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Item 1. Financial Statements

2023-08-04 compared with 2023-05-05 · 293 added, 179 removed, 773 unchanged (38% of the section changed)

3 unchanged sentences

(In millions, except per share amounts)

Three Months Ended

March 31, 2023 March 31, 2022

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Sale of vacation ownership products $ 391 $ 425 $ 766 $ 735

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Transaction and integration costs ( 10 ) ( 37 ) ( 23 ) ( 65 )

Other 1 1 1 1

INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 140 178 268 268

1 unchanged sentence

NET INCOME 90 135 177 193

Net income attributable to noncontrolling interests — —

Net loss attributable to noncontrolling interests — 1 — 1

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 90 $ 136 $ 177 $ 194

7 unchanged sentences

(In millions)

Three Months Ended

March 31, 2023 March 31, 2022

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

NET INCOME $ 90 $ 135 $ 177 $ 193

Foreign currency translation adjustments 6 ( 2 ) 12 2

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

Derivative instrument adjustment, net of tax ( 1 ) 7 ( 4 ) 23

OTHER COMPREHENSIVE GAIN, NET OF TAX 3 20

Net income attributable to noncontrolling interests — —

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS — —

OTHER COMPREHENSIVE GAIN (LOSS), NET OF TAX 5 ( 5 ) 8 15

Net loss attributable to noncontrolling interests — 1 — 1

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS — 1 — 1

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 95 $ 131 $ 185 $ 209

3 unchanged sentences

(In millions, except share and per share data)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 242 $ 524

42 unchanged sentences

(In millions)

Three Months Ended

March 31, 2023 March 31, 2022

Six Months Ended

June 30, 2023 June 30, 2022

OPERATING ACTIVITIES

Net income $ 177 $ 193

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

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

Depreciation and amortization of intangibles 66 65

3 unchanged sentences

Impairment charges 2 —

Gains and other income, net ( 7 ) ( 47 )

Deferred income taxes 10 29

10 unchanged sentences

Other liabilities 12 —

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

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

Other, net ( 4 ) 1

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

Net cash, cash equivalents and restricted cash provided by operating activities 27 218

INVESTING ACTIVITIES

Proceeds from disposition of subsidiaries, net of cash and restricted cash transferred — 93

Capital expenditures for property and equipment (excluding inventory) ( 63 ) ( 23 )

Issuance of note receivable to VIE — ( 47 )

Purchase of company owned life insurance ( 4 ) ( 11 )

Other, net — 3

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

Other dispositions, net 14 3

Net cash, cash equivalents and restricted cash (used in) provided by investing activities ( 53 ) 15

See Interim Condensed Notes to Consolidated Financial Statements

2 unchanged sentences

(In millions)

Three Months Ended

March 31, 2023 March 31, 2022

Six Months Ended

June 30, 2023 June 30, 2022

FINANCING ACTIVITIES

20 unchanged sentences

Non-cash transfer from other assets to property and equipment — 15

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 —

Non-cash reduction of debt associated with bifurcation of conversion feature on the 2022 Convertible Notes — 5

Non-cash adjustment to additional paid-in capital for 2022 Convertible Note Hedges — 6

Interest paid, net of amounts capitalized 99 69

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

Income taxes paid, net of refunds 133 33

See Interim Condensed Notes to Consolidated Financial Statements

14 unchanged sentences

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

— Net income — — — — 90 90 — 90

— Foreign currency translation adjustments — — — 6 — 6 — 6

— Derivative instrument adjustment — — — ( 1 ) — ( 1 ) — ( 1 )

— Share-based compensation plans — 1 10 — — 11 — 11

— Repurchase of common stock — ( 82 ) — — — ( 82 ) — ( 82 )

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

75.8 BALANCE AT JUNE 30, 2023 $ 1 $ ( 2,213 ) $ 3,947 $ 23 $ 718 $ 2,476 $ 2 $ 2,478

See Interim Condensed Notes to Consolidated Financial Statements

MARRIOTT VACATIONS WORLDWIDE CORPORATION

INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (CONTINUED)

(In millions)

Issued Common

13 unchanged sentences

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

— Net income — — — — 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

See Interim Condensed Notes to Consolidated Financial Statements

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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.

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 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.

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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.

The uncertainties in the broader macroeconomic environment, including inflationary pressures, as well as 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.

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(“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

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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”)

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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.

