UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 10-Q
___________________________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2024
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number 001-35219
_________________________
(Exact name of registrant as specified in its charter)
_________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||||||||
(407 ) 206-6000 (Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||||||||||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the issuer’s common stock, par value $0.01 per share, as of May 3, 2024 was 35,163,907 .
MARRIOTT VACATIONS WORLDWIDE CORPORATION
FORM 10-Q TABLE OF CONTENTS
| Page | ||||||||
| Part I. | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Part II. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
Throughout this report, we refer to Marriott Vacations Worldwide Corporation, together with its consolidated subsidiaries, as “Marriott Vacations Worldwide,” “MVW,” “we,” “us,” or the “Company.” We also refer to brands that we own, as well as those brands that we license, as our brands. All brand names, trademarks, trade names, and service marks cited in this report are the property of their respective owners, including those of other companies and organizations. Solely for convenience, trademarks, trade names, and service marks referred to in this report may appear without the ® or TM symbols, however, such references are not intended to indicate in any way that MVW or the owner, as applicable, will not assert, to the fullest extent under applicable law, all rights to such trademarks, trade names, and service marks.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
| Three Months Ended | |||||||||||
| March 31, 2024 | March 31, 2023 | ||||||||||
| REVENUES | |||||||||||
| Sale of vacation ownership products | $ | $ | |||||||||
| Management and exchange | |||||||||||
| Rental | |||||||||||
| Financing | |||||||||||
| Cost reimbursements | |||||||||||
| TOTAL REVENUES | |||||||||||
| EXPENSES | |||||||||||
| Cost of vacation ownership products | |||||||||||
| Marketing and sales | |||||||||||
| Management and exchange | |||||||||||
| Rental | |||||||||||
| Financing | |||||||||||
| General and administrative | |||||||||||
| Depreciation and amortization | |||||||||||
| Litigation charges | |||||||||||
| Restructuring | |||||||||||
| Royalty fee | |||||||||||
| Impairment | |||||||||||
| Cost reimbursements | |||||||||||
| TOTAL EXPENSES | |||||||||||
| Gains and other income, net | |||||||||||
| Interest expense, net | ( | ( | |||||||||
| Transaction and integration costs | ( | ( | |||||||||
| Other | ( | ||||||||||
| INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS | |||||||||||
| Provision for income taxes | ( | ( | |||||||||
| NET INCOME | |||||||||||
| Net loss attributable to noncontrolling interests | |||||||||||
| NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | $ | |||||||||
| EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
| CASH DIVIDENDS DECLARED PER SHARE | $ | $ | |||||||||
See Interim Condensed Notes to Consolidated Financial Statements
1
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
| Three Months Ended | |||||||||||
| March 31, 2024 | March 31, 2023 | ||||||||||
| NET INCOME | $ | $ | |||||||||
| Foreign currency translation adjustments | |||||||||||
| Derivative instrument adjustment, net of tax | ( | ( | |||||||||
| OTHER COMPREHENSIVE (LOSS) GAIN, NET OF TAX | ( | ||||||||||
| Net loss attributable to noncontrolling interests | |||||||||||
| COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | |||||||||||
| COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | $ | |||||||||
See Interim Condensed Notes to Consolidated Financial Statements
2
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)
| Unaudited | |||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Restricted cash (including $ | |||||||||||
Accounts and contracts receivable, net (including $ | |||||||||||
Vacation ownership notes receivable, net (including $ | |||||||||||
| Inventory | |||||||||||
| Property and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Intangibles, net | |||||||||||
Other (including $ | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Advance deposits | |||||||||||
Accrued liabilities (including $ | |||||||||||
| Deferred revenue | |||||||||||
| Payroll and benefits liability | |||||||||||
| Deferred compensation liability | |||||||||||
Securitized debt, net (including $ | |||||||||||
| Debt, net | |||||||||||
| Other | |||||||||||
| Deferred taxes | |||||||||||
| TOTAL LIABILITIES | |||||||||||
Contingencies and Commitments (Note 10) | |||||||||||
Preferred stock — $ | |||||||||||
Common stock — $ | |||||||||||
Treasury stock — at cost; | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive income | |||||||||||
| Retained earnings | |||||||||||
| TOTAL MVW STOCKHOLDERS' EQUITY | |||||||||||
| Noncontrolling interests | ( | ||||||||||
| TOTAL EQUITY | |||||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | |||||||||
The abbreviation VIEs above means Variable Interest Entities. | |||||||||||
See Interim Condensed Notes to Financial Statements
3
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended | |||||||||||
| March 31, 2024 | March 31, 2023 | ||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash, cash equivalents and restricted cash provided by operating activities: | |||||||||||
| Depreciation and amortization of intangibles | |||||||||||
| Amortization of debt discount and issuance costs | |||||||||||
| Vacation ownership notes receivable reserve | |||||||||||
| Share-based compensation | |||||||||||
| Impairment charges | |||||||||||
| Deferred income taxes | |||||||||||
| Net change in assets and liabilities: | |||||||||||
| Accounts and contracts receivable | ( | ( | |||||||||
| Vacation ownership notes receivable originations | ( | ( | |||||||||
| Vacation ownership notes receivable collections | |||||||||||
| Inventory | |||||||||||
| Other assets | ( | ( | |||||||||
| Accounts payable, advance deposits and accrued liabilities | ( | ( | |||||||||
| Deferred revenue | |||||||||||
| Payroll and benefit liabilities | ( | ||||||||||
| Deferred compensation liability | ( | ||||||||||
| Other liabilities | ( | ||||||||||
| Purchase of property for future transfer to inventory | ( | ||||||||||
| Other, net | ( | ||||||||||
| Net cash, cash equivalents and restricted cash provided by (used in) operating activities | ( | ||||||||||
| INVESTING ACTIVITIES | |||||||||||
| Capital expenditures for property and equipment (excluding inventory) | ( | ( | |||||||||
| Purchase of company owned life insurance | ( | ||||||||||
| Purchase and development of property for future sale | ( | ||||||||||
| Net cash, cash equivalents and restricted cash used in investing activities | ( | ( | |||||||||
Continued
See Interim Condensed Notes to Consolidated Financial Statements
4
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In millions)
(Unaudited)
| Three Months Ended | |||||||||||
| March 31, 2024 | March 31, 2023 | ||||||||||
| FINANCING ACTIVITIES | |||||||||||
| Borrowings from securitization transactions | |||||||||||
| Repayment of debt related to securitization transactions | ( | ( | |||||||||
| Proceeds from debt | |||||||||||
| Repayments of debt | ( | ( | |||||||||
| Finance lease incentive | |||||||||||
| Finance lease payment | ( | ( | |||||||||
| Payment of debt issuance costs | ( | ||||||||||
| Repurchase of common stock | ( | ( | |||||||||
| Payment of dividends | ( | ( | |||||||||
| Payment of withholding taxes on vesting of restricted stock units | ( | ( | |||||||||
| Net cash, cash equivalents and restricted cash provided by (used in) financing activities | ( | ||||||||||
| Effect of changes in exchange rates on cash, cash equivalents and restricted cash | ( | ||||||||||
| Change in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
| SUPPLEMENTAL DISCLOSURES | |||||||||||
| Non-cash issuance of treasury stock for employee stock purchase plan | $ | $ | |||||||||
| Non-cash transfer from inventory to property and equipment | |||||||||||
| Non-cash transfer from property and equipment to inventory | |||||||||||
| Non-cash transfer from property and equipment to other assets | |||||||||||
| Right-of-use asset obtained in exchange for finance lease obligation | |||||||||||
| Non-cash issuance of debt in connection with finance lease | |||||||||||
| Interest paid, net of amounts capitalized | $ | $ | |||||||||
| Income taxes paid, net of refunds | |||||||||||
See Interim Condensed Notes to Consolidated Financial Statements
5
MARRIOTT VACATIONS WORLDWIDE CORPORATION
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions)
(Unaudited)
| Common Stock Issued | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total MVW Stockholders' Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2023 | $ | $ | ( | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| — | Net income (loss) | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| — | Foreign currency translation adjustments | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | Derivative instrument adjustment | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| — | Share-based compensation plans | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | Repurchase of common stock | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| — | Dividends | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2024 | $ | $ | ( | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||
| Common Stock Issued | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total MVW Stockholders' Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2022 | $ | $ | ( | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| — | Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | Foreign currency translation adjustments | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | Derivative instrument adjustment | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation plans | — | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| — | Repurchase of common stock | — | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| — | Dividends | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AT MARCH 31, 2023 | $ | $ | ( | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
See Interim Condensed Notes to Consolidated Financial Statements
6
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, 2023 (the “2023 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 in accordance with consolidation accounting guidance. References in these Financial Statements to net income attributable to common stockholders and MVW stockholders’ 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 inflation outpacing wage growth, continuing high interest rates, mixed economic indicators and increased global insecurity, 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 and seasonal and short-term variations. 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 2023 Annual Report.
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 prior to the ILG Acquisition and the associated brands as “Legacy-MVW.” We refer to the business and brand that we acquired in the acquisition of Welk Hospitality Group, Inc. (“Welk”) in 2021 (the “Welk Acquisition”) as “Legacy-Welk.” During 2023, we rebranded all Legacy-Welk resorts as Hyatt Vacation Club resorts. Additionally, we use the term “Marriott Vacation Ownership” to refer to our Marriott-, Sheraton-, and Westin-brands and the term “Hyatt Vacation Ownership” to refer to our Hyatt-brands.
We have reclassified certain prior year amounts to conform with our current year presentation.
7
| 2. | SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING STANDARDS | ||||
Future Adoption of Accounting Standards
Accounting Standards Update 2023-07 – “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”)
In November 2023, the FASB issued ASU 2023-07, which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This update will be applied retrospectively for all prior periods presented in the financial statements. We will begin providing the enhanced disclosures required by this standard with our Annual Report on Form 10-K for the year ending December 31, 2024.
Accounting Standards Update 2023-09 – “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”)
In December 2023, the FASB issued ASU 2023-09, which is intended to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 primarily enhances and expands both the annual income tax rate reconciliation disclosure and the annual income taxes paid disclosure. This update is effective for fiscal years beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis, with early adoption permitted. We will begin providing the enhanced disclosures required by this standard with our Annual Report on Form 10-K for the year ending December 31, 2025.
| 3. | ACQUISITIONS | ||||
Savannah, Georgia
During the third quarter of 2023, we acquired a 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 $17 million. We plan to develop the parcel of land into a 50 -unit vacation ownership property and use a portion of the retail space to operate a sales center. The transaction was accounted for as an asset acquisition and was recorded in Property and equipment, net.
| 4. | REVENUE AND RECEIVABLES | ||||
Sources of Revenue by Segment
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| ($ in millions) | Vacation Ownership | Exchange & Third-Party Management | Corporate and Other | Total | |||||||||||||||||||
| Sale of vacation ownership products | $ | $ | $ | $ | |||||||||||||||||||
| Ancillary revenues | |||||||||||||||||||||||
| Management fee revenues | ( | ||||||||||||||||||||||
| Exchange and other services revenues | |||||||||||||||||||||||
| Management and exchange | |||||||||||||||||||||||
| Rental | |||||||||||||||||||||||
| Cost reimbursements | ( | ||||||||||||||||||||||
| Revenue from contracts with customers | |||||||||||||||||||||||
| Financing | |||||||||||||||||||||||
| Total Revenues | $ | $ | $ | $ | |||||||||||||||||||
8
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| ($ in millions) | Vacation Ownership | Exchange & Third-Party Management | Corporate and Other | Total | |||||||||||||||||||
| Sale of vacation ownership products | $ | $ | $ | $ | |||||||||||||||||||
| Ancillary revenues | |||||||||||||||||||||||
| Management fee revenues | ( | ||||||||||||||||||||||
| Exchange and other services revenues | |||||||||||||||||||||||
| Management and exchange | |||||||||||||||||||||||
| Rental | |||||||||||||||||||||||
| Cost reimbursements | ( | ||||||||||||||||||||||
| Revenue from contracts with customers | |||||||||||||||||||||||
| Financing | |||||||||||||||||||||||
| Total Revenues | $ | $ | $ | $ | |||||||||||||||||||
Timing of Revenue from Contracts with Customers by Segment
The following tables detail the timing of revenue from contracts with customers by segment for the time periods presented.
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| ($ in millions) | Vacation Ownership | Exchange & Third-Party Management | Corporate and Other | Total | |||||||||||||||||||
| Services transferred over time | $ | $ | $ | $ | |||||||||||||||||||
| Goods or services transferred at a point in time | |||||||||||||||||||||||
| Revenue from contracts with customers | $ | $ | $ | $ | |||||||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| ($ in millions) | Vacation Ownership | Exchange & Third-Party Management | Corporate and Other | Total | |||||||||||||||||||
| Services transferred over time | $ | $ | $ | $ | |||||||||||||||||||
| Goods or services transferred at a point in time | |||||||||||||||||||||||
| Revenue from contracts with customers | $ | $ | $ | $ | |||||||||||||||||||
Sale of Vacation Ownership Products
Revenues were reduced during the first quarter of 2024 by $4 million due to changes in our estimates of variable consideration for performance obligations that were satisfied in prior periods.
9
Receivables from Contracts with Customers, Contract Assets, & Contract Liabilities
The following table shows the composition of our receivables from contracts with customers and contract liabilities. We had no
| ($ in millions) | At March 31, 2024 | At December 31, 2023 | |||||||||
| Receivables from Contracts with Customers | |||||||||||
| Accounts and contracts receivable, net | $ | $ | |||||||||
| Vacation ownership notes receivable, net | |||||||||||
| $ | $ | ||||||||||
| Contract Liabilities | |||||||||||
| Advance deposits | $ | $ | |||||||||
| Deferred revenue | |||||||||||
| $ | $ | ||||||||||
Revenue recognized during the first quarter of 2024 that was included in our contract liabilities balance at December 31, 2023 was $121 million.
Remaining Performance Obligations
Our remaining performance obligations represent the expected transaction price allocated to our contracts that we expect to recognize as revenue in future periods when we perform under the contracts. At March 31, 2024, approximately 93 % of this amount is expected to be recognized as revenue over the next two years .
Accounts and Contracts Receivable
Accounts and contracts receivable is composed of amounts due from customers, primarily owners’ associations, resort developers, owners and members, credit card receivables, interest receivables, amounts due from taxing authorities, indemnification assets, and other miscellaneous receivables. The following table shows the composition of our accounts and contracts receivable balances:
| ($ in millions) | At March 31, 2024 | At December 31, 2023 | |||||||||
| Receivables from contracts with customers, net | $ | $ | |||||||||
| Interest receivable | |||||||||||
| Tax receivable | |||||||||||
| Indemnification assets | |||||||||||
| Employee tax credit receivable | |||||||||||
| Other | |||||||||||
| $ | $ | ||||||||||
| 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 43.0 % and 32.3 % for the three months ended March 31, 2024 and March 31, 2023, respectively.
