”) generally continued to reference LIBOR, as did certain interest rate swaps and collars.

During the third quarter of 2022, we amended the terms of our Warehouse Credit Facility to, among other things, reference SOFR (as defined in Footnote 12 “Securitized Debt”) rather than LIBOR.

Our Term Loan and certain interest rate swaps and collars 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 September 30, 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.

In the first quarter of 2023, we adopted accounting standards update (“ASU”) 2022-02, which eliminated the recognition and measurement guidance applicable to troubled debt restructurings for creditors and enhanced 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.

ACQUISITIONS AND DISPOSITIONS

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

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 were 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 was 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

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 Legacy-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.

There were no Welk Acquisition-related costs included in the unaudited pro forma results below for the nine months ended September 30, 2021.

Nine Months Ended

($ in millions, except per share data) September 30, 2021

Revenues $ 2,837

Net income $ 7

Net loss attributable to common shareholders $ ( 1 )

LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

Basic $ ( 0.01 )

Diluted $ ( 0.01 )

Legacy-Welk Results of Operations

The following table presents the results of Legacy-Welk operations included in our Income Statement for the three months and nine months ended September 30, 2022 and September 30, 2021.

Three Months Ended Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Revenue $ 67 $ 53 $ 174 $ 101

Net income $ 15 $ 10 $ 27 $ 16

Other Acquisitions

The adoption of ASU 2022-02 on January 1, 2023, on a prospective basis, did not have a material impact on our financial statements or disclosures other than the incremental disclosures relating to gross write-offs for financing receivables.

See Footnote 6 “Vacation Ownership Notes Receivable” for the incremental disclosures required by the adoption of ASU 2022-02.

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”) and Accounting Standards Update 2022-06 – “ Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848 ” (“ASU 2022-06”)

In March 2020, the Financial Accounting Standards Board (“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 USD London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

This update was effective upon issuance and issuers were able to generally elect to adopt the optional expedients and exceptions over time through a period ending on December 31, 2022.

In December 2022, the FASB issued ASU 2022-06 to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024.

As of March 31, 2023, our Term Loan (as defined in Footnote 12 “Debt”) and certain of our interest rate swaps and collars 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.

Subsequent to March 31, 2023, we amended the terms of our Term Loan to reference SOFR (as defined in Footnote 12 “Debt”) rather than LIBOR.

See Footnote 12 “Debt” for more information.

We have not adopted any of the optional expedients or exceptions under ASU 2020-04 as of March 31, 2023, but continue to evaluate their adoption during the effective period as circumstances evolve.

Charleston, South Carolina

During the first quarter of 2023, we acquired a parcel of land and an adjacent retail space in Charleston, South Carolina for $ 17 million.

We plan to develop the parcel of land into a 50 -unit vacation ownership resort, and use a portion of the retail space to operate a sales center.

The transaction was accounted for as an asset acquisition and was recorded in Property and equipment, net.

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.

On April 29, 2022, we disposed of VRI Americas for proceeds of $ 56 million, net of cash and restricted cash transferred to the buyer of $ 12 million, after determining that this business was not a core component of our future growth strategy and operating model.

The results of VRI Americas are included in our Exchange and Third-Party Management segment through the date of the sale.

The net carrying value of VRI Americas as of the date of the disposition was $ 51 million, including $ 25 million of goodwill and $ 20 million of intangible assets.

As a result of the disposition, we recorded a gain of $ 1 million and $ 17 million in (Losses) gains and other (expense) income, net on our Income Statements for the three and nine months ended September 30, 2022, respectively.

Additionally, on June 28, 2022, we disposed of entities that owned and operated a Vacation Ownership segment hotel in Puerto Vallarta, Mexico, for proceeds of $ 38 million, net of cash and restricted cash transferred to the buyer of $ 3 million, consistent with our development strategy to dispose of non-strategic assets.

The net carrying value of the business disposed of as of the date of the disposition, excluding the cumulative translation adjustment, was $ 18 million, substantially all of which was property and equipment.

As a result of this disposition, we recorded a gain of $ 33 million in (Losses) gains and other (expense) income, net on our Income Statements for the nine months ended September 30, 2022, which included the realization of cumulative foreign currency translation gains of $ 10 million associated with the disposition of these entities .

The transaction was accounted for as an asset acquisition and the purchase price was allocated to Property and equipment, net.

As consideration for the acquisition, we paid $ 12 million in cash and issued a non-interest bearing note payable for $ 11 million, of which $ 6 million was repaid in the first quarter of 2023.

Further, during the first quarter of 2022, we reclassified $ 13 million of previous deposits associated with the project from Other assets to Property and equipment, net.

REVENUE AND RECEIVABLES

Sources of Revenue by Segment

Three Months Ended September 30, 2022

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Sale of vacation ownership products $ 444 $ — $ — $ 444

Ancillary revenues 63 1 — 64

Management fee revenues 41 7 ( 1 ) 47

Exchange and other services revenues 32 47 8 87

Management and exchange 136 55 7 198

Rental 154 11 — 165

Cost reimbursements 374 5 ( 8 ) 371

Revenue from contracts with customers 1,108 71 ( 1 ) 1,178

Financing 74 — — 74

Total Revenues $ 1,182 $ 71 $ ( 1 ) $ 1,252

Three Months Ended September 30, 2021

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Sale of vacation ownership products $ 330 $ — $ — $ 330

Ancillary revenues 55 1 — 56

Management fee revenues 40 10 ( 4 ) 46

Exchange and other services revenues 31 48 44 123

Management and exchange 126 59 40 225

Rental 121 9 — 130

Cost reimbursements 328 9 ( 39 ) 298

Revenue from contracts with customers 905 77 1 983

Financing 69 — — 69

Total Revenues $ 974 $ 77 $ 1 $ 1,052

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

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Total Revenues $ 1,097 $ 71 $ 1 $ 1,169

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

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The following tables detail the timing of revenue from contracts with customers by segment for the time periods presented.

Three Months Ended September 30, 2022

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Services transferred over time $ 597 $ 31 $ ( 1 ) $ 627

Goods or services transferred at a point in time 511 40 — 551

Revenue from contracts with customers $ 1,108 $ 71 $ ( 1 ) $ 1,178

Three Months Ended September 30, 2021

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

Services transferred over time $ 517 $ 38 $ 1 $ 556

Goods or services transferred at a point in time 388 39 — 427

Revenue from contracts with customers $ 905 $ 77 $ 1 $ 983

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

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Revenue from contracts with customers $ 1,019 $ 71 $ 1 $ 1,091

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total

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Sale of Vacation Ownership Products

Revenue declined during the third quarter and first three quarters of 2022 by $ 22 million and $ 27 million, respectively, due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods.

Revenues were reduced during the first quarter of 2023 by $ 8 million due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods.

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 September 30, 2022 or December 31, 2021.

($ in millions) At September 30, 2022 At December 31, 2021

We had no contract assets at either March 31, 2023 or December 31, 2022.

($ in millions) At March 31, 2023 At December 31, 2022

Receivables from Contracts with Customers

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Deferred revenue 448 344

Revenue recognized during the third quarter and first three quarters of 2022 that was included in our contract liabilities balance at December 31, 2021 was $ 93 million and $ 336 million, respectively.

Revenue recognized during the first quarter of 2023 that was included in our contract liabilities balance at December 31, 2022 was $ 100 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 September 30, 2022, approximately 87 % of this amount is expected to be recognized as revenue over the next two years .

At March 31, 2023, approximately 91 % of this amount is expected to be recognized as revenue over the next two years .

