What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-04 compared with 2023-05-05 · 405 added, 149 removed, 494 unchanged (53% of the section changed)

2 unchanged sentences

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

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

Forward-looking statements include the information concerning:

our possible or assumed future results of operations;

1 unchanged sentence

dividend payments;

business strategies, such as our plans to continue to increase our focus on sales of vacation ownership products to first-time buyers and our expectations that we will continue to offer financing incentives;

financing plans;

competitive position;

potential growth opportunities;

potential operating performance improvements, including the expectations that contract sales, resort management, resort occupancies, and tour flow will continue to remain strong in 2023;

our expectation that interest income will increase in 2023;

our expectations regarding availability of inventory for Getaways and exchange transactions;

indemnification;

dilution related to convertible notes;

inventory spending;

the effects of competition;

and any effects of the COVID-19 pandemic.

our expectations regarding development profit margins, defaults and expected losses, notes receivable balances, commitments to owners’ associations, payments for property acquisitions, that interest income and notes receivable will increase in 2023, interest rates, financing profit margin, general and administrative expenses, inventory costs and inventory spending, taxes, and any effects of the COVID-19 pandemic;

business strategies, such as our expectations that we will continue to offer financing incentives;

and potential operating performance improvements, including the expectations regarding contract sales, resort management and financing plans.

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

2 unchanged sentences

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

the effects of the COVID-19 pandemic or future health crises, including their short and longer-term impact on consumer confidence and demand for travel, and the pace of recovery following a future health crisis;

the effects of a future health crisis, including its short and longer-term impacts on consumer confidence and demand for travel, and the pace of recovery following a health crisis;

variations in demand for vacation ownership and exchange products and services;

37 unchanged sentences

In April 2022, we disposed of VRI Americas after determining that the business was not a core component of our future growth strategy and operating model.

This business was a component of our Exchange and Third-Party Management segment through the date of the sale.

This business was a component of our Exchange & Third-Party Management segment through the date of the sale.

Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to consolidated property owners’ associations (“Consolidated Property Owners’ Associations”).

9 unchanged sentences

In the third quarter of 2022, we aligned our business practices and contract terms, resulting in the prospective change in the timing of the transfer of control to the customer for Marriott-branded VOIs.

Prior to these changes, control transfer occurred at closing for Marriott-branded vacation ownership products.

Prior to these changes, control transfer occurred at closing for

Marriott-branded vacation ownership products.

Subsequent to this alignment, transfer of control of Marriott-branded vacation ownership products occurs at expiration of the statutory rescission period, consistent with the historical timing of Sheraton-, Westin- and Hyatt- branded transactions.

4 unchanged sentences

We measure operating performance using the key metrics described below:

• Contract sales from the sale of vacation ownership products, which consists of the total amount of vacation ownership product sales under contracts signed during the period where we have generally received a down payment of at least ten percent of the contract price, reduced by actual rescissions during the period, inclusive of contracts associated with sales of vacation ownership products on behalf of third-parties, which we refer to as “resales contract sales.” In circumstances where a customer applies any or all of their existing ownership interests as part of the purchase price for additional interests, we include only the incremental value purchased as contract sales.

Contract sales differ from revenues from the sale of vacation ownership products that we report on our income statements due to the requirements for revenue recognition described above.

• Contract sales from the sale of vacation ownership products, which consists of the total amount of vacation ownership product sales under contracts signed during the period where we have generally received a down payment of at least ten percent of the contract price, reduced by actual rescissions during the period, inclusive of contracts associated with sales of vacation ownership products on behalf of third parties, which we refer to as “resales contract sales.” In circumstances where customers apply any or all of their existing ownership interests as part of the purchase price for additional interests, we include only the incremental value purchased as contract sales.

Contract sales differ from revenues from the sale of vacation ownership products that we report on our income statements due to the requirements for revenue recognition described above and adjustments for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.

We consider contract sales to be an important operating measure because it reflects the pace of sales in our business.

5 unchanged sentences

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

We believe that Development profit margin is an important measure of the profitability of our development and marketing and sales of VOIs.

We believe that Development profit margin is an important measure of the profitability of our development and subsequent marketing and sales of VOIs.

• Total active members is the number of Interval International network active members at the end of the applicable period.

7 unchanged sentences

Consolidated Results

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

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

19 unchanged sentences

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

Operating Statistics

2023 First Quarter

2023 Second Quarter

Three Months Ended

(Contract sales $ in millions) March 31, 2023 March 31, 2022 Change % Change

(Contract sales $ in millions) June 30, 2023 June 30, 2022 Change % Change

Vacation Ownership

6 unchanged sentences

Average revenue per member $ 39.30 $ 38.79 $ 0.51 1%

2023 First Quarter

2023 First Half

Six Months Ended

(Contract sales $ in millions) June 30, 2023 June 30, 2022 Change % Change

Vacation Ownership

Total contract sales $ 906 $ 919 $ (13) (1%)

Consolidated contract sales $ 887 $ 900 $ (13) (1%)

Joint venture contract sales $ 19 $ 19 $ — NM

VPG $ 4,150 $ 4,653 $ (503) (11%)

Exchange & Third-Party Management

Total active members at end of period (000's) 1,566 1,596 (30) (2%)

Average revenue per member $ 81.35 $ 83.32 $ (1.97) (2%)

2023 Second Quarter

Three Months Ended

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

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

Vacation Ownership $ 1,112 $ 1,091 $ 21 2%

1 unchanged sentence

Total Segment Revenues 1,177 1,165 12 1%

Consolidated Property Owners’ Associations 1 (1) 2 NM

Total Revenues $ 1,178 $ 1,164 $ 14 1%

2023 First Half

Six Months Ended

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

Vacation Ownership $ 2,209 2,047 $ 162 8%

Exchange & Third-Party Management 136 158 (22) (14%)

Total Segment Revenues 2,345 2,205 140 6%

Consolidated Property Owners’ Associations 2 11 (9) (85%)

17 unchanged sentences

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

2023 First Quarter

2023 Second Quarter

Three Months Ended Change

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

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

Net income attributable to common shareholders $ 90 $ 136 $ (46) (34%)

3 unchanged sentences

EBITDA 210 241 (31) (14%)

Share-based compensation expense 7 8 (1) (10%)

Certain items 2 30 (28) (97%)

Share-based compensation expense 12 12 — NM

Certain items — 2 (2) NM

Adjusted EBITDA $ 222 $ 255 $ (33) (13%)

Adjusted EBITDA Margin 27% 30% (3 pts)

The table below details the components of Certain items.

