What changed in this filing

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Item 1. Financial Statements

2025-11-05 compared with 2025-08-05 · 134 added, 101 removed, 467 unchanged (33% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of services rendered

16 unchanged sentences

(In millions, except share data)

September 30,

Current Assets:

4 unchanged sentences

Contract assets

Assets held for sale

Total Current Assets

4 unchanged sentences

Long-term marketable securities

Deferred policy acquisition costs

Deferred reinsurance

Reinsurance recoverables

Deferred customer acquisition costs

5 unchanged sentences

Home warranty claims

Income taxes payable

Deferred revenue

6 unchanged sentences

Unearned insurance premium

Unpaid losses and loss adjustment reserves

Long-term deferred revenue

5 unchanged sentences

2,000,000,000 shares authorized;

88,086,073 shares issued and 73,111,103 shares outstanding as of June 30, 2025 and 87,434,468 shares issued and 75,314,243 shares outstanding as of December 31, 2024

88,389,769 shares issued and 72,433,160 shares outstanding as of September 30, 2025 and 87,434,468 shares issued and 75,314,243 shares outstanding as of December 31, 2024

Additional paid-in capital

2 unchanged sentences

Less treasury stock, at cost;

14,974,970 shares as of June 30, 2025 and 12,120,225 shares as of December 31, 2024

15,956,609 shares as of September 30, 2025 and 12,120,225 shares as of December 31, 2024

Total Shareholders' Equity

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Common Stock:

24 unchanged sentences

(In millions)

Six Months Ended

Nine Months Ended

September 30,

Cash and Cash Equivalents at Beginning of Period

4 unchanged sentences

Stock-based compensation expense

Restructuring charges

Payments for restructuring charges

Prepaid expenses and other current assets

Deferred reinsurance

Deferred policy acquisition costs

Deferred customer acquisition costs

2 unchanged sentences

Accrued liabilities

Unpaid losses and loss adjustment reserves

Deferred insurance premiums

23 unchanged sentences

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

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

Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the audited consolidated financial statements included in our 2024 Form 10-K.

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

There have been no material changes to our significant accounting policies during the nine months ended September 30, 2025.

Real Estate Held for Sale

We classify long-lived assets to be sold as held for sale in the period in which all required criteria are met.

We initially measure a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale.

Upon determining a long-lived asset meets the criteria to be classified as held for sale, we cease depreciation and report such long-lived assets, if material, as Assets held for sale on the accompanying condensed consolidated statements of financial position.

On September 4, 2025, we listed 2-10 HBW's corporate office in Aurora, Colorado for sale.

We determined that the related assets met the criteria to be classified as held for sale as of September 30, 2025.

Basis of Presentation

3 unchanged sentences

Newly Issued Accounting Standards

In 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740), which improves income tax disclosure requirements, primarily through enhanced disclosures related to the rate reconciliation and income taxes paid information.

This guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted, and the guidance should be applied on a prospective basis.

Retrospective application is permitted.

We are currently evaluating the impact of this ASU on our enhanced disclosures.

In 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740), which improves income tax disclosures.

We plan to adopt this guidance prospectively in our Annual Report on Form 10-K for the year ending December 31, 2025.

The adoption of this standard will expand our annual income tax disclosures, including enhanced transparency in the effective tax rate reconciliation and disaggregation of income taxes paid.

The adoption is not expected to have a material impact on the consolidated financial statements.

In 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires disclosure, in the notes to the financial statements, of specified information about certain costs and expenses on an annual and interim basis.

2 unchanged sentences

We are currently evaluating the impact of this ASU on our enhanced disclosures.

In 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) , which modernizes the accounting guidance for the costs to develop software for internal use.

This guidance is effective for annual periods beginning after December 15, 2027.

Early adoption is permitted and the guidance can be applied on a prospective basis, a modified basis for in-process projects or on a retrospective basis.

We are currently evaluating the impact of this ASU on our consolidated financial statements.

The majority of our revenue is generated from home warranty contracts entered into with our customers.

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions)

2 unchanged sentences

(1) First-year revenue only.

(2) For the three and six months ended June 30, 2025, includes $ 56 million and $ 97 million as a result of the 2-10 HBW Acquisition on December 19, 2024.

Our home warranty contracts have one primary performance obligation, which is to provide for the repair or replacement of essential home systems and appliances, as applicable per the contract.

