MARRIOTT VACATIONS WORLDWIDE Corp 10-Q

Item 1. Financial Statements MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) (Unaudited) Three Months Ended March 31, 2023 March 31, 2022 REVENUES Sale of vacation ownership products $ 375 $ 310 Management and exchange 200 222 Rental 151 133 Financing 78 71 Cost reimbursements 365 316 TOTAL REVENUES 1,169 1,052 EXPENSES Cost of vacation ownership products 58 60 Marketing and sales 210 182 Management and exchange 107 127 Rental 113 81 Financing 26 21 General and administrative 68 61 Depreciation and amortization 32 33 Litigation charges 3 3 Royalty fee 29 27 Impairment 4 — Cost reimbursements 365 316 TOTAL EXPENSES 1,015 911 Gains and other income, net 21 4 Interest expense, net ( 34 ) ( 27 ) Transaction and integration costs ( 13 ) ( 28 ) INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 128 90 Provision for income taxes ( 41 ) ( 32 ) NET INCOME 87 58 Net income attributable to noncontrolling interests — — NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 87 $ 58 EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS Basic $ 2.32 $ 1.36 Diluted $ 2.06 $ 1.23 CASH DIVIDENDS DECLARED PER SHARE $ 0.72 $ 0.62 See Interim Condensed Notes to Consolidated Financial Statements 1 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) (Unaudited) Three Months Ended March 31, 2023 March 31, 2022 NET INCOME $ 87 $ 58 Foreign currency translation adjustments 6 4 Derivative instrument adjustment, net of tax ( 3 ) 16 OTHER COMPREHENSIVE GAIN, NET OF TAX 3 20 Net income attributable to noncontrolling interests — — COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS — — COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 90 $ 78 See Interim Condensed Notes to Consolidated Financial Statements 2 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED BALANCE SHEETS (In millions, except share and per share data) Unaudited March 31, 2023 December 31, 2022 ASSETS Cash and cash equivalents $ 306 $ 524 Restricted cash (including $ 85 and $ 85 from VIEs, respectively) 268 330 Accounts and contracts receivable, net (including $ 13 and $ 13 from VIEs, respectively) 289 292 Vacation ownership notes receivable, net (including $ 1,793 and $ 1,792 from VIEs, respectively) 2,220 2,198 Inventory 672 660 Property and equipment, net 1,215 1,139 Goodwill 3,117 3,117 Intangibles, net 898 911 Other (including $ 80 and $ 76 from VIEs, respectively) 617 468 TOTAL ASSETS $ 9,602 $ 9,639 LIABILITIES AND EQUITY Accounts payable $ 222 $ 356 Advance deposits 178 158 Accrued liabilities (including $ 3 and $ 5 from VIEs, respectively) 334 369 Deferred revenue 448 344 Payroll and benefits liability 206 251 Deferred compensation liability 147 139 Securitized debt, net (including $ 1,957 and $ 1,982 from VIEs, respectively) 1,936 1,938 Debt, net 3,129 3,088 Other 183 167 Deferred taxes 339 331 TOTAL LIABILITIES 7,122 7,141 Contingencies and Commitments (Note 10) Preferred stock — $ 0.01 par value; 2,000,000 shares authorized; none issued or outstanding — — Common stock — $ 0.01 par value; 100,000,000 shares authorized; 75,805,974 and 75,744,524 shares issued, respectively 1 1 Treasury stock — at cost; 38,731,521 and 38,263,442 shares, respectively ( 2,132 ) ( 2,054 ) Additional paid-in capital 3,937 3,941 Accumulated other comprehensive income 18 15 Retained earnings 654 593 TOTAL MVW SHAREHOLDERS' EQUITY 2,478 2,496 Noncontrolling interests 2 2 TOTAL EQUITY 2,480 2,498 TOTAL LIABILITIES AND EQUITY $ 9,602 $ 9,639 The abbreviation VIEs above means Variable Interest Entities. See Interim Condensed Notes to Financial Statements 3 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three Months Ended March 31, 2023 March 31, 2022 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 Amortization of debt discount and issuance costs 7 5 Vacation ownership notes receivable reserve 38 29 Share-based compensation 7 8 Impairment charges 3 — Deferred income taxes 6 18 Net change in assets and liabilities: Accounts and contracts receivable ( 6 ) 45 Vacation ownership notes receivable originations ( 225 ) ( 205 ) Vacation ownership notes receivable collections 161 188 Inventory 16 28 Other assets ( 146 ) ( 134 ) Accounts payable, advance deposits and accrued liabilities ( 101 ) 12 Deferred revenue 101 54 Payroll and benefit liabilities ( 45 ) 13 Deferred compensation liability 4 ( 7 ) Other liabilities 16 ( 3 ) Purchase of vacation ownership units for future transfer to inventory — ( 12 ) Other, net ( 5 ) ( 1 ) Net cash, cash equivalents and restricted cash (used in) provided by operating activities ( 50 ) 129 INVESTING ACTIVITIES Capital expenditures for property and equipment (excluding inventory) ( 37 ) ( 9 ) Purchase of company owned life insurance — ( 4 ) Other, net — 3 Net cash, cash equivalents and restricted cash used in investing activities ( 37 ) ( 10 ) Continued See Interim Condensed Notes to Consolidated Financial Statements 4 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (In millions) (Unaudited) Three Months Ended March 31, 2023 March 31, 2022 FINANCING ACTIVITIES Borrowings from securitization transactions 171 102 Repayment of debt related to securitization transactions ( 174 ) ( 178 ) Proceeds from debt 405 30 Repayments of debt ( 461 ) ( 30 ) Finance lease incentive 10 — Finance lease payment ( 2 ) ( 2 ) Payment of debt issuance costs — ( 4 ) Repurchase of common stock ( 80 ) ( 119 ) Payment of dividends ( 54 ) ( 49 ) Payment of withholding taxes on vesting of restricted stock units ( 9 ) ( 22 ) Net cash, cash equivalents and restricted cash used in financing activities ( 194 ) ( 272 ) Effect of changes in exchange rates on cash, cash equivalents and restricted cash 1 — Change in cash, cash equivalents and restricted cash ( 280 ) ( 153 ) Cash, cash equivalents and restricted cash, beginning of period 854 803 Cash, cash equivalents and restricted cash, end of period $ 574 $ 650 SUPPLEMENTAL DISCLOSURES Non-cash issuance of debt in connection with asset acquisition $ — $ 11 Non-cash issuance