What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-04 · 309 added, 291 removed, 608 unchanged (50% of the section changed)

4 unchanged sentences

our possible or assumed future results of operations;

financial condition and leverage;

financial condition and leverage, including the expected impact of the Maui wildfires;

dividend payments;

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.

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

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

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.

8 unchanged sentences

volatility in the international and national economy and credit markets;

impact of the current or a future banking crisis;

the ongoing war between Russia and Ukraine and related sanctions and other measures;

the impact of the current or a future banking crisis;

wars involving Russia, Ukraine, Israel and Gaza and related sanctions and other measures;

our ability to attract and retain our global workforce;

4 unchanged sentences

difficulties associated with implementing new or maintaining existing technology;

changes in privacy laws and other matters referred to under the heading “Risk Factors” contained herein and also in our most recent Annual Report on Form 10-K, and which may be updated in our future periodic filings with the U.S.

changes in privacy laws;

the effects of steps that we or our affiliates have taken and may continue to take to reduce operating costs;

impacts from natural or man-made disasters and wildfires, including the Maui wildfires;

and other matters referred to under the heading “Risk Factors” contained herein and also in our most recent Annual Report on Form 10-K, and which may be updated in our future periodic filings with the U.S.

Securities and Exchange Commission (the “SEC”).

11 unchanged sentences

Our Vacation Ownership segment includes a diverse portfolio of resorts that includes some of the world’s most iconic brands licensed under exclusive long-term relationships.

We are the exclusive worldwide developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club and Hyatt Residence Club brands, as well as under Marriott Vacation Club Pulse, an extension to the Marriott Vacation Club brand.

We are 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 Vacation Club brands, as well as under Marriott Vacation Club Pulse, an extension to the Marriott Vacation Club brand.

We are also the exclusive worldwide developer, marketer and seller of vacation ownership and related products under The Ritz-Carlton Club brand, we have the non-exclusive right to develop, market and sell whole ownership residential products under The Ritz-Carlton Residences brand and we have a license to use the St.

20 unchanged sentences

Based upon the different terms of our contracts with the customer and business practices, control of the vacation ownership product has historically transferred to the customer at different points in time for each brand of VOIs.

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.

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.

In the third quarter of 2022, we aligned our business practices and contract terms for the sale of vacation ownership products (the “Contract Alignment”), 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.

Subsequent to the Contract 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.

Marriott-branded VOI sales contracts executed prior to these modifications have been accounted for with transfer of control of the VOI occurring at closing.

Control transfer for Legacy-Welk VOIs continues to occur at closing.

As a result of the unification of our Marriott-, Sheraton- and Westin- branded vacation ownership products under the Abound by Marriott Vacations program and stabilization of default rates following the initial impact of the COVID-19 pandemic, in the third quarter of 2022, we combined and aligned our reserve methodology for vacation ownership notes receivable for our Marriott, Sheraton and Westin brands.

As a result of the unification of our Marriott-, Sheraton- and Westin-branded vacation ownership products under the Abound by Marriott Vacations program in the third quarter of 2022, we combined the reserves, and aligned our reserve methodology, for vacation ownership notes receivable for our Marriott, Sheraton and Westin brands (the “Reserve Alignment”).

Performance Measures

19 unchanged sentences

Consolidated Results

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Sale of vacation ownership products $ 319 $ 444 $ 1,085 $ 1,179

16 unchanged sentences

TOTAL EXPENSES 1,081 1,012 3,099 2,880

Gains and other income, net 10 37 31 41

Gains (losses) and other income (expense), net 3 (2) 34 39

Interest expense, net (36) (34) (106) (91)

4 unchanged sentences

NET INCOME 42 110 219 303

Net loss attributable to noncontrolling interests — 1 — 1

Net income attributable to noncontrolling interests — (1) — —

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 42 $ 109 $ 219 $ 303

Operating Statistics

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Vacation Ownership

6 unchanged sentences

Average revenue per member $ 39.15 $ 38.91 $ 0.24 1%

2023 First Half

Six Months Ended

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

2023 First Three Quarters

Nine Months Ended

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

Vacation Ownership

1 unchanged sentence

Consolidated contract sales $ 1,325 $ 1,383 $ (58) (4%)

Joint venture contract sales $ 19 $ 19 $ — NM

Joint venture contract sales $ 24 $ 28 $ (4) (16%)

VPG $ 4,118 $ 4,544 $ (426) (9%)

