What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-05 compared with 2025-05-01 · 163 added, 81 removed, 259 unchanged (49% of the section changed)

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We also offer non-warranty home services via our website and app to our home warranty customers directly and others through partnerships and our subscription-based Frontdoor app.

As of March 31, 2025, we had approximately 2.1 million active home warranties across all brands in the United States.

For the three months ended March 31, 2025 and 2024, we generated revenue, net income and Adjusted EBITDA of $426 million, $37 million and $100 million, respectively, and $378 million, $34 million and $71 million, respectively.

As of June 30, 2025, we had approximately 2.1 million active home warranties across all brands in the United States.

For the three months ended June 30, 2025 and 2024, we generated revenue, net income and Adjusted EBITDA of $617 million, $111 million and $199 million, respectively, and $542 million, $92 million and $158 million, respectively.

For the six months ended June 30, 2025 and 2024, we generated revenue, net income and Adjusted EBITDA of $1,043 million, $148 million and $300 million, respectively, and $920 million, $126 million and $229 million, respectively.

For a reconciliation of net income to Adjusted EBITDA, see “—Results of Operations—Adjusted EBITDA.”

For the three months ended March 31, 2025, our total operating revenue included 78 percent of revenue derived from existing customer renewals, while six percent and eight percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and eight percent was derived from other revenue channels.

For the three months ended March 31, 2024, our total operating revenue included 79 percent of revenue derived from existing customer renewals, while seven percent and nine percent were derived from new home service plan sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and five percent was derived from other revenue channels.

For the six months ended June 30, 2025, our total operating revenue included 76 percent of revenue derived from existing customer renewals, while seven percent and eight percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and nine percent was derived from other revenue channels.

For the six months ended June 30, 2024, our total operating revenue included 78 percent of revenue derived from existing customer renewals, while seven percent and nine percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and six percent was derived from other revenue channels.

Key Factors and Trends Affecting Our Results of Operations

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While these macroeconomic conditions generally impact the United States as a whole, we believe our nationwide presence limits the impact on us of unfavorable economic conditions in any particular region of the United States.

Our financial condition and results of operations for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 continued to be adversely impacted by the following:

• Challenging real estate market conditions, driven by a decline in the number of home resale transactions, primarily resulting from high interest rates combined with low home inventory levels, continue to constrain demand for home warranties.

• Consumer sentiment remains mixed as a result of a broad range of current macroeconomic conditions, including pressure on consumer prices and high interest rates.

Our financial condition and results of operations for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 continued to be adversely impacted by the following:

• Challenging real estate market conditions, driven by a decline in the number of existing home sales, continue to constrain demand for home warranties.

• Consumer sentiment declined as a result of a broad range of current macroeconomic conditions, including pressure on consumer prices and high interest rates.

We believe this environment continues to impact demand for home warranties.

• Our labor, parts and equipment costs continue to be impacted by inflation.

• Inflation continues to impact our labor, parts and equipment costs.

The ultimate implications of the current macroeconomic conditions on our results of operations and overall financial performance remain uncertain.

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Our critical accounting policies and estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 Form 10-K.

There have been no material changes to our critical accounting policies during the three months ended March 31, 2025.

There have been no material changes to our critical accounting policies during the six months ended June 30, 2025.

Results of Operations

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Three Months Ended

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Provision for income taxes

We reported revenue of $426 million and $378 million for the three months ended March 31, 2025 and 2024, respectively.

The following table provides a summary of our revenue by major customer acquisition channel for our home warranties and other revenue:

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Six Months Ended

(In millions)

Cost of services rendered

Selling and administrative expenses

Depreciation and amortization expense

Restructuring charges

Interest expense

Interest and net investment income

Income before Income Taxes

Provision for income taxes

We reported revenue of $617 million and $542 million for the three months ended June 30, 2025 and 2024, respectively, and $1,043 million and $920 million for the six months ended June 30, 2025 and 2024, respectively.

The following tables provide a summary of our revenue by major customer acquisition channel for our home warranties and other revenue:

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

Three Months Ended

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(1) First-year revenue only.