(2) For the three and nine months ended September 30, 2025 , includes $ 52 million and $ 149 million as a result of the 2-10 HBW Acquisition on December 19, 2024.

Our home warranty contracts have one primary performance obligation, which is to provide for the repair or replacement of essential home systems and appliances, as applicable pursuant to the contracts' terms and conditions.

We recognize revenue at the agreed upon contractual amount over time using the input method in proportion to the costs expected to be incurred in performing services under the contracts.

14 unchanged sentences

First-year revenue from the direct-to-consumer channel is classified as direct-to-consumer above.

Upon renewal of the contract, which is often exercised by the customer, the future revenue derived from home warranties sold in this channel is classified as renewal revenue as described above.

Other revenue primarily includes revenue generated by non-warranty home services and new home structural warranties.

At the option of the customer, upon renewal of the contract, the future revenue derived from home warranties sold in this channel is classified as renewal revenue as described above.

Other revenue primarily includes revenue generated by non-warranty home services, including the New HVAC and Moen programs, and new home structural warranties.

Deferred Customer Acquisition Costs

We capitalize the incremental costs of obtaining a contract with a customer and recognize the related expense using the input method in proportion to the costs expected to be incurred in performing services under the contract, over the expected customer relationship period.

Deferred customer acquisition costs were $ 12 million and $ 11 million as of June 30, 2025 and December 31, 2024, respectively.

Amortization of deferred customer acquisition costs was $ 3 million and $ 4 million for the three months ended June 30, 2025 and 2024, respectively, and $ 6 million and $ 7 million for the six months ended June 30, 2025 and 2024 , respectively.

There were no impairment losses related to these capitalized costs during the six months ended June 30, 2025 and 2024.

We capitalize the incremental costs of obtaining a home warranty contract with a customer and recognize the related expense using the input method in proportion to the costs expected to be incurred in performing services under the contract, over the expected customer relationship period.

Deferred customer acquisition costs were $ 13 million and $ 11 million as of September 30, 2025 and December 31, 2024, respectively.

Amortization of deferred customer acquisition costs was $ 4 million and $ 3 million for the three months ended September 30, 2025 and 2024, respectively, and $ 9 million and $ 10 million for the nine months ended September 30, 2025 and 2024 , respectively.

There were no impairment losses related to these capitalized costs during the nine months ended September 30, 2025 and 2024.

Deferred Policy Acquisition Costs

We capitalize certain costs related to the issuance of insurance policies under the new home warranty program as deferred policy acquisition costs and amortize these costs over the contract period.

We capitalize certain costs related to the issuance of insurance policies, net of ceding commission income from reinsurers, under the new home warranty program as deferred policy acquisition costs and amortize these costs over the term of the underlying pattern of insurance risk.

Ceding commission amounts, which represent a recovery of policy acquisition costs, are treated as a reduction of deferred policy acquisition costs.

We anticipate that all deferred policy acquisition costs will be recoverable.

Deferred policy acquisition costs were $ 1 million and less than $ 1 million as of June 30, 2025 and December 31, 2024, respectively.

Amortization of deferred policy acquisition costs were less than $ 1 million for each of the three and six months ended June 30, 2025 .

There was no amortization of deferred policy acquisition costs for the three and six months ended June 30, 2024.

Deferred policy acquisition costs were $ 3 million and less than $ 1 million as of September 30, 2025 and December 31, 2024, respectively.

Amortization of deferred policy acquisition costs were less than $ 1 million for each of the three and nine months ended September 30, 2025 .

There was no amortization of deferred policy acquisition costs for the three and nine months ended September 30, 2024.

Deferred policy acquisition costs are recorded in Other assets on the accompanying condensed consolidated statement of financial position.

Receivables, Less Allowance

6 unchanged sentences

These timing differences are created when the recognition of revenue in proportion to the costs expected to be incurred in performing the services under the contract are accelerated as compared to the recognition of revenue on a straight-line basis over the contract period.

Contract assets were $ 11 million as of June 30, 2025 .

Contract assets were $ 77 million as of September 30, 2025 .

There were no contract assets as of December 31, 2024.

1 unchanged sentence

Amounts are recognized as revenue in proportion to the costs expected to be incurred in performing services under our contracts.

A summary of the changes in deferred revenue, including the long-term portion, for the six months ended June 30, 2025 is as follows:

A summary of the changes in deferred revenue, including the long-term portion, for the nine months ended September 30, 2025 is as follows:

(In millions)

2 unchanged sentences

Recognition of deferred revenue

Balance as of June 30, 2025

There was approximately $ 110 million of revenue recognized during the six months ended June 30, 2025 that was included in the deferred revenue balance as of December 31, 2024.

Balance as of September 30, 2025

There was approximately $ 15 million and $ 125 million of revenue recognized during the three and nine months ended September 30, 2025, respectively, that was included in the deferred revenue balance as of December 31, 2024.

Unearned Insurance Premium

New home structural warranty revenue is recognized over the life of the contract in proportion to the costs expected to be incurred in performing services under the contract.

New home structural warranty revenue is recognized over the term of the underlying pattern of insurance risk in proportion to the costs expected to be incurred in performing services under the contract.

Amounts not earned and recognized to date are recognized as unearned insurance premium on the accompanying condensed consolidated statement of financial position.

1 unchanged sentence

In the normal course of business, we seek to reduce our loss exposure in the new home warranty program by reinsuring certain levels of risk with reinsurers.

Premiums ceded are recognized within revenue over the term of underlying insurance policies, and the unexpired portion of reinsurance is deferred and recognized as deferred reinsurance on the accompanying condensed consolidated statement of financial position.

Premiums ceded are recognized within revenue over the term of underlying pattern of insurance risk, and the unexpired portion of reinsurance is deferred and recognized as deferred reinsurance on the accompanying condensed consolidated statement of financial position.

Goodwill and Intangible Assets

1 unchanged sentence

We perform our annual assessment for impairment on October 1 of every year.

The balance of goodwill was $ 972 million and $ 967 million as of June 30, 2025 and December 31, 2024, respectively.

There were no goodwill impairment charges during the six months ended June 30, 2025 and 2024.

The increase in goodwill during the six months ended June 30, 2025 was driven by updates to purchase accounting allocations, offset, in part, by the finalization of the 2-10 HBW Acquisition purchase price.

The balance of goodwill was $ 971 million and $ 967 million as of September 30, 2025 and December 31, 2024, respectively.

There were no goodwill impairment charges during the nine months ended September 30, 2025 and 2024.

The increase in goodwill during the nine months ended September 30, 2025 was driven by updates to purchase accounting valuations, offset, in part, by the reduction in the 2-10 HBW Acquisition purchase price as a result of the working capital true up provisions in the purchase agreement.

The following table provides a summary of the components of our intangible assets:

As of June 30, 2025

As of September 30, 2025

As of December 31, 2024

6 unchanged sentences

(1) Not subject to amortization.

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.

There were no intangible asset impairment charges during the six months ended June 30, 2025 and 2024.

We have operating leases for our corporate headquarters located in Memphis, Tennessee, a collaboration center located in Scottsdale, Arizona and a technology collaboration center in Pune, India.

Amortization expense was $ 13 million and $ 1 million for the three months ended September 30, 2025 and 2024, respectively, and $ 38 million and $ 2 million for the nine months ended September 30, 2025 and 2024 , respectively.

There were no intangible asset impairment charges during the nine months ended September 30, 2025 and 2024.

We have operating leases for our corporate headquarters located in Memphis, Tennessee, a collaboration center located in Scottsdale, Arizona and an administrative center in Pune, India.

We also continue to lease certain office space in other geographies, which we have, as indicated below, either exited or subleased.

Our leases have remaining lease terms ranging from three years to 10 years , some of which include options to extend the leases for up to five years .

Our leases have remaining lease terms ranging from two years to 9 years , some of which include options to extend the leases for up to five years .

The weighted-average remaining lease term and weighted-average discount rate related to our operating leases are as follows:

September 30,

Weighted-average remaining lease term (years)

Weighted-average discount rate

We recognized operating lease expense of less than $ 1 million for each of the three months ended June 30, 2025 and 2024 and $ 1 million for each of the six months ended June 30, 2025 and 2024.

We recognized operating lease expense of less than $ 1 million for each of the three months ended September 30, 2025 and 2024 and $ 1 million for each of the nine months ended September 30, 2025 and 2024.

These expenses are included in selling and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

Supplemental statement of financial position information related to our operating lease liabilities is as follows:

September 30,

(In millions)

3 unchanged sentences

Supplemental cash flow information related to our operating leases is as follows:

Six Months Ended

Nine Months Ended

September 30,

(In millions)

2 unchanged sentences

(1) Amount is presented net of cash provided from sublease income.

In conjunction with the operating leases of our corporate headquarters located in Memphis, Tennessee, and our collaboration center located in Scottsdale, Arizona, we recognized $ 2 million in tenant improvement allowances as of June 30, 2024, which is a non-cash investing activity.

The following table presents the maturities of our operating lease liabilities as of June 30, 2025:

In conjunction with the operating leases of our corporate headquarters located in Memphis, Tennessee, and our collaboration center located in Scottsdale, Arizona, we recognized $ 2 million in tenant improvement allowances as of February 29, 2024, which is a non-cash investing activity.

The following table presents the maturities of our operating lease liabilities as of September 30, 2025:

(In millions)

4 unchanged sentences

(1) Amount is presented net of future sublease income totaling $ 2 million, which relates to the remainder of the year ending December 31, 2025 and the year ending December 31, 2027.

On July 4, 2025, the One Big Beautiful Bill Act (the “Bill”) was enacted in the U.S.

The Bill includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

We are currently assessing its impact on our consolidated financial statements.

We are subject to taxation in the United States, various states and foreign jurisdictions.

Substantially all of our income before income taxes for the six months ended June 30, 2025 and 2024 was generated in the United States.

Substantially all of our income before income taxes for the nine months ended September 30, 2025 and 2024 was generated in the United States.

We compute interim period income taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss from operations before income taxes, except for significant unusual or infrequently occurring items.

As a result, our estimated tax rate is adjusted each quarter.

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.

The effective tax rate on income before income taxes was 25.8 percent and 25.1 percent for the three months ended September 30, 2025 and 2024 , respectively, and 24.6 percent and 25.3 percent for the nine months ended September 30, 2025 and 2024, respectively.

The increase in the effective tax rate for the three months ended September 30, 2025 was primarily due to state income taxes.

The decrease in the effective tax rate for the nine months ended September 30, 2025 was primarily due to changes in share-based compensation and acquisition-related transaction costs, offset, in part, by state income taxes and a reduction in tax credits.

On July 4, 2025, the One Big Beautiful Bill Act (the “Bill”) was enacted in the U.S.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

Key provisions of the Bill, including restoration of 100% bonus depreciation and revised treatment of domestic research and development costs, have a material impact on our deferred tax balances and projected taxable income for the year ending December 31, 2025.

As a result, we recorded a material increase in our deferred tax liability and a corresponding decrease in our current tax liability during the interim period.

In addition, these provisions are expected to materially reduce our cash tax payments in the current year.

The Bill does not materially impact our effective tax rate.

O n December 19, 2024 , we completed the acquisition of all of the issued and outstanding common stock of 2-10 HBW pursuant to a purchase agreement dated June 3, 2024 for aggregate cash consideration of $ 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 the business of 2-10 HBW as of the closing of the transaction.

1 unchanged sentence

2-10 HBW is also a provider of home warranties.

Total consideration as of June 30, 2025, is as follows:

Total consideration as of September 30, 2025, is as follows:

(In millions)

14 unchanged sentences

Deferred reinsurance

Reinsurance recoverables

Accounts payable

5 unchanged sentences

Unearned insurance premium

Unpaid losses and loss adjustment reserves

Long-term deferred revenue

1 unchanged sentence

Total consideration paid

As of June 30, 2025, the purchase price allocation for this acquisition has not been finalized.

In particular, we are still evaluating the fair value of certain intangible assets.

As of September 30, 2025, the purchase price allocation for this acquisition has not been finalized.

In particular, we are still evaluating the allocation of the purchase price to the identifiable assets acquired and liabilities assumed.

As we finalize the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period in 2025.

During the six months ended June 30, 2024, we made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date.

These adjustments included updates to purchase accounting allocations and a $ 3 million reduction in the 2-10 HBW Acquisition purchase price.

During the nine months ended September 30, 2025 , we made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date.

These adjustments included updates to purchase accounting valuations and a $ 3 million reduction in the 2-10 HBW Acquisition purchase price as a result of the working capital true up provisions in the purchase agreement.

The impact of these adjustments was a $ 5 million increase in goodwill, an $ 11 million decrease in intangible assets, and a $ 2 million decrease in deferred tax liabilities, net.

In conjunction with the 2-10 HBW Acquisition, we recognized acquisition-related costs of $ 2 million and $ 6 million during the three months ended June 30, 2025 and 2024 , respectively, and $ 4 million and $ 6 million during the six months ended June 30, 2025 and 2024, respectively.

In conjunction with the 2-10 HBW Acquisition, we recognized acquisition-related costs of $ 2 million and $ 3 million during the three months ended September 30, 2025 and 2024 , respectively, and $ 6 million and $ 9 million during the nine months ended September 30, 2025 and 2024, respectively.

These charges represent direct third-party costs, including legal, accounting and financial advisory fees, as well as post-acquisition systems integration costs, and are included in selling and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

Unaudited pro forma revenue for the three and six months ended June 30, 2024 as if the 2-10 HBW Acquisition occurred as of January 1, 2024 was $ 598 million and $ 1,017 million, respectively.

Unaudited pro forma revenue for the three and nine months ended September 30, 2024 as if the 2-10 HBW Acquisition occurred as of January 1, 2024 was $ 590 million and $ 1,607 million, respectively.

Commitments and Contingencies

7 unchanged sentences

Unpaid losses and loss adjustment reserves represent the estimated ultimate cost of settling all new home structural warranty claims and includes the estimated costs of claims incurred but not reported as of the balance sheet date.

The reserve is based upon the facts of each case and the Company’s experience with similar cases.

The reserve is based upon the facts of each case and our experience with similar cases.

The establishment of appropriate reserves is an inherently uncertain and complex process.

1 unchanged sentence

We regularly review our estimates of unpaid losses and adjust our estimates when appropriate.

The Company reports its unpaid losses and loss adjustment reserves gross of the amounts related to unpaid losses recoverable from reinsurers and net of amounts ceded to reinsurers.

We report our unpaid losses and loss adjustment reserves gross of the amounts related to unpaid losses recoverable from reinsurers and net of amounts ceded to reinsurers.

Unpaid losses and loss adjustment reserves are recorded in Other long-term liabilities on the accompanying condensed consolidated statement of financial position.

We have certain liabilities with respect to existing or potential claims, lawsuits and other proceedings.

6 unchanged sentences

Stock-Based Compensation

We recognized stock-based compensation expense of $ 9 million ($ 7 million, net of tax) and $ 8 million ($ 6 million, net of tax) for the three months ended June 30, 2025 and 2024, respectively, and $ 17 million ($ 12 million, net of tax) and $ 15 million ($ 12 million, net of tax) for the six months ended June 30, 2025 and 2024, respectively.

We recognized stock-based compensation expense of $ 8 million ($ 6 million, net of tax) and $ 6 million ($ 5 million, net of tax) for the three months ended September 30, 2025 and 2024, respectively, and $ 25 million ($ 18 million, net of tax) and $ 20 million ($ 17 million, net of tax) for the nine months ended September 30, 2025 and 2024, respectively.

These charges are included in selling and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

A summary of awards granted under the Omnibus Plan during the six months ended June 30, 2025 is as follows:

A summary of awards granted under the Omnibus Plan during the nine months ended September 30, 2025 is as follows:

Stock options

3 unchanged sentences

The ultimate number of performance shares that may be earned depends on the achievement of this performance condition .

As of June 30, 2025, there was $ 61 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options, performance options, restricted stock units (“RSUs”) and performance shares.

As of September 30, 2025, there was $ 54 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options, performance options, restricted stock units (“RSUs”) and performance shares.

These costs are expected to be recognized over a weighted-average period of 2.25 years.

1 unchanged sentence

Long-term debt is summarized in the following table:

September 30,

(In millions)

4 unchanged sentences

Total long-term debt

(1) Term Loan A is presented net of unamortized debt issuance costs of $ 6 million as of June 30, 2025 and December 31, 2024.

(2) Term Loan B is presented net of unamortized debt issuance costs of $ 10 million as of June 30, 2025 and December 31, 2024 and unamortized discount of $ 2 million as of June 30, 2025 and December 31, 2024.

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

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

(1) Term Loan A is presented net of unamortized debt issuance costs of $ 5 million and $ 6 million as of September 30, 2025 and December 31, 2024, respectively.

(2) Term Loan B is presented net of unamortized debt issuance costs of $ 9 million and $ 10 million as of September 30, 2025 and December 31, 2024, respectively, and unamortized discount of $ 2 million as of September 30, 2025 and December 31, 2024.

As of September 30, 2025 , we had $ 2 million of letters of credit outstanding under the Revolving Credit Facility, and the available borrowing capacity under the Revolving Credit Facility was $ 248 million.

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

Scheduled Debt Payments

The following table presents future scheduled debt payments as of June 30, 2025:

The following table presents future scheduled debt payments as of September 30, 2025:

(In millions)

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions)

5 unchanged sentences

(1) Other segment items include depreciation and amortization expense, restructuring charges, interest expense, interest and net investment income, and provision for income taxes.

September 30,

Supplemental Cash Flow Information

Supplemental information relating to our accompanying condensed consolidated statements of cash flows is as follows:

Six Months Ended

Nine Months Ended

September 30,

(In millions)

5 unchanged sentences

Cash, money market funds and certificates of deposits with maturities of three months or less when purchased are included in Cash and cash equivalents on the accompanying condensed consolidated statements of financial position.

As of June 30, 2025 and December 31, 2024, the amortized cost of our short- and long-term investments was less than $ 1 million and $ 53 million, respectively, and the estimated fair value of these investments was less than $ 1 million and $ 53 million, respectively.

As of June 30, 2025 , short- and long-term marketable securities primarily consisted of certificates of deposit.

There were no unrealized losses which had been in a loss position for more than one year as of June 30, 2025.

As of September 30, 2025 and December 31, 2024, the amortized cost of our short- and long-term investments was less than $ 1 million and $ 53 million, respectively, and the estimated fair value of these investments was less than $ 1 million and $ 53 million, respectively.

As of September 30, 2025 , short- and long-term marketable securities primarily consisted of certificates of deposit.

There were no unrealized losses which had been in a loss position for more than one year as of September 30, 2025.

Gains and losses on sales of investments, as determined on a specific identification basis, are included in investment income in the period they are realized.

We periodically review our portfolio of investments to determine whether there has been an other-than-temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which the issuer competes.

During the three months ended June 30, 2025 , there were less than $ 1 million each in proceeds from sales of securities, maturities, gross realized gains and gross realized losses resulting from sales of available-for-sale securities.

During the six months ended June 30, 2025 , there were $ 48 million in proceeds from sales of securities, $ 12 million in maturities and less than $ 1 million each in gross realized gains and gross realized losses resulting from sales of available-for-sale securities.

During the three months and six months ended June 30, 2024 , there were no proceeds, maturities, gross realized gains and gross realized losses resulting from sales of available-for-sale securities.

There were no impairment charges due to other-than-temporary declines in the value of certain investments for the six months ended June 30, 2025 and 2024 .

During the three months ended September 30, 2025 , there were less than $ 1 million each in proceeds from sales of securities, maturities, gross realized gains and gross realized losses resulting from sales of available-for-sale securities.

During the nine months ended September 30, 2025 , there were $ 48 million in proceeds from sales of securities, $ 12 million in maturities and less than $ 1 million each in gross realized gains and gross realized losses resulting from sales of available-for-sale securities.

During the three months and nine months ended September 30, 2024 , there were no proceeds, maturities, gross realized gains and gross realized losses resulting from sales of available-for-sale securities.

There were no impairment charges due to other-than-temporary declines in the value of certain investments for the nine months ended September 30, 2025 and 2024 .

Comprehensive Income (Loss)

9 unchanged sentences

Total other comprehensive loss

Balance at June 30, 2025

Balance at September 30, 2025

(1) Amounts are net of income taxes.

1 unchanged sentence

A summary of reclassifications out of AOCI is as follows:

Six Months Ended

Nine Months Ended

September 30,

(In millions)

15 unchanged sentences

See Note 14 to the accompanying condensed consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in AOCI and for the amounts reclassified out of AOCI and into earnings during the periods presented.

As the underlying forecasted transactions occur during the next 12 months, we estimate the unrealized hedging loss in AOCI expected to be recognized in earnings is $ 3 million, net of tax, as of June 30, 2025.

The amounts ultimately reclassified into earnings during the next 12 months will be determined based on the actual interest rates in effect at the time the positions are settled, and as a result, they could differ materially from our estimate noted above.

10 unchanged sentences

Any unrealized losses where the decline in value is other than temporary are reported in interest and net investment income in the accompanying condensed consolidated statements of operations and comprehensive income.

There were no other-than-temporary declines in value for the periods ended June 30, 2025 and December 31, 2024.

As of June 30, 2025 and December 31, 2024, the carrying amounts of our total debt were $ 1,186 million and $ 1,199 million, respectively, and the estimated fair values were $ 1,204 million and $ 1,211 million, respectively.

There were no other-than-temporary declines in value for the periods ended September 30, 2025 and December 31, 2024.

As of September 30, 2025 and December 31, 2024, the carrying amounts of our total debt were $ 1,180 million and $ 1,199 million, respectively, and the estimated fair values were $ 1,198 million and $ 1,211 million, respectively.

The fair value of our debt was estimated based on available market prices for the same or similar instruments that are considered significant other observable inputs (Level 2) within the fair value hierarchy and was based on information available to us as of the respective period-end dates.

2 unchanged sentences

The expected future settlements are determined by comparing the contract interest rates to the expected forward interest rate as of each settlement date and applying the difference between these two rates to the notional amounts of debt in the interest rate swap contracts.

We did not change our valuation techniques for measuring the fair value of any financial assets and liabilities during the six months ended June 30, 2025 .

We did not change our valuation techniques for measuring the fair value of any financial assets and liabilities during the nine months ended September 30, 2025 .

Transfers between hierarchy levels, if any, are recognized at the end of the reporting period.

There were no transfers between hierarchy levels during the six months ended June 30, 2025.

There were no transfers between hierarchy levels during the nine months ended September 30, 2025.

The carrying amount and estimated fair value of our financial instruments that are recorded at fair value on a recurring basis for the periods presented are as follows:

1 unchanged sentence

(In millions)

As of June 30, 2025:

As of September 30, 2025:

Other accrued liabilities

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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 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 accompanying condensed consolidated statements of financial position.

As of September 30, 2025, we had repurchased a total of 4,545,461 outstanding shares at an aggregate cost of $ 234 million under this program, which is included in treasury stock on the accompanying condensed consolidated statements of financial position.

On September 3, 2024, our previous repurchase authorization of up to $ 400 million expired.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions, except per share data)

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Cost of shares purchased (1)

(1) The average price paid per share and the cost of shares purchased are calculated on a trade date basis and exclude associated commissions and taxes of $ 1 million and less than $ 1 million for the three months ended June 30, 2025 and 2024, respectively, and $ 1 million for each of the six months ended June 30, 2025 and 2024 .

(1) The average price paid per share and the cost of shares purchased are calculated on a trade date basis and exclude associated commissions and taxes of $ 1 million for each of the three months ended September 30, 2025 and 2024, and $ 2 million and $ 1 million for the nine months ended September 30, 2025 and 2024 , respectively.

Earnings Per Share

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions, except per share data)

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Diluted earnings per share

(1) RSUs of 1,304 shares and 3,093 shares for the three months ended June 30, 2025 and 2024, respectively, and 389,970 shares and 428,235 shares for the six months ended June 30, 2025 and 2024 , respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

(2) Stock options to purchase 770,881 shares and 1,504,925 shares for the three months ended June 30, 2025 and 2024, respectively, and 438,547 shares and 1,299,171 shares for the six months ended June 30, 2025 and 2024 , respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

(3) Performance options to purchase 274,282 shares for each of the three and six months ended June 30, 2024 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

There were no anti-dilutive shares of performance options for the three and six months ended June 30, 2025 .

(1) RSUs of 14,266 shares and 2,706 shares for the three months ended September 30, 2025 and 2024, respectively, and 347,719 shares and 461,600 shares for the nine months ended September 30, 2025 and 2024 , respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

(2) Stock options to purchase 538,962 shares for the three months ended September 30, 2024 and 539,832 shares and 1,015,848 shares for the nine months ended September 30, 2025 and 2024, respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

There were no anti-dilutive shares of stock options for the three months ended September 30, 2025 .

(3) Performance options to purchase 191,348 shares for the nine months ended September 30, 2024 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

There were no anti-dilutive shares of performance options for the three months ended September 30, 2025 and 2024 and the nine months ended September 30, 2025 .

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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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 1. Financial Statements