2 unchanged sentences

Average revenue per member $ 120.48 $ 122.30 $ (1.82) (1%)

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Vacation Ownership $ 1,126 $ 1,182 $ (56) (5%)

3 unchanged sentences

Total Revenues $ 1,186 $ 1,252 $ (66) (5%)

2023 First Half

Six Months Ended

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

2023 First Three Quarters

Nine Months Ended

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

Vacation Ownership $ 3,335 3,229 $ 106 3%

1 unchanged sentence

Total Segment Revenues 3,535 3,458 77 2%

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

Consolidated Property Owners’ Associations (2) 10 (12) NM

Total Revenues 3,533 3,468 $ 65 2%

16 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 Second Quarter

2023 Third Quarter

Three Months Ended Change

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

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

Net income attributable to common shareholders $ 42 $ 109 $ (67) (61%)

3 unchanged sentences

EBITDA 135 235 (100) (42%)

Share-based compensation expense 12 12 — NM

Share-based compensation expense 6 10 (4) (33%)

Certain items 9 39 (30) NM

1 unchanged sentence

Adjusted EBITDA Margin 20% 32% (12 pts)

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

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

Three Months Ended

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

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

ILG integration $ — $ 22

Welk acquisition and integration 5 5

Other transformation initiatives — 6

Other transaction costs — 1

2 unchanged sentences

Litigation charges 2 2

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

Impairment — 1

Gain on disposition of hotel, land and other (1) —

Gain on disposition of VRI Americas — (1)

2 unchanged sentences

Change in indemnification asset (6) (1)

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

Early termination of VRI management contract — (2)

(Gains) losses and other (income) expense, net (3) 2

Expiration/forfeiture of deposits on pre-acquisition preview packages — (6)

Change in estimate relating to pre-acquisition contingencies — (2)

Total Certain items $ 9 $ 39

2023 First Half

Six Months Ended Change

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

2023 First Three Quarters

Nine Months Ended Change

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

Net income attributable to common shareholders $ 219 $ 303 $ (84) (28%)

4 unchanged sentences

Share-based compensation expense 25 30 (5) (15%)

Certain items 2 32 (30) (93%)

Certain items 11 71 (60) NM

Adjusted EBITDA $ 575 $ 727 $ (152) (21%)

Adjusted EBITDA Margin 24% 30% (6%)

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

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

Nine Months Ended

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

ILG integration $ 15 $ 80

Welk acquisition and integration 13 10

Other transformation initiatives — 6

Other transaction costs — 3

1 unchanged sentence

Early redemption of senior secured notes 10 —

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

Gain on disposition of hotel, land and other (8) (33)

Gain on disposition of VRI Americas — (17)

6 unchanged sentences

Impairment 4 1

Expiration/forfeiture of deposits on pre-acquisition preview packages — (6)

Early termination of VRI management contract — (2)

2 unchanged sentences

Segment Adjusted EBITDA

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Vacation Ownership $ 173 $ 299 $ (126) (42%)

1 unchanged sentence

Segment adjusted EBITDA 203 338 (135) (40%)

General and administrative (55) (54) (1) (1%)

General and administrative (53) (54) 1 NM

Adjusted EBITDA $ 150 $ 284 $ (134) (47%)

2023 First Half

Six Months Ended

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

Vacation Ownership $ 474 $ 473 $ 1 NM

2023 First Three Quarters

Nine Months Ended

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

Vacation Ownership $ 647 $ 772 $ (125) (16%)

Exchange & Third-Party Management 99 117 (18) (15%)

4 unchanged sentences

Vacation Ownership

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Segment financial results $ 149 $ 270 $ (121) (45%)

1 unchanged sentence

Share-based compensation expense 2 2 — 17%

Certain items (5) (27) 22 83%

Certain items (1) 4 (5) NM

Segment adjusted EBITDA $ 173 $ 299 $ (126) (42%)

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

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

Three Months Ended

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

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

Transaction and integration costs $ — $ 2

1 unchanged sentence

Litigation charges 2 2

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

Impairment — 1

Foreign currency translation — (1)

Insurance proceeds (1) —

Change in indemnification asset (6) —

Gains and other income, net (7) (1)

Expiration/forfeiture of deposits on pre-acquisition preview packages — (6)

Change in estimate relating to pre-acquisition contingencies — (2)

Total Certain items $ (1) $ 4

2023 First Half

Six Months Ended

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

2023 First Three Quarters

Nine Months Ended

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

Segment financial results $ 578 $ 720 $ (142) (20%)

1 unchanged sentence

Share-based compensation expense 6 5 1 24%

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

Certain items (6) (20) 14 NM

Segment adjusted EBITDA $ 647 $ 772 $ (125) (16%)

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

Nine Months Ended

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

Transaction and integration costs $ — 3

2 unchanged sentences

Impairment 4 1

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

Foreign currency translation — 1

Gain on disposition of hotel, land and other (7) (33)

Insurance proceeds (3) (3)

1 unchanged sentence

Gains and other income, net (23) (36)

Expiration/forfeiture of deposits on pre-acquisition preview packages — (6)

Change in estimate relating to pre-acquisition contingencies — (5)

1 unchanged sentence

Exchange & Third-Party Management

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Segment financial results $ 23 $ 29 $ (6) (22%)

Depreciation and amortization 7 8 (1) (3%)

Share-based compensation expense — 1 (1) (30%)

Certain items — 1 (1) NM

Segment adjusted EBITDA $ 30 $ 39 $ (9) (20%)

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

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

Three Months Ended

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

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

Gain on disposition of hotel, land and other $ (1) $ —

Gain on disposition of VRI Americas — (1)

Early termination of VRI management contract — (2)

Foreign currency translation — 2

(Gains) losses and other (income) expense, net (1) 1

Total Certain items $ — $ 1

2023 First Half

Six Months Ended

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

2023 First Three Quarters

Nine Months Ended

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

Segment financial results $ 75 $ 108 $ (33) (30%)

Depreciation and amortization 16 16 — NM

Share-based compensation expense 1 1 — NM

Depreciation and amortization 23 24 (1) (2%)

Share-based compensation expense 1 2 (1) (22%)

Certain items — (17) 17 NM

Segment adjusted EBITDA $ 99 $ 117 $ (18) (15%)

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

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

Nine Months Ended

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

Gain on disposition of hotel, land and other $ (1) $ —

Gain on disposition of VRI Americas — (17)

Foreign currency translation — 2

Gains and other income, net (1) (15)

Early termination of VRI management contract — (2)

5 unchanged sentences

Vacation Ownership

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Sale of vacation ownership products $ 319 $ 444 $ 1,085 $ 1,179

22 unchanged sentences

Sale of Vacation Ownership Products

2023 Second Quarter

2023 Third Quarter

Three 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

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

Total consolidated contract sales $ 438 $ 483 $ (45) (9%)

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.

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 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 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

Contract sales in the 2023 third quarter declined due to a 7% decrease in VPG and a 3% decrease in tours.

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

Though improving, we expect these factors to continue to impact VPG and contract sales for the remainder of 2023.

The favorable revenue reportability in the 2022 third quarter was primarily due to the Contract Alignment which resulted in the prospective acceleration of revenue for Marriott-branded vacation ownership interests of $46 million.

Financing propensity was 64% in the third quarter of 2023, a 530 basis point increase over the third quarter of 2022.

We expect to continue offering financing incentive programs throughout the remainder of 2023.

The average FICO score of customers for whom a credit score was available, generally U.S.

and Canadian residents, who financed a vacation ownership purchase was 729 and 730 for the three months ended September 30, 2023 and September 30, 2022, respectively.

In the third quarter of 2023, we evaluated our vacation ownership notes receivable reserve in light of trends in delinquencies and default rates.

As a result, we increased our originated vacation ownership notes receivable reserve by $59 million.

We primarily used a historical period of increased defaults as a basis for estimating the increase in our reserve.

This additional reserve adjusts our future default rate estimate to reflect current macroeconomic conditions, including inflation outpacing wage growth, continuing high interest rates, mixed economic indicators and increased global insecurity.

The 2022 third quarter sales reserve included a $19 million increase attributed to the Reserve Alignment, which was offset by a decrease in the acquired reserve for vacation ownership notes receivable recorded as a reduction of Financing expenses.

2023 First Three Quarters

Nine Months Ended

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

Total consolidated contract sales $ 1,325 $ 1,383 $ (58) (4%)

Joint venture contract sales 19 19 — NM

Joint venture contract sales 24 28 (4) (16%)

Total contract sales 1,349 1,411 (62) (4%)

10 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.

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.

Contract sales in the first three quarters of 2023 declined, despite tour growth of 5%, due to a 9% decrease in VPG.

The decline in VPG was attributed to the temporary suspension of activity at our sales centers in Maui, due to the wildfires, lower closing efficiencies due to the continued transition associated with the launch of Abound by Marriott Vacations and the continued integration of the Hyatt and Legacy-Welk business models and sales processes.

Financing propensity was 58% in the first three quarters of 2023, a 390 basis point increase over the first three quarters of 2022.

The average FICO score of customers for whom a credit score was available, generally U.S.

and Canadian residents, who financed a vacation ownership purchase was 734 and 733 for the nine months ended September 30, 2023 and September 30, 2022, respectively.

The sales reserve in the first three quarters of 2023 increased $78 million in light of trends in delinquencies and default rates in 2023.

The sales reserve in the first three quarters of 2022 included a $19 million increase attributed to the Reserve Alignment, which was offset by a decrease in the acquired reserve for vacation ownership notes receivable recorded as a reduction of Financing expenses.

Development Profit

2023 Second Quarter

2023 Third Quarter

Three Months Ended Change % Change

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

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

Sale of vacation ownership products $ 319 $ 444 $ (125) (28%)

3 unchanged sentences

Development profit margin 20.7% 36.1% (15.4 pts)

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

The decrease in Development profit reflects $43 million from unfavorable revenue reportability primarily attributed to the Contract Alignment, which resulted in the prospective acceleration of $39 million of revenue recognition for Marriott-branded VOI sales in the 2022 third quarter, $24 million from lower contract sales volumes and $35 million related to higher sales reserves, partially offset by $8 million of favorable product cost due mainly to the sale of lower cost inventory.

The $35 million of higher sales reserves included $49 million in the third quarter of 2023 ($59 million gross increase in reserve offset by a decrease of $10 million to product cost), partially offset by $14 million from the Reserve alignment in the third quarter of 2022.

Development profit margin, excluding the impact of the sales reserve increase of $49 million, was 30.5% in the third quarter of 2023.

We expect Development profit margin for the full year to be in line with year-to-date 2023 results.

2023 First Three Quarters

Nine Months Ended

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

Sale of vacation ownership products $ 1,085 $ 1,179 $ (94) (8%)

3 unchanged sentences

Development profit margin 27.0% 30.5% (3.5 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.

The decrease in Development profit reflects $47 million of lower contract sales volumes, $49 million related to higher sales reserves, and $5 million from unfavorable revenue reportability, partially offset by $28 million of favorable product cost due mainly to the sale of lower cost inventory, and $6 million of favorable product cost true-up activity.

Development profit margin, excluding the impact of the $49 million sales reserve increase in the third quarter of 2023, was 29.9% in the first three quarters of 2023.

Resort Management and Other Services Revenues, Expenses and Profit

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Management fee revenues $ 44 $ 41 $ 3 9%

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 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

The increase in Resort management and other services revenues reflects higher club dues of $4 million, higher management fees and $1 million of higher refurbishment project revenues, partially offset by lower ancillary revenues.

The $5 million increase in Resort management and other services expenses reflects an increase in ancillary expenses of $2 million due to inflation and foreign currency exchange rate changes in Mexico, and an increase in customer services and exchange company expenses of $3 million due to incremental headcount, wages, benefits, and other operating cost increases.

2023 First Three Quarters

Nine Months Ended

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

Management fee revenues $ 134 $ 124 $ 10 8%

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 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.

The increase in Resort management and other services revenues reflects higher ancillary revenues, including revenues from food and beverage and golf offerings (as a result of an 8% increase in revenue per occupied key, partially offset by a 2% decrease in occupied keys at resorts with ancillary businesses) and higher management fees and commissions from third-party vacation and other offerings.

The decline in occupied keys at resorts with ancillary businesses was primarily in Maui due to the wildfires.

The increase in Resort management and other services expenses reflects an increase in ancillary expenses of $15 million due to increased volumes sold, inflation and foreign currency exchange rate changes in Mexico, and an increase in customer services and exchange company expenses of $9 million due to incremental headcount, wages, benefits, and other operating cost increases.

Rental Revenues, Expenses and Profit

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Rental revenues $ 128 $ 154 $ (26) (17%)

3 unchanged sentences

Three Months Ended

June 30, 2023 June 30, 2022 Change % Change

September 30, 2023 September 30, 2022 Change % Change

Transient keys rented (1)

509,057 509,621 (564) —%

Average transient rate $ 263 $ 262 $ 1 NM

Average transient rate $ 256 $ 267 $ (12) (4%)

Rental occupancy (2)

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(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 $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 profit for transient keys, including plus points and excluding keys from owned hotels, declined due to an $11 million increase in unsold maintenance fees associated with developer owned inventory, $9 million of decreased profit due largely to the Maui wildfires and declining average daily rates, offset by the continued rebound of the Asia Pacific region and $5 million of higher operating costs.

These decreases were partially offset by $8 million of higher plus points revenue.

In addition to these variances, there was a $25 million higher net down of rental revenues and expense in the 2023 third quarter associated with unsold VOIs that are registered and held for sale.

Rental profit for our owned hotels in the third quarter of 2023 decreased $1 million compared to the third quarter of 2022.

2023 First Three Quarters

Nine Months Ended

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

Rental revenues $ 404 $ 405 $ (1) —%

Rental expenses (354) (311) (43) (14%)

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

Rental profit

$ 50 $ 94 $ (44) (47%)

Rental profit margin 12.3% 23.2% (10.9 pts)

Six Months Ended

June 30, 2023 June 30, 2022 Change % Change

Nine Months Ended

September 30, 2023 September 30, 2022 Change % Change

Transient keys rented (1)

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(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.

Rental profit for transient keys, including plus points and excluding keys from owned hotels, declined by $40 million due to a $34 million increase in unsold maintenance fees associated with developer owned inventory, $10 million of increased costs associated with higher owner utilization of third-party vacation and other offerings, $12 million of decreased profit due to lower demand, the Maui wildfires and an unfavorable change in the mix of keys available to rent, and $3 million of higher other costs.

These decreases were partially offset by $16 million of higher plus points revenue and a $3 million reduction of rental costs associated with occupancy used for marketing and sales activities.

to these variances, there was a $2 million lower net down of rental revenues and expense in the first three quarters of 2023 associated with unsold VOIs that are registered and held for sale.

Rental profit for our owned hotels decreased by $4 million, or 30%, attributed to the disposition of our Puerto Vallarta hotel in 2022 and Branson hotel in 2023.

Financing Revenues, Expenses and Profit

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Financing revenues $ 81 $ 74 $ 7 10%

Financing expenses (5) (10) 5 54%

Financing expenses (11) 9 (20) NM

Consumer financing interest expense (19) (14) (5) (36%)

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Financing propensity 64.0% 58.7%

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 pay-down of existing vacation ownership notes receivable.

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 related loan originations.

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.

Financing revenues reflect $8 million of higher interest income as a result of a higher average notes receivable balance partially offset by $1 million of higher plus point financing incentive costs.

The higher average notes receivable balance was the result of new loan originations in excess of the repayment of existing vacation ownership notes receivable, which we expect to continue.

As part of our Reserve Alignment for Marriott-, Westin- and Sheraton-branded vacation ownership notes receivable, in the third quarter of 2022, we recorded a $19 million reduction in our estimated reserve for acquired vacation ownership notes receivable as a decrease in Financing expenses.

Excluding this difference, Financing expenses increased $1 million due to higher operating costs.

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.

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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

2023 First Three Quarters

Nine Months Ended

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

Financing revenues 239 217 22 10%

Financing expenses (15) (19) 4 22%

Financing expenses (26) (10) (16) NM

Consumer financing interest expense (55) (39) (16) (41%)

2 unchanged sentences

Financing propensity 58.2% 54.3%

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

Financing revenues reflect $24 million of higher interest income as a result of a higher average notes receivable balance partially offset by $2 million of higher plus point financing incentive costs.

The higher average notes receivable balance was the result of new loan originations in excess of the repayment of existing vacation ownership notes receivable, which we expect will continue.

Excluding the change in our estimated reserve for acquired vacation ownership notes receivable, Financing expenses were in line with prior year.

In 2023, we recorded a $3 million reduction to our reserve for acquired vacation ownership notes receivable compared to a $19 million reduction in the comparable reserve in 2022.

2023 Third Quarter

Three Months Ended

($ 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

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

Royalty fee $ 30 $ 28 $ 2 5%

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.

Royalty fee expense increased in the third quarter of 2023 due to an increase of $2 million in the volume of closings on Marriott-branded products.

2023 First Three Quarters

Nine Months Ended

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

Royalty fee $ 88 $ 84 $ 4 4%

Royalty fee expense increased in the first three quarters of 2023 due to an increase in the volume of closings on Marriott-branded products ($2 million) and increased variable royalty fees paid to Hyatt, which commenced in the fourth quarter of 2022 ($2 million).

Gains and Other Income

2023 Second Quarter

2023 Third Quarter

Three Months Ended

($ 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

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

Gains and other income, net $ 7 $ 1 $ 6 NM

During the third quarter of 2023, we recorded a $6 million reduction in certain pre-acquisition contingencies associated with the ILG Acquisition and $1 million related to the receipt of insurance proceeds related to property damage from the 2017 hurricanes.

During the third quarter of 2022, we recorded a $1 million gain from foreign currency translation.

2023 First Three Quarters

Nine Months Ended

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

Gains and other income, net $ 23 $ 36 $ (13) (36%)

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.

During the first three quarters 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 $9 million reduction in certain pre-acquisition contingencies associated with the ILG Acquisition, $2 million related to the receipt of business interruption insurance proceeds, and $1 million related to the receipt of insurance proceeds related to property damage from the 2017 hurricanes.

During the first three quarters of 2022, we recorded gains and other income of $33 million related to the strategic decision to dispose of our hotel in Puerto Vallarta, Mexico and $3 million related to the receipt of business interruption insurance proceeds.

Exchange & Third-Party Management

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Management and exchange $ 50 $ 55 $ 157 $ 177

6 unchanged sentences

TOTAL EXPENSES 42 41 126 136

Gains and other income, net — 16 — 16

Gains (losses) and other income (expense), net 1 (1) 1 15

SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 23 $ 29 $ 75 $ 108

Management and Exchange Profit

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Management and exchange revenue $ 50 $ 55 $ (5) (7%)

2 unchanged sentences

Management and exchange profit margin 38.9% 48.1% (9.2 pts)

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

The decrease in management and exchange revenue reflects a $3 million decline in Aqua-Aston management revenues resulting from lower revenue per available room in the Hawaii market and the wildfires in Maui.

Interval International management and exchange revenues declined $2 million primarily attributed to 5% lower transaction volume, partially offset by a 1% increase in average revenue per member.

The decrease in management and exchange profit was primarily attributed to higher marketing and sales expense, higher information technology costs and higher wages and benefits and lower revenues.

2023 First Three Quarters

Nine Months Ended

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

Management and exchange revenue $ 157 $ 177 $ (20) (11%)

3 unchanged sentences

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 $8 million or 4%.

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.

Aqua-Aston management revenue declined $3 million as a result of the wildfires in Maui and higher property level expenses adversely impacting management fees.

Interval International management and exchange revenues declined $5 million, primarily attributed to lower membership fees and transaction revenues.

Interval International transaction volume declined 6% and average revenue per member decreased 1% compared to the prior year comparable period.

Excluding the impact of the disposition of VRI Americas, management and exchange profit decreased by $14 million or 15% in the first three quarters of 2023, primarily attributed to higher information technology costs and higher wages and benefits and lower revenues.

Rental Revenues

2023 Second Quarter

2023 Third Quarter

Three Months Ended

($ 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

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

Rental revenues $ 10 $ 11 $ (1) (7%)

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

Results reflect higher rental inventory procurement costs, which are recorded net within Rental revenues.

2023 First Three Quarters

Nine Months Ended

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

Rental revenues $ 31 $ 33 $ (2) (5%)

Results reflect higher rental inventory procurement costs, which are recorded net within Rental revenues.

Gains (Losses) and Other Income (Expense)

2023 Third 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

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

Gains (losses) and other income (expense), net $ 1 $ (1) $ 2 NM

2023 First Three Quarters

Nine Months Ended

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

Gains and other income, net $ 1 $ 15 $ (14) 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.

During the first three quarters of 2022, we recorded a $17 million gain related to the sale of our VRI Americas business, partially offset by $2 million of foreign currency translation losses.

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

2 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

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

Resort management and other services $ 12 $ 7 $ 29 $ 44

8 unchanged sentences

TOTAL EXPENSES 56 61 193 202

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

(Losses) gains and other (expense) income, net (5) (2) 10 (12)

Interest expense, net (36) (34) (106) (91)

2 unchanged sentences

Provision for income taxes (24) (59) (115) (134)

Net loss attributable to noncontrolling interests — 1 — 1

Net income attributable to noncontrolling interests — (1) — —

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (130) $ (190) $ (434) $ (525)

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 Six Months Ended

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

Three Months Ended Nine Months Ended

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

Resort management and other services $ 12 $ 6 $ 29 $ 42

8 unchanged sentences

FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS — 1 1 (3)

Net loss attributable to noncontrolling interests — 1 — 1

Provision for income taxes (1) — (1) —

Net income attributable to noncontrolling interests — (1) — —

FINANCIAL RESULTS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (1) $ — $ — $ (3)

General and Administrative

2023 Second Quarter

2023 Third Quarter

Three Months Ended

($ 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.

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

General and administrative $ 57 $ 62 $ (5) (7%)

The change in General and administrative expenses is due to $17 million of lower variable compensation expense and $4 million of higher allocations of expenses to operations, offset by $9 million of incremental costs primarily related to compliance activities and new product development initiatives, $5 million of higher costs related to the implementation of technology, and a $2 million increase in wages and benefits.

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

2023 First Three Quarters

Nine Months Ended

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

General and administrative $ 189 $ 187 $ 2 1%

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.

General and administrative expenses increased due to $20 million of costs related to the implementation of technology associated with the integration of Legacy-ILG, $15 million of incremental costs primarily related to compliance activities and new product development initiatives, $8 million of increased wages and benefits, a $3 million increase in insurance expense, and $2 million of other miscellaneous expenses, partially offset by a $40 million decrease in variable compensation expense and $6 million of higher allocations of general and administrative expenses to operations.

Gains (Losses) and Other Income (Expense)

2023 Second Quarter

2023 Third Quarter

Three Months Ended

($ 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

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

Losses and other expense, net $ (5) $ (2) $ (3) NM

In the third quarter of 2023, we recorded $5 million of foreign currency translation losses.

In the third quarter of 2022, we recorded $2 million of foreign currency translation losses and $1 million of miscellaneous losses and other expense, partially offset by $1 million of non-income tax related adjustments to the receivable for the indemnification we expect to receive from Marriott International for indemnified tax matters.

2023 First Three Quarters

Nine Months Ended

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

Gains (losses) and other income (expense), net $ 10 $ (12) $ 22 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.

In the first three quarters 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), partially offset by a $10 million expense attributed to the redemption premium and write-off of unamortized debt issuance costs in connection with the early redemption of our senior secured notes, and $1 million of foreign currency translation losses.

In the first three quarters of 2022, we recorded $8 million of foreign currency translation losses, $3 million of non-cash losses pursuant to a change in control of certain Consolidated Property Owners’ Associations, $2 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 $1 million of miscellaneous losses and other expense, partially offset by $2 million of proceeds from corporate owned life insurance.

Interest Expense

2023 Second Quarter

2023 Third Quarter

Three Months Ended

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

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

Interest expense, net $ (36) $ (34) $ (2) (4%)

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 Half

Six Months Ended

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

The increase in Interest expense, net is attributed to $5 million associated with higher borrowings and higher variable interest rates on both the Warehouse Credit Facility and the Revolving Corporate Credit Facility, $2 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, $1 million of lower interest expense associated with our convertible notes, $1 million of lower other interest expense and $1 million of interest income.

2023 First Three Quarters

Nine Months Ended

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

Interest expense, net $ (106) $ (91) $ (15) (15%)

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

The increase in Interest expense, net is attributed to $14 million associated with higher borrowings and higher variable interest rates on both the Warehouse Credit Facility and the Revolving Corporate Credit Facility, $7 million of higher interest expense associated with our 2027 Convertible Notes issued in December 2022, $8 million of higher variable interest expense on the Term Loan, and $5 million of interest expense related to leased assets.

This was partially offset by $12 million of lower interest expense associated with the early redemption of our senior secured notes, $3 million of lower interest on non-income tax related items, $3 million of higher interest income, and $1 million of lower other interest expense.

2023 Third Quarter

Three Months Ended

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

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

Provision for income taxes $ (24) $ (59) $ 35 59%

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

Our effective tax rate was 36.1% and 34.7% for the three months ended September 30, 2023 and September 30, 2022, respectively.

The increase in the effective tax rate is predominately attributable to a decrease in Income before income taxes and noncontrolling interests from 2022 to 2023 without a proportional decrease to non-deductible tax expenses, in addition to a net decrease in the tax expense for foreign uncertain tax benefits in 2023.

2023 First Three Quarters

Nine Months Ended

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

Provision for income taxes $ (115) $ (134) $ 19 14%

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.

Our interim effective tax rate was 34.3% and 30.6% for the nine months ended September 30, 2023 and September 30, 2022, respectively.

The increase in the effective tax rate is predominately attributable to a decrease in Income before income taxes and noncontrolling interests from 2022 to 2023 without a proportional decrease to non-deductible tax expenses, partially offset by a net increase in the tax expense for foreign uncertain tax benefits in 2023.

Liquidity and Capital Resources

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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 June 30, 2023, roughly in-line with our targeted leverage range of 2.5x to 3.0x.

Our corporate debt, net of cash and equivalents, to Adjusted EBITDA ratio was 3.5 at September 30, 2023.

We have no material maturities of corporate debt until 2025.

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.

At the end of the third quarter of 2023, the interest rate applicable to approximately 80% 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 3.9% as of September 30, 2023.

Sources of Liquidity

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

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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 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.

During the third quarter of 2023, and as of September 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.

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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.

At September 30, 2023, we had $345 million of borrowings outstanding on our Warehouse Credit Facility.

As of September 30, 2023, $70 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 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.

At September 30, 2023, $90 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 six months ended June 30, 2023.

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 (losses) and other income (expense), net on our Income Statement for the nine months ended September 30, 2023.

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

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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 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.

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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, during the first quarter of each year, we generally have significant variable 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

Six Months Ended

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

Nine Months Ended

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

Inventory spending $ (56) $ (108)

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

Purchase of property for future transfer to inventory (27) (12)

Inventory costs 137 183

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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 half 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 three quarters of 2023 was lower than cost of sales and was primarily related to purchases under our VOI repurchase programs.

Purchase of property for future transfer to inventory included the acquisition of property in Savannah, Georgia and Charleston, South Carolina in 2023 (see Footnote 3 “Acquisitions and Dispositions”).

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

Vacation Ownership Notes Receivable Collections Less Than Originations

Six Months Ended

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

Nine Months Ended

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

Vacation ownership notes receivable collections — non-securitized $ 119 $ 91

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Vacation ownership notes receivable collections less than originations $ (288) $ (259)

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.

Vacation ownership notes receivable collections were less than originations in each of the first three quarters 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

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

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

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

For the first three quarters of 2023 1,936,855 248 128.03

As of September 30, 2023 24,710,073 $ 2,367 $ 95.80

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 half of 2023 as follows:

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

Declaration Date Shareholder Record Date Distribution Date Dividend per Share

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

We declared cash dividends to holders of our common stock during the third quarter of 2023, and distributed such cash dividends subsequent to the end of the third quarter of 2023 as follows:

Declaration Date Shareholder Record Date Distribution Date Dividend per Share

September 7, 2023 September 21, 2023 October 5, 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.

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Material Cash Requirements

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

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

Payments Due by Period

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See Footnote 12 “Debt” to our Financial Statements for additional information on this lease.

(6) Primarily relates to future guaranteed purchases of rental inventory of $6 million and our commitment to an owners’ association that we manage to pay for any shortfall between the actual expenses incurred by the owners’ association and the income received by the owners’ association, in lieu of maintenance fees, of $6 million.

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.

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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 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.

The following tables present consolidating financial information as of September 30, 2023 and December 31, 2022, and for the nine months ended September 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 Statement of Income

Nine Months Ended September 30, 2023

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

($ in millions) MVWC MORI

Revenues $ — $ 679 $ 2,077 $ 808 $ (31) $ 3,533

Expenses (15) (809) (1,834) (572) 31 (3,199)

Benefit from (provision for) income taxes 4 27 (76) (70) — (115)

Equity in net income (loss) of subsidiaries 230 350 — — (580) —

Net income (loss) 219 247 167 166 (580) 219

Net income attributable to noncontrolling interests — — — — — —

Net income (loss) attributable to common shareholders $ 219 $ 247 $ 167 $ 166 $ (580) $ 219

Condensed Consolidating Balance Sheet

As of June 30, 2023

As of September 30, 2023

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

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Total liabilities and equity $ 3,683 $ 5,007 $ 5,804 $ 2,738 $ (7,593) $ 9,639

Condensed Consolidating Statement of Income

Six Months Ended June 30, 2023

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

($ in millions) MVWC MORI

Revenues $ — $ 487 $ 1,354 $ 526 $ (20) $ 2,347

Expenses (17) (561) (1,156) (365) 20 (2,079)

Provision for income taxes 5 8 (65) (39) — (91)

Equity in net income (loss) of subsidiaries 189 260 — — (449) —

Net income (loss) 177 194 133 122 (449) 177

Net income attributable to noncontrolling interests — — — — — —

Net income (loss) attributable to common shareholders $ 177 $ 194 $ 133 $ 122 $ (449) $ 177

Recent Accounting Pronouncements

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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