The table below details the components of Certain items for the three months ended June 30, 2023 and June 30, 2022.

Three Months Ended

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

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

ILG integration $ 6 $ 33

Welk acquisition and integration 4 2

Other transaction costs — 2

Transaction and integration costs 10 37

1 unchanged sentence

Litigation charges 2 2

Impairment 4 —

Gain on disposition of hotel/land (7) (33)

Gain on disposition of VRI Americas — (16)

Foreign currency translation (2) 8

Insurance proceeds — (2)

Change in indemnification asset (1) 3

Gains and other income, net (10) (37)

Early termination of VRI management contract — (2)

Change in estimate relating to pre-acquisition contingencies — (3)

Total Certain items $ — $ 2

2023 First Half

Six Months Ended Change

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

Net income attributable to common shareholders $ 177 $ 194 $ (17) (9%)

Interest expense, net 70 57 13 22%

Provision for income taxes 91 75 16 21%

Depreciation and amortization 66 65 1 1%

EBITDA 404 391 13 3%

Share-based compensation expense 19 20 (1) (6%)

Certain items 2 32 (30) (93%)

Adjusted EBITDA $ 425 $ 443 $ (18) (4%)

Adjusted EBITDA Margin 26% 28% (2%)

The table below details the components of Certain items for the six months ended June 30, 2023 and June 30, 2022.

Six Months Ended

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

ILG integration $ 15 $ 58

Welk acquisition and integration 8 5

Other transaction costs — 2

Transaction and integration costs 23 65

Early redemption of senior secured notes 10 —

Gain on disposition of hotel/land (7) (33)

Gain on disposition of VRI Americas — (16)

Foreign currency translation (4) 7

2 unchanged sentences

Gains and other income, net (31) (41)

Purchase accounting adjustments 3 8

Litigation charges 5 5

Impairment 4 —

Early termination of VRI management contract — (2)

Change in estimate relating to pre-acquisition contingencies — (3)

Total Certain items $ 2 $ 32

Segment Adjusted EBITDA

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

Vacation Ownership $ 245 $ 274 $ (29) (11%)

3 unchanged sentences

Adjusted EBITDA $ 222 $ 255 $ (33) (13%)

2023 First Half

Six Months Ended

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

Vacation Ownership $ 474 $ 473 $ 1 NM

Exchange & Third-Party Management 69 78 (9) (12%)

Segment adjusted EBITDA 543 551 (8) (2%)

General and administrative (118) (108) (10) (8%)

Adjusted EBITDA $ 425 $ 443 $ (18) (4%)

The following tables present segment financial results attributable to common shareholders reconciled to segment Adjusted EBITDA.

Vacation Ownership

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

Segment financial results $ 224 $ 277 $ (53) (19%)

1 unchanged sentence

Share-based compensation expense 3 2 1 27%

Certain items — 3 (3) NM

Certain items (5) (27) 22 83%

Segment adjusted EBITDA $ 245 $ 274 $ (29) (11%)

The table below details the components of Certain items.

The table below details the components of Certain items for the three months ended June 30, 2023 and June 30, 2022.

Three Months Ended

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

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

Transaction and integration costs $ — $ 1

Purchase accounting adjustments 1 5

Litigation charges 3 2

Gain on disposition of hotel/land (7) (33)

Foreign currency translation — 1

Gains and other income, net (7) (32)

Change in estimate relating to pre-acquisition contingencies — (3)

Total Certain items $ (5) $ (27)

2023 First Half

Six Months Ended

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

Segment financial results $ 429 $ 450 $ (21) (5%)

Depreciation and amortization 46 44 2 4%

Share-based compensation expense 4 3 1 28%

Certain items (5) (24) 19 78%

Segment adjusted EBITDA $ 474 $ 473 $ 1 NM

The table below details the components of Certain items for the six months ended June 30, 2023 and June 30, 2022.

Six Months Ended

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

Transaction and integration costs $ — 1

Purchase accounting adjustments 3 8

Litigation charges 6 5

Impairment 4 —

Gain on disposition of hotel/land (7) (33)

Foreign currency translation — 1

Insurance proceeds (2) (3)

1 unchanged sentence

Gains and other income, net (16) (35)

Change in estimate relating to pre-acquisition contingencies — (3)

Total Certain items $ (5) $ (24)

Exchange & Third-Party Management

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

Segment financial results $ 24 $ 46 $ (22) (47%)

Depreciation and amortization 8 7 1 5%

Share-based compensation expense 1 1 — (25%)

Certain items — (18) 18 NM

Segment adjusted EBITDA $ 32 $ 35 $ (3) (10%)

The table below details the components of Certain items for the three months ended June 30, 2023 and June 30, 2022.

Three Months Ended

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

Gain on disposition of VRI Americas $ — $ (16)

Early termination of VRI management contract — (2)

Total Certain items $ — $ (18)

2023 First Half

Six Months Ended

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

Segment financial results $ 52 $ 79 $ (27) (34%)

Depreciation and amortization 16 16 — NM

Share-based compensation expense 1 1 — NM

Certain items — (18) 18 NM

Segment adjusted EBITDA $ 69 $ 78 $ (9) (12%)

The table below details the components of Certain items for the six months ended June 30, 2023 and June 30, 2022.

Six Months Ended

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

Gain on disposition of VRI Americas $ — $ (16)

Early termination of VRI management contract — (2)

Total Certain items $ — $ (18)

Business Segments

3 unchanged sentences

Vacation Ownership

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

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

16 unchanged sentences

Gains and other income, net 7 32 16 35

Transaction and integration costs — (1) — (1)

Other 1 1 1 1

SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS 224 277 429 450

2 unchanged sentences

Sale of Vacation Ownership Products

2023 First Quarter

2023 Second Quarter

Three Months Ended

($ in millions) March 31, 2023 % of Consolidated Contract Sales, Net of Resales March 31, 2022 % of Consolidated Contract Sales, Net of Resales Change % Change

($ in millions) June 30, 2023 % of Consolidated Contract Sales, Net of Resales June 30, 2022 % of Consolidated Contract Sales, Net of Resales Change % Change

Total consolidated contract sales $ 453 $ 506 $ (53) (10%)

12 unchanged sentences

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

The higher contract sales performance reflects tour growth of 18% compared to the 2022 first quarter, resulting from strong package and in-house sales channel results as well as the rebound of leisure travel in Asia Pacific, partially offset by a decline in VPG of 7% attributed to the strong first quarter 2022 performance.