The effective tax rate for the three months ended March 31, 2024 differed from the blended statutory tax rate for the same period due to income tax adjustments for discrete items, including $11 million primarily related to a $20 million increase to remove the permanent reinvestment assertion for certain non-U.S. entities offset by a $9 million decrease for the expiration of statutes of limitation on certain unrecognized tax benefits. The effective tax rate for the three months ended March 31, 2023 differed from the blended statutory tax rate for the same period due to income tax adjustments for discrete items, including $9 million primarily related to an increase in uncertain tax benefits of $20 million for new unrecognized tax benefits in a foreign jurisdiction, offset by decreases in stock compensation of $7 million and $4 million related to prior year true-up adjustments.
10
Unrecognized Tax Benefits
The following table summarizes the activity related to our unrecognized tax benefits (excluding interest and penalties) during the three months ended March 31, 2024.
| ($ in millions) | Unrecognized Tax Benefits | ||||
Balance at December 31, 2023 | $ | ||||
| Increases to tax positions related to a prior period | |||||
| Decreases to tax positions related to a prior period | ( | ||||
| Decreases as a result of a lapse of the applicable statute of limitation | ( | ||||
Balance at March 31, 2024 | $ | ||||
The total amount of gross interest and penalties accrued related to unrecognized tax benefits was $41 million at March 31, 2024 and $48 million at December 31, 2023, a decrease of $7 million, which is predominantly attributable to the expiration of statutes of limitation, partially offset by additional interest and penalties related to non-U.S. uncertain tax positions. At March 31, 2024, unrecognized tax benefits (including interest and penalties) of $26 million, net of indemnification, would impact the effective tax rate if recognized.
We anticipate $38 million of unrecognized tax benefits, including interest and penalties, to be indemnified pursuant to a Tax Matters Agreement dated May 11, 2016 by and among Starwood Hotels & Resorts Worldwide, Inc., Vistana Signature Experiences, Inc., and Interval Leisure Group, Inc., and consequently have recorded a corresponding indemnification asset. The unrecognized tax benefits, including accrued interest and penalties, are included in Other liabilities on our Balance Sheet.
Our income tax returns are subject to examination by relevant tax authorities. Certain of our returns are being audited in various jurisdictions for tax years 2007 through 2020. The amount of the unrecognized tax benefits may increase or decrease within the next twelve months as a result of audits or audit settlements.
| 6. | VACATION OWNERSHIP NOTES RECEIVABLE | ||||
The following table shows the composition of our vacation ownership notes receivable balances, net of reserves.
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| ($ in millions) | Originated | Acquired | Total | Originated | Acquired | Total | |||||||||||||||||||||||||||||
| Securitized | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Eligible for securitization(1) | |||||||||||||||||||||||||||||||||||
Not eligible for securitization(1) | |||||||||||||||||||||||||||||||||||
| Non-securitized | |||||||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(1)Refer to Footnote 7 “Financial Instruments” for discussion of eligibility of our vacation ownership notes receivable for securitization. | |||||||||||||||||||||||||||||||||||
We reflect interest income associated with vacation ownership notes receivable on our Income Statements in the Financing revenues caption. The following table summarizes interest income associated with vacation ownership notes receivable.
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
Interest income associated with securitized vacation ownership notes receivable | $ | $ | |||||||||
Interest income associated with non-securitized vacation ownership notes receivable | |||||||||||
| Total interest income associated with vacation ownership notes receivable | $ | $ | |||||||||
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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 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.
The weighted average FICO score within our consolidated vacation ownership notes receivable pool was 724 and 723 , at March 31, 2024 and December 31, 2023, respectively, based upon 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 a $14 million reserve, and interest rates for our acquired vacation ownership notes receivable at March 31, 2024.
| Acquired Vacation Ownership Notes Receivable | |||||||||||||||||
| ($ in millions) | Non-Securitized | Securitized | Total | ||||||||||||||
| 2024, remaining | $ | $ | $ | ||||||||||||||
| 2025 | |||||||||||||||||
| 2026 | |||||||||||||||||
| 2027 | |||||||||||||||||
| 2028 | |||||||||||||||||
| Thereafter | |||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ||||||||||||||
| Weighted average stated interest rate | |||||||||||||||||
| Range of stated interest rates | |||||||||||||||||
The following tables show the acquired vacation ownership notes receivable, before reserves, by brand and borrower FICO score at origination.
Acquired Vacation Ownership Notes Receivable as of March 31, 2024 | |||||||||||||||||||||||||||||
| ($ in millions) | 700+ | 600 - 699 | < 600 | No Score | Total | ||||||||||||||||||||||||
| Marriott Vacation Ownership | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Hyatt Vacation Ownership | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Acquired Vacation Ownership Notes Receivable as of December 31, 2023 | |||||||||||||||||||||||||||||
| ($ in millions) | 700+ | 600 - 699 | < 600 | No Score | Total | ||||||||||||||||||||||||
| Marriott Vacation Ownership | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Hyatt Vacation Ownership | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||||||||||||||
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Originated Vacation Ownership Notes Receivable
Originated vacation ownership notes receivable represent vacation ownership notes receivable originated by Legacy-ILG and Legacy-Welk subsequent to each respective acquisition date, and all Legacy-MVW vacation ownership notes receivable. The following table shows future principal payments, net of reserves, and interest rates for our originated vacation ownership notes receivable at March 31, 2024.
| Originated Vacation Ownership Notes Receivable | |||||||||||||||||
| ($ in millions) | Non-Securitized | Securitized | Total | ||||||||||||||
| 2024, remaining | $ | $ | $ | ||||||||||||||
| 2025 | |||||||||||||||||
| 2026 | |||||||||||||||||
| 2027 | |||||||||||||||||
| 2028 | |||||||||||||||||
| Thereafter | |||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ||||||||||||||
| Weighted average stated interest rate | |||||||||||||||||
| Range of stated interest rates | |||||||||||||||||
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, 2023 | $ | $ | $ | ||||||||||||||
Increase (decrease) in vacation ownership notes receivable reserve | ( | ||||||||||||||||
| Securitizations | ( | ||||||||||||||||
| Clean-up call | ( | ||||||||||||||||
| Write-offs | ( | ( | |||||||||||||||
Defaulted vacation ownership notes receivable repurchase activity(1) | ( | ||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ||||||||||||||
(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 at origination.
Originated Vacation Ownership Notes Receivable as of March 31, 2024 | |||||||||||||||||||||||||||||
| ($ in millions) | 700 + | 600 - 699 | < 600 | No Score | Total | ||||||||||||||||||||||||
| Marriott Vacation Ownership | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Hyatt Vacation Ownership | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||||||||||||||
Originated Vacation Ownership Notes Receivable as of December 31, 2023 | |||||||||||||||||||||||||||||
| ($ in millions) | 700 + | 600 - 699 | < 600 | No Score | Total | ||||||||||||||||||||||||
| Marriott Vacation Ownership | $ | $ | $ | $ | |||||||||||||||||||||||||
| Hyatt Vacation Ownership | |||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | |||||||||||||||||||||||||
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The following tables detail the origination year of our originated vacation ownership notes receivable, before reserves, by brand and borrower FICO score at origination as of March 31, 2024, and gross write-offs by brand for the first quarter of 2024.
| Originated Vacation Ownership Notes Receivable - Marriott Vacation Ownership | |||||||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2022 | 2021 | 2020 & Prior | Total | |||||||||||||||||||||||||||||
| 700 + | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| 600 - 699 | |||||||||||||||||||||||||||||||||||
| < 600 | |||||||||||||||||||||||||||||||||||
| No Score | |||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Gross write-offs | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Originated Vacation Ownership Notes Receivable - Hyatt Vacation Ownership | |||||||||||||||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | 2022 | 2021 | 2020 & Prior | Total | |||||||||||||||||||||||||||||
| 700 + | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| 600 - 699 | |||||||||||||||||||||||||||||||||||
| < 600 | |||||||||||||||||||||||||||||||||||
| No Score | |||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Gross write-offs | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
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 12.62 % as of March 31, 2024 and 13.00 % as of December 31, 2023. 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 $13
The following table shows our recorded investment in non-accrual vacation ownership notes receivable, which are vacation ownership notes receivable that are 90 days or more past due.
| Vacation Ownership Notes Receivable | |||||||||||||||||
| ($ in millions) | Non-Securitized | Securitized | Total | ||||||||||||||
Investment in vacation ownership notes receivable on non-accrual status at March 31, 2024 | $ | $ | $ | ||||||||||||||
Investment in vacation ownership notes receivable on non-accrual status at December 31, 2023 | $ | $ | $ | ||||||||||||||
The following table shows the aging of the recorded investment in principal, before reserves, in vacation ownership notes receivable as of March 31, 2024 and December 31, 2023.
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||||||||||||||||||||||||||
| ($ in millions) | Non-Securitized | Securitized | Total | Non-Securitized | Securitized | Total | |||||||||||||||||||||||||||||
| 31 – 90 days past due | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| 91 – 120 days past due | |||||||||||||||||||||||||||||||||||
| Greater than 120 days past due | |||||||||||||||||||||||||||||||||||
| Total past due | |||||||||||||||||||||||||||||||||||
| Current | |||||||||||||||||||||||||||||||||||
| Total vacation ownership notes receivable | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
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| 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 March 31, 2024 | At December 31, 2023 | ||||||||||||||||||||||
| ($ in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| Vacation ownership notes receivable, net | $ | $ | $ | $ | |||||||||||||||||||
| Contracts receivable for financed VOI sales, net | |||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||
| Total financial assets | $ | $ | $ | $ | |||||||||||||||||||
| Securitized debt, net | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Term Loan, net | ( | ( | ( | ( | |||||||||||||||||||
| Revolving Corporate Credit Facility, net | ( | ( | ( | ( | |||||||||||||||||||
| 2028 Notes, net | ( | ( | ( | ( | |||||||||||||||||||
| 2029 Notes, net | ( | ( | ( | ( | |||||||||||||||||||
| 2026 Convertible Notes, net | ( | ( | ( | ( | |||||||||||||||||||
| 2027 Convertible Notes, net | ( | ( | ( | ( | |||||||||||||||||||
| Non-interest bearing note payable, net | ( | ( | |||||||||||||||||||||
| Total financial liabilities | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Vacation Ownership Notes Receivable
| At March 31, 2024 | At December 31, 2023 | ||||||||||||||||||||||
| ($ in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| Securitized | $ | $ | $ | $ | |||||||||||||||||||
| Eligible for securitization | |||||||||||||||||||||||
| Not eligible for securitization | |||||||||||||||||||||||
| Non-securitized | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
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 asset-backed securities (“ABS”) market. Generally, vacation ownership notes receivable are considered not eligible for securitization if any of the following attributes are present: (1) payments are greater than 30 days past due; (2) the first payment has not been received; or (3) the collateral is located in Asia or Europe. In some cases, eligibility may also be determined based on the credit score of the borrower, the remaining term of the loans and other similar factors that may reflect investor demand in a securitization transaction or the cost to effectively securitize the vacation ownership notes receivable.
15
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. We concluded that this fair value measurement should be categorized within Level 3.
Other Assets
Other assets include $110 million and $99 million of company owned insurance policies (the “COLI policies”) acquired on the lives of certain participants in the Marriott Vacations Worldwide Deferred Compensation Plan (the “Deferred Compensation Plan”) at March 31, 2024 and December 31, 2023, respectively, 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 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.
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.
16
| 8. | EARNINGS PER SHARE | ||||
Basic earnings per common share attributable to common stockholders is calculated by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the reporting period. Diluted earnings per common share attributable to common stockholders reflects the assumed conversion of all dilutive securities, calculated using the treasury stock method.
The table below illustrates the reconciliation of the earnings and number of shares used in our calculation of basic earnings per share attributable to common stockholders.
| Three Months Ended | |||||||||||
| (in millions, except per share amounts) | March 31, 2024 | March 31, 2023 | |||||||||
Net income attributable to common stockholders | $ | $ | |||||||||
| Shares for basic earnings per share | |||||||||||
| Basic earnings per share | $ | $ | |||||||||
The table below illustrates the reconciliation of the earnings and number of shares used in our calculation of diluted earnings per share attributable to common stockholders.
| Three Months Ended | |||||||||||
| (in millions, except per share amounts) | March 31, 2024 | March 31, 2023 | |||||||||
Net income attributable to common stockholders | $ | $ | |||||||||
| Add back of interest expense related to convertible notes, net of tax | |||||||||||
| Numerator used to calculate diluted earnings per share | $ | $ | |||||||||
Shares for basic earnings per share | |||||||||||
| Effect of dilutive shares outstanding | |||||||||||
| Employee SARs | |||||||||||
| Restricted stock units | |||||||||||
2026 Convertible Notes ($ | |||||||||||
2027 Convertible Notes ($ | |||||||||||
| Shares for diluted earnings per share | |||||||||||
| Diluted earnings per share | $ | $ | |||||||||
The computations of diluted earnings per share attributable to common stockholders in the table above exclude approximately 396,000 and 239,000 shares of common stock, the maximum number of shares issuable as of March 31, 2024 and March 31, 2023, respectively, upon the vesting of certain performance-based awards, because the performance conditions required to be met for the shares subject to such awards to vest were not achieved by the end of the reporting period.
In accordance with the applicable accounting guidance for calculating earnings per share, for the first quarter of 2024, we excluded from our calculation of diluted earnings per share 645,524 93.73 173.88
For the first quarter of 2023, we excluded from our calculation of diluted earnings per share 237,249 shares underlying SARs that may settle in shares of common stock because the exercise prices of such SARs, which ranged from $153.10 to $173.88 , were greater than the average market price of our common stock for the applicable period.
17
| 9. | INVENTORY | ||||
The following table shows the composition of our inventory balances:
| ($ in millions) | At March 31, 2024 | At December 31, 2023 | |||||||||
Finished goods(1) | $ | $ | |||||||||
| Work-in-progress | |||||||||||
Real estate inventory | |||||||||||
| Other | |||||||||||
| $ | $ | ||||||||||
(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. | |||||||||||
Product cost true-up activity relating to vacation ownership products increased carrying values of inventory by $5 million during the first quarter of 2024 and $11 million during the first quarter of 2023.
In addition to the above, at March 31, 2024 and December 31, 2023, we had $349 million and $370 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. We also had deposits on future purchases of inventory of $9 million at March 31, 2024, of which $5 million was included in Other assets and $4 million was included in Accounts and contracts receivable, net on our Balance Sheet, and $3 million at December 31, 2023, which was included in Other assets on our Balance Sheet.
| 10. | CONTINGENCIES AND COMMITMENTS | ||||
Commitments and Letters of Credit
As of March 31, 2024, 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 $81 million, of which we expect $29 million, $26 million, $16 million, $6 million, $4 million and less than $1 million will be paid in the remainder of 2024, 2025, 2026, 2027, 2028, and thereafter, respectively.
•We have remaining commitments of $36 million to purchase vacation ownership units located in Bali, Indonesia in two separate transactions, contingent upon completion of construction to agreed-upon standards within specified timeframes, for use in our Vacation Ownership segment. We expect to complete the acquisition of 32 vacation ownership units in 2025 pursuant to one of the commitments, and to make remaining payments with respect to these units when specific construction milestones are completed as follows: $4 million in the remainder of 2024, $10 million in 2025, and $1 million in 2026. We expect to complete the acquisition of 26 vacation ownership units in 2026 pursuant to the other commitment, and to make remaining payments with respect to these units when specific construction milestones are completed as follows: $4 million in the remainder of 2024, $2 million in 2025, $14 million in 2026, and $1 million in 2027.
•We have a remaining commitment of $37 million to purchase 60 vacation ownership units located in Khao Lak, Thailand, contingent upon completion of construction to agreed-upon standards within specified timeframes, for use in our Vacation Ownership segment. We expect to complete the acquisition of these vacation ownership units in 2026. We expect to make remaining payments when specific construction milestones are completed as follows: $4 million in 2025, $31 million in 2026 and $2 million in 2027.
•We have a commitment to acquire real estate in Waikiki, Hawaii 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.
As of March 31, 2024, we had $33 million of letters of credit outstanding under our Revolving Corporate Credit Facility (as defined in Footnote 12 “Debt”), of which $32 million were related to and in lieu of reserves required for our most recent outstanding securitization transactions completed during the first quarter of 2024 and the fourth quarter of 2023. In addition, as of March 31, 2024, we had $1 million in letters of credit outstanding that were not issued pursuant to, nor do they impact our borrowing capacity under, the Revolving Corporate Credit Facility.
18
Surety bonds issued as of March 31, 2024 totaled $122 million, the majority of which were requested by federal, state or local governments in connection with our operations.
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 March 31, 2024, our maximum exposure under fixed dollar guarantees was $4 million, of which $1 million, $1 million, $1 million, $1 million, and less than $1 million relate to the remainder of 2024, 2025, 2026, 2027, and 2028, 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 March 31, 2024, our expected commitment for the remainder of 2024 is $9 million, which will ultimately be recorded as a component of rental expense on our income statement.
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. In January 2024, the appellate court upheld the dismissal of the other claims. 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. Plaintiff has appealed that dismissal. As of March 31, 2024, the appeal remains pending. We believe we have meritorious defenses to the claims in this matter and intend to vigorously defend against them.
In the ordinary course of our business, various claims and lawsuits have been filed or are pending against us. A number of these lawsuits and claims may exist at any given time. Additionally, the COVID-19 pandemic may give rise to various claims and lawsuits from owners, members and other parties. We record and accrue for legal contingencies when we determine that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations, we evaluate, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, our ability to make a reasonable estimate of loss. We review these accruals each reporting period and make revisions based on changes in facts and circumstances.
We have not accrued for the pending matter described above and we cannot estimate a range of the potential liability associated with this pending matter, if any, at this time. We have accrued for other claims and lawsuits, but the amount accrued is not material individually or in the aggregate. For matters not requiring accrual, we do not believe that the ultimate outcome of such matters, individually or in the aggregate, will materially harm our financial position, cash flows, or overall trends in results of operations based on information currently available. However, legal proceedings are inherently uncertain, and while we believe that our accruals, 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.
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| 11. | SECURITIZED DEBT | ||||
The following table provides detail on our securitized debt, net of unamortized debt discount and issuance costs.
| ($ in millions) | At March 31, 2024 | At December 31, 2023 | ||||||||||||
Vacation ownership notes receivable securitizations, gross(1) | $ | $ | ||||||||||||
| Unamortized debt discount and issuance costs | ( | ( | ||||||||||||
Warehouse Credit Facility, gross | ||||||||||||||
Unamortized debt issuance costs(2) | ( | |||||||||||||
| $ | $ | |||||||||||||
(1)Interest rates as of March 31, 2024 range from | ||||||||||||||
(2)Excludes $ | ||||||||||||||
All of our securitized debt is non-recourse. See Footnote 15 “Variable Interest Entities” for a discussion of the collateral for the non-recourse debt associated with our securitized debt.
The following table shows anticipated future principal payments for our securitized debt as of March 31, 2024.
| Vacation Ownership Notes Receivable Securitizations | |||||
| ($ in millions) | |||||
Payment Year | |||||
| 2024, remaining | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| $ | |||||
Vacation Ownership Notes Receivable Securitizations
Each of the securitized vacation ownership notes receivable transactions contains various triggers relating to the performance of the underlying vacation ownership notes receivable. If a pool of securitized vacation ownership notes receivable fails to perform within the pool’s established parameters (default or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess spread we would otherwise receive from that pool (attributable to the interests we retained) to accelerate the principal payments to investors (taking into account the subordination of the different tranches to the extent there are multiple tranches) until the performance trigger is cured. During the first quarter of 2024, and as of March 31, 2024, we had 14 securitized vacation ownership notes receivable pools outstanding, none
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 first quarter of 2024, we securitized a pool of $439 million of vacation ownership notes receivable. In connection with the securitization, $430 million in vacation ownership loan backed notes were issued by MVW 2024-1 LLC (the “2024-1 LLC”) in a private placement. Three classes of vacation ownership loan backed notes were issued by the 2024-1 LLC: $284 million of Class A Notes, $89 million of Class B Notes, and $57 million of Class C Notes. The Class A Notes have an interest rate of 5.32 %, the Class B Notes have an interest rate of 5.51 %, and the Class C Notes have an interest rate of 6.20 %, for an overall weighted average interest rate of 5.48 %. Proceeds from the transaction, net of fees and a reserve, were used to repay the outstanding obligations on our warehouse credit facility (the “Warehouse Credit Facility”) and for other general corporate purposes.
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| 12. | DEBT | ||||
The following table provides detail on our debt balances, net of unamortized debt discount and issuance costs.
| ($ in millions) | At March 31, 2024 | At December 31, 2023 | ||||||||||||
| Corporate Credit Facility | ||||||||||||||
| Term Loan | $ | $ | ||||||||||||
| Unamortized debt discount and issuance costs | ( | ( | ||||||||||||
Revolving Corporate Credit Facility(1) | ||||||||||||||
Unamortized debt issuance costs | ( | ( | ||||||||||||
| Senior Unsecured Notes | ||||||||||||||
| 2028 Notes | ||||||||||||||
| Unamortized debt discount and issuance costs | ( | ( | ||||||||||||
| 2029 Notes | ||||||||||||||
| Unamortized debt discount and issuance costs | ( | ( | ||||||||||||
| Convertible Notes | ||||||||||||||
| 2026 Convertible Notes | ||||||||||||||
| Unamortized debt issuance costs | ( | ( | ||||||||||||
| 2027 Convertible Notes | ||||||||||||||
| Unamortized debt issuance costs | ( | ( | ||||||||||||
| Finance Leases | ||||||||||||||
| Non-interest bearing note payable | ||||||||||||||
| $ | $ | |||||||||||||
(1)Effective interest rate as of March 31, 2024 was | ||||||||||||||
The following table shows scheduled principal payments for our debt, excluding finance leases, as of March 31, 2024.
| Payments Year | |||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | Remaining 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Total | ||||||||||||||||||||||||||||||||||
| Term Loan | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Revolving Corporate Credit Facility | |||||||||||||||||||||||||||||||||||||||||
| 2028 Notes | |||||||||||||||||||||||||||||||||||||||||
| 2029 Notes | |||||||||||||||||||||||||||||||||||||||||
| 2026 Convertible Notes | |||||||||||||||||||||||||||||||||||||||||
| 2027 Convertible Notes | |||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
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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, as of March 31, 2024, was scheduled to mature on August 31, 2025, and a revolving credit facility with a borrowing capacity of $750 million (the “Revolving Corporate Credit Facility”), which includes a letter of credit sub-facility of $75 million, that terminates on March 31, 2027.
Subsequent to the end of the first quarter of 2024, we entered into an amendment to the Corporate Credit Facility (the “Amendment”), which, among other things, provides for a new $800 million term loan facility scheduled to mature on April 1, 2031 (the “New Term Loan”). The proceeds of the New Term Loan were used to refinance in full the Term Loan, which was scheduled to mature on August 31, 2025. The interest rate applicable to the New Term Loan is the Secured Overnight Financing Rate (“SOFR”) plus 2.25 %. There were no changes to the borrowing capacity or the termination date of the Revolving Corporate Credit Facility or its letter of credit sub-facility.
As of March 31, 2024, we have $200 million of interest rate swaps, under which we may pay a fixed rate of 2.17 % and receive a floating interest rate through April 2024, and a $100 million interest rate collar with a cap strike price of 2.43 % through April 2024, in each case, that we entered into prior to 2023 to hedge a portion of our interest rate risk on the Term Loan. Both the interest rate swap and the interest rate collar have been designated and qualify as cash flow hedges of interest rate risk and are recorded in Other assets on our Balance Sheets as of March 31, 2024 and December 31, 2023. We characterize payments we make or receive in connection with these derivative instruments as interest expense and a reclassification of accumulated other comprehensive income or loss for presentation purposes.
The following table reflects the activity in accumulated other comprehensive income or loss related to our derivative instruments during the first quarter of 2024 and 2023. There were no
| ($ in millions) | 2024 | 2023 | |||||||||
| Derivative instrument adjustment balance, January 1 | $ | $ | |||||||||
| Other comprehensive loss before reclassifications | ( | ( | |||||||||
| Derivative instrument adjustment balance, March 31 | |||||||||||
Senior Notes
Our senior notes include:
•$350 million aggregate principal amount of 4.750 % Senior Unsecured Notes due 2028 issued in the fourth quarter of 2019 with a maturity date of January 15, 2028 (the “2028 Notes”).
•$500 million aggregate principal amount of 4.500 % Senior Unsecured Notes due 2029 issued in the second quarter of 2021 with a maturity date of June 15, 2029 (the “2029 Notes”).
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 earlier repurchased or converted in accordance with their terms prior to that date.
The conversion rate of the 2026 Convertible Notes is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of March 31, 2024 to 6.2076 shares of common stock per $1,000 principal amount of 2026 Convertible Notes (equivalent to a conversion price of $161.09 per share of our common stock), as a result of the dividends we declared since issuance of the 2026 Convertible Notes that were greater than the quarterly dividend we paid when the 2026 Convertible Notes were issued. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. As of March 31, 2024, the effective interest rate was 0.55 %.
The following table shows interest expense information related to the 2026 Convertible Notes.
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| Amortization of debt issuance costs | $ | $ | |||||||||
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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 3.6 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 3.6 million shares of our common stock, in each case, as of March 31, 2024. The strike prices of the 2026 Convertible Note Hedges and the 2026 Warrants were subject to adjustment to $161.09 and $201.36 , respectively, as of March 31, 2024, and no
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 conversion rate of the 2027 Convertible Notes is subject to adjustment for certain events as described in the indenture governing the notes, and was subject to adjustment as of March 31, 2024 to 5.2776 shares of common stock per $1,000 principal amount of 2027 Convertible Notes (equivalent to a conversion price of $189.48 per share of our common stock), as a result of the dividends we declared since issuance of the 2027 Convertible Notes that were greater than the quarterly dividend we paid when the 2027 Convertible notes were issued. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election. As of March 31, 2024, the effective interest rate was 3.88 %.
The following table shows interest expense information related to the 2027 Convertible Notes.
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| Contractual interest expense | $ | $ | |||||||||
| Amortization of debt issuance costs | |||||||||||
| $ | $ | ||||||||||
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, in each case, as of March 31, 2024. The strike prices of the 2027 Convertible Note Hedges and the 2027 Warrants were subject to adjustment to $189.48 and $286.01 , respectively, as of March 31, 2024, and no
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), 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 bankruptcy remote special purpose subsidiaries.
| 13. | STOCKHOLDERS’ EQUITY | ||||
Marriott Vacations Worldwide has 100,000,000 authorized shares of common stock, par value of $0.01 per share. At March 31, 2024, there were 75,847,526 shares of Marriott Vacations Worldwide common stock issued, of which 35,163,680 shares were outstanding and 40,683,846 shares were held as treasury stock. At December 31, 2023, there were 75,807,882 shares of Marriott Vacations Worldwide common stock issued, of which 35,319,306 shares were outstanding and 40,488,576 shares were held as treasury stock. Marriott Vacations Worldwide has 2,000,000 0.01 none
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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”). As of March 31, 2024, approximately $414 million remained available for share repurchases under the current Share Repurchase Program.
Share repurchases may be made through open market purchases, privately negotiated transactions, block transactions, tender offers, or otherwise. The specific timing, amount and other terms of the repurchases will depend on market conditions, corporate and regulatory requirements, contractual restrictions, and other factors. In connection with the current Share Repurchase Program, we are authorized to adopt one or more plans pursuant to the provisions of Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The authorization for the current Share Repurchase Program may be suspended, terminated, increased or decreased by our Board of Directors at any time without prior notice. Acquired shares of our common stock are currently held as treasury shares and carried at cost in our Financial Statements.
The following table summarizes share repurchase activity under our Share Repurchase Program:
| ($ in millions, except per share amounts) | Number of Shares Repurchased | Cost Basis of Shares Repurchased | Average Price Paid per Share | ||||||||||||||
| As of December 31, 2023 | $ | $ | |||||||||||||||
| For the first quarter of 2024 | $ | ||||||||||||||||
| As of March 31, 2024 | $ | $ | |||||||||||||||
Dividends
We declared cash dividends to holders of common stock during the first quarter of 2024 as follows. Any future dividend payments will be subject to the restrictions imposed under the agreements covering our debt and approval of our Board of Directors. There can be no assurance that we will pay dividends in the future.
| Declaration Date | Stockholder Record Date | Distribution Date | Dividend per Share | |||||||||||||||||
| February 15, 2024 | February 29, 2024 | March 14, 2024 | $ | |||||||||||||||||
| 14. | SHARE-BASED COMPENSATION | ||||
We maintain the Marriott Vacations Worldwide Corporation 2020 Equity Incentive Plan (the “MVW Equity Plan”) for the benefit of our officers, directors, and employees. Under the MVW Equity Plan, we are authorized to award: (1) restricted stock and restricted stock units (“RSUs”) of our common stock, (2) stock appreciation rights (“SARs”) relating to our common stock, and (3) stock options to purchase our common stock. A total of 1.8 million shares are authorized for issuance pursuant to grants under the MVW Equity Plan. As of March 31, 2024, less than 1 million shares were available for grants under the MVW Equity Plan.
The following table details our share-based compensation expense related to award grants to our officers, directors, and employees:
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| Service-based RSUs | $ | $ | |||||||||
| Performance-based RSUs | |||||||||||
| $ | $ | ||||||||||
The following table details our deferred compensation costs related to unvested awards:
| ($ in millions) | At March 31, 2024 | At December 31, 2023 | |||||||||
| Service-based RSUs | $ | $ | |||||||||
| Performance-based RSUs | |||||||||||
| SARs | |||||||||||
| $ | $ | ||||||||||
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Restricted Stock Units
We granted 380,924 service-based RSUs, which are subject to time-based vesting conditions, with a weighted average grant-date fair value of $87.00 , to our employees and non-employee directors during the first quarter of 2024. During the first quarter of 2024, we also granted performance-based RSUs, which are subject to performance-based vesting conditions, to members of management. A maximum of 204,020 RSUs may be earned under the performance-based RSU awards granted during the first quarter of 2024.
Stock Appreciation Rights
We granted 86,759 SARs, with a weighted average grant-date fair value of $34.58 and a weighted average exercise price of $93.73 , to members of management during the first quarter of 2024. We use the Black-Scholes model to estimate the fair value of the SARs granted. The expected stock price volatility was calculated based on the average of the historical and implied volatility of our stock price. The average expected life was calculated using the simplified method, as we have insufficient historical information to provide a basis for estimating average expected life. The risk-free interest rate was calculated based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The dividend yield assumption listed below is based on the expectation of future payouts.
The following table outlines the assumptions used to estimate the fair value of grants during the first quarter of 2024:
| Expected volatility | |||||
| Dividend yield | |||||
| Risk-free rate | |||||
| Expected term (in years) | |||||
| 15. | VARIABLE INTEREST ENTITIES | ||||
Variable Interest Entities Related to Our Vacation Ownership Notes Receivable Securitizations
The following table shows consolidated assets, which are collateral for the obligations of the VIEs related to our vacation ownership notes receivable securitizations, and consolidated liabilities included on our Balance Sheet at March 31, 2024:
| ($ in millions) | Vacation Ownership Notes Receivable Securitizations | Warehouse Credit Facility | Total | ||||||||||||||
| Consolidated Assets | |||||||||||||||||
| Vacation ownership notes receivable, net of reserves | $ | $ | $ | ||||||||||||||
| Interest receivable | |||||||||||||||||
| Restricted cash | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Consolidated Liabilities | |||||||||||||||||
| Interest payable | $ | $ | $ | ||||||||||||||
| Securitized debt | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The following table shows the interest income and expense recognized as a result of our involvement with these VIEs during the first quarter of 2024:
| ($ in millions) | Vacation Ownership Notes Receivable Securitizations | Warehouse Credit Facility | Total | ||||||||||||||
| Interest income | $ | $ | $ | ||||||||||||||
| Interest expense | $ | $ | $ | ||||||||||||||
| Debt issuance cost amortization | $ | $ | $ | ||||||||||||||
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The following table shows cash flows between us and the vacation ownership notes receivable securitization VIEs:
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| Cash Inflows | |||||||||||
| Net proceeds from vacation ownership notes receivable securitizations | $ | $ | |||||||||
| Principal receipts | |||||||||||
| Interest receipts | |||||||||||
| Reserve release | |||||||||||
| Total | |||||||||||
| Cash Outflows | |||||||||||
| Principal payments | ( | ( | |||||||||
| Voluntary repurchases of defaulted vacation ownership notes receivable | ( | ( | |||||||||
| Voluntary clean-up call | ( | ||||||||||
| Interest payments | ( | ( | |||||||||
| Funding of restricted cash | ( | ||||||||||
| Total | ( | ( | |||||||||
| Net Cash Flows | $ | $ | |||||||||
The following table shows cash flows between us and the Warehouse Credit Facility VIE:
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| Cash Inflows | |||||||||||
| Proceeds from vacation ownership notes receivable securitizations | $ | $ | |||||||||
| Principal receipts | |||||||||||
| Interest receipts | |||||||||||
| Reserve release | |||||||||||
| Total | |||||||||||
| Cash Outflows | |||||||||||
| Principal payments | ( | ( | |||||||||
| Voluntary repurchases of defaulted vacation ownership notes receivable | ( | ||||||||||
| Repayment of Warehouse Credit Facility | ( | ||||||||||
| Interest payments | ( | ( | |||||||||
| Funding of restricted cash | ( | ( | |||||||||
| Total | ( | ( | |||||||||
| Net Cash Flows | $ | ( | $ | ||||||||
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.
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Other Variable Interest Entities
We have a commitment to purchase a property located in Waikiki, Hawaii. The property is held by a VIE for which we are not the primary beneficiary. We do not control the decisions that most significantly impact the economic performance of the entity during construction. Further, our purchase commitment is generally contingent upon the property being redeveloped to our brand standards. Accordingly, we have not consolidated the VIE. We expect to acquire the property over time and as of March 31, 2024, we expect to make remaining payments for the property as follows: $65 million in the remainder of 2024, $82 million in 2025, and $41 million in 2026. As of March 31, 2024, our Balance Sheet reflected $1 million in Accounts and contracts receivable, net, including a note receivable of less than $1 million, $8 million in Property and equipment, net, $1 million in Accrued liabilities and $1 million in the Other line within liabilities on our Balance Sheets. We believe that our maximum exposure to loss as a result of our involvement with this VIE is approximately $10 million as of March 31, 2024. During the first quarter of 2024, we fulfilled our outstanding commitment to purchase retail space for $48 million and incurred $1 million of cost related to the fit-out of this space. We have an agreement to sell the retail space to a third party, at cost, upon completion of construction, which we expect to occur in the second half of 2024.
Deferred Compensation Plan
We consolidate the liabilities of the 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 the primary beneficiary of the rabbi trust because we direct the activities of the trust and are the beneficiary of the trust. At March 31, 2024 and December 31, 2023, the value of the assets held in the rabbi trust was $110 million and $99 million, respectively, and was included in the Other line within assets on our Balance Sheets.
| 16. | BUSINESS SEGMENTS | ||||
We define our reportable segments based on the way in which the chief operating decision maker (“CODM”), currently our chief executive officer, manages the operations of the Company for purposes of allocating resources and assessing performance. We operate in two
•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. We are also the exclusive worldwide developer, marketer and seller of vacation ownership and related products under The Ritz-Carlton Club brand, and we have the non-exclusive right to develop, market and sell whole ownership residential products under The Ritz-Carlton Residences brand. We also have a license to use the St. Regis brand for specified fractional ownership products.
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.
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.
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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 attributable to common stockholders excluded from Adjusted EBITDA are not separately evaluated. Adjusted EBITDA is defined as net income attributable to common stockholders, 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 attributable to common stockholders is presented below.
Revenues
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| Vacation Ownership | $ | $ | |||||||||
| Exchange & Third-Party Management | |||||||||||
| Total segment revenues | |||||||||||
Consolidated Property Owners’ Associations | |||||||||||
| $ | $ | ||||||||||
Adjusted EBITDA and Reconciliation to Net Income Attributable to Common Stockholders
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| Adjusted EBITDA Vacation Ownership | $ | $ | |||||||||
| Adjusted EBITDA Exchange & Third-Party Management | |||||||||||
| Reconciling items: | |||||||||||
| Corporate and other | ( | ( | |||||||||
| Interest expense, net | ( | ( | |||||||||
| Tax provision | ( | ( | |||||||||
| Depreciation and amortization | ( | ( | |||||||||
| Share-based compensation expense | ( | ( | |||||||||
| Certain items | ( | ( | |||||||||
Net income attributable to common stockholders | $ | $ | |||||||||
Assets
| ($ in millions) | At March 31, 2024 | At December 31, 2023 | |||||||||
| Vacation Ownership | $ | $ | |||||||||
| Exchange & Third-Party Management | |||||||||||
| Total segment assets | |||||||||||
| Corporate and other | |||||||||||
| $ | $ | ||||||||||
Revenues Excluding Cost Reimbursements
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| United States | $ | $ | |||||||||
| All other countries | |||||||||||
| $ | $ | ||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
We make forward-looking statements throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”), based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among other things, the information concerning: our possible or assumed future results of operations, financial condition, leverage, liquidity, returns on investments, margins including financing profit and development profit margins; dividend payments; business strategies; financing plans; our competitive position; our plans to pursue growth opportunities; potential operating performance, including our expectations regarding contract sales, including contract sales from our Maui sales centers; our expectation regarding consumer financing interest expense; our expectation that inventory spending will exceed cost of sales for the remainder of 2024 and the impact of inventory repurchases; indemnification; capital requirements; taxes, including the impact of Pillar 2; our ability to securitize consumer loans and related default rates and reserve requirements; and the pace of originations of vacation ownership notes receivable compared to payoffs. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. We caution you that these statements are not guarantees of future performance and are subject to numerous and evolving risks and uncertainties that we may not be able to predict or assess, such as: a future health crisis and responses to a health crisis, including possible quarantines or other government imposed travel or health-related restrictions and the effects of a health crisis, including the short and longer-term impact on consumer confidence and demand for travel and the pace of recovery following a health crisis; variations in demand for vacation ownership and exchange products and services; worker absenteeism; price inflation; difficulties associated with implementing new or maintaining existing technology; changes in privacy laws; the impact of a future banking crisis; impacts from natural or man-made disasters and wildfires, including the Maui wildfires; global supply chain disruptions; volatility in the international and national economy and credit markets, including as a result of the ongoing conflicts between Russia and Ukraine, Israel and Gaza and elsewhere in the world and related sanctions and other measures; our ability to attract and retain our global workforce; competitive conditions; the availability of capital to finance growth; the impact of changes in interest rates; the effects of steps we have taken and may continue to take to reduce operating costs; political or social strife; and other matters referred to under the heading “Risk Factors” contained herein and also in our 2023 Annual Report, and which may be updated in our future periodic filings with the U.S. Securities and Exchange Commission (the “SEC”).
All forward-looking statements in this Quarterly Report apply only as of the date of this Quarterly Report or as of the date they were made or as otherwise specified herein. We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. You should not put undue reliance on any forward-looking statements in this Quarterly Report. We do not have any intention or obligation to update forward-looking statements after the date of this Quarterly Report, except as required by law.
The risk factors discussed in “Risk Factors” in our 2023 Annual Report could cause actual results to differ materially from those expressed or implied in forward-looking statements in this Quarterly Report. There may be other risks and uncertainties that we cannot predict at this time or that we currently do not expect will have a material adverse effect on our financial position, results of operations or cash flows. Any such risks could cause our results to differ materially from those we express in forward-looking statements.
Our Financial Statements (as defined below), which we discuss below, reflect our historical financial condition, results of operations and cash flows. However, the financial information discussed below and included in this Quarterly Report may not necessarily reflect what our financial condition, results of operations or cash flows may be in the future.
In order to make this report easier to read, we refer 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 that we include in the Financial Statements of this Quarterly Report.
29
Business Overview
We are a leading global vacation company that offers vacation ownership, exchange, rental and resort and property management, along with related businesses, products and services. Our business operates in two reportable segments: Vacation Ownership and Exchange & Third-Party Management.
Our Vacation Ownership segment includes a diverse portfolio of resorts that includes some of the world’s most iconic brands licensed under exclusive long-term relationships. We are the exclusive worldwide developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation Club, Grand Residences by Marriott, Sheraton Vacation Club, Westin Vacation Club, and Hyatt Vacation Club brands. We are also the exclusive worldwide developer, marketer and seller of vacation ownership and related products under The Ritz-Carlton Club brand, and we have the non-exclusive right to develop, market and sell whole ownership residential products under The Ritz-Carlton Residences brand. We also have a license to use the St. Regis brand for specified fractional ownership products.
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.
Our Exchange & Third-Party Management segment includes an exchange network and membership programs, as well as the provision of management services to other resorts and lodging properties. 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. We provide these services through our Interval International and Aqua-Aston businesses.
Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to consolidated property owners’ associations (“Consolidated Property Owners’ Associations”).
We routinely post important information, including news releases, announcements and other statements about our business and results of operations, that may be deemed material to investors on the Investor Relations section of our website, www.marriottvacationsworldwide.com. We use our website as a means of disclosing material, nonpublic information and for complying with our disclosure obligations under Regulation FD. Investors should monitor the Investor Relations section of our website in addition to following our press releases, filings with the SEC, public conference calls and webcasts. The information on our website is not part of, and is not incorporated by reference into this Quarterly Report.
Performance Measures
We measure operating performance using the key metrics described below:
•Contract sales from the sale of vacation ownership products, which consists of the total amount of vacation ownership product sales under contracts signed during the period where we have generally received a down payment of at least ten percent of the contract price, reduced by actual rescissions during the period, inclusive of contracts associated with sales of vacation ownership products on behalf of third parties, which we refer to as “resales contract sales.” In circumstances where customers apply any or all of their existing ownership interests as part of the purchase price for additional interests, we include only the incremental value purchased as contract sales. Contract sales differ from revenues from the sale of vacation ownership products that we report on our income statements due to the requirements for revenue recognition and adjustments for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue. We consider contract sales to be an important operating measure because it reflects the pace of sales in our business.
•Total contract sales include contract sales from the sale of vacation ownership products including non-consolidated joint ventures.
•Consolidated contract sales exclude contract sales from the sale of vacation ownership products for non-consolidated joint ventures.
•Volume per guest (“VPG”) is calculated by dividing consolidated vacation ownership contract sales, excluding fractional sales, telesales, resales, and other sales that are not attributed to a tour, by the number of tours in a given period. We believe that this operating metric is valuable in evaluating the effectiveness of the sales process as it combines the impact of average contract price with the number of touring guests who make a purchase.
•Development profit margin is calculated by dividing Development profit by revenues from the sale of vacation ownership products. We refer to revenues from the sale of vacation ownership products less the cost of vacation ownership products and marketing and sales costs as Development profit. We believe that Development profit margin is an important measure of the profitability of our development and subsequent marketing and sales of VOIs.
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•Total active members is the number of Interval Network active members at the end of the applicable period. We consider active members to be an important metric because it represents the population of owners eligible to book transactions using the Interval Network.
•Average revenue per member is calculated by dividing membership fee revenue, transaction revenue, rental revenue, and other member revenue for the Interval Network by the monthly weighted average number of Interval Network active members during the applicable period. We believe this metric is valuable in measuring the overall engagement of our Interval Network active members.
•Segment financial results attributable to common stockholders represents revenues less expenses directly attributable to each applicable reportable business segment (Vacation Ownership and Exchange & Third-Party Management). We consider this measure to be important in evaluating the performance of our reportable business segments. See Footnote 16 “Business Segments” to our Financial Statements for further information on our reportable business segments.
NM = Not meaningful.
Consolidated Results
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| REVENUES | |||||||||||
| Sale of vacation ownership products | $ | 352 | $ | 375 | |||||||
| Management and exchange | 211 | 200 | |||||||||
| Rental | 158 | 151 | |||||||||
| Financing | 83 | 78 | |||||||||
| Cost reimbursements | 391 | 365 | |||||||||
| TOTAL REVENUES | 1,195 | 1,169 | |||||||||
| EXPENSES | |||||||||||
| Cost of vacation ownership products | 53 | 58 | |||||||||
| Marketing and sales | 223 | 210 | |||||||||
| Management and exchange | 116 | 107 | |||||||||
| Rental | 107 | 113 | |||||||||
| Financing | 34 | 26 | |||||||||
| General and administrative | 63 | 68 | |||||||||
| Depreciation and amortization | 38 | 32 | |||||||||
| Litigation charges | 3 | 3 | |||||||||
| Restructuring | 2 | — | |||||||||
| Royalty fee | 28 | 29 | |||||||||
| Impairment | — | 4 | |||||||||
| Cost reimbursements | 391 | 365 | |||||||||
| TOTAL EXPENSES | 1,058 | 1,015 | |||||||||
| Gains and other income, net | — | 21 | |||||||||
| Interest expense, net | (40) | (34) | |||||||||
| Transaction and integration costs | (15) | (13) | |||||||||
| Other | (1) | — | |||||||||
| INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS | 81 | 128 | |||||||||
| Provision for income taxes | (35) | (41) | |||||||||
| NET INCOME | 46 | 87 | |||||||||
| Net loss attributable to noncontrolling interests | 1 | — | |||||||||
| NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 47 | $ | 87 | |||||||
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Operating Statistics
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| (Contract sales $ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Vacation Ownership | |||||||||||||||||||||||
| Total contract sales | $ | 433 | $ | 444 | $ | (11) | (2%) | ||||||||||||||||
| Consolidated contract sales | $ | 428 | $ | 434 | $ | (6) | (1%) | ||||||||||||||||
| Joint venture contract sales | $ | 5 | $ | 10 | $ | (5) | (49%) | ||||||||||||||||
| VPG | $ | 4,129 | $ | 4,358 | $ | (229) | (5%) | ||||||||||||||||
| Exchange & Third-Party Management | |||||||||||||||||||||||
| Total active members at end of period (000's) | 1,566 | 1,568 | (2) | —% | |||||||||||||||||||
| Average revenue per member | $ | 41.74 | $ | 42.07 | $ | (0.33) | (1%) | ||||||||||||||||
Revenues
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Vacation Ownership | $ | 1,130 | $ | 1,097 | $ | 33 | 3% | ||||||||||||||||
| Exchange & Third-Party Management | 65 | 71 | (6) | (8%) | |||||||||||||||||||
| Total Segment Revenues | 1,195 | 1,168 | 27 | 2% | |||||||||||||||||||
| Consolidated Property Owners’ Associations | — | 1 | (1) | NM | |||||||||||||||||||
| Total Revenues | $ | 1,195 | $ | 1,169 | $ | 26 | 2% | ||||||||||||||||
Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA
EBITDA, a financial measure that is not prescribed by GAAP, is defined as earnings, or net income attributable to common stockholders, before interest expense, net (excluding consumer financing interest expense associated with term securitization transactions), income taxes, depreciation and amortization. Adjusted EBITDA reflects additional adjustments for certain items, and excludes share-based compensation expense to address considerable variability among companies in recording compensation expense because companies use share-based payment awards differently, both in the type and quantity of awards granted. For purposes of our EBITDA and Adjusted EBITDA calculations, we do not adjust for consumer financing interest expense associated with term securitization transactions because we consider it to be an operating expense of our business. We consider Adjusted EBITDA to be an indicator of operating performance, which we use to measure our ability to service debt, fund capital expenditures, expand our business, and return cash to stockholders. We also use Adjusted EBITDA, as do analysts, lenders, investors, and others, because this measure excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be dependent on a company’s capital structure, debt levels and credit ratings. Accordingly, the impact of interest expense on earnings can vary significantly among companies. The tax positions of companies can also vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the jurisdictions in which they operate. As a result, effective tax rates and provisions for income taxes can vary considerably among companies. EBITDA and Adjusted EBITDA also exclude depreciation and amortization because companies utilize productive assets of different ages and use different methods of both acquiring and depreciating productive assets. These differences can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. We believe Adjusted EBITDA is useful as an indicator of operating performance because it allows for period-over-period comparisons of our on-going core operations before the impact of the excluded items. Adjusted EBITDA also facilitates comparison by us, analysts, investors, and others of results from our on-going core operations before the impact of these items with results from other companies.
EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do or may not calculate them at all, limiting their usefulness as comparative measures. The table below shows our EBITDA and Adjusted EBITDA calculation and reconciles these measures with Net income attributable to common stockholders, which is the most directly comparable GAAP financial measure.
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2024 First Quarter
| Three Months Ended | Change | ||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | % Change | ||||||||||||||||||||
Net income attributable to common stockholders | $ | 47 | $ | 87 | $ | (40) | (46%) | ||||||||||||||||
| Interest expense, net | 40 | 34 | 6 | 17% | |||||||||||||||||||
| Provision for income taxes | 35 | 41 | (6) | (15%) | |||||||||||||||||||
| Depreciation and amortization | 38 | 32 | 6 | 16% | |||||||||||||||||||
| EBITDA | 160 | 194 | (34) | (18%) | |||||||||||||||||||
| Share-based compensation expense | 7 | 7 | — | (13%) | |||||||||||||||||||
| Certain items | 20 | 2 | 18 | NM | |||||||||||||||||||
| Adjusted EBITDA | $ | 187 | $ | 203 | $ | (16) | (8%) | ||||||||||||||||
| Adjusted EBITDA Margin | 23% | 25% | (2 pts) | ||||||||||||||||||||
The table below details the components of Certain items for the three months ended March 31, 2024 and March 31, 2023.
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||||||||||||||
| ILG integration | $ | — | $ | 9 | |||||||||||||||||||
| Welk acquisition and integration | 15 | 4 | |||||||||||||||||||||
| Transaction and integration costs | 15 | 13 | |||||||||||||||||||||
| Purchase accounting adjustments | 1 | 2 | |||||||||||||||||||||
| Litigation charges | 3 | 3 | |||||||||||||||||||||
| Restructuring charges | 2 | — | |||||||||||||||||||||
| Impairment charges | — | 4 | |||||||||||||||||||||
| Early redemption of senior secured notes | — | 10 | |||||||||||||||||||||
| Foreign currency translation | 2 | (2) | |||||||||||||||||||||
| Insurance proceeds | — | (2) | |||||||||||||||||||||
| Change in indemnification asset | (2) | (23) | |||||||||||||||||||||
| Other | — | (4) | |||||||||||||||||||||
| Gains and other income, net | — | (21) | |||||||||||||||||||||
| Other | (1) | 1 | |||||||||||||||||||||
| Total Certain items | $ | 20 | $ | 2 | |||||||||||||||||||
Segment Adjusted EBITDA
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Vacation Ownership | $ | 213 | $ | 229 | $ | (16) | (7%) | ||||||||||||||||
| Exchange & Third-Party Management | 32 | 37 | (5) | (14%) | |||||||||||||||||||
| Segment adjusted EBITDA | 245 | 266 | (21) | (8%) | |||||||||||||||||||
| General and administrative | (63) | (68) | 5 | 8% | |||||||||||||||||||
Other | 5 | 5 | — | (13%) | |||||||||||||||||||
| Adjusted EBITDA | $ | 187 | $ | 203 | $ | (16) | (8%) | ||||||||||||||||
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The following tables present segment financial results attributable to common stockholders reconciled to segment Adjusted EBITDA.
Vacation Ownership
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Segment financial results | $ | 182 | $ | 205 | $ | (23) | (11%) | ||||||||||||||||
| Depreciation and amortization | 25 | 23 | 2 | 11% | |||||||||||||||||||
| Share-based compensation expense | 2 | 1 | 1 | 8% | |||||||||||||||||||
| Certain items | 4 | — | 4 | NM | |||||||||||||||||||
| Segment adjusted EBITDA | $ | 213 | $ | 229 | $ | (16) | (7%) | ||||||||||||||||
The table below details the components of Certain items for Vacation Ownership segment financial results for the three months ended March 31, 2024 and March 31, 2023.
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||||||||||||||
| Purchase accounting adjustments | $ | 1 | $ | 2 | |||||||||||||||||||
| Litigation charges | 3 | 3 | |||||||||||||||||||||
| Impairment charges | — | 4 | |||||||||||||||||||||
| Insurance proceeds | — | (2) | |||||||||||||||||||||
| Change in indemnification asset | — | (3) | |||||||||||||||||||||
| Other | — | (4) | |||||||||||||||||||||
| Gains and other income, net | — | (9) | |||||||||||||||||||||
| Total Certain items | $ | 4 | $ | — | |||||||||||||||||||
Exchange & Third-Party Management
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Segment financial results | $ | 25 | $ | 28 | $ | (3) | (13%) | ||||||||||||||||
| Depreciation and amortization | 7 | 8 | (1) | (14%) | |||||||||||||||||||
| Share-based compensation expense | — | 1 | (1) | (11%) | |||||||||||||||||||
| Segment adjusted EBITDA | $ | 32 | $ | 37 | $ | (5) | (14%) | ||||||||||||||||
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Business Segments
Our business is grouped into two reportable business segments: Vacation Ownership and Exchange & Third-Party Management. See Footnote 16 “Business Segments” to our Financial Statements for further information on our segments.
Vacation Ownership
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| REVENUES | |||||||||||
| Sale of vacation ownership products | $ | 352 | $ | 375 | |||||||
| Resort management and other services | 148 | 135 | |||||||||
| Rental | 147 | 141 | |||||||||
| Financing | 83 | 78 | |||||||||
| Cost reimbursements | 400 | 368 | |||||||||
| TOTAL REVENUES | 1,130 | 1,097 | |||||||||
| EXPENSES | |||||||||||
| Cost of vacation ownership products | 53 | 58 | |||||||||
| Marketing and sales | 223 | 210 | |||||||||
| Resort management and other services | 71 | 64 | |||||||||
| Rental | 110 | 116 | |||||||||
| Financing | 34 | 26 | |||||||||
| Depreciation and amortization | 25 | 23 | |||||||||
| Litigation charges | 3 | 3 | |||||||||
| Royalty fee | 28 | 29 | |||||||||
| Impairment | — | 4 | |||||||||
| Cost reimbursements | 400 | 368 | |||||||||
| TOTAL EXPENSES | 947 | 901 | |||||||||
| Gains and other income, net | — | 9 | |||||||||
| Other | (1) | — | |||||||||
| SEGMENT FINANCIAL RESULTS BEFORE NONCONTROLLING INTERESTS | 182 | 205 | |||||||||
| Net loss attributable to noncontrolling interests | — | — | |||||||||
| SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 182 | $ | 205 | |||||||
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Sale of Vacation Ownership Products
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | % of Consolidated Contract Sales, Net of Resales | March 31, 2023 | % of Consolidated Contract Sales, Net of Resales | Change | % Change | |||||||||||||||||||||||||||||
Consolidated contract sales | $ | 428 | $ | 434 | $ | (6) | (1%) | ||||||||||||||||||||||||||||
| Joint venture contract sales | 5 | 10 | (5) | (49%) | |||||||||||||||||||||||||||||||
| Total contract sales | 433 | 444 | (11) | (2%) | |||||||||||||||||||||||||||||||
Less: Resales contract sales | (12) | (11) | (1) | ||||||||||||||||||||||||||||||||
Less: Joint venture contract sales | (5) | (10) | 5 | ||||||||||||||||||||||||||||||||
| Consolidated contract sales, net of resales | 416 | 423 | (7) | (2%) | |||||||||||||||||||||||||||||||
| Plus: | |||||||||||||||||||||||||||||||||||
| Settlement revenue | 8 | 2% | 8 | 2% | — | ||||||||||||||||||||||||||||||
| Resales revenue | 5 | 1% | 6 | 1% | (1) | ||||||||||||||||||||||||||||||
| Revenue recognition adjustments: | |||||||||||||||||||||||||||||||||||
| Reportability | (9) | (2%) | — | —% | (9) | ||||||||||||||||||||||||||||||
| Sales reserve | (46) | (11%) | (38) | (9%) | (8) | ||||||||||||||||||||||||||||||
Other(1) | (22) | (6%) | (24) | (6%) | 2 | ||||||||||||||||||||||||||||||
| Sale of vacation ownership products | $ | 352 | 84% | $ | 375 | 88% | $ | (23) | (6%) | ||||||||||||||||||||||||||
Financing propensity | 53.4% | 54.2% | (0.8 pts) | ||||||||||||||||||||||||||||||||
Average FICO Score (2) | 737 | 738 | |||||||||||||||||||||||||||||||||
(1)Adjustment for sales incentives that will not be recognized as Sale of vacation ownership products revenue and other adjustments to Sale of vacation ownership products revenue.
(2)For customers who financed a vacation ownership purchase and for whom a credit score was available, generally U.S. and Canadian residents.
Contract sales in the first quarter of 2024 declined due to a 5% decrease in VPG, partially offset by a 4% increase in tours primarily attributed to our Asia Pacific locations. The 5% decrease in VPG was due to lower performance in both North America and international sales operations, a larger mix of international tours, which carry a lower VPG than our North America business, and the on-going impact from our Maui sales centers. Excluding the $16 million decline in contract sales at our Maui sales centers, contract sales increased 3%. We expect that full year 2024 contract sales from our Maui sales centers will be generally in-line with 2023 results and that full year 2024 consolidated contract sales, net of resales will exceed 2023 results.
The revenue reportability adjustment for the first quarter of 2024 resulted from contracts that remained in the contractual rescission period at the end of the quarter.
In the latter half of 2023, we increased our vacation ownership notes receivable reserve to reflect trends in delinquencies and default rates. We estimated the amount of the increase in our sales reserve primarily using a historical period of increased defaults. The additional reserves recorded in 2023 adjusted our future default rate estimate to reflect then-current macroeconomic conditions, including inflation outpacing wage growth, continuing high interest rates, mixed economic indicators and increased global insecurity. The sales reserve for the first quarter of 2024 continues to reflect these ongoing macroeconomic conditions and remains in-line with the reserve recorded in the fourth quarter of 2023.
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Development Profit
2024 First Quarter
| Three Months Ended | Change | % Change | |||||||||||||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | % of Revenue | March 31, 2023 | % of Revenue | |||||||||||||||||||||||||||||||
| Sale of vacation ownership products | $ | 352 | $ | 375 | $ | (23) | (6%) | ||||||||||||||||||||||||||||
| Cost of vacation ownership products | (53) | (15%) | (58) | (16%) | 5 | 9% | |||||||||||||||||||||||||||||
| Marketing and sales | (223) | (63%) | (210) | (56%) | (13) | (6%) | |||||||||||||||||||||||||||||
| Development profit | $ | 76 | $ | 107 | $ | (31) | (29%) | ||||||||||||||||||||||||||||
| Development profit margin | 21.5% | 28.5% | (7.0 pts) | ||||||||||||||||||||||||||||||||
The decrease in Development profit reflects higher marketing and sales costs, including $6 million of higher preview costs, and lower sales of vacation ownership products, including $8 million from the higher sales reserve and $7 million from unfavorable revenue reportability, partially offset by $2 million due primarily to the sale of lower cost inventory. We expect Development profit margin for the full year to decline slightly compared to 2023 results.
Resort Management and Other Services Revenues, Expenses and Profit
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Management fee revenues | $ | 52 | $ | 45 | $ | 7 | 15% | ||||||||||||||||
| Ancillary revenues | 65 | 61 | 4 | 7% | |||||||||||||||||||
| Other management and exchange revenues | 31 | 29 | 2 | 7% | |||||||||||||||||||
| Resort management and other services revenues | 148 | 135 | 13 | 10% | |||||||||||||||||||
| Resort management and other services expenses | (71) | (64) | (7) | (11%) | |||||||||||||||||||
| Resort management and other services profit | $ | 77 | $ | 71 | $ | 6 | 8% | ||||||||||||||||
| Resort management and other services profit margin | 51.8% | 52.7% | (0.9 pts) | ||||||||||||||||||||
Resort occupancy (1) | 90.2% | 88.9% | 1.3 pts | ||||||||||||||||||||
(1)Resort occupancy represents all transient, previews, and owner keys divided by total keys available, net of keys out of service. | |||||||||||||||||||||||
The increase in Other management and exchange revenues is attributed to higher club dues. The increase in Resort management and other services expenses reflects an increase in ancillary expenses of $4 million, and an increase in customer service and exchange company expenses of $3 million due to incremental headcount, wages, benefits, and other operating cost increases.
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Rental Revenues, Expenses and Profit
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Rental revenues | $ | 147 | $ | 141 | $ | 6 | 4% | ||||||||||||||||
| Rental expenses | (110) | (116) | 6 | 5% | |||||||||||||||||||
| Rental profit | $ | 37 | $ | 25 | $ | 12 | 47% | ||||||||||||||||
| Rental profit margin | 25.3% | 17.9% | 7.4 pts | ||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||
| March 31, 2024 | March 31, 2023 | Change | % Change | ||||||||||||||||||||
Transient keys rented(1) | 542,970 | 547,540 | (4,570) | (1%) | |||||||||||||||||||
| Average transient rate | $ | 286 | $ | 287 | $ | (1) | —% | ||||||||||||||||
Rental occupancy(2) | 72.7% | 70.4% | 2.3 pts | ||||||||||||||||||||
(1)Transient keys rented exclude plus points and preview stays.
(2)Rental occupancy represents transient and preview keys divided by keys available to rent, which is total available keys excluding owner usage.
Rental profit for transient keys, including plus points and excluding keys from owned hotels, increased due to higher plus points revenue of $11 million, a $6 million increase in costs allocated to marketing and sales expense for occupancy used for previews and $2 million of lower unsold maintenance fees associated with developer owned inventory. These changes were partially offset by $4 million of decreased profit due to fewer transient keys rented and higher tidy and variable costs and $3 million of increased costs associated with higher owner utilization of third-party vacation and other offerings. Rental profit for our owned hotels remained in-line with the first quarter of 2023.
Financing Revenues, Expenses and Profit
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Financing revenues | $ | 83 | $ | 78 | $ | 5 | 6% | ||||||||||||||||
| Financing expenses | (9) | (10) | 1 | 11% | |||||||||||||||||||
| Consumer financing interest expense | (25) | (16) | (9) | (50%) | |||||||||||||||||||
| Financing profit | $ | 49 | $ | 52 | $ | (3) | (4%) | ||||||||||||||||
| Financing profit margin | 59.5% | 65.7% | (6.2 pts) | ||||||||||||||||||||
| Financing propensity | 53.4% | 54.2% | (0.8 pts) | ||||||||||||||||||||
Financing revenues reflect $5 million of higher interest income as a result of a higher average notes receivable balance and a slightly higher average interest rate. The higher average notes receivable balance was the result of new loan originations in excess of the repayment of existing vacation ownership notes receivable, which we expect to continue in 2024.
The increase in consumer financing interest expense is attributable to the higher average securitized debt at a higher average interest rate for our more recent term securitization transactions. We expect consumer financing interest expense to continue to remain higher than our average outstanding interest rates on existing securitization transactions as a result of higher interest rates until meaningful market interest rate declines occur. We do not adjust interest rates on consumer financing offerings at the same pace as, or in lock-step with, broader market interest rates; as a result, we expect our financing profit margin to continue to decrease in 2024, as we repay existing securitization transactions with lower interest rates and enter into new securitization transactions with higher interest rates.
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Royalty Fee
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Royalty fee | $ | 28 | $ | 29 | $ | (1) | (4%) | ||||||||||||||||
Royalty fee expense decreased in the first quarter of 2024 due to higher sales of pre-owned inventory, which carry a lower royalty fee as compared to initial sales (one percent versus two percent).
Gains and Other Income
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Gains and other income, net | $ | — | $ | 9 | $ | (9) | NM | ||||||||||||||||
During the first quarter of 2023, we recorded a $4 million gain associated with the earn out of additional proceeds from the 2019 disposition of a land parcel in Cancun, Mexico, a $3 million reduction in certain pre-acquisition contingencies associated with the ILG Acquisition and $2 million related to the receipt of business interruption insurance proceeds.
Litigation Charges
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Litigation charges | $ | 3 | $ | 3 | $ | — | 2% | ||||||||||||||||
Litigation charges during the first quarter of 2024, as well as the first quarter of 2023, relate primarily to business in Europe.
Exchange & Third-Party Management
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| REVENUES | |||||||||||
| Management and exchange | $ | 52 | $ | 56 | |||||||
| Rental | 11 | 10 | |||||||||
| Cost reimbursements | 2 | 5 | |||||||||
| TOTAL REVENUES | 65 | 71 | |||||||||
| EXPENSES | |||||||||||
| Management and exchange | 31 | 30 | |||||||||
| Depreciation and amortization | 7 | 8 | |||||||||
| Cost reimbursements | 2 | 5 | |||||||||
| TOTAL EXPENSES | 40 | 43 | |||||||||
| SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 25 | $ | 28 | |||||||
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Management and Exchange Profit
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Management and exchange revenue | $ | 52 | $ | 56 | $ | (4) | (9%) | ||||||||||||||||
| Management and exchange expense | (31) | (30) | (1) | (3%) | |||||||||||||||||||
| Management and exchange profit | $ | 21 | $ | 26 | $ | (5) | (21%) | ||||||||||||||||
| Management and exchange profit margin | 40.6% | 47.1% | (6.5 pts) | ||||||||||||||||||||
The decrease in management and exchange revenue reflects a $2 million decline in Aqua-Aston management revenues resulting from fewer available nights for rent and a lower average daily rate in the Hawaii market due to changes in demand. Interval International management and exchange revenues declined $2 million or 5% primarily attributed to lower exchange transaction volume.
The decrease in management and exchange profit was primarily attributed to lower revenues and higher information technology costs.
Rental Revenues
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Rental revenues | $ | 11 | $ | 10 | $ | 1 | 7% | ||||||||||||||||
Results reflect a 2% increase in volume of transactions and a 4% increase in average fee per transaction.
Corporate and Other
Corporate and Other consists of results that are not allocable to our segments, including company-wide general and administrative costs, corporate interest expense, transaction and integration costs, and income taxes. In addition, Corporate and Other includes the revenues and expenses from Consolidated Property Owners’ Associations.
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| REVENUES | |||||||||||
| Resort management and other services | $ | 11 | $ | 9 | |||||||
| Cost reimbursements | (11) | (8) | |||||||||
| TOTAL REVENUES | — | 1 | |||||||||
| EXPENSES | |||||||||||
| Resort management and other services | 14 | 13 | |||||||||
| Rental | (3) | (3) | |||||||||
| General and administrative | 63 | 68 | |||||||||
| Depreciation and amortization | 6 | 1 | |||||||||
| Restructuring | 2 | — | |||||||||
| Cost reimbursements | (11) | (8) | |||||||||
| TOTAL EXPENSES | 71 | 71 | |||||||||
| Gains and other income, net | — | 12 | |||||||||
| Interest expense, net | (40) | (34) | |||||||||
| Transaction and integration costs | (15) | (13) | |||||||||
| FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS | (126) | (105) | |||||||||
| Provision for income taxes | (35) | (41) | |||||||||
| Net loss attributable to noncontrolling interests | 1 | — | |||||||||
| FINANCIAL RESULTS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | (160) | $ | (146) | |||||||
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Consolidated Property Owners’ Associations
The following table illustrates the impact of certain Consolidated Property Owners’ Associations under the relevant accounting guidance and the changes attributed to the deconsolidation of individual Consolidated Property Owners’ Associations.
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| REVENUES | |||||||||||
| Resort management and other services | $ | 11 | $ | 9 | |||||||
| Cost reimbursements | (11) | (8) | |||||||||
| TOTAL REVENUES | — | 1 | |||||||||
| EXPENSES | |||||||||||
| Resort management and other services | 14 | 13 | |||||||||
| Rental | (3) | (3) | |||||||||
| Cost reimbursements | (11) | (8) | |||||||||
| TOTAL EXPENSES | — | 2 | |||||||||
| FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS | — | (1) | |||||||||
| Net loss attributable to noncontrolling interests | 1 | — | |||||||||
FINANCIAL RESULTS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 1 | $ | (1) | |||||||
General and Administrative
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| General and administrative | $ | 63 | $ | 68 | $ | (5) | (8%) | ||||||||||||||||
The change in General and administrative expenses is due to $4 million of lower wages and benefits and $2 million of lower insurance expense, partially offset by $1 million of higher other expenses.
Gains (Losses) and Other Income (Expense)
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Gains and other income, net | $ | — | $ | 12 | $ | (12) | (101%) | ||||||||||||||||
In the first quarter of 2024, we recorded $2 million of foreign currency translation losses, offset by $2 million of non-income tax related adjustments to the receivable for the indemnification we expect to receive from Marriott International for indemnified tax matters.
In the first quarter of 2023, we recorded a $20 million increase in our receivable from Marriott International for indemnified tax matters (the true-up to the offsetting accrual is included in the Provision for income taxes line) and $2 million of foreign currency translation gains, partially offset by $10 million attributed to the redemption premium and write-off of unamortized debt issuance costs resulting from the early redemption of our senior secured notes.
Interest Expense
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Interest expense, net | $ | (40) | $ | (34) | $ | (6) | (17%) | ||||||||||||||||
The increase in Interest expense, net is attributed to $2 million associated with higher borrowings and higher variable interest rates on both the Warehouse Credit Facility and the Revolving Corporate Credit Facility, $2 million of higher variable interest expense on the Term Loan, and $2 million of interest expense related to leased assets.
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Income Tax
2024 First Quarter
| Three Months Ended | |||||||||||||||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | Change | % Change | |||||||||||||||||||
| Provision for income taxes | $ | (35) | $ | (41) | $ | 6 | 15% | ||||||||||||||||
Our effective tax rate was 43.0% and 32.3% for the three months ended March 31, 2024 and March 31, 2023, respectively.
The effective tax rate for the three months ended March 31, 2024 differed from the blended statutory tax rate for the same period due to income tax adjustments for discrete items, including $11 million primarily related to a $20 million increase to remove the permanent reinvestment assertion for certain non-U.S. entities offset by a $9 million decrease for the expiration of statutes of limitation on certain unrecognized tax benefits. The effective tax rate for the three months ended March 31, 2023 differed from the blended statutory tax rate for the same period due to income tax adjustments for discrete items including $9 million primarily related to an increase in uncertain tax benefits of $20 million for new unrecognized tax benefits in a foreign jurisdiction, offset by decreases in stock compensation of $7 million and $4 million related to prior year true-up adjustments.
The Organization for Economic Co-operation and Development has proposed a global minimum tax of 15% of reported profits (“Pillar 2”) that has been agreed upon in principle by over 140 non-U.S. countries. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 differently than the model rules and/or on different timelines. While we continue to monitor legislative developments, we do not anticipate Pillar 2 will have a material impact on our 2024 or long-term financial results.
Liquidity and Capital Resources
Typically, our capital needs are supported by cash on hand, cash generated from operations, our ability to access funds under the Warehouse Credit Facility and the Revolving Corporate Credit Facility, our ability to raise capital through securitizations in the ABS market, and, to the extent necessary, our ability to issue new debt and refinance existing debt. We believe these sources of capital will be adequate to meet our short-term and long-term liquidity requirements, finance our long-term growth plans, satisfy debt service requirements, fulfill other cash requirements, and return capital to stockholders. We continuously monitor the capital markets to evaluate the effect that changes in market conditions may have on our ability to fund our liquidity needs.
At March 31, 2024, our corporate debt, net of cash and equivalents, to Adjusted EBITDA ratio was 3.9, above our targeted range of 2.5 to 3.0, and we remain committed to reducing this ratio to 3.0 by the end of 2025.
In April 2024, we amended the Corporate Credit Facility to provide for a new $800 million term loan facility that is scheduled to mature on April 1, 2031. The proceeds were used to refinance in full the Term Loan, which was scheduled to mature on August 31, 2025. As of May 1, 2024, as a result of refinancing the Term Loan, we have no maturities of corporate debt until 2026.
As of March 31, 2024, after considering the impact of interest rate hedges and excluding finance leases, the interest rate applicable to approximately 78% of our corporate debt was effectively fixed. The weighted average interest rate of our total corporate debt as of March 31, 2024, excluding finance leases and including the impact of interest rate hedges, was 4.0%. Excluding the impact of the interest rate hedges, 68% of our corporate debt was fixed as of March 31, 2024.
Sources of Liquidity
Cash from Operations
Our primary sources of funds from operations are (1) cash sales and down payments on financed sales, (2) cash from our financing operations, including principal and interest payments received on outstanding vacation ownership notes receivable, (3) cash from fee-based membership, exchange and rental transactions, and (4) net cash generated from our rental and resort management and other services operations.
Vacation Ownership Notes Receivable Securitizations
We periodically securitize, without recourse, through bankruptcy remote special purpose entities, the majority of the notes receivable originated in connection with the sale of vacation ownership products to institutional investors in the ABS term securitization market. These vacation ownership notes receivable securitizations provide liquidity for general corporate purposes. In a vacation ownership notes receivable term securitization, several classes of debt securities issued
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by a special purpose entity are generally collateralized by a single pool of transferred assets, which consist of vacation ownership notes receivable. In connection with each vacation ownership notes receivable securitization, we may retain all or a portion of the securities that are issued. Typically, we receive cash at inception of the term securitization transaction for the amount of notes issued less fees and monies held in reserve and we receive cash during the life of the transaction in amounts reflecting the excess spread of interest received on the related vacation ownership notes receivable less the interest payable on the ABS securities, less administrative fees and amounts from related vacation ownership notes receivable that default.
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 parameters (default or delinquency thresholds vary by transaction), transaction provisions effectively redirect the monthly excess spread of interest accruing on the related vacation ownership notes receivable less the interest accruing on the ABS securities and fees we would otherwise receive from that pool (attributable to the interests we retained) to accelerate the principal payments to investors (taking into account the subordination of the different tranches to the extent there are multiple tranches) until the performance trigger is cured. During the first quarter of 2024, and as of March 31, 2024, we had 14 term securitization transactions outstanding, all of which were in compliance with their respective required parameters. Since 2000, we have issued approximately $9.4 billion of debt securities in securitization transactions in the term ABS market, excluding amounts securitized through warehouse credit facilities or private bank transactions.
On an ongoing basis, we have the ability to use our Warehouse Credit Facility to securitize, on a revolving non-recourse basis, eligible consumer loans derived from certain vacation ownership sales. Those loans may later be transferred to term securitization transactions in the ABS market, which typically occur twice a year. At March 31, 2024, we had no borrowings outstanding on our Warehouse Credit Facility.
As of March 31, 2024, $61 million of gross vacation ownership notes receivable were eligible for securitization.
Revolving Corporate Credit Facility
Our Revolving Corporate Credit Facility, which expires on March 31, 2027, provides for up to $750 million of aggregate borrowings for general corporate needs, including working capital, capital expenditures, letters of credit, and acquisitions. At March 31, 2024, $160 million of borrowings and $33 million of letters of credit were outstanding on our Revolving Corporate Credit Facility.
Uses of Cash
We minimize our working capital needs through cash management, strict credit-granting policies, and disciplined collection efforts. Our working capital needs fluctuate throughout the year given the timing of annual maintenance fees on unsold inventory we pay to owners’ associations and certain annual compensation-related outflows. In addition, our cash from operations varies due to the timing of repayment by owners of vacation ownership notes receivable, the closing or recording of sales contracts for vacation ownership products, financing propensity, and cash outlays for inventory acquisitions and development.
Seasonality
Our cash flow from operations fluctuates during the year due to the timing of certain receipts and contractual and compensation-related payments. Significant changes in cash flow can result from the timing of our collection of maintenance fees, club dues, and other customer payments, which typically occurs in either the fourth quarter or the first quarter of each year. Generally, cash outflows related to our payment of maintenance fees associated with unsold inventory occurs in the fourth quarter for our points-based products, and in the first quarter for our weeks-based products. In addition, during the first quarter of each year, we typically have significant variable compensation-related cash outflows associated with payment of annual bonuses.
Operations
In addition to net income and adjustments for non-cash items, the following are key drivers of our cash flow from operating activities:
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Inventory Spending Less Than Cost of Sales
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| Inventory spending | $ | (25) | $ | (22) | |||||||
| Purchase of property for future transfer to inventory | — | (8) | |||||||||
| Inventory costs | 42 | 46 | |||||||||
| Inventory spending less than cost of sales | $ | 17 | $ | 16 | |||||||
Although we have significant inventory on hand, we intend to continue selectively pursuing growth opportunities by targeting high-quality inventory that allows us to add desirable new destinations to our systems with new on-site sales locations. Where possible, we will structure transactions to limit our up-front capital investment and allow us to purchase finished inventory closer to the time it is needed for sale. These capital efficient vacation ownership transaction structures may consist of the development of new inventory, or the conversion of previously built units, by third parties. In addition, we may develop inventory on our balance sheet in key markets where we believe the opportunities will generate acceptable risk adjusted returns.
Through our existing VOI repurchase program, we proactively acquire previously sold VOIs from owners’ associations and individual owners at lower costs than would be required to develop new inventory. Among other reasons for repurchasing inventory, we expect these repurchases will stabilize the future cost of our vacation ownership products.
Our spending for real estate inventory in the first quarter of 2024 was lower than cost of sales and was primarily related to purchases under our VOI repurchase programs. Purchase of property for future transfer to inventory in 2023 included the acquisition of property in Charleston, South Carolina. We expect inventory spending to exceed cost of sales for the remainder of 2024, due to our remaining commitment to acquire property in Waikiki.
Vacation Ownership Notes Receivable Collections Less Than Originations
| Three Months Ended | |||||||||||
| ($ in millions) | March 31, 2024 | March 31, 2023 | |||||||||
| Vacation ownership notes receivable collections — non-securitized | $ | 9 | $ | 48 | |||||||
| Vacation ownership notes receivable collections — securitized | 151 | 113 | |||||||||
| Vacation ownership notes receivable originations | (200) | (225) | |||||||||
| Vacation ownership notes receivable collections less than originations | $ | (40) | $ | (64) | |||||||
We expect vacation ownership notes receivable originations to continue to outpace vacation ownership notes receivable collections in 2024 due to sales growth.
Repurchase of Common Stock
The following table summarizes share repurchase activity under our current share repurchase program:
| ($ in millions, except per share amounts) | Number of Shares Repurchased | Cost Basis of Shares Repurchased | Average Price Paid per Share | ||||||||||||||
| As of December 31, 2023 | 25,141,073 | $ | 2,405 | $ | 95.65 | ||||||||||||
| For the first quarter of 2024 | 279,577 | 24 | 87.37 | ||||||||||||||
| As of March 31, 2024 | 25,420,650 | $ | 2,429 | $ | 95.56 | ||||||||||||
See Footnote 13 “Stockholders' Equity” to our Financial Statements for further information related to our current share repurchase program.
Payment of Dividends to Common Stockholders
We distributed cash dividends to holders of common stock during the first quarter of 2024 as follows:
| Declaration Date | Stockholder Record Date | Distribution Date | Dividend per Share | |||||||||||||||||
| December 7, 2023 | December 21, 2023 | January 4, 2024 | $0.76 | |||||||||||||||||
| February 15, 2024 | February 29, 2024 | March 14, 2024 | $0.76 | |||||||||||||||||
We currently expect to pay quarterly dividends in the future, but any future dividend payments will be subject to the approval of our Board of Directors, which will depend on our financial condition, results of operations and capital requirements, as well as applicable law, regulatory constraints, industry practice, and other business considerations that our Board of Directors considers relevant. In addition, our Corporate Credit Facility and the indentures governing our
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senior notes contain restrictions on our ability to pay dividends, and the terms of agreements governing debt that we may incur in the future may also limit or prohibit the payment of dividends. The payment of certain cash dividends may also result in an adjustment to the conversion rate of our convertible notes in a manner adverse to us. Accordingly, there can be no assurance that we will pay dividends in the future at any particular rate or at all.
Material Cash Requirements
The following table summarizes our future material cash requirements from known contractual or other obligations as of March 31, 2024:
| Payments Due by Period | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | Total | Remainder of 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | |||||||||||||||||||||||||||||||||||||
Debt(1)(2) | $ | 3,281 | $ | 87 | $ | 883 | $ | 635 | $ | 793 | $ | 373 | $ | 510 | ||||||||||||||||||||||||||||||
Securitized debt(1)(3) | 2,850 | 218 | 287 | 282 | 277 | 267 | 1,519 | |||||||||||||||||||||||||||||||||||||
Purchase obligations(4) | 446 | 128 | 148 | 122 | 26 | 17 | 5 | |||||||||||||||||||||||||||||||||||||
Operating lease obligations(5) | 125 | 18 | 23 | 21 | 14 | 10 | 39 | |||||||||||||||||||||||||||||||||||||
Finance lease obligations(5) | 543 | 13 | 17 | 14 | 12 | 13 | 474 | |||||||||||||||||||||||||||||||||||||
Other long-term obligations | 28 | 23 | 3 | 1 | 1 | — | — | |||||||||||||||||||||||||||||||||||||
| $ | 7,273 | $ | 487 | $ | 1,361 | $ | 1,075 | $ | 1,123 | $ | 680 | $ | 2,547 | |||||||||||||||||||||||||||||||
(1)Includes principal as well as interest payments and excludes unamortized debt discount and issuance costs.
(2)In April 2024, we amended the Corporate Credit Facility to provide for a new $800 million term loan facility that is scheduled to mature on April 1, 2031. The proceeds were used to refinance in full the Term Loan, which was scheduled to mature on August 31, 2025.
(3)Payments based on estimated timing of cash flow associated with securitized notes receivable.
(4)Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure, and approximate timing of the transaction. Amounts reflected herein represent expected funding under such contracts and primarily relate to future purchases of vacation ownership units and information technology assets (hardware and software). Amounts reflected on the consolidated balance sheet as accounts payable and accrued liabilities are excluded from the table above.
(5)Includes interest.
In the normal course of our resort management business, we enter into purchase commitments on behalf of owners’ associations to manage the daily operating needs of our resorts. Since we are reimbursed for these commitments from the cash flows of the owners’ associations, these obligations have minimal impact on our net income and cash flow. These purchase commitments are excluded from the table above.
Supplemental Guarantor Information
The 2028 Notes are guaranteed by MVWC, Marriott Ownership Resorts, Inc. (“MORI”), and certain other subsidiaries whose voting securities are wholly owned directly or indirectly by MORI (such subsidiaries collectively, the “Senior Notes Guarantors”). These guarantees are full and unconditional and joint and several. The guarantees of the Senior Notes Guarantors are subject to release in limited circumstances only upon the occurrence of certain customary conditions.
The following tables present consolidating financial information as of March 31, 2024 and December 31, 2023, and for the three months ended March 31, 2024 for MVWC and MORI on a stand-alone basis (collectively, the “Issuers”), the Senior Notes Guarantors, the combined non-guarantor subsidiaries of MVWC, and MVW on a consolidated basis.
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Condensed Consolidating Statement of Income
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||
| Issuers | Senior Notes Guarantors | Non-Guarantor Subsidiaries | Total Eliminations | MVW Consolidated | |||||||||||||||||||||||||||||||
| ($ in millions) | MVWC | MORI | |||||||||||||||||||||||||||||||||
| Revenues | $ | — | $ | 302 | $ | 625 | $ | 279 | $ | (11) | $ | 1,195 | |||||||||||||||||||||||
| Expenses | (12) | (333) | (576) | (204) | 11 | (1,114) | |||||||||||||||||||||||||||||
| Benefit from (provision for) income taxes | — | 8 | (1) | (42) | — | (35) | |||||||||||||||||||||||||||||
| Equity in net income (loss) of subsidiaries | 59 | 120 | — | — | (179) | — | |||||||||||||||||||||||||||||
| Net income (loss) | 47 | 97 | 48 | 33 | (179) | 46 | |||||||||||||||||||||||||||||
| Net loss attributable to noncontrolling interests | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | 47 | $ | 97 | $ | 48 | $ | 34 | $ | (179) | $ | 47 | |||||||||||||||||||||||
Condensed Consolidating Balance Sheet
| As of March 31, 2024 | |||||||||||||||||||||||||||||||||||
| Issuers | Senior Notes Guarantors | Non-Guarantor Subsidiaries | Total Eliminations | MVW Consolidated | |||||||||||||||||||||||||||||||
| ($ in millions) | MVWC | MORI | |||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | — | $ | 22 | $ | 85 | $ | 130 | $ | — | $ | 237 | |||||||||||||||||||||||
| Restricted cash | — | 25 | 87 | 201 | — | 313 | |||||||||||||||||||||||||||||
| Accounts and contracts receivable, net | 31 | 160 | 113 | 122 | (4) | 422 | |||||||||||||||||||||||||||||
| Vacation ownership notes receivable, net | — | 123 | 161 | 2,052 | — | 2,336 | |||||||||||||||||||||||||||||
| Inventory | — | 226 | 298 | 113 | — | 637 | |||||||||||||||||||||||||||||
| Property and equipment, net | — | 329 | 719 | 251 | — | 1,299 | |||||||||||||||||||||||||||||
| Goodwill | — | — | 3,117 | — | — | 3,117 | |||||||||||||||||||||||||||||
| Intangibles, net | — | — | 807 | 32 | — | 839 | |||||||||||||||||||||||||||||
| Investments in subsidiaries | 3,390 | 3,853 | — | — | (7,243) | — | |||||||||||||||||||||||||||||
| Other | 128 | 139 | 342 | 186 | (128) | 667 | |||||||||||||||||||||||||||||
| Total assets | $ | 3,549 | $ | 4,877 | $ | 5,729 | $ | 3,087 | $ | (7,375) | $ | 9,867 | |||||||||||||||||||||||
| Accounts payable | $ | 27 | $ | 38 | $ | 91 | $ | 65 | $ | — | $ | 221 | |||||||||||||||||||||||
| Advance deposits | — | 72 | 88 | 16 | — | 176 | |||||||||||||||||||||||||||||
| Accrued liabilities | 10 | 112 | 149 | 113 | — | 384 | |||||||||||||||||||||||||||||
| Deferred revenue | — | 9 | 228 | 270 | (25) | 482 | |||||||||||||||||||||||||||||
| Payroll and benefits liability | — | 111 | 73 | 25 | — | 209 | |||||||||||||||||||||||||||||
| Deferred compensation liability | — | 128 | 41 | 4 | — | 173 | |||||||||||||||||||||||||||||
| Securitized debt, net | — | — | — | 2,205 | (27) | 2,178 | |||||||||||||||||||||||||||||
| Debt, net | 1,133 | 1,801 | 176 | 1 | — | 3,111 | |||||||||||||||||||||||||||||
| Other | — | 1 | 209 | 17 | — | 227 | |||||||||||||||||||||||||||||
| Deferred taxes | — | 128 | 244 | 36 | (80) | 328 | |||||||||||||||||||||||||||||
| MVW stockholders' equity | 2,379 | 2,477 | 4,430 | 336 | (7,243) | 2,379 | |||||||||||||||||||||||||||||
| Noncontrolling interests | — | — | — | (1) | — | (1) | |||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 3,549 | $ | 4,877 | $ | 5,729 | $ | 3,087 | $ | (7,375) | $ | 9,867 | |||||||||||||||||||||||
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| As of December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Issuers | Senior Notes Guarantors | Non-Guarantor Subsidiaries | Total Eliminations | MVW Consolidated | |||||||||||||||||||||||||||||||
| ($ in millions) | MVWC | MORI | |||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | — | $ | 20 | $ | 96 | $ | 132 | $ | — | $ | 248 | |||||||||||||||||||||||
| Restricted cash | — | 25 | 153 | 148 | — | 326 | |||||||||||||||||||||||||||||
| Accounts and contracts receivable, net | 30 | 106 | 142 | 120 | (13) | 385 | |||||||||||||||||||||||||||||
| Vacation ownership notes receivable, net | — | 121 | 176 | 2,046 | — | 2,343 | |||||||||||||||||||||||||||||
| Inventory | — | 186 | 336 | 112 | — | 634 | |||||||||||||||||||||||||||||
| Property and equipment, net | — | 265 | 736 | 259 | — | 1,260 | |||||||||||||||||||||||||||||
| Goodwill | — | — | 3,117 | — | — | 3,117 | |||||||||||||||||||||||||||||
| Intangibles, net | — | — | 822 | 32 | — | 854 | |||||||||||||||||||||||||||||
| Investments in subsidiaries | 3,421 | 3,943 | — | — | (7,364) | — | |||||||||||||||||||||||||||||
| Other | 122 | 126 | 279 | 118 | (132) | 513 | |||||||||||||||||||||||||||||
| Total assets | $ | 3,573 | $ | 4,792 | $ | 5,857 | $ | 2,967 | $ | (7,509) | $ | 9,680 | |||||||||||||||||||||||
| Accounts payable | $ | 55 | $ | 30 | $ | 196 | $ | 81 | $ | — | $ | 362 | |||||||||||||||||||||||
| Advance deposits | — | 65 | 83 | 16 | — | 164 | |||||||||||||||||||||||||||||
| Accrued liabilities | 5 | 95 | 137 | 113 | (7) | 343 | |||||||||||||||||||||||||||||
| Deferred revenue | — | 7 | 169 | 213 | (7) | 382 | |||||||||||||||||||||||||||||
| Payroll and benefits liability | — | 91 | 86 | 28 | — | 205 | |||||||||||||||||||||||||||||
| Deferred compensation liability | — | 126 | 39 | 3 | — | 168 | |||||||||||||||||||||||||||||
| Securitized debt, net | — | — | — | 2,121 | (25) | 2,096 | |||||||||||||||||||||||||||||
| Debt, net | 1,131 | 1,736 | 177 | 5 | — | 3,049 | |||||||||||||||||||||||||||||
| Other | — | 2 | 229 | 18 | — | 249 | |||||||||||||||||||||||||||||
| Deferred taxes | — | 124 | 242 | 19 | (105) | 280 | |||||||||||||||||||||||||||||
| MVW stockholders' equity | 2,382 | 2,516 | 4,499 | 350 | (7,365) | 2,382 | |||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 3,573 | $ | 4,792 | $ | 5,857 | $ | 2,967 | $ | (7,509) | $ | 9,680 | |||||||||||||||||||||||
Recent Accounting Pronouncements
See Footnote 2 “Significant Accounting Policies and Recent Accounting Standards” to our Financial Statements for a discussion of recently issued accounting pronouncements, including information on new accounting standards and the future adoption of such standards.
Critical Accounting Policies and Estimates
Our preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed those policies and estimates that we believe are critical and require the use of complex judgment in their application in our 2023 Annual Report. Since the date of our 2023 Annual Report, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk has not changed materially from that disclosed in Part I, Item 7A of the 2023 Annual Report, other than as set forth below.
We manage the interest rate risk on our corporate debt through the use of a combination of fixed-rate debt and may use interest rate hedges to fix a portion of our variable-rate debt. At March 31, 2024, after considering the impact of interest rate hedge agreements and excluding finance leases, the interest rate applicable to approximately 78% of our corporate debt was effectively fixed and the interest rate applicable to the remaining 22% (approximately $644 million) was variable. Excluding the impact of the interest rate hedges, 68% of our corporate debt was fixed as of March 31, 2024. Assuming we had no outstanding hedging arrangements and no outstanding balance on our Revolving Corporate Credit Facility, a 100 basis point increase in the underlying benchmark rate on our variable-rate debt at March 31, 2024 would result in an annual increase in cash interest of approximately $8 million.
The following table presents the scheduled maturities and the total fair value as of March 31, 2024 for our financial instruments that are impacted by market risks:
| ($ in millions) | Average Interest Rate | Maturities by Period | |||||||||||||||||||||||||||||||||||||||||||||||||||
Remainder of 2024 | 2025 | 2026 | 2027 | 2028 | Thereafter | Total Carrying Value | Total Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||
| Assets – Maturities represent expected principal receipts; fair values represent assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Vacation ownership notes receivable — non-securitized | 12.0% | $ | 55 | $ | 51 | $ | 46 | $ | 43 | $ | 35 | $ | 192 | $ | 422 | $ | 424 | ||||||||||||||||||||||||||||||||||||
| Vacation ownership notes receivable — securitized | 13.4% | $ | 126 | $ | 173 | $ | 179 | $ | 181 | $ | 181 | $ | 1,074 | $ | 1,914 | $ | 1,995 | ||||||||||||||||||||||||||||||||||||
| Contracts receivable for financed VOI sales, net | 12.9% | $ | 3 | $ | 4 | $ | 4 | $ | 4 | $ | 4 | $ | 29 | $ | 48 | $ | 48 | ||||||||||||||||||||||||||||||||||||
| Liabilities – Maturities represent expected principal payments; fair values represent liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securitized debt | 4.7% | $ | (143) | $ | (194) | $ | (201) | $ | (204) | $ | (202) | $ | (1,261) | $ | (2,205) | $ | (2,167) | ||||||||||||||||||||||||||||||||||||
Term Loan(1) | 7.2% | $ | — | $ | (784) | $ | — | $ | — | $ | — | $ | — | $ | (784) | $ | (781) | ||||||||||||||||||||||||||||||||||||
| Revolving Corporate Credit Facility | 7.2% | $ | — | $ | — | $ | — | $ | (160) | $ | — | $ | — | $ | (160) | $ | (160) | ||||||||||||||||||||||||||||||||||||
| Senior notes | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2028 Notes | 4.8% | $ | — | $ | — | $ | — | $ | — | $ | (350) | $ | — | $ | (350) | $ | (329) | ||||||||||||||||||||||||||||||||||||
| 2029 Notes | 4.5% | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (500) | $ | (500) | $ | (457) | ||||||||||||||||||||||||||||||||||||
| 2026 Convertible Notes | —% | $ | — | $ | — | $ | (575) | $ | — | $ | — | $ | — | $ | (575) | $ | (543) | ||||||||||||||||||||||||||||||||||||
| 2027 Convertible Notes | 3.3% | $ | — | $ | — | $ | — | $ | (575) | $ | — | $ | — | $ | (575) | $ | (540) | ||||||||||||||||||||||||||||||||||||
(1)In April 2024, we amended the Corporate Credit Facility to provide for a new $800 million term loan facility that is scheduled to mature on April 1, 2031. The proceeds were used to refinance in full the Term Loan, which was scheduled to mature on August 31, 2025.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report, we evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), and management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance about management’s control objectives. Our disclosure controls and procedures have been designed to provide reasonable assurance of achieving the desired control objectives. However, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based upon the foregoing evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2024, our disclosure controls and procedures were effective and operating to provide reasonable assurance that we record, process, summarize and report the information we are required to disclose in the reports that we file or submit under the Exchange Act within the time periods specified in the rules and forms of the SEC, and to provide
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reasonable assurance that we accumulate and communicate such information to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosure.
Changes in Internal Control Over Financial Reporting
We made no changes in our internal control over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Currently, and from time to time, we are subject to claims in legal proceedings arising in the normal course of business, including, among others, the legal actions discussed under “Loss Contingencies” in Footnote 10 “Contingencies and Commitments” to our Financial Statements. While management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, cash flows, or overall trends in results of operations, legal proceedings are inherently uncertain, and unfavorable rulings could, individually or in the aggregate, have a material adverse effect on our business, financial condition, or operating results.
Item 1A. Risk Factors
There have been no material changes to the risk factors set forth in Item 1A to Part 1 of our 2023 Annual Report, except to the extent factual information disclosed elsewhere in this Quarterly Report relates to such risk factors, which is incorporated herein by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
| Period | Total Number of Shares Purchased | Average Price Paid per Share(2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Plans or Programs(1)(2) | |||||||||||||||||||
January 1, 2024 – January 31, 2024 | 137,000 | $ | 85.29 | 137,000 | $ | 426,910,101 | |||||||||||||||||
February 1, 2024 – February 29, 2024 | 106,577 | $ | 86.04 | 106,577 | $ | 417,740,157 | |||||||||||||||||
March 1, 2024 – March 31, 2024 | 36,000 | $ | 95.46 | 36,000 | $ | 414,303,514 | |||||||||||||||||
| Total | 279,577 | $ | 86.88 | 279,577 | $ | 414,303,514 | |||||||||||||||||
(1)On May 11, 2023, we announced that our Board of Directors increased the then-remaining authorization under our share repurchase program that was first announced on September 13, 2021 to authorize purchases of up to $600 million of our common stock and extended the term of our share repurchase program to December 31, 2024.
(2)All dollar amounts presented exclude the nondeductible 1% excise tax on the net value of certain stock repurchases that was imposed by the Inflation Reduction Act of 2022.
Item 5. Other Information
(c) Trading Plans
During the quarter ended March 31, 2024, no director or Section 16 officer adopted terminated
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Item 6. Exhibits
All documents referenced below are being filed as a part of this Quarterly Report, unless otherwise noted.
| Exhibit Number | Description | Filed Herewith | Incorporation By Reference From | |||||||||||||||||||||||||||||
| Form | Exhibit | Date Filed | ||||||||||||||||||||||||||||||
| 3.1 | 8-K | 3.2 | 5/15/2023 | |||||||||||||||||||||||||||||
| 3.2 | 10-Q | 3.3 | 8/4/2023 | |||||||||||||||||||||||||||||
| 4.1 | 10 | 4.1 | 10/14/2011 | |||||||||||||||||||||||||||||
| 4.2 | 8-K | 4.1 | 10/1/2019 | |||||||||||||||||||||||||||||
| 4.3 | 10-K | 4.12 | 3/2/2020 | |||||||||||||||||||||||||||||
| 4.4 | 10-K | 4.13 | 3/2/2020 | |||||||||||||||||||||||||||||
| 4.5 | 8-K | 4.2 | 10/1/2019 | |||||||||||||||||||||||||||||
| 4.6 | 8-K | 4.3 | 10/1/2019 | |||||||||||||||||||||||||||||
| 4.7 | 8-K | 4.1 | 2/3/2021 | |||||||||||||||||||||||||||||
| 4.8 | 8-K | 4.1 | 2/3/2021 | |||||||||||||||||||||||||||||
| 4.9 | 8-K | 4.1 | 6/22/2021 | |||||||||||||||||||||||||||||
| 4.10 | 8-K | 4.2 | 6/22/2021 | |||||||||||||||||||||||||||||
| 4.11 | 8-K | 4.1 | 12/8/2022 | |||||||||||||||||||||||||||||
| 4.12 | 8-K | 4.2 | 12/8/2022 | |||||||||||||||||||||||||||||
| 4.13 | 10-K | 4.16 | 3/2/2020 | |||||||||||||||||||||||||||||
10.1 | 10-K | 10.25 | 02/27/2024 | |||||||||||||||||||||||||||||
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| Exhibit Number | Description | Filed Herewith | Incorporation By Reference From | |||||||||||||||||||||||||||||
| Form | Exhibit | Date Filed | ||||||||||||||||||||||||||||||
| 10.2 | Incremental Facility Amendment and Amendment No. 3, dated as of April 1, 2024, by and among Marriott Vacations Worldwide Corporation, Marriott Ownership Resorts, Inc., as borrower, the subsidiary guarantors party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the lenders party thereto | 8-K | 10.1 | 04/2/2024 | ||||||||||||||||||||||||||||
10.3 | X | |||||||||||||||||||||||||||||||
10.4 | X | |||||||||||||||||||||||||||||||
10.5 | X | |||||||||||||||||||||||||||||||
| 22.1 | 10-K | 22.1 | 02/27/2024 | |||||||||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||||||||
| 32.1 | Furnished | |||||||||||||||||||||||||||||||
| 32.2 | Furnished | |||||||||||||||||||||||||||||||
| 101 | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL: (i) Interim Consolidated Statements of Income, (ii) Interim Consolidated Statements of Comprehensive Income, (iii) Interim Consolidated Balance Sheets, (iv) Interim Consolidated Statements of Cash Flows, (v) Interim Consolidated Statements of Stockholders’ Equity, and (vi) Notes to Interim Consolidated Financial Statements | |||||||||||||||||||||||||||||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL and contained in Exhibit 101 | |||||||||||||||||||||||||||||||
* | Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplemental copies to the SEC of any omitted schedule upon request by the SEC. | |||||||||||||||||||||||||||||||
| ** | Management contract or compensatory plan or arrangement. | |||||||||||||||||||||||||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MARRIOTT VACATIONS WORLDWIDE CORPORATION | |||||||||||
| Date: | May 7, 2024 | /s/ John E. Geller, Jr. | |||||||||
| John E. Geller, Jr. | |||||||||||
| President and Chief Executive Officer | |||||||||||
| /s/ Jason P. Marino | |||||||||||
| Jason P. Marino | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
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