MARRIOTT VACATIONS WORLDWIDE Corp 10-Q

Item 1. Financial Statements MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 REVENUES Sale of vacation ownership products $ 319 $ 444 $ 1,085 $ 1,179 Management and exchange 205 198 611 623 Rental 138 165 435 438 Financing 81 74 239 217 Cost reimbursements 443 371 1,163 1,011 TOTAL REVENUES 1,186 1,252 3,533 3,468 EXPENSES Cost of vacation ownership products 50 76 174 216 Marketing and sales 202 207 618 603 Management and exchange 115 101 332 330 Rental 119 126 344 294 Financing 30 5 81 49 General and administrative 57 62 189 187 Depreciation and amortization 33 33 99 98 Litigation charges 2 2 7 7 Royalty fee 30 28 88 84 Impairment — 1 4 1 Cost reimbursements 443 371 1,163 1,011 TOTAL EXPENSES 1,081 1,012 3,099 2,880 Gains (losses) and other income (expense), net 3 ( 2 ) 34 39 Interest expense, net ( 36 ) ( 34 ) ( 106 ) ( 91 ) Transaction and integration costs ( 5 ) ( 34 ) ( 28 ) ( 99 ) Other ( 1 ) ( 1 ) — — INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 66 169 334 437 Provision for income taxes ( 24 ) ( 59 ) ( 115 ) ( 134 ) NET INCOME 42 110 219 303 Net income attributable to noncontrolling interests — ( 1 ) — — NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 42 $ 109 $ 219 $ 303 EARNINGS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS Basic $ 1.16 $ 2.76 $ 5.96 $ 7.39 Diluted $ 1.09 $ 2.53 $ 5.33 $ 6.68 CASH DIVIDENDS DECLARED PER SHARE $ 0.72 $ 0.62 $ 2.16 $ 1.86 See Interim Condensed Notes to Consolidated Financial Statements 1 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) (Unaudited) Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 NET INCOME $ 42 $ 110 $ 219 $ 303 Foreign currency translation adjustments ( 2 ) ( 1 ) 10 1 Reclassification of foreign currency translation adjustments realized upon disposition of entities — — — ( 10 ) Derivative instrument adjustment, net of tax ( 3 ) 8 ( 7 ) 31 OTHER COMPREHENSIVE (LOSS) GAIN, NET OF TAX ( 5 ) 7 3 22 Net income attributable to noncontrolling interests — ( 1 ) — — COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS — ( 1 ) — — COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 37 $ 116 $ 222 $ 325 See Interim Condensed Notes to Consolidated Financial Statements 2 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED BALANCE SHEETS (In millions, except share and per share data) Unaudited September 30, 2023 December 31, 2022 ASSETS Cash and cash equivalents $ 265 $ 524 Restricted cash (including $ 84 and $ 85 from VIEs, respectively) 238 330 Accounts and contracts receivable, net (including $ 14 and $ 13 from VIEs, respectively) 298 292 Vacation ownership notes receivable, net (including $ 1,885 and $ 1,792 from VIEs, respectively) 2,291 2,198 Inventory 642 660 Property and equipment, net 1,250 1,139 Goodwill 3,117 3,117 Intangibles, net 868 911 Other (including $ 88 and $ 76 from VIEs, respectively) 484 468 TOTAL ASSETS $ 9,453 $ 9,639 LIABILITIES AND EQUITY Accounts payable $ 238 $ 356 Advance deposits 169 158 Accrued liabilities (including $ 3 and $ 5 from VIEs, respectively) 359 369 Deferred revenue 371 344 Payroll and benefits liability 193 251 Deferred compensation liability 156 139 Securitized debt, net (including $ 2,048 and $ 1,982 from VIEs, respectively) 2,026 1,938 Debt, net 3,031 3,088 Other 165 167 Deferred taxes 335 331 TOTAL LIABILITIES 7,043 7,141 Contingencies and Commitments (Note 10) Preferred stock — $ 0.01 par value; 2,000,000 shares authorized; none issued or outstanding — — Common stock — $ 0.01 par value; 100,000,000 shares authorized; 75,807,873 and 75,744,524 shares issued, respectively 1 1 Treasury stock — at cost; 40,122,822 and 38,263,442 shares, respectively ( 2,298 ) ( 2,054 ) Additional paid-in capital 3,953 3,941 Accumulated other comprehensive income 18 15 Retained earnings 734 593 TOTAL MVW SHAREHOLDERS' EQUITY 2,408 2,496 Noncontrolling interests 2 2 TOTAL EQUITY 2,410 2,498 TOTAL LIABILITIES AND EQUITY $ 9,453 $ 9,639 The abbreviation VIEs above means Variable Interest Entities. See Interim Condensed Notes to Financial Statements 3 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Nine Months Ended September 30, 2023 September 30, 2022 OPERATING ACTIVITIES Net income $ 219 $ 303 Adjustments to reconcile net income to net cash, cash equivalents and restricted cash provided by operating activities: Depreciation and amortization of intangibles 99 98 Amortization of debt discount and issuance costs 17 20 Vacation ownership notes receivable reserve 182 130 Share-based compensation 25 30 Impairment charges 2 1 Gains and other income, net ( 8 ) ( 48 ) Deferred income taxes 2 64 Net change in assets and liabilities: Accounts and contracts receivable ( 16 ) 6 Vacation ownership notes receivable originations ( 749 ) ( 728 ) Vacation ownership notes receivable collections 461 469 Inventory 80 74 Other assets ( 10 ) ( 21 ) Accounts payable, advance deposits and accrued liabilities ( 103 ) ( 28 ) Deferred revenue 24 ( 5 ) Payroll and benefit liabilities ( 58 ) 52 Deferred compensation liability 12 8 Other liabilities ( 2 ) 7 Deconsolidation of certain Consolidated Property Owners' Associations — ( 48 ) Purchase of property for future transfer to inventory ( 27 ) ( 12 ) Other, net ( 1 ) 8 Net cash, cash equivalents and restricted cash provided by operating activities 149 380 INVESTING ACTIVITIES Proceeds from disposition of subsidiaries, net of cash and restricted cash transferred — 94 Capital expenditures for property and equipment (excluding inventory) ( 92 ) ( 36 ) Issuance of note receivable to VIE — ( 47 ) Proceeds from collection of note receivable from VIE — 47 Purchase of company owned life insurance ( 8 ) ( 14 ) Other dispositions, net 15 5 Net cash, cash equivalents and restricted cash (used in) provided by investing activities ( 85 ) 49 Continued See Interim Condensed Notes to Consolidated Financial Statements 4 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (In millions) (Unaudited) Nine Months Ended September 30, 2023 September 30, 2022 FINANCING ACTIVITIES Borrowings from securitization transactions 916 609 Repayment of debt related to securitization transactions ( 828 ) ( 655 ) Proceeds from debt 790 505 Repayments of debt ( 956 ) ( 505 ) Finance lease incentive 10 — Finance lease payment ( 2 ) ( 3 ) Payment of debt issuance costs ( 6 ) ( 10 ) Repurchase of common stock ( 248 ) ( 528 ) Payment of dividends ( 80 ) ( 75 ) Payment of withholding taxes on vesting of restricted stock units ( 10 ) ( 23 ) Net cash, cash equivalents and restricted cash used in financing activities ( 414 ) ( 685 ) Effect of changes in exchange rates on cash, cash equivalents and restricted cash ( 1 ) ( 4 ) Change in cash, cash equivalents and restricted cash ( 351 ) ( 260 ) Cash, cash equivalents and restricted cash, beginning of period 854 803 Cash, cash equivalents and restricted cash, end of period $ 503 $ 543 SUPPLEMENTAL DISCLOSURES Non-cash issuance of debt in connection with asset acquisition $ — $ 11 Non-cash issuance of treasury stock for employee stock purchase plan 4 4 Non-cash transfer from inventory to property and equipment 11 45 Non-cash transfer from property and equipment to inventory 60 2 Non-cash transfer from other assets to property and equipment — 15 Right-of-use asset obtained in exchange for finance lease obligation 80 — Non-cash issuance of debt in connection with finance lease 97 — Dividends payable 26 24 Interest paid, net of amounts capitalized 141 104 Income taxes paid, net of refunds 138 51 See Interim Condensed Notes to Consolidated Financial Statements 5 MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In millions) (Unaudited) Common Stock Issued Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity 75.7 BALANCE AT DECEMBER 31, 2022 $ 1 $ ( 2,054 ) $ 3,941 $ 15 $ 593 $ 2,496 $ 2 $ 2,498 — Net income — — — — 87 87 — 87 — Foreign currency translation adjustments — — — 6 — 6 — 6 — Derivative instrument adjustment — — — ( 3 ) — ( 3 ) — ( 3 ) 0.1 Share-based compensation plans — 2 ( 4 ) — — ( 2 ) — ( 2 ) — Repurchase of common stock — ( 80 ) — — — ( 80 ) — ( 80 ) — Dividends — — — — ( 26 ) ( 26 ) — ( 26 ) 75.8 BALANCE AT MARCH 31, 2023 1 ( 2,132 ) 3,937 18 654 2,478 2 2,480 — Net income — — — — 90 90 — 90 — Foreign currency translation adjustments — — — 6 — 6 — 6 — Derivative instrument adjustment — — — ( 1 ) — ( 1 ) — ( 1 ) — Share-based compensation plans — 1 10 — — 11 — 11 — Repurchase of common stock — ( 82 ) — — — ( 82 ) — ( 82 ) — Dividends — — — — ( 26 ) ( 26 ) — ( 26 ) 75.8 BALANCE AT JUNE 30, 2023 1 ( 2,213 ) 3,947 23 718 2,476 2 2,478 — Net income — — — — 42 42 — 42 — Foreign currency translation adjustments — — — ( 2 ) — ( 2 ) — ( 2 ) — Derivative instrument adjustment — — — ( 3 ) — ( 3 ) — ( 3 ) — Share-based compensation plans — 1 6 — — 7 — 7 — Repurchase of common stock — ( 86 ) — — — ( 86 ) — ( 86 ) — Dividends — — — — ( 26 ) ( 26 ) — ( 26 ) 75.8 BALANCE AT SEPTEMBER 30, 2023 $ 1 $ ( 2,298 ) $ 3,953 $ 18 $ 734 $ 2,408 $ 2 $ 2,410 Continued See Interim Condensed Notes to Consolidated Financial Statements 6 MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (CONTINUED) (In millions) (Unaudited) Common Stock Issued Common Stock Treasury Stock Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Retained Earnings Total MVW Shareholders' Equity Noncontrolling Interests Total Equity 75.5 BALANCE AT DECEMBER 31, 2021 $ 1 $ ( 1,356 ) $ 4,072 $ ( 16 ) $ 275 $ 2,976 $ 10 $ 2,986 — Impact of adoption of ASU 2020-06 — — ( 111 ) — 31 ( 80 ) — ( 80 ) 75.5 OPENING BALANCE 2022 1 ( 1,356 ) 3,961 ( 16 ) 306 2,896 10 2,906 — Net income — — — — 58 58 — 58 — Foreign currency translation adjustments — — — 4 — 4 — 4 — Derivative instrument adjustment — — — 16 — 16 — 16 0.2 Share-based compensation plans — 1 ( 16 ) — — ( 15 ) — ( 15 ) — Repurchase of common stock — ( 119 ) — — — ( 119 ) — ( 119 ) — Dividends — — — — ( 26 ) ( 26 ) — ( 26 ) 75.7 BALANCE AT MARCH 31, 2022 1 ( 1,474 ) 3,945 4 338 2,814 10 2,824 — Net income — — — — 136 136 ( 1 ) 135 — Foreign currency translation adjustments — — — ( 2 ) — ( 2 ) — ( 2 ) — Reclassification of foreign currency translation adjustments realized upon disposition of entities — — — ( 10 ) — ( 10 ) — ( 10 ) — Derivative instrument adjustment — — — 7 — 7 — 7 — Adjustment for 2022 Convertible Note Hedges — — 6 — — 6 — 6 — Share-based compensation plans — 1 12 — — 13 — 13 — Repurchase of common stock — ( 193 ) — — — ( 193 ) — ( 193 ) — Deconsolidation of certain Consolidated Property Owners' Associations — — — — — — ( 8 ) ( 8 ) — Dividends — — — — ( 26 ) ( 26 ) — ( 26 ) 75.7 BALANCE AT JUNE 30, 2022 1 ( 1,666 ) 3,963 ( 1 ) 448 2,745 1 2,746 — Net income — — — — 109 109 1 110 — Foreign currency translation adjustments — — — ( 1 ) — ( 1 ) — ( 1 ) — Derivative instrument adjustment — — — 8 — 8 — 8 — Tax effect on equity, convertible notes — — ( 1 ) — — ( 1 ) — ( 1 ) — Share-based compensation plans — — 5 — — 5 — 5 — Repurchase of common stock — ( 216 ) — — — ( 216 ) — ( 216 ) — Dividends — — — — ( 24 ) ( 24 ) — ( 24 ) — Employee stock plan issuance — — 1 — — 1 — 1 75.7 BALANCE AT SEPTEMBER 30, 2022 $ 1 $ ( 1,882 ) $ 3,968 $ 6 $ 533 $ 2,626 $ 2 $ 2,628 See Interim Condensed Notes to Consolidated Financial Statements 7 Table of Contents MARRIOTT VACATIONS WORLDWIDE CORPORATION INTERIM CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The Interim Consolidated Financial Statements present the results of operations, financial position and cash flows of Marriott Vacations Worldwide Corporation (referred to in this report as (i) “we,” “us,” “Marriott Vacations Worldwide,” “MVW,” or the “Company,” which includes our consolidated subsidiaries except where the context of the reference is to a single corporate entity, or (ii) “MVWC,” which shall refer only to Marriott Vacations Worldwide Corporation, without its consolidated subsidiaries). In order to make this report easier to read, we refer throughout to (i) our Interim Consolidated Financial Statements as our “Financial Statements,” (ii) our Interim Consolidated Statements of Income as our “Income Statements,” (iii) our Interim Consolidated Balance Sheets as our “Balance Sheets,” and (iv) our Interim Consolidated Statements of Cash Flows as our “Cash Flows.” In addition, references throughout to numbered “Footnotes” refer to the numbered Notes in the Interim Condensed Notes to Consolidated Financial Statements, unless otherwise noted. Capitalized terms used and not specifically defined herein have the same meanings given those terms in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”). We also use certain other terms that are defined within these Financial Statements. The Financial Statements presented herein and discussed below include 100 % of the assets, liabilities, revenues, expenses, and cash flows of Marriott Vacations Worldwide, all entities in which Marriott Vacations Worldwide has a controlling voting interest (“subsidiaries”), and variable interest entities (“VIEs”) for which Marriott Vacations Worldwide is the primary beneficiary, as determined in accordance with consolidation accounting guidance. References in these Financial Statements to net income or loss attributable to common shareholders and MVW shareholders’ equity do not include noncontrolling interests, which represent the outside ownership of our consolidated non-wholly owned entities and are reported separately. Intercompany accounts and transactions between consolidated entities have been eliminated in consolidation. These Financial Statements reflect our financial position, results of operations, and cash flows as prepared in conformity with United States Generally Accepted Accounting Principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates include, but are not limited to, revenue recognition, cost of vacation ownership products, inventory valuation, goodwill and intangibles valuation, accounting for acquired vacation ownership notes receivable, vacation ownership notes receivable reserves, income taxes, and loss contingencies. The uncertainties in the broader macroeconomic environment, including inflationary pressures, as well as effects of the COVID-19 pandemic, have made it more challenging to make these estimates. Actual results could differ from our estimates, and such differences may be material. In our opinion, our Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position, the results of our operations, and cash flows for the periods presented. Interim results may not be indicative of fiscal year performance because of, among other reasons, general macroeconomic conditions, including inflationary pressures, rising interest rates, and seasonal and short-term variations, as well as any effects of the COVID-19 pandemic. These Financial Statements have not been audited. We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP. Although we believe our footnote disclosures are adequate to make the information presented not misleading, the Financial Statements in this report should be read in conjunction with the consolidated financial statements and notes thereto in our 2022 Annual Report. We refer to the business and brands that we acquired in the acquisition of Welk Hospitality Group, Inc. (“Welk”) in 2021 (the “Welk Acquisition”) as “Legacy-Welk.” We refer to the business and brands that we acquired in the acquisition of ILG, LLC, formerly known as ILG, Inc. (“ILG”), in 2018 (the “ILG Acquisition”) as “Legacy-ILG.” We refer to the business we conducted, and the associated brands, prior to the ILG Acquisition as “Legacy-MVW.” During the third quarter of 2023 we launched Hyatt Vacation Club across our former Hyatt Residence Club and Legacy-Welk properties, which connects these properties and associated vacation ownership programs under a single brand. 8 Table of Contents 2. SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS New Accounting Standards Accounting Standards Update 2022-02 – “ Financial Instruments — Credit Losses (Topic 326) – Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”) In the first quarter of 2023, we adopted accounting standards update (“ASU”) 2022-02, which eliminated the recognition and measurement guidance applicable to troubled debt restructurings for creditors and enhanced disclosure requirements with respect to loan modifications for borrowers experiencing financial difficulty. ASU 2022-02 also requires disclosure of current-period gross write-offs by year of origination to be presented in the vintage disclosures for financing receivables. The adoption of ASU 2022-02 on January 1, 2023, on a prospective basis, did not have a material impact on our financial statements or disclosures other than the incremental disclosures relating to gross write-offs for vacation ownership notes receivable. See Footnote 6 “Vacation Ownership Notes Receivable” for the incremental disclosures required by the adoption of ASU 2022-02. Accounting Standards Update 2020-04 – “ Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting ” (“ASU 2020-04”) and Accounting Standards Update 2022-06 – “ Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848 ” (“ASU 2022-06”) In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, as amended, which provides optional expedients and exceptions to existing guidance on contract modifications and hedge accounting in an effort to ease the financial reporting burdens related to the expected market transition from the USD London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This update was effective upon issuance and issuers generally were able to elect to adopt the optional expedients and exceptions over time through a period ending on December 31, 2022. In December 2022, the FASB issued ASU 2022-06 to extend the temporary accounting rules under Topic 848 from December 31, 2022 to December 31, 2024. During the second quarter of 2023, we amended our Term Loan (as defined in Footnote 12 “Debt”) and our interest rate swaps and collar to reference SOFR (as defined in Footnote 12 “Debt”) rather than LIBOR. See Footnote 12 “Debt” for more information. Both our Term Loan and the related interest rate swaps and collar transitioned to SOFR at the same time, effective July 31, 2023. As of September 30, 2023, we have no other financial instruments to transition from LIBOR. 3. ACQUISITIONS AND DISPOSITIONS Acquisitions Savannah, Georgia During the third quarter of 2023, we acquired property in Savannah, Georgia for $ 19 million. We plan to convert the property into a 73 -unit vacation ownership property. The transaction was accounted for as an asset acquisition and was recorded in Property and equipment, net. Charleston, South Carolina During the first quarter of 2023, we acquired a parcel of land and an adjacent retail space in Charleston, South Carolina for $ 17 million. We plan to develop the parcel of land into a 50 -unit vacation ownership property and use a portion of the retail space to operate a sales center. The transaction was accounted for as an asset acquisition and was recorded in Property and equipment, net. Bali During the first quarter of 2022, we acquired 88 completed vacation ownership units, as well as a sales center, located in Bali, Indonesia for $ 36 million. The transaction was accounted for as an asset acquisition and the purchase price was allocated to Property and equipment, net. As consideration for the acquisition, we paid $ 12 million in cash and issued a non-interest bearing note payable for $ 11 million, of which $ 6 million was repaid in the first quarter of 2023. Further, during the first quarter of 2022, we reclassified $ 13 million of previous deposits associated with the project from Other assets to Property and equipment, net. Dispositions As part of the ILG Acquisition, we acquired the Vacation Resorts International (“VRI”) and Trading Places International (“TPI”) businesses (together, the “VRI Americas” business), which was part of our Exchange & Third-Party Management segment prior to our disposal of VRI Americas during the second quarter of 2022, as discussed below. 9 Table of Contents During the second quarter of 2022, we disposed of VRI Americas for proceeds of $ 56 million, net of cash and restricted cash transferred to the buyer of $ 12 million, after determining that this business was not a core component of our future growth strategy and operating model. The results of VRI Americas are included in our Exchange and Third-Party Management segment through the date of the sale. The net carrying value of VRI Americas as of the date of the disposition was $ 51 million, including $ 25 million of goodwill and $ 20 million of intangible assets. As a result of the disposition, we recorded a gain of $ 1 million and $ 17 million in Gains (losses) and other income (expense), net on our Income Statements for the three and nine months ended September 30, 2022, respectively. Additionally, during the second quarter of 2022, we disposed of entities that owned and operated a Vacation Ownership segment hotel in Puerto Vallarta, Mexico, for proceeds of $ 38 million, net of cash and restricted cash transferred to the buyer of $ 3 million, consistent with our strategy to dispose of non-strategic assets. The net carrying value of the business disposed of as of the date of the disposition, excluding the cumulative translation adjustment, was $ 18 million, substantially all of which was for property and equipment. As a result of this disposition, we recorded a gain of $ 33 million in Gains (losses) and other income (expense), net on our Income Statement for the nine months ended September 30, 2022, which included the realization of cumulative foreign currency translation gains of $ 10 million associated with the disposition of these entities. 4. REVENUE AND RECEIVABLES Sources of Revenue by Segment Three Months Ended September 30, 2023 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Sale of vacation ownership products $ 319 $ — $ — $ 319 Ancillary revenues 62 1 — 63 Management fee revenues 44 5 — 49 Exchange and other services revenues 37 44 12 93 Management and exchange 143 50 12 205 Rental 128 10 — 138 Cost reimbursements 455 4 ( 16 ) 443 Revenue from contracts with customers 1,045 64 ( 4 ) 1,105 Financing 81 — — 81 Total Revenues $ 1,126 $ 64 $ ( 4 ) $ 1,186 10 Table of Contents Three Months Ended September 30, 2022 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Sale of vacation ownership products $ 444 $ — $ — $ 444 Ancillary revenues 63 1 — 64 Management fee revenues 41 7 ( 1 ) 47 Exchange and other services revenues 32 47 8 87 Management and exchange 136 55 7 198 Rental 154 11 — 165 Cost reimbursements 374 5 ( 8 ) 371 Revenue from contracts with customers 1,108 71 ( 1 ) 1,178 Financing 74 — — 74 Total Revenues $ 1,182 $ 71 $ ( 1 ) $ 1,252 Nine Months Ended September 30, 2023 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Sale of vacation ownership products $ 1,085 $ — $ — $ 1,085 Ancillary revenues 193 3 — 196 Management fee revenues 134 18 ( 2 ) 150 Exchange and other services revenues 98 136 31 265 Management and exchange 425 157 29 611 Rental 404 31 — 435 Cost reimbursements 1,182 12 ( 31 ) 1,163 Revenue from contracts with customers 3,096 200 ( 2 ) 3,294 Financing 239 — — 239 Total Revenues $ 3,335 $ 200 $ ( 2 ) $ 3,533 11 Table of Contents Nine Months Ended September 30, 2022 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Sale of vacation ownership products $ 1,179 $ — $ — $ 1,179 Ancillary revenues 183 3 — 186 Management fee revenues 124 28 ( 5 ) 147 Exchange and other services revenues 95 146 49 290 Management and exchange 402 177 44 623 Rental 405 33 — 438 Cost reimbursements 1,026 19 ( 34 ) 1,011 Revenue from contracts with customers 3,012 229 10 3,251 Financing 217 — — 217 Total Revenues $ 3,229 $ 229 $ 10 $ 3,468 Timing of Revenue from Contracts with Customers by Segment The following tables detail the timing of revenue from contracts with customers by segment for the time periods presented. Three Months Ended September 30, 2023 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Services transferred over time $ 658 $ 27 $ ( 4 ) $ 681 Goods or services transferred at a point in time 387 37 — 424 Revenue from contracts with customers $ 1,045 $ 64 $ ( 4 ) $ 1,105 Three Months Ended September 30, 2022 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Services transferred over time $ 597 $ 31 $ ( 1 ) $ 627 Goods or services transferred at a point in time 511 40 — 551 Revenue from contracts with customers $ 1,108 $ 71 $ ( 1 ) $ 1,178 Nine Months Ended September 30, 2023 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Services transferred over time $ 1,802 $ 83 $ ( 2 ) $ 1,883 Goods or services transferred at a point in time 1,294 117 — 1,411 Revenue from contracts with customers $ 3,096 $ 200 $ ( 2 ) $ 3,294 Nine Months Ended September 30, 2022 ($ in millions) Vacation Ownership Exchange & Third-Party Management Corporate and Other Total Services transferred over time $ 1,638 $ 103 $ 10 $ 1,751 Goods or services transferred at a point in time 1,374 126 — 1,500 Revenue from contracts with customers $ 3,012 $ 229 $ 10 $ 3,251 12 Table of Contents Sale of Vacation Ownership Products Revenues were reduced during the third quarter and first three quarters of 2023 by $ 47 million and $ 66 million, respectively, due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods. Receivables from Contracts with Customers, Contract Assets, & Contract Liabilities The following table shows the composition of our receivables from contracts with customers and contract liabilities. We had no contract assets at either September 30, 2023 or December 31, 2022. ($ in millions) At September 30, 2023 At December 31, 2022 Receivables from Contracts with Customers Accounts and contracts receivable, net $ 176 $ 194 Vacation ownership notes receivable, net 2,291 2,198 $ 2,467 $ 2,392 Contract Liabilities Advance deposits $ 169 $ 158 Deferred revenue 371 344 $ 540 $ 502 Revenue recognized during the third quarter and first three quarters of 2023 that was included in our contract liabilities balance at December 31, 2022 was $ 67 million and $ 241 million, respectively. Remaining Performance Obligations Our remaining performance obligations represent the expected transaction price allocated to our contracts that we expect to recognize as revenue in future periods when we perform under the contracts. At September 30, 2023, approximately 91 % of this amount is expected to be recognized as revenue over the next two years . Accounts and Contracts Receivable Accounts and contracts receivable is comprised of amounts due from customers, primarily owners’ associations, resort developers, owners and members, credit card receivables, interest receivables, amounts due from taxing authorities, indemnification assets, and other miscellaneous receivables. The following table shows the composition of our accounts and contracts receivable balances: ($ in millions) At September 30, 2023 At December 31, 2022 Receivables from contracts with customers, net $ 176 $ 194 Interest receivable 17 16 Tax receivable 42 20 Indemnification assets 38 19 Employee tax credit receivable 13 16 Other 12 27 $ 298 $ 292 5. INCOME TAXES Our provision for income taxes is calculated using an estimated annual effective tax rate (“AETR”), based upon expected annual income less losses in certain jurisdictions, non-deductible expenses under federal and local tax laws, statutory rates and planned tax strategies in the various jurisdictions in which we operate. Certain items that do not relate directly to ordinary income are excluded from the AETR and included in the period in which they occur. Our effective tax rate was 36.1 % and 34.7 % for the three months ended September 30, 2023 and September 30, 2022, respectively, and 34.3 % and 30.6 % for the nine months ended September 30, 2023 and September 30, 2022, respectively. 13 Table of Contents The increase in the effective tax rate for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 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. The increase in the effective tax rate for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 is 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. Unrecognized Tax Benefits The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the nine months ended September 30, 2023. These unrecognized tax benefits relate to uncertain income tax positions, which would affect the effective tax rate if recognized. ($ in millions) Unrecognized Tax Benefits Balance at December 31, 2022 $ 25 Increases to tax positions related to a prior period 8 Decreases to tax positions related to a prior period ( 8 ) Balance at September 30, 2023 $ 25 The total amount of gross interest and penalties accrued was $ 46 million at September 30, 2023 and $ 28 million at December 31, 2022, an increase of $ 18 million, which is predominantly attributable to additional interest and penalties related to the pre-acquisition reserves for uncertain tax positions. We anticipate $ 35 million of unrecognized tax benefits, including interest and penalties, to be indemnified pursuant to a Tax Matters Agreement dated May 11, 2016 by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc., and consequently have recorded a corresponding indemnification asset. The unrecognized tax benefits, including accrued interest and penalties, are included in Other liabilities on our Balance Sheet. Our income tax returns are subject to examination by relevant tax authorities. Certain of our returns are being audited in various jurisdictions for tax years 2007 through 2020. The amount of the unrecognized tax benefits may increase or decrease within the next twelve months as a result of audits or audit settlements. 6. VACATION OWNERSHIP NOTES RECEIVABLE The following table shows the composition of our vacation ownership notes receivable balances, net of reserves. September 30, 2023 December 31, 2022 ($ in millions) Originated Acquired Total Originated Acquired Total Securitized $ 1,722 $ 163 $ 1,885 $ 1,571 $ 221 $ 1,792 Non-securitized Eligible for securitization (1) 59 1 60 63 — 63 Not eligible for securitization (1) 327 19 346 322 21 343 Subtotal 386 20 406 385 21 406 $ 2,108 $ 183 $ 2,291 $ 1,956 $ 242 $ 2,198 (1) Refer to Footnote 7 “Financial Instruments” for discussion of eligibility of our vacation ownership notes receivable for securitization. 14 Table of Contents We reflect interest income associated with vacation ownership notes receivable in our Income Statements in the Financing revenues caption. The following table summarizes interest income associated with vacation ownership notes receivable. Three Months Ended Nine Months Ended ($ in millions) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Interest income associated with vacation ownership notes receivable — securitized $ 70 $ 60 $ 205 $ 179 Interest income associated with vacation ownership notes receivable — non-securitized 9 11 26 30 Total interest income associated with vacation ownership notes receivable $ 79 $ 71 $ 231 $ 209 Credit Quality Indicators - Vacation Ownership Notes Receivable We use the origination of vacation ownership notes receivable and the FICO scores of the customer by brand as the primary credit quality indicators, as historical performance indicates that there is a relationship between the default behavior of borrowers by FICO score and the brand associated with the vacation ownership interest (“VOI”) they have acquired. The estimates of the variable consideration included in the transaction price for the sale of the related vacation ownership product for originated vacation ownership notes receivable and the reserve for credit losses on the acquired vacation ownership notes receivable are based on default rates that are an output of our static pool analyses and estimates regarding future defaults. In 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. In the third quarter of 2022, in connection with the combination of the reserves for Marriott-, Sheraton-, and Westin-brands, we recorded a reversal of credit loss expense for the acquired vacation ownership notes receivable of $ 19 million in Financing expense and an increase in the reserve for our originated vacation ownership notes receivable of $ 21 million, which was recorded as a reduction of sales of vacation ownership products revenues. We use the term “Combined Marriott” to refer to our Marriott-, Sheraton-, and Westin-brands. The weighted average FICO score of the borrowers within our consolidated vacation ownership notes receivable pool was 722 and 721 , at September 30, 2023 and December 31, 2022, respectively, based on the FICO score of the borrower at the time of origination. Acquired Vacation Ownership Notes Receivable Acquired vacation ownership notes receivable represent vacation ownership notes receivable acquired as part of the ILG Acquisition and the Welk Acquisition. The following table shows future contractual principal payments, net of reserves, and interest rates for our acquired vacation ownership notes receivable at September 30, 2023. Acquired Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total 2023, remaining $ 2 $ 8 $ 10 2024 3 33 36 2025 3 30 33 2026 3 27 30 2027 2 22 24 Thereafter 7 43 50 Balance at September 30, 2023 $ 20 $ 163 $ 183 Weighted average stated interest rate 14.0 % 14.2 % 14.2 % Range of stated interest rates 0.0 % to 21.9 % 0.0 % to 21.9 % 0.0 % to 21.9 % 15 Table of Contents The following table summarizes activity related to our acquired vacation ownership notes receivable reserve. Acquired Vacation Ownership Notes Receivable Reserve ($ in millions) Non-Securitized Securitized Total Balance at December 31, 2022 $ 11 $ 18 $ 29 Securitizations ( 2 ) 2 — Clean-up call 2 ( 2 ) — Write-offs ( 21 ) — ( 21 ) Recoveries 13 — 13 Defaulted vacation ownership notes receivable repurchase activity (1) 14 ( 14 ) — (Decrease) increase in vacation ownership notes receivable reserve ( 10 ) 7 ( 3 ) Balance at September 30, 2023 $ 7 $ 11 $ 18 (1) Reflects the change attributable to the transfer of the reserve from the securitized vacation ownership notes receivable reserve to the non-securitized vacation ownership notes receivable reserve when we voluntarily repurchased securitized vacation ownership notes receivable. The following tables show the acquired vacation ownership notes receivable, before reserves, by brand and borrower FICO score. Acquired Vacation Ownership Notes Receivable as of September 30, 2023 ($ in millions) 700+ 600 - 699 < 600 No Score Total Combined Marriott $ 51 $ 35 $ 4 $ 11 $ 101 Hyatt and Welk 59 39 1 1 100 $ 110 $ 74 $ 5 $ 12 $ 201 Acquired Vacation Ownership Notes Receivable as of December 31, 2022 ($ in millions) 700+ 600 - 699 < 600 No Score Total Combined Marriott $ 67 $ 47 $ 6 $ 16 $ 136 Hyatt and Welk 80 53 1 1 135 $ 147 $ 100 $ 7 $ 17 $ 271 The following tables detail the origination year of our acquired vacation ownership notes receivable, before reserves, by brand and borrower FICO score as of September 30, 2023, and gross write-offs by brand for the first three quarters of 2023. Acquired Vacation Ownership Notes Receivable - Combined Marriott ($ in millions) 2021 2020 2019 & Prior Total 700 + $ — $ — $ 51 $ 51 600 - 699 — — 35 35 < 600 — — 4 4 No Score — — 11 11 $ — $ — $ 101 $ 101 Gross write-offs $ — $ — $ 11 $ 11 Acquired Vacation Ownership Notes Receivable - Hyatt and Welk ($ in millions) 2021 2020 2019 & Prior Total 700 + $ 4 $ 13 $ 42 $ 59 600 - 699 2 7 30 39 < 600 — — 1 1 No Score — — 1 1 $ 6 $ 20 $ 74 $ 100 Gross write-offs $ 1 $ 2 $ 7 $ 10 16 Table of Contents Originated Vacation Ownership Notes Receivable Originated vacation ownership notes receivable represent vacation ownership notes receivable originated by Legacy-ILG and Legacy-Welk subsequent to each respective acquisition date and all Legacy-MVW vacation ownership notes receivable. The following table shows future principal payments, net of reserves, and interest rates for our originated vacation ownership notes receivable at September 30, 2023. Originated Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total 2023, remaining $ 8 $ 34 $ 42 2024 47 141 188 2025 34 147 181 2026 34 155 189 2027 34 163 197 Thereafter 229 1,082 1,311 Balance at September 30, 2023 $ 386 $ 1,722 $ 2,108 Weighted average stated interest rate 12.1 % 13.2 % 13.0 % Range of stated interest rates 0.0 % to 20.9 % 0.0 % to 19.9 % 0.0 % to 20.9 % For originated vacation ownership notes receivable, we record the difference between the vacation ownership note receivable and the variable consideration included in the transaction price for the sale of the related vacation ownership product as a reserve on our vacation ownership notes receivable. The following table summarizes the activity related to our originated vacation ownership notes receivable reserve. Originated Vacation Ownership Notes Receivable Reserve ($ in millions) Non-Securitized Securitized Total Balance at December 31, 2022 $ 149 $ 213 $ 362 Increase in vacation ownership notes receivable reserve 162 21 183 Securitizations ( 126 ) 126 — Clean-up call 43 ( 43 ) — Write-offs ( 88 ) — ( 88 ) Defaulted vacation ownership notes receivable repurchase activity (1) 76 ( 76 ) — Balance at September 30, 2023 $ 216 $ 241 $ 457 (1) Reflects the change attributable to the transfer of the reserve from the securitized vacation ownership notes receivable reserve to the non-securitized vacation ownership notes receivable reserve when we voluntarily repurchased securitized vacation ownership notes receivable. The following tables show originated vacation ownership notes receivable, before reserves, by brand and borrower FICO score. Originated Vacation Ownership Notes Receivable as of September 30, 2023 ($ in millions) 700 + 600 - 699 < 600 No Score Total Combined Marriott $ 1,341 $ 602 $ 57 $ 307 $ 2,307 Hyatt and Welk 180 72 2 4 258 $ 1,521 $ 674 $ 59 $ 311 $ 2,565 Originated Vacation Ownership Notes Receivable as of December 31, 2022 ($ in millions) 700 + 600 - 699 < 600 No Score Total Combined Marriott $ 1,210 $ 549 $ 55 $ 278 2,092 Hyatt and Welk 157 64 3 2 226 $ 1,367 $ 613 $ 58 $ 280 $ 2,318 17 Table of Contents The following tables detail the origination year of our originated vacation ownership notes receivable, before reserves, by brand and FICO score as of September 30, 2023, and gross write-offs by brand for the first three quarters of 2023. Originated Vacation Ownership Notes Receivable - Combined Marriott ($ in millions) 2023 2022 2021 2020 2019 & Prior Total 700 + $ 377 $ 413 $ 228 $ 78 $ 245 $ 1,341 600 - 699 145 174 114 42 127 602 < 600 13 16 11 5 12 57 No Score 117 74 29 19 68 307 $ 652 $ 677 $ 382 $ 144 $ 452 $ 2,307 Gross write-offs $ 2 $ 14 $ 22 $ 9 $ 27 $ 74 Originated Vacation Ownership Notes Receivable - Hyatt and Welk ($ in millions) 2023 2022 2021 2020 2019 & Prior Total 700 + $ 73 $ 71 $ 31 $ 2 $ 3 $ 180 600 - 699 26 31 12 1 2 72 < 600 — 1 1 — — 2 No Score 3 1 — — — 4 $ 102 $ 104 $ 44 $ 3 $ 5 $ 258 Gross write-offs $ — $ 6 $ 7 $ — $ 1 $ 14 Vacation Ownership Notes Receivable on Non-Accrual Status For both non-securitized and securitized vacation ownership notes receivable, we estimated the average remaining default rates of 13.35 % as of September 30, 2023 and 11.62 % as of December 31, 2022. A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $ 13 million as of September 30, 2023 and $ 12 million as of December 31, 2022. The following table shows our recorded investment in non-accrual vacation ownership notes receivable, which are vacation ownership notes receivable that are 90 days or more past due. Vacation Ownership Notes Receivable ($ in millions) Non-Securitized Securitized Total Investment in vacation ownership notes receivable on non-accrual status at September 30, 2023 $ 144 $ 25 $ 169 Investment in vacation ownership notes receivable on non-accrual status at December 31, 2022 $ 126 $ 24 $ 150 The following table shows the aging of the recorded investment in principal, before reserves, in vacation ownership notes receivable as of September 30, 2023 and December 31, 2022. As of September 30, 2023 As of December 31, 2022 ($ in millions) Non-Securitized Securitized Total Non-Securitized Securitized Total 31 – 90 days past due $ 20 $ 57 $ 77 $ 25 $ 56 $ 81 91 – 120 days past due 6 16 22 7 16 23 Greater than 120 days past due 138 9 147 119 8 127 Total past due 164 82 246 151 80 231 Current 465 2,055 2,520 415 1,943 2,358 Total vacation ownership notes receivable $ 629 $ 2,137 $ 2,766 $ 566 $ 2,023 $ 2,589 18 Table of Contents 7. FINANCIAL INSTRUMENTS The following table shows the carrying values and the estimated fair values of financial assets and liabilities that qualify as financial instruments, determined in accordance with the authoritative guidance for disclosures regarding the fair value of financial instruments. Considerable judgment is required in interpreting market data to develop estimates of fair value. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts. The table excludes Cash and cash equivalents, Restricted cash, Accounts and contracts receivable (excluding contracts receivable for financed VOI sales, net), deposits included in Other assets, Accounts payable, Advance deposits, Accrued liabilities, and derivative instruments, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments. At September 30, 2023 At December 31, 2022 ($ in millions) Carrying Amount Fair Value Carrying Amount Fair Value Vacation ownership notes receivable, net $ 2,291 $ 2,355 $ 2,198 $ 2,245 Contracts receivable for financed VOI sales, net 35 35 22 22 Other assets 88 88 76 76 Total financial assets $ 2,414 $ 2,478 $ 2,296 $ 2,343 Securitized debt, net $ ( 2,026 ) $ ( 1,937 ) $ ( 1,938 ) $ ( 1,828 ) Term Loan, net ( 780 ) ( 782 ) ( 778 ) ( 775 ) Revolving Corporate Credit Facility, net ( 86 ) ( 90 ) — — 2025 Notes, net — — ( 248 ) ( 258 ) 2028 Notes, net ( 348 ) ( 306 ) ( 347 ) ( 307 ) 2029 Notes, net ( 495 ) ( 419 ) ( 494 ) ( 417 ) 2026 Convertible Notes, net ( 568 ) ( 508 ) ( 565 ) ( 560 ) 2027 Convertible Notes, net ( 562 ) ( 496 ) ( 560 ) ( 568 ) Non-interest bearing note payable, net ( 4 ) ( 4 ) ( 10 ) ( 10 ) Total financial liabilities $ ( 4,869 ) $ ( 4,542 ) $ ( 4,940 ) $ ( 4,723 ) Vacation Ownership Notes Receivable At September 30, 2023 At December 31, 2022 ($ in millions) Carrying Amount Fair Value Carrying Amount Fair Value Vacation ownership notes receivable, net Securitized $ 1,885 $ 1,947 $ 1,792 $ 1,837 Eligible for securitization 60 62 63 65 Not eligible for securitization 346 346 343 343 Non-securitized 406 408 406 408 $ 2,291 $ 2,355 $ 2,198 $ 2,245 We estimate the fair value of our vacation ownership notes receivable that have been securitized using a discounted cash flow model. We believe this is comparable to the model that an independent third party would use in the current market. Our model uses default rates, prepayment rates, coupon rates, and loan terms for our securitized vacation ownership notes receivable portfolio as key drivers of risk and relative value to determine the fair value of the underlying vacation ownership notes receivable. We concluded that this fair value measurement should be categorized within Level 3. Due to factors that impact the general marketability of our vacation ownership notes receivable that have not been securitized, as well as current market conditions, we bifurcate our non-securitized vacation ownership notes receivable at each balance sheet date into those eligible and not eligible for securitization using criteria applicable to current securitization transactions in the ABS market. Generally, vacation ownership notes receivable are considered not eligible for securitization if any of the following attributes are present: (1) payments are greater than 30 days past due; (2) the first payment has not been received; or (3) the collateral is located in Asia or Europe. In some cases, eligibility may also 19 Table of Contents be determined based on the credit score of the borrower, the remaining term of the loans and other similar factors that may reflect investor demand in a securitization transaction or the cost to effectively securitize the vacation ownership notes receivable. The table above shows the bifurcation of our vacation ownership notes receivable that have not been securitized into those eligible and not eligible for securitization based upon the aforementioned eligibility criteria. We estimate the fair value of the portion of our vacation ownership notes receivable that have not been securitized that we believe will ultimately be securitized in the same manner as vacation ownership notes receivable that have been securitized. We value the remaining vacation ownership notes receivable that have not been securitized at their carrying value, rather than using our pricing model. We believe that the carrying value of these particular vacation ownership notes receivable approximates fair value because the stated, or otherwise imputed, interest rates of these loans are generally consistent with current market rates and the reserve for these vacation ownership notes receivable appropriately accounts for risks in default rates, prepayment rates, discount rates, and loan terms. We concluded that this fair value measurement should be categorized within Level 3. Contracts Receivable for Financed VOI Sales At the time at which we recognize revenue for Marriott-branded VOI sales, we temporarily record a contract receivable for financed VOI sales, until the time at which we originate a vacation ownership note receivable, which occurs at closing. We believe that the carrying value of the contracts receivable for financed VOI sales approximates fair value because the stated, or otherwise imputed, interest rates of these receivables are generally consistent with current market rates and the reserve for these contracts receivable for financed VOI sales appropriately accounts for risks in default rates, prepayment rates, and discount rates. We concluded that this fair value measurement should be categorized within Level 3. Other Assets Other assets include $ 88 million of company owned insurance policies (the “COLI policies”), acquired on the lives of certain participants in the Marriott Vacations Worldwide Deferred Compensation Plan, that are held in a rabbi trust. The carrying value of the COLI policies is equal to their cash surrender value (Level 2 inputs). Securitized Debt We generate cash flow estimates by modeling all bond tranches for our active vacation ownership notes receivable securitization transactions, with consideration for the collateral specific to each tranche. The key drivers in our analysis include default rates, prepayment rates, bond interest rates, and other structural factors, which we use to estimate the projected cash flows. In order to estimate market credit spreads by rating, we obtain indicative credit spreads from investment banks that actively issue and facilitate the market for vacation ownership securities and determine an average credit spread by rating level of the different tranches. We then apply those estimated market spreads to swap rates in order to estimate an underlying discount rate for calculating the fair value of the active bonds payable. We concluded that this fair value measurement should be categorized within Level 3. Term Loan We estimate the fair value of our Term Loan (as defined in Footnote 12 “Debt”) using quotes from securities dealers as of the last trading day for the quarter; however, this loan has only a limited trading history and volume, and as such, this fair value estimate is not necessarily indicative of the value at which the Term Loan could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 3. Revolving Corporate Credit Facility We estimate that the gross carrying value of our Revolving Corporate Credit Facility (as defined in Footnote 12 “Debt”) approximates fair value as the contractual interest rate is variable plus an applicable margin. We concluded that this fair value measurement should be categorized within Level 3. Senior Notes We estimate the fair value of our 2025 Notes, 2028 Notes, and 2029 Notes (each as defined in Footnote 12 “Debt”) using quoted market prices as of the last trading day for the quarter; however these notes have only a limited trading history and volume, and as such, this fair value estimate is not necessarily indicative of the value at which these notes could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 2. 20 Table of Contents Convertible Notes We estimate the fair value of our convertible notes using quoted market prices as of the last trading day for the quarter; however, these notes have only a limited trading history and volume, and as such, this fair value estimate is not necessarily indicative of the value at which the convertible notes could be retired or transferred. We concluded that this fair value measurement should be categorized within Level 2. Non-Interest Bearing Note Payable The carrying value of our non-interest bearing note payable issued in connection with the acquisition of vacation ownership units located in Bali, Indonesia approximates fair value. We concluded that this fair value measurement should be categorized within Level 3. 8. EARNINGS PER SHARE Basic earnings or loss per common share attributable to common shareholders is calculated by dividing net income or loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the reporting period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding. Diluted earnings or loss per common share attributable to common shareholders is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period, except in periods when there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. The dilutive effect of outstanding equity-based compensation awards is reflected in diluted earnings or loss per common share applicable to common shareholders by application of the treasury stock method using average market prices during the period. The shares issuable upon exercise of the warrants sold in connection with the issuance of our convertible notes will not impact the total dilutive weighted average shares outstanding unless and until the price of our common stock exceeds the respective strike price. If and when the price of our common stock exceeds the respective strike price of any of the warrants, we will include the dilutive effect of the additional shares that may be issued upon exercise of the warrants in total dilutive weighted average shares outstanding, which we calculate using the treasury stock method. The convertible note hedges purchased in connection with each issuance of our convertible notes are considered to be anti-dilutive and do not impact our calculation of diluted earnings per share attributable to common shareholders for any periods presented herein. The table below illustrates the reconciliation of the earnings or loss and number of shares used in our calculation of basic earnings or loss per share attributable to common shareholders. Three Months Ended Nine Months Ended (in millions, except per share amounts) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Net income attributable to common shareholders $ 42 $ 109 $ 219 $ 303 Shares for basic earnings per share 36.4 39.5 36.9 41.1 Basic earnings per share $ 1.16 $ 2.76 $ 5.96 $ 7.39 21 Table of Contents The table below illustrates the reconciliation of the earnings or loss and number of shares used in our calculation of diluted earnings or loss per share attributable to common shareholders. Three Months Ended Nine Months Ended (in millions, except per share amounts) September 30, 2023 (1) September 30, 2022 (1) September 30, 2023 (1) September 30, 2022 (1) Net income attributable to common shareholders $ 42 $ 109 $ 219 $ 303 Add back of interest expense related to convertible notes, net of tax 5 1 14 4 Numerator used to calculate diluted earnings per share $ 47 $ 110 $ 233 $ 307 Shares for basic earnings per share 36.4 39.5 36.9 41.1 Effect of dilutive shares outstanding Employee SARs 0.1 0.2 0.1 0.2 Restricted stock units 0.3 0.3 0.3 0.3 2022 Convertible Notes ($ 230 million of principal) — — — 0.9 2026 Convertible Notes ($ 575 million of principal) 3.5 3.4 3.5 3.4 2027 Convertible Notes ($ 575 million of principal) 3.0 — 3.0 — Shares for diluted earnings per share 43.3 43.4 43.8 45.9 Diluted earnings per share $ 1.09 $ 2.53 $ 5.33 $ 6.68 (1) The computations of diluted earnings per share attributable to common shareholders exclude approximately 200,000 and 293,000 shares of common stock, the maximum number of shares issuable as of September 30, 2023 and September 30, 2022, respectively, upon the vesting of certain performance-based awards, because the performance conditions required to be met for the shares subject to such awards to vest were not achieved by the end of the reporting period. In accordance with the applicable accounting guidance for calculating earnings per share, for the third quarter and first three quarters of 2023, we excluded from our calculation of diluted earnings per share 287,125 shares underlying stock appreciation rights (“SARs”) that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 143.38 to $ 173.88 , were greater than the average market price of our common stock for the applicable period. For the third quarter of 2022, we excluded from our calculation of diluted earnings per share 252,314 shares underlying SARs that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 143.38 to $ 173.88 , were greater than the average market price of our common stock for the applicable period. For the first three quarters of 2022, we excluded from our calculation of diluted earnings per share 199,813 shares underlying SARs that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $ 159.27 to $ 173.88 , were greater than the average market price of our common stock for the applicable period. 22 Table of Contents 9. INVENTORY The following table shows the composition of our inventory balances: ($ in millions) At September 30, 2023 At December 31, 2022 Real estate inventory (1) $ 632 $ 651 Other 10 9 $ 642 $ 660 (1) Represents completed inventory that is registered for sale as VOIs and vacation ownership inventory expected to be reacquired pursuant to estimated future defaults on originated vacation ownership notes receivable. We value vacation ownership products at the lower of cost or fair market value less costs to sell, in accordance with applicable accounting guidance, and we record operating supplies at the lower of cost (using the first-in, first-out method) or net realizable value. Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $ 24 million during the first three quarters of 2023 and $ 15 million during the first three quarters of 2022. In addition to the above, at September 30, 2023 and December 31, 2022, we had $ 369 million and $ 428 million, respectively, of completed vacation ownership units which are classified as a component of Property and equipment, net until the time at which they are available and legally registered for sale as vacation ownership products. 10. CONTINGENCIES AND COMMITMENTS Commitments and Letters of Credit As of September 30, 2023, we had the following commitments outstanding: • We have various contracts for the use of information technology hardware and software that we use in the normal course of business. Our aggregate commitment under these contracts was $ 107 million, of which we expect $ 17 million, $ 42 million, $ 24 million, $ 14 million, $ 6 million and $ 4 million will be paid in the remainder of 2023, 2024, 2025, 2026, 2027, and thereafter, respectively. • We have a commitment to acquire real estate for use in our Vacation Ownership segment via our involvement with a VIE. Refer to Footnote 15 “Variable Interest Entities” for additional information and our activities relating to the VIE involved in this transaction. Surety bonds issued as of September 30, 2023 totaled $ 121 million, the majority of which were requested by federal, state, or local governments in connection with our operations. As of September 30, 2023, we had $ 1 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 12 “Debt”). In addition, as of September 30, 2023, we had $ 1 million in letters of credit outstanding related to and in lieu of reserves required for several vacation ownership notes receivable securitization transactions outstanding. These letters of credit are not issued pursuant to, nor do they impact our borrowing capacity under, the Revolving Corporate Credit Facility. Guarantees Certain of our rental management agreements in our Exchange & Third-Party Management segment provide for owners of properties we manage to receive specified percentages of rental revenue or guaranteed amounts generated under our management. In these cases, the operating expenses for the rental operations are paid from the revenue generated by the rentals, the owners are then paid their contractual percentages or guaranteed amounts, and we either retain the balance of the rental revenue (if any) as our fee or we make up the deficit if the owners have not received their guaranteed amounts. At September 30, 2023, our maximum exposure under fixed dollar guarantees was $ 5 million, of which $ 2 million, $ 1 million, $ 1 million, and $ 1 million relate to 2024, 2025, 2026, and 2027 and thereafter, respectively. We have a commitment to an owners’ association that we manage to pay for any shortfall between the actual expenses incurred by the owners’ association and the income received by the owners’ association, in lieu of our payment of maintenance fees for unsold inventory. The agreement will terminate on the earlier of: 1) sale of 95 % of the total ownership interests in the owners’ association; or 2) written notification of termination by either party. At September 30, 2023, our expected commitment for the remainder of 2023 is $ 3 million. 23 Table of Contents Loss Contingencies In February 2019, the owners’ association for the St. Regis Residence Club, New York filed a lawsuit in the Supreme Court for the State of New York, New York County, Commercial Division against ILG and several of its subsidiaries and certain third parties. The operative complaint alleges that the defendants breached their fiduciary duties related to sale and rental practices, aided and abetted certain breaches of fiduciary duty, engaged in self-dealing as the sponsor and manager of the club, tortiously interfered with the management agreement, were unjustly enriched, and engaged in anticompetitive conduct. The plaintiff is seeking unspecified damages, punitive damages and disgorgement of payments under the management and purchase agreements. In February 2022, the Court granted our motion to dismiss the complaint and dismissed with prejudice all claims except one (such claim, the “Remaining Claim”), with respect to which the plaintiff was granted leave to amend its complaint. The plaintiff filed an amended complaint with respect to the Remaining Claim and appealed the dismissal of the other claims. In June 2023, the appellate court upheld the dismissal of those claims. Plaintiff filed a motion for reconsideration of that appellate ruling, and in October 2023, the appellate court denied that motion. In November 2022, the Court granted our motion to dismiss the amended complaint with respect to the Remaining Claim and again granted plaintiff leave to amend its complaint. The plaintiff filed an amended complaint with respect to the Remaining Claim and again appealed the dismissal of the other claims. That appeal remains pending. In September 2023, the Court granted our motion to dismiss the amended complaint with respect to the Remaining Claim and denied plaintiff permission to file any additional amended complaints. We believe we have meritorious defenses to the claims in this matter and intend to vigorously defend against them. In the ordinary course of our business, various claims and lawsuits have been filed or are pending against us. A number of these lawsuits and claims may exist at any given time. Additionally, the COVID-19 pandemic may give rise to various claims and lawsuits from owners, members and other parties. We record and accrue for legal contingencies when we determine that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, we evaluate, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, our ability to make a reasonable estimate of loss. We review these accruals each reporting period and make revisions based on changes in facts and circumstances. We have not accrued for the pending matter described above and we cannot estimate a range of the potential liability associated with this pending matter, if any, at this time. We have accrued for other claims and lawsuits, but the amount accrued is not material individually or in the aggregate. For matters not requiring accrual, we do not believe that the ultimate outcome of such matters, individually or in the aggregate, will materially harm our financial position, cash flows, or overall trends in results of operations based on information currently available. However, legal proceedings are inherently uncertain, and while we believe that our accruals, where required, are adequate and/or we have valid defenses to the claims asserted, unfavorable rulings could occur that could, individually or in the aggregate, have a material adverse effect on our business, financial condition, or operating results. 11. SECURITIZED DEBT The following table provides detail on our securitized debt, net of unamortized debt discount and issuance costs. ($ in millions) At September 30, 2023 At December 31, 2022 Vacation ownership notes receivable securitizations, gross (1) $ 1,703 $ 1,799 Unamortized debt discount and issuance costs ( 20 ) ( 21 ) 1,683 1,778 Warehouse Credit Facility, gross (2) 345 162 Unamortized debt issuance costs ( 2 ) ( 2 ) 343 160 $ 2,026 $ 1,938 (1) Interest rates as of September 30, 2023 range from 1.5 % to 6.6 %, with a weighted average interest rate of 3.8 %. (2) Effective interest rate as of September 30, 2023 was 6.8 %. All of our securitized debt is non-recourse. See Footnote 15 “Variable Interest Entities” for a discussion of the collateral for the non-recourse debt associated with our securitized debt. 24 Table of Contents The following table shows anticipated future principal payments for our securitized debt as of September 30, 2023. Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility (1) Total ($ in millions) Payments Year 2023, remaining $ 42 $ 4 $ 46 2024 171 17 188 2025 173 18 191 2026 176 306 482 2027 176 — 176 Thereafter 965 — 965 $ 1,703 $ 345 $ 2,048 (1) Excludes future Warehouse Credit Facility renewals. Vacation Ownership Notes Receivable Securitizations Each of the securitized vacation ownership notes receivable transactions contains various triggers relating to the performance of the underlying vacation ownership notes receivable. If a pool of securitized vacation ownership notes receivable fails to perform within the pool’s established parameters (default or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess spread we would otherwise receive from that pool (attributable to the interests we retained) to accelerate the principal payments to investors (taking into account the subordination of the different tranches to the extent there are multiple tranches) until the performance trigger is cured. During the third quarter of 2023, and as of September 30, 2023, we had 14 securitized vacation ownership notes receivable pools outstanding, none of which were out of compliance with their respective established parameters. As the contractual terms of the underlying securitized vacation ownership notes receivable determine the maturities of the non-recourse debt associated with them, actual maturities may occur earlier than shown above due to prepayments by the vacation ownership notes receivable obligors. During the second quarter of 2023, we securitized a pool of $ 388 million of vacation ownership notes receivable. In connection with the securitization, $ 380 million in vacation ownership loan backed notes were issued by MVW 2023-1 LLC (the “2023-1 LLC”) in a private placement. Four classes of vacation ownership loan backed notes were issued by the 2023-1 LLC: $ 237 million of Class A Notes, $ 65 million of Class B Notes, $ 48 million of Class C Notes, and $ 30 million of Class D Notes. The Class A Notes have an interest rate of 4.93 %, the Class B Notes have an interest rate of 5.42 %, the Class C Notes have an interest rate of 6.54 %, and the Class D Notes have an interest rate of 8.83 %. Investors purchased $ 369 million of the vacation ownership loan backed notes issued by the 2023-1 LLC, composed of the Class A Notes, the Class B Notes, the Class C Notes, and a portion of the Class D Notes, of which we retained $ 11 million. Proceeds from the transaction, net of fees and a reserve, were used to repay the outstanding obligations on our warehouse credit facility (the “Warehouse Credit Facility”) and for other general corporate purposes. The Class D notes that we retained were subsequently sold at par during the second quarter of 2023. Warehouse Credit Facility During the second quarter of 2023, we amended certain agreements associated with our Warehouse Credit Facility (the “Warehouse Amendment”). The Warehouse Amendment increased the borrowing capacity of the existing facility from $ 425 million to $ 500 million and extended the revolving period from July 28, 2024 to May 31, 2025. The Warehouse Amendment made no other material changes to the Warehouse Credit Facility. 25 Table of Contents 12. DEBT The following table provides detail on our debt balances, net of unamortized debt discount and issuance costs. ($ in millions) At September 30, 2023 At December 31, 2022 Corporate Credit Facility Term Loan $ 784 $ 784 Unamortized debt discount and issuance costs ( 4 ) ( 6 ) 780 778 Revolving Corporate Credit Facility (1) 90 — Unamortized debt issuance costs (2) ( 4 ) — 86 — Senior Secured Notes 2025 Notes — 250 Unamortized debt discount and issuance costs — ( 2 ) — 248 Senior Unsecured Notes 2028 Notes 350 350 Unamortized debt discount and issuance costs ( 2 ) ( 3 ) 348 347 2029 Notes 500 500 Unamortized debt discount and issuance costs ( 5 ) ( 6 ) 495 494 Convertible Notes 2026 Convertible Notes 575 575 Unamortized debt issuance costs ( 7 ) ( 10 ) 568 565 2027 Convertible Notes 575 575 Unamortized debt issuance costs ( 13 ) ( 15 ) 562 560 Finance Leases 188 86 Non-interest bearing note payable 4 10 $ 3,031 $ 3,088 (1) Effective interest rate as of September 30, 2023 was 7.2 %. (2) Excludes $ 5 million of unamortized debt issuance costs as of December 31, 2022. As no cash borrowings were outstanding under the Revolving Corporate Credit Facility at that time, the unamortized debt issuance costs were included in Other assets. 26 Table of Contents The following table shows scheduled principal payments for our debt, based on contractual terms and maturity dates, excluding finance leases, as of September 30, 2023. Payments Year ($ in millions) Remaining 2023 2024 2025 2026 2027 Thereafter Total Term Loan $ — $ — $ 784 $ — $ — $ — $ 784 Revolving Corporate Credit Facility — — — — 90 — 90 2028 Notes — — — — — 350 350 2029 Notes — — — — — 500 500 2026 Convertible Notes — — — 575 — — 575 2027 Convertible Notes — — — — 575 — 575 Non-Interest Bearing Note Payable — 4 — — — — 4 $ — $ 4 $ 784 $ 575 $ 665 $ 850 $ 2,878 Corporate Credit Facility Our corporate credit facility (“Corporate Credit Facility”), which provides support for our business, including ongoing liquidity and letters of credit, includes a $ 900 million term loan facility (the “Term Loan”), which matures on August 31, 2025, and a revolving credit facility with a borrowing capacity of $ 750 million (the “Revolving Corporate Credit Facility”), including a letter of credit sub-facility of $ 75 million, that terminates on March 31, 2027. During the second quarter of 2023, we entered into an amendment to the Corporate Credit Facility (the “Amendment”), which modified the interest rate applicable to borrowings under the Term Loan. Beginning July 31, 2023, the Term Loan references the Secured Overnight Financing Rate (“SOFR”) and is based on “Adjusted Term SOFR,” which is calculated as Term SOFR (as defined in the Amendment), plus a 0.10 % adjustment for a one-month interest period, a 0.15 % adjustment for a three-month interest period, or a 0.25 % adjustment for a six-month interest period, subject to a 0.00 % floor. Prior to 2022, we entered into interest rate swaps and an interest rate collar under which we may pay a fixed rate and receive a floating interest rate to hedge a portion of our interest rate risk on the Term Loan. During the second quarter of 2023, we amended these interest rate swaps and the collar to reference SOFR rather than LIBOR, effective July 31, 2023. As a result of this transition, the fixed rate on the $ 250 million of interest rate swaps that matured in September 2023 was amended to 2.88 %, the fixed rate on the $ 200 million of interest rate swaps maturing in April 2024 was amended to 2.17 %, and the cap strike price on the $ 100 million interest rate collar was amended to 2.43 %. Both the interest rate swaps and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and are recorded in Other assets on our Balance Sheets as of September 30, 2023 and December 31, 2022. We characterize payments we make or receive in connection with these derivative instruments as interest expense and a reclassification of accumulated other comprehensive income or loss for presentation purposes. The following table reflects the activity in accumulated other comprehensive income or loss related to our derivative instruments during the first three quarters of 2023 and 2022. There were no reclassifications to the Income Statement for any of the periods presented below. ($ in millions) 2023 2022 Derivative instrument adjustment balance, January 1 $ 13 $ ( 18 ) Other comprehensive (loss) gain before reclassifications ( 3 ) 16 Derivative instrument adjustment balance, March 31 10 ( 2 ) Other comprehensive (loss) gain before reclassifications ( 1 ) 7 Derivative instrument adjustment balance, June 30 9 5 Other comprehensive (loss) gain before reclassifications ( 3 ) 8 Derivative instrument adjustment balance, September 30 $ 6 $ 13 27 Table of Contents Senior Notes Our senior notes include: • $ 500 million aggregate principal amount of 6.125 % Senior Secured Notes due 2025 issued in the second quarter of 2020 with a maturity date of September 15, 2025 (the “2025 Notes”), of which $ 250 million was outstanding as of December 31, 2022. • $ 350 million aggregate principal amount of 4.750 % Senior Unsecured Notes due 2028 issued in the fourth quarter of 2019 with a maturity date of January 15, 2028 (the “2028 Notes”). • $ 500 million aggregate principal amount of 4.500 % Senior Unsecured Notes due 2029 issued in the second quarter of 2021 with a maturity date of June 15, 2029 (the “2029 Notes”). Redemption of Senior Secured Notes During the first quarter of 2023, we redeemed, prior to maturity, the remaining $ 250 million of the 2025 Notes outstanding pursuant to a redemption notice issued in the fourth quarter of 2022 and the terms of the indenture governing the 2025 Notes. In connection with this redemption, we incurred charges of $ 10 million, inclusive of a redemption premium and the write-off of unamortized debt issuance costs, which was recorded in Gains (losses) and other income (expense), net on our Income Statement for the nine months ended September 30, 2023. Convertible Notes 2026 Convertible Notes During 2021, we issued $ 575 million aggregate principal amount of convertible senior notes (the “2026 Convertible Notes”) that bear interest at a rate of 0.00 %. The 2026 Convertible Notes mature on January 15, 2026, unless repurchased or converted in accordance with their terms prior to that date. The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of September 30, 2023 to 6.1044 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $ 163.82 per share of our common stock), as a result of the dividends we declared since issuance of the 2026 Convertible Notes that were greater than the quarterly dividend we paid when the 2026 Convertible Notes were issued. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. As of September 30, 2023, the effective interest rate was 0.55 %. The following table shows interest expense information related to the 2026 Convertible Notes. Three Months Ended Nine Months Ended ($ in millions) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Amortization of debt issuance costs $ — $ 1 $ 2 $ 2 2026 Convertible Note Hedges and Warrants In connection with the offering of the 2026 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions: convertible note hedge transactions with respect to our common stock (the “2026 Convertible Note Hedges”), covering a total of 3.5 million shares of our common stock, and warrant transactions (the “2026 Warrants”), whereby we sold to the counterparties to the 2026 Convertible Note Hedges warrants to acquire 3.5 million shares of our common stock. As of September 30, 2023, the strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to approximately $ 163.82 and $ 204.77 , respectively, and no 2026 Convertible Note Hedges or 2026 Warrants have been exercised. 2027 Convertible Notes During 2022, we issued $ 575 million aggregate principal amount of convertible senior notes (the “2027 Convertible Notes”) that bear interest at a rate of 3.25 %. The 2027 Convertible Notes mature on December 15, 2027, unless earlier repurchased or converted in accordance with their terms prior to that date. The 2027 Convertible Notes are convertible at a rate of 5.2729 shares of common stock per $1,000 principal amount of 2027 Convertible Notes (equivalent to a conversion price of $ 189.65 per share of our common stock) as of September 30, 2023. The conversion rate is subject to adjustment for certain events as described in the indenture governing the notes. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. As of September 30, 2023, the effective interest rate was 3.88 %. 28 Table of Contents The following table shows interest expense information related to the 2027 Convertible Notes. Three Months Ended Nine Months Ended ($ in millions) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Contractual interest expense $ 5 $ — $ 14 $ — Amortization of debt issuance costs — — 2 — $ 5 $ — $ 16 $ — 2027 Convertible Note Hedges and Warrants In connection with the offering of the 2027 Convertible Notes, we concurrently entered into the following privately-negotiated separate transactions: convertible note hedge transactions with respect to our common stock (the “2027 Convertible Note Hedges”), covering a total of 3.0 million shares of our common stock, and warrant transactions (the “2027 Warrants”), whereby we sold to the counterparties to the 2027 Convertible Note Hedges warrants to acquire 3.0 million shares of our common stock. As of September 30, 2023, the strike prices of the 2027 Convertible Note Hedges and the 2027 Warrants were $ 189.65 and $ 286.26 , respectively, and no 2027 Convertible Note Hedges or 2027 Warrants have been exercised. Security and Guarantees Amounts borrowed under the Corporate Credit Facility, as well as obligations with respect to letters of credit issued pursuant to the Corporate Credit Facility, are secured by a perfected first priority security interest in substantially all of the assets of the borrowers under, and guarantors of, that facility (which include MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy remote special purpose subsidiaries), in each case including inventory, subject to certain exceptions. In addition, the Corporate Credit Facility, the 2026 Convertible Notes, the 2027 Convertible Notes, the 2028 Notes, and the 2029 Notes are guaranteed by MVWC and certain of our direct and indirect, existing and future, domestic subsidiaries, excluding certain bankruptcy remote special purpose subsidiaries. Finance Lease During 2020, we entered into a finance lease arrangement, which was amended in 2021, for our new global headquarters office building in Orlando, Florida. The lease for the new building commenced for accounting purposes during the first quarter of 2023, upon the substantial completion of construction. The lease includes a 26-year lease term, consisting of a 16-year initial term plus two five-year renewal options. As of September 30, 2023, the present value of the future lease payments, net of lease incentives, was $ 78 million, with a corresponding lease liability of $ 99 million. We record right-of-use assets for our finance leases in Property and equipment, net. Our total payments under this lease are $ 245 million, of which we expect $ 1 million, $ 7 million, $ 8 million, $ 8 million, $ 9 million, and $ 212 million will be paid in 2023, 2024, 2025, 2026, 2027, and thereafter, respectively. 13. SHAREHOLDERS’ EQUITY Marriott Vacations Worldwide has 100,000,000 authorized shares of common stock, par value of $ 0.01 per share. At September 30, 2023, there were 75,807,873 shares of Marriott Vacations Worldwide common stock issued, of which 35,685,051 shares were outstanding and 40,122,822 shares were held as treasury stock. At December 31, 2022, there were 75,744,524 shares of Marriott Vacations Worldwide common stock issued, of which 37,481,082 shares were outstanding and 38,263,442 shares were held as treasury stock. Marriott Vacations Worldwide has 2,000,000 authorized shares of preferred stock, par value of $ 0.01 per share, none of which were issued or outstanding as of September 30, 2023 or December 31, 2022. Share Repurchase Program From time to time, with the approval of our Board of Directors, we may undertake programs to purchase shares of our common stock (each, a “Share Repurchase Program” and collectively, the “Share Repurchase Programs”). During the third quarter of 2021, our Board of Directors authorized us to purchase shares of our common stock under a Share Repurchase Program for an aggregate purchase price not to exceed $ 250 million, prior to December 31, 2022. During the first quarter of 2022, our Board of Directors authorized the purchase of up to an additional $ 300 million of our common stock under this program and extended the term of this program to March 31, 2023. During the third quarter of 2022, our Board of Directors authorized the purchase of up to an additional $ 500 million of our common stock under this program and extended the term of this program to June 30, 2023. During the second quarter of 2023, our Board of Directors increased the remaining authorization to authorize purchases of up to $ 600 million and extended the term of this program 29 Table of Contents to December 31, 2024. As of September 30, 2023, approximately $ 476 million remained available for share repurchases under the Share Repurchase Program. Share repurchases may be made through open market purchases, privately negotiated transactions, block transactions, tender offers, or otherwise. The specific timing, amount and other terms of the repurchases will depend on market conditions, corporate and regulatory requirements, contractual restrictions, and other factors. In connection with the current Share Repurchase Program, we are authorized to adopt one or more plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The authorization for the current Share Repurchase Program may be suspended, terminated, increased or decreased by our Board of Directors at any time without prior notice. Acquired shares of our common stock are currently held as treasury shares and carried at cost in our Financial Statements. The Inflation Reduction Act of 2022, which was enacted in August 2022, imposes a 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. For purposes of calculating the excise tax, the fair value of certain share issuances may be netted against the fair market value of stock repurchases during the same taxable year. In the first three quarters of 2023, we reflected the applicable excise tax in treasury stock as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in Accrued liabilities on our Balance Sheet. The following table summarizes share repurchase activity under our Share Repurchase Programs: ($ in millions, except per share amounts) Number of Shares Repurchased Cost Basis of Shares Repurchased Average Price Paid per Share As of December 31, 2022 22,773,218 $ 2,119 $ 93.06 For the first three quarters of 2023 1,936,855 248 $ 128.03 As of September 30, 2023 24,710,073 $ 2,367 $ 95.80 Dividends We declared cash dividends to holders of common stock during the first three quarters of 2023 as follows. Any future dividend payments will be subject to the restrictions imposed under the agreements covering our debt, and Board approval. There can be no assurance that we will pay dividends in the future. Declaration Date Shareholder Record Date Distribution Date Dividend per Share February 16, 2023 March 2, 2023 March 16, 2023 $ 0.72 May 11, 2023 May 25, 2023 June 8, 2023 $ 0.72 September 7, 2023 September 21, 2023 October 5, 2023 $ 0.72 14. SHARE-BASED COMPENSATION We maintain the Marriott Vacations Worldwide Corporation 2020 Equity Incentive Plan (the “MVW Equity Plan”) for the benefit of our officers, directors, and employees. Under the MVW Equity Plan, we are authorized to award: (1) restricted stock and restricted stock units (“RSUs”) of our common stock, (2) stock appreciation rights (“SARs”) relating to our common stock, and (3) stock options to purchase our common stock. A total of 1.8 million shares are authorized for issuance pursuant to grants under the MVW Equity Plan. As of September 30, 2023, approximately 0.8 million shares were available for grants under the MVW Equity Plan. The following table details our share-based compensation expense related to award grants to our officers, directors, and employees: Three Months Ended Nine Months Ended ($ in millions) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Service-based RSUs $ 7 $ 7 $ 22 $ 24 Performance-based RSUs ( 2 ) 1 1 2 5 8 23 26 SARs 1 2 2 4 $ 6 $ 10 $ 25 $ 30 30 Table of Contents The following table details our deferred compensation costs related to unvested awards: ($ in millions) At September 30, 2023 At December 31, 2022 Service-based RSUs $ 30 $ 26 Performance-based RSUs 4 7 34 33 SARs 1 1 $ 35 $ 34 Restricted Stock Units We granted 199,468 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $ 143.54 , to our employees and non-employee directors during the first three quarters of 2023. During the first three quarters of 2023, we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management. A maximum of 114,602 RSUs may be earned under the performance-based RSU awards granted during the first three quarters of 2023. Stock Appreciation Rights We granted 37,436 SARs, with a weighted average grant-date fair value of $ 58.50 and a weighted average exercise price of $ 153.10 , to members of management during the first three quarters of 2023. We use the Black-Scholes model to estimate the fair value of the SARs granted. The expected stock price volatility was calculated based on the average of the historical and implied volatility of our stock price. The average expected life was calculated using the simplified method, as we have insufficient historical information to provide a basis for estimating average expected life. The risk-free interest rate was calculated based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The dividend yield assumption listed below is based on the expectation of future payouts. The following table outlines the assumptions used to estimate the fair value of grants during the first three quarters of 2023: Expected volatility 40.47 % Dividend yield 1.87 % Risk-free rate 4.07 % Expected term (in years) 6.25 15. VARIABLE INTEREST ENTITIES Variable Interest Entities Related to Our Vacation Ownership Notes Receivable Securitizations We periodically securitize, without recourse, through bankruptcy remote special purpose entities, notes receivable originated in connection with the sale of vacation ownership products. These vacation ownership notes receivable securitizations provide funding for general corporate purposes. In a vacation ownership notes receivable securitization, various classes of debt securities issued by a special purpose entity are generally collateralized by a single tranche of transferred assets, which consist of vacation ownership notes receivable. With each vacation ownership notes receivable securitization, we may retain all or a portion of the securities that are issued, and certain residual interests. We created these bankruptcy remote special purpose entities to serve as a mechanism for holding assets and related liabilities, and the entities have no equity investment at risk, making them VIEs. We continue to service the vacation ownership notes receivable, transfer all proceeds collected to these special purpose entities, and retain rights to receive benefits that are potentially significant to the entities. Accordingly, we concluded that we are the entities’ primary beneficiary and, therefore, consolidate them. There is no noncontrolling interest balance related to these entities and the creditors of these entities do not have general recourse to us. 31 Table of Contents The following table shows consolidated assets, which are collateral for the obligations of these VIEs, and consolidated liabilities included on our Balance Sheet at September 30, 2023: ($ in millions) Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility Total Consolidated Assets Vacation ownership notes receivable, net of reserves $ 1,526 $ 359 $ 1,885 Interest receivable 11 3 14 Restricted cash 61 23 84 Total $ 1,598 $ 385 $ 1,983 Consolidated Liabilities Interest payable $ 2 $ 1 $ 3 Securitized debt 1,703 345 2,048 Total $ 1,705 $ 346 $ 2,051 The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the third quarter of 2023: ($ in millions) Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility Total Interest income $ 59 $ 11 $ 70 Interest expense $ 17 $ 4 $ 21 Debt issuance cost amortization $ 2 $ — $ 2 The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first three quarters of 2023: ($ in millions) Vacation Ownership Notes Receivable Securitizations Warehouse Credit Facility Total Interest income $ 180 $ 25 $ 205 Interest expense $ 48 $ 11 $ 59 Debt issuance cost amortization $ 7 $ 1 $ 8 Administrative expenses $ 1 $ — $ 1 The following table shows cash flows between us and the vacation ownership notes receivable securitization VIEs: Nine Months Ended ($ in millions) September 30, 2023 September 30, 2022 Cash Inflows Net proceeds from vacation ownership notes receivable securitizations $ 396 $ 371 Principal receipts 375 413 Interest receipts 178 174 Reserve release 16 153 Total 965 1,111 Cash Outflows Principal payments ( 389 ) ( 446 ) Voluntary repurchases of defaulted vacation ownership notes receivable ( 88 ) ( 69 ) Voluntary clean-up call ( 19 ) ( 39 ) Interest payments ( 51 ) ( 34 ) Funding of restricted cash ( 17 ) ( 95 ) Total ( 564 ) ( 683 ) Net Cash Flows $ 401 $ 428 32 Table of Contents Under the terms of our vacation ownership notes receivable securitizations, we have the right to substitute loans for, or repurchase, defaulted loans at our option, subject to certain limitations. Our maximum exposure to potential loss relating to the special purpose entities that purchase, sell and own these vacation ownership notes receivable is the overcollateralization amount (the difference between the loan collateral balance and the balance of the outstanding vacation ownership notes receivable), plus cash reserves and any residual interest in future cash flows from collateral. The following table shows cash flows between us and the Warehouse Credit Facility VIE: Nine Months Ended ($ in millions) September 30, 2023 September 30, 2022 Cash Inflows Proceeds from vacation ownership notes receivable securitizations $ 515 $ 234 Principal receipts 43 12 Interest receipts 24 5 Reserve release 9 1 Total 591 252 Cash Outflows Principal payments ( 34 ) ( 3 ) Voluntary repurchases of defaulted vacation ownership notes receivable ( 2 ) — Repayment of Warehouse Credit Facility ( 296 ) ( 98 ) Interest payments ( 9 ) ( 2 ) Funding of restricted cash ( 18 ) ( 2 ) Total ( 359 ) ( 105 ) Net Cash Flows $ 232 $ 147 Other Variable Interest Entities We have a commitment to purchase a property located in Waikiki, Hawaii. The property is held by a VIE for which we are not the primary beneficiary. We do not control the decisions that most significantly impact the economic performance of the entity during construction. Further, our purchase commitment is generally contingent upon the property being redeveloped to our brand standards. Accordingly, we have not consolidated the VIE. We expect to acquire the property over time and as of September 30, 2023, we expect to make payments for the property as follows: $ 112 million in 2024, $ 81 million in 2025 and $ 41 million in 2026. As of September 30, 2023, our Balance Sheet reflected $ 1 million in Accounts Receivable, including a note receivable of approximately $ 1 million, $ 3 million in Property and Equipment, and $ 1 million in Accrued Liabilities. We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $ 3 million as of September 30, 2023. Deferred Compensation Plan We consolidate the liabilities of the Marriott Vacations Worldwide Deferred Compensation Plan and the related assets, which consist of the COLI policies held in a rabbi trust. The rabbi trust is considered a VIE. We are considered the primary beneficiary of the rabbi trust because we direct the activities of the trust and are the beneficiary of the trust. At September 30, 2023, the value of the assets held in the rabbi trust was $ 88 million, which is included in the Other line within assets on our Balance Sheets. 33 Table of Contents 16. BUSINESS SEGMENTS We define our reportable segments based on the way in which the chief operating decision maker (“CODM”), currently our chief executive officer, manages the operations of the Company for purposes of allocating resources and assessing performance. We operate in two operating and reportable business segments: • Vacation Ownership includes a diverse portfolio of resorts that includes some of the world’s most iconic brands licensed under exclusive, long-term relationships. We are the exclusive worldwide developer, marketer, seller, and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club, and Hyatt Vacation Club brands, as well as under Marriott Vacation Club Pulse, an extension of the Marriott Vacation Club brand. We are also the exclusive worldwide developer, marketer, and seller of vacation ownership and related products under The Ritz-Carlton Club brand, we have the non-exclusive right to develop, market, and sell whole ownership residential products under The Ritz-Carlton Residences brand and have a license to use the St. Regis brand for specified fractional ownership resorts. • Our Vacation Ownership segment generates most of its revenues from four primary sources: selling vacation ownership products; managing vacation ownership resorts, clubs, and owners’ associations; financing consumer purchases of vacation ownership products; and renting vacation ownership inventory. • Exchange & Third-Party Management includes an exchange network and membership programs, as well as provision of management services to other resorts and lodging properties. We provide these services through our Interval International and Aqua-Aston businesses. Exchange & Third-Party Management revenue generally is fee-based and derived from membership, exchange and rental transactions, property and owners’ association management, and other related products and services. VRI Americas was part of the Exchange & Third-Party Management segment through the date of sale in April 2022. Our CODM evaluates the performance of our segments based primarily on the results of the segment without allocating corporate expenses or income taxes. We do not allocate corporate interest expense or indirect general and administrative expenses to our segments. We include interest income specific to segment activities within the appropriate segment. We allocate depreciation and amortization, other gains and losses, equity in earnings or losses from our joint ventures, and noncontrolling interest to each of our segments as appropriate. Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to consolidated owners’ associations, as our CODM does not use this information to make operating segment resource allocations. Our CODM uses Adjusted Earnings before Interest Expense, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) to evaluate the profitability of our operating segments, and the components of net income or loss attributable to common shareholders excluded from Adjusted EBITDA are not separately evaluated. Adjusted EBITDA is defined as net income or loss attributable to common shareholders, before interest expense (excluding consumer financing interest expense associated with term securitization transactions), income taxes, depreciation and amortization, excluding share-based compensation expense and adjusted for certain items that affect the comparability of our operating performance. Our reconciliation of the aggregate amount of Adjusted EBITDA for our reportable segments to consolidated net income or loss attributable to common shareholders is presented below. Revenues Three Months Ended Nine Months Ended ($ in millions) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Vacation Ownership $ 1,126 $ 1,182 $ 3,335 $ 3,229 Exchange & Third-Party Management 64 71 200 229 Total segment revenues 1,190 1,253 3,535 3,458 Corporate and other ( 4 ) ( 1 ) ( 2 ) 10 $ 1,186 $ 1,252 $ 3,533 $ 3,468 34 Table of Contents Adjusted EBITDA and Reconciliation to Net Income Attributable to Common Shareholders Three Months Ended Nine Months Ended ($ in millions) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Adjusted EBITDA Vacation Ownership $ 173 $ 299 $ 647 $ 772 Adjusted EBITDA Exchange & Third-Party Management 30 39 99 117 Reconciling items: Corporate and other ( 53 ) ( 54 ) ( 171 ) ( 162 ) Interest expense, net ( 36 ) ( 34 ) ( 106 ) ( 91 ) Tax provision ( 24 ) ( 59 ) ( 115 ) ( 134 ) Depreciation and amortization ( 33 ) ( 33 ) ( 99 ) ( 98 ) Share-based compensation expense ( 6 ) ( 10 ) ( 25 ) ( 30 ) Certain items ( 9 ) ( 39 ) ( 11 ) ( 71 ) Net income attributable to common shareholders $ 42 $ 109 $ 219 $ 303 Assets ($ in millions) At September 30, 2023 At December 31, 2022 Vacation Ownership $ 8,057 $ 8,037 Exchange & Third-Party Management 830 865 Total segment assets 8,887 8,902 Corporate and other 566 737 $ 9,453 $ 9,639 Revenues Excluding Cost Reimbursements Three Months Ended Nine Months Ended ($ in millions) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 United States $ 622 $ 771 $ 2,038 $ 2,173 All other countries 121 110 332 284 $ 743 $ 881 $ 2,370 $ 2,457 35 Table of Contents