Accounts and Contracts Receivable

Accounts and contracts receivable is comprised of amounts due from customers, primarily owners’ associations, resort developers, owners 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 September 30, 2022 At December 31, 2021

The following table shows the composition of our accounts and contracts receivable balances:

($ in millions) At March 31, 2023 At December 31, 2022

Receivables from contracts with customers, net $ 181 $ 209

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However, discrete items related to prior year tax items are treated separately.

Our interim effective tax rate was 34.7 % and 81.5 % for the three months ended September 30, 2022 and September 30, 2021, respectively.

Our interim effective tax rate was 30.6 % and 110.6 % for the nine months ended September 30, 2022 and September 30, 2021, respectively.

The change in the effective tax rate for both the three and nine months ended September 30, 2022 is predominately attributable to an increase in pre-tax income.

Our interim effective tax rate was 32.3 % and 35.6 % for the three months ended March 31, 2023 and March 31, 2022, respectively.

The decrease in the effective tax rate is predominately attributable to an increase in Income Before Income Taxes and Noncontrolling Interests and a net increase in discrete items, including a net increase in the reserve for uncertain tax benefits of $ 16 million, partially offset by an increase in our share-based compensation benefit of $ 5 million and a $ 4 million increase in favorable foreign income tax adjustments.

Unrecognized Tax Benefits

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the nine months ended September 30, 2022.

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the three months ended March 31, 2023.

These unrecognized tax benefits relate to uncertain income tax positions, which would affect the effective tax rate if recognized.

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Increases related to tax positions taken during a prior period 7

Decreases as a result of a lapse of the applicable statute of limitations ( 1 )

Balance at September 30, 2022

The total amount of gross interest and penalties accrued was $ 51 million at September 30, 2022 and $ 42 million at December 31, 2021.

Decreases related to tax positions taken during a prior period ( 5 )

Balance at March 31, 2023

The total amount of gross interest and penalties accrued was $ 46 million at March 31, 2023 and $ 28 million at December 31, 2022, an increase of $ 18 million which is predominantly attributable to additional adjustments to the pre-acquisition reserves for uncertain tax positions.

We anticipate $ 33 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.

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The following table shows the composition of our vacation ownership notes receivable balances, net of reserves.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

($ in millions) Originated Acquired Total Originated Acquired Total

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$ 1,998 $ 222 $ 2,220 $ 1,956 $ 242 $ 2,198

_________________________

(1) Refer to Footnote 7 “Financial Instruments” for a discussion of eligibility of our vacation ownership notes receivable for securitization.

(1) Refer to Footnote 7 “Financial Instruments” for 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 Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Three Months Ended

($ in millions) March 31, 2023 March 31, 2022

Interest income associated with vacation ownership notes receivable — securitized $ 67 $ 59

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Credit Quality Indicators - Vacation Ownership Notes Receivable

Third Quarter of 2022

The estimates of the variable consideration for originated vacation ownership notes receivable and the reserve for credit losses on the acquired vacation ownership notes receivable are based on default rates that are an output of our static pool analyses and estimates regarding future defaults.

In 2020, we recorded an additional $ 69 million of reserve on vacation ownership notes receivable attributed to the elevated default rates expected as a result of the COVID-19 pandemic.

At that time, we allocated $ 59 million of the reserve to our originated vacation ownership notes receivable reserve and $ 10 million to our acquired vacation ownership notes receivable reserve.

Given the uncertainty as to which vacation ownership notes receivable (originated or acquired) would default, from 2020 through the second quarter of 2022 we assessed the sufficiency of our reserves for all vacation ownership notes receivable in total.

In the third quarter of 2022, in connection with the stabilization of default rates and the alignment and combination of the reserves for Marriott-, Sheraton-, and Westin-brands (see Footnote 2 “Significant Accounting Policies and Recent Accounting Standards”), we recorded a reversal of credit loss expense for the acquired vacation ownership notes receivable of $ 19 million in Financing expense and an increase in the reserve for our originated vacation ownership notes receivable of $ 21 million, which was recorded as a reduction of sales of vacation ownership products revenues.

In the third quarter of 2022, in connection with the use of FICO scores of the customer as a primary credit quality indicator for all brands (see Footnote 2 “Significant Accounting Policies and Recent Accounting Standards”), the weighted average FICO score within our consolidated vacation ownership notes receivable pool was 720 at September 30, 2022, based upon the FICO score of the borrower at the time of origination.

Prior to Third Quarter of 2022

Prior to the third quarter of 2022, we used the aging of the vacation ownership notes receivable as the primary credit quality indicator for Legacy-MVW vacation ownership notes receivable, and FICO score by brand as the primary credit quality indicator for the Sheraton, Westin, Hyatt and Welk vacation ownership notes receivable.

At December 31, 2021, the weighted average FICO score within our consolidated Legacy-ILG and Legacy-Welk vacation ownership notes receivable pools was 707 , based upon the FICO score of the borrower at the time of origination.

We use the origination of vacation ownership notes receivable by Marriott-, Sheraton-, and Westin-brands (“Combined Marriott”) and the FICO scores of the customer as the primary credit quality indicators, as historical performance indicates that there is a relationship between the default behavior of borrowers and the brand associated with the vacation ownership interest (“VOI”) they have acquired.

The weighted average FICO score within our consolidated vacation ownership notes receivable pool was 722 and 721 , at March 31, 2023 and December 31, 2022, respectively, based on the FICO score of the borrower at the time of origination.

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 September 30, 2022.

The following table shows future contractual principal payments, net of reserves, and interest rates for our acquired vacation ownership notes receivable at March 31, 2023.

Acquired Vacation Ownership Notes Receivable

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Thereafter 8 49 57

Balance at September 30, 2022 $ 34 $ 241 $ 275

Balance at March 31, 2023 $ 23 $ 199 $ 222

Weighted average stated interest rate 13.9 % 14.2 % 14.2 %

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Balance at December 31, 2022 $ 11 $ 18 $ 29

Securitizations ( 1 ) 1 —

Clean-up call 1 ( 1 ) —

Write-offs ( 7 ) — ( 7 )

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(Decrease) increase in vacation ownership notes receivable reserve ( 4 ) 4 —

Balance at September 30, 2022 $ 14 $ 21 $ 35

_________________________

(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.

Balance at March 31, 2023 $ 9 $ 17 $ 26

The following tables show the acquired vacation ownership notes receivable, before reserves, by brand and FICO score.

Acquired Vacation Ownership Notes Receivable as of September 30, 2022

Acquired Vacation Ownership Notes Receivable as of March 31, 2023

($ in millions) 700+ 600 - 699 < 600 No Score Total

Combined Marriott $ 63 $ 43 $ 5 $ 14 $ 125

Hyatt 6 3 1 — 10

Welk 83 57 1 1 142

Hyatt and Welk 72 49 1 1 123

$ 135 $ 92 $ 6 $ 15 $ 248

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($ 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

Combined Marriott $ 67 $ 47 $ 6 $ 16 $ 136

Hyatt and Welk 80 53 1 1 135

$ 147 $ 100 $ 7 $ 17 $ 271

The following tables detail the origination year of our acquired vacation ownership notes receivable by brand and FICO score as of September 30, 2022.

The following tables detail the origination year of our acquired vacation ownership notes receivable, before reserves, by brand and FICO score as of March 31, 2023, and gross write-offs by brand for the first quarter of 2023.

