What changed in this filing

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Item 1A. Risk Factors

2026-02-26 compared with 2025-02-27 · 159 added, 123 removed, 396 unchanged (42% of the section changed)

8 unchanged sentences

Risks Related to Our Business

Changing macroeconomic conditions, including inflation, tariffs, global supply chain challenges and changing interest rates, especially as they may affect existing or new home sales, consumer confidence, labor availability or our costs, may adversely impact our business, financial position, results of operations and cash flows.

Changing macroeconomic conditions, including inflation, tariffs, global supply chain challenges and changing interest rates, especially as they may affect existing or new home sales, consumer confidence, demand for our services, labor availability or our costs, may adversely impact our business, financial position, results of operations and cash flows.

Our results of operations are dependent upon consumer spending.

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Unfavorable changes in economic conditions, which are typically beyond our control, including without limitation, as a result of weak existing or new home sales, higher home foreclosures, inflation, tariff policies, restriction on imports of components and raw materials applicable to our business, slowing growth, rising interest rates, recession, changes in the political climate, international conflict, supply chain or labor market disruptions, banking or financial market disruptions, declining consumer confidence, rising unemployment rates, pandemics or other global health crises or other adverse changes, could adversely affect consumer spending levels, our costs, reduce demand for our services and adversely impact our business, financial position, results of operations and cash flows.

While the Federal Reserve decreased interest rates in September, November and December of 2024, it held interest rates unchanged in January 2025.

The sustained level of higher interest rates has caused buyer apprehension and affordability concerns, resulting in a decrease in home sales in 2022, 2023 and 2024 and has negatively impacted our business.

Although the Federal Reserve lowered interest rates in 2024, it has paused this approach to-date in 2025, and the trajectory of current rates remains uncertain.

While the Federal Reserve lowered interest rates three times over the course of 2024 and three times over the course of 2025, it has expressed an expectation that the pace any such decreases may be slower going forward.

Accordingly, significant uncertainty remains regarding the timing and extent of future interest rate changes.

The sustained level of higher interest rates has in recent years caused buyer apprehension and affordability concerns, resulting in a decrease in home sales in 2022, 2023, 2024 and flat home sales in 2025 compared to 2024 and has negatively impacted our business.

Changing interest rates could continue to affect mortgage rates and negatively impact our business.

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We may incur significant costs to implement our strategies, service and product offerings, which may not succeed in increasing revenue, growing our customer base or growing profitability.

For example, in 2024, we incurred significant expense when we relaunched the American Home Shield brand through an updated look and feel.

For example, in 2025, we incurred significant costs when we acquired 2-10 HBW to access a business opportunity in the new home builder warranty space to complement our existing business and provide cross-selling opportunities for home warranties and our non-warranty services.

In addition, in 2024, we incurred significant expense when we relaunched the American Home Shield brand through an updated look and feel.

Similarly, in 2023, we launched the Frontdoor app, which required a substantial marketing investment.

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Also, our business strategies may change in light of our ability to implement new business initiatives, competitive pressures, economic uncertainties or developments or other factors.

Marketing efforts to increase sales through our real estate and DTC channels may not be successful or cost-effective.

Marketing efforts to increase home warranty and non-warranty sales through our real estate and DTC channels may not be successful or cost-effective.

Attracting consumers, professional contractor firms and real estate brokers to our brands and businesses involves considerable expenditures for marketing.

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With respect to our marketing efforts, we may also include certain discounts or other promotional rates in order to attract and retain customers.

These efforts may require increasing amounts or be offered at increasing frequency over time.

These efforts may become more costly or be offered at increasing frequency over time.

Certain factors including the nature and type of our services offered, potential and existing customers’ perception of the value of our services, and other macroeconomic factors like general economic conditions and consumer sentiment may impact our efforts.

These efforts may not be successful or cost-effective or remain effective over time.

With respect to our online marketing efforts, rapid and frequent changes in the pricing and operating dynamics of search engines, as well as changing policies and guidelines applicable to keyword advertising (which may unilaterally be updated by search engines without advance notice), could adversely affect our paid search engine marketing efforts and free search engine traffic.

With respect to our digital marketing efforts, rapid and frequent changes in the pricing and operating dynamics of search engines, changing policies and guidelines applicable to keyword advertising (which may unilaterally be updated by search engines without advance notice), as well as the use of new or improved technology such as generative artificial intelligence powered search platforms, could adversely affect our paid search engine marketing efforts and free search engine traffic.

Such changes could adversely affect paid listings (both their placement and pricing), as well as the ranking of our brands and businesses within paid and organic search results, any or all of which could increase our marketing expenditures (particularly if free traffic is replaced with paid traffic).

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We cannot provide any assurance that we will be able to continue to appropriately manage our marketing efforts in response to any or all of the events and trends discussed above, and the failure to do so could adversely affect our reputation, business, financial position, results of operations and cash flow.

We depend on our first-year DTC acquisition and real estate channels for a significant percentage of our sales.

We depend on our first-year DTC acquisition and real estate channels for a significant percentage of our home warranty sales.

Consumer demand for services purchased through our first-year DTC channel can fluctuate and, as such, is subject to changes in macroeconomic conditions, including interest rates and inflation, as well as consumer sentiment about the value of home warranties and our reputation as a home warranty provider.

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If we are unsuccessful in attracting consumers to our home warranties, we could experience a material adverse impact to our business, financial position, results of operations and cash flows.

A significant percentage of our sales are generated through our first-year real estate customer and DTC home warranty acquisition channels, which feed our renewal channel.

A significant percentage of our sales is generated through our first-year real estate and DTC home warranty acquisition channels, which feed our renewal channel.

In our real estate channel, our strategic relationships with top real estate brokers and agents are important to our business because they provide marketing and information services that are useful to our real estate customer acquisition channel.

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• conversely, when demand for existing homes exceeds supply.

We depend on our renewal channel for a substantial percentage of our sales.

Our third and largest home warranty sales channel is our renewal channel.

We depend on our existing warranty customer base and strategic partners for a significant portion of our non‑warranty sales.

Our ability to grow our non‑warranty services business depends in part on our ability to maintain and deepen engagement with our existing warranty customers and to successfully cross‑sell non‑warranty offerings.

If customers elect to seek these services from competitors or delay discretionary home improvement spending, demand for our non‑warranty services may decline.

In addition, certain non‑warranty services rely on strategic third‑party relationships, including partnerships with product manufacturers such as Moen, as well as our network of independent, licensed contractors who perform installation and maintenance services.

Any deterioration in these relationships, inability to attract or retain qualified independent contractors, failure to maintain service quality or consistency, or disruption in partner‑provided products or programs could adversely affect customer satisfaction, our reputation, and demand for our non‑warranty services.

If we are unable to effectively manage these risks or adapt our non‑warranty offerings, pricing, or delivery model in response to these risks, our non‑warranty services business may not grow as expected, which could have a material adverse impact on our business, financial position, results of operations and cash flows.

We depend on our renewal channel for a substantial percentage of our home warranty sales.

Our largest home warranty sales channel is our renewal channel.

Sales in this channel are dependent upon the flow of sales from our first-year real estate and DTC channels, as well as our customers’ perceptions of the value of our home warranties, and accordingly, their willingness to renew their plans.

Any decrease in sales from period to period in our real estate and DTC channels may have a negative impact on future growth opportunities in our renewal channel.

Any decrease in sales from period to period in our first-year real estate and DTC channels may have a negative impact on future growth opportunities in our renewal channel.

Whether existing customers choose to renew their home warranties is driven by both external factors such as macroeconomic conditions, our reputation and actions of our competitors, as well as internal factors such as their experience with our home warranties, including whether they have used their home warranties and their satisfaction with any services we provided, and how they perceive the value of our home warranties in light of the cost of a renewal.

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We could also fail to provide service to our customers if we lose contractors that we cannot replace in a timely manner, which could lead to customer complaints and possible claims and litigation.

In addition, our third-party contractors interact directly with our customers, and if our third-party contractors do not provide satisfactory services, our retention rate, reputation and business may be adversely affected.

In addition, these potential impacts may be exacerbated upon termination of a relationship with a preferred contractor, as approximately 85 percent of our home warranty service requests were completed by our preferred contractor network in 2024.

Additionally, laws and regulations, such as restrictive immigration laws may limit our ability to attract, retain or replace contractors.

Furthermore, our third-party contractors interact directly with our customers, and if our third-party contractors do not provide satisfactory services, our retention rate, reputation and business may be adversely affected.

These potential impacts may be exacerbated upon termination of a relationship with a preferred contractor, as approximately 84 percent of our home warranty service requests were completed by our preferred contractor network in 2025.

We are also dependent on vendors for parts, appliances and home systems and the ability to rely on the pricing for such goods in the contracts we negotiate with these vendors.

In recent years, global supply chain challenges, including as a result of the COVID-19 pandemic, have led to industry-wide price increases for parts and equipment as well as availability challenges across our trades as demand has outpaced production.

In recent years, global supply chain challenges, including as a result of pandemics or other public health crises, such as the COVID-19 pandemic, have led to industry-wide price increases for parts and equipment as well as availability challenges across our trades as demand has outpaced production.

If we cannot obtain the parts, appliances or home systems from vendors within our existing stable of vendors to satisfy consumer claims in a timely manner, we may be forced to obtain parts, appliances and home systems from other vendors or through our third-party contractors at higher costs, which could have a material adverse impact on our business, financial position, results of operations and cash flows.

In addition, if we cannot obtain appliance parts to satisfy consumer claims in a timely manner, we may be forced to obtain replacement appliances or systems at a higher cost compared to the cost of appliance parts.

In addition, if we cannot obtain parts to satisfy consumer claims in a timely manner, we may be forced to obtain replacement appliances or systems at a higher cost compared to the cost of appliance parts.

Increases in parts, appliance and home system prices and other operating costs could adversely impact our business, financial position, results of operations and cash flows.

Our financial performance may be adversely affected by increases in the level of our operating expenses, such as refrigerants, appliances, equipment, parts, raw materials, wages and salaries, employee benefits, healthcare, contractor costs, costs of repair, self-insurance costs and other insurance premiums, as well as various regulatory compliance costs, all of which may be subject to inflationary and other pressures.

For example, in recent years, we have experienced a rapid increase in the cost of parts, appliance and home system costs due to inflation and global supply chain challenges, which, in turn, increased our contract claims costs.

For example, in recent years, we have experienced a rapid increase in the cost of parts, appliance and home system costs due to inflation, changes in U.S.

tariff and import/export regulations and global supply chain challenges, which, in turn, increased our contract claims costs.

Such increase in operating expenses, including contract claims costs, could have a material adverse impact on our business, financial position, results of operations and cash flows.

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The current U.S.

administration has voiced strong concerns about imports from countries that it perceives as engaging in unfair trade practices and could impose import duties or restrictions on components and raw materials that are applicable to our business from countries it perceives as engaging in unfair trade practices.

Such duties or restrictions, or the perception that they could occur, may materially and adversely affect our business by increasing our costs or reducing global trade.

For example, rising costs due to blanket tariffs on imported steel and aluminum could increase the costs of parts associated with our repair and replacement of home systems and appliances, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

administration has voiced strong concerns about imports from countries that it perceives as engaging in unfair trade practices and has made governmental policy and regulatory changes in a variety of areas, including tariffs and other trade barriers on components and raw materials that are applicable to our business from countries it perceives as engaging in unfair trade practices.

Such tariffs or trade barriers, or the perception that they could occur, may materially and adversely affect our business by increasing our costs or reducing global trade.

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 parts associated with our repair and replacement of home systems and appliances, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

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.

Moreover, new tariffs and changes to U.S.

trade policy could prompt retaliation from affected countries, potentially triggering the imposition of tariffs on U.S.

trade policy have prompted, and could prompt retaliation from affected countries, potentially triggering the imposition of tariffs on U.S.

Such a “trade war” could lead to general economic downturn or could materially and adversely affect the demand for our services, thus negatively impacting our business, financial position, results of operations and cash flows.

We cannot predict how or what tariffs will be imposed or what retaliatory measures other countries may take in response to tariffs proposed or imposed by the U.S.

There is uncertainty as to further actions that may be taken by the U.S.

with respect to U.S.

trade policy, including with respect to the proposed tariffs.

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

We may not be able to attract and retain qualified key employees, which could adversely impact us and our business and inhibit our ability to operate and grow successfully.

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While we employ both domestic and overseas third-party customer service resources to help fulfill our service and other obligations, the effectiveness of such resources may be adversely affected by the availability of labor in such markets and the continuing viability of contract relations with such third parties.

Additionally, laws and regulations, such as restrictive immigration laws may limit our ability to attract, retain or replace

In the event of a labor shortage affecting our own customer service personnel or our third-party service providers, we could experience difficulty in responding to customer inquiries in a timely fashion or delivering our services in a high-quality or timely manner and could be forced to increase wages to attract and retain employees, which would result in higher operating costs and reduced profitability.

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Our business process outsourcing initiatives increase our reliance on third-party vendors and may expose our business to harm upon the termination or disruption of our third-party vendor relationships.

Our strategy to increase profitability, in part, by reducing our costs of operations includes the implementation of certain business process outsourcing initiatives, including offshore outsourcing of certain aspects of our customer service, administrative and other service operations, some of which are located near regions that have previously been affected by Acts of God, such as earthquakes, wildfires, hurricanes and typhoons, and outsourcing of certain technology development initiatives.

Our strategy to maintain or reduce our costs of operations includes the implementation of certain business process outsourcing initiatives, including offshore outsourcing of certain aspects of our customer service, administrative and other service operations, some of which are located near regions that have previously been affected by Acts of God, such as earthquakes, wildfires, hurricanes and typhoons, and outsourcing of certain technology development initiatives.

Additionally, most of this outsourcing occurs in developing countries.

Any disruption, termination or substandard performance of these outsourced services, including possible breaches by third-party vendors of their agreements with us, could delay or limit our ability to successfully implement our business strategies and adversely affect our brands, reputation, customer relationships, financial position, results of operations and cash flows.

Also, to the extent a third-party vendor relationship is terminated, there is a risk of disputes or litigation and that we may not be able to enter into a similar agreement with an alternate provider in a timely manner or on terms that are acceptable to us or at all.

Even if we find an alternate provider, or choose to insource such services, there are significant risks associated with any transitioning activities.

Even if we find an alternative provider, or choose to insource such services, there are significant risks associated with any transitioning activities.

In addition, to the extent we decide to terminate outsourcing services and insource such services, there is a risk that we may not have the capabilities to perform these services internally, resulting in a disruption to our business, which could adversely impact our reputation, businesses, financial position, results of operations and cash flows.

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We are dependent on a limited number of suppliers for various key components used in the services and products we offer to customers, and the cost, quality and availability of these components are essential to our services.

In particular, we have seven national suppliers of parts, appliances and home systems that each account for more than five percent of our supplier spend.

In particular, we have six national suppliers of parts, appliances and home systems that each account for more than five percent of our supplier spend.

We are subject to the risk of shortages, increased costs and long lead times in the supply of these components and other materials, and the risk that our suppliers discontinue or modify, or increase the price of, the components used.

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Accordingly, a loss or interruption in the service of any key party could adversely impact our reputation, business, financial position, results of operations and cash flows.

Weather, including the frequency and intensity of weather conditions, natural disasters and seasonality, as well as related environmental regulations, can affect the demand for our services, our ability to operate and our results of operations and cash flows.

The demand for our services, and our results of operations, are affected by the frequency and intensity of weather conditions and seasonality.

Seasonality causes our results of operations to vary considerably from quarter to quarter.

Accordingly, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

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 2025 as compared to 2024 resulted in a lower number of home warranty service requests per customer, which favorably impacted contract claims costs.

Major weather events and other similar Acts of God, or natural disasters are typically addressed by homeowners’ and other forms of insurance as opposed to the home warranties that we offer and therefore do not increase our obligations to provide service.

Nevertheless, major weather events and other similar Acts of God, or natural disasters such as typhoons, hurricanes, tornadoes, wildfires or earthquakes, may affect the demand for our services and our results of operations.

Such weather events could affect our facilities, or those of our major suppliers or business process outsource providers, which could affect our costs, our ability to meet supply requirements, our ability to provide services and our ability to access our data and other records.

Extreme or unpredictable weather conditions could materially adversely impact our business, financial position, results of operations and cash flows.

New environmental regulations or interpretations of existing laws may result in enhanced disclosure obligations, which could negatively affect us and materially increase our regulatory burden.

Increased regulations generally increase our costs, and we could continue to experience higher costs if new laws require us to spend more time, hire additional personnel or buy new technology to comply effectively.

New environmental regulations or guidance, as well as the perspectives of shareholders, employees and other stakeholders regarding these standards, may affect our business activities and operations, or increase disclosure and compliance requirements, which may increase our costs.

Laws and government regulations applicable to our business and lawsuits, enforcement actions and other claims by third parties or governmental authorities could increase our legal and regulatory expenses and impact our business, financial position, results of operations and cash flows.

Our business is subject to significant federal, state and local laws and regulations.

These laws and regulations include but are not limited to laws relating to consumer protection, unfair and/or deceptive trading practices, service contracts, home warranties, home service plans, real estate settlement services, wage and hour requirements, state contractor laws, the employment of immigrants, labor relations, licensing, building code requirements, workers’ safety, environmental, privacy and data protection, securities, insurance coverages, sales tax collection and remittance, healthcare reforms, employee benefits, marketing (including, without limitation, telemarketing) and advertising.

In addition, we are regulated by the Consumer Financial Protection Bureau and in certain states by the applicable state insurance regulatory authority or other state regulatory bodies, such as the Virginia Department of Agriculture and the Texas Department of Licensing and Regulation, with respect to our home warranty business, and by the Department of Insurance for the District of Columbia and other state insurance bodies, with respect to our new home builder warranty business nationwide.

Some of these laws and regulations require that we obtain regulatory approval prior to implementing changes in our pricing, contract terms and claims handling processes, which may limit or slow our ability to adjust our business strategies to address evolving challenges or opportunities.

Failure to comply with such laws and regulations may have a material adverse impact on our business, financial position, results of operations and cash flows.

Additionally, a portion of our business operates as an insurance company, and the IRS or state agencies could deem us to be taxed across our company as such, which could adversely impact the timing of our tax payments.

We are also subject to various federal, state and local laws and regulations designed to protect consumers, including laws governing deceptive trade practices, consumer privacy and fraud, the collection and use of consumer data, telemarketing and other forms of solicitation.

From time to time, we have received and we expect that we may continue to receive inquiries or investigative demands from regulatory bodies, including state attorneys general and other federal and state agencies.

The telemarketing rules adopted by the Federal Communications Commission pursuant to the Telephone Consumer Protection Act and the Telemarketing Sales Rule issued by the Federal Trade Commission, or FTC, govern our telephone sales practices.

In addition, some states and local governing bodies have adopted laws and regulations targeted at direct telephone sales, i.e., “do-not-call” regulations.

The implementation of these marketing regulations requires us to rely more extensively on other marketing methods and channels and may have a material adverse impact on our business, financial position, results of operations and cash flows.

We are also subject to different consumer protection laws, including laws that regulate the offering of automatically renewing subscription offers at both the state and federal level.

For example, the FTC, previously implemented the “Click-to-Cancel” rule that would have prohibited covered businesses from, among other things, impeding consumers from canceling recurring subscriptions and memberships.

While the U.S.

Court of Appeals for the Eight Circuit vacated the entirety of the “Click-to-Cancel” rule on July 8, 2025 due to a finding of flaws in the FTC’s rulemaking process, it is possible that the FTC may propose similar rules in the future.

Various federal, state and local governing bodies may propose additional legislation and regulation that may be detrimental to our business or may substantially increase our operating costs, including:

increases in the minimum wage;

environmental regulations, equipment efficiency standards, certain refrigerant production and use and other environmental matters;

healthcare coverage;

“do-not-call” or other marketing regulations;

or regulations implemented in response to business practices in our industry.

It is difficult to predict the future impact of the broad and expanding legislative and regulatory requirements affecting our business, and changes to such requirements may adversely affect our business, financial position, results of operations and cash flows.

In addition, if we were to fail to comply with any applicable law or regulation, we could be subject to substantial fines or damages, be involved in lawsuits, enforcement actions and other claims by third parties or governmental authorities, suffer harm to our reputation, suffer the loss of licenses or incur penalties that may affect how our business is operated, any of which, in turn, could have a material adverse impact on our business, financial position, results of operations and cash flows.

Disruptions or failures in our technology systems could create liability for us or limit our ability to effectively monitor, operate and control our operations and adversely impact our reputation, business, financial position, results of operations and cash flows.

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If our disaster recovery plans do not work as anticipated, or if the third-party vendors to which we have outsourced certain technology, customer service or other services fail to fulfill their obligations, our operations may be adversely affected, and any of these circumstances could adversely affect our reputation, business, financial position, results of operations and cash flows.

If we fail to protect the security of personal information about our customers, associates or third parties, we could be subject to interruption of our business operations, private litigation, reputational damage and costly penalties.

Failure to protect the security of personal information about our customers, associates or third parties could result in the interruption of our business operations, private litigation, reputational damage and costly penalties.

We rely on, among other things, commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential information of customers, associates and third parties, such as payment cards and personal information.

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We are subject to risks caused by data breaches and operational disruptions, particularly through third-party criminal activity including “ransomware” or other malware, cyber-attack or cyber-intrusion, including by computer hackers, foreign governments and cyber terrorists.

These risks include potential damage and disruption from traditional cyber criminals, malicious code (such as viruses and worms), employee theft, misuse, social engineering, denial-of-service attacks, as well as sophisticated nation-state and nation-state-supported actors, including advanced persistent threat intrusions.

These risks include potential damage and disruption from traditional cyber criminals, malicious code (such as viruses and worms), employee theft, negligence or misuse, social engineering, denial-of-service attacks, as well as sophisticated nation-state and nation-state-supported actors, including advanced persistent threat intrusions.

Any cyber or similar attack or unauthorized access to our software or systems that we experience could damage our technology systems and infrastructures, lead to the loss, compromise or corruption of data, prevent us from providing our services, erode our reputation and those of our various brands, lead to the termination of advantageous contracts, result in inaccurate reporting of financial information, result in the disclosure of confidential consumer and professional contractor information, result in erroneous payments to malicious actors, expose us to significant liabilities for the violation of data privacy laws, result in the disclosure of confidential and sensitive business information or intellectual property, result in claims or litigation against us and/or otherwise be costly to mitigate or remedy.

The frequency of data breaches of companies and governments has increased in recent years as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

In addition, risk from cyber and data security threats is exacerbated with the

advancement of artificial intelligence, which malicious third parties are using to create new, sophisticated and more frequent attacks.

The occurrence of any of these events could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

In addition, although we have insurance to mitigate some of these risks, such policies may not cover the particular cyber or similar attack experienced and, even if the risk is covered, such insurance coverage may not be adequate to compensate for related losses.

Although we have insurance to mitigate some of these risks, such policies may not cover the particular cyber or similar attack experienced and, even if the risk is covered, such insurance coverage may not be adequate to compensate for related losses.

The impact of cybersecurity events experienced by third parties with whom we do business (or upon whom we otherwise rely in connection with our day-to-day operations) could have similar effects on us.

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Additional U.S.

states have passed their own comprehensive consumer privacy laws, some of which went into effect in 2023 and 2024 or will go into effect in 2025, and other states are considering doing so.

states have passed their own comprehensive consumer privacy laws and other states are considering doing so.

Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data.

The burdens imposed by the CCPA, CPRA and other similar laws that may be enacted at the federal and state level may require us to further modify our data processing practices and policies and to incur substantial expenditures in order to comply.

Our business is subject to significant federal, state and local laws and regulations.

These laws and regulations include but are not limited to laws relating to consumer protection, unfair and/or deceptive trading practices, service contracts, home warranties, home service plans, real estate settlement, wage and hour requirements, state contractor laws, the employment of immigrants, labor relations, licensing, building code requirements, workers’ safety, environmental, privacy and data protection, securities, insurance coverages, sales tax collection and remittance, healthcare reforms, employee benefits, marketing (including, without limitation, telemarketing) and advertising.

Failure to comply with such laws and regulations may have a material adverse impact on our business, financial position, results of operations and cash flows.

From time to time, we have received and we expect that we may continue to receive inquiries or investigative demands from regulatory bodies, including the Consumer Financial Protection Bureau and state attorneys general and other state agencies.

In addition, some states and local governing bodies have adopted laws and regulations targeted at direct telephone sales, i.e., “do-not-call” regulations.

increases in the minimum wage;

environmental regulations, equipment efficiency standards, certain refrigerant production and use and other environmental matters;

healthcare coverage;

“do-not-call” or other marketing regulations;

or regulations implemented in response to business practices in our industry.

Weather, including the frequency and intensity of weather conditions, natural disasters and seasonality, as well as related regulations, can affect the demand for our services, our ability to operate and our results of operations and cash flows.

The demand for our services, and our results of operations, are affected by the frequency and intensity of weather conditions and seasonality.

Seasonality causes our results of operations to vary considerably from quarter to quarter.

Accordingly, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

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

Major weather events and other similar Acts of God, or natural disasters such as typhoons, hurricanes, tornadoes, wildfires or earthquakes, may affect the demand for our services and our results of operations.

Extreme or unpredictable weather conditions could materially adversely impact our business, financial position, results of operations and cash flows.

Nevertheless, while weather variations as described above may affect our business, costs and repairs, major weather events and other similar Acts of God, or natural disasters are typically addressed by homeowners’ and other forms of insurance as opposed to the home warranties that we offer and therefore do not increase our obligations to provide service.

New environmental regulations or interpretations of existing laws may result in enhanced disclosure obligations, which could negatively affect us and materially increase our regulatory burden.

Success in our new home structural warranty business depends on our ability to underwrite risks accurately and to charge adequate prices to builder members, as well as our ability to effectively reinsure a large portion of those risks.

Our business, financial position, results of operations and cash flows depend on our ability to underwrite and appropriately price the risks of providing new home structural warranties.

Technological developments in artificial intelligence could disrupt our industry and subject us to increased competition, legal and regulatory risks and compliance costs.

Technological developments in artificial intelligence, including machine learning technology and generative artificial intelligence and their current and potential future applications as well as the legal and regulatory frameworks within which they operate, are rapidly evolving.

The full extent of current or future risks related thereto is not possible to predict and we may not be able to anticipate, prevent, mitigate or remediate all of the potential risks, challenges or impacts of such changes.

Artificial intelligence could significantly disrupt our industry and subject us to increased competition, legal and regulatory risks and compliance costs, which could have a material adverse effect on our business, financial condition and results of operations.

Some of our competitors may be more successful than us in the development and implementation of new technologies, including services, platforms and marketing efforts based on artificial intelligence, to address consumer demands or improve operations.

If we are unable to adequately advance our capabilities in these areas, or do so at a slower pace than others in our industry, we may be at a competitive disadvantage.

Through our use of artificial intelligence, we intend to avail ourselves of the potential benefits, insights and efficiencies resulting from these technologies.

However, these technologies also present a number of potential risks that cannot be fully mitigated.

If the data we, or third parties whose services we rely on, use in connection with the possible development or deployment of artificial intelligence is incomplete, inadequate or biased in some way, the performance of our products, services, and businesses could suffer.

The volume and reliance on data and algorithms also make artificial intelligence, and in turn, us, more susceptible to cybersecurity threats.

We could be exposed to risks to the extent third-party service providers, or any counterparties, use artificial intelligence in their business activities.

There is also a risk that artificial intelligence may be misused or misappropriated by our employees and/or third parties engaged by us.

In addition, we may not be able to control how third-party artificial intelligence that we choose to use is developed or maintained, or how data we input is used or disclosed, even where we have sought contractual protections with respect to these matters.

We may be subject to legal and regulatory investigations and/or actions related to our use of artificial intelligence, including as related to alleged misuse or misappropriation of our data.

This could also have an adverse impact on our reputation.

Regulations related to artificial intelligence may also impose on us certain obligations and costs related to monitoring and compliance.

Regulators are increasing scrutiny and considering, and in some cases enacting, regulation of the use of artificial intelligence.

The use of artificial intelligence by us and others may require compliance with legal and regulatory frameworks that are not fully developed or tested, and we may face litigation and regulatory actions related to our use of artificial intelligence.

Future acquisitions or other strategic transactions could negatively affect our reputation, business, financial position, results of operations and cash flows.

Our business strategy includes the pursuit of opportunistic strategic transactions, which could involve acquisitions or dispositions of businesses or assets.

For example, in 2024, we acquired 2-10 HBW to access a business opportunity in the new home builder warranty space, complement our existing business and provide cross-selling opportunities for home warranties and our non-warranty services.

Any future strategic transaction could involve integration or implementation challenges, business disruption or other risks, or change our business profile significantly.

Any inability on our part to consolidate and manage growth from acquired businesses or successfully implement other strategic transactions could have an adverse impact on our reputation, business, financial position, results of operations and cash flows.

Any acquisition that we make may not provide us with the benefits that were anticipated when entering into such acquisition.

The process of integrating an acquired business may create unforeseen difficulties and expenses, including:

the diversion of resources needed to integrate new businesses, technologies, products, personnel or systems;

the inability to retain employees, customers and suppliers;

the assumption of actual or contingent liabilities;

failure to effectively and timely adopt and adhere to internal control processes and other policies;

write-offs or impairment charges relating to goodwill and other intangible assets;

unanticipated liabilities;

distraction of senior management from other strategic priorities;

and potential expense associated with litigation with sellers of such businesses.

Any future disposition transactions could also impact our business and may subject us to various risks, including failure to obtain appropriate value for the disposed businesses and post-closing claims.

We may be required to recognize impairment charges on goodwill and intangible assets due to reasons including, among other things, adverse changes in the business climate, expected operating changes, and adverse actions or assessments by regulators.

We have significant amounts of goodwill and intangible assets, such as trade names.

In accordance with applicable accounting standards, goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment on an annual basis, or more frequently if circumstances indicate a potential impairment, including:

• significant adverse changes in the business climate, including economic or financial conditions;

• significant adverse changes in expected operating results;

• adverse actions or assessments by regulators;

• unanticipated competition;

• loss of key personnel;

• a current expectation that it is more likely than not that a reporting unit or intangible asset will be sold or otherwise disposed of.

Based upon economic and financial market conditions, the operating performance of our reporting units and other factors, including those listed above, we have incurred, and may in the future incur, impairment charges.

It is possible that such future impairments, if required, could be material.

Any future impairment charges that we are required to record could have a material adverse impact on our results of operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in Part II of this Annual Report on Form 10-K for additional information.

Success in our new home builder warranty business depends on our ability to underwrite risks accurately and to charge adequate prices to builder members, as well as our ability to effectively reinsure a large portion of those risks.

Our business, financial position, results of operations and cash flows depend on our ability to underwrite and appropriately price the risks of providing new home builder warranties.

The role of the pricing function is to ensure that rates are adequate to generate sufficient revenue to pay losses and underwriting expenses and to earn a profit.

We rely on historical loss data for our business, our builder members and the geographies in which they operate, as well as the experience of our underwriting team and engineering experts, to project future warranty claims and expenses, allocate risks to our reinsurers and set the price for new home structural warranties and other services that we provide to our builder members.

We rely on historical loss data for our business, our builder members and the geographies in which they operate, as well as the experience of our underwriting team and engineering experts, to project future warranty claims and expenses, allocate risks to our reinsurers and set the price for new home builder warranties and other services that we provide to our builder members.

As a result, our ability to price accurately is subject to a number of risks and uncertainties, including, without limitation:

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In addition, underpricing insurance policies over time could erode the capital position of one or more of our insurance subsidiaries, constraining our ability to write new business.

We depend on the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home structural warranty business.

We depend on the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home builder warranty business.

If reinsurance is unavailable to us at current levels and prices, our ability to write new business may be limited.

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Reinsurance may not remain continuously available to us to the same extent and on the same terms and rates as were historically available or is currently available.

Our ability to economically justify reinsurance to reduce our risk may depend on our ability to adjust new home structural warranty pricing to fully or partially recover cost.

Our ability to economically justify reinsurance to reduce our risk may depend on our ability to adjust new home builder warranty pricing to fully or partially recover cost.

If we cannot maintain our current level of reinsurance or purchase new reinsurance protection in amounts we consider sufficient at acceptable prices, we would have to either accept an increase in our exposure, reduce our insurance exposure or seek other alternatives.

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Evolving governance rules, regulations and stakeholder expectations have resulted in, and may continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations.

Developing and acting on initiatives within the scope of corporate governance, and collecting, measuring and reporting related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including, the new California climate disclosure rules, and similar proposals by other federal and state regulatory bodies.

Developing and acting on initiatives within the scope of corporate governance, and collecting, measuring and reporting related information and metrics can be costly, difficult and time consuming and are subject to evolving reporting standards, including, the new California climate disclosure rules, and similar proposals by other federal and state regulatory bodies.

If our corporate governance, environmental or other related data, processes or reporting are incomplete, inaccurate or criticized, our reputation, business, financial performance and growth could be adversely affected.

The use of social media by us and other parties could result in damage to our reputation or otherwise adversely affect us.

We increasingly utilize social media to communicate with current and potential customers, contractors, real estate brokers and employees, as well as other individuals interested in us.

Information delivered by us, or by third parties about us, via social media can be easily accessed and rapidly disseminated, and any such information that is not deemed appropriate by the public could result in reputational harm, decreased customer loyalty or other issues that could diminish the value of our brand or result in significant liability.

We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.

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Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products, services or activities infringe their intellectual property rights.

Future acquisitions or other strategic transactions could negatively affect our reputation, business, financial position, results of operations and cash flows.

Our business strategy includes the pursuit of opportunistic strategic transactions, which could involve acquisitions or dispositions of businesses or assets.

For example, in 2024, we acquired 2-10 HBW to access a business opportunity in the new home structural warranty space, complement our existing business and provide cross-selling opportunities for home warranties and our non-warranty services.

Any future strategic transaction could involve integration or implementation challenges, business disruption or other risks, or change our business profile significantly.

Any acquisition that we make may not provide us with the benefits that were anticipated when entering into such acquisition.

The process of integrating an acquired business may create unforeseen difficulties and expenses, including:

the diversion of resources needed to integrate new businesses, technologies, products, personnel or systems;

the inability to retain employees, customers and suppliers;

the assumption of actual or contingent liabilities;

failure to effectively and timely adopt and adhere to internal control processes and other policies;

write-offs or impairment charges relating to goodwill and other intangible assets;

unanticipated liabilities;

distraction of senior management from other strategic priorities;

and potential expense associated with litigation with sellers of such businesses.

We may be required to recognize impairment charges.

We have significant amounts of goodwill and intangible assets, such as trade names.

• significant adverse changes in the business climate, including economic or financial conditions;

• significant adverse changes in expected operating results;

• adverse actions or assessments by regulators;

• unanticipated competition;

• loss of key personnel;

• a current expectation that it is more likely than not that a reporting unit or intangible asset will be sold or otherwise disposed of.

It is possible that such future impairments, if required, could be material.

Any future impairment charges that we are required to record could have a material adverse impact on our results of operations.

Third-party use of our trademarks as keywords in Internet search engine advertising programs may direct potential customers to competitors’ websites, which could harm our reputation and cause us to lose sales.

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If we are unable to protect our trademarks from such unauthorized use and curtail the use of confusingly similar terms, competitors and other third parties may drive potential online customers away from our websites to competing and unauthorized websites, which could harm our reputation and cause us to lose sales.

The use of social media by us and other parties could result in damage to our reputation or otherwise adversely affect us.

We increasingly utilize social media to communicate with current and potential customers, contractors, real estate brokers and employees, as well as other individuals interested in us.

Our operations outside the United States are subject to special risks that could adversely affect us.

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and operational and compliance challenges resulting from distance, language and cultural differences.

Acts of God, war, terror acts and pandemics or other public health crises, such as COVID-19, may impair our ability to operate or the ability of our business process outsource providers to operate, in particular countries or regions.

Acts of God, war, terror acts and pandemics or other public health crises, such as the COVID-19 pandemic, may impair our ability to operate or the ability of our business process outsource providers to operate, in particular countries or regions.

Risks Related to Our Acquisition of 2-10 Home Buyers Warranty

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• diversion of significant resources from our core product offerings;

• our inability to retain the service of key management and other personnel of 2-10 HBW;

• our inability to retain the service of key personnel of 2-10 HBW;

• our inability to effectively diversify and expand into a new line of business and execute on cross-selling opportunities for home warranties and our non-warranty services;

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If we are responsible for liabilities not covered by insurance, we could suffer severe consequences that could have a material adverse effect on our business, financial position, results of operations and cash flows.

Financing the 2-10 HBW Acquisition resulted in an increase in our indebtedness, which could adversely affect us, including by decreasing our business flexibility and increasing our interest expense.

We financed a portion of the purchase price and related fees and expenses of the 2-10 HBW Acquisition with incremental borrowings under a senior secured incremental term loan facility under our existing Credit Agreement.

This increase in our indebtedness may, among other things, reduce our flexibility to respond to changing business and economic conditions or to fund capital expenditures or working capital needs.

In addition, the amount of cash required to pay interest on our increased indebtedness, and thus the demands on our cash resources, have materially increased as a result of the indebtedness to finance the acquisition.

For further discussion of risks related to our indebtedness, see “Risk Factors-Risks Related to Our Indebtedness” below.

Risks Related to Our Common Stock

We do not intend to pay cash dividends on our common stock at this point and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We do not currently pay any cash dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We currently intend to use our future earnings to develop our business and for working capital needs and general corporate purposes, to fund our growth, to repay debt, and to repurchase shares of our common stock.

As a result, we did not pay cash dividends in 2024, and we do not expect to pay any cash dividend for the foreseeable future.

As a result, we did not declare or pay cash dividends on our common stock in 2025, and we do not currently pay any cash dividends.

All decisions regarding the payment of dividends will be made by our board of directors from time to time in accordance with applicable law.

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As a result, increases in interest rates would increase the cost of servicing our indebtedness and could materially reduce our profitability and cash flows.

As of December 31, 2024, each one percentage point change in interest rates would result in an approximately $6 million change in the annual interest expense on the Term Loan Facilities after considering the impact of the effective interest rate swap.

Assuming all revolving loans were fully drawn as of December 31, 2024, each one percentage point change in interest rates would result in an approximately $3 million change in annual interest expense on the Revolving Credit Facility.

As of December 31, 2025, each one percentage point change in interest rates would result in an approximate $6 million change in the annual interest expense on our Term Loan Facilities after considering the impact of the interest rate swap.

The impact of increases in interest rates could be more significant for us than it would be for some other companies given that our indebtedness obligations are at variable interest rates.

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We are exposed to the impact of interest rate changes and manage this exposure through the use of variable-rate and fixed-rate debt and by utilizing an interest rate swap.

On October 24, 2018, we entered into an interest rate swap contract effective October 31, 2018 that expires on August 16, 2025 (the “2018 swap”).

The notional amount of the agreement is $350 million.

On October 24, 2018, we entered into an interest rate swap contract effective October 31, 2018 that expired on August 16, 2025 (the “2018 swap”).

The notional amount of the agreement was $350 million.

On December 19, 2024, in connection with the Amended Credit Facility, we entered into an additional interest rate swap contract, with an initial notional amount of $299 million with additional step up and step down provisions embedded in the contract.

The notional amount steps up in August 2025 by $350 million upon the expiration of the 2018 swap.

The notional amount stepped up in August 2025 by $350 million upon the expiration of the 2018 swap.

The notional amount steps down over the term of the agreement on a basis that correlates with the scheduled principal payments on the Amended Term Loan Facilities.

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Risk Management Personnel.

Among management, our Chief Information Security Officer (“CISO”), together with our Chief Operating Officer (“COO”), is responsible for leading efforts to assess and manage cybersecurity risks.

Among management, our Chief Information Security Officer (“CISO”), together with our Chief Technology Officer (“CTO”), is responsible for leading efforts to assess and manage cybersecurity risks.

Our CISO has over 20 years of experience assessing and managing cybersecurity risk, including leading information security teams at complex web-based businesses, and has a Master’s degree in Computer Information Systems and multiple professional and cybersecurity certifications, including CISM, CDPSE, CIPM, CIPT, and PMP.

Our COO oversees, among other things, our company’s technology strategy and architecture and the integration and delivery of technology into our operations and service offerings.

Our COO has over 10 years of experience supervising teams in implementations of key internal- and external-facing technology systems.

Prior to joining the Company, our COO worked at a multinational public technology company and led teams in solving operations problems with technology.

Our COO has a Bachelor’s degree in Chemical Engineering, a Master's degree in Business Administration and a Juris Doctorate.

Our CTO oversees, among other things, our company’s technology strategy and architecture and the integration and delivery of technology into our operations and service offerings.

Our CTO brings experience in digital transformation, cybersecurity and product development.

Prior to joining the Company, our CTO served on our board of directors and worked at a logistics company providing e-commerce delivery services.

Our CTO has a Bachelor’s degree from the Indian National Defence Academy, and an MBA, MS and a PHD in aerospace engineering from the Georgia Institute of Technology.

Monitoring Cybersecurity Incidents.

On a daily basis, our information security team monitors, identifies and classifies potential cybersecurity events and is responsible for notifying the COO and CISO of such events as appropriate based on risk to our organization.

Our COO and CISO are responsible for notifying executive leadership, other functional teams and our audit committee, as appropriate.

On a daily basis, our information security team monitors, identifies and classifies potential cybersecurity events and is responsible for notifying the CTO and CISO of such events as appropriate based on risk to our organization.

Our CTO and CISO are responsible for notifying executive leadership, other functional teams and our audit committee, as appropriate.

Reporting to the Board of Directors.

Our COO and CISO report to the audit committee at least quarterly about the detection, prevention, mitigation and remediation of cybersecurity events, including information about the latest cybersecurity threats, the status of our prevention and detection measures and the effectiveness of our mitigation and remediation efforts, as well as any other cybersecurity risk management activities and the progress of related projects.

Our CTO and CISO report to the audit committee at least quarterly about the detection, prevention, mitigation and remediation of cybersecurity events, including information about the latest cybersecurity threats, the status of our prevention and detection measures and the effectiveness of our mitigation and remediation efforts, as well as any other cybersecurity risk management activities and the progress of related projects.

These briefings include updates on the formalized incident response plan, communications and escalation procedures.

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Our corporate headquarters is located in Memphis, Tennessee, in a leased facility.

We also lease a collaboration center located in Scottsdale, Arizona and a technology collaboration center in Pune, India.

We also lease a collaboration center located in Scottsdale, Arizona, and a small footprint in an administrative center in Pune, India.

As part of the 2-10 HBW Acquisition, we acquired 2-10 HBW's corporate office in Aurora, Colorado.

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

We believe these facilities are suitable and adequate to support the needs of our business.

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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-K

Item 1A. Risk Factors