of treasury stock for employee stock purchase plan 1 1 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 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 Interim Condensed Notes to Consolidated Financial Statements 5 MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In millions) (Unaudited) Common Stock Issued Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive 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 — Net income — — — — 87 87 — 87 — Foreign currency translation adjustments — — — 6 — 6 — 6 — Derivative instrument adjustment — — — ( 3 ) — ( 3 ) — ( 3 ) 0.1 Share-based compensation plans — 2 ( 4 ) — — ( 2 ) — ( 2 ) — Repurchase of common stock — ( 80 ) — — — ( 80 ) — ( 80 ) — Dividends — — — — ( 26 ) ( 26 ) — ( 26 ) 75.8 BALANCE AT MARCH 31, 2023 $ 1 $ ( 2,132 ) $ 3,937 $ 18 $ 654 $ 2,478 $ 2 $ 2,480 Common Stock Issued Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity 75.5 BALANCE AT DECEMBER 31, 2021 $ 1 $ ( 1,356 ) $ 4,072 $ ( 16 ) $ 275 $ 2,976 $ 10 $ 2,986 — Impact of adoption of ASU 2020-06 — — ( 111 ) — 31 ( 80 ) — ( 80 ) 75.5 OPENING BALANCE 2022 1 ( 1,356 ) 3,961 ( 16 ) 306 2,896 10 2,906 — Net income — — — — 58 58 — 58 — Foreign currency translation adjustments — — — 4 — 4 — 4 — Derivative instrument adjustment — — — 16 — 16 — 16 0.2 Share-based compensation plans — 1 ( 16 ) — — ( 15 ) — ( 15 ) — Repurchase of common stock — ( 119 ) — — — ( 119 ) — ( 119 ) — Dividends — — — — ( 26 ) ( 26 ) — ( 26 ) 75.7 BALANCE AT MARCH 31, 2022 $ 1 $ ( 1,474 ) $ 3,945 $ 4 $ 338 $ 2,814 $ 10 $ 2,824 See Interim Condensed Notes to Consolidated Financial Statements 6 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The Interim Consolidated Financial Statements present the results of operations, financial position and cash flows of Marriott Vacations Worldwide Corporation (referred to in this report as (i) “we,” “us,” “Marriott Vacations Worldwide,” “MVW,” or the “Company,” which includes our consolidated subsidiaries except where the context of the reference is to a single corporate entity, or (ii) “MVWC,” which shall refer only to Marriott Vacations Worldwide Corporation, without its consolidated subsidiaries). In order to make this report easier to read, we refer throughout to (i) our Interim Consolidated Financial Statements as our “Financial Statements,” (ii) our Interim Consolidated Statements of Income as our “Income Statements,” (iii) our Interim Consolidated Balance Sheets as our “Balance Sheets,” and (iv) our Interim Consolidated Statements of Cash Flows as our “Cash Flows.” In addition, references throughout to numbered “Footnotes” refer to the numbered Notes in 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 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. 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, 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, 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. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP. Although we believe our footnote disclosures are adequate to make the information presented not misleading, the Financial Statements in this report should be read in conjunction with the consolidated financial statements and notes thereto in our 2022 Annual Report. 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. 7 Table of Contents 2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS New Accounting Standards Accounting Standards Update 2022-02 – “ Financial Instruments — Credit Losses (Topic 326) – Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”) 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. 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. 3. ACQUISITIONS 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. Bali During the first quarter of 2022, we acquired 88 completed vacation ownership units, as well as a sales center, located in Bali, Indonesia for $ 36 million. The transaction was accounted for as an asset acquisition 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. 8 Table of Contents 4. REVENUE AND RECEIVABLES Sources of Revenue by Segment Three Months Ended March 31, 2023 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Sale of vacation ownership products $ 375 $ — $ — $ 375 Ancillary revenues 61 1 — 62 Management fee revenues 45 8 ( 1 ) 52 Exchange and other services revenues 29 47 10 86 Management and exchange 135 56 9 200 Rental 141 10 — 151 Cost reimbursements 368 5 ( 8 ) 365 Revenue from contracts with customers 1,019 71 1 1,091 Financing 78 — — 78 Total Revenues $ 1,097 $ 71 $ 1 $ 1,169 Three Months Ended March 31, 2022 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Sale of vacation ownership products $ 310 $ — $ — $ 310 Ancillary revenues 54 1 — 55 Management fee revenues 42 10 ( 3 ) 49 Exchange and other services revenues 30 53 35 118 Management and exchange 126 64 32 222 Rental 122 11 — 133 Cost reimbursements 327 9 ( 20 ) 316 Revenue from contracts with customers 885 84 12 981 Financing 71 — — 71 Total Revenues $ 956 $ 84 $ 12 $ 1,052 9 Table of Contents Timing of Revenue from Contracts with Customers by Segment The following tables detail the timing of revenue from contracts with customers by segment for the time periods presented. Three Months Ended March 31, 2023 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Services transferred over time $ 578 $ 29 $ 1 $ 608 Goods or services transferred at a point in time 441 42 — 483 Revenue from contracts with customers $ 1,019 $ 71 $ 1 $ 1,091 Three Months Ended March 31, 2022 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Services transferred over time $ 517 $ 38 $ 12 $ 567 Goods or services transferred at a point in time 368 46 — 414 Revenue from contracts with customers $ 885 $ 84 $ 12 $ 981 Sale of Vacation Ownership Products 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 March 31, 2023 or December 31, 2022. ($ in millions) At March 31, 2023 At December 31, 2022 Receivables from Contracts with Customers Accounts and contracts receivable, net $ 181 $ 209 Vacation ownership notes receivable, net 2,220 2,198 $ 2,401 $ 2,407 Contract Liabilities Advance deposits $ 178 $ 158 Deferred revenue 448 344 $ 626 $ 502 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 March 31, 2023, approximately 91 % of this amount is expected to be recognized as revenue over the next two years . 