Acquired Vacation Ownership Notes Receivable - Combined Marriott

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$ — $ — $ 125 $ 125

Acquired Vacation Ownership Notes Receivable - Hyatt

($ in millions) 2021 2020 2019 2018 & Prior Total

700 + $ — $ — $ — $ 6 $ 6

600 - 699 — — — 3 3

< 600 — — — 1 1

No Score — — — — —

$ — $ — $ — $ 10 $ 10

Acquired Vacation Ownership Notes Receivable - Welk

Gross write-offs $ — $ — $ 4 $ 4

Acquired Vacation Ownership Notes Receivable - Hyatt and Welk

($ in millions) 2021 2020 2019 & Prior Total

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$ 8 $ 24 $ 91 $ 123

Gross write-offs $ — $ 1 $ 2 $ 3

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 September 30, 2022.

The following table shows future principal payments, net of reserves, and interest rates for our originated vacation ownership notes receivable at March 31, 2023.

Originated Vacation Ownership Notes Receivable

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Thereafter 223 912 1,135

Balance at September 30, 2022 $ 446 $ 1,421 $ 1,867

Balance at March 31, 2023 $ 404 $ 1,594 $ 1,998

Weighted average stated interest rate 12.3 % 13.2 % 13.0 %

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Securitizations ( 23 ) 23 —

Clean-up call 15 ( 15 ) —

Write-offs ( 29 ) — ( 29 )

Defaulted vacation ownership notes receivable repurchase activity (1)

Balance at September 30, 2022 $ 179 $ 192 $ 371

_________________________

Balance at March 31, 2023 $ 149 $ 222 $ 371

The following tables show originated vacation ownership notes receivable, before reserves, by brand and FICO score.

Originated Vacation Ownership Notes Receivable as of September 30, 2022

Originated Vacation Ownership Notes Receivable as of March 31, 2023

($ in millions) 700 + 600 - 699 < 600 No Score Total

Combined Marriott $ 1,230 $ 554 $ 55 $ 297 $ 2,136

Hyatt 28 13 1 1 43

Welk 117 48 1 2 168

Hyatt and Welk 162 66 2 3 233

$ 1,392 $ 620 $ 57 $ 300 $ 2,369

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($ 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

Combined Marriott $ 1,210 $ 549 $ 55 $ 278 2,092

Hyatt and Welk 157 64 3 2 226

$ 1,367 $ 613 $ 58 $ 280 $ 2,318

(1) Balances as of December 31, 2021 exclude $ 1,329 million of Marriott branded vacation ownership notes receivable as the change in credit quality indicator occurred during the third quarter of 2022.

The following tables detail the origination year of our originated vacation ownership notes receivable by brand and FICO score as of September 30, 2022.

The following tables detail the origination year of our originated vacation ownership notes receivable, before reserves, by brand and FICO score as of March 31, 2023, and gross write-offs by brand for the first quarter of 2023.

Originated Vacation Ownership Notes Receivable - Combined Marriott

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$ 202 $ 760 $ 460 $ 170 $ 544 $ 2,136

Originated Vacation Ownership Notes Receivable - Hyatt

($ in millions) 2022 2021 2020 2019 2018 2017 & Prior Total

700 + $ 14 $ 7 $ 2 $ 4 $ 1 $ — $ 28

600 - 699 5 4 1 2 1 — 13

< 600 — 1 — — — — 1

No Score 1 — — — — — 1

$ 20 $ 12 $ 3 $ 6 $ 2 $ — $ 43

Originated Vacation Ownership Notes Receivable - Welk

Gross write-offs $ — $ 3 $ 9 $ 4 $ 10 $ 26

Originated Vacation Ownership Notes Receivable - Hyatt and Welk

($ in millions) 2023 2022 2021 2020 2019 & Prior Total

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$ 37 $ 131 $ 56 $ 3 $ 6 $ 233

Gross write-offs $ — $ 1 $ 2 $ — $ — $ 3

Vacation Ownership Notes Receivable on Non-Accrual Status

For both non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of 11.66 % as of September 30, 2022 and 11.75 % 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 $ 12 million as of September 30, 2022 and $ 10 million as of December 31, 2021.

For both non-securitized and securitized vacation ownership notes receivable, we estimated the average remaining default rates of 11.54 % as of March 31, 2023 and 11.62 % as of December 31, 2022.

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 $ 12 million as of both March 31, 2023 and December 31, 2022.

The following table shows our recorded investment in non-accrual vacation ownership notes receivable, which are vacation ownership notes receivable that are 90 days or more past due.

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($ in millions) Non-Securitized Securitized Total

Investment in vacation ownership notes receivable on non-accrual status at September 30, 2022

Investment in vacation ownership notes receivable on non-accrual status at March 31, 2023

$ 128 $ 26 $ 154

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$ 126 $ 24 $ 150

The following table shows the aging of the recorded investment in principal, before reserves, in vacation ownership notes receivable as of September 30, 2022 and December 31, 2021.

As of September 30, 2022 As of December 31, 2021

The following table shows the aging of the recorded investment in principal, before reserves, in vacation ownership notes receivable as of March 31, 2023 and December 31, 2022.

As of March 31, 2023 As of December 31, 2022

($ in millions) Non-Securitized Securitized Total Non-Securitized Securitized Total

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The table excludes Cash and cash equivalents, Restricted cash, Accounts and contracts receivable, deposits included in Other assets, Accounts payable, Advance deposits, Accrued liabilities, and derivative instruments, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments.

At September 30, 2022 At December 31, 2021

At March 31, 2023 At December 31, 2022

($ in millions) Carrying

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2026 Convertible Notes, net ( 566 ) ( 553 ) ( 565 ) ( 560 )

— — ( 224 ) ( 280 )

2027 Convertible Notes, net ( 561 ) ( 566 ) ( 560 ) ( 568 )

( 564 ) ( 531 ) ( 461 ) ( 682 )

Non-interest bearing note payable, net ( 4 ) ( 4 ) ( 10 ) ( 10 )

Total financial liabilities $ ( 4,883 ) $ ( 4,675 ) $ ( 4,940 ) $ ( 4,723 )

_________________________

(1) Prior period amounts have not been adjusted to reflect 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 September 30, 2022 At December 31, 2021

At March 31, 2023 At December 31, 2022

($ in millions) Carrying

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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:

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or (3) the collateral is located in Asia or Europe.

In some cases, eligibility may also be determined based on 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.

In some cases, eligibility may also be determined based on 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.

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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 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 generally 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.

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Convertible Notes

We estimate the fair value of the 2026 Convertible Notes (as defined in Footnote 13 “Debt”) using quoted market prices as of the last trading day for the quarter;

We estimate the fair value of 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 2026 Convertible notes.

The 2022 Convertible Notes (as defined in Footnote 13 “Debt”) matured on September 15, 2022, and were repaid in full during the third quarter of 2022.

See Footnote 13 “Debt” for further information on the 2022 Convertible Notes.

Non-Interest Bearing Note Payable

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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 is 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.

We issued notice of our intent to settle the 2022 Convertible Notes in cash, which became irrevocable on June 15, 2022, and as a result, we suspended the use of the “if-converted” method for the 2022 Convertible Notes at that time, as there was no longer a share settlement option.

Earnings per share for the three and nine months ended September 30, 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 any 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.

The 2022 Convertible Notes and the 2022 Convertible Note Hedges (as defined in Footnote 13 “Debt”) matured on September 15, 2022, however the 2022 Warrants (as defined in Footnote 13 “Debt”) remained outstanding as of September 30, 2022.

See Footnote 13 “Debt” for further information on our convertible notes.

The convertible note hedges purchased in connection with each issuance of our 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.

The table below illustrates the reconciliation of the earnings or loss and number of shares used in our calculation of basic earnings or loss per share attributable to common shareholders.