During the second quarter of 2023, we amended our Term Loan (as defined in Footnote 12 “Debt”) and our interest rate swaps and collar 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.

Both our Term Loan and the related interest rate swaps and collar will transition to SOFR at the same time, effective July 31, 2023.

As of June 30, 2023, we have no other financial instruments to transition from LIBOR.

ACQUISITIONS AND DISPOSITIONS

Charleston, South Carolina

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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.

As part of the ILG Acquisition, we 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, as discussed below.

During the second quarter of 2022, we disposed of VRI Americas for proceeds of $ 55 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 $ 16 million in Gains and other income, net on our Income Statements for the three and six months ended June 30, 2022.

Additionally, during the second quarter of 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 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 for property and equipment.

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

REVENUE AND RECEIVABLES

Sources of Revenue by Segment

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

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

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Total Revenues $ 1,112 $ 65 $ 1 $ 1,178

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

9 unchanged sentences

Total Revenues $ 1,091 $ 74 $ ( 1 ) $ 1,164

Six Months Ended June 30, 2023

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

Sale of vacation ownership products $ 766 $ — $ — $ 766

Ancillary revenues 131 2 — 133

Management fee revenues 90 13 ( 2 ) 101

Exchange and other services revenues 61 92 19 172

Management and exchange 282 107 17 406

Rental 276 21 — 297

Cost reimbursements 727 8 ( 15 ) 720

Revenue from contracts with customers 2,051 136 2 2,189

Financing 158 — — 158

Total Revenues $ 2,209 $ 136 $ 2 $ 2,347

Six Months Ended June 30, 2022

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

Sale of vacation ownership products $ 735 $ — $ — $ 735

Ancillary revenues 120 2 — 122

Management fee revenues 83 21 ( 4 ) 100

Exchange and other services revenues 63 99 41 203

Management and exchange 266 122 37 425

Rental 251 22 — 273

Cost reimbursements 652 14 ( 26 ) 640

Revenue from contracts with customers 1,904 158 11 2,073

Financing 143 — — 143

Total Revenues $ 2,047 $ 158 $ 11 $ 2,216

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

Three Months Ended June 30, 2023

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

2 unchanged sentences

Revenue from contracts with customers $ 1,032 $ 65 $ 1 $ 1,098

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

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

2 unchanged sentences

Revenue from contracts with customers $ 1,019 $ 74 $ ( 1 ) $ 1,092

Six Months Ended June 30, 2023

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

Services transferred over time $ 1,145 $ 56 $ 2 $ 1,203

Goods or services transferred at a point in time 906 80 — 986

Revenue from contracts with customers $ 2,051 $ 136 $ 2 $ 2,189

Six Months Ended June 30, 2022

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

Services transferred over time $ 1,041 $ 72 $ 11 $ 1,124

Goods or services transferred at a point in time 863 86 — 949

Revenue from contracts with customers $ 1,904 $ 158 $ 11 $ 2,073

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.

Revenues were reduced during the second quarter and first half of 2023 by $ 11 million and $ 19 million, respectively, 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

We had no contract assets at either June 30, 2023 or December 31, 2022.

($ in millions) At June 30, 2023 At December 31, 2022

Receivables from Contracts with Customers

5 unchanged sentences

Deferred revenue 417 344

Revenue recognized during the first quarter of 2023 that was included in our contract liabilities balance at December 31, 2022 was $ 100 million.

Revenue recognized during the second quarter and first half of 2023 that was included in our contract liabilities balance at December 31, 2022 was $ 74 million and $ 174 million, respectively.

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 .

At June 30, 2023, approximately 91 % of this amount is expected to be recognized as revenue over the next two years .

Accounts and Contracts Receivable

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

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

($ in millions) At June 30, 2023 At December 31, 2022

Receivables from contracts with customers, net $ 164 $ 194

3 unchanged sentences

Employee tax credit receivable 15 16

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.

Our provision for income taxes is calculated using an estimated annual effective tax rate (“AETR”), 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.

Certain items that do not relate directly to ordinary income are excluded from the AETR and included in the period in which they occur.

Our effective tax rate was 35.4 % and 24.3 % for the three months ended June 30, 2023 and June 30, 2022, respectively, and 33.9 % and 28.1 % for the six months ended June 30, 2023 and June 30, 2022, respectively.