10 Table of Contents 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 and contracts receivable balances: ($ in millions) At March 31, 2023 At December 31, 2022 Receivables from contracts with customers, net $ 181 $ 209 Interest receivable 16 16 Tax receivable 35 20 Indemnification assets 39 19 Employee tax credit receivable 16 16 Other 2 12 $ 289 $ 292 5. INCOME TAXES Our provision for income taxes is calculated using an estimated annual effective tax rate, based upon expected annual income less losses in certain jurisdictions, permanent items, statutory rates and planned tax strategies in the various jurisdictions in which we operate. However, discrete items related to prior year tax items are treated separately. Our interim effective tax rate was 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 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. ($ in millions) Unrecognized Tax Benefits Balance at December 31, 2022 $ 25 Increases related to tax positions taken during a prior period 7 Decreases related to tax positions taken during a prior period ( 5 ) Balance at March 31, 2023 $ 27 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. The unrecognized tax benefits, including accrued interest and penalties, are included in Other liabilities on our Balance Sheet. Our income tax returns are subject to examination by relevant tax authorities. Certain of our returns are being audited in various jurisdictions for tax years 2007 through 2020. The amount of the unrecognized tax benefits may increase or decrease within the next twelve months as a result of audits or audit settlements. 11 Table of Contents 6. VACATION OWNERSHIP NOTES RECEIVABLE The following table shows the composition of our vacation ownership notes receivable balances, net of reserves. March 31, 2023 December 31, 2022 ($ in millions) Originated Acquired Total Originated Acquired Total Securitized $ 1,594 $ 199 $ 1,793 $ 1,571 $ 221 $ 1,792 Non-securitized Eligible for securitization (1) 104 1 105 63 — 63 Not eligible for securitization (1) 300 22 322 322 21 343 Subtotal 404 23 427 385 21 406 $ 1,998 $ 222 $ 2,220 $ 1,956 $ 242 $ 2,198 (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 ($ in millions) March 31, 2023 March 31, 2022 Interest income associated with vacation ownership notes receivable — securitized $ 67 $ 59 Interest income associated with vacation ownership notes receivable — non-securitized 9 10 Total interest income associated with vacation ownership notes receivable $ 76 $ 69 Credit Quality Indicators - Vacation Ownership Notes Receivable 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 March 31, 2023. Acquired Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total 2023, remaining $ 3 $ 27 $ 30 2024 3 36 39 2025 3 33 36 2026 3 30 33 2027 3 24 27 Thereafter 8 49 57 Balance at March 31, 2023 $ 23 $ 199 $ 222 Weighted average stated interest rate 13.9 % 14.2 % 14.2 % Range of stated interest rates 0.0 % to 21.9 % 0.0 % to 21.9 % 0.0 % to 21.9 % 12 Table of Contents The following table summarizes activity related to our acquired vacation ownership notes receivable reserve. Acquired Vacation Ownership Notes Receivable Reserve ($ in millions) Non-Securitized Securitized Total Balance at December 31, 2022 $ 11 $ 18 $ 29 Write-offs ( 7 ) — ( 7 ) Recoveries 4 — 4 Defaulted vacation ownership notes receivable repurchase activity (1) 5 ( 5 ) — (Decrease) increase in vacation ownership notes receivable reserve ( 4 ) 4 — Balance at March 31, 2023 $ 9 $ 17 $ 26 (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 repurchased securitized vacation ownership notes receivable. The following tables show the acquired vacation ownership notes receivable, before reserves, by brand and FICO score. 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 and Welk 72 49 1 1 123 $ 135 $ 92 $ 6 $ 15 $ 248 Acquired Vacation Ownership Notes Receivable as of December 31, 2022 ($ in millions) 700+ 600 - 699 < 600 No Score Total 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, 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 ($ in millions) 2021 2020 2019 & Prior Total 700 + $ — $ — $ 63 $ 63 600 - 699 — — 43 43 < 600 — — 5 5 No Score — — 14 14 $ — $ — $ 125 $ 125 Gross write-offs $ — $ — $ 4 $ 4 Acquired Vacation Ownership Notes Receivable - Hyatt and Welk ($ in millions) 2021 2020 2019 & Prior Total 700 + $ 5 $ 15 $ 52 $ 72 600 - 699 3 8 38 49 < 600 — 1 — 1 No Score — — 1 1 $ 8 $ 24 $ 91 $ 123 Gross write-offs $ — $ 1 $ 2 $ 3 13 Table of Contents Originated Vacation Ownership Notes Receivable Originated vacation ownership notes receivable represent vacation ownership notes receivable originated by Legacy-ILG and Legacy-Welk subsequent to each respective acquisition date and all Legacy-MVW vacation ownership notes receivable. The following table shows future principal payments, net of reserves, and interest rates for our originated vacation ownership notes receivable at March 31, 2023. Originated Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total 2023, remaining $ 38 $ 99 $ 137 2024 40 137 177 2025 35 142 177 2026 35 149 184 2027 33 155 188 Thereafter 223 912 1,135 Balance at March 31, 2023 $ 404 $ 1,594 $ 1,998 Weighted average stated interest rate 12.3 % 13.2 % 13.0 % Range of stated interest rates 0.0 % to 20.9 % 0.0 % to 19.9 % 0.0 % to 20.9 % For originated vacation ownership notes receivable, we record the difference between the vacation ownership note receivable and the variable consideration included in the transaction price for the sale of the related vacation ownership product as a reserve on our vacation ownership notes receivable. The following table summarizes the activity related to our originated vacation ownership notes receivable reserve. Originated Vacation Ownership Notes Receivable Reserve ($ in millions) Non-Securitized Securitized Total Balance at December 31, 2022 $ 149 $ 213 $ 362 Increase in vacation ownership notes receivable reserve 29 9 38 Securitizations ( 23 ) 23 — Write-offs ( 29 ) — ( 29 ) Defaulted vacation ownership notes receivable repurchase activity (1) 23 ( 23 ) — Balance at March 31, 2023 $ 149 $ 222 $ 371 (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 repurchased securitized vacation ownership notes receivable. The following tables show originated vacation ownership notes receivable, before reserves, by brand and FICO score. 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 and Welk 162 66 2 3 233 $ 1,392 $ 620 $ 57 $ 300 $ 2,369 Originated Vacation Ownership Notes Receivable as of December 31, 2022 ($ in millions) 700 + 600 - 699 < 600 No Score Total Combined Marriott $ 1,210 $ 549 $ 55 $ 278 2,092 Hyatt and Welk 157 64 3 2 226 $ 1,367 $ 613 $ 58 $ 280 $ 2,318 14 Table of Contents 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 ($ in millions) 2023 2022 2021 2020 2019 & Prior Total 700 + $ 115 $ 453 $ 277 $ 92 $ 293 $ 1,230 600 - 699 36 188 132 49 149 554 < 600 3 18 14 6 14 55 No Score 48 101 37 23 88 297 $ 202 $ 760 $ 460 $ 170 $ 544 $ 2,136 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 700 + $ 27 $ 90 $ 39 $ 2 $ 4 $ 162 600 - 699 9 38 16 1 2 66 < 600 — 1 1 — — 2 No Score 1 2 — — — 3 $ 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 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. Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total Investment in vacation ownership notes receivable on non-accrual status at March 31, 2023 $ 128 $ 26 $ 154 Investment in vacation ownership notes receivable on non-accrual status at December 31, 2022 $ 126 $ 24 $ 150 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 31 – 90 days past due $ 20 $ 53 $ 73 $ 25 $ 56 $ 81 91 – 120 days past due 6 16 22 7 16 23 Greater than 120 days past due 122 10 132 119 8 127 Total past due 148 79 227 151 80 231 Current 437 1,953 2,390 415 1,943 2,358 Total vacation ownership notes receivable $ 585 $ 2,032 $ 2,617 $ 566 $ 2,023 $ 2,589 15 Table of Contents 7. FINANCIAL INSTRUMENTS The following table shows the carrying values and the estimated fair values of financial assets and liabilities that qualify as financial instruments, determined in accordance with the authoritative guidance for disclosures regarding the fair value of financial instruments. Considerable judgment is required in interpreting market data to develop estimates of fair value. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts. The table excludes Cash and cash equivalents, Restricted cash, Accounts 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 March 31, 2023 At December 31, 2022 ($ in millions) Carrying Amount Fair Value Carrying Amount Fair Value Vacation ownership notes receivable, net $ 2,220 $ 2,283 $ 2,198 $ 2,245 Other assets 80 80 76 76 Total financial assets $ 2,300 $ 2,363 $ 2,274 $ 2,321 Securitized debt, net $ ( 1,936 ) $ ( 1,838 ) $ ( 1,938 ) $ ( 1,828 ) 2025 Notes, net — — ( 248 ) ( 258 ) 2028 Notes, net ( 347 ) ( 310 ) ( 347 ) ( 307 ) 2029 Notes, net ( 494 ) ( 424 ) ( 494 ) ( 417 ) Term Loan, net ( 779 ) ( 780 ) ( 778 ) ( 775 ) Revolving Corporate Credit Facility, net ( 196 ) ( 200 ) — — 2026 Convertible Notes, net ( 566 ) ( 553 ) ( 565 ) ( 560 ) 2027 Convertible Notes, net ( 561 ) ( 566 ) ( 560 ) ( 568 ) Non-interest bearing note payable, net ( 4 ) ( 4 ) ( 10 ) ( 10 ) Total financial liabilities $ ( 4,883 ) $ ( 4,675 ) $ ( 4,940 ) $ ( 4,723 ) Vacation Ownership Notes Receivable At March 31, 2023 At December 31, 2022 ($ in millions) Carrying Amount Fair Value Carrying Amount Fair Value Vacation ownership notes receivable, net Securitized $ 1,793 $ 1,854 $ 1,792 $ 1,837 Eligible for securitization 105 107 63 65 Not eligible for securitization 322 322 343 343 Non-securitized 427 429 406 408 $ 2,220 $ 2,283 $ 2,198 $ 2,245 We estimate the fair value of our vacation ownership notes receivable that have been securitized using a discounted cash flow model. We believe this is comparable to the model that an independent third party would use in the current market. Our model uses default rates, prepayment rates, coupon rates, and loan terms for our securitized vacation ownership notes receivable portfolio as key drivers of risk and relative value to determine the fair value of the underlying vacation ownership notes receivable. We concluded that this fair value measurement should be categorized within Level 3. Due to factors that impact the general marketability of our vacation ownership notes receivable that have not been securitized, as well as current market conditions, we bifurcate our non-securitized vacation ownership notes receivable at each balance sheet date into those eligible and not eligible for securitization using criteria applicable to current securitization transactions in the ABS market. Generally, vacation ownership notes receivable are considered not eligible for securitization if any of the following attributes are present: (1) payments are greater than 30 days past due; (2) the first payment has not been received; or (3) the collateral is located in Asia or Europe. In some cases, eligibility may also be determined based on the credit score of the borrower, the remaining term of the loans and other similar factors that 16 Table of Contents may reflect investor demand in a securitization transaction or the cost to effectively securitize the vacation ownership notes receivable. The table above shows the bifurcation of our vacation ownership notes receivable that have not been securitized into those eligible and not eligible for securitization based upon the aforementioned eligibility criteria. We estimate the fair value of the portion of our vacation ownership notes receivable that have not been securitized that we believe will ultimately be securitized in the same manner as vacation ownership notes receivable that have been securitized. We value the remaining vacation ownership notes receivable that have not been securitized at their carrying value, rather than using our pricing model. We believe that the carrying value of these particular vacation ownership notes receivable approximates fair value because the stated, or otherwise imputed, interest rates of these loans are 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. Other Assets Other assets include $ 80 million of company owned insurance policies (the “COLI policies”), acquired on the lives of certain participants in the Marriott Vacations Worldwide Deferred Compensation Plan, that are held in a rabbi trust. The carrying value of the COLI policies is equal to their cash surrender value (Level 2 inputs). Securitized Debt We generate cash flow estimates by modeling all bond tranches for our active vacation ownership notes receivable securitization transactions, with consideration for the collateral specific to each tranche. The key drivers in our analysis include default rates, prepayment rates, bond interest rates, and other structural factors, which we use to estimate the projected cash flows. In order to estimate market credit spreads by rating, we obtain indicative credit spreads from investment banks that actively issue and facilitate the market for vacation ownership securities and determine an average credit spread by rating level of the different tranches. We then apply those estimated market spreads to swap rates in order to estimate an underlying discount rate for calculating the fair value of the active bonds payable. We concluded that this fair value measurement should be categorized within Level 3. Senior Notes We estimate the fair value of our 2025 Notes, 2028 Notes, and 2029 Notes (each as defined in Footnote 12 “Debt”) using quoted market prices as of the last trading day for the quarter; however these notes have only a limited trading history and volume, and as such, this fair value estimate is not necessarily indicative of the value at which these notes could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 2. Term Loan We estimate the fair value of our Term Loan (as defined in Footnote 12 “Debt”) using quotes from securities dealers as of the last trading day for the quarter; however, this loan has only a limited trading history and volume, and as such, this fair value estimate is not necessarily indicative of the value at which the Term Loan could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 3. Revolving Corporate Credit Facility We estimate that the gross carrying value of our Revolving Corporate Credit Facility (as defined in Footnote 12 “Debt”) approximates fair value as the contractual interest rate is variable plus an applicable margin. We concluded that this fair value measurement should be categorized within Level 3. Convertible Notes 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. Non-Interest Bearing Note Payable The carrying value of our non-interest bearing note payable issued in connection with the acquisition of vacation ownership units located in Bali, Indonesia approximates fair value. We concluded that this fair value measurement should be categorized within Level 3. 17 Table of Contents 8. EARNINGS PER SHARE Basic earnings or loss per common share attributable to common shareholders is calculated by dividing net income or loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding. Diluted earnings or loss per common share attributable to common shareholders is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period, except in periods when there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. The dilutive effect of outstanding equity-based compensation awards is reflected in diluted earnings or loss per common share applicable to common shareholders by application of the treasury stock method using average market prices during the period. 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 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 (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 (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 Employee SARs 0.2 0.2 Restricted stock units 0.3 0.3 2022 Convertible Notes ($ 230 million of principal) — 1.6 2026 Convertible Notes ($ 575 million of principal) 3.5 3.4 2027 Convertible Notes ($ 575 million of principal) 3.0 — 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. 18 Table of Contents 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. 9. INVENTORY The following table shows the composition of our inventory balances: ($ in millions) At March 31, 2023 At December 31, 2022 Real estate inventory (1) $ 663 $ 651 Other 9 9 $ 672 $ 660 (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 $ 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. 10. CONTINGENCIES AND COMMITMENTS Commitments and Letters of Credit 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 $ 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. 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. Guarantees Certain of our rental management agreements in our Exchange & Third-Party Management segment provide for owners of properties we manage to receive specified percentages of rental revenue or guaranteed amounts generated under our management. In these cases, the operating expenses for the rental operations are paid from the revenue generated by the rentals, the owners are then paid their contractual percentages or guaranteed amounts, and we either retain the balance (if any) as our fee or we make up the deficit. 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. 19 Table of Contents 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 our payment of maintenance fees for unsold inventory. The agreement will terminate on the earlier of: 1) sale of 95 % of the total ownership interests in the owners’ association; or 2) written notification of termination by either party. At March 31, 2023, our expected commitment for the remainder of 2023 is $ 7 million. Loss Contingencies In February 2019, the owners’ association for the St. Regis Residence Club, New York filed a lawsuit in the Supreme Court for the State of New York, New York County, Commercial Division against ILG and several of its subsidiaries and certain third parties. The operative complaint alleges that the defendants breached their fiduciary duties related to sale and rental practices, aided and abetted certain breaches of fiduciary duty, engaged in self-dealing as the sponsor and manager of the club, tortiously interfered with the management agreement, were unjustly enriched, and engaged in anticompetitive conduct. The plaintiff is seeking unspecified damages, punitive damages and disgorgement of payments under the management and purchase agreements. In February 2022, the Court granted our motion to dismiss the complaint and dismissed with prejudice all claims except one, with respect to which the plaintiff was granted leave to amend its complaint. The plaintiff 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. A number of these lawsuits and claims may exist at any given time. Additionally, the COVID-19 pandemic may give rise to various claims and lawsuits from owners, members and other parties. We record and accrue for legal contingencies when we determine that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, we evaluate, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, our ability to make a reasonable estimate of loss. We review these accruals each reporting period and make revisions based on changes in facts and circumstances. We have not accrued for 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. For matters not requiring accrual, we do not believe that the ultimate outcome of such matters, individually or in the aggregate, will materially harm our financial position, cash flows, or overall trends in results of operations based on information currently available. However, legal proceedings are inherently uncertain, and while we believe that our accruals are adequate and/or we have valid defenses to the claims asserted, unfavorable rulings could occur that could, individually or in the aggregate, have a material adverse effect on our business, financial condition, or operating results. 11. SECURITIZED DEBT The following table provides detail on our securitized debt, net of unamortized debt discount and issuance costs. ($ in millions) At March 31, 2023 At December 31, 2022 Vacation ownership notes receivable securitizations, gross (1) $ 1,661 $ 1,799 Unamortized debt discount and issuance costs ( 20 ) ( 21 ) 1,641 1,778 Warehouse Credit Facility, gross (2) 296 162 Unamortized debt issuance costs ( 1 ) ( 2 ) 295 160 $ 1,936 $ 1,938 (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 %. 20 Table of Contents 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 March 31, 2023. Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility (1) Total ($ in millions) Payments Year 2023, remaining $ 127 $ 10 $ 137 2024 172 15 187 2025 174 271 445 2026 176 — 176 2027 173 — 173 Thereafter 839 — 839 $ 1,661 $ 296 $ 1,957 (1) Excludes future Warehouse Credit Facility renewals. Vacation Ownership Notes Receivable Securitizations Each of the securitized vacation ownership notes receivable transactions contains various triggers relating to the performance of the underlying vacation ownership notes receivable. If a pool of securitized vacation ownership notes receivable fails to perform within the pool’s established parameters (default or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess spread we would otherwise receive from that pool (attributable to the interests we retained) to accelerate the principal payments to investors (taking into account the subordination of the different tranches to the extent there are multiple tranches) until the performance trigger is cured. During the first quarter of 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. 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. Four classes of vacation ownership loan backed notes were issued by the 2023-1 LLC: $ 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 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. 21 Table of Contents 12. DEBT The following table provides detail on our debt balances, net of unamortized debt discount and issuance costs. ($ in millions) At March 31, 2023 At December 31, 2022 Senior Secured Notes 2025 Notes $ — $ 250 Unamortized debt discount and issuance costs — ( 2 ) — 248 Senior Unsecured Notes 2028 Notes 350 350 Unamortized debt discount and issuance costs ( 3 ) ( 3 ) 347 347 2029 Notes 500 500 Unamortized debt discount and issuance costs ( 6 ) ( 6 ) 494 494 Corporate Credit Facility Term Loan 784 784 Unamortized debt discount and issuance costs ( 5 ) ( 6 ) 779 778 Revolving Corporate Credit Facility (1) 200 — Unamortized debt issuance costs (2) ( 4 ) — 196 — Convertible Notes 2026 Convertible Notes 575 575 Unamortized debt issuance costs ( 9 ) ( 10 ) 566 565 2027 Convertible Notes 575 575 Unamortized debt issuance costs ( 14 ) ( 15 ) 561 560 Finance Leases 182 86 Non-interest bearing note payable 4 10 $ 3,129 $ 3,088 (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. 22 Table of Contents 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 Senior Notes Our senior notes include: • $ 500 million aggregate principal amount of 6.125 % Senior Secured Notes due 2025 issued in the second quarter of 2020 with a maturity date of September 15, 2025 (the “2025 Notes”), of which $ 250 million was outstanding as of December 31, 2022. • $ 350 million aggregate principal amount of 4.750 % Senior Unsecured Notes due 2028 issued in the fourth quarter of 2019 with a maturity date of January 15, 2028 (the “2028 Notes”). • $ 500 million aggregate principal amount of 4.500 % Senior Unsecured Notes due 2029 issued in the second quarter of 2021 with a maturity date of June 15, 2029 (the “2029 Notes”). 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 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 March 31, 2023 and December 31, 2022. 