Three Months Ended Nine Months Ended

(in millions, except per share amounts) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Net income (loss) attributable to common shareholders $ 109 $ 10 $ 303 $ ( 12 )

Shares for basic earnings (loss) per share 39.5 42.9 41.1 42.4

Basic earnings (loss) per share $ 2.76 $ 0.24 $ 7.39 $ ( 0.28 )

Three Months Ended

(in millions, except per share amounts) March 31, 2023 March 31, 2022

Net income attributable to common shareholders $ 87 $ 58

Shares for basic earnings per share 37.4 42.4

Basic earnings per share $ 2.32 $ 1.36

The table below illustrates the reconciliation of the earnings or loss and number of shares used in our calculation of diluted earnings or loss per share attributable to common shareholders.

Three Months Ended Nine Months Ended

(in millions, except per share amounts) September 30, 2022 (1)

September 30, 2021 (1)

September 30, 2022 (1)

September 30, 2021 (1)

Net income (loss) attributable to common shareholders $ 109 $ 10 $ 303 $ ( 12 )

Add back of interest expense related to convertible notes subsequent to the adoption of ASU 2020-06, net of tax 1 — 4 —

Numerator used to calculate diluted earnings (loss) per share $ 110 $ 10 $ 307 $ ( 12 )

Shares for basic earnings (loss) per share 39.5 42.9 41.1 42.4

Three Months Ended

(in millions, except per share amounts) March 31, 2023 (1)

March 31, 2022 (1)

Net income attributable to common shareholders $ 87 $ 58

Add back of interest expense related to convertible notes, net of tax 4 1

Numerator used to calculate diluted earnings per share $ 91 $ 59

Shares for basic earnings per share 37.4 42.4

Effect of dilutive shares outstanding

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2026 Convertible Notes ($ 575 million of principal)

Shares for diluted earnings (loss) per share 43.4 43.7 45.9 42.4

Diluted earnings (loss) per share $ 2.53 $ 0.23 $ 6.68 $ ( 0.28 )

_______________________________

(1) The computations of diluted earnings per share attributable to common shareholders exclude approximately 293,000 and 298,000 shares of common stock, the maximum number of shares issuable as of September 30, 2022 and September 30, 2021, respectively, 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.

(2) For the first three quarters 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 period presented, as the effects of including these securities would have been anti-dilutive.

Nine Months Ended

(in millions) September 30, 2021

Employee SARs 0.2

Restricted stock units 0.5

2027 Convertible Notes ($ 575 million of principal)

(3) We had the option to settle the 2022 Convertible Notes in cash, stock, or a combination of the two.

Therefore, from the beginning of 2022, through the date on which our notice of our intent to settle the 2022 Convertible Notes in cash became irrevocable, we included shares in the denominator of the diluted earnings per share calculation, applying the “if-converted” method.

For the period from June 15, 2022 through the maturity date of September 15, 2022, we excluded the related shares from the denominator of the diluted earnings per share calculation.

In accordance with the applicable accounting guidance for calculating earnings per share, for the third quarter of 2022, we excluded from our calculation of diluted earnings per share 252,314 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 143.38 to $ 173.88 , were greater than the average market price of our common stock for the applicable period.

For the first three quarters of 2022, we excluded from our calculation of diluted earnings per share 199,813 shares underlying SARs that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 159.27 to $ 173.88 , were greater than the average market price of our common stock for the applicable period.

For the third quarter of 2021, we excluded from our calculation of diluted earnings per share 127,008 shares underlying 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 of our common stock for the applicable period.

Shares for diluted earnings per share 44.4 47.9

Diluted earnings per share $ 2.06 $ 1.23

(1) The computations of diluted earnings per share attributable to common shareholders exclude approximately 239,000 and 300,000 shares of common stock, the maximum number of shares issuable as of March 31, 2023 and March 31, 2022, respectively, 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.

In accordance with the applicable accounting guidance for calculating earnings per share, for the first quarter of 2023, we excluded from our calculation of diluted earnings per share 237,249 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 153.10 to $ 173.88 , were greater than the average market price of our common stock for the applicable period.

For the first quarter of 2022, we excluded from our calculation of diluted earnings per share 126,169 shares underlying 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 of our common stock for the applicable period.

The following table shows the composition of our inventory balances:

($ in millions) At September 30, 2022 At December 31, 2021

($ in millions) At March 31, 2023 At December 31, 2022

Real estate inventory (1)

_________________________

(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 defaults on originated vacation ownership notes receivable.

(1) Represents completed inventory that is registered for sale as VOIs and vacation ownership inventory expected to be reacquired pursuant to estimated future defaults on originated vacation ownership notes receivable.

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 $ 15 million during the first three quarters of 2022 and by $ 6 million during the first three quarters of 2021.

In addition to the above, at September 30, 2022 and December 31, 2021, we had $ 441 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.

GOODWILL AND INTANGIBLES

The following table details the carrying amount of our goodwill at September 30, 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 )

Disposition of VRI Americas — ( 25 ) ( 25 )

Balance at September 30, 2022 $ 2,770 $ 347 $ 3,117

Intangible Assets

The following table details the composition of our intangible asset balances:

($ in millions) At September 30, 2022 At December 31, 2021

Definite-lived intangible assets

Member relationships $ 667 $ 671

Management contracts 427 452

Accumulated amortization ( 233 ) ( 194 )

Indefinite-lived intangible assets

Trade names 63 64

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 11 million during the first quarter of 2023 and $ 7 million during the first quarter of 2022.

In addition to the above, at March 31, 2023 and December 31, 2022, we had $ 392 million and $ 428 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.

CONTINGENCIES AND COMMITMENTS

Commitments and Letters of Credit

As of September 30, 2022, we had the following commitments outstanding:

As of March 31, 2023, 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 $ 77 million, of which we expect $ 24 million, $ 29 million, $ 13 million, $ 7 million, and $ 4 million will be paid in the remainder of 2022, 2023, 2024, 2025, and 2026 and thereafter, respectively.

Our aggregate commitment under these contracts was $ 70 million, of which we expect $ 42 million, $ 16 million, $ 8 million, and $ 4 million will be paid in the remainder of 2023, 2024, 2025, and 2026, 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 15 “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 $ 22 million.

Surety bonds issued as of September 30, 2022 totaled $ 129 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of September 30, 2022, we had $ 1 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 13 “Debt”).

In addition, as of September 30, 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.

Surety bonds issued as of March 31, 2023 totaled $ 127 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of March 31, 2023, we had $ 1 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 12 “Debt”).

In addition, as of March 31, 2023, 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.

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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 we either retain the balance (if any) as our fee or we make up the deficit.

At September 30, 2022, our maximum exposure under fixed dollar guarantees was $ 7 million, of which $ 2 million, $ 2 million, $ 1 million, $ 1 million, and $ 1 million relate to 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.

At March 31, 2023, our maximum exposure under fixed dollar guarantees was $ 6 million, of which $ 1 million, $ 2 million, $ 1 million, $ 1 million, and $ 1 million relate to the remainder of 2023, 2024, 2025, 2026, and thereafter, respectively.

The agreement will terminate on the earlier of:

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or 2) written notification of termination by either party.

At September 30, 2022, our expected commitment for the remainder of 2022 is $ 2 million, which will ultimately be recorded as a component of rental expense on our income statement.

At March 31, 2023, our expected commitment for the remainder of 2023 is $ 7 million.

Loss Contingencies

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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.

In August 2022, the District Court denied plaintiffs’ motion for class certification.

In September 2022, the U.S.

Court of Appeals for the Third Circuit denied plaintiffs’ petition for leave to appeal the District Court’s order denying class certification.

We believe we have meritorious defenses to the claims in each of the above matters and intend to vigorously defend each matter.

The plaintiff filed an amended complaint and appealed the dismissal of the other claims.

