# MARRIOTT VACATIONS WORLDWIDE Corp (VAC) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from MARRIOTT VACATIONS WORLDWIDE Corp's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1524358/000152435825000044/vac-20241231.htm
Accession: 0001524358-25-000044
Filing date: 2025-02-28
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/VAC/
All MD&A years: /company/VAC/mda/
Previous year: /company/VAC/mda/fy2023/ (FY 2023)
Next year: /company/VAC/mda/fy2025/ (FY 2025)

Item 7.        Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

You should read the following discussion of our results of operations and financial condition together with our audited historical consolidated financial statements and accompanying notes in Part II, “Item 8. Financial Statements and Supplementary Data,” and Part I, “Item 1. Business,” of this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on our current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those we discuss in the sections of this Annual Report entitled “Risk Factors” and “Special Note About Forward-Looking Statements.”

Our consolidated financial statements, which we discuss below, reflect our historical financial condition, results of operations and cash flows. The financial information discussed below and included in this Annual Report may not, however, necessarily reflect what our financial condition, results of operations and cash flows may be in the future.

Our discussion and analysis of fiscal year 2024 to fiscal year 2023 is included herein. Our discussion and analysis of fiscal year 2023 to fiscal year 2022 has been omitted from this Form 10-K and can be found in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the Securities and Exchange Commission on February 27, 2024.

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. In April 2022, we disposed of VRI Americas after determining that the business was not a core component of our future growth strategy and operating model. This business was a component of our Exchange & Third-Party Management segment through the date of the sale.

Corporate and other represents that portion of our results that are not allocable to our segments, including those relating to Consolidated Property Owners’ Associations.

Significant Accounting Policies Used in Describing Results of Operations

Sale of Vacation Ownership Products

We recognize revenues from the sale of vacation ownership products (also referred to as “VOIs”) when control of the vacation ownership product is transferred to the customer and the transaction price is deemed collectible. Based upon the different terms of our contracts with the customer and business practices, control of the vacation ownership product has historically transferred to the customer at different points in time for each brand of VOIs. In the third quarter of 2022 and the fourth quarter of 2024, we aligned our business practices and contract terms for the sale of vacation ownership products (the “Contract Alignments”), resulting in the prospective change in the timing of the transfer of control to the

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customer for Marriott-branded VOIs and Hyatt-branded VOIs derived from Legacy-Welk sales contracts, respectively. Prior to these changes, control transfer occurred at closing for these vacation ownership products. Subsequent to the Contract Alignments, transfer of control of these vacation ownership products occurs at expiration of the statutory rescission period, consistent with the historical timing of Sheraton-, Westin- and Hyatt- branded transactions. Marriott-branded VOIs and Hyatt-branded VOIs derived from Legacy-Welk sales contracts executed prior to the applicable Contract Alignment have been accounted for with the transfer of control of the VOI occurring at closing.

Sales of vacation ownership products may be made for cash or we may provide financing. In addition, we recognize settlement fees associated with the transfer of vacation ownership products and commission revenues from sales of vacation ownership products on behalf of third parties, which we refer to as “resales revenue.”

We also provide sales incentives to certain purchasers. These sales incentives typically include Marriott Bonvoy points, World of Hyatt points or an alternative sales incentive that we refer to as “plus points.” Plus points are redeemable for stays at our resorts or for use in other third-party offerings, generally up to two years from the date of issuance.

Finally, as more fully described in “Financing” below, we record the difference between the contract receivable or vacation ownership note receivable and the consideration to which we expect to be entitled (also known as a vacation ownership notes receivable reserve or a sales reserve) as a reduction of revenues from the sale of vacation ownership products at the time we recognize revenues from a sale.

We report, on a supplemental basis, contract sales for our Vacation Ownership segment. Contract sales consist of the total amount of vacation ownership product sales under contract signed during the period where we have generally received a down payment of at least ten percent of the contract price, reduced by actual rescissions during the period, inclusive of contracts associated with sales of vacation ownership products on behalf of third parties, which we refer to as “resales contract sales.” In circumstances where a customer applies any or all of their existing ownership interests as part of the purchase price for additional interests (also referred to as an equity upgrade), we include only the incremental value purchased as contract sales. Contract sales differ from revenues from the sale of vacation ownership products that we report on our income statements due to the requirements for revenue recognition described above. We consider contract sales to be an important operating measure because it reflects the pace of sales in our business.

Cost of vacation ownership products includes costs to acquire, develop and construct our projects (also known as real estate inventory costs), other non-capitalizable costs associated with the overall project development process and settlement expenses associated with the closing process. For each project, we expense real estate inventory costs in the same proportion as the revenue recognized. Consistent with the applicable accounting guidance, to the extent there is a change in the estimated sales revenues or inventory costs for the project in a period, a non-cash adjustment is recorded on our income statements to true up costs in that period to those that would have been recorded historically if the revised estimates had been used. These true-ups, which we refer to as product cost true-up activity, can have a positive or negative impact on our income statements.

Management and Exchange

Our management and exchange revenues include revenues generated from fees we earn for managing each of our vacation ownership resorts, providing property management, owners’ association management and related services and fees we earn for providing rental services and related hotel, condominium resort, and owners’ association management services to vacation property owners.

In addition, we earn revenue from ancillary offerings, including food and beverage outlets, golf courses and other retail and service outlets located at our Vacation Ownership resorts. We also receive annual membership fees, club dues and certain transaction-based fees from members, owners and other third parties.

Management and exchange expenses include costs to operate the food and beverage outlets and other ancillary operations and to provide overall customer support services, including reservations, and certain transaction-based expenses relating to exchange service providers.

In our Vacation Ownership segment and Consolidated Property Owners’ Associations, we refer to these activities as “Resort Management and Other Services.”

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Financing

We offer financing to qualified customers for the purchase of most types of our vacation ownership products. The typical financing agreement provides for monthly payments of principal and interest with the principal balance of the loan fully amortizing over the term of the related vacation ownership note receivable, which is generally ten to fifteen years. While we adjust interest rates on our financing programs from time to time, such changes are typically not made in lockstep with the timing and magnitude of changes in broader market rates. We may use incentives to encourage our customers to choose our financing. Included within our vacation ownership notes receivable are originated vacation ownership notes receivable and vacation ownership notes receivable acquired in connection with the ILG Acquisition and the Welk Acquisition.

The interest income earned from our vacation ownership financing arrangements is earned on an accrual basis on the principal balance outstanding over the contractual life of the arrangement and is recorded as Financing revenues on our Income Statements. Financing revenues also include fees earned from servicing the existing vacation ownership notes receivable portfolio. The amount of interest income earned in a period depends on the amount of outstanding vacation ownership notes receivable, which is impacted positively by the origination of new vacation ownership notes receivable and negatively by principal collections and defaults. We calculate financing propensity as contract sales volume of financed contracts originated in the period divided by contract sales volume of all contracts originated in the period. We do not include resales contract sales in the financing propensity calculation. First-time buyers are more likely to finance their purchases and remain an integral part of our overall marketing and sales strategy.

Acquired vacation ownership notes receivable are accounted for using the purchased credit deteriorated assets provision of the current expected credit loss model. The estimates of 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 the estimated value of collateral securing the acquired vacation ownership notes receivable.

In the event of a default, we generally have the right to foreclose on or revoke the underlying VOI. We return VOIs that we reacquire through foreclosure or revocation back to inventory. As discussed above, for originated vacation ownership notes receivable, we record a reserve at the time of sale and classify the reserve as a reduction to revenues from the sale of vacation ownership products on our Income Statements. Revisions to estimates that result in decreases or increases to the reserve for originated vacation ownership notes receivable can increase or decrease revenues, respectively. In contrast, for acquired vacation ownership notes receivable, we record changes to the reserve as an adjustment to Financing expenses on our Income Statements.

As a result of the unification of our Marriott-, Sheraton- and Westin- branded vacation ownership products under the Abound by Marriott Vacations program and stabilization of the default rates, in the third quarter of 2022, we combined and aligned our reserve methodology for vacation ownership notes receivable for our Marriott, Sheraton and Westin brands. See Footnote 6 “Vacation Ownership Notes Receivable” to our Financial Statements for further information.

Financing expenses include consumer financing interest expense, which represents interest expense associated with the securitization of our vacation ownership notes receivable, costs to support the financing, servicing and securitization processes and changes in expected credit losses related to acquired vacation ownership notes receivable. We distinguish consumer financing interest expense from all other interest expense because the debt associated with the consumer financing interest expense is considered to be an operating expense of our business.

Rental

In our Vacation Ownership segment, we operate a rental business to provide owner flexibility and to help mitigate carrying costs associated with our inventory. We obtain rental inventory and generate revenue from rentals of inventory that we hold for sale as interests in our vacation ownership programs, inventory that we control because our owners have elected alternative usage options permitted under our vacation ownership programs and rentals of unregistered inventory and owned-hotel properties. We also recognize rental revenue from the utilization of plus points at redemption for rental stays at one of our resorts or other third-party offerings. For rental revenues associated with vacation ownership products which we own and which are registered and held for sale, to the extent that the revenues from rental are less than costs, revenues are reported net in accordance with Accounting Standards Codification (“ASC”) Topic 978, “Real Estate - Time-Sharing Activities” (“ASC 978”). The rental activity associated with discounted vacation packages requiring a tour (“preview stays”) is not included in transient rental metrics, and because the majority of these preview stays are sourced directly or indirectly from unsold inventory, the associated revenues and expenses are reported net in Marketing and sales expense.

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In our Exchange & Third-Party Management segment, we offer vacation rental offers known as Getaways to members of the Interval Network and certain other membership programs. Getaways allows us to monetize excess availability of resort accommodations within the applicable exchange network, as well as provide additional vacation opportunities to members. Resort accommodations typically become available as Getaways as a result of seasonal oversupply or underutilized space in the applicable exchange program. We also source resort accommodations specifically for the Getaways program. Rental revenues associated with Getaways are reported net of related expenses.

Rental expenses include:

•Maintenance and other fees on unsold inventory;

•Costs to provide alternative usage options, including Marriott Bonvoy points, World of Hyatt points, and offerings available as part of third-party offerings, for owners who elect to exchange their inventory; and

•Marketing costs and direct operating and related expenses in connection with the rental business (such as housekeeping, labor costs, credit card expenses, and reservation services).

Rental metrics, including the average daily transient rate or the number of transient keys rented, may not be comparable between periods given fluctuation in available occupancy by location, unit size (such as two bedroom, one bedroom or studio unit), owner use and exchange behavior, rental inventory on hand and keys allocated for preview stays. In addition, rental metrics may not correlate with rental revenues due to the requirement to report certain rental revenues net of rental expenses in accordance with ASC 978 (as discussed above). Further, as our ability to rent certain inventory may be limited on a site-by-site basis, rental operations may not generate adequate rental revenues to cover associated costs. Our Vacation Ownership segment units are either “full villas” or “lock-off” villas. Lock-off villas are units that can be separated into a primary unit and a guest room. Full villas are “non-lock-off” villas because they cannot be separated. A “key” is the lowest increment for reporting occupancy statistics based upon the mix of non-lock-off and lock-off villas. Lock-off villas represent two keys and non-lock-off villas represent one key. The “transient keys” metric represents the blended mix of inventory available for rent and includes all of the combined inventory configurations available in our resort system.

Cost Reimbursements

Cost reimbursements include direct and indirect costs that are reimbursed to us by owners’ associations and customers under management contracts. All costs reimbursed to us by owners’ associations and customers, with the exception of taxes assessed by a governmental authority, are reported on a gross basis. We recognize cost reimbursements when we incur the related reimbursable costs. Cost reimbursements consist of actual expenses with no added margin.

Interest Expense

Interest expense consists of all interest expense other than consumer financing interest expense, which is included within Financing expense, net of interest income.

Transaction and Integration Costs

Transaction and integration costs primarily include fees paid to change-management consultants, technology-related costs associated with the integrations of ILG and Welk and charges for employee retention, severance and other termination-related benefits. Transaction and integration costs also include costs related to the ILG and Welk Acquisitions, primarily for financial advisory, legal, and other professional service fees, as well as certain tax-related accruals. During the third quarter of 2023 and the second quarter of 2024, we discontinued classifying costs associated with the continued integration of ILG and Welk, respectively, in Transaction and integration costs. Further integration costs incurred after these periods are reflected in the operating results of each of our segments and/or General and administrative expenses.

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Performance Measures

We measure operating performance using the key metrics described below:

•Contract sales from the sale of vacation ownership products is considered 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 sales tour (referred to as Tours, see below), by the number of tours in a given period. We believe that VPG 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.

•Tours is the number of sales tours performed during the applicable period, and generally includes virtual and offsite sales tours, and excludes telesales. We believe that Tours is a valuable metric because it represents the volume of touring guests.

•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.

•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 20 “Business Segments” to our Financial Statements for further information about our reportable business segments.

•Adjusted EBITDA margin represents Adjusted EBITDA divided by the Company’s total revenues less cost reimbursements revenues.

•Segment Adjusted EBITDA margin represents Segment Adjusted EBITDA divided by the applicable segment’s total revenues less cost reimbursements revenues.

NM = Not meaningful.

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CONSOLIDATED RESULTS

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023","","2022"],["REVENUES"],["Sale of vacation ownership products","$","1,448","","","$","1,460","","","$","1,618"],["Management and exchange","843","","","813","","","827"],["Rental","645","","","571","","","551"],["Financing","342","","","322","","","293"],["Cost reimbursements","1,689","","","1,561","","","1,367"],["TOTAL REVENUES","4,967","","","4,727","","","4,656"],["EXPENSES"],["Cost of vacation ownership products","200","","","224","","","289"],["Marketing and sales","919","","","823","","","807"],["Management and exchange","482","","","442","","","444"],["Rental","481","","","452","","","382"],["Financing","146","","","113","","","75"],["General and administrative","243","","","273","","","249"],["Depreciation and amortization","146","","","135","","","132"],["Litigation charges","17","","","13","","","11"],["Restructuring","10","","","6","","","\u2014"],["Royalty fee","114","","","117","","","114"],["Impairment","30","","","32","","","2"],["Cost reimbursements","1,689","","","1,561","","","1,367"],["TOTAL EXPENSES","4,477","","","4,191","","","3,872"],["(Losses) gains and other (expense) income, net","(1)","","","47","","","40"],["Interest expense, net","(162)","","","(145)","","","(118)"],["Transaction and integration costs","(18)","","","(37)","","","(125)"],["Other","(3)","","","(3)","","","1"],["INCOME BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS","306","","","398","","","582"],["Provision for income taxes","(89)","","","(146)","","","(191)"],["NET INCOME","217","","","252","","","391"],["Net loss attributable to noncontrolling interests","1","","","2","","","\u2014"],["NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS","$","218","","","$","254","","","$","391"]]
[[/GREPCENT_TABLE]]

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Operating Statistics

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["(Contract sales $ in millions)","2024","","2023","","2022","","Change"],["Vacation Ownership"],["Total contract sales","$","1,829","","","$","1,800","","","$","1,874","","","$","29","","","2%"],["Consolidated contract sales","$","1,813","","","$","1,772","","","$","1,837","","","$","41","","","2%"],["Joint venture contract sales","$","16","","","$","28","","","$","37","","","$","(12)","","","(43%)"],["VPG","$","3,911","","","$","4,088","","","$","4,421","","","$","(177)","","","(4%)"],["Tours","432,716","","","405,825","","","390,593","","","26,891","","","7%"],["Exchange & Third-Party Management"],["Total active members at end of year (000's)","1,546","","","1,564","","","1,566","","","(18)","","","(1%)"],["Average revenue per member","$","154.34","","","$","156.65","","","$","179.48","","","$","(2.31)","","","(1%)"]]
[[/GREPCENT_TABLE]]

Revenues

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Vacation Ownership","$","4,730","","","$","4,468","","","$","4,342","","","$","262","","","6%"],["Exchange & Third-Party Management","231","","","262","","","291","","","(31)","","","(12%)"],["Total Segment Revenues","4,961","","","4,730","","","4,633","","","231","","","5%"],["Consolidated Property Owners\u2019 Associations","6","","","(3)","","","23","","","9","","","NM"],["Total Revenues","$","4,967","","","$","4,727","","","$","4,656","","","$","240","","","5%"]]
[[/GREPCENT_TABLE]]

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, Adjusted EBITDA, and Adjusted EBITDA margin 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 consider Adjusted EBITDA margin to be an indicator of our operating profitability. We also use Adjusted EBITDA and Adjusted EBITDA margin, as do analysts, lenders, investors, and others, because these measures exclude 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, Adjusted EBITDA, and Adjusted EBITDA margin 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 and Adjusted EBITDA margin are useful as indicators of operating performance and profitability, respectively, because they allow for period-over-period comparisons of our ongoing core operations before the impact of the excluded items. Adjusted EBITDA and Adjusted EBITDA margin also facilitate comparisons by us, analysts, investors, and others of results from our ongoing core operations before the impact of these items with results from other companies.

EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin 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, Adjusted EBITDA, and Adjusted EBITDA margin differently than we do or may not calculate them at all, limiting their usefulness as comparative measures.

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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.

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Net income attributable to common stockholders","$","218","","","$","254","","","$","391","","","$","(36)","","","(14%)"],["Interest expense, net","162","","","145","","","118","","","17","","","12%"],["Provision for income taxes","89","","","146","","","191","","","(57)","","","(39%)"],["Depreciation and amortization","146","","","135","","","132","","","11","","","8%"],["EBITDA","615","","","680","","","832","","","(65)","","","(10%)"],["Share-based compensation expense","33","","","31","","","39","","","2","","","5%"],["Certain items","79","","","50","","","95","","","29","","","NM"],["Adjusted EBITDA","$","727","","","$","761","","","$","966","","","$","(34)","","","(4%)"],["Adjusted EBITDA Margin","22.2%","","24.0%","","29.4%","","(1.8 pts)"]]
[[/GREPCENT_TABLE]]

The table below details the components of Certain items for fiscal years 2024 and 2023.

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023"],["ILG integration","$","\u2014","","","","","$","15"],["Welk acquisition and integration","18","","","","","22"],["Transaction and integration costs","","","18","","","","","37"],["Purchase accounting adjustments","","","1","","","","","8"],["Litigation charges","","","17","","","","","13"],["Restructuring charges","","","10","","","","","6"],["Impairment charges","","","30","","","","","32"],["Early redemption of senior secured notes","\u2014","","","","","10"],["Gain on disposition of hotel, land, and other","(8)","","","","","(8)"],["Foreign currency translation loss (gain)","13","","","","","(6)"],["Insurance proceeds","(5)","","","","","(9)"],["Change in indemnification asset","5","","","","","(31)"],["Change in estimates relating to pre-acquisition contingencies","(4)","","","","","\u2014"],["Other","\u2014","","","","","(3)"],["Losses (gains) and other expense (income), net","","","1","","","","","(47)"],["Other","","","2","","","","","1"],["Total Certain items","","","$","79","","","","","$","50"]]
[[/GREPCENT_TABLE]]

During the third quarter of 2023 and the second quarter of 2024, we discontinued classifying costs associated with the continued integration of ILG and Welk, respectively, in Transaction and integration costs. Further integration costs incurred after these periods are reflected in the operating results of each of our segments and/or General and administrative expenses.

Segment Adjusted EBITDA

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Vacation Ownership","$","845","","","$","883","","","$","1,033","","","$","(38)","","","(4%)"],["Exchange & Third-Party Management","102","","","130","","","148","","","(28)","","","(21%)"],["Segment Adjusted EBITDA","947","","","1,013","","","1,181","","","(66)","","","(6%)"],["General and administrative","(243)","","","(273)","","","(249)","","","30","","","11%"],["Other","23","","","21","","","34","","","2","","","6%"],["Adjusted EBITDA","$","727","","","$","761","","","$","966","","","$","(34)","","","(4%)"]]
[[/GREPCENT_TABLE]]

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

Vacation Ownership

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Segment financial results","$","703","","","$","777","","","$","961","","","$","(74)","","","(10%)"],["Depreciation and amortization","100","","","93","","","92","","","7","","","7%"],["Share-based compensation expense","8","","","8","","","7","","","\u2014","","","\u2014%"],["Certain items","34","","","5","","","(27)","","","29","","","NM"],["Segment Adjusted EBITDA","$","845","","","$","883","","","$","1,033","","","$","(38)","","","(4%)"],["Segment Adjusted EBITDA Margin","28.1%","","30.7%","","35.0%","","(2.6 pts)"]]
[[/GREPCENT_TABLE]]

The table below details the components of Certain items for the Vacation Ownership segment financial results for fiscal years 2024 and 2023.

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023"],["Purchase accounting adjustments","","","$","1","","","","","$","8"],["Litigation charges","","","18","","","","","12"],["Restructuring charges","","","1","","","","","\u2014"],["Impairment charges","","","28","","","","","12"],["Gain on disposition of hotel, land, and other","(7)","","","","","(7)"],["Insurance proceeds","(5)","","","","","(9)"],["Change in indemnification asset","\u2014","","","","","(9)"],["Change in estimates relating to pre-acquisition contingencies","(4)","","","","","\u2014"],["Other","\u2014","","","","","(4)"],["Gains and other income, net","","","(16)","","","","","(29)"],["Other","","","2","","","","","2"],["Total Certain items","","","$","34","","","","","$","5"]]
[[/GREPCENT_TABLE]]

Exchange & Third-Party Management

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Segment financial results","$","69","","","$","93","","","$","132","","","$","(24)","","","(26%)"],["Depreciation and amortization","28","","","31","","","31","","","(3)","","","(7%)"],["Share-based compensation expense","2","","","2","","","2","","","\u2014","","","NM"],["Certain items","3","","","4","","","(17)","","","(1)","","","NM"],["Segment Adjusted EBITDA","$","102","","","$","130","","","$","148","","","$","(28)","","","(21%)"],["Segment Adjusted EBITDA Margin","45.9%","","52.5%","","55.2%","","(6.6) pts"]]
[[/GREPCENT_TABLE]]

The table below details the components of Certain items for the Exchange & Third-Party Management segment financial results for fiscal years 2024 and 2023.

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023"],["Litigation charges","$","\u2014","","","$","1"],["Restructuring charges","1","","","\u2014"],["Impairment charges","2","","","4"],["Gain on disposition of hotel, land, and other","(1)","","","(1)"],["Foreign currency translation loss","1","","","\u2014"],["Total Certain items","$","3","","","$","4"]]
[[/GREPCENT_TABLE]]

50

BUSINESS SEGMENTS

Our business is grouped into two reportable business segments: Vacation Ownership and Exchange & Third-Party Management. See Footnote 20 “Business Segments” to our Financial Statements for further information about our segments.

VACATION OWNERSHIP

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023","","2022"],["REVENUES"],["Sale of vacation ownership products","$","1,448","","","$","1,460","","","$","1,618"],["Resort management and other services","612","","","568","","","534"],["Rental","605","","","531","","","509"],["Financing","342","","","322","","","293"],["Cost reimbursements","1,723","","","1,587","","","1,388"],["TOTAL REVENUES","4,730","","","4,468","","","4,342"],["EXPENSES"],["Cost of vacation ownership products","200","","","224","","","289"],["Marketing and sales","919","","","823","","","807"],["Resort management and other services","293","","","270","","","240"],["Rental","498","","","466","","","400"],["Financing","146","","","113","","","75"],["Depreciation and amortization","100","","","93","","","92"],["Litigation charges","18","","","12","","","9"],["Restructuring","1","","","\u2014","","","\u2014"],["Royalty fee","114","","","117","","","114"],["Impairment","28","","","12","","","2"],["Cost reimbursements","1,723","","","1,587","","","1,388"],["TOTAL EXPENSES","4,040","","","3,717","","","3,416"],["Gains and other income, net","16","","","29","","","37"],["Transaction and integration costs","\u2014","","","\u2014","","","(3)"],["Other","(3)","","","(3)","","","1"],["SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON STOCKHOLDERS","$","703","","","$","777","","","$","961"]]
[[/GREPCENT_TABLE]]

51

Sale of Vacation Ownership Products

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","% of Consolidated Contract Sales, Net of Resales","","2023","","% of Consolidated Contract Sales, Net of Resales","","2022","","% of Consolidated Contract Sales, Net of Resales","","Change"],["Consolidated contract sales","$","1,813","","","","","$","1,772","","","","","$","1,837","","","","","$","41","","","2%"],["Joint venture contract sales","16","","","","","28","","","","","37","","","","","(12)","","","(43%)"],["Total contract sales","1,829","","","","","1,800","","","","","1,874","","","","","29","","","2%"],["Less resales contract sales","(38)","","","","","(42)","","","","","(40)","","","","","4"],["Less joint venture contract sales","(16)","","","","","(28)","","","","","(37)","","","","","12"],["Consolidated contract sales, net of resales","1,775","","","","","1,730","","","","","1,797","","","","","45","","","3%"],["Plus:"],["Settlement revenue","38","","","2%","","39","","","2%","","36","","","2%","","(1)"],["Resales revenue","19","","","1%","","22","","","1%","","20","","","1%","","(3)"],["Revenue recognition adjustments:"],["Reportability","(2)","","","\u2014%","","3","","","\u2014%","","43","","","2%","","(5)"],["Sales reserve","(278)","","","(16%)","","(232)","","","(13%)","","(170)","","","(9%)","","(46)"],["Other(1)","(104)","","","(6%)","","(102)","","","(6%)","","(108)","","","(6%)","","(2)"],["Sale of vacation ownership products","$","1,448","","","82%","","$","1,460","","","84%","","$","1,618","","","90%","","$","(12)","","","(1%)"],["VPG","3,911","","","","","4,088","","","","","4,421","","","","","(177)","","","(4%)"],["Tours","432,716","","","","","405,825","","","","","390,593","","","","","26,891","","","7%"],["Financing propensity","55.9%","","","","58.1%","","","","53.9%","","","","(2.2 pts)"],["Average FICO Score(2)","737","","","","735","","","","734"]]
[[/GREPCENT_TABLE]]

(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.

2024 Compared to 2023

Contract sales increased in 2024 due to a 7% increase in tours, partially offset by a 4% decline in VPG. The decrease in VPG was due to a larger percentage mix of international and North America first time buyer tours, both of which carry a lower VPG than existing owner tours. While existing owner VPG was in line with the prior year, first time buyer VPG declined 9%.

In the third quarter of 2023, we increased our vacation ownership notes receivable reserve to reflect then-current trends in delinquencies and default rates. We estimated the increase in our sales reserve primarily using information from a historical period of increased defaults. The $59 million additional reserve recorded in 2023 was the result of an adjustment to 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.

During the second quarter of 2024, we increased our sales reserve by $70 million to reflect increases in expected cumulative loss rates for our vacation ownership notes receivable originated during 2021-2024. Consistent with our analysis in the third quarter of 2023, we considered the cumulative impact of inflation and mixed economic environment on delinquencies and default rates. We believed the related impact of higher than historical year-over-year increases in maintenance fees for 2023 and 2024 would continue to drive elevated delinquencies and defaults. As expected, maintenance fee increases for our points-based products for 2025, which were approved by the relevant property owners’ association, returned to levels consistent with historical experience. We have increased our sales reserve rate to reflect higher expected cumulative losses on new originations and do not expect to lower the sales reserve rate until we have sufficient evidence of improvement in delinquency and default rates.

52

Development Profit

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","% of Revenue","","2023","","% of Revenue","","2022","","% of Revenue","","Change"],["Sale of vacation ownership products","$","1,448","","","","","$","1,460","","","","","$","1,618","","","","","$","(12)","","","(1%)"],["Cost of vacation ownership products","(200)","","","(14%)","","(224)","","","(15%)","","(289)","","","(18%)","","24","","","11%"],["Marketing and sales","(919)","","","(63%)","","(823)","","","(56%)","","(807)","","","(50%)","","(96)","","","(12%)"],["Development profit","$","329","","","","","$","413","","","","","$","522","","","","","$","(84)","","","(20%)"],["Development profit margin","22.7%","","","","28.3%","","","","32.2%","","","","(5.6 pts)"]]
[[/GREPCENT_TABLE]]

2024 Compared to 2023 

The decrease in Development profit was due to the following:

•lower sales of vacation ownership products due to the increase in sales reserve discussed above; and

•higher marketing and sales costs due to:

•higher preview costs attributed to a $26 million increase in cost of occupancy and $4 million for higher tours volume;

•$28 million increase in tour generation costs;

•$19 million of higher compensation due to inflation and higher contract sales; and

•$19 million of higher information technology and other operating costs.

These changes were partially offset by:

•lower cost of vacation ownership products attributed to the sale of lower average cost inventory, including product cost true-up activity, partially offset by higher contract sales.

Resort Management and Other Services Revenues, Expenses and Profit

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Management fee revenues","$","207","","","$","180","","","$","166","","","$","27","","","15%"],["Ancillary revenues","266","","","252","","","241","","","14","","","6%"],["Other management and exchange revenues","139","","","136","","","127","","","3","","","3%"],["Resort management and other services revenues","612","","568","","534","","44","","","8%"],["Resort management and other services expenses","(293)","","","(270)","","","(240)","","","(23)","","","(9%)"],["Resort management and other services profit","$","319","","","$","298","","","$","294","","","$","21","","","7%"],["Resort management and other services profit margin","52.1%","","52.4%","","55.1%","","(0.3 pts)"],["Resort occupancy(1)","89.8%","","88.1%","","89.3%","","1.7 pts"]]
[[/GREPCENT_TABLE]]

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

2024 Compared to 2023 

The increase in Resort management and other services revenues reflects higher management fees, higher ancillary revenues and higher club dues.

The increase in Resort management and other services expenses reflects an increase in ancillary expenses of $15 million due to increased volumes sold and operating costs, and an increase in customer services and exchange company expenses of $8 million due to wages, benefits, and other operating cost increases.

53

Rental Revenues, Expenses and Margin

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Rental revenues","$","605","","","$","531","","","$","509","","","$","74","","","14%"],["Rental expenses","(498)","","","(466)","","","(400)","","","(32)","","","(7%)"],["Rental profit","$","107","","","$","65","","","$","109","","","$","42","","","62%"],["Rental profit margin","17.6%","","12.4%","","21.4%","","5.2 pts"],["Transient keys rented(1)","2,172,529","","","2,072,590","","","2,073,945","","","99,939","","","5%"],["Average transient key rate","$","256.61","","","$","268.79","","","$","268.39","","","$","(12.18)","","","(5%)"],["Rental occupancy(2)","72.3%","","68.2%","","70.3%","","4.1 pts"]]
[[/GREPCENT_TABLE]]

(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.

2024 Compared to 2023

Rental profit, excluding profit from owned hotels, increased due to:

•$43 million of higher plus points revenue attributed to enhanced sales incentive programs put in place during COVID, which increased the amount of plus points issued and lengthened the use period; and

•$26 million increase in costs allocated to marketing and sales expense for occupancy used for previews.

These changes were partially offset by:

•$17 million of increased costs associated with higher owner utilization of third-party vacation and other offerings; and

•$12 million of decreased profit due to a lower average transient rate on higher keys rented and higher tidy and variable costs.

Rental profit for our owned hotels increased $2 million.

We expect rental profit to decline in 2025 due to a higher mix of keys in lower ADR markets, lower plus point revenue due the expiration of enhanced sales incentives programs put in place during COVID, additional preview usage and higher costs associated with unsold maintenance fees.

Financing Revenues, Expenses and Margin

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Financing revenues","$","342","","","$","322","","","$","293","","","$","20","","","6%"],["Financing expenses","(41)","","","(36)","","","(20)","","","(5)","","","(13%)"],["Consumer financing interest expense","(105)","","","(77)","","","(55)","","","(28)","","","(36%)"],["Financing profit","$","196","","","$","209","","","$","218","","","$","(13)","","","(6%)"],["Financing profit margin","57.4%","","64.9%","","74.5%","","(7.5 pts)"],["Financing propensity","55.9%","","58.1%","","53.9%","","(2.2 pts)"]]
[[/GREPCENT_TABLE]]

2024 Compared to 2023

The increase in Financing revenues reflects $20 million of higher interest income as a result of a higher average vacation ownership notes receivable balance and $1 million of higher late and service fees, partially offset by $1 million of higher plus point financing incentive costs (recorded as a reduction of interest income).

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.

54

We expect our average interest rate to continue to increase as the current interest rate environment for new securitization transactions is higher than the average interest rate on our existing securitized debt. We do not adjust interest rates on consumer financing offerings at the same pace as, or in lock-step with, broader market interest rates.

We expect our financing profit to remain flat in 2025.

Litigation Charges

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Litigation charges","$","18","","","$","12","","","$","9","","","$","6","","","54%"]]
[[/GREPCENT_TABLE]]

2024 Compared to 2023

During 2024 and 2023, litigation charges relate primarily to a land disposition in the U.S. and certain resorts in Europe.

Impairment

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Impairment","$","28","","","$","12","","","$","2","","","$","16","","","NM"]]
[[/GREPCENT_TABLE]]

During 2024, we recorded a non-cash impairment charge of $28 million related to Legacy-Welk inventory. The impairment charge reflects an elongated pace of sales at a higher marketing and selling cost than that estimated in purchase accounting.

During 2023, we recorded non-cash impairment charges of $8 million related to our investment in a joint venture, $2 million related to an ancillary operation in Europe, and $2 million related to an owned hotel.

Gains and Other Income

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Gains and other income, net","$","16","","","$","29","","","$","37","","","$","(13)","","","NM"]]
[[/GREPCENT_TABLE]]

During 2024, we recorded $6 million of gains on the disposition of excess real estate, $5 million related to the receipt of business interruption insurance proceeds, and a $4 million reduction in certain pre-acquisition contingencies associated with the ILG Acquisition.

During 2023, we recorded a $9 million reduction in certain pre-acquisition contingencies associated with the ILG Acquisition, $9 million related to the receipt of business interruption and property damage insurance proceeds, $7 million of gains on the disposition of excess real estate, and $4 million of gains associated with the earn out of additional proceeds from the 2019 disposition of a land parcel in Cancun, Mexico.

55

EXCHANGE & THIRD-PARTY MANAGEMENT

Our Exchange & Third-Party Management segment is comprised of the Interval International and Aqua-Aston businesses. Results below include VRI Americas for the period prior to its disposition in the second quarter of 2022.

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023","","2022"],["REVENUES"],["Management and exchange","$","182","","","$","206","","","$","226"],["Rental","40","","","40","","","42"],["Cost reimbursements","9","","","16","","","23"],["TOTAL REVENUES","231","","","262","","","291"],["EXPENSES"],["Management and exchange","122","","","118","","","120"],["Depreciation and amortization","28","","","31","","","31"],["Litigation charges","\u2014","","","1","","","\u2014"],["Restructuring","1","","","\u2014","","","\u2014"],["Impairment","2","","","4","","","\u2014"],["Cost reimbursements","9","","","16","","","23"],["TOTAL EXPENSES","162","","","170","","","174"],["Gains and other income, net","\u2014","","","1","","","15"],["SEGMENT FINANCIAL RESULTS ATTRIBUTABLE TO COMMON STOCKHOLDERS","$","69","","","$","93","","","$","132"]]
[[/GREPCENT_TABLE]]

Management and Exchange Profit

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Management and exchange revenue","$","182","","","$","206","","","$","226","","","$","(24)","","","(12%)"],["Management and exchange expense","(122)","","","(118)","","","(120)","","","(4)","","","(3%)"],["Management and exchange profit","$","60","","","$","88","","","$","106","","","$","(28)","","","(31%)"],["Management and exchange profit margin","33.2%","","42.5%","","47.0%","","(9.3 pts)"]]
[[/GREPCENT_TABLE]]

2024 Compared to 2023

Interval International management and exchange revenues declined $11 million, or 6%, as a result of 7% lower exchange transaction volume, partially offset by a 4% increase in average exchange fees. The decrease in management and exchange revenue also reflects a $13 million decline in Aqua-Aston management revenues resulting from changes in demand in Maui, along with a decline in available nights across the portfolio. The decrease in management and exchange profit was primarily attributed to lower revenues and higher information technology expenses.

Rental Revenues

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Rental revenues","$","40","","","$","40","","","$","42","","","$","\u2014","","","1%"]]
[[/GREPCENT_TABLE]]

2024 Compared to 2023 

Results reflect a 6% increase in average fees per transaction and lower inventory acquisition costs, partially offset by an 8% decrease in transaction volume.

56

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, net, transaction and integration costs, and income taxes. In addition, Corporate and Other includes the revenues and expenses from the Consolidated Property Owners’ Associations.

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023","","2022"],["REVENUES"],["Resort management and other services","$","49","","","$","39","","","$","67"],["Cost reimbursements","(43)","","","(42)","","","(44)"],["TOTAL REVENUES","6","","","(3)","","","23"],["EXPENSES"],["Resort management and other services","67","","","54","","","84"],["Rental","(17)","","","(14)","","","(18)"],["General and administrative","243","","","273","","","249"],["Depreciation and amortization","18","","","11","","","9"],["Litigation charges","(1)","","","\u2014","","","2"],["Restructuring","8","","","6","","","\u2014"],["Impairment","\u2014","","","16","","","\u2014"],["Cost reimbursements","(43)","","","(42)","","","(44)"],["TOTAL EXPENSES","275","","","304","","","282"],["(Losses) gains and other (expense) income, net","(17)","","","17","","","(12)"],["Interest expense, net","(162)","","","(145)","","","(118)"],["Transaction and integration costs","(18)","","","(37)","","","(122)"],["FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS","(466)","","","(472)","","","(511)"],["Provision for income taxes","(89)","","","(146)","","","(191)"],["Net loss attributable to noncontrolling interests","1","","","2","","","\u2014"],["FINANCIAL RESULTS ATTRIBUTABLE TO COMMON STOCKHOLDERS","$","(554)","","","$","(616)","","","$","(702)"]]
[[/GREPCENT_TABLE]]

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 certain individual Consolidated Property Owners’ Associations.

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023","","2022"],["REVENUES"],["Resort management and other services","$","49","","","$","39","","","$","64"],["Cost reimbursements","(43)","","","(42)","","","(44)"],["TOTAL REVENUES","6","","","(3)","","","20"],["EXPENSES"],["Resort management and other services","67","","","54","","","84"],["Rental","(17)","","","(14)","","","(18)"],["Cost reimbursements","(43)","","","(42)","","","(44)"],["TOTAL EXPENSES","7","","","(2)","","","22"],["Losses and other expense, net","\u2014","","","\u2014","","","(3)"],["Interest expense, net","1","","","1","","","\u2014"],["FINANCIAL RESULTS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS","\u2014","","","\u2014","","","(5)"],["Provision for income taxes","(1)","","","(1)","","","(1)"],["Net loss attributable to noncontrolling interests","1","","","2","","","\u2014"],["FINANCIAL RESULTS ATTRIBUTABLE TO COMMON STOCKHOLDERS","$","\u2014","","","$","1","","","$","(6)"]]
[[/GREPCENT_TABLE]]

57

General and Administrative

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["General and administrative","$","243","","","$","273","","","$","249","","","$","(30)","","","(11%)"]]
[[/GREPCENT_TABLE]]

2024 Compared to 2023

The decrease in General and administrative expense is primarily due to one-time information technology expenses incurred in 2023 and lower consulting and compliance related expenses, partially offset by higher variable compensation expense and higher operating costs.

We expect General and administrative expenses to increase in the near term due to the continued impact of increased wages and variable compensation expense and additional investment in upgrading, maintaining, and implementing new technology, including costs associated with our continued transition to software as a service, which are recorded as a component of General and administrative expense as opposed to Depreciation expense.

Restructuring

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Restructuring","$","8","","","$","6","","","$","\u2014","","","$","2","","","NM"]]
[[/GREPCENT_TABLE]]

In November 2024, we announced the creation of a Strategic Business Operations office focused on accelerating our growth and driving operating efficiencies in all areas of our business while increasing organizational agility. We intend to modernize and optimize our processes and systems, including through advanced technology and automation, while focusing on efforts to increase sales efficiency and inventory optimization while capturing significant savings from initiatives related to procurement and corporate overhead. We believe that we can drive $150 million to $200 million of run rate benefits from these initiatives by the end of 2026, with half coming from cost savings and efficiencies with the balance from accelerating revenue growth. We expect to incur one-time costs related to these initiatives of approximately $100 million in each of 2025 and 2026 to enhance our customer platforms, products and services to achieve these benefits. We also expect additional savings that will benefit our owners’ maintenance fees. During 2024, we incurred $4 million of severance costs and $4 million of other costs associated with these efforts.

During 2023, we realigned our management structure, resulting in severance costs associated with the elimination of certain positions.

Impairment

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Impairment","$","\u2014","","","$","16","","","$","\u2014","","","$","(16)","","","NM"]]
[[/GREPCENT_TABLE]]

During 2023, upon our relocation to our new corporate headquarters, we recorded a non-cash impairment of a right-of-use asset related to operating leases for our legacy corporate headquarters located in Orlando, Florida, as we did not expect proceeds from subleasing these spaces to exceed our future obligations under the operating leases.

(Losses) Gains and Other (Expense) Income

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["(Losses) gains and other (expense) income, net","$","(17)","","","$","17","","","$","(12)","","","$","(34)","","","NM"]]
[[/GREPCENT_TABLE]]

In 2024, we recorded $12 million of foreign currency translation losses and $5 million of tax related adjustments to the receivable from Marriott International for indemnified tax matters.

In 2023, we recorded a $22 million increase to our receivable from Marriott International for indemnified income tax matters (the offsetting accrual is included in the Provision for income taxes line) and $6 million of foreign currency translation gains, partially offset by a $10 million expense attributed to the redemption premium and write-off of unamortized debt issuance costs in connection with the early redemption of our 6.125% Senior Secured Notes due 2025 (“2025 Notes”).

58

Interest Expense

[[GREPCENT_TABLE]]
[["","Fiscal Years","","2024 vs. 2023"],["($ in millions)","2024","","2023","","2022","","Change"],["Interest expense, net","$","(162)","","","$","(145)","","","$","(118)","","","$","(17)","","","(12%)"]]
[[/GREPCENT_TABLE]]

2024 Compared to 2023

The increase in Interest expense, net is attributed to higher variable interest expense and changes in outstanding borrowings during the comparative periods.

Income Tax

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023","","2022"],["Provision for income taxes","$","(89)","","","$","(146)","","","$","(191)"],["Effective tax rate","29.0%","","36.5%","","32.9%"]]
[[/GREPCENT_TABLE]]

2024 Compared to 2023

The change in our income tax expense is attributable to lower income before income taxes and noncontrolling interests $23 million and benefits from changes in uncertain tax benefits and our valuation allowance ($78 million). These decreases were partially offset by certain state, foreign and permanent differences which were unfavorable to prior periods ($44 million), of which $20 million related to the removal of our permanent reinvestment assertion for earnings in certain non-U.S. entities.

Refer to Footnote 5 “Income Taxes” for additional information.

In December 2021, the Organization for Economic Co-operation and Development (“OECD”) released model rules introducing a 15% global minimum tax rate for large multinational corporations (“Pillar 2”). Certain countries in which we operate have enacted legislation consistent with the OECD model rules effective beginning in 2024. We considered the applicable tax laws enacted in relevant jurisdictions and concluded there is not a material effect on our tax provision for the year ended December 31, 2024. We will continue to evaluate the impact of additional Pillar Two legislative changes on future reporting periods.

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 December 31, 2024, our corporate debt, net of cash and equivalents, to Adjusted EBITDA ratio was 4.0, above our targeted range of 2.5 to 3.0, and we remain focused on reducing this ratio over time.

During the second quarter of 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 “New Term Loan”). The proceeds of the New Term Loan were used to refinance in full the Term Loan, which had a balance of $784 million as of March 31, 2024 and was scheduled to mature on August 31, 2025. We have no material principal payment obligations on our debt prior to 2026. See Footnote 16 “Debt” to our Financial Statements for further information related to maturities of our debt.

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) cash generated from our rental and resort management and other services operations.

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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 by a special purpose entity are collateralized by a single pool of transferred 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. Loan defaults under securitizations offset a portion of the excess spread we receive, on a monthly basis. We completed two term securitization transactions in 2024 resulting in net proceeds of $863 million.

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. At the recent level of defaults, there is no impact to cash whether we repurchase defaulted vacation ownership notes receivable from a securitization VIE and pursue foreclosure or foreclose on behalf of a securitization VIE. During 2024, and as of December 31, 2024, no securitized vacation ownership notes receivable pools were out of compliance with their respective required parameters. As of December 31, 2024, we had 12 term securitization transactions outstanding. Since 2000, we have issued approximately $10 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. During 2024, we amended certain agreements associated with our Warehouse Credit Facility, which extended the revolving period from May 31, 2025 to June 11, 2026. At December 31, 2024, we had $124 million of borrowings outstanding on our Warehouse Credit Facility.

As of December 31, 2024, $110 million of gross vacation ownership notes receivable were eligible for securitization. See Footnote 15 “Securitized Debt’ and Footnote 19 “Variable Interest Entities” for further information on these facilities.

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 December 31, 2024, $125 million of borrowings and $18 million of letters of credit were outstanding under our Revolving Corporate Credit Facility. See Footnote 16 “Debt” to our Financial Statements for more information on interest rates pertaining to this 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.

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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 generally have significant variable compensation-related cash outflows associated with payment of annual bonuses.

Timing of Estimated Tax Payments

The Internal Revenue Service provided for the deferral of federal income tax payments as tax relief for businesses in parts of Florida affected by the hurricanes that occurred during the third and fourth quarters of 2024. This relief allows us to delay making certain estimated tax payments, without interest or penalty. As a result, we deferred $38 million of estimated tax payments from the third and fourth quarters of 2024 to the second quarter of 2025. Similarly, in the prior year, as tax relief for businesses in parts of Florida affected by the hurricanes that occurred in 2023, we were able to defer $32 million of estimated tax payments from the third and fourth quarters of 2023 to the first quarter of 2024.

Operations

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

Inventory Spending (In Excess of) Less Than Cost of Sales

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023","","2022"],["Inventory spending","$","(183)","","","$","(89)","","","$","(138)"],["Purchase of property for future transfer to inventory","(10)","","","(27)","","","(12)"],["Inventory costs","150","","","176","","","242"],["Inventory spending (in excess of) less than cost of sales","$","(43)","","","$","60","","","$","92"]]
[[/GREPCENT_TABLE]]

Although we have adequate 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 to support anticipated future contract sales growth. 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 help stabilize the future cost of our vacation ownership products.

Our spending for real estate inventory in 2024 was higher than our cost of sales due to our acquisition of vacation ownership units in Waikiki and purchases under our VOI repurchase programs. Refer to Footnote 3 “Acquisitions and Dispositions” for information about acquisitions that occurred in 2024. Purchases of property for future transfer to inventory in 2023 included the acquisition of property in Charleston, South Carolina and Savannah, Georgia. To manage our inventory spending and more closely align it with future sales, we have delayed the construction of certain projects. We expect inventory spending to again be more than cost of sales for 2025 based upon our existing commitments to purchase inventory in 2025.

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Vacation Ownership Notes Receivable Collections Less Than Originations

[[GREPCENT_TABLE]]
[["","Fiscal Years"],["($ in millions)","2024","","2023","","2022"],["Vacation ownership notes receivable collections \u2014 non-securitized","$","111","","","$","152","","","$","196"],["Vacation ownership notes receivable collections \u2014 securitized","521","","","444","","","446"],["Vacation ownership notes receivable originations","(1,015)","","","(987)","","","(980)"],["Vacation ownership notes receivable collections less than originations","$","(383)","","","$","(391)","","","$","(338)"]]
[[/GREPCENT_TABLE]]

Vacation ownership notes receivable collections were less than originations in 2024, 2023 and 2022 due to the growth of our vacation ownership notes receivable portfolio. We expect vacation ownership notes receivable originations to continue to outpace vacation ownership notes receivable collections in 2025.

Repurchase of Common Stock

The following table summarizes share repurchase activity under our current Share Repurchase Program:

[[GREPCENT_TABLE]]
[["($ 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 year ended December 31, 2024","649,477","","","56","","","85.79"],["As of December 31, 2024","25,790,550","","","$","2,461","","","$","95.40"]]
[[/GREPCENT_TABLE]]

See Footnote 17 “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 year ended December 31, 2024 as follows:

[[GREPCENT_TABLE]]
[["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"],["May 9, 2024","","May 23, 2024","","June 6, 2024","","$0.76"],["September 4, 2024","","September 19, 2024","","October 3, 2024","","$0.76"]]
[[/GREPCENT_TABLE]]

On December 6, 2024, our Board of Directors declared a quarterly dividend of $0.79 per share that was paid subsequent to the end of 2024, on January 3, 2025, to stockholders of record as of December 19, 2024.

Subsequent to the end of 2024, on February 20, 2025, our Board of Directors declared a quarterly dividend of $0.79 per share to be paid on March 19, 2025 to stockholders of record as of March 5, 2025.

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 at the time, 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 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.

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Material Cash Requirements

The following table summarizes our future material cash requirements from known contractual or other obligations as of December 31, 2024:

[[GREPCENT_TABLE]]
[["","","","Payments Due by Period"],["($ in millions)","Total","","Less Than 1 Year","","1 - 3 Years","","3 - 5 Years","","More Than 5 Years"],["Debt(1)(2)","$","3,439","","","$","119","","","$","1,508","","","$","996","","","$","816"],["Securitized debt(1)(3)","2,736","","","282","","","647","","","486","","","1,321"],["Purchase obligations(4)","538","","","224","","","283","","","19","","","12"],["Operating lease obligations(5)","117","","","25","","","39","","","22","","","31"],["Finance lease obligations(5)","535","","","18","","","30","","","26","","","461"],["Other long-term obligations","25","","","22","","","2","","","1","","","\u2014"],["","$","7,390","","","$","690","","","$","2,509","","","$","1,550","","","$","2,641"]]
[[/GREPCENT_TABLE]]

(1)Includes principal as well as interest payments and excludes unamortized debt discount and issuance costs.

(2)During the second quarter of 2024, we amended the Corporate Credit Facility to provide for the New Term Loan, which is scheduled to mature on April 1, 2031. The proceeds from the New Term Loan were used to refinance in full the Term Loan, which had a balance of $784 million as of March 31, 2024, and 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 property and 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 December 31, 2024, and for the fiscal year ended December 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 Balance Sheet

[[GREPCENT_TABLE]]
[["","As of December 31, 2024"],["","Issuers","","Senior Notes Guarantors","","Non-Guarantor Subsidiaries","","Total Eliminations","","MVW Consolidated"],["($ in millions)","MVWC","","MORI"],["Cash and cash equivalents","$","1","","","$","14","","","$","59","","","$","123","","","$","\u2014","","","$","197"],["Restricted cash","\u2014","","","25","","","134","","","172","","","\u2014","","","331"],["Accounts and contracts receivable, net","18","","","166","","","118","","","88","","","(3)","","","387"],["Vacation ownership notes receivable, net","\u2014","","","177","","","161","","","2,102","","","\u2014","","","2,440"],["Inventory","\u2014","","","282","","","345","","","108","","","\u2014","","","735"],["Property and equipment, net","\u2014","","","280","","","652","","","238","","","\u2014","","","1,170"],["Goodwill","\u2014","","","\u2014","","","3,117","","","\u2014","","","\u2014","","","3,117"],["Intangibles, net","\u2014","","","\u2014","","","763","","","27","","","\u2014","","","790"],["Investments in subsidiaries","3,466","","","3,743","","","\u2014","","","\u2014","","","(7,209)","","","\u2014"],["Other","148","","","199","","","261","","","105","","","(72)","","","641"],["Total assets","$","3,633","","","$","4,886","","","$","5,610","","","$","2,963","","","$","(7,284)","","","$","9,808"],["Accounts payable","$","51","","","$","52","","","$","164","","","$","76","","","$","\u2014","","","$","343"],["Advance deposits","\u2014","","","68","","","79","","","15","","","\u2014","","","162"],["Accrued liabilities","2","","","103","","","149","","","127","","","3","","","384"],["Deferred revenue","\u2014","","","15","","","157","","","190","","","(8)","","","354"],["Payroll and benefits liability","\u2014","","","103","","","86","","","31","","","\u2014","","","220"],["Deferred compensation liability","\u2014","","","143","","","48","","","4","","","\u2014","","","195"],["Securitized debt, net","\u2014","","","\u2014","","","\u2014","","","2,163","","","(27)","","","2,136"],["Debt, net","1,138","","","1,771","","","179","","","1","","","\u2014","","","3,089"],["Other","\u2014","","","2","","","118","","","19","","","\u2014","","","139"],["Deferred taxes","\u2014","","","121","","","236","","","31","","","(43)","","","345"],["MVW stockholders' equity","2,442","","","2,508","","","4,394","","","307","","","(7,209)","","","2,442"],["Noncontrolling interests","\u2014","","","\u2014","","","\u2014","","","(1)","","","\u2014","","","(1)"],["Total liabilities and equity","$","3,633","","","$","4,886","","","$","5,610","","","$","2,963","","","$","(7,284)","","","$","9,808"]]
[[/GREPCENT_TABLE]]

Condensed Consolidating Statement of Income

[[GREPCENT_TABLE]]
[["","2024"],["","Issuers","","Senior Notes Guarantors","","Non-Guarantor Subsidiaries","","Total Eliminations","","MVW Consolidated"],["($ in millions)","MVWC","","MORI"],["Revenues","$","\u2014","","","$","1,146","","","$","2,727","","","$","1,137","","","$","(43)","","","$","4,967"],["Expenses","(44)","","","(1,291)","","","(2,542)","","","(827)","","","43","","","(4,661)"],["Benefit from (provision for) income taxes","13","","","71","","","(43)","","","(130)","","","\u2014","","","(89)"],["Equity in net income (loss) of subsidiaries","249","","","411","","","\u2014","","","\u2014","","","(660)","","","\u2014"],["Net income (loss)","218","","","337","","","142","","","180","","","(660)","","","217"],["Net loss attributable to noncontrolling interests","\u2014","","","\u2014","","","\u2014","","","1","","","\u2014","","","1"],["Net income (loss) attributable to common stockholders","$","218","","","$","337","","","$","142","","","$","181","","","$","(660)","","","$","218"]]
[[/GREPCENT_TABLE]]

Recent Accounting Pronouncements

See Footnote 2 “Summary of Significant Accounting Policies” to our Financial Statements for a discussion of recently issued accounting pronouncements, including information about new accounting standards and the future adoption of such standards.

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Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Management considers an accounting estimate to be critical if: (1) it requires assumptions to be made that are uncertain at the time the estimate is made; and (2) changes in the estimate, or different estimates that could have been selected, could have a material effect on our results of operations or financial condition.

While we believe that our estimates, assumptions, and judgments are reasonable, they are based on information presently available. Actual results may differ significantly. Additionally, changes in our assumptions, estimates or assessments as a result of unforeseen events or otherwise could have a material impact on our consolidated financial position or results of operations.

See Footnote 2 “Summary of Significant Accounting Policies” to our Financial Statements for further information related to our critical accounting policies and estimates, which are as follows:

•Revenue recognition, including how we recognize revenue under ASC Topic 606 “Revenue from Contracts with Customers” for the sale of vacation ownership products, including our estimates of the sales reserve (variable consideration). Revisions to estimates of variable consideration from the sale of vacation ownership products impact the reserve on originated vacation ownership notes receivable and can increase or decrease revenue. See Footnote 6 “Vacation Ownership Notes Receivable” to our Financial Statements for further information on our assessments of our originated vacation ownership notes receivable reserve.

•Inventories and cost of vacation ownership products, which requires estimation of future revenues and product costs to apply a relative sales value method specific to the vacation ownership industry and how we evaluate the fair value of our vacation ownership inventory.

•Valuation of goodwill and other intangible assets, including how we determine the fair value of goodwill and our other intangible assets and reporting units, and how we determine when an impairment loss should be recorded. During the fourth quarter of 2024, we conducted our annual goodwill impairment test and did not record any impairment charges. The estimated fair values of our reporting units exceeded their carrying amounts at the date of their most recent estimated fair value determination. During 2024, we evaluated our other intangible assets for impairment and did not record any impairment charges.

•Loss contingencies, including information on how we account for loss contingencies. Accruals for contingent liabilities are recorded when it is probable that a liability has been incurred, or an asset impaired, and the amount of the loss can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and range of loss based on historical litigation and settlement experience, recommendations of legal counsel and, if applicable, other experts.

•Income taxes, including the accounting related to uncertain tax positions and the determination of valuation allowances on our deferred tax assets. The recognition and measurement of uncertain tax positions involves consideration of the amounts and probabilities of various outcomes that could be realized upon ultimate resolution. Tax valuation allowances are established to reduce deferred tax assets, such as tax loss carryforwards, to net realizable value. Factors considered in estimating net realizable value include historical results by tax jurisdiction, carryforward periods, income tax strategies and forecasted taxable income.

65