Contract sales in the 2023 second quarter declined, despite tour growth of 4%, due to a 14% decrease in VPG.

The decline in VPG was attributed to lower closing efficiencies due to the continued transition associated with the launch of Abound by Marriott Vacations (which commenced in the 2022 third quarter) and the continued integration of the Hyatt and Legacy-Welk business models and sales processes.

We expect contract sales for the remainder of 2023 to exceed 2022 results.

Financing propensity was 54% in the first quarter of 2023 and 50% in the first quarter of 2022.

Financing propensity was 56% in the second quarter of 2023, a 300 basis point increase over the second quarter of 2022.

We expect to continue offering financing incentive programs in 2023.

The average FICO score of customers who were U.S.

citizens or residents who financed a vacation ownership purchase was 738 and 736 for the three months ended March 31, 2023 and March 31, 2022, respectively.

The increase in the sales reserve as a percentage of Consolidated contract sales, net of resales is attributed to the increase in reportability (65 basis points) and financing propensity (65 basis points), and a higher reserve rate (25 basis points).

Historical default rates as a percentage of each year’s beginning gross vacation ownership notes receivable balance increased to 1.5% in the 2023 first quarter from 1.1% in the 2022 first quarter.

Excluding the impact of defaults on loans financing the purchase of Legacy-Welk vacation ownership products, historical default rates as a percentage of each year’s beginning gross vacation ownership notes receivable increased 20bps.

citizens or residents who financed a vacation ownership purchase was 736 and 735 for the three months ended June 30, 2023 and June 30, 2022, respectively.

The increase in the sales reserve as a percentage of Consolidated contract sales, net of resales is attributed to $11 million of defaults in excess of expected losses (220 basis points), higher financing propensity and reportability (80 basis points), and an increase in our reserve rate (25 basis points), partially offset by a decrease in Legacy-Welk sales, which carry a higher reserve on originated vacation ownership notes receivable (65 basis points).

Defaults in excess of expected losses have been reserved as if they are permanent differences, as opposed to an acceleration in timing of defaults.

2023 First Half

Six Months Ended

($ in millions) June 30, 2023 % of Consolidated Contract Sales, Net of Resales June 30, 2022 % of Consolidated Contract Sales, Net of Resales Change % Change

Total consolidated contract sales $ 887 $ 900 $ (13) (1%)

Joint venture contract sales 19 19 — NM

Total contract sales 906 919 (13) (1%)

resales contract sales (21) (20) (1)

joint venture contract sales (19) (19) —

Consolidated contract sales, net of resales 866 880 (14) (2%)

Settlement revenue 17 2% 16 2% 1

Resales revenue 12 1% 8 1% 4

Revenue recognition adjustments:

Reportability 5 1% (47) (5%) 52

Sales reserve (83) (10%) (66) (8%) (17)

(51) (6%) (56) (6%) 5

Sale of vacation ownership products $ 766 88% $ 735 83% $ 31 4%

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

Contract sales in the first half of 2023 declined, despite tour growth of 10%, due to an 11% decrease in VPG.

Financing propensity was 55% in the first half of 2023, a 300 basis point increase over the first half of 2022.

We expect to continue offering financing incentive programs in 2023.

The average FICO score of customers who were U.S.

citizens or residents who financed a vacation ownership purchase was 737 and 735 for the six months ended June 30, 2023 and June 30, 2022, respectively.

The increase in the sales reserve as a percentage of Consolidated contract sales, net of resales is attributed to $19 million of defaults in excess of expected losses (130 basis points), higher financing propensity and reportability (100 basis points), and an increase in our reserve rate (30 basis points), partially offset by a decrease in Legacy-Welk sales, which carry a higher reserve on originated vacation ownership notes receivable (50 basis points).

Defaults in excess of expected losses have been reserved as if they are permanent differences, as opposed to an acceleration in timing of defaults.

Development Profit

2023 First Quarter

2023 Second Quarter

Three Months Ended Change % Change

($ in millions) March 31, 2023 % of Revenue March 31, 2022 % of Revenue

($ in millions) June 30, 2023 % of Revenue June 30, 2022 % of Revenue

Sale of vacation ownership products $ 391 $ 425 $ (34) (8%)

3 unchanged sentences

Development profit margin 30.8% 31.0% (0.2 pts)

The increase in Development profit reflects $24 million from favorable revenue reportability, $5 million benefit of higher contract sales volumes and $11 million of favorable product cost, due mainly to the sale of lower cost inventory and, to a lesser extent, a $4 million favorable product cost true-up, partially offset by $5 million related to higher sales reserves.

We expect development profit margins for the remainder of 2023 to be above the 2023 first quarter results.

The decrease in Development profit reflects $28 million from lower contract sales volumes and $10 million related to higher sales reserves, partially offset by $14 million from favorable revenue reportability, $10 million of favorable product cost due mainly to the sale of lower cost inventory, and $2 million of favorable product cost true-up activity.

We expect development profit margins for the remainder of 2023 to be consistent with 2023 second quarter results.

2023 First Half

Six Months Ended

($ in millions) June 30, 2023 % of Revenue June 30, 2022 % of Revenue Change % Change

Sale of vacation ownership products $ 766 $ 735 $ 31 4%

Cost of vacation ownership products (124) (16%) (140) (19%) 16 11%

Marketing and sales (416) (54%) (396) (54%) (20) (5%)

Development profit $ 226 $ 199 $ 27 14%

Development profit margin 29.6% 27.1% 2.5 pts

The increase in Development profit reflects $38 million from favorable revenue reportability, $20 million of favorable product cost due mainly to the sale of lower cost inventory, and $6 million of favorable product cost true-up activity, partially offset by $23 million of lower contract sales volumes and $14 million related to higher sales reserves.

Resort Management and Other Services Revenues, Expenses and Profit

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

Management fee revenues $ 45 $ 41 $ 4 10%

8 unchanged sentences

(1) Resort occupancy represents all transient, previews, and owner keys divided by total keys available, net of keys out of service.

Resort management and other services revenues reflect higher ancillary revenues, including revenues from food and beverage and golf offerings, as a result of a 13% increase in revenue per occupied key, and a 1% increase in occupied keys at resorts with ancillary businesses, as well as higher management fees, partially offset by $1 million of lower refurbishment project revenues.

The $1 million decrease in resort management and other services profit reflects a $1 million decrease in ancillary profit, timing of club dues, higher customer services and exchange company expenses due to wage increases and improvements in service levels, partially offset by higher management fee revenues.

Resort management and other services revenues reflect higher ancillary revenues, including revenues from food and beverage and golf offerings (as a result of a 10% increase in revenue per occupied key, partially offset by a 4% decline in occupied keys at resorts with ancillary businesses) and higher management fees, partially offset by $1 million of lower refurbishment project revenues.

The $9 million increase in resort management and other services expenses reflects an increase in ancillary expenses of $5 million due to inflation and increased volumes sold, and an increase in customer services and exchange company expenses of $4 million due to incremental headcount, wages, benefits, and other operating cost increases.

As a result of the changes in resort management and other services revenues and expenses, resort management and other services profit declined $2 million.

2023 First Half

Six Months Ended

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

Management fee revenues $ 90 $ 83 $ 7 8%

Ancillary revenues 131 120 11 9%

Other management and exchange revenues 61 63 (2) (2%)

Resort management and other services revenues 282 266 16 6%

Resort management and other services expenses (133) (114) (19) (17%)

Resort management and other services profit $ 149 $ 152 $ (3) (2%)

Resort management and other services profit margin 52.8% 57.1% (4.3 pts)

Resort occupancy (1)

88.8% 89.1% (0.3 pts)

(1) Resort occupancy represents all transient, previews, and owner keys divided by total keys available, net of keys out of service.

Resort management and other services revenues reflect higher ancillary revenues, including revenues from food and beverage and golf offerings (as a result of an 11% increase in revenue per occupied key, partially offset by a 1% decrease in occupied keys at resorts with ancillary businesses) and higher management fees, partially offset by $2 million of lower refurbishment project revenues.

The $19 million increase in resort management and other services expenses reflects an increase in ancillary expenses of $13 million due to inflation and increased volumes sold, and an increase in customer services and exchange company expenses of $6 million due to incremental headcount, wages, benefits, and other operating cost increases.

As a result of the changes in resort management and other services revenues and expenses, resort management and other services profit declined $3 million.

Rental Revenues, Expenses and Profit

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

Rental revenues $ 135 $ 129 $ 6 4%

3 unchanged sentences

Three Months Ended

March 31, 2023 March 31, 2022 Change % Change

June 30, 2023 June 30, 2022 Change % Change

Transient keys rented (1)

549,329 577,114 (27,785) (5%)

Average transient rate $ 286.82 $ 275.49 $ 11.33 4%

Rental occupancy 70.4% 67.0% 3.4 pts

Average transient rate $ 263 $ 262 $ 1 NM

Rental occupancy (2)

70.8% 74.8% (4.0 pts)

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

(2) Rental occupancy represents transient and preview keys divided by keys available to rent, which is total available keys excluding owner usage.

Rental profit for transient keys, including plus points and excluding keys from owned hotels, declined by $5 million due to a $13 million increase in unsold maintenance fees associated with developer owned inventory and $6 million of increased costs associated with higher owner utilization of third-party vacation and other offerings.

These decreases were partially offset by $6 million of higher profit from the increase in keys rented and 4% higher average transient rate, net of tidy and variable costs, $3 million of higher plus points revenue, a $3 million reduction of rental costs recorded as marketing and sales expense for marketing purposes costs and $2 million of lower hotel loyalty and other costs.

Rental profit for our owned hotels decreased by $2 million (43%) due to the disposition of our Puerto Vallarta hotel in 2022.

Rental profit for transient keys, including plus points and excluding keys from owned hotels, declined by $18 million due to a $12 million increase in unsold maintenance fees associated with developer owned inventory, $10 million of decreased profit from fewer keys rented due to lower demand and an unfavorable change in the mix of keys available to rent, and $3 million of increased costs associated with higher owner utilization of third-party vacation and other offerings.

These decreases were partially offset by $5 million of higher plus points revenue and a $2 million reduction in rental costs recorded as marketing and sales expense for increased marketing purposes.

In addition to these variances, there was a $16 million higher net down of rental revenues and expense in the 2023 second quarter associated with unsold VOIs that are registered and held for sale.

Rental profit for our owned hotels decreased by $1 million, or 25%, due to a $1 million decrease related to the disposition of our Puerto Vallarta hotel in 2022.

2023 First Half

Six Months Ended

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

Rental revenues $ 276 $ 251 $ 25 10%

Rental expenses (232) (181) (51) (28%)

Rental profit (loss) $ 44 $ 70 $ (26) (38%)

Rental profit margin 15.7% 27.7% (12.0 pts)

Six Months Ended

June 30, 2023 June 30, 2022 Change % Change

Transient keys rented (1)

1,096,869 1,116,673 (19,804) (2%)

Average transient key rate $ 275 $ 269 $ 6 2%

Rental occupancy (2)

70.6% 70.9% (0.3 pts)

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

(2) Rental occupancy represents transient and preview keys divided by keys available to rent, which is total available keys excluding owner usage.

Rental profit for transient keys, including plus points and excluding keys from owned hotels, declined by $23 million due to a $23 million increase in unsold maintenance fees associated with developer owned inventory, $8 million of increased costs associated with higher owner utilization of third-party vacation and other offerings, and $4 million of decreased profit from fewer keys rented due to lower demand and an unfavorable change in the mix of keys available to rent.

These decreases were partially offset by $8 million of higher plus points revenue and a $4 million reduction of rental costs

recorded as marketing and sales expense for marketing purposes.

In addition to these variances, there was a $28 million higher net down of rental revenues and expense in the first half of 2023 associated with unsold VOIs that are registered and held for sale.

Rental profit for our owned hotels decreased by $3 million, or 34%, due to a $3 million decrease related to the disposition of our Puerto Vallarta hotel in 2022.

Financing Revenues, Expenses and Profit

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

Financing revenues $ 80 $ 72 $ 8 11%

5 unchanged sentences

Financing revenues reflect $9 million of higher interest income as a result of a higher average notes receivable balance partially offset by $1 million of lower plus point financing incentive costs.

The higher average notes receivable balance was the result of new loan originations in excess of the amount of the continued pay-down of the existing vacation ownership notes receivable portfolio.

We expect the average notes receivable balance, and resulting interest income, to continue to increase during the remainder of 2023 as a result of the expected growth in contract sales and loan originations.

Financing expenses increased $1 million due to timing of certain expenses.

The higher average notes receivable balance was the result of new loan originations in excess of the pay-down of existing vacation ownership notes receivable.

In the second quarter of 2023, we recorded a $3 million reduction in the reserve for acquired vacation ownership notes receivable as an offset to financing expenses.

Excluding this adjustment, financing expenses decreased $2 million due to the timing of lien fee income recognition.

The increase in consumer financing interest expense is attributable to the higher average securitized debt at a higher average interest rate for the more recent term securitization transactions.

We expect consumer financing interest expense to continue to remain elevated over our average outstanding interest rates on existing securitization transactions as a result of rising interest rates.

We expect consumer financing interest expense to continue to remain elevated over our average outstanding interest rates on existing securitization transactions as a result of rising interest rates for the remainder of 2023.

We do not adjust interest rates on consumer financing offerings at the same pace as, or in lock-step with, broader market interest rates;

thus we expect our financing profit margin to continue to decrease in 2023, as we repay existing securitization transactions with historically low interest rates and enter into new securitization transactions with higher interest rates.

2023 First Quarter

thus we expect our financing profit margin to continue to decrease in 2023, as we repay existing securitization transactions with lower interest rates and enter into new securitization transactions with higher interest rates.

2023 First Half

Six Months Ended

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

Financing revenues 158 143 15 10%

Financing expenses (15) (19) 4 22%

Consumer financing interest expense (36) (25) (11) (45%)

Financing profit $ 107 $ 99 $ 8 8%

Financing profit margin 67.4% 69.0% (1.6 pts)

Financing propensity 55.3% 51.9%

Financing revenues reflect $17 million of higher interest income as a result of a higher average notes receivable balance partially offset by $2 million of lower plus point financing incentive costs.

The higher average notes receivable balance was the result of new loan originations in excess of the pay-down of existing vacation ownership notes receivable.

In the second quarter of 2023, we recorded a $3 million reduction in the reserve for acquired vacation ownership notes receivable as an offset to financing expenses.

Excluding this adjustment, financing expenses decreased $1 million due to the timing of lien fee income recognition.

2023 Second Quarter

Three Months Ended

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

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

Royalty fee $ 29 $ 29 $ — NM

Royalty fee expense in the second quarter of 2023 remained flat to the second quarter of 2022 due to a decrease of $1 million in the dollar volume of closings on Marriott-branded products, offset by $1 million of increased variable royalty fees paid to Hyatt, which commenced in the fourth quarter of 2022.

2023 First Half

Six Months Ended

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

Royalty fee $ 58 $ 56 $ 2 4%

The increase in royalty fee expense in the first quarter of 2023 included $1 million from an increase in the dollar volume of closings and $1 million relating to variable royalty fees paid to Hyatt, which commenced in the fourth quarter of 2022.

Royalty fee expense increased $1 million in the first half of 2023 due to an increase in the dollar volume of closings on Marriott-branded products and $1 million relating to variable royalty fees paid to Hyatt.

Gains and Other Income

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

Gains and other income, net $ 9 $ 3 $ 6 NM

During the first quarter of 2023, we recorded a $4 million gain associated with the earn out of additional proceeds from the 2019 disposition of a land parcel in Cancun, Mexico, $3 million of non-income tax adjustments, and $2 million related to receipt of business interruption insurance proceeds.

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

Gains and other income, net $ 7 $ 32 $ (25) (79%)

During the second quarter of 2023, we recorded $7 million of gains on the disposition of excess real estate.

During the second quarter of 2022, we recorded a $33 million gain related to the strategic decision to dispose of our hotel in Puerto Vallarta, Mexico, partially offset by $1 million of foreign currency translation charges.

2023 First Half

Six Months Ended

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

Gains and other income, net $ 16 $ 35 $ (19) 55%

During the first half of 2023, we recorded $7 million of gains on the disposition of excess real estate, a $4 million gain associated with the earn out of additional proceeds from the 2019 disposition of a land parcel in Cancun, Mexico, a $3 million reduction in certain pre-acquisition contingencies associated with the ILG Acquisition, and $2 million related to receipt of business interruption insurance proceeds.

During the first half of 2022, we recorded a $33 million gain related to the strategic decision to dispose of our hotel in Puerto Vallarta, Mexico, and $3 million related to receipt of business interruption insurance proceeds, partially offset by $1 million of foreign currency translation charges.

Exchange & Third-Party Management

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

Management and exchange $ 51 $ 58 $ 107 $ 122

Rental 11 11 21 22

Cost reimbursements 3 5 8 14

4 unchanged sentences

TOTAL EXPENSES 41 44 84 95

Gains and other income, net — 16 — 16

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 24 $ 46 $ 52 $ 79

Management and Exchange Profit

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

Management and exchange revenue $ 51 $ 58 $ (7) (13%)

2 unchanged sentences

Management and exchange profit margin 40.4% 45.2% (4.8 pts)

The decrease in management and exchange revenue reflects $8 million of lower revenue due to the disposition of our VRI Americas business during the second quarter of 2022.

Management and exchange profit and profit margin, excluding the impact of the disposition of VRI Americas, would have decreased by $3 million or 9% in the first quarter of 2023, due to higher wage and benefits costs.

Excluding the $5 million decrease attributed to the disposition of our VRI Americas business during the second quarter of 2022, management and exchange revenue decreased $2 million or 6% compared to the second quarter of 2022, primarily attributed to a decline in Aqua-Aston management revenues resulting from a lower average daily rate in the Hawaii market.

Interval International transaction volume declined 5% and was offset by a 1% increase in average revenue per member.

Excluding the impact of the disposition of VRI Americas, management and exchange profit would have decreased by $2 million or 13% in the second quarter of 2023, primarily attributed to a decline in Aqua-Aston management profit and a slight decline in Interval International revenue.

2023 First Half

Six Months Ended

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

Management and exchange revenue $ 107 $ 122 $ (15) (13%)

Management and exchange expense (60) (65) 5 8%

Management and exchange profit $ 47 $ 57 $ (10) (18%)

Management and exchange profit margin 44.0% 47.0% (3.0 pts)

Excluding the $12 million decrease attributed to the disposition of our VRI Americas business during the second quarter of 2022, management and exchange revenue decreased $3 million or 3%.

Aqua-Aston management revenue declined $1 million resulting from higher property level expenses adversely impacting management fees.

Interval International management and exchange revenues declined $2 million, primarily attributed to lower membership fees.

Interval International average revenue per member decreased 2% compared to the prior year comparable period.

Excluding the impact of the disposition of VRI Americas, management and exchange profit would have decreased by $5 million or 11% in the first half of 2023, primarily attributed to higher information technology costs and higher wages and benefits and lower revenues.

Rental Revenues

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

Rental revenues $ 11 $ 11 $ — NM

Rental revenues, the average Getaway fee, and rental inventory procurement costs, which are recorded net within Rental revenues, were in line with the prior year.

2023 First Half

Six Months Ended

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

Rental revenues $ 21 $ 22 $ (1) (4%)

Results reflect a $1 million decrease in gross Getaway revenues, which resulted from a 10% decrease in transactions driven by lower inventory availability, partially offset by a 2% increase in the average Getaway fee.

Results reflect a $1 million decrease in Getaway revenues, which resulted from a 4% decrease in transactions driven by lower bookings, partially offset by a 1% increase in the average Getaway fee.

Rental inventory procurement costs, which are recorded net within Rental revenues, were in line with the prior year.

Gains and Other Income

2023 Second Quarter

Three Months Ended

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

Gains and other income, net $ — $ 16 $ (16) NM

2023 First Half

Six Months Ended

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

Gains and other income, net $ — $ 16 $ (16) NM

During the second quarter and first half of 2022, we recorded a $16 million gain related to the sale of our VRI Americas business.

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

Corporate and Other

1 unchanged sentence

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

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

Resort management and other services $ 8 $ 5 $ 17 $ 37

5 unchanged sentences

Depreciation and amortization 3 3 4 5

Litigation charges (1) — (1) —

Cost reimbursements (7) (6) (15) (26)

TOTAL EXPENSES 66 67 137 141

Gains and other income, net 12 1

Gains (losses) and other income (expense), net 3 (11) 15 (10)

Interest expense, net (36) (30) (70) (57)

2 unchanged sentences

Provision for income taxes (50) (43) (91) (75)

Net income attributable to noncontrolling interests — —

Net loss attributable to noncontrolling interests — 1 — 1

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (158) $ (187) $ (304) $ (335)

1 unchanged sentence

The following table illustrates the impact of certain Consolidated Property Owners’ Associations under the relevant accounting guidance and the changes attributed to the deconsolidation of individual Consolidated Property Owners’ Associations.

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

Resort management and other services $ 8 $ 4 $ 17 $ 36

6 unchanged sentences

Losses and other expense, net — (3) — (3)

Interest expense, net 1 — 1 —

FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 2 (5) 1 (4)

Provision for income taxes — (1)

Net income attributable to noncontrolling interests — —

Net loss attributable to noncontrolling interests — 1 — 1

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 2 $ (4) $ 1 $ (3)

General and Administrative

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

General and administrative $ 64 $ 64 $ — NM

General and administrative expenses increased $4 million for costs related to the implementation of technology associated with the integration of Legacy-ILG, $6 million of incremental costs primarily related to compliance activities and new product development initiatives, and a $3 million increase in insurance expense, offset by a $13 million decrease in compensation-related costs due to lower variable compensation expense partially offset by an increase in wages.

We expect General and administrative expenses for the remainder of 2023 to increase due the continued impact of increased wages and additional investment in upgrading, maintaining, and implementing technology, including the continued transition to software as a service, which are recorded as a component of General and administrative expense as opposed to Depreciation expense.

2023 First Half

Six Months Ended

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

General and administrative $ 132 $ 125 $ 7 5%

General and administrative expenses increased $5 million for costs related to the implementation of technology associated with the integration of Legacy-ILG, $5 million of incremental costs primarily related to compliance activities and new product development initiatives, and a $1 million increase in insurance expense, partially offset by a $4 million decrease in compensation related costs due to lower bonus expense partially offset by an increase in wages.

We expect General and administrative expenses for the remainder of 2023 to increase due the continued impact of increased wages and additional investment in upgrading and implementing technology.

Gains and Other Income

2023 First Quarter

General and administrative expenses increased $11 million for costs related to the implementation of technology associated with the integration of Legacy-ILG, $10 million of incremental costs primarily related to compliance activities and new product development initiatives, a $4 million increase in insurance expense, and $1 million of business travel related expenses, partially offset by a $19 million decrease in compensation-related costs due to lower variable compensation expense partially offset by an increase in wages.

Gains (Losses) and Other Income (Expense)

2023 Second Quarter

Three Months Ended

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

Gains and other income, net $ 12 $ 1 $ 11 NM

In the first quarter of 2023, we recorded a $20 million increase in our receivable from Marriott International for indemnified tax matters (the true-up to the offsetting accrual is included in the Provision for income taxes line) and $2 million of foreign currency translation gains, partially offset by $10 million attributed to the redemption premium and write-off of unamortized debt issuance costs attributed to the early redemption of our senior secured notes.

In the first quarter of 2022, we recorded $1 million of foreign currency translation gains.

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

Gains (losses) and other income (expense), net $ 3 $ (11) $ 14 NM

In the second quarter of 2023, we recorded a $1 million increase in our receivable from Marriott International for indemnified income tax matters (the offsetting accrual is included in the Provision for income taxes line) and $2 million of foreign currency translation gains.

In the second quarter of 2022, we recorded $7 million of foreign currency translation losses, $3 million of non-income tax related adjustments to the receivable for the indemnification we expect to receive from Marriott International for indemnified tax matters, and $3 million of non-cash losses pursuant to a change in control of certain Consolidated Property Owners’ Associations, partially offset by $2 million of proceeds from corporate owned life insurance.

