What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-08-05 · 106 added, 109 removed, 313 unchanged (41% of the section changed)

10 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.

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.

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

For the three months ended September 30, 2025 and 2024, we generated revenue, net income and Adjusted EBITDA of $618 million, $106 million and $195 million, respectively, and $540 million, $100 million and $165 million, respectively.

For the nine months ended September 30, 2025 and 2024, we generated revenue, net income and Adjusted EBITDA of $1,660 million, $253 million and $494 million, respectively, and $1,461 million, $226 million and $394 million, respectively.

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

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.

For the nine months ended September 30, 2025, our total operating revenue included 76 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 nine percent was derived from other revenue channels.

For the nine months ended September 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

Macroeconomic Conditions

Current macroeconomic conditions, including inflation, high interest rates, the challenging real estate market, and ongoing global geopolitical issues, may affect existing home sales, consumer sentiment, prices of goods and services or labor availability.

Current macroeconomic conditions, including inflation, U.S.

tariffs, high interest rates, the challenging real estate market, and ongoing global geopolitical issues, may affect existing home sales, consumer sentiment, prices of goods and services or labor availability.

These conditions may reduce demand for our services, increase our costs or otherwise adversely impact our business.

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 six months ended June 30, 2025 as compared to the six months ended June 30, 2024 continued to be adversely impacted by the following:

Our financial condition and results of operations for the nine months ended September 30, 2025 as compared to the nine months ended September 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.

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Extreme temperatures, typically in the winter and summer months, can lead to an increase in home warranty service requests related to home systems, particularly HVAC systems, resulting in higher costs and lower profitability, while mild temperatures in the winter or summer months can lead to lower home systems claim frequency, resulting in lower costs and higher profitability.

For example, favorable weather trends in 2024 as compared to 2023 resulted in a lower number of home warranty service requests per customer in the HVAC trade, which favorably impacted contract claims costs.

For example, favorable weather trends in the first nine months of 2025 as compared to the first nine months of 2024 resulted in a lower number of home warranty service requests per customer in the HVAC trade, which favorably impacted contract claims costs.

While weather variations as described above may affect our business, major weather events and other similar Acts of God, or natural disasters such as hurricanes, tornadoes, typhoons, wildfires or earthquakes, typically do not increase our obligations to provide service.

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Changes in U.S.

tariff and import/export regulations may impact the costs of parts, appliances and home systems.

tariff and import/export regulations have impacted and may continue to impact the costs of parts, appliances and home systems.

Import duties or restrictions on components and raw materials that are imposed, or the perception that they could occur, may materially and adversely affect our business by increasing our costs.

For example, rising costs due to blanket tariffs on imported steel and aluminum, or blanket tariffs on goods from countries that are key suppliers of replacement parts for appliances and home systems, could increase the costs of our parts, appliances and home systems.

For example, rising costs due to blanket tariffs on imported steel and aluminum, or blanket tariffs on goods from countries that are key suppliers of replacement parts for appliances and home systems, have increased and may continue to increase the costs of our parts, appliances and home systems.

Recently, the United States has proposed, and in some cases has imposed, significant increases to tariffs on goods imported into the U.S., including from countries where we have sourced replacement parts for appliances and home systems covered by our home warranties.

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trade policy, including with respect to the proposed tariffs.

Such uncertainty and/or tariffs or countermeasures could further increase our costs, decrease our margins or reduce the competitiveness of our products and services.

Further tariffs or countermeasures may increase our costs, decrease our margins or reduce the competitiveness of our products and services.

We compete in the U.S.

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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 six months ended June 30, 2025.

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

Results of Operations

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

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

Three Months Ended

September 30,

(In millions)

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Provision for income taxes

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

Six Months Ended

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Nine Months Ended

September 30,

(In millions)

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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.

We reported revenue of $618 million and $540 million for the three months ended September 30, 2025 and 2024, respectively, and $1,660 million and $1,461 million for the nine months ended September 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 September 30, 2025 Compared to Three Months Ended September 30, 2024

Three Months Ended

September 30,

Increase (Decrease)

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(1) First-year revenue only.

(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.

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

Revenue increased 14 percent for the three months ended September 30, 2025 compared to the three months ended September 30, 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 the number of renewed home warranties.

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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

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Nine Months Ended

September 30,

Increase (Decrease)

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(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.

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

Revenue increased 14 percent for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

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

September 30,

(In millions)

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Customer retention rate

(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.

(1) As of September 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 one percent and the customer retention rate was 78.1 percent.

The growth in the number of home warranties as of September 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 $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.

We reported cost of services rendered of $264 million and $235 million for the three months ended September 30, 2025 and 2024, respectively, and $716 million and $655 million for the nine months ended September 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

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

(In millions)

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Impact of change in revenue

Contract claims costs

Three Months Ended June 30, 2025

Three Months Ended September 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 $6 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

Additionally, contract claims costs reflects a $5 million favorable adjustment in the third quarter of 2025 related to the development of prior period claims, compared to a $3 million favorable adjustment in the third quarter of 2024.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

(In millions)

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Impact of change in revenue

Contract claims costs

Six Months Ended June 30, 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, offset, in part, by inflationary cost pressures.

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.

Nine Months Ended September 30, 2025

The decrease in contract claims costs primarily reflects continued process improvement initiatives, a lower number of service requests per customer, primarily driven by a favorable weather impact of $7 million and higher trade service fees, offset, in part, by inflationary cost pressures.

Additionally, contract claims costs reflects an $8 million favorable adjustment in the first nine months of 2025 related to the development of prior period claims, compared to a $4 million favorable adjustment in the first nine months of 2024.

Selling and Administrative Expenses

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.

We reported selling and administrative expenses of $174 million and $154 million for the three months ended September 30, 2025 and 2024, respectively, and $498 million and $456 million for the nine months ended September 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

Nine Months Ended

September 30,

(In millions)

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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

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

(In millions)

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Sales and marketing costs

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Other general and administrative costs

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.

Three Months Ended September 30, 2025

Sales and marketing costs increased due to 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

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

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

(In millions)

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Sales and marketing costs

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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.

Nine Months Ended September 30, 2025

Sales and marketing costs increased due to 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.

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

Depreciation and Amortization Expense

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.

Depreciation expense was $9 million for each of the three months ended September 30, 2025 and 2024, and $28 million and $26 million for the nine months ended September 30, 2025 and 2024, respectively.

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, 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 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.

Restructuring charges were less than $1 million and $3 million for the three months ended September 30, 2025 and 2024, respectively, and $1 million and $5 million for the nine months ended September 30, 2025 and 2024, respectively.

For the nine months ended September 30, 2024, restructuring charges include $4 million of severance costs and $1 million of expenses related to the exit of certain operating leases.

Interest Expense

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 expense was $20 million and $10 million for the three months ended September 30, 2025 and 2024, respectively, and $59 million and $29 million for the nine months ended September 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 $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.

Interest and net investment income was $6 million and $5 million for the three months ended September 30, 2025 and 2024, respectively, and $16 million and $15 million for the nine months ended September 30, 2025 and 2024, respectively.

Provision for Income Taxes

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.

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 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.

Net income was $106 million and $100 million for the three months ended September 30, 2025 and 2024, respectively, and $253 million and $226 million for the nine months ended September 30, 2025 and 2024, respectively.

Adjusted EBITDA

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.

Adjusted EBITDA was $195 million and $165 million for the three months ended September 30, 2025 and 2024, respectively, and $494 million and $394 million for the nine months ended September 30, 2025 and 2024, respectively.

Summary of 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

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

(In millions)

Adjusted EBITDA

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Impact of change in revenue

Contract claims costs

Sales and marketing costs

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Provision for income taxes

Three Months Ended June 30, 2025

Three Months Ended September 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

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

(In millions)

Adjusted EBITDA

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Impact of change in revenue

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Provision for income taxes

Six Months Ended June 30, 2025

Nine Months Ended September 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In millions)

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

As of September 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 $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.

Cash and cash equivalents totaled $563 million and $421 million as of September 30, 2025 and December 31, 2024, respectively, and short- and long-term marketable securities totaled less than $1 million and $53 million as of September 30, 2025 and December 31, 2024, respectively.

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 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.

See “—Limitations on Distributions and Dividends by Subsidiaries.” As of September 30, 2025 and December 31, 2024, the total net assets subject to these third-party restrictions were $178 million and $184 million, respectively.

As of September 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 June 30, 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 September 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.

We regularly review the statutory reserve requirements to which our regulated entities are subject and any changes to such requirements.

We regularly review applicable statutory reserve requirements to which our regulated entities may be subject and any changes to such requirements.

These reviews may result in identifying current reserve levels above or below minimum statutory reserve requirements, in which case we may adjust our reserves.

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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 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.

As of September 30, 2025, we 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 condensed consolidated statements of financial position included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of September 30, 2025, we had $416 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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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:

Six Months Ended

Nine Months Ended

September 30,

(In millions)

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Operating Activities

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.

Net cash provided from operating activities was $315 million and $212 million for the nine months ended September 30, 2025 and 2024, respectively.

Net cash provided from operating activities for the nine months ended September 30, 2025 comprised $355 million in earnings adjusted for non-cash charges, offset, in part, by $40 million in cash used primarily for working capital.

Net cash provided from operating activities for the nine months ended September 30, 2024 comprised $276 million in

earnings adjusted for non-cash charges, offset, in part, by $64 million in cash used for working capital.

Cash used for working capital was primarily driven by seasonality, 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.

Investing Activities

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.

Net cash provided from investing activities was $37 million for the nine months ended September 30, 2025 as compared to net cash used for investing activities of $31 million for the nine months ended September 30, 2024.

For the nine months ended September 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 $20 million for nine months ended September 30, 2025 and included recurring capital needs and technology projects.

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.

For the nine months ended September 30, 2024, capital expenditures were $31 million and included recurring capital needs and technology projects.

Financing Activities

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 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.

Net cash used for financing activities was $210 million and $131 million for the nine months ended September 30, 2025 and 2024, respectively.

For the nine months ended September 30, 2025, we made scheduled principal payments of debt of $22 million and purchased outstanding shares of our common stock at an aggregate cost of $195 million.

Repurchases of common stock included associated commissions and taxes of $2 million.

For the nine months ended September 30, 2024, we made scheduled principal payments of debt of $13 million and purchased

outstanding shares of our common stock at an aggregate cost of $120 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:

Six Months Ended

Nine Months Ended

September 30,

(In millions)

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There are no significant additions to our obligations and commitments since those reported in the 2024 Form 10-K.

Financial Position

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