In November 2022, the Court granted our motion to dismiss the amended complaint and again granted plaintiff leave to amend.

The appeal remains pending.

We believe we have meritorious defenses to the claims in this matter and intend to vigorously defend against them.

In the ordinary course of our business, various claims and lawsuits have been filed or are pending against us.

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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 not accrued for the pending matter described above and we cannot estimate a range of the potential liability associated with this pending matter, 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.

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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 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.

SECURITIZED DEBT

The following table provides detail on our securitized debt, net of unamortized debt discount and issuance costs.

($ in millions) At September 30, 2022 At December 31, 2021

($ in millions) At March 31, 2023 At December 31, 2022

Vacation ownership notes receivable securitizations, gross (1)

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$ 1,936 $ 1,938

_________________________

(1) Interest rates as of September 30, 2022 range from 1.5 % to 4.6 %, with a weighted average interest rate of 2.7 %.

(2) Effective interest rate as of September 30, 2022 was 3.9 %.

(3) Excludes $ 2 million of unamortized debt issuance costs as of December 31, 2021, as no cash borrowings were outstanding at that time.

(1) Interest rates as of March 31, 2023 range from 1.5 % to 6.6 %, with a weighted average interest rate of 3.3 %.

(2) Effective interest rate as of March 31, 2023 was 5.9 %.

All of our securitized debt is non-recourse to MVWC.

See Footnote 15 “Variable Interest Entities” for a discussion of the collateral for the non-recourse debt associated with our securitized debt.

The following table shows anticipated future principal payments for our securitized debt as of September 30, 2022.

The following table shows anticipated future principal payments for our securitized debt as of March 31, 2023.

Vacation Ownership

Notes Receivable Securitizations Warehouse Credit

Facility Total

($ in millions)

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$ 1,661 $ 296 $ 1,957

(1) Excludes future Warehouse Credit Facility renewals.

Vacation Ownership Notes Receivable Securitizations

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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 third quarter of 2022, and as of September 30, 2022, we had 14 securitized vacation ownership notes receivable pools outstanding, none of which were out of compliance with their respective established parameters.

During the first quarter of 2023, and as of March 31, 2023, 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.

During the second quarter of 2022, we completed the securitization of a pool of $ 383 million of vacation ownership notes receivable.

In connection with the securitization, investors purchased $ 375 million in vacation ownership loan backed notes issued by MVW 2022-1 LLC (the “2022-1 LLC”) in a private placement.

The 2022-1 LLC issued four classes of vacation ownership loan backed notes:

$ 220 million of Class A Notes, $ 77 million of Class B Notes, $ 48 million of Class C Notes, and $ 30 million of Class D Notes.

The Class A Notes have an interest rate of 4.15 %, the Class B Notes have an interest rate of 4.40 %, the Class C Notes have an interest rate of 5.23 %, and the Class D Notes have an interest rate of 7.35 %, for an overall weighted average interest rate of 4.59 %.

Of the $ 375 million in proceeds from the transaction, approximately $ 98 million was used to repay all outstanding amounts previously drawn under our Warehouse Credit Facility (as defined below), approximately $ 7 million was used to pay transaction expenses and fund required reserves, and the remaining $ 176 million will be used for general corporate purposes.

In connection with this securitization, we redeemed the remaining vacation ownership loan backed notes issued in a prior securitization transaction for approximately $ 38 million.

The majority of the loans acquired through the redemption were purchased by the 2022-1 LLC.

On November 3, 2022, subsequent to the end of the third quarter of 2022, we completed the securitization of a pool of $ 286 million of vacation ownership notes receivable.

On April 13, 2023, subsequent to the end of the first quarter of 2023, we securitized a pool of $ 388 million of vacation ownership notes receivable.

In connection with the securitization, $ 380 million in vacation ownership loan backed notes were issued by MVW 2023-1 LLC (the “2023-1 LLC”) in a private placement.

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$ 237 million of Class A Notes, $ 65 million of Class B Notes, $ 48 million of Class C Notes, and $ 30 million of Class D Notes.

The Class A Notes have an interest rate of 6.11 %, the Class B Notes have an interest rate of 6.55 %, the Class C Notes have an interest rate of 7.62 %, and the Class D Notes have an interest rate of 9.00 %, for an overall weighted average interest rate of 6.58 %.

The weighted average interest rate of the first three classes of notes sold to third parties was 6.37 %.

Investors purchased $ 258 million of the vacation ownership loan backed notes issued by the 2022-2 LLC on November 3, 2022, comprised of the Class A Notes, the Class B Notes, and the Class C Notes, and we retained the $ 22 million of Class D Notes.

Of the $ 259 million in proceeds from the transaction, approximately $ 129 million was used to repay all outstanding amounts previously drawn under our Warehouse Credit Facility (as defined below), approximately $ 6 million was used to pay transaction expenses and fund required reserves, and the remaining $ 124 million will be used for general corporate purposes.

In connection with this securitization, we redeemed the remaining vacation ownership loan backed notes issued in a prior securitization transaction for approximately $ 22 million.

The majority of the loans acquired through the redemption were purchased by the 2022-2 LLC.

Warehouse Credit Facility

Our warehouse credit facility (the “Warehouse Credit Facility”) 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.

During the third quarter of 2022, we amended certain agreements associated with our Warehouse Credit Facility (the “Warehouse Amendment”).

The Warehouse Amendment increased the borrowing capacity of the existing facility from $ 350 million to $ 425 million and extended the revolving period from April 21, 2023 to July 28, 2024.

The Warehouse Amendment also modified the interest rate applicable to most borrowings under the Warehouse Credit Facility.

The Warehouse Credit Facility now uses a U.S.

Treasury overnight financing rate (Secured Overnight Financing Rate or “SOFR”) plus a 0.10 % adjustment (“Adjusted SOFR”) replacing 1-month LIBOR as its benchmark interest rate.

As part of the Warehouse Amendment, the credit spread remained at 135 basis points over Adjusted SOFR.

The Warehouse Amendment made no other material changes to the Warehouse Credit Facility.

During the third 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 $ 159 million.

The average advance rate was 83 %, which resulted in gross proceeds of $ 132 million.

Net proceeds were $ 132 million due to the funding of reserve accounts of less than $ 1 million.

The Class A Notes have an interest rate of 4.93 %, the Class B Notes have an interest rate of 5.42 %, the Class C Notes have an interest rate of 6.54 %, and the Class D Notes have an interest rate of 8.83 %.

Investors purchased $ 369 million of the vacation ownership loan backed notes issued by the 2023-1 LLC on April 13, 2023, comprised of the Class A Notes, the Class B Notes, the Class C Notes, and a portion of the Class D Notes, of which we retained $ 11 million.

Proceeds from the transaction, net of fees and a reserve, were used to repay the outstanding obligations on our warehouse credit facility (the “Warehouse Credit Facility”) and for other general corporate purposes.

The following table provides detail on our debt balances, net of unamortized debt discount and issuance costs.

($ in millions) At September 30, 2022 At December 31, 2021

($ in millions) At March 31, 2023 At December 31, 2022

Senior Secured Notes

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2026 Convertible Notes 575 575

Unamortized debt discount and issuance costs — ( 6 )

Unamortized debt issuance costs ( 9 ) ( 10 )

2027 Convertible Notes 575 575

Unamortized debt discount and issuance costs ( 11 ) ( 114 )

Non-interest bearing note payable 10 —

Unamortized debt issuance costs ( 14 ) ( 15 )

Finance Leases 182 86

$ 2,749 $ 2,631

Non-interest bearing note payable 4 10

$ 3,129 $ 3,088

(1) Effective interest rate as of September 30, 2022 was 7.0 %.

(1) Effective interest rate as of March 31, 2023 was 6.7 %.

(2) Excludes $ 5 million of unamortized debt issuance costs as of December 31, 2022, as no cash borrowings were outstanding under the Revolving Corporate Credit Facility at that time.

The following table shows scheduled principal payments for our debt, excluding finance leases, as of September 30, 2022.

($ in millions) 2025

Loan Revolving Corporate Credit Facility 2026 Convertible Notes Non-Interest Bearing Note Payable Total

Year Payments

2022, remaining $ — $ — $ — $ — $ — $ — $ — $ —

2023 — — — — — — 6 6

2024 — — — — — — 4 4

2025 250 — — 784 — — — 1,034

2026 — — — — — 575 — 575

Thereafter — 350 500 — 230 — — 1,080

The following table shows scheduled principal payments for our debt, excluding finance leases, as of March 31, 2023.

Payments Year

($ in millions) Remaining 2023 2024 2025 2026 2027 Thereafter Total

2028 Notes $ — $ — $ — $ — $ — $ 350 $ 350

2029 Notes — — — — — 500 500

Term Loan — — 784 — — — 784

Revolving Corporate Credit Facility — — — — 200 — 200

2026 Convertible Notes — — — 575 — — 575

2027 Convertible Notes — — — — 575 — 575

Non-Interest Bearing Note Payable — 4 — — — — 4

$ — $ 4 $ 784 $ 575 $ 775 $ 850 $ 2,988

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 September 30, 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”).

Redemption of Senior Secured Notes

During the first quarter of 2023, we redeemed, prior to maturity, the remaining $ 250 million of the 2025 Notes outstanding pursuant to a redemption notice issued in the fourth quarter of 2022 and the terms of the indenture governing the 2025 Notes.

In connection with this redemption, we incurred charges of $ 10 million, inclusive of a redemption premium and the write-off of unamortized debt issuance costs, which was recorded in Gains and other income, net on our Income Statement for the three months ended March 31, 2023.

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”) which 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 “Revolver 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 Revolver Amendment modified the interest rate applicable to borrowings under the Revolving Corporate Credit Facility to reference SOFR and to be based on “Adjusted Term SOFR,” which is calculated as Term SOFR (as defined in the Revolver 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 Revolver Amendment made no other material changes to the Corporate Credit Facility.

During the third quarter of 2022, we borrowed $ 380 million under our Revolving Corporate Credit Facility, $ 230 million of which was used to repay the 2022 Convertible Notes (as defined and discussed further below).

As of September 30, 2022, $ 230 million of principal was outstanding and all other amounts borrowed under the Revolving Corporate Credit Facility had been repaid.

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 a revolving credit facility with a borrowing capacity of $ 750 million (the “Revolving Corporate Credit Facility”), including a letter of credit sub-facility of $ 75 million, that terminates on March 31, 2027.

Subsequent to the end of the first quarter of 2023, we entered into an amendment to the Corporate Credit Facility (the “Amendment”), which modified the interest rate applicable to borrowings under the Term Loan.

Beginning July 1, 2023, the Term Loan will reference the Secured Overnight Financing Rate (“SOFR”) and will be based on “Adjusted Term SOFR,” which is calculated as Term SOFR (as defined in the Amendment), plus a 0.10 % adjustment for a one-month interest period, a 0.15 % adjustment for a three-month interest period, or a 0.25 % adjustment for a six-month interest period, subject to a 0.00 % floor.

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 are recorded in Other assets on our Balance Sheet as of September 30, 2022 and in Other liabilities on our Balance Sheet as of December 31, 2021.

We characterize payments we make or receive in connection with these

derivative instruments as interest expense and a reclassification of accumulated other comprehensive income or loss for presentation purposes.

The following table reflects the activity in accumulated other comprehensive income or loss related to our derivative instruments during the first three quarters of 2022 and 2021.

We characterize payments we make or receive in connection with these derivative instruments as interest expense and a reclassification of accumulated other comprehensive income or loss for presentation purposes.

The following table reflects the activity in accumulated other comprehensive income or loss related to our derivative instruments during the first quarter of 2023 and 2022.

There were no reclassifications to the Income Statement for either of the periods presented below.

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Derivative instrument adjustment balance, January 1 $ 13 $ ( 18 )

Other comprehensive gain before reclassifications 16 6

Other comprehensive (loss) gain before reclassifications ( 3 ) 16

Derivative instrument adjustment balance, March 31 $ 10 $ ( 2 )

Other comprehensive gain before reclassifications 7 3

Derivative instrument adjustment balance, June 30 $ 5 $ ( 30 )

Other comprehensive gain before reclassifications 8 3

Derivative instrument adjustment balance, September 30 $ 13 $ ( 27 )

Convertible Notes

2026 Convertible Notes

During 2017, we issued $ 230 million aggregate principal amount of 1.50 % convertible senior notes for which interest was payable semi-annually (the “2022 Convertible Notes”).

The 2022 Convertible Notes matured at par on September 15, 2022, at which time they were settled in cash and the remaining discount and deferred financing costs were fully amortized.

The following table reflects the activity related to our 2022 Convertible Notes during the first three quarters of 2022.

($ in millions) Principal Amount Unamortized Debt Discount Unamortized Debt Issuance Costs Debt, net Carrying Amount of Equity Component, net of Issuance Costs

At December 31, 2021 $ 230 $ ( 5 ) $ ( 1 ) $ 224 $ 33

Adoption of ASU 2020-06 (1)

— 5 — 5 ( 33 )

At January 1, 2022 230 — ( 1 ) 229 —

Amortization — — 1 1 —

Fair value of conversion option transferred to other liabilities (2)

— ( 5 ) — ( 5 ) —

At June 30, 2022 230 ( 5 ) — 225 —

Amortization — 5 — 5 —

Repayment upon maturity ( 230 ) — — ( 230 ) —

At September 30, 2022 $ — $ — $ — $ — $ —

________________________

(1) As a result of the adoption of ASU 2020-06 during the first quarter of 2022, we no longer accounted 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 to reflect 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.

(2) We issued notice of our intent to settle the 2022 Convertible Notes in cash, which became irrevocable on June 15, 2022, and as a result, our previous exception to derivative accounting no longer applied and we were required to fair value the conversion feature on the 2022 Convertible Notes at that time.

The fair value of the conversion feature of $ 5 million was recorded as a debt discount and a corresponding increase to Other liabilities on our balance sheet.

Subsequent changes to the fair value of the conversion feature were recorded on our income statement.

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, 2023 to 6.0262 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 165.94 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, 2023, the effective interest rate was 0.55 %.

The following table shows interest expense information related to the 2026 Convertible Notes.

Three Months Ended Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Contractual interest expense $ 1 $ 1 $ 3 $ 3

Amortization of debt discount 5 1 5 5

Three Months Ended

($ in millions) March 31, 2023 March 31, 2022

Amortization of debt issuance costs $ 1 $ 1

$ 6 $ 2 $ 9 $ 9

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 (“2022 Convertible Note Hedges”), covering 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.

The 2022 Note Hedges were required to follow the same settlement provisions as the 2022 Convertible Notes.

As such, upon issuance of the irrevocable notice of our intent to settle the 2022 Convertible Notes in cash, our previous exception to the derivative accounting for the 2022 Convertible Note Hedges no longer applied and we were required to fair value the 2022 Convertible Note Hedges at that time.

The 2022 Convertible Note Hedges expired upon the maturity of the 2022 Convertible Notes, and none were exercised.

The 2022 Warrants expire in ratable portions on a series of expiration dates over the 60 scheduled trading day period commencing on December 15, 2022.

As of September 30, 2022, the strike price of the 2022 Warrants was subject to adjustment to approximately $ 176.11 , as a result of the dividends we declared since the issuance of the 2022 Warrants that were greater than the quarterly dividend we paid when the 2022 Warrants were issued.

As of September 30, 2022, no 2022 Warrants have been exercised.

convertible note hedge transactions with respect to our common stock (the “2026 Convertible Note Hedges”), covering a total of 3.5 million shares of our common stock, and warrant transactions (the “2026 Warrants”), whereby we sold to the counterparties to the 2026 Convertible Note Hedges, warrants to acquire 3.5 million shares of our common stock.

As of March 31, 2023, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 165.94 and $ 207.43 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

2027 Convertible Notes

During 2022, we issued $ 575 million aggregate principal amount of convertible senior notes (the “2027 Convertible Notes”) that bear interest at a rate of 3.25 %.

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 September 30, 2022 to 5.9657 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 167.62 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.

The 2027 Convertible Notes mature on December 15, 2027, unless earlier repurchased or converted in accordance with their terms prior to that date.

The 2027 Convertible Notes are convertible at a rate of 5.2729 shares of common stock per $1,000 principal amount of 2027 Convertible Notes (equivalent to a conversion price of $ 189.65 per share of our common stock) as of March 31, 2023.

The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes.

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 September 30, 2022, the effective interest rate was 0.55 %.

The following table shows the net carrying value of the 2026 Convertible Notes.

($ in millions) At September 30, 2022 At December 31, 2021

Liability component

Principal amount $ 575 $ 575

Unamortized debt discount (1)

Unamortized debt issuance costs ( 11 ) ( 10 )

Net carrying amount of the liability component $ 564 $ 461

Carrying amount of equity component, net of issuance costs (1)

________________________

(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 to reflect 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.

As of March 31, 2023, the effective interest rate was 3.88 %.

The following table shows interest expense information related to the 2027 Convertible Notes.

Three Months Ended Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Amortization of debt discount $ — $ 6 $ — $ 16

Three Months Ended

($ in millions) March 31, 2023 March 31, 2022

Contractual interest expense $ 4 $ —

Amortization of debt issuance costs 1 —

$ 1 $ 7 $ 2 $ 18

2027 Convertible Note Hedges and Warrants

In connection with the offering of the 2027 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 September 30, 2022, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 167.62 and $ 209.53 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

convertible note hedge transactions with respect to our common stock (the “2027 Convertible Note Hedges”), covering a total of 3.0 million shares of our common stock, and warrant transactions (the “2027 Warrants”), whereby we sold to the counterparties to the 2027 Convertible Note Hedges, warrants to acquire 3.0 million shares of our common stock.

As of March 31, 2023, the strike prices of the 2027 Convertible Note Hedges and the 2027 Warrants were $ 189.65 and $ 286.26 , respectively, and no 2027 Convertible Note Hedges or 2027 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.

Amounts borrowed under the Corporate Credit Facility, 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 2027 Convertible 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 certain bankruptcy remote special purpose subsidiaries.

Finance Lease

During 2020, we entered into a finance lease arrangement, which was amended in 2021, for our new global headquarters office building in Orlando, Florida.

The lease for the new building commenced for accounting purposes during the first quarter of 2023, upon the substantial completion of construction.

The lease includes a 26-year lease term, consisting of a 16-year initial term plus two five-year renewal options.

As of March 31, 2023, the present value of the future lease payments, net of lease incentives, was $ 80 million, with a corresponding lease liability of $ 97 million.

We record right-of-use assets for our finance leases in Property and equipment, net.

Our total payments under this lease are $ 247 million, of which we expect $ 1 million, $ 7 million, $ 8 million, $ 8 million, $ 9 million, and $ 214 million will be paid in 2023, 2024, 2025, 2026, 2027, and thereafter respectively.

SHAREHOLDERS’ EQUITY

Marriott Vacations Worldwide has 100,000,000 authorized shares of common stock, par value of $ 0.01 per share.

At September 30, 2022, there were 75,744,121 shares of Marriott Vacations Worldwide common stock issued, of which 38,707,674 shares were outstanding and 37,036,447 shares were held as treasury stock.

At March 31, 2023, there were 75,805,974 shares of Marriott Vacations Worldwide common stock issued, of which 37,074,453 shares were outstanding and 38,731,521 shares were held as treasury stock.

At December 31, 2022, there were 75,744,524 shares of Marriott Vacations Worldwide common stock issued, of which 37,481,082 shares were outstanding and 38,263,442 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 September 30, 2022 or December 31, 2021.

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, 2023 or December 31, 2022.

Share Repurchase Program

From time to time, with the approval of our Board of Directors, we may undertake programs to purchase our own shares (each, a “Share Repurchase Program” and collectively, the “Share Repurchase Programs”).

From time to time, with the approval of our Board of Directors, we may undertake programs to purchase shares of our common stock (each, a “Share Repurchase Program” and collectively, the “Share Repurchase Programs”).

During the third quarter of 2021, our Board of Directors authorized us to purchase shares of our common stock under a Share Repurchase Program for an aggregate purchase price not to exceed $ 250 million, prior to December 31, 2022.

During the first quarter of 2022, our Board of Directors authorized the purchase of up to an additional $ 300 million of our common stock under this program, as well as the extension of the term of this program to March 31, 2023.

During the third quarter of 2022, our Board of Directors authorized the purchase of up to an additional $ 500 million of our common stock under this program, as well as the extension of the term of this program to June 30, 2023.

As of September 30, 2022, approximately $ 444 million remained available for share repurchases under the Share Repurchase Program.

During the first quarter of 2022, our Board of Directors authorized the purchase of up to an additional $ 300 million of our common stock under this program, and extended the term of this program to March 31, 2023.

During the third quarter of 2022, our Board of Directors authorized the purchase of up to an additional $ 500 million of our common stock under this program, and extended the term of this program to June 30, 2023.

As of March 31, 2023, approximately $ 191 million remained available for share repurchases under the Share Repurchase Program.

Share repurchases may be made through open market purchases, privately negotiated transactions, block transactions, tender offers, or otherwise.

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Acquired shares of our common stock are currently held as treasury shares and carried at cost in our Financial Statements.

The Inflation Reduction Act of 2022, which was enacted in August 2022, imposes a 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.

In the first quarter of 2023, we reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in Accrued liabilities on our Balance Sheet.

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

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

Paid per Share

As of December 31, 2022 22,773,218 $ 2,119 $ 93.06

For the first three quarters of 2022 3,852,726 528 $ 137.16

As of September 30, 2022 21,534,121 $ 1,946 $ 90.37

We declared cash dividends to holders of common stock during the first three quarters of 2022 as follows.

For the first quarter of 2023 522,422 80 $ 153.71

As of March 31, 2023 23,295,640 $ 2,199 $ 94.42

We declared cash dividends to holders of common stock during the first quarter of 2023 as follows.

Any future dividend payments will be subject to the restrictions imposed under the agreements covering our debt, and Board approval.

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February 16, 2023 March 2, 2023 March 16, 2023 $ 0.72

May 12, 2022 May 26, 2022 June 9, 2022 $ 0.62

September 8, 2022 September 22, 2022 October 6, 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 $ 2 million and $ 10 million, as of September 30, 2022 and December 31, 2021, respectively, are included on our Balance Sheets as a component of equity.

SHARE-BASED COMPENSATION

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A total of 1.8 million shares are authorized for issuance pursuant to grants under the MVW Equity Plan.

As of September 30, 2022, approximately 1.0 million shares were available for grants under the MVW Equity Plan.

As of March 31, 2023, approximately 0.8 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 Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Three Months Ended

($ in millions) March 31, 2023 March 31, 2022

Service-based RSUs $ 6 $ 7

Performance-based RSUs 1 —

$ 10 $ 11 $ 30 $ 33

The following table details our deferred compensation costs related to unvested awards:

($ in millions) At September 30, 2022 At December 31, 2021

($ in millions) At March 31, 2023 At December 31, 2022

Service-based RSUs $ 46 $ 26

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Restricted Stock Units

We granted 179,505 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 152.06 , to our employees and non-employee directors during the first three quarters of 2022.

During the first three quarters of 2022, we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management.

A maximum of 129,280 RSUs may be earned under the performance-based RSU awards granted during the first three quarters of 2022.

We granted 180,842 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 146.11 , to our employees and non-employee directors during the first quarter of 2023.

During the first quarter of 2023, we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management.

A maximum of 114,602 RSUs may be earned under the performance-based RSU awards granted during the first quarter of 2023.

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 three quarters of 2022.

We granted 37,436 SARs, with a weighted average grant-date fair value of $ 58.50 and a weighted average exercise price of $ 153.10 , to members of management during the first quarter of 2023.

We use the Black-Scholes model to estimate the fair value of the SARs granted.

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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 three quarters of 2022:

The following table outlines the assumptions used to estimate the fair value of grants during the first quarter of 2023:

Expected volatility 40.47 %

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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 liquidity for general corporate purposes.

These vacation ownership notes receivable securitizations provide funding for general corporate purposes.

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.

With each vacation ownership notes receivable securitization, we may retain all or a portion of the securities that are issued, and certain residual interests.

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.

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There is no noncontrolling interest balance related to these entities and the creditors of these entities do not have general recourse to us.

The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at September 30, 2022:

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, 2023:

($ in millions) Vacation Ownership

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Total $ 1,662 $ 298 $ 1,960

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the third quarter of 2022:

($ in millions) Vacation Ownership

Notes Receivable

Securitizations Warehouse

Credit Facility Total

Interest income $ 58 $ 2 $ 60

Interest expense to investors $ 12 $ 1 $ 13

Debt issuance cost amortization $ 2 $ — $ 2

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first three quarters of 2022:

The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first quarter of 2023:

($ in millions) Vacation Ownership

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Debt issuance cost amortization $ 2 $ 1 $ 3

Administrative expenses $ 1 $ — $ 1

The following table shows cash flows between us and the vacation ownership notes receivable securitization VIEs:

Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021

Three Months Ended

($ in millions) March 31, 2023 March 31, 2022

Net proceeds from vacation ownership notes receivable securitizations $ 21 $ —

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Voluntary repurchases of defaulted vacation ownership notes receivable ( 28 ) ( 23 )

Voluntary clean-up call ( 39 ) ( 72 )

Interest to investors ( 16 ) ( 11 )

Funding of restricted cash ( 95 ) ( 110 )

Total ( 175 ) ( 189 )

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The following table shows cash flows between us and the Warehouse Credit Facility VIE:

Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021

Three Months Ended

($ in millions) March 31, 2023 March 31, 2022

Proceeds from vacation ownership notes receivable securitizations $ 150 $ 102

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Interest receipts 10 1

Reserve release 1 —

Total 178 107

Cash Outflows

Principal to investors ( 15 ) —

Repayment of Warehouse Credit Facility ( 98 ) —

Interest to investors ( 3 ) —

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We do not control the decisions that most significantly impact the economic performance of the entity during construction.

Further, our purchase commitment is contingent upon the property being redeveloped to our brand standards.

Further, our purchase commitment is generally contingent upon the property being redeveloped to our brand standards.

Accordingly, we have not consolidated the VIE.

During the second quarter of 2022, we amended the terms of our prior commitment and extended a bridge loan to the VIE for $ 47 million.

During the third quarter of 2022, we further amended the terms of our prior commitment at which time the bridge loan was fully repaid.

We expect to acquire the property over time and as of September 30, 2022, we expect to make payments for the property as follows:

We expect to acquire the property over time and as of March 31, 2023, we expect to make payments for the property as follows:

$ 112 million in 2024, $ 81 million in 2025 and $ 41 million in 2026.

As of September 30, 2022, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of approximately $ 1 million, $ 1 million in Property and Equipment, and $ 2 million in Accrued Liabilities.

We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 1 million as of September 30, 2022.

As of March 31, 2023, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of approximately $ 1 million, $ 1 million in Property and Equipment, and $ 1 million in Accrued Liabilities.

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, 2023.

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.

We consolidate the liabilities of the Marriott Vacations Worldwide Deferred Compensation Plan and the related assets, which consist of the COLI policies held in a 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 September 30, 2022, the value of the assets held in the rabbi trust was $ 68 million, which is included in the Other line within assets on our Balance Sheets.

At March 31, 2023, the value of the assets held in the rabbi trust was $ 80 million, which is included in the Other line within assets on our Balance Sheets.

BUSINESS SEGMENTS

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• 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.

We are also the exclusive worldwide developer, marketer, and seller of vacation ownership and related products under The Ritz-Carlton 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.

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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 Interval International and Aqua-Aston.

Exchange & Third-Party Management revenue generally is fee-based and derived from membership, exchange and rental transactions, owners’ association management, and other related products and services.

• Exchange & Third-Party Management includes an exchange network and membership programs, as well as provision of management services to other resorts and lodging properties.

We provide these services through our Interval International and Aqua-Aston businesses.

Exchange & Third-Party Management revenue generally is fee-

based and derived from membership, exchange and rental transactions, property and owners’ association management, and other related products and services.

VRI Americas was part of the Exchange & Third-Party Management segment through the date of sale in April 2022.

See Footnote 3 “Acquisitions and Dispositions” for more information on the disposition of VRI Americas.

Our CODM evaluates the performance of our segments based primarily on the results of the segment without allocating corporate expenses or income taxes.

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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.

We allocate depreciation and amortization, 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 CODM uses Adjusted Earnings before Interest Expense, Taxes, Depreciation and Amortization (“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 term 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.

Three Months Ended Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Three Months Ended

($ in millions) March 31, 2023 March 31, 2022

Vacation Ownership $ 1,097 $ 956

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Adjusted EBITDA and Reconciliation to Net Income or Loss Attributable to Common Shareholders

Three Months Ended Nine Months Ended

($ in millions) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021

Three Months Ended

($ in millions) March 31, 2023 March 31, 2022

Adjusted EBITDA Vacation Ownership $ 229 $ 199

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Corporate and other ( 63 ) ( 54 )

Interest expense ( 34 ) ( 41 ) ( 91 ) ( 128 )

Interest expense, net ( 34 ) ( 27 )

Tax provision ( 41 ) ( 32 )

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Certain items ( 2 ) ( 30 )

Net income (loss) attributable to common shareholders $ 109 $ 10 $ 303 $ ( 12 )

($ in millions) At September 30, 2022 At December 31, 2021

Net income attributable to common shareholders $ 87 $ 58

($ in millions) At March 31, 2023 At December 31, 2022

Vacation Ownership $ 8,197 $ 8,037

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$ 9,602 $ 9,639

We conduct business globally, and our operations outside the United States represented approximately 12 % and 10 % of our revenues, excluding cost reimbursements, for the three months ended September 30, 2022 and September 30, 2021, respectively, and 12 % and 10 % of our revenues, excluding cost reimbursements, for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Revenues Excluding Cost Reimbursements

Three Months Ended

($ in millions) March 31, 2023 March 31, 2022

United States $ 700 $ 657

All other countries 104 79

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

What changed 10-Q

Item 1. Financial Statements