The increase in the effective tax rate for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 is predominately attributable to a decrease in Income before income taxes and noncontrolling interests, including foreign gains from the sale of a hotel in Puerto Vallarta, Mexico (see Footnote 3 “Acquisitions and Dispositions” for more information on this disposition) in the three months ending June 30, 2022 ( 725 basis points) and a net increase in discrete items of 385 basis points, including a decrease in favorable foreign return to provision income tax adjustments and a decrease in our share-based compensation benefit, partially offset by a net decrease in the reserve for foreign uncertain tax benefits.

The increase in the effective tax rate for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 is predominately attributable to a net increase in discrete items ( 485 basis points), including a net increase in the reserve for foreign uncertain tax benefits which we believe are fully indemnified.

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.

The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the six months ended June 30, 2023.

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

3 unchanged sentences

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.

Balance at June 30, 2023

The total amount of gross interest and penalties accrued was $ 45 million at June 30, 2023 and $ 28 million at December 31, 2022, an increase of $ 17 million which is predominantly attributable to additional adjustments to the pre-acquisition reserves for uncertain tax positions.

We anticipate $ 35 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.

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

($ in millions) Originated Acquired Total Originated Acquired Total

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The following table summarizes interest income associated with vacation ownership notes receivable.

Three Months Ended

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

Three Months Ended Six Months Ended

($ in millions) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Interest income associated with vacation ownership notes receivable — securitized $ 68 $ 60 $ 135 $ 119

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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.

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

We use the term “Combined Marriott” to refer to our Marriott-, Sheraton-, and Westin-brands.

The weighted average FICO score within our consolidated vacation ownership notes receivable pool was 722 and 721 , at June 30, 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.

The following table shows future contractual principal payments, net of reserves, and interest rates for our acquired vacation ownership notes receivable at June 30, 2023.

Acquired Vacation Ownership Notes Receivable

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Thereafter 8 47 55

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

Balance at June 30, 2023 $ 23 $ 181 $ 204

Weighted average stated interest rate 14.0 % 14.2 % 14.2 %

6 unchanged sentences

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

Securitizations ( 2 ) 2 —

Clean-up call 2 ( 2 ) —

Write-offs ( 14 ) — ( 14 )

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(Decrease) increase in vacation ownership notes receivable reserve ( 7 ) 4 ( 3 )

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

Balance at June 30, 2023 $ 8 $ 12 $ 20

(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

Acquired Vacation Ownership Notes Receivable as of June 30, 2023

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

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$ 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.

The following tables detail the origination year of our acquired vacation ownership notes receivable, before reserves, by brand and FICO score as of June 30, 2023, and gross write-offs by brand for the first half of 2023.

Acquired Vacation Ownership Notes Receivable - Combined Marriott

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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.

The following table shows future principal payments, net of reserves, and interest rates for our originated vacation ownership notes receivable at June 30, 2023.

Originated Vacation Ownership Notes Receivable

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Thereafter 216 1,013 1,229

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

Balance at June 30, 2023 $ 386 $ 1,682 $ 2,068

Weighted average stated interest rate 12.1 % 13.2 % 13.0 %

9 unchanged sentences

Securitizations ( 99 ) 99 —

Clean-up call 43 ( 43 ) —

Write-offs ( 61 ) — ( 61 )

Defaulted vacation ownership notes receivable repurchase activity (1)

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

Balance at June 30, 2023 $ 150 $ 232 $ 382

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

Originated Vacation Ownership Notes Receivable as of June 30, 2023

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

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

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.

The following tables detail the origination year of our originated vacation ownership notes receivable, before reserves, by brand and FICO score as of June 30, 2023, and gross write-offs by brand for the first half of 2023.

Originated Vacation Ownership Notes Receivable - Combined Marriott

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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.

For both non-securitized and securitized vacation ownership notes receivable, we estimated the average remaining default rates of 11.30 % as of June 30, 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 $ 13 million as of June 30, 2023 and $ 12 million as of 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 March 31, 2023

Investment in vacation ownership notes receivable on non-accrual status at June 30, 2023

$ 134 $ 22 $ 156

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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 March 31, 2023 and December 31, 2022.

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

The following table shows the aging of the recorded investment in principal, before reserves, in vacation ownership notes receivable as of June 30, 2023 and December 31, 2022.

