What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2026-02-26 compared with 2025-02-27 · 102 added, 117 removed, 355 unchanged (38% of the section changed)

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Our common stock is listed on the NASDAQ under the symbol ‘‘FTDR.’’ As of February 20, 2026, there were approximately 8 registered holders of our common stock.

We did not pay any cash dividends in 2024.

We do not intend to declare or pay cash dividends on our common stock for the foreseeable future.

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.

We did not declare or pay cash dividends on our common stock in 2025.

We have strong recurring cash flows, which give us flexibility in how we allocate capital, and we regularly review the appropriate use of our capital and 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.

Declaration or payment of dividends, if any, in the future will be at the discretion of our board of directors from time to time in accordance with applicable law and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the board of directors.

Issuer Purchases of Equity Securities

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

As of December 31, 2024, we repurchased a total of 709,077 outstanding shares at an aggregate cost of $41 million, and we had $609 million remaining available for future repurchases under this program.

As of December 31, 2025, we had $329 million remaining available for future repurchases under this program.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity” in Part II, Item 7 of this report for more information.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our 2024 Annual Report on Form 10-K filed with the SEC on February 27, 2025, which specific discussion is incorporated herein by reference.

Frontdoor is the leading provider of home warranties and new home structural warranties in the United States, as measured by revenue, and operates primarily under the American Home Shield and 2-10 HBW brands.

Frontdoor is the leading provider of home warranties and new home builder warranties in the United States, as measured by revenue, and operates primarily under the American Home Shield, HSA, OneGuard, Landmark and 2-10 HBW brands.

Our customizable home warranties help customers protect and maintain their homes, typically their most valuable asset, from costly and unplanned breakdowns of essential home systems and appliances.

Our home warranty customers usually subscribe to an annual service plan agreement that covers the repair or replacement of major components of up to 29 home systems and appliances, including electrical, plumbing, HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops, as well as optional coverages for electronics, pools, spas and pumps.

Our new home structural warranty business provides value to home builders and owners of new homes by providing coverage, including insurance-backed coverage for workmanship, systems and/or structural failures, as well as other post-construction services.

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.

Our home warranty customers usually subscribe to an annual service plan agreement that covers the repair or replacement for breakdowns that generally occur as a result of normal wear and tear of major components of up to 29 home systems and appliances, including electrical, plumbing, HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops, as well as optional coverages for pools, spas and pumps.

We also offer non-warranty home services, including our New HVAC upgrade and installation of Moen water shut-off devices, and select home maintenance offerings.

Non-warranty services are marketed to our existing warranty customer base, enabling incremental revenue opportunities beyond traditional warranty coverage.

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

We also offer new home builder warranty solutions, which deliver value to both builders and homeowners through a suite of builder warranty products and support services.

We offer flexible builder-backed and insurance-backed warranty options covering workmanship, home distribution systems, and structural components.

Additional add-on programs provide service request management for warranties and claims administration for structural warranties.

On December 19, 2024, we completed the acquisition of all of the issued and outstanding common stock of 2-10 HBW pursuant to a purchase agreement dated June 3, 2024 for aggregate cash consideration of $585 million, subject to certain customary adjustments including the amount of cash acquired, debt, seller transaction expenses, working capital and regulatory capital in the business of 2-10 HBW.

Following the settlement of all contractual adjustments, the aggregate cash consideration paid was $580 million.

See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on this acquisition.

As a part of the 2-10 HBW Acquisition, we entered into an amendment to our Credit Agreement, which became effective on December 19, 2024.

See "Liquidity and Capital Resources” and Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on our liquidity and the debt refinancing transactions.

For the year ended December 31, 2025, we generated revenue, net income and Adjusted EBITDA of $2,093 million, $255 million and $553 million, respectively.

For the year ended December 31, 2024, we generated revenue, net income and Adjusted EBITDA of $1,843 million, $235 million and $443 million, respectively.

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

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

For the year ended December 31, 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 year ended December 31, 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 year ended December 31, 2023, our total operating revenue included 77 percent of revenue derived from existing customer renewals, while eight percent and 11 percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and four percent was derived from other revenue channels.

2-10 HBW Acquisition

On December 19, 2024, we completed the acquisition of all of the issued and outstanding common stock of 2-10 HBW pursuant to a purchase agreement dated June 3, 2024 for aggregate cash consideration of $585 million, subject to certain customary adjustments based on, among other things, the amount of cash, debt, transaction expenses, working capital and regulatory capital in the business of 2-10 HBW as of the closing of the transaction.

2-10 HBW is a leading provider of new home structural warranties that provide home builders insurance-backed coverage and/or administrative services for workmanship, systems and/or structural failures.

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

See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on this acquisition.

2024 Debt Refinancing

We entered into an amendment to our Credit Agreement, which became effective on December 19, 2024, in part, to fund the 2-10 HBW Acquisition.

See "—Liquidity and Capital Resources—2024 Debt Refinancing” and Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on our liquidity and the debt refinancing transactions.

Key Factors and Trends Affecting Our Results of Operations

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Seasonal fluctuations are primarily driven by a higher number of HVAC work orders with respect to our home warranty business in the summer months.

In 2024, approximately 21 percent, 29 percent, 29 percent and 21 percent of our revenue, approximately 14 percent, 39 percent, 43 percent and four percent of our net income, and approximately 16 percent, 36 percent, 37 percent and 11 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.

In 2025, approximately 20 percent, 29 percent, 30 percent and 21 percent of our revenue, approximately 14 percent, 44 percent, 41 percent and 1 percent of our net income, and approximately 18 percent, 36 percent, 35 percent and 11 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.

Effect of Weather Conditions

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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.

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 compete in the U.S.

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We believe our nationwide network of qualified professional contractor firms, in combination with our large base of contracted customers, differentiate us from other platforms in the home services industry.

Our new home structural warranty business faces competition from other providers of new home structural warranties and builders that self-insure.

Our new home builder warranty business faces competition from other providers of new home builder warranties and builders that self-insure.

Acquisition Activity

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Historically, we have used acquisitions to grow our customer base in high-growth geographies, and we intend to continue to do so.

Most recently, we acquired 2-10 HBW, which provides us more home warranty customers and increased revenue, in addition to opportunities for a new sales channel and a more diversified business portfolio.

Most recently, we acquired 2-10 HBW, which provides us opportunities for a new sales channel and a more diversified business portfolio as well as more home warranty customers and increased revenue.

We have also used acquisitions to enhance our technological capabilities and geographic presence.

We may also explore opportunities to make strategic acquisitions that will expand our service offering in the broader home services industry, such as new home structural warranties acquired as part of 2-10 HBW.

We may also explore opportunities to make strategic acquisitions that will expand our service offering in the broader home services industry, such as new home builder warranties acquired as part of 2-10 HBW.

See “2-10 HBW Acquisition” for additional information related to the acquisition.

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Our revenue is primarily a function of the volume and pricing of the services provided to our customers, as well as the mix of services provided.

Our revenue volume is impacted by new home warranty sales, customer retention and acquisitions.

Our revenue volume is impacted by home warranty sales, customer retention and acquisitions.

We also generate revenue through our non-warranty and other revenue channel, which primarily includes revenue from non-warranty home services, including the New HVAC upgrade and Moen programs, home maintenance services and new home builder warranties.

We derive substantially all of our revenue from customers in the United States.

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Net Income and Earnings Per Share .

The presentation of net income and basic and diluted earnings per share provides measures of performance which are useful for investors, analysts and other interested parties in company-to-company operating performance comparisons.

Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potentially dilutive shares of common stock been issued.

The dilutive effect, if any, of non-qualified stock options, performance options (which are stock options that become exercisable upon the achievement, in whole or in part, of the applicable performance goals, pursuant to the terms of the Omnibus Plan and the award agreement), restricted stock units ("RSUs"), performance shares (which are contractual rights to receive a share of our common stock (or the cash equivalent thereof) upon the achievement, in whole or in part, of the applicable performance goals, pursuant to the terms of the Omnibus Plan and the award agreement) and restricted stock awards ("RSAs") are reflected in diluted earnings per share by applying the treasury stock method.

The dilutive effect, if any, of non-qualified stock options, performance options, restricted stock units ("RSUs"), performance shares and restricted stock awards ("RSAs") are reflected in diluted earnings per share by applying the treasury stock method.

Adjusted EBITDA and Adjusted EBITDA Margin.

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restructuring charges;

acquisition-related costs;

acquisition and integration costs;

provision for income taxes;

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We report on our number of home warranties and customer retention rate as measurements of our operating performance.

These measurements are presented on a rolling 12-month basis in order to avoid seasonal anomalies.

Customer retention rate is presented on a rolling 12-month basis in order to avoid seasonal anomalies.

The number of home warranties is representative of our recurring home warranty customer base and is measured as the number of customers with active contracts as of the respective period-end date.

Our customer retention rate is calculated as the ratio of the number of end-of-period home warranty contracts to the sum of the number of beginning-of-period home warranty contracts and the number of new home warranty sales and acquired accounts during the respective period.

Our customer retention rate is calculated as the ratio of the number of home warranties to the sum of the number of beginning home warranties and the number of new home warranties and acquired accounts during the respective period.

Critical Accounting Policies and Estimates

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Upon the conclusion of the measurement period or the final determination of the values of assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recognized to the consolidated statements of operations.

See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed.

See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed.

Home Warranty Claims Accruals

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Goodwill and indefinite-lived intangible assets are considered impaired if the carrying amount of the reporting unit exceeds its fair value.

As of December 31, 2024, we do not believe there are any circumstances that would indicate any other potential impairment of our goodwill or indefinite-lived intangible assets.

As of December 31, 2025, we do not believe there are any circumstances that would indicate any potential impairment of our goodwill or indefinite-lived intangible assets.

We will continue to monitor the macroeconomic impacts on our business in our ongoing evaluation of potential impairments.

Newly Issued Accounting Standards

New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements.

See Note 2 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on newly issued accounting standards.

Results of Operations

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Provision for income taxes

* not meaningful

We reported revenue of $2,093 million and $1,843 million for the years ended December 31, 2025 and 2024, respectively.

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Direct-to-consumer (1)

Non-warranty and other

(1) First-year revenue only.

(2) For the year ended December 31, 2024, includes approximately $6 million as a result of the 2-10 HBW Acquisition on December 19, 2024.

Revenue increased four percent for the year ended December 31, 2024 compared to the year ended December 31, 2023.

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

The decrease in real estate revenue reflects a decline in the number of first-year real estate home warranties driven by the challenging real estate market, offset, in part, by higher price realization.

The decrease in direct-to-consumer revenue reflects lower price realization resulting from our efforts to drive incremental sales.

The increase in other revenue was driven by growth in non-warranty home services, primarily new HVAC sales.

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

(2) For the years ended December 31, 2025 and 2024, includes approximately $188 million and $6 million, respectively, as a result of the 2-10 HBW Acquisition on December 19, 2024.

Revenue increased 14 percent for the year ended December 31, 2025 compared to the year ended December 31, 2024.

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

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

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

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

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

As of December 31,

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Number of home warranties

Growth (reduction) in number of home warranties

(Reduction) growth in number of home warranties

Customer retention rate

(1) As of December 31, 2024, excluding the 2-10 HBW home warranties acquired on December 19, 2024, the number of home warranties was 1.94 million, the reduction in home warranties was three percent and the customer retention rate was 78.5 percent.

The growth in the number of home warranties as of December 31, 2024 was primarily driven by the 2-10 HBW acquisition, offset, in part, by the challenging real estate market.

The decline in the number of home warranties as of December 31, 2025 was primarily driven by the challenging real estate market.

Cost of Services Rendered

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Impact of change in revenue

Contract claims costs

Year Ended December 31, 2025

The impact of change in revenue is driven by growth in non-warranty home services, offset, in part, by the reduction in number of home warranties, other than the 2-10 HBW home warranties acquired on December 19, 2024.

The decrease in contract claims costs primarily reflects the impact of higher trade service fees, which drove a lower number of home warranty service requests per customer and a lower net cost per service request, a favorable weather impact of $8 million, as milder weather drove a lower number of home warranty service requests in the HVAC trade, and continued process improvement initiatives, specifically relating to better cost management across our contractor network.

The decrease was offset, in part, by ongoing inflationary cost pressures.

The increase in cost of services rendered is due to the impact of change in revenue, primarily driven by the 2-10 HBW Acquisition and the increase in non-warranty revenue.

Contract claims costs were relatively flat, reflecting continued process improvement initiatives, a lower number of service requests per customer, a favorable weather impact of $7 million and higher trade service fees, offset, in part, by inflationary cost pressures.

Additionally, contract claims costs reflects a $7 million favorable adjustment in 2025 related to the development of prior period claims, compared to a $5 million favorable adjustment in 2024.

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Stock-based compensation expense

Acquisition-related costs

Acquisition and integration costs

Other general and administrative costs

Year Ended December 31, 2025

Sales and marketing costs increased primarily due to our investment in marketing associated with our direct-to-consumer channel, offset, in part by, a reduction in costs driven by sales optimization efforts.

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

Other general and administrative costs increased primarily due to increased personnel costs.

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 and integration 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 and technology costs including costs from the 2-10 HBW acquisition and professional fees.

Depreciation and Amortization Expense

Depreciation expense was $35 million and $32 million for the years ended December 31, 2024 and 2023, respectively, with the increase primarily driven by incremental capital expenditures in the period.

Amortization expense was $4 million for each of the years ended December 31, 2024 and 2023.

Depreciation expense was $36 million and $35 million for the years ended December 31, 2025 and 2024, Amortization expense was $53 million and $4 million for the years ended December 31, 2025 and 2024, respectively, with the increase primarily driven by the amortization of intangible assets acquired as part of the 2-10 HBW Acquisition.

Restructuring Charges

Restructuring charges were $4 million and $8 million for the years ended December 31, 2025 and 2024, respectively.

In 2025, restructuring charges primarily included $3 million of severance costs.

In 2024, restructuring charges included $7 million of severance costs and $1 million of expenses related to the exit of certain operating leases.

In 2023, restructuring charges included $10 million in non-cash impairment charges related to the operating lease right-of-use assets and related property and equipment of certain of our leased and company-owned facilities as discussed further in Note 6 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, $2 million of professional fees and $3 million of severance costs.

The impairment charges were the result of our decision to exit the leased and company-owned properties.

The severance costs related to our continued review and optimization of selling, general and administrative expenses.

Interest Expense

Interest expense was $40 million for each of the years ended December 31, 2024 and 2023.

Interest expense was $79 million and $40 million for the years ended December 31, 2025 and 2024, respectively.

The increase was 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

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The effective tax rate on income was 24.7 percent and 24.1 percent for the years ended December 31, 2025 and 2024, respectively.

The decrease in the effective tax rate was primarily due to stock-based compensation, offset, in part, by non-deductible acquisition-related transaction costs.

The increase in the effective tax rate was primarily due to state and local income taxes.

Net income was $255 million and $235 million for the years ended December 31, 2025 and 2024, respectively, with the increase primarily driven by the operating results discussed throughout “Results of Operations” above.

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Adjusted EBITDA was $553 million and $443 million for the years ended December 31, 2025 and 2024, respectively.

The following table provides a summary of the changes in our Adjusted EBITDA:

Summary of Changes in Net Income and Adjusted EBITDA

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

(In millions)

Adjusted EBITDA

Year Ended December 31, 2024

Impact of change in revenue

Contract claims costs

Sales and marketing costs

Customer service costs

General and administrative costs

Stock-based compensation expense

Acquisition and integration costs

Other general and administrative costs

Depreciation and amortization expense

Restructuring charges

Interest expense

Interest and net investment income

Provision for income taxes

Loss on extinguishment of debt

Year Ended December 31, 2025

The impact of change in revenue is driven by improved price realization, offset, in part, by the reduction in number of home warranties, other than the 2-10 HBW home warranties acquired on December 19, 2024.

The decrease was offset, in part, by ongoing inflationary cost pressures.

Additionally, contract claims costs reflects a $5 million favorable adjustment in 2024 related to the development of prior period claims, compared to a $11 million favorable adjustment in 2023.

Other general and administrative costs increased primarily due to increased personnel costs.

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.

Reconciliation of Net Income to Adjusted EBITDA

A reconciliation of net income to Adjusted EBITDA is as follows:

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Restructuring charges (1)

Acquisition-related costs (1)

Acquisition and integration costs (1)

Provision for income taxes

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Loss on extinguishment of debt (1)

Other non-operating expenses (1)

Adjusted EBITDA

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

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

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

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Liquidity and Capital Resources

Frontdoor is a holding company that derives its operating cash flow from its operating subsidiaries.

Our principal sources of liquidity include cash flows generated from operating activities of our subsidiaries and borrowing availability under our Revolving Credit Facility.

We have accessed the debt capital markets both opportunistically and as necessary to support the growth of our business, desired leverage levels, and other capital allocation priorities.

We believe we have ample liquidity in the Revolving Credit Facility and are generating substantial Free Cash Flow, which together support both organic operations and other capital allocation priorities as they arise.

We believe that our liquidity sources are sufficient to satisfy our anticipated operating and debt service requirements over the next twelve months and thereafter for the foreseeable future.

A substantial portion of our liquidity needs are due to debt service requirements on our indebtedness.

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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 December 31, 2024 and 2023, the total net assets subject to these third-party restrictions were $184 million and $157 million, respectively.

As of December 31, 2025 and 2024, the total net assets subject to these third-party restrictions were $151 million and $184 million, respectively.

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

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We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility as of December 31, 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 closely monitor the performance of our investment portfolio, primarily cash deposits.

We regularly review the statutory reserve requirements to which our regulated entities are 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.

The reviews may also identify opportunities to satisfy certain regulatory reserve requirements through alternate financial vehicles.

The reviews may also identify opportunities to satisfy certain regulatory reserve requirements through alternate financial vehicles, such as installing guarantee agreements without subsidiaries in place of statutory reserves.

See Note 9 to the audited consolidated financials statements included in Item 8 of this Annual Report on Form 10-K for additional information related to these guarantee agreements.

We have a diversified investment strategy for our cash investments and give priority to the major financial institutions that serve as lenders under the Credit Agreement.

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In connection with the second amendment to the Credit Agreement, we repaid all of the then current outstanding principal amounts of the Prior Term Loan Facilities, consisting of $218 million related to the Prior Term Loan A and $368 million related to the Prior Term Loan B, and recorded a loss on extinguishment of debt of $3 million, which included the write-off of unamortized debt issuance costs and original issue discount.

Additionally, on December 19, 2024, we amended and restated the Revolving Credit Facility, which carried, and continues to carry, a $2 million balance.

Additionally, on December 19, 2024, we amended and restated our $250 million Revolving Credit Facility.

See Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information related to our indebtedness.

2-10 HBW Acquisition

On December 19, 2024, we completed the acquisition of all of the issued and outstanding common stock of 2-10 HBW pursuant to a purchase agreement dated June 3, 2024 for aggregate cash consideration of $585 million, subject to certain customary adjustments based on, among other things, the amount of cash, debt, transaction expenses, working capital and regulatory capital in the business of 2-10 HBW as of the closing of the transaction.

Following the settlement of all contractual adjustments, the aggregate cash consideration paid was $580 million.

2-10 HBW is a leading provider of new home builder warranties that provide home builders insurance-backed coverage and/or administrative services for workmanship, systems and/or structural failures.

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

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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 December 31, 2024, we repurchased a total of 709,077 outstanding shares at an aggregate cost of $41 million under this program, which is included in treasury stock on the audited consolidated statements of financial position included in Item 8 of this Annual Report on Form 10-K.

We repurchased a total of 5,402,120 outstanding shares for the year ended December 31, 2025 at an aggregate cost of $280 million, which is included in treasury stock on the audited consolidated statements of financial position included in Item 8 of this Annual Report on Form 10-K.

As of December 31, 2025, we had $329 million remaining available for future repurchases under this program.

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

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

We repurchased a total of 11,319,091 shares at an aggregate cost of $400 million under this previous program, which is included in treasury stock on the audited consolidated statements of financial position included in Item 8 of this Annual Report on Form 10-K.

Limitations on Distributions and Dividends by Subsidiaries

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Net cash provided from operating activities was $416 million for the year ended December 31, 2025, compared to $270 million for the year ended December 31, 2024.

Net cash provided from operating activities in 2024 comprised $312 million in earnings adjusted for non-cash charges, offset, in part, by $36 million in cash used for working capital and $6 million in payments for restructuring charges.

Net cash provided from operating activities in 2025 comprised $386 million in earnings adjusted for non-cash charges and $30 million in cash used for working capital.

Cash provided from working capital was primarily driven by the timing of trade payables and accrued income taxes.

Net cash provided from operating activities in 2024 comprised $304 million in earnings adjusted for non-cash charges, offset by $34 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.

Net cash provided from operating activities in 2023 comprised $242 million in earnings adjusted for non-cash charges, offset, in part, by $7 million in payments for restructuring charges and $33 million in cash used for working capital.

Cash used for working capital was primarily driven by 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, and favorable development of prior period claims.

Investing Activities

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Capital expenditures were $26 million and $39 million in 2025 and 2024, respectively, 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 $35 million to $45 million.

We have no additional material capital commitments at this time.

We paid $583 million, net of cash acquired, for the 2-10 HBW Acquisition in 2024.

We received $3 million and paid $583 million, net of cash acquired, for the years ended December 31, 2025 and 2024, respectively, for the 2-10 HBW Acquisition in 2024.

See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on this acquisition.

During the year ended December 31, 2025, we received $60 million from sales and maturities of available-for-sale securities.

Financing Activities

Net cash used for financing activities was $302 million and $447 million for the years ended December 31, 2025 and 2024, respectively.

During the year ended December 31, 2025, we made other scheduled principal payments of debt of $29 million and purchased outstanding shares of our common stock at an aggregate cost of $283 million.

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

During the year ended December 31, 2024, we refinanced our Term Loan Facilities.

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

During the year ended December 31, 2023, we made scheduled principal payments of debt of $17 million and purchased outstanding shares of our common stock at an aggregate cost of $121 million.

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

Free Cash Flow

The following table reconciles net cash provided from operating activities, which we consider to be the most directly comparable U.S.

The following table reconciles net cash provided from operating activities, which is the most directly comparable U.S.

GAAP measure, to Free Cash Flow using data derived from the audited consolidated statements of cash flows included in Item 8 of this Annual Report on Form 10-K.

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Payments related to the Term Loan Facilities are based on applicable variable and fixed interest rates as of December 31, 2025 plus the specified margin in the Credit Agreement for each period presented.

As of December 31, 2024, the estimated debt balance as of each year ending from 2025 through 2029 is $1,172 million, $1,120 million, $1,068 million, $1,016 million and $650 million, respectively, and the weighted-average interest rate on the estimated debt balances is 6.3 percent as of each year ending from 2025 through 2028 and 6.6 percent for the year ending 2029.

As of December 31, 2025, the estimated debt balance as of each year ending from 2026 through 2030 is $1,160 million, $1,131 million, $1,102 million, $760 million and $752 million, respectively, and the weighted-average interest rate on the estimated debt balances is 6.2 percent as of each year ending from 2026 through 2030.

See Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the terms and maturities of existing debt obligations.

(3) These amounts represent future payments relating to real estate operating leases.

Financial Position

The 2-10 HBW Acquisition on December 19, 2024 significantly changed certain accounts on our statement of financial position.

For a summary of the amounts of identified assets acquired and liabilities assumed at the acquisition date, as determined based on management's preliminary assessment of the acquisition date fair value, see Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

A summary of the other significant changes in our financial position from December 31, 2023 to December 31, 2024 is as follows:

• Cash and cash equivalents increased during 2024, primarily reflecting cash provided from operating activities and the 2024 debt refinancing activities, offset, in part, by capital expenditures and purchases of outstanding shares.

• Long-term debt, including the current portion, increased during 2024, reflecting the 2024 debt refinancing activities, offset, in part, by scheduled debt payments.

• Total shareholders’ equity was $239 million as of December 31, 2024 compared to $136 million as of December 31, 2023.

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

See the audited consolidated statements of changes in equity (deficit) included in Item 8 of this Annual Report on Form 10-K for further information.

QUANTI TATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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These conditions may reduce demand for our services, increase our costs or otherwise adversely impact our business, which could have a material adverse impact on our future results of operations.

Interest Rate Risk

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.

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We do not hold or issue derivative financial instruments for trading or speculative purposes.

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

The notional amount of the agreement is $350 million.

Under the terms of the agreement, we will pay a fixed rate of interest of 3.028 percent on the notional amount, and we will receive a floating rate of interest (based on SOFR, subject to a floor of zero percent) on the notional amount.

As a result, through August 16, 2025, $350 million of the Amended Term Loan Facilities is fixed at a rate of 3.028 percent, plus the incremental borrowing margin of 2.25 percent.

In connection with the Amended Credit Facility, we entered into an additional interest rate swap contract effective December 19, 2024 that expires on December 31, 2029.

The initial notional amount of the agreement is $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 company's other interest rate swap contract described above.

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.

Under the terms of the agreement, we will pay a fixed rate of interest of 4.140 percent on the notional amount, and we will receive a floating rate of interest (based on SOFR, subject to a floor of zero percent) on the notional amount.

As a result, a portion of the outstanding principal balance on the Amended Term Loan Facilities in an amount that correlates with the then current notional amount of this interest rate swap contract is fixed at a rate of 4.140 percent, plus the incremental borrowing margin of 2.25 percent.

We believe our exposure to interest rate fluctuations could be material to our overall results of operations.

See Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on our use of interest rate swaps.

A significant portion of our outstanding debt, including indebtedness under the Amended Credit Facilities, bears interest at variable rates.

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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.

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

The impact of increases in interest rates could be more significant for us than it would be for some other companies because of our significant indebtedness.

The following table summarizes information about our debt as of December 31, 2024 (after considering the impact of the effective interest rate swaps), including the principal cash payments and related weighted‑average interest rates by expected maturity dates based on applicable rates as of December 31, 2024.

(In millions)

Variable rate

Average interest rate

During the year ended December 31, 2024, the average interest rates paid and received on the interest rate swaps, before the application of the applicable borrowing margin, were 3.0 percent and 5.2 percent, respectively.

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 5. Market for Registrant’s Common Equity