(2) For the three months ended March 31, 2025, includes approximately $41 million as a result of the 2-10 HBW Acquisition on December 19, 2024.

Revenue increased 13 percent for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The increase in renewal revenue reflects improved price realization resulting from our prior pricing actions and the impact of the 2-10 HBW Acquisition, offset, in part, by a decline in number of renewed home warranties.

The decrease in direct-to-consumer revenue reflects lower price realization resulting from our efforts to drive incremental sales, offset, in part, by the impact of the 2-10 HBW Acquisition.

(2) For the three months ended June 30, 2025, includes approximately $56 million as a result of the 2-10 HBW Acquisition on December 19, 2024.

Revenue increased 14 percent for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

The increase in real estate revenue reflects the impact of the 2-10 HBW Acquisition.

The increase in direct-to-consumer revenue reflects an increase in the number of direct-to-consumer home warranties and the impact of the 2-10 HBW Acquisition, offset, in part, by lower price realization resulting from our discounting efforts to drive incremental sales.

The increase in other revenue was primarily driven by the impact of new home structural warranties from the 2-10 HBW Acquisition and growth in non-warranty home services.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Six Months Ended

Increase (Decrease)

(In millions)

Real estate (1)

Direct-to-consumer (1)

(1) First-year revenue only.

(2) For the six months ended June 30, 2025, includes approximately $97 million as a result of the 2-10 HBW Acquisition on December 19, 2024.

Revenue increased 13 percent for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

The increase in real estate revenue reflects the impact of the 2-10 HBW Acquisition, offset, in part, by the challenging real estate macro environment.

The increase in direct-to-consumer revenue reflects the impact of the 2-10 HBW Acquisition and an increase in the number of direct-to-consumer home warranties, offset, in part, by lower price realization resulting from our discounting efforts to drive incremental sales.

The increase in other revenue was primarily driven by the impact of new home structural warranties from the 2-10 HBW Acquisition and growth in non-warranty home services.

The following table provides a summary of the number of home warranties, reduction in number of home warranties and customer retention rate:

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Customer retention rate

(1) As of March 31, 2025, excluding the 2-10 HBW home warranties acquired on December 19, 2024, the number of home warranties was 1.9 million, the reduction in home warranties was two percent and the customer retention rate was 78.5 percent.

The growth in the number of home warranties as of March 31, 2025 was primarily driven by the 2-10 HBW acquisition, offset, in part, by the challenging real estate market.

(1) As of June 30, 2025, excluding the 2-10 HBW home warranties acquired on December 19, 2024, the number of home warranties was 1.9 million, the reduction in home warranties was two percent and the customer retention rate was 78.3 percent.

The growth in the number of home warranties as of June 30, 2025 was primarily driven by the 2-10 HBW acquisition, offset, in part, by the challenging real estate macro environment and decline in number of renewed home warranties.

Cost of Services Rendered

We reported cost of services rendered of $191 million and $184 million for the three months ended March 31, 2025 and 2024, respectively.

The following table provides a summary of the changes in cost of services rendered:

We reported cost of services rendered of $261 million and $237 million for the three months ended June 30, 2025 and 2024, respectively, and $452 million and $420 million for the six months ended June 30, 2025 and 2024, respectively.

The following tables provide a summary of the changes in cost of services rendered:

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

(In millions)

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Impact of change in revenue

Contract claims costs

Three Months Ended March 31, 2025

The decrease in contract claims costs primarily reflects continued process improvement initiatives, specifically relating to better cost management across our contractor network and higher trade service fees, which drove a lower number of home warranty service requests per customer.

This was offset, in part, by an unfavorable weather impact of $5 million, driven by a higher number of home warranty service requests in the HVAC trade, and ongoing inflationary cost pressures.

Additionally, contract claims costs reflects a $7 million favorable adjustment in the first quarter of 2025 related to the development of prior period claims, compared to a $1 million favorable adjustment in the first quarter of 2024.

Three Months Ended June 30, 2025

The increase in contract claims costs primarily reflects inflationary cost pressures, offset, in part, by a lower number of service requests per customer, primarily driven by a favorable weather impact of $5 million.

Additionally, contract claims costs reflects a $4 million favorable adjustment in the second quarter of 2025 related to the development of prior period claims, compared to a $5 million favorable adjustment in the second quarter of 2024.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

(In millions)

Six Months Ended June 30, 2024

Impact of change in revenue

Contract claims costs

Six Months Ended June 30, 2025

Additionally, contract claims costs reflects a $7 million favorable adjustment in the first six months of 2025 related to the development of prior period claims, compared to a $4 million favorable adjustment in the first six months of 2024.

Selling and Administrative Expenses

We reported selling and administrative expenses of 151 million and $135 million for the three months ended March 31, 2025 and 2024, respectively.

We reported selling and administrative expenses of $172 million and $167 million for the three months ended June 30, 2025 and 2024, respectively, and $323 million and $302 million for the six months ended June 30, 2025 and 2024, respectively.

The following table provides a summary of the components of selling and administrative expenses:

Three Months Ended

Six Months Ended

(In millions)

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General and administrative costs

The following table provides a summary of the changes in selling and administrative expenses:

The following tables provide a summary of the changes in selling and administrative expenses:

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

(In millions)

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Sales and marketing costs

Customer service costs

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Other general and administrative costs

Three Months Ended March 31, 2025

Customer service costs increased primarily due to growth in our non-warranty home services.

Acquisition-related costs are driven by the 2-10 HBW Acquisition and represent direct third-party costs, including legal, accounting and financial advisory fees.

Three Months Ended June 30, 2025

Sales and marketing costs decreased due to the timing of marketing investments and sales optimization efforts, offset, in part, by increases driven by the 2-10 HBW Acquisition.

Customer service costs increased primarily due to the 2-10 HBW acquisition and growth in non-warranty home services.

Acquisition-related costs are driven by the 2-10 HBW Acquisition and represent direct third-party costs, including legal, accounting and financial advisory fees, as well as post-acquisition systems integration costs.

Other general and administrative costs increased primarily due to increased personnel costs from the 2-10 HBW acquisition.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

(In millions)

Six Months Ended June 30, 2024

Sales and marketing costs

Customer service costs

Stock-based compensation expense

Acquisition-related costs

Other general and administrative costs

Six Months Ended June 30, 2025

Sales and marketing costs decreased due to the timing of marketing investments and sales optimization efforts, offset, in part, by increases driven by the 2-10 HBW Acquisition.

Customer service costs increased primarily due to the 2-10 HBW acquisition and growth in non-warranty home services.

Other general and administrative costs increased primarily due to increased personnel costs from the 2-10 HBW acquisition.

Depreciation and Amortization Expense

Depreciation expense was $10 million and $8 million for the three months ended March 31, 2025 and 2024, respectively.

Amortization expense was $13 million and $1 million for the three months ended March 31, 2025 and 2024, respectively, with the increase primarily driven by the amortization of intangible assets acquired as part of the 2-10 HBW Acquisition.

Depreciation expense was $9 million and $8 million for the three months ended June 30, 2025 and 2024, respectively, and $19 million and $17 million for the six months ended June 30, 2025 and 2024, respectively.

Amortization expense was $12 million and $1 million for the three months ended June 30, 2025 and 2024, respectively, and $25 million and $1 million for the six months ended June 30, 2025 and 2024, respectively, with the increase primarily driven by the amortization of intangible assets acquired as part of the 2-10 HBW Acquisition.

Restructuring Charges

Restructuring charges were $1 million and less than $1 million for the three months ended March 31, 2025 and 2024, respectively.

For the three months ended March 31, 2025, restructuring charges primarily include severance costs.

Restructuring charges were less than $1 million and $1 million for the three months ended June 30, 2025 and 2024, respectively, and less than $1 million and $1 million for the six months ended June 30, 2025 and 2024, respectively.

For the three and six months ended June 30, 2024, these charges primarily included expenses related to the exit of certain operating leases and severance costs.

Interest Expense

Interest expense was $19 million and $10 million for the three months ended March 31, 2025 and 2024, respectively, with the increase driven by the higher debt balance as compared to prior year.

Interest expense was $20 million and $10 million for the three months ended June 30, 2025 and 2024, respectively, and $39 million and $20 million for the six months ended June 30, 2025 and 2024, respectively, with the increase driven by the higher debt balance as compared to prior year as a result of financing the 2-10 HBW Acquisition.

Interest and Net Investment Income

Interest and net investment income was $6 million and $5 million for the three months ended March 31, 2025 and 2024, respectively.

Interest and net investment income was $4 million and $5 million for the three months ended June 30, 2025 and 2024, respectively, and $10 million for each of the six months ended June 30, 2025 and 2024.

Provision for Income Taxes

The effective tax rate on income before income taxes was 22.3 percent and 24.4 percent for the three months ended March 31, 2025 and 2024, respectively.

The decrease in the effective tax rate was primarily due to share-based compensation.

Net income was $37 million and $34 million for the three months ended March 31, 2025 and 2024, respectively.

The effective tax rate on income before income taxes was 24.3 percent and 25.8 percent for the three months ended June 30, 2025 and 2024, respectively, and 23.8 percent and 25.4 percent for the six months ended June 30, 2025 and 2024, respectively.

The decrease in the effective tax rate for the three and six months ended June 30, 2025 was primarily due to changes in share-based compensation and acquisition-related transaction costs.

Net income was $111 million and $92 million for the three months ended June 30, 2025 and 2024, respectively, and $148 million and $126 million for the six months ended June 30, 2025 and 2024, respectively.

Adjusted EBITDA

Adjusted EBITDA was $100 million and $71 million for the three months ended March 31, 2025 and 2024, respectively.

Adjusted EBITDA was $199 million and $158 million for the three months ended June 30, 2025 and 2024, respectively, and $300 million and $229 million for the six months ended June 30, 2025 and 2024, respectively.

Summary of Changes in Net Income and Adjusted EBITDA

The following table provides a summary of the changes in net income and Adjusted EBITDA:

The following tables provide a summary of the changes in net income and Adjusted EBITDA:

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

(In millions)

Adjusted EBITDA

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Impact of change in revenue

Contract claims costs

Sales and marketing costs

Customer service costs

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Depreciation and amortization expense

Restructuring charges

Interest expense

Interest and net investment income

Three Months Ended March 31, 2025

The impact of change in revenue was primarily driven by improved price realization and the impact of the 2-10 HBW Acquisition, offset, in part, by a reduction in the number of organic home warranties.

For more information on changes in net income or Adjusted EBITDA, see discussion above.

Provision for income taxes

Three Months Ended June 30, 2025

The impact of change in revenue was primarily driven by improved price realization and the impact of the 2-10 HBW Acquisition, offset, in part, by a decline in the number of renewed home warranties.

For more information on changes in net income or Adjusted EBITDA, see discussion of individual line items above.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

(In millions)

Adjusted EBITDA

Six Months Ended June 30, 2024

Impact of change in revenue

Contract claims costs

Sales and marketing costs

Customer service costs

Stock-based compensation expense

Acquisition-related costs

Other general and administrative costs

Depreciation and amortization expense

Restructuring charges

Interest expense

Interest and net investment income

Provision for income taxes

Six Months Ended June 30, 2025

The impact of change in revenue was primarily driven by improved price realization and the impact of the 2-10 HBW Acquisition, offset, in part, by the challenging real estate macro environment and a decline in the number of renewed home warranties.

For more information on changes in net income or Adjusted EBITDA, see discussion of individual line items above.

Reconciliation of Net Income to Adjusted EBITDA

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Three Months Ended

Six Months Ended

(In millions)

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Interest expense

Other non-operating expenses (1)

Adjusted EBITDA

(1) We exclude restructuring charges and acquisition-related costs from Adjusted EBITDA because we believe they do not reflect our ongoing operations and because we believe doing so is useful to investors in aiding period-to-period comparability.

(1) We exclude restructuring charges, acquisition-related costs and other non-operating expenses from Adjusted EBITDA because we believe they do not reflect our ongoing operations and because we believe doing so is useful to investors in aiding period-to-period comparability.

(2) We exclude non-cash stock-based compensation expense from Adjusted EBITDA because it is a non-cash expense and because it is not used by management to assess ongoing operational performance.

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The Credit Agreement contains covenants that limit or restrict our ability, including the ability of certain of our subsidiaries, to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates.

As of March 31, 2025, we were in compliance with the covenants under the Credit Agreement.

As of June 30, 2025, we were in compliance with the covenants under the Credit Agreement.

We do not believe current macroeconomic conditions will affect our ongoing ability to meet our debt covenants.

Cash and cash equivalents totaled $506 million and $421 million as of March 31, 2025 and December 31, 2024, respectively, and short- and long-term marketable securities totaled less than $1 million and $53 million as of March 31, 2025 and December 31, 2024.

Cash and cash equivalents totaled $562 million and $421 million as of June 30, 2025 and December 31, 2024, respectively, and short- and long-term marketable securities totaled less than $1 million and $53 million as of June 30, 2025 and December 31, 2024.

Our cash and cash equivalents and short- and long-term marketable securities include balances associated with regulatory requirements in our business.

See “—Limitations on Distributions and Dividends by Subsidiaries.” As of March 31, 2025 and December 31, 2024, the total net assets subject to these third-party restrictions were $185 million and $184 million, respectively.

As of March 31, 2025, there was $2 million of letters of credit outstanding under our $250 million Revolving Credit Facility, and the available borrowing capacity under the Revolving Credit Facility was $248 million.

See “—Limitations on Distributions and Dividends by Subsidiaries.” As of June 30, 2025 and December 31, 2024, the total net assets subject to these third-party restrictions were $185 million and $184 million, respectively.

As of June 30, 2025, there was $2 million of letters of credit outstanding under our $250 million Revolving Credit Facility, and the available borrowing capacity under the Revolving Credit Facility was $248 million.

The letters of credit are posted in lieu of cash to satisfy regulatory requirements in certain states in which we operate.

We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility as of March 31, 2025 will provide us with sufficient liquidity to meet our obligations in the short- and long-term.

We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility as of June 30, 2025 will provide us with sufficient liquidity to meet our obligations in the short- and long-term.

We closely monitor the performance of our investment portfolio, primarily cash deposits and short- and long-term marketable securities.

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On July 26, 2024, our Board of Directors approved a new share repurchase authorization of up to $650 million of our common stock over the three-year period from September 4, 2024 through September 4, 2027.

Purchases under this repurchase program may be made from time to time by the company in the open market at prevailing market prices (including through a Rule 10b5-1 Plan), in privately negotiated transactions, or through any combination of these methods, through September 4, 2027.

Purchases under this repurchase program may be made from time to time by the company in the open market at prevailing market prices (including through Rule 10b5-1 Plans), in privately negotiated transactions, or through any combination of these methods, through September 4, 2027.

The actual timing, number, manner and value of any shares repurchased will depend on several factors, including the market price of the company’s stock, general market and economic conditions, the company’s liquidity requirements, applicable legal requirements and other business considerations.

The repurchase program does not obligate us to acquire any number of shares in any specific period or at all and may be suspended or discontinued at any time at our discretion.

As of March 31, 2025, we repurchased a total of 2,149,160 outstanding shares at an aggregate cost of $111 million under this program, which is included in treasury stock on the condensed consolidated statements of financial position included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of March 31, 2025, we had $539 million remaining available for future repurchases under this program.

As of June 30, 2025, we repurchased a total of 3,563,822 outstanding shares at an aggregate cost of $175 million under this program, which is included in treasury stock on the condensed consolidated statements of financial position included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of June 30, 2025, we had $475 million remaining available for future repurchases under this program.

We expect to fund future share repurchases from net cash provided from operating activities.

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Among other things, such laws and regulations require certain subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can pay to us.

We expect that such limitations will be in effect for the foreseeable future.

None of our subsidiaries are obligated to make funds available to us through the payment of dividends.

Cash flows from operating, investing and financing activities, as reflected in the condensed consolidated statements of cash flows included in Part I, Item 1 of this Quarterly Report on Form 10-Q are summarized in the following table:

Three Months Ended

Six Months Ended

(In millions)

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Operating Activities

Net cash provided from operating activities was $124 million and $84 million for the three months ended March 31, 2025 and 2024, respectively.

Net cash provided from operating activities for the three months ended March 31, 2025 comprised $68 million in earnings adjusted for non-cash charges and $61 million in cash provided from working capital and long-term insurance-related accounts, offset, in part, by $4 million in payments for restructuring charges.

Cash provided from working capital was primarily driven by seasonality, offset, in part, by payments of accrued bonuses.

Net cash provided from operating activities for the three months ended March 31, 2024 comprised $51 million in earnings adjusted for non-cash charges and $34 million in cash provided from working capital, offset, in part, by $1 million in payments for restructuring charges.

Net cash provided from operating activities was $251 million and $187 million for the six months ended June 30, 2025 and 2024, respectively.

Net cash provided from operating activities for the six months ended June 30, 2025 comprised $208 million in earnings adjusted for non-cash charges and $48 million in cash provided from working capital and long-term insurance-related accounts, offset, in part, by $5 million in payments for restructuring charges.

Cash provided from working capital was primarily driven by seasonality, offset, in part, by payments of accrued bonuses and a decline in the number of first-year real estate home warranties, which are typically paid for upfront at the time of closing on the home sale.

Net cash provided from operating activities for the six months ended June 30, 2024 comprised $161 million in earnings adjusted for non-cash charges and $28 million in cash provided from working capital, offset, in part, by $3 million in payments for restructuring charges.

Investing Activities

Net cash provided from investing activities was $47 million for the three months ended March 31, 2025 as compared to net cash used for investing activities of $10 million for the three months ended March 31, 2024.

For the three months ended March 31, 2025, cash provided from sales and maturities of available-for-sale securities was $60 million, and purchases of available-for-sale securities was $6 million.

There were no sales and maturities or purchases of available-for-sale securities for the three months ended March 31, 2024.

Capital expenditures were $7 million and $10 million for three months ended March 31, 2025 and 2024, respectively, and included recurring capital needs and technology projects.

Net cash provided from investing activities was $42 million for the six months ended June 30, 2025 as compared to net cash used for investing activities of $22 million for the six months ended June 30, 2024.

For the six months ended June 30, 2025, cash provided from sales and maturities of available-for-sale securities was $60 million, purchases of available-for-sale securities was $6 million, and there was $3 million in cash provided from the finalization of the 2-10 HBW Acquisition purchase price.

Capital expenditures were $14 million for six months ended June 30, 2025 and included recurring capital needs and technology projects.

We expect capital expenditures for the full year 2025 relating to committed, recurring capital needs and the continuation of investments in information systems and productivity enhancing technology to be approximately $25 million to $35 million.

We have no additional material capital commitments at this time.

For the six months ended June 30, 2024, capital expenditures were $22 million and included recurring capital needs and technology projects.

Financing Activities

Net cash used for financing activities was $85 million and $21 million for the three months ended March 31, 2025 and 2024, respectively.

For the three months ended March 31, 2025, we made scheduled principal payments of debt of $7 million and purchased outstanding shares of our common stock at an aggregate cost of $71 million.

Net cash used for financing activities was $153 million and $71 million for the six months ended June 30, 2025 and 2024, respectively.

For the six months ended June 30, 2025, we made scheduled principal payments of debt of $14 million and purchased outstanding shares of our common stock at an aggregate cost of $135 million.

Repurchases of common stock included associated commissions and taxes of $1 million.

For the three months ended March 31, 2024, we made scheduled principal payments of debt of $4 million and purchased outstanding shares of our common stock at an aggregate cost of $13 million.

Repurchases of common stock included associated commissions and taxes of less than $1 million.

For the six months ended June 30, 2024, we made scheduled principal payments of debt of $8 million and purchased outstanding shares of our common stock at an aggregate cost of $58 million.

Repurchases of common stock included associated commissions and taxes of $1 million.

Free Cash Flow

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GAAP measure, to Free Cash Flow using data derived from the condensed consolidated statements of cash flows in Part 1, Item 1 of this Quarterly Report on Form 10-Q:

Three Months Ended

Six Months Ended

(In millions)

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Financial Position

A summary of the significant changes in our financial position from December 31, 2024 to March 31, 2025 is as follows:

• Cash and cash equivalents increased during the three months ended March 31, 2025, reflecting cash provided from operating activities, offset, in part, by capital expenditures, scheduled principal payments of debt and purchases of outstanding shares.

• Marketable securities decreased during the three months ended March 31, 2025, reflecting the sale of available-for-sale securities.

• Intangible assets decreased during the three months ended March 31, 2025, reflecting the amortization of intangible assets acquired as part of the 2-10 HBW Acquisition.

• Long-term marketable securities decreased during the three months ended March 31, 2025, reflecting the sale of available-for-sale securities.

• Accrued liabilities—Payroll and related expenses decreased during the three months ended March 31, 2025, reflecting payments of accrued bonuses.

• Accrued liabilities—Home warranty claims decreased during the three months ended March 31, 2025, reflecting favorable claims costs.

• Accrued liabilities—Other increased during the three months ended March 31, 2025, reflecting an increase in income tax payable.

• Deferred revenue increased during the three months ended March 31, 2025, reflecting recognition of revenue on an other-than-straight-line basis to match the timing of cost recognition.

• Other long-term liabilities increased during the three months ended March 31, 2025, reflecting a change in our interest rate swap valuation.

• Total shareholders’ equity was $198 million as of March 31, 2025 compared to $239 million as of December 31, 2024.

The decrease was primarily driven by repurchases of our common stock, offset, in part, by net income.

A summary of the significant changes in our financial position from December 31, 2024 to June 30, 2025 is as follows:

• Cash and cash equivalents increased during the six months ended June 30, 2025, reflecting cash provided from operating activities and the sale of marketable securities, offset, in part, by capital expenditures, scheduled principal payments of debt and purchases of outstanding shares.

• Marketable securities decreased during the six months ended June 30, 2025, reflecting the sale of available-for-sale securities.

• Contract assets increased during the six months ended June 30, 2025, reflecting a net contract asset related to the recognition of monthly pay customer revenue on an other-than-straight-line basis to match the timing of cost recognition.

• Intangible assets, net, decreased during the six months ended June 30, 2025, reflecting the amortization and revised allocation of intangible assets acquired as part of the 2-10 HBW Acquisition.

• Long-term marketable securities decreased during the six months ended June 30, 2025, reflecting the sale of available-for-sale securities.

• Accounts payable increased during the six months ended June 30, 2025, reflecting the timing of trade payables driven by seasonality.

• Accrued liabilities—Payroll and related expenses decreased during the six months ended June 30, 2025, reflecting payments of accrued bonuses.

• Accrued liabilities—Home warranty claims increased during the six months ended June 30, 2025, reflecting a higher number of service requests driven by seasonality.

• Accrued liabilities—Other increased during the six months ended June 30, 2025, reflecting an increase in income tax payable.

• Deferred revenue decreased during the six months ended June 30, 2025, reflecting a decline in the number of first-year real estate home warranties, which are typically paid in full at closing on the real estate transaction.

• Long-term debt decreased during the six months ended June 30, 2025, reflecting scheduled debt payments.

• Deferred tax liabilities, net, decreased during the six months ended June 30, 2025, reflecting the impact of amortization expense of the intangible assets acquired as part of the 2-10 HBW Acquisition.

• Other long-term liabilities increased during the six months ended June 30, 2025, reflecting a change in our interest rate swap valuation.

• Total shareholders’ equity was $254 million as of June 30, 2025 compared to $239 million as of December 31, 2024.

The increase was primarily driven by net income, offset, in part, by repurchases of our common stock.

See the condensed consolidated statements of changes in equity included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis