MARRIOTT VACATIONS WORLDWIDE Corp

Previous wording

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: timing of payments related to purchase commitments; 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 full year contract sales, including contract sales from our Maui sales centers; VPG and tour growth; our expectation that consumer financing interest expense will remain higher than our average outstanding interest rates on existing securitization transactions and the resulting impact on our profit margin; our expectation that inventory spending will exceed cost of sales for the remainder of 2024 and the quantity and impact of inventory repurchases on the future cost of our vacation ownership products; indemnification; capital requirements; taxes, including the impact of Pillar 2; our ability to securitize consumer loans and our assumptions regarding related delinquency and default rates and reserve requirements; the pace of originations of vacation ownership notes receivable compared to payoffs of existing notes receivable; and the rate of maintenance fee increases. 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.

Current wording

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 and growth opportunities, revenues, financial condition, leverage, liquidity, returns on investments, margins and related financing, development and rental profits; dividend payments; business strategies, ; financing plans and the adequacy of capital to meet short-term and long-term liquidity requirements; our competitive position; our plans to pursue growth opportunities; our expectations regarding average consumer financing interest rates and our financing profit margin; our expectations regarding the objectives, costs and benefits of our Strategic Business Operations office including revenue growth, operational efficiencies and savings; our ability to reduce our corporate debt, net of cash and equivalents, to Adjusted EBITDA ratio; our expectations regarding inventory spending in 2025 and the impact of inventory repurchases; taxes; our ability to securitize consumer loans; and expectations related to sales reserves, delinquencies and default rates. 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.

Previous wording

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 such 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; delinquency and default rates; 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 and accelerate growth and profitability; 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”).

Current wording

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: uncertainty in the current global macroeconomic environment created by rapid governmental policy and regulatory changes, 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; the ability to use artificial intelligence (“AI”) technologies successfully and potential business, compliance, or reputational risks associated with the use of AI technologies; changes in privacy laws; the impact of a future banking crisis; impacts from natural or man-made disasters and wildfires, including the Maui and Los Angeles area wildfires; delinquency and default rates; 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 and accelerate growth and profitability; political or social strife; and other matters referred to under the heading “Risk Factors” contained herein and also in our 2024 Annual Report, and which may be updated in our future periodic filings with the U.S. Securities and Exchange Commission (the “SEC”).

Previous wording

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.

Current wording

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, except as required by law. You should not put undue reliance on any forward-looking statements in this Quarterly Report.

Previous wording

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.

Current wording

The risk factors discussed in “Risk Factors” in our 2024 Annual Report and under Part II Item 1A of this 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.

Previous wording

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.

Current wording

Our Financial Statements (as defined below), which we discuss below, reflect our historical financial condition, results of operations and cash flows. The financial information discussed below and included in this Quarterly Report may not, however, necessarily reflect what our financial condition, results of operations or cash flows may be in the future.

Previous wording

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.

Current wording

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.” References throughout to numbered “Footnotes” refer to the numbered Notes in the Interim Condensed Notes to Consolidated Financial Statements included in this Quarterly Report.

Previous wording

•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.” 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, the reserve for vacation ownership notes receivable 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.

Current wording

•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.

Previous wording

•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), by the number of tours in a given period. Tours refers to the number of sales tours performed during the applicable period, and generally include virtual and offsite sales tours, and exclude telesales. 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. We believe that tours is a valuable metric because it represents the volume of touring guests.

Current wording

•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.

Previous wording

•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 about our reportable business segments.

Current wording

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

Previous wording

•Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total revenues less cost reimbursement revenues.

Current wording

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

Previous wording

•Segment Adjusted EBITDA margin is calculated by dividing Segment Adjusted EBITDA by the applicable segment’s total revenues less cost reimbursement revenues.

Current wording

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

Previous wording

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 performance. 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 is useful as an indicator of operating performance because it allows for period-over-period comparisons of our ongoing core operations before the impact of the excluded items. We believe Adjusted EBITDA margin is useful as an indicator of operating profitability because it allows for period-over-period comparisons of the profitability 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.

Current wording

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 and amortization of cloud computing software implementation costs. Share-based compensation expense is excluded 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. Amortization of cloud computing software implementation costs, which are not included in depreciation and amortization, are excluded for comparability purposes.

Previous wording

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. 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.

Current wording

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.

Previous wording

During the second quarter of 2024, we discontinued classifying adjustments related to Welk purchase accounting as Purchase accounting adjustments. Commencing in the third quarter of 2024, ongoing costs associated with the continued integration of Welk are reflected in our operating results.

Current wording

During the second quarter of 2024, we discontinued classifying costs associated with the continued integration of Welk in Transaction and integration costs. Welk integration costs incurred after this period are reflected in the operating results of each of our segments and/or General and administrative expenses.

Previous wording

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 about our segments.

Current wording

Our business is grouped into two reportable business segments: Vacation Ownership and Exchange & Third-Party Management. See Footnote 15 “Business Segments” to our Financial Statements for further information about our segments.

Previous wording

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 amount of the increase in our sales reserve primarily using a historical period of increased defaults. The $59 million 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. Subsequent to the third quarter of 2023, we increased our sales reserve rate to provide for higher expected cumulative losses on new originations.

Current wording

•An increase in our sales reserve to reflect higher expected cumulative losses on new originations, consistent with the increase in our sales reserve rate in the latter half of 2024.

Previous wording

The increase in Development profit reflects higher sales of vacation ownership products ($59 million from the higher sales reserve recorded in the prior year), partially offset by higher marketing and sales costs, including $8 million of higher preview costs associated with higher tour volumes and higher cost of vacation ownership products ($10 million associated with the prior year sales reserve).

Current wording

The increase in Development profit was due to the following:

Previous wording

These changes were partially offset by:

Current wording

These changes were partially offset by higher marketing and sales costs due to:

Previous wording

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

Current wording

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

Previous wording

•$2 million of higher unsold maintenance fees associated with developer-owned inventory.

Current wording

•$5 million of higher unsold maintenance fees associated with increased developer-owned inventory;

Previous wording

•$7 million of decreased profit due to a lower average transient rate on higher keys rented and higher tidy and variable costs.

Current wording

•$2 million of higher tidy and variable costs on higher keys rented; and

Previous wording

•$3 million of increased costs associated with higher owner utilization of third-party vacation and other offerings; and

Current wording

•$2 million of increased costs associated with higher owner utilization of third-party vacation and other offerings.

Previous wording

•a $22 million increase in costs allocated to marketing and sales expense for occupancy used for previews.

Current wording

•a $3 million increase in costs allocated to marketing and sales expense for occupancy used for previews.

Previous wording

Rental profit for our owned hotels remained in-line with the third quarter of 2023.

Current wording

Rental profit for our owned hotels remained in-line with the first quarter of 2024.

Previous wording

Financing revenues reflect higher interest income as a result of a higher average notes receivable balances and a slightly higher average interest rate for the three and nine months ended September 30, 2024. The higher average notes receivable balances resulted from new loan originations in excess of the repayment of existing vacation ownership notes receivable, which we expect to continue for the remainder of 2024.

Current wording

•Financing revenues reflect higher interest income as a result of a higher average notes receivable balance and a slightly higher average interest rate for the three months ended March 31, 2025.

Previous wording

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.

Current wording

•Consumer financing interest expense was flat due to lower average securitized debt at a slightly higher average interest rate for our more recent term securitization transactions.

Previous wording

We expect our average interest rate to continue to increase as the current interest rate environment for new securitization transactions is above 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; 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.

Current wording

We expect our average interest rate to continue to increase slightly as the current interest rate environment for new securitization transactions exceeds 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; as a result, we expect our financing profit margin to continue to decrease in 2025, as we repay existing securitization transactions with proceeds from newer securitization transactions with lower interest rates.

Previous wording

Litigation charges during the third quarter of 2024 and 2023, as well as the first three quarters of 2024 and 2023, relate primarily to a land disposition in the U.S. and certain resorts in Europe.

Current wording

Litigation charges during the first quarter of 2025 as well as the first quarter of 2024, relate primarily to certain resorts in Europe.

Previous wording

During the first three quarters of 2023, we recorded a $9 million reduction in certain pre-acquisition contingencies associated with the ILG Acquisition, $7 million of gains on the disposition of excess real estate, a $4 million gain associated with the earn out of additional proceeds from the 2019 disposition of a land parcel in Cancun, Mexico, and $3 million related to the receipt of insurance proceeds.

Current wording

During the first quarter of 2025, we recorded $7 million related to the receipt of service interruption insurance proceeds from the Maui wildfires and a $2 million reduction in certain pre-acquisition contingencies associated with the ILG Acquisition.

Previous wording

Interval International management and exchange revenues declined $3 million or 8% primarily attributed to 7% lower exchange transaction volume, partially offset by a 4% increase in average exchange fees. The decrease in management and exchange revenue reflects a $3 million decline in Aqua-Aston management revenues resulting from fewer available nights for rent, lower occupancy, and a lower average daily rate in the Hawaii market due to changes in demand. The decrease in management and exchange profit was primarily attributed to lower revenues and higher information technology expenses.

Current wording

•Interval International management and exchange revenues declined $4 million, or 7%, primarily due to 11% lower exchange transaction volume, partially offset by a 3% increase in average exchange fees.

Previous wording

In the third quarter of 2024, we recorded $6 million of foreign currency translation gains.

Current wording

In the first quarter of 2025, we recorded $3 million of foreign currency translation gains and $1 million of other gains.

Previous wording

In the first three quarters of 2024, we recorded $4 million of tax related adjustments to the receivable from Marriott International for indemnified tax matters.

Current wording

In the first quarter of 2024, we recorded $2 million of foreign currency translation losses, offset by $2 million of tax related adjustments to the receivable from Marriott International for indemnified tax matters.

Previous wording

Our effective tax rate was 28.7% and 36.1% for the three months ended September 30, 2024 and September 30, 2023, respectively.

Current wording

Our effective tax rate was 43.6% and 43.0% for the three months ended March 31, 2025 and March 31, 2024, respectively.

Previous wording

The effective tax rate for the three months ended September 30, 2024 differed from the blended statutory tax rate for the same period due to income tax adjustments for discrete items, including an $11 million decrease related to changes in valuation allowances on certain deferred tax assets in non-U.S. jurisdictions and a $6 million decrease primarily attributable to the expiration of statutes of limitation on certain unrecognized tax benefits, partially offset by an $8 million increase to remove the permanent reinvestment assertion for our earnings in certain non-U.S. entities and an increase of $3 million for deferred non-U.S. withholding taxes.

Current wording

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.

Previous wording

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.

Current wording

The following table illustrates the impact of certain Consolidated Property Owners’ Associations under the relevant accounting guidance.

Previous wording

At September 30, 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 focused on reducing this ratio by the end of 2025.

Current wording

At March 31, 2025, our corporate debt, net of cash and equivalents, to Adjusted EBITDA ratio was 4.1, above our targeted range of 2.5 to 3.0, and we remain focused on reducing this ratio over time.

Previous wording

In 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 12 “Debt” to our Financial Statements for further information related to maturities of our debt.

Current wording

We have no material principal payment obligations on our debt prior to 2026. See Footnote 11 “Debt” to our Financial Statements for further information related to maturities of our debt.

Previous wording

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.

Current wording

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.

Previous wording

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. Given the recent increase in delinquencies and defaults above historical averages, the cash excess spread we received from our securitization transactions has been lower than previously anticipated. 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.

Current wording

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.

Previous wording

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 third quarter of 2024, and as of September 30, 2024, we had 15 term securitization transactions outstanding, all of which were in compliance with their respective required parameters. Since 2000, we have issued approximately $9.8 billion of debt securities in securitization transactions in the term ABS market, excluding amounts securitized through warehouse credit facilities or private bank transactions.

Current wording

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 the first quarter of 2025, and as of March 31, 2025, we had 12 term securitization transactions outstanding, all of which were in compliance with their respective required parameters. 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.