As of June 30, 2023 As of December 31, 2022

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

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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

The table excludes Cash and cash equivalents, Restricted cash, Accounts and contracts receivable (excluding contracts receivable for financed VOI sales, net), 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 June 30, 2023 At December 31, 2022

($ in millions) Carrying

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Vacation ownership notes receivable, net $ 2,272 $ 2,336 $ 2,198 $ 2,245

Contracts receivable for financed VOI sales, net 32 32 22 22

Other assets 87 87 76 76

1 unchanged sentence

Securitized debt, net $ ( 2,028 ) $ ( 1,933 ) $ ( 1,938 ) $ ( 1,828 )

Term Loan, net ( 780 ) ( 782 ) ( 778 ) ( 775 )

Revolving Corporate Credit Facility, net ( 61 ) ( 65 ) — —

2025 Notes, net — — ( 248 ) ( 258 )

1 unchanged sentence

2029 Notes, net ( 495 ) ( 432 ) ( 494 ) ( 417 )

Term Loan, net ( 779 ) ( 780 ) ( 778 ) ( 775 )

Revolving Corporate Credit Facility, net ( 196 ) ( 200 ) — —

2026 Convertible Notes, net ( 567 ) ( 532 ) ( 565 ) ( 560 )

3 unchanged sentences

Vacation Ownership Notes Receivable

At March 31, 2023 At December 31, 2022

At June 30, 2023 At December 31, 2022

($ in millions) Carrying

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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 concluded that this fair value measurement should be categorized within Level 3.

Contracts Receivable for Financed VOI Sales

At the time at which we recognize revenue for Marriott-branded VOI sales, we temporarily record a contract receivable for financed VOI sales, until the time at which we originate a vacation ownership note receivable, which occurs at closing.

We believe that the carrying value of the contracts receivable for financed VOI sales approximates fair value because the stated, or otherwise imputed, interest rates of these receivables are generally consistent with current market rates and the reserve for these contracts receivable for financed VOI sales appropriately accounts for risks in default rates, prepayment rates, and discount rates.

We concluded that this fair value measurement should be categorized within Level 3.

Other assets include $ 87 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.

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We concluded that this fair value measurement should be categorized within Level 3.

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.

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;

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We concluded that this fair value measurement should be categorized within Level 3.

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;

We concluded that this fair value measurement should be categorized within Level 2.

Convertible Notes

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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

Three Months Ended Six Months Ended

(in millions, except per share amounts) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Net income attributable to common shareholders $ 90 $ 136 $ 177 $ 194

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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)

Three Months Ended Six Months Ended

(in millions, except per share amounts) June 30, 2023 (1)

June 30, 2022 (1)

June 30, 2023 (1)

June 30, 2022 (1)

Net income attributable to common shareholders $ 90 $ 136 $ 177 $ 194

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2026 Convertible Notes ($ 575 million of principal)

3.5 3.4 3.5 3.4

2027 Convertible Notes ($ 575 million of principal)

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Diluted earnings per share $ 2.17 $ 2.97 $ 4.23 $ 4.18

(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.

(1) The computations of diluted earnings per share attributable to common shareholders exclude approximately 213,000 and 293,000 shares of common stock, the maximum number of shares issuable as of June 30, 2023 and June 30, 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 second quarter and first half of 2023, we excluded from our calculation of diluted earnings per share 289,750 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 , was greater than the average market price of our common stock for the applicable period.

For the second quarter of 2022, we excluded from our calculation of diluted earnings per share 252,314 shares underlying SARs that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 143.38 to $ 173.88 , was greater than the average market price of our common stock for the applicable period.

For the first half 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 , 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 March 31, 2023 At December 31, 2022

($ in millions) At June 30, 2023 At December 31, 2022

Real estate inventory (1)

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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.

Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 15 million during the first half of 2023 and $ 10 million during the first half of 2022.

In addition to the above, at June 30, 2023 and December 31, 2022, we had $ 377 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 March 31, 2023, we had the following commitments outstanding:

As of June 30, 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.

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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.

Surety bonds issued as of June 30, 2023 totaled $ 130 million, the majority of which were requested by federal, state, or local governments in connection with our operations.

As of June 30, 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 June 30, 2023, we had $ 1 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.

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.

At June 30, 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 2027 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 our payment of maintenance fees for unsold inventory.

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or 2) written notification of termination by either party.

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

At June 30, 2023, our expected commitment for the remainder of 2023 is $ 6 million.

Loss Contingencies

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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.

In June 2023, the appellate court upheld the dismissal of those claims.

Plaintiff filed a motion for reconsideration of that appellate ruling.

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

The plaintiff filed an amended complaint and again appealed the dismissal.

That appeal remains pending.

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

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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.

However, legal proceedings are inherently uncertain, and while we believe that our accruals, where required, 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.

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

($ in millions) At June 30, 2023 At December 31, 2022

Vacation ownership notes receivable securitizations, gross (1)

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$ 2,028 $ 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 %.

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

(1) Interest rates as of June 30, 2023 range from 1.5 % to 6.6 %, with a weighted average interest rate of 3.8 %.

(2) Effective interest rate as of June 30, 2023 was 6.5 %.

All of our securitized debt is non-recourse.

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.

The following table shows anticipated future principal payments for our securitized debt as of June 30, 2023.

Vacation Ownership

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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 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.

During the second quarter of 2023, and as of June 30, 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.

During the second 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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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.

Investors purchased $ 369 million of the vacation ownership loan backed notes issued by the 2023-1 LLC, composed 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 Class D notes that we retained were subsequently sold at par during the second quarter of 2023.

Warehouse Credit Facility

During the second quarter of 2023, 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 $ 425 million to $ 500 million and extended the revolving period from July 28, 2024 to May 31, 2025.

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

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

($ in millions) At June 30, 2023 At December 31, 2022

Corporate Credit Facility

Term Loan $ 784 $ 784

Unamortized debt discount and issuance costs ( 4 ) ( 6 )

Revolving Corporate Credit Facility (1)

Unamortized debt issuance costs (2)

Senior Secured Notes

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Unamortized debt discount and issuance costs ( 5 ) ( 6 )

Corporate Credit Facility

Term Loan 784 784

Unamortized debt discount and issuance costs ( 5 ) ( 6 )

Revolving Corporate Credit Facility (1)

Unamortized debt issuance costs (2)

Convertible Notes

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$ 3,001 $ 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.

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

(1) Effective interest rate as of June 30, 2023 was 6.9 %.

(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 unamortized debt issuance costs were included in Other assets.

The following table shows scheduled principal payments for our debt, based on contractual terms and maturity dates, excluding finance leases, as of June 30, 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 — — — — 65 — 65

2028 Notes — — — — — 350 350

2029 Notes — — — — — 500 500

2026 Convertible Notes — — — 575 — — 575

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$ — $ 4 $ 784 $ 575 $ 640 $ 850 $ 2,853

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.

During the second 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 31, 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.

Prior to 2022, we entered into interest rate swaps and an interest rate collar under which we may pay a fixed rate and receive a floating interest rate to hedge a portion of our interest rate risk on the Term Loan.

During the second quarter of 2023, we amended these interest rate swaps and the collar to reference SOFR rather than LIBOR, effective July 31, 2023.

As a result of this transition, the fixed rate on the $ 250 million of interest rate swaps maturing in September 2023 was amended to 2.88 %, the fixed rate on the $ 200 million of interest rate swaps maturing in April 2024 was amended to 2.17 %, and the cap strike price on the $ 100 million interest rate collar was amended to 2.43 %.

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.

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

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

($ in millions) 2023 2022

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Derivative instrument adjustment balance, March 31 10 ( 2 )

Other comprehensive (loss) gain before reclassifications ( 1 ) 7

Derivative instrument adjustment balance, June 30 $ 9 $ 5

Our senior notes include:

• $ 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

Convertible Notes

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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.

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 June 30, 2023 to 6.0609 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 164.99 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 %.

As of June 30, 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

Three Months Ended Six Months Ended

($ in millions) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Amortization of debt issuance costs $ 1 $ — $ 2 $ 1

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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.

As of June 30, 2023, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 164.99 and $ 206.24 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised.

2027 Convertible Notes

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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 %.

As of June 30, 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

Three Months Ended Six Months Ended

($ in millions) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Contractual interest expense $ 5 $ — $ 9 $ —

Amortization of debt issuance costs 1 — 2 —

$ 6 $ — $ 11 $ —

2027 Convertible Note Hedges and Warrants

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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.

As of June 30, 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

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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.

As of June 30, 2023, the present value of the future lease payments, net of lease incentives, was $ 80 million, with a corresponding lease liability of $ 99 million.

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

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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 June 30, 2023, there were 75,806,578 shares of Marriott Vacations Worldwide common stock issued, of which 36,469,493 shares were outstanding and 39,337,085 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.

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 June 30, 2023 or December 31, 2022.

Share Repurchase Program

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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.

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.

During the second quarter of 2023, our Board of Directors increased the remaining authorization to $ 600 million, and extended the term of this program to December 31, 2024.

As of June 30, 2023, approximately $ 561 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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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.

For purposes of calculating the excise tax, the fair value of certain share issuances may be netted against the fair market value of stock repurchases during the same taxable year.

In the first half 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:

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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

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

For the first half of 2023 1,143,555 162 $ 141.84

As of June 30, 2023 23,916,773 $ 2,281 $ 95.40

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

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

2 unchanged sentences

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

May 11, 2023 May 25, 2023 June 8, 2023 $ 0.72

SHARE-BASED COMPENSATION

3 unchanged sentences

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.

As of June 30, 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

Three Months Ended Six Months Ended

($ in millions) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Service-based RSUs $ 9 $ 10 $ 15 $ 17

Performance-based RSUs 2 1 3 1

$ 12 $ 12 $ 19 $ 20

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

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

($ in millions) At June 30, 2023 At December 31, 2022

Service-based RSUs $ 38 $ 26

1 unchanged sentence

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.

We granted 194,628 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 144.52 , to our employees and non-employee directors during the first half of 2023.

During the first half 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 half 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 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 half of 2023.

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

4 unchanged sentences

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:

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

Expected volatility 40.47 %

12 unchanged sentences

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 March 31, 2023:

The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at June 30, 2023:

($ in millions) Vacation Ownership

11 unchanged sentences

Total $ 1,865 $ 190 $ 2,055

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:

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

($ in millions) Vacation Ownership

5 unchanged sentences

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 half of 2023:

($ in millions) Vacation Ownership

Notes Receivable

Securitizations Warehouse

Credit Facility Total

Interest income $ 121 $ 14 $ 135

Interest expense to investors $ 32 $ 5 $ 37

Debt issuance cost amortization $ 4 $ 1 $ 5

Administrative expenses $ 1 $ — $ 1

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

Six Months Ended

($ in millions) June 30, 2023 June 30, 2022

Net proceeds from vacation ownership notes receivable securitizations $ 396 $ 371

6 unchanged sentences

Voluntary repurchases of defaulted vacation ownership notes receivable ( 57 ) ( 46 )

Voluntary clean-up call ( 19 ) ( 39 )

Interest to investors ( 34 ) ( 21 )

Funding of restricted cash ( 17 ) ( 96 )

Total ( 386 ) ( 501 )

3 unchanged sentences

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

Six Months Ended

($ in millions) June 30, 2023 June 30, 2022

Proceeds from vacation ownership notes receivable securitizations $ 342 $ 102

1 unchanged sentence

Interest receipts 14 3

Reserve release 8 1

Total 389 114

1 unchanged sentence

Principal to investors ( 19 ) ( 3 )

Voluntary repurchases of defaulted vacation ownership notes receivable ( 1 ) —

Repayment of Warehouse Credit Facility ( 296 ) ( 98 )

Interest to investors ( 5 ) ( 1 )

8 unchanged sentences

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:

We expect to acquire the property over time and as of June 30, 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.

As of June 30, 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 June 30, 2023.

Deferred Compensation Plan

2 unchanged sentences

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.

At June 30, 2023, the value of the assets held in the rabbi trust was $ 87 million, which is included in the Other line within assets on our Balance Sheets.

BUSINESS SEGMENTS

3 unchanged sentences

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.

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.

6 unchanged sentences

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.

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.

7 unchanged sentences

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

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

Three Months Ended Six Months Ended

($ in millions) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Vacation Ownership $ 1,112 $ 1,091 $ 2,209 $ 2,047

3 unchanged sentences

$ 1,178 $ 1,164 $ 2,347 $ 2,216

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 and Reconciliation to Net Income Attributable to Common Shareholders

Three Months Ended Six Months Ended

($ in millions) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Adjusted EBITDA Vacation Ownership $ 245 $ 274 $ 474 $ 473

8 unchanged sentences

Net income attributable to common shareholders $ 90 $ 136 $ 177 $ 194

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

($ in millions) At June 30, 2023 At December 31, 2022

Vacation Ownership $ 8,087 $ 8,037

4 unchanged sentences

Revenues Excluding Cost Reimbursements

Three Months Ended

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

Three Months Ended Six Months Ended

($ in millions) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

United States $ 710 $ 745 $ 1,410 $ 1,402

All other countries 113 95 217 174

$ 823 $ 840 $ 1,627 $ 1,576

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