2023 First Half

Six Months Ended

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

Gains (losses) and other income (expense), net $ 15 $ (10) $ 25 NM

In the first half of 2023, we recorded a $21 million increase in our receivable from Marriott International for indemnified income tax matters (the offsetting accrual is included in the Provision for income taxes line) and $4 million of foreign currency translation gains, partially offset by $10 million attributed to the redemption premium and write-off of unamortized debt issuance costs attributed to the early redemption of our senior secured notes.

In the first half of 2022, we recorded $6 million of foreign currency translation losses, $3 million of non-income tax related adjustments to the receivable for the indemnification we expect to receive from Marriott International for indemnified tax matters, and $3 million of non-cash losses pursuant to a change in control of certain Consolidated Property Owners’ Associations, partially offset by $2 million of proceeds from corporate owned life insurance.

Interest Expense

2023 First Quarter

2023 Second Quarter

Three Months Ended

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

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

Interest expense, net $ (36) $ (30) $ (6) (18%)

The increase in Interest expense, net is attributed to $5 million associated with higher borrowings on the Warehouse Credit Facility and Revolving Corporate Credit Facility, including the impact of the increase in the variable interest rate on the Revolving Corporate Credit Facility, $3 million of higher variable interest expense on the Term Loan, $4 million of higher interest expense associated with our convertible notes, and $1 million of interest expense related to leased assets.

The increase in Interest expense, net is attributed to $4 million associated with higher borrowings and higher variable interest rates on both the Warehouse Credit Facility and the Revolving Corporate Credit Facility, $4 million of higher interest expense associated with our convertible notes, $3 million of higher variable interest expense on the Term Loan, and $2 million of interest expense related to leased assets.

This was partially offset by $4 million of lower interest expense associated with the early redemption of our senior secured notes, $2 million of lower interest on non-income tax related items and $1 million of interest income.

2023 First Quarter

2023 First Half

Six Months Ended

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

Interest expense, net $ (70) $ (57) $ (13) (22%)

The increase in Interest expense, net is attributed to $10 million associated with higher borrowings and higher variable interest rates on both the Warehouse Credit Facility and the Revolving Corporate Credit Facility, $9 million of higher interest expense associated with our convertible notes, $5 million of higher variable interest expense on the Term Loan, and $3 million of interest expense related to leased assets.

This was partially offset by $8 million of lower interest expense associated with the early redemption of our senior secured notes, $4 million of lower interest on non-income tax related items and $2 million of interest income.

2023 Second Quarter

Three Months Ended

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

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

Provision for income taxes $ (50) $ (43) $ (7) (14%)

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.

See Footnote 5 “Income Taxes” to our Financial Statements for further information on our uncertain tax benefits and corresponding indemnification.

Our effective tax rate was 35.4% and 24.3% for the three 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.

2023 First Half

Six Months Ended

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

Provision for income taxes $ (91) $ (75) $ (16) (21%)

Our interim effective tax rate was 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 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.

Liquidity and Capital Resources

Typically, our capital needs are supported by cash on hand, cash generated from operations, our ability to raise capital through securitizations in the ABS market, our ability to issue new debt and refinance existing debt, and, to the extent necessary, our ability to access funds under the Warehouse Credit Facility and the Revolving Corporate Credit Facility.

Typically, our capital needs are supported by cash on hand, cash generated from operations, our ability to access funds under the Warehouse Credit Facility and the Revolving Corporate Credit Facility, our ability to raise capital through securitizations in the ABS market, and, to the extent necessary, our ability to issue new debt and refinance existing debt.

We believe these sources of capital will be adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, satisfy debt service requirements, fulfill other cash requirements, and return capital to shareholders.

We continuously monitor the capital markets to evaluate the effect that changes in market conditions may have on our ability to fund our liquidity needs.

Our corporate debt, net of cash and equivalents, to Adjusted EBITDA ratio was 3.1 at March 31, 2023, roughly in-line with our targeted leverage range of 2.5x to 3.0x, and we expect to be within the range by the end of 2023.

Our corporate debt, net of cash and equivalents, to Adjusted EBITDA ratio was 3.1 at June 30, 2023, roughly in-line with our targeted leverage range of 2.5x to 3.0x.

We have no material maturities of corporate debt until 2025.

At the end of the first quarter of 2023, the interest rate applicable to approximately 85% of our total corporate debt, excluding finance leases and including the impact of interest rate hedges, was effectively fixed.

The weighted average interest rate of our total corporate debt, excluding finance leases and including the impact of interest rate hedges, was 3.7% as of March 31, 2023.

At the end of the second quarter of 2023, the interest rate applicable to approximately 90% of our total corporate debt, excluding finance leases and including the impact of interest rate hedges, was effectively fixed.

The weighted average interest rate of our total corporate debt, excluding finance leases and including the impact of interest rate hedges, was 3.6% as of June 30, 2023.

Sources of Liquidity

4 unchanged sentences

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

In a vacation ownership notes receivable term securitization, several 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.

In a vacation ownership notes receivable term securitization, several 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.

In connection with each vacation ownership notes receivable securitization, we may retain all or a portion of the securities that are issued.

2 unchanged sentences

If a pool of securitized vacation ownership notes receivable fails to perform within the pool’s parameters (default or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess spread of interest accruing on the related vacation ownership notes receivable less the interest accruing on the ABS securities and fees 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 term securitization transactions outstanding, all of which were in compliance with their respective required parameters.

Since 2000, we have issued approximately $8.1 billion of debt securities in securitization transactions in the term ABS market, excluding amounts securitized through warehouse credit facilities or private bank transactions.

See Footnote 11 “Securitized Debt” to our Financial Statements for further information related to our recent securitization transaction, completed subsequent to the end of the first quarter of 2023.

During the second quarter of 2023, and as of June 30, 2023, we had 14 term securitization transactions outstanding, all of which were in compliance with their respective required parameters.

Since 2000, we have issued almost $8.5 billion of debt securities in securitization transactions in the term ABS market, excluding amounts securitized through warehouse credit facilities or private bank transactions.

On an ongoing basis, we have the ability to use our Warehouse Credit Facility to securitize, on a revolving non-recourse basis, eligible consumer loans derived from certain vacation ownership sales.

Those loans may later be transferred to term securitization transactions in the ABS market, which typically occur at least once per year.

Our Warehouse Credit Facility provides for up to $425 million of aggregate borrowings through July 28, 2024, and at March 31, 2023, we had $296 million of borrowings outstanding.

As of March 31, 2023, $120 million of gross vacation ownership notes receivable were eligible for securitization.

Those loans may later be transferred to term securitization transactions in the ABS market, which typically occur twice a year.

During the second quarter of 2023, we amended certain agreements associated with our Warehouse Credit Facility, which 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.

At June 30, 2023, we had $189 million of borrowings outstanding on our Warehouse Credit Facility.

As of June 30, 2023, $59 million of gross vacation ownership notes receivable were eligible for securitization.

Revolving Corporate Credit Facility

Our Revolving Corporate Credit Facility, which expires on March 31, 2027, provides for up to $750 million of aggregate borrowings for general corporate needs, including working capital, capital expenditures, letters of credit, and acquisitions.

At March 31, 2023, $200 million of borrowings were outstanding on our Revolving Corporate Credit Facility, and $1 million of le tters of credit were outstanding.

At June 30, 2023, $65 million of borrowings were outstanding on our Revolving Corporate Credit Facility, and $1 million of le tters of credit were outstanding.

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, including a redemption premium and the write-off of unamortized debt issuance costs, which were recorded in Gains and other income, net on our Income Statement for the three months ended March 31, 2023.

We minimize our working capital needs through cash management, strict credit-granting policies, and disciplined collection efforts.

1 unchanged sentence

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

Cash and cash equivalents on hand at March 31, 2023 totaled $306 million, a decrease of $218 million from December 31, 2022, primarily reflecting the redemption of senior notes of $250 million, the repurchase of common stock of $80 million, payment of dividends of $54 million, capital expenditures for property and equipment (excluding inventory) of $37 million, $9 million for payment of withholding taxes on vesting of restricted stock units, and repayments of securitized debt in excess of new borrowings of $3 million, partially offset by other debt borrowings in excess of repayments of $194 million, $12 million associated with net cash and cash equivalents provided by operating activities, $8 million of finance lease incentives in excess of payments, and $1 million due to the effect of changes in exchange rates.

Cash and cash equivalents on hand at June 30, 2023 totaled $242 million, a decrease of $282 million from December 31, 2022, primarily reflecting the redemption of senior notes of $250 million, the repurchase of common stock of $162 million, payment of dividends of $80 million, capital expenditures for property and equipment (excluding inventory) of $63 million, $10 million for payment of withholding taxes on vesting of restricted stock units, and $10 million of other uses of cash, partially offset by $119 million associated with net cash and cash equivalents provided by operating activities, new borrowings in excess of repayments of securitized debt of $92 million, other debt borrowings in excess of repayments of $59 million, $14 million of proceeds from dispositions of real property, $8 million of finance lease incentives in excess of payments, and $1 million due to the effect of changes in exchange rates.

Our cash flow from operations fluctuates during the year due to the timing of certain receipts and contractual and compensation-related payments.

Significant changes in cash flow can result from the timing of our collection of maintenance fees, club dues, and other customer payments, which typically occur in either the fourth quarter or the first quarter of each year.

Generally, cash outflows related to our payment of maintenance fees associated with unsold inventory occurs in the fourth quarter for our points products, and in the first quarter for our weeks-based products.

In addition, significant compensation-related cash outflows occur in the first quarter of each year associated with payment of annual bonuses and the payment of two quarterly dividends (December and February dividend declarations).

Generally, cash outflows related to our payment of maintenance fees associated with unsold inventory occurs in the fourth quarter for our points-based products, and in the first quarter for our weeks-based products.

In addition, during the first quarter of each year we generally have significant compensation-related cash outflows associated with payment of annual bonuses.

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

Inventory Spending Less Than Cost of Sales

Three Months Ended

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

Six Months Ended

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

Inventory spending $ (49) $ (92)

8 unchanged sentences

Among other reasons, by repurchasing inventory, we expect to be able to help stabilize the future cost of our vacation ownership products.

Our spending for real estate inventory in the first quarter of 2023 was lower than cost of sales and was primarily related to our VOI repurchase programs.

Our spending for real estate inventory in the first half of 2023 was lower than cost of sales and was primarily related to our VOI repurchase programs.

We expect inventory spending to be less than cost of sales for 2023.

Vacation Ownership Notes Receivable Collections Less Than Originations

Three Months Ended

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

Six Months Ended

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

Vacation ownership notes receivable collections — non-securitized $ 90 $ 133

2 unchanged sentences

Vacation ownership notes receivable collections less than originations $ (162) $ (118)

Vacation ownership notes receivable collections were less than originations due to the growth of sales of VOIs in the 2023 first quarter and 2022.

Vacation ownership notes receivable collections were less than originations in each of the first halves of 2023 and 2022 due to the growth of the average vacation ownership notes receivable pool attributed to sales of VOIs.

Repurchase of Common Stock

3 unchanged sentences

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

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

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

See Footnote 13 “Shareholders' Equity” to our Financial Statements for further information related to our current share repurchase program.

Payment of Dividends to Common Shareholders

We distributed cash dividends to holders of common stock during the first quarter of 2023 as follows:

We distributed cash dividends to holders of common stock during the first half of 2023 as follows:

Declaration Date Shareholder Record Date Distribution Date Dividend per Share

1 unchanged sentence

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

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

We currently expect to pay quarterly dividends in the future, but any future dividend payments will be subject to Board of Directors approval, which will depend on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice, and other business considerations that our Board of Directors considers relevant.

3 unchanged sentences

Material Cash Requirements

The following table summarizes our future material cash requirements from known contractual or other obligations as of March 31, 2023:

The following table summarizes our future material cash requirements from known contractual or other obligations as of June 30, 2023:

Payments Due by Period

24 unchanged sentences

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

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

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

These purchase commitments are excluded from the table above.

4 unchanged sentences

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

The following tables present consolidating financial information as of March 31, 2023 and December 31, 2022, and for the three months ended March 31, 2023 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVWC, and MVW on a consolidated basis.

The following tables present consolidating financial information as of June 30, 2023 and December 31, 2022, and for the six months ended June 30, 2023 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVWC, and MVW on a consolidated basis.

Condensed Consolidating Balance Sheet

As of March 31, 2023

As of June 30, 2023

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

52 unchanged sentences

Condensed Consolidating Statement of Income

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

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

14 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis