1 unchanged sentence
“Risk Factors” in our 2024 Form 10-K.
−Removed: Other than the following risks related to the 2-10 HBW Acquisition, there have been no material changes to the risk factors disclosed in our 2023 Form 10-K during the nine months ended September 30, 2024.
−Removed: The risks described below and in our 2023 Form 10-K are not the only risks we face.
+Added: There have been no material changes to the risk factors disclosed in our 2024 Form 10-K during the three months ended March 31, 2025.
+Added: The risks described in our 2024 Form 10-K are not the only risks we face.
Additional risks and uncertainties not currently known to us or those we currently view to be immaterial could also materially and adversely affect our business, financial condition or results of operations.
−Removed: Risks Related to Our Acquisition of 2-10 Home Buyers Warranty
−Removed: The acquisition may not achieve its intended results.
−Removed: On June 3, 2024, we entered into a Purchase Agreement to acquire 2-10 HBW in an all cash transaction valued at $585 million, subject to certain customary adjustments based on, among other things, the amount of cash, debt, transaction expenses, working capital and regulatory capital in 2-10 HBW as of the closing of the acquisition, with the expectation that the acquisition would result in various benefits, including, among other things, accelerating Frontdoor’s growth trajectory, operating synergies, and a strengthened financial profile.
−Removed: Achieving the anticipated benefits of the acquisition is subject to a number of uncertainties, including whether our business and 2-10 HBW are integrated in an efficient and effective manner.
−Removed: Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues generated by the combined company and diversion of management’s attention and energy away from ongoing business concerns, any of which could have a material adverse effect on our business, financial condition and performance, operating results and prospects.
−Removed: Additional risks relating to the 2-10 HBW Acquisition and integration of 2-10 HBW into our business, include, among others, the following:
−Removed: • general economic and business conditions;
−Removed: • potential unknown liabilities and unforeseen delays or regulatory conditions associated with the acquisition;
−Removed: • our inability to successfully or timely integrate 2-10 HBW in a manner that permits us to achieve the benefits anticipated to result from the acquisition;
−Removed: • disruption to our and 2-10 HBW’s business and operations and relationships with service providers, customers, employees and other partners;
−Removed: • diversion of significant resources from our core product offerings;
−Removed: • our inability to retain the service of key management and other personnel of 2-10 HBW;
−Removed: • our ability to effectively diversify and expand into a new line of business and execute on cross-selling opportunities for home warranties and our on-demand services;
−Removed: • our inability to successfully integrate 2-10 HBW into our internal control over financial reporting, which could compromise the integrity of our financial reporting;
−Removed: • greater than anticipated costs related to the integration of 2-10 HBW’s business and operations into ours.
−Removed: These potential difficulties, some of which are outside of our control, could adversely affect our ability to achieve the anticipated benefits of the acquisition.
−Removed: We cannot guarantee that we will achieve our goals or meet our expectations with respect to the acquisition.
−Removed: The full benefits of the 2-10 HBW Acquisition, including the anticipated financial benefits, synergies and growth opportunities, may not be realized as expected or may not be achieved within the anticipated timeframe, or at all.
−Removed: If our assumptions are inaccurate or we are unable to meet our expectations, our business, financial performance and operating results could be materially and adversely affected.
−Removed: In addition, the market price of our common stock may decline if our assumptions regarding the anticipated benefits of the acquisition are not accurate or we do not achieve the anticipated benefits of the acquisition as rapidly or to the extent anticipated by financial or industry analysts or at all.
−Removed: Notwithstanding the due diligence investigation that we performed in connection with our entry into the Purchase Agreement, 2-10 HBW may have liabilities, losses, or other exposures for which we do not have adequate insurance coverage, indemnification, or other protection.
−Removed: While we performed due diligence on 2-10 HBW prior to our entry into the Purchase Agreement, we are dependent on the accuracy and completeness of statements and disclosures made or actions taken by 2-10 HBW and its representatives during due diligence and during our evaluation of the results of such due diligence.
−Removed: We did not control 2-10 HBW and may be unaware of certain activities of 2-10 HBW before the completion of the acquisition, including those related to other litigation claims or disputes, information security vulnerabilities, violations of laws, policies, rules and regulations, commercial disputes, tax liabilities and other known and unknown liabilities.
−Removed: Following the completion of the 2-10 HBW Acquisition, the liabilities of 2-10 HBW, including contingent liabilities, will be consolidated with the Company’s.
−Removed: If 2-10 HBW’s liabilities are greater than expected, or if 2-10 HBW has obligations of which we are not aware, our business could be materially and adversely affected.
−Removed: We do not have indemnification rights from the prior owners of 2-10 HBW and instead rely on a limited amount of representation and warranty insurance.
−Removed: Such insurance is subject to exclusions, policy limits and certain other customary terms and conditions.
−Removed: 2-10 HBW may also have other unknown liabilities.
−Removed: If we are responsible for liabilities not covered by insurance, we could suffer severe consequences that could have a material adverse effect on our financial condition and results of operations.
−Removed: In the event that the Purchase Agreement is validly terminated in connection with a failure to receive applicable government regulatory approvals in certain circumstances as described in the Purchase Agreement, we will be required to pay a termination fee of $30 million.
−Removed: Our ability to consummate the 2-10 HBW Acquisition is subject to various closing conditions, including the expiration or earlier termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (the "HSR Waiting Period") and receipt of certain other specified governmental regulatory approvals (collectively, the “Government Approvals”).
−Removed: Subject to certain exceptions, the Company and 2-10 HBW have agreed to use their respective reasonable best efforts to obtain required Government Approvals.
−Removed: If the Purchase Agreement is validly terminated in connection with a failure to receive applicable Government Approvals in certain circumstances as described in the Purchase Agreement, we will be required to pay 2-10 HBW a termination fee of $30 million dollars.
−Removed: While the HSR Waiting Period expired on July 17, 2024, at 11:59 p.m.
−Removed: Eastern Time and applicable regulators in Florida and the District of Columbia have approved the transaction subject to customary regulatory conditions, the 2-10 HBW Acquisition remains subject to other Government Approvals.
−Removed: Completion of the 2-10 HBW Acquisition is subject to conditions, and if these conditions are not satisfied or waived, the acquisition will not be completed.
−Removed: Each of our and 2-10 HBW’s obligation to complete the acquisition is subject to the satisfaction or waiver of a number of conditions set forth in the Purchase Agreement, which include, among others, the receipt of Government Approvals;
−Removed: the accuracy of the parties’ respective representations and warranties, subject to certain bring-down standards;
−Removed: material performance of the parties’ obligations under the Purchase Agreement;
−Removed: and, with respect to the Company’s obligation to complete the acquisition, the absence of a material adverse effect on 2-10 HBW.
−Removed: The failure to satisfy all of the required conditions in the Purchase Agreement could delay the completion of the acquisition or prevent the acquisition from occurring.
−Removed: Any delay in completing the acquisition could cause us not to realize some or all of the benefits that we expect to achieve even if the acquisition is successfully completed within the expected timeframe.
−Removed: There can be no assurance that the conditions to the closing of the acquisition will be satisfied or waived or that the acquisition will be completed, or as to whether the acquisition will be completed on terms other than those set forth in the Purchase Agreement.
−Removed: Failure to complete the acquisition could adversely impact the price of shares of our common stock.
−Removed: Financing the 2-10 HBW Acquisition will result in an increase in our indebtedness, which could adversely affect us, including by decreasing our business flexibility and increasing our interest expense.
−Removed: We intend to finance a portion of the $585 million purchase price and related fees and expenses of the 2-10 HBW Acquisition with $575 million of borrowings under a senior secured incremental term loan facility under our existing Credit Agreement.
−Removed: This increase in our indebtedness may, among other things, reduce our flexibility to respond to changing business and economic conditions or to fund capital expenditures or working capital needs.
−Removed: In addition, the amount of cash required to pay interest on our increased indebtedness, and thus the demands on our cash resources, will materially increase as a result of the indebtedness to finance the acquisition.
−Removed: For further discussion of risks related to our indebtedness, see “Risk Factors—Risks Related to Our Indebtedness” in our 2023 Form 10-K.
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