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. 23 Table of Contents 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. ($ in millions) 2023 2022 Derivative instrument adjustment balance, January 1 $ 13 $ ( 18 ) Other comprehensive (loss) gain before reclassifications ( 3 ) 16 Derivative instrument adjustment balance, March 31 $ 10 $ ( 2 ) Convertible Notes 2026 Convertible Notes During 2021, we issued $ 575 million aggregate principal amount of convertible senior notes (the “2026 Convertible Notes”) that bear interest at a rate of 0.00 %. The 2026 Convertible Notes mature on January 15, 2026, unless repurchased or converted in accordance with their terms prior to that date. The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of March 31, 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 ($ in millions) March 31, 2023 March 31, 2022 Amortization of debt issuance costs $ 1 $ 1 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 (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 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 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 ($ in millions) March 31, 2023 March 31, 2022 Contractual interest expense $ 4 $ — Amortization of debt issuance costs 1 — $ 5 $ — 24 Table of Contents 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 (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, 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. 13. SHAREHOLDERS’ EQUITY Marriott Vacations Worldwide has 100,000,000 authorized shares of common stock, par value of $ 0.01 per share. 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 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 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, 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. 25 Table of Contents Share repurchases may be made through open market purchases, privately negotiated transactions, block transactions, tender offers, or otherwise. The specific timing, amount and other terms of the repurchases will depend on market conditions, corporate and regulatory requirements, contractual restrictions, and other factors. In connection with the current Share Repurchase Program, we are authorized to adopt one or more plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The authorization for the current Share Repurchase Program may be suspended, terminated, increased or decreased by our Board of Directors at any time without prior notice. 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 Basis of Shares Repurchased Average Price Paid per Share As of December 31, 2022 22,773,218 $ 2,119 $ 93.06 For the first quarter of 2023 522,422 80 $ 153.71 As of March 31, 2023 23,295,640 $ 2,199 $ 94.42 Dividends 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. There can be no assurance that we will pay dividends in the future. Declaration Date Shareholder Record Date Distribution Date Dividend per Share February 16, 2023 March 2, 2023 March 16, 2023 $ 0.72 14. SHARE-BASED COMPENSATION We maintain the Marriott Vacations Worldwide Corporation 2020 Equity Incentive Plan (the “MVW Equity Plan”) for the benefit of our officers, directors, and employees. Under the MVW Equity Plan, we are authorized to award: (1) restricted stock and restricted stock units (“RSUs”) of our common stock, (2) stock appreciation rights (“SARs”) relating to our common stock, and (3) stock options to purchase our common stock. A total of 1.8 million shares are authorized for issuance pursuant to grants under the MVW Equity Plan. As of March 31, 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 ($ in millions) March 31, 2023 March 31, 2022 Service-based RSUs $ 6 $ 7 Performance-based RSUs 1 — 7 7 SARs — 1 $ 7 $ 8 26 Table of Contents The following table details our deferred compensation costs related to unvested awards: ($ in millions) At March 31, 2023 At December 31, 2022 Service-based RSUs $ 46 $ 26 Performance-based RSUs 12 7 58 33 SARs 2 1 $ 60 $ 34 Restricted Stock Units 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 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. The expected stock price volatility was calculated based on the average of the historical and implied volatility of our stock price. The average expected life was calculated using the simplified method, as we have insufficient historical information to provide a basis for estimating average expected life. The risk-free interest rate was calculated based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The dividend yield assumption listed below is based on the expectation of future payouts. The following table outlines the assumptions used to estimate the fair value of grants during the first quarter of 2023: Expected volatility 40.47 % Dividend yield 1.87 % Risk-free rate 4.07 % Expected term (in years) 6.25 15. VARIABLE INTEREST ENTITIES Variable Interest Entities Related to Our Vacation Ownership Notes Receivable Securitizations We periodically securitize, without recourse, through bankruptcy remote special purpose entities, notes receivable originated in connection with the sale of vacation ownership products. These vacation ownership notes receivable securitizations provide funding for 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 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. We continue to service the vacation ownership notes receivable, transfer all proceeds collected to these special purpose entities, and retain rights to receive benefits that are potentially significant to the entities. Accordingly, we concluded that we are the entities’ primary beneficiary and, therefore, consolidate them. There is no noncontrolling interest balance related to these entities and the creditors of these entities do not have general recourse to us. 27 Table of Contents The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at March 31, 2023: ($ in millions) Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility Total Consolidated Assets Vacation ownership notes receivable, net of reserves $ 1,481 $ 312 $ 1,793 Interest receivable 11 2 13 Restricted cash 66 19 85 Total $ 1,558 $ 333 $ 1,891 Consolidated Liabilities Interest payable $ 1 $ 2 $ 3 Securitized debt 1,661 296 1,957 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 first quarter of 2023: ($ in millions) Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility Total Interest income $ 56 $ 11 $ 67 Interest expense to investors $ 14 $ 4 $ 18 Debt issuance cost amortization $ 2 $ 1 $ 3 The following table shows cash flows between us and the vacation ownership notes receivable securitization VIEs: Three Months Ended ($ in millions) March 31, 2023 March 31, 2022 Cash Inflows Net proceeds from vacation ownership notes receivable securitizations $ 21 $ — Principal receipts 121 139 Interest receipts 57 58 Reserve release — 57 Total 199 254 Cash Outflows Principal to investors ( 131 ) ( 155 ) Voluntary repurchases of defaulted vacation ownership notes receivable ( 28 ) ( 23 ) Interest to investors ( 16 ) ( 11 ) Total ( 175 ) ( 189 ) Net Cash Flows $ 24 $ 65 Under the terms of our vacation ownership notes receivable securitizations, we have the right to substitute loans for, or repurchase, defaulted loans at our option, subject to certain limitations. Our maximum exposure to potential loss relating to the special purpose entities that purchase, sell and own these vacation ownership notes receivable is the overcollateralization amount (the difference between the loan collateral balance and the balance of the outstanding vacation ownership notes receivable), plus cash reserves and any residual interest in future cash flows from collateral. 28 Table of Contents The following table shows cash flows between us and the Warehouse Credit Facility VIE: Three Months Ended ($ in millions) March 31, 2023 March 31, 2022 Cash Inflows Proceeds from vacation ownership notes receivable securitizations $ 150 $ 102 Principal receipts 18 4 Interest receipts 10 1 Total 178 107 Cash Outflows Principal to investors ( 15 ) — Interest to investors ( 3 ) — Funding of restricted cash ( 5 ) ( 1 ) Total ( 23 ) ( 1 ) Net Cash Flows $ 155 $ 106 Other Variable Interest Entities We have a commitment to purchase a property located in Waikiki, Hawaii. The property is held by a VIE for which we are not the primary beneficiary. We do not control the decisions that most significantly impact the economic performance of the entity during construction. Further, our purchase commitment is generally contingent upon the property being redeveloped to our brand standards. Accordingly, we have not consolidated the VIE. 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 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 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 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. 16. BUSINESS SEGMENTS We define our reportable segments based on the way in which the chief operating decision maker (“CODM”), currently our chief executive officer, manages the operations of the Company for purposes of allocating resources and assessing performance. We operate in two operating and reportable business segments: • Vacation Ownership includes a diverse portfolio of resorts that includes some of the world’s most iconic brands licensed under exclusive, long-term relationships. We are the exclusive worldwide developer, marketer, seller, and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club, and Hyatt Residence Club brands, as well as under Marriott Vacation Club Pulse, an extension of 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 Club brand, we have the non-exclusive right to develop, market, and sell whole ownership residential products under The Ritz-Carlton Residences brand and have a license to use the St. Regis brand for specified fractional ownership resorts. • Our Vacation Ownership segment generates most of its revenues from four primary sources: selling vacation ownership products; managing vacation ownership resorts, clubs, and owners’ associations; financing consumer purchases of vacation ownership products; and renting vacation ownership inventory. • Exchange & Third-Party Management includes 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- 29 Table of Contents 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. Our CODM evaluates the performance of our segments based primarily on the results of the segment without allocating corporate expenses or income taxes. We do not allocate corporate interest expense or indirect general and administrative expenses to our segments. We include interest income specific to segment activities within the appropriate segment. We allocate depreciation 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 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. Revenues Three Months Ended ($ in millions) March 31, 2023 March 31, 2022 Vacation Ownership $ 1,097 $ 956 Exchange & Third-Party Management 71 84 Total segment revenues 1,168 1,040 Corporate and other 1 12 $ 1,169 $ 1,052 Adjusted EBITDA and Reconciliation to Net Income or Loss Attributable to Common Shareholders Three Months Ended ($ in millions) March 31, 2023 March 31, 2022 Adjusted EBITDA Vacation Ownership $ 229 $ 199 Adjusted EBITDA Exchange & Third-Party Management 37 43 Reconciling items: Corporate and other ( 63 ) ( 54 ) Interest expense, net ( 34 ) ( 27 ) Tax provision ( 41 ) ( 32 ) Depreciation and amortization ( 32 ) ( 33 ) Share-based compensation expense ( 7 ) ( 8 ) Certain items ( 2 ) ( 30 ) Net income attributable to common shareholders $ 87 $ 58 Assets ($ in millions) At March 31, 2023 At December 31, 2022 Vacation Ownership $ 8,197 $ 8,037 Exchange & Third-Party Management 845 865 Total segment assets 9,042 8,902 Corporate and other 560 737 $ 9,602 $ 9,639 30 Table of Contents Revenues Excluding Cost Reimbursements Three Months Ended ($ in millions) March 31, 2023 March 31, 2022 United States $ 700 $ 657 All other countries 104 79 $ 804 $ 736