Frontdoor, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGIST ERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Frontdoor, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated statements of financial position of Frontdoor, Inc. and subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive income, changes in (deficit) equity, and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accrual for Home Warranty Claims – Refer to Notes 2 and 9 of the financial statements Critical Audit Matter Description The Company maintains an accrual for the cost to complete home warranty claims when the ultimate cost of the claims is not yet known. The estimate is determined using an internal analysis based on current claims and historical claims experience. In addition, the Company engages a third-party actuary to develop an independent estimate of the ultimate costs using generally accepted actuarial methods that incorporate cumulative claims experience and information provided by the Company. The Company regularly reviews its estimates of claims costs and adjusts the estimates, as needed. We identified the accrual for home warranty claims as a critical audit matter because estimating the cost to complete home warranty claims involves significant estimation by management due to the subjectivity involved in determining loss development factors for outstanding claims, including the impact of underlying business changes and market trends on the ultimate costs. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists, when performing audit procedures to evaluate the reasonableness of the accrual for home warranty claims as of December 31, 2025. 49 How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the home warranty claims accrual included the following, among others: • We tested the design and operating effectiveness of controls over the home warranty claims accrual, including those over the Company’s internal analysis to project the ultimate costs associated with settling each claim as well as oversight of the actuary and related assumptions. Additionally, we tested the design and operating effectiveness over the controls covering the completeness and accuracy of the claims data underlying the accrual process. • We compared management’s prior period assumptions of expected development to actual development during the current year and subsequent period to identify potential bias in the determination of the home warranty claims accrual. • With the assistance of our actuarial specialists: ▪ We evaluated the methods and assumptions used by management to estimate the home warranty claims accrual. ▪ We developed independent estimates of the home warranty claims accrual and compared our estimate to management’s estimate. • We tested the underlying data that served as the basis for the Company’s internal analysis and their actuary’s analysis, including historical claims, to ensure that the inputs to the estimates were complete and accurate. /s/ Deloitte & Touche LLP Memphis, Tennessee February 26, 2026 We have served as the Company's auditor since 2017. 50 Consolidated Statements of Oper ations and Comprehensive Income ( In millions, except per share data ) Year Ended December 31, 2025 2024 2023 Revenue $ 2,093 $ 1,843 $ 1,780 Cost of services rendered 936 852 895 Gross Profit 1,157 991 885 Selling and administrative expenses 669 612 581 Depreciation and amortization expense 89 39 37 Restructuring charges 4 8 16 Interest expense 79 40 40 Interest and net investment income ( 22 ) ( 20 ) ( 16 ) Loss on extinguishment of debt — 3 — Income before Income Taxes 338 309 229 Provision for income taxes 84 74 57 Net Income $ 255 $ 235 $ 171 Other Comprehensive Loss, Net of Income Taxes: Unrealized loss on derivative instruments, net of income taxes ( 12 ) ( 6 ) ( 3 ) Total Other Comprehensive (Loss) Income, Net of Income Taxes ( 12 ) ( 6 ) ( 3 ) Comprehensive Income $ 243 $ 229 $ 169 Earnings per Share: Basic $ 3.48 $ 3.05 $ 2.13 Diluted $ 3.42 $ 3.01 $ 2.12 Weighted-average Common Shares Outstanding: Basic 73.1 77.0 80.5 Diluted 74.5 78.0 80.9 See the accompanying Notes to the Consolidated Financial Statements. 51 Consolidated Statemen ts of Financial Position (In millions, except share data) As of December 31, 2025 2024 Assets: Current Assets: Cash and cash equivalents $ 566 $ 421 Marketable securities — 15 Receivables, less allowance of $ 4 and $ 4 , respectively 10 10 Prepaid expenses and other current assets 44 42 Assets held for sale 4 — Total Current Assets 624 488 Other Assets: Property and equipment, net 57 73 Goodwill 959 967 Intangible assets, net 398 448 Operating lease right-of-use assets 7 8 Long-term marketable securities — 38 Deferred reinsurance 66 65 Deferred customer acquisition costs 14 11 Other assets 17 11 Total Assets $ 2,142 $ 2,107 Liabilities and Shareholders' Equity: Current Liabilities: Accounts payable $ 89 $ 71 Accrued liabilities: Payroll and related expenses 47 44 Home warranty claims 69 74 Income taxes payable 26 — Other 34 28 Deferred revenue 107 123 Current portion of long-term debt 29 29 Total Current Liabilities 402 369 Long-Term Debt 1,144 1,170 Other Long-Term Liabilities: Deferred tax liabilities, net 53 49 Operating lease liabilities 18 20 Unearned insurance premium 236 233 Long-term deferred revenue 19 12 Other long-term liabilities 27 16 Total Other Long-Term Liabilities 354 329 Commitments and Contingencies (Note 9) Shareholders' Equity: Common stock, $ 0.01 par value; 2,000,000,000 shares authorized; 88,480,560 shares issued and 70,958,215 shares outstanding as of December 31, 2025 and 87,434,468 shares issued and 75,314,243 shares outstanding as of December 31, 2024 1 1 Additional paid-in capital 195 152 Retained earnings 785 530 Accumulated other comprehensive loss ( 12 ) — Less treasury stock, at cost; 17,522,345 shares as of December 31, 2025 and 12,120,225 shares as of December 31, 2024 ( 727 ) ( 444 ) Total Shareholders' Equity 242 239 Total Liabilities and Shareholders' Equity $ 2,142 $ 2,107 See the accompanying Notes to the Consolidated Financial Statements. 52 Consol idated Statements of Changes in (Deficit) Equity (In millions) Shares Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Equity Balances as of December 31, 2022 82 $ 1 $ 90 $ 124 $ 8 $ ( 162 ) $ 61 Net income — — — 171 — — 171 Stock-based compensation expense — — 26 — — — 26 Exercise of stock options — — 4 — — — 4 Taxes paid related to net share settlement of equity awards — — ( 4 ) — — — ( 4 ) Issuance of common stock related to ESPP — — 1 — — — 1 Repurchases of common stock ( 4 ) — — — — ( 121 ) ( 121 ) Other comprehensive income, net of tax — — — — ( 3 ) — ( 3 ) Balances as of December 31, 2023 78 $ 1 $ 117 $ 296 $ 6 $ ( 283 ) $ 136 Net income — — — 235 — — 235 Stock-based compensation expense — — 26 — — — 26 Exercise of stock options — — 14 — — — 14 Taxes paid related to net share settlement of equity awards — — ( 6 ) — — — ( 6 ) Issuance of common stock related to ESPP — — 1 — — — 1 Repurchases of common stock ( 4 ) — — — — ( 161 ) ( 161 ) Other comprehensive loss, net of tax — — — — ( 6 ) — ( 6 ) Balances as of December 31, 2024 75 $ 1 $ 152 $ 530 $ — $ ( 444 ) $ 239 Net income — — — 255 — — 255 Stock-based compensation expense — — 34 — — — 34 Exercise of stock options — — 18 — — — 18 Taxes paid related to net share settlement of equity awards — — ( 9 ) — — — ( 9 ) Issuance of common stock upon vesting of equity awards 1 — — — — — — Issuance of common stock related to ESPP — — 1 — — — 1 Repurchases of common stock ( 5 ) — — — — ( 283 ) ( 283 ) Other comprehensive loss, net of tax — — — — ( 12 ) — ( 12 ) Balances as of December 31, 2025 71 $ 1 $ 195 $ 785 $ ( 12 ) $ ( 727 ) $ 242 See the accompanying Notes to the Consolidated Financial Statements. 53 Consolidated S tatements of Cash Flows (In millions) Year Ended December 31, 2025 2024 2023 Cash and Cash Equivalents at Beginning of Period $ 421 $ 325 $ 292 Cash Flows from Operating Activities: Net Income 255 235 171 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization expense 89 39 37 Deferred income tax provision (benefit) 9 — ( 13 ) Stock-based compensation expense 34 26 26 Loss on extinguishment of debt — 3 — Other ( 1 ) 1 6 Changes in working capital: Receivables ( 1 ) 1 — Deferred reinsurance ( 2 ) — — Deferred customer acquisition costs ( 3 ) 1 — Prepaid expenses and other current assets ( 5 ) ( 2 ) ( 1 ) Accounts payable 19 ( 7 ) ( 4 ) Deferred revenue ( 8 ) ( 9 ) ( 19 ) Accrued liabilities ( 1 ) ( 10 ) 2 Unearned insurance premium 5 ( 1 ) — Current income taxes 25 ( 8 ) ( 1 ) Net Cash Provided from Operating Activities 416 270 202 Cash Flows from Investing Activities: Purchases of property and equipment ( 26 ) ( 39 ) ( 32 ) Business acquisitions, net of cash acquired 3 ( 583 ) — Purchases of available-for-sale securities ( 6 ) — — Sales and maturities of available-for-sale securities 60 — — Net Cash Provided from (Used for) Investing Activities 31 ( 622 ) ( 32 ) Cash Flows from Financing Activities: Borrowings of debt, net of discount — 1,216 — Repayments of debt ( 29 ) ( 598 ) ( 17 ) Debt issuance costs paid — ( 18 ) — Repurchases of common stock ( 283 ) ( 161 ) ( 121 ) Other financing activities 9 9 1 Net Cash Provided from (Used for) Financing Activities ( 302 ) 447 ( 137 ) Cash Increase During the Period 145 96 34 Cash and Cash Equivalents at End of Period $ 566 $ 421 $ 325 See the accompanying Notes to the Consolidated Financial Statements. 54 Frontdoor, Inc. Notes to the Consolidated Financial Statements Note 1. Description of Business 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 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. Note 2. Significant Accounting Policies Consolidation Our consolidated financial statements include all of our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements requires management to make certain estimates and assumptions required under U.S. GAAP that may differ from actual results. The more significant areas requiring the use of management estimates relate to: revenue recognition; business combinations; home warranty claims accruals; the valuation of property and equipment, goodwill and intangible assets; useful lives for recognizing depreciation and amortization expense; accruals for current and deferred tax accounts; stock-based compensation expense; and litigation matters. Revenue The majority of our revenue is generated from home warranty contracts entered into with our customers. Home warranty contracts are typically one year in duration. Home warranty claims costs are expensed as incurred. We recognize revenue over the life of these contracts in proportion to the expected direct costs. Those costs bear a direct relationship to the fulfillment of our obligations under the contracts and are representative of the relative value provided to our customers. We regularly review our estimates of claims costs and adjust our estimates when appropriate. Revenues are presented net of sales taxes collected and remitted to government taxing authorities in the accompanying consolidated statements of operations and comprehensive income. We record a receivable due from customers once we have an unconditional right to invoice and receive payment in the future related to the services provided and anticipate the collection of amounts due to us. We invoice our monthly-pay customers on a straight-line basis over the contract term. As a result, contract assets arise when we recognize revenue for our home warranty contracts prior to a customer being invoiced. Deferred revenue represents a contract liability and is recognized when cash payments are received in advance of the performance of services, including when the amounts are refundable. Amounts are recognized as revenue in proportion to the costs expected to be incurred in performing services under our contracts. 55 Home Warranty Claim Accruals Home warranty claims costs are expensed as incurred. Accruals for home warranty claims are made using internal actuarial projections, which are based on current claims and historical claims experience. Accruals are established based on estimates of the ultimate cost to settle claims. Home warranty claims take approximately three months to settle, on average, and substantially all claims are settled within six months of incurrence. The amount of time required to settle a claim can vary based on a number of factors, including whether a replacement is ultimately required. In addition to our estimates, we engage a third-party actuary to perform an accrual analysis utilizing generally accepted actuarial methods that incorporate cumulative historical claims experience and information provided by us. We regularly review our estimates of claims costs along with the third-party analysis and adjust our estimates when appropriate. We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these judgmental accruals. However, the use of any estimation technique in this area is inherently sensitive given the magnitude of claims involved. For example, industry-wide parts and equipment availability challenges and inflation can impact our ability to estimate the cost to settle claims. We believe our recorded obligations for these expenses are consistently measured. Nevertheless, changes in claims costs can materially affect the estimates for these liabilities. Business Combinations We account for business combinations using the acquisition method of accounting. Under the acquisition method, the purchase price of the acquisition is allocated to the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the time of the acquisition. This allocation involves a number of assumptions, estimates and judgments that could materially affect the timing or amounts recognized in the consolidated financial statements. In developing estimates of fair values for long-lived assets, including identifiable intangible assets, we utilize a variety of inputs including forecasted cash flows, anticipated growth rates, discount rates, customer attrition, royalty rates, estimated replacement costs and depreciation and obsolescence factors. Determining the fair value for tangible assets such as real and personal property and specifically identified intangible assets such as customer lists and developed technology involves judgment. We may refine our estimates and make adjustments to the assets acquired and liabilities assumed over a measurement period, not to exceed one year. 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 allocation of the purchase price to the fair value of the assets acquired and liabilities assumed. Property and Equipment, Goodwill and Intangible Assets Property and equipment consist of the following: As of December 31, Estimated Useful Lives (In millions) 2025 2024 (Years) Land $ — $ 2 Buildings and improvements 9 11 10 - 40 Technology and communications 163 139 3 - 7 Office equipment, furniture and fixtures, and vehicles 5 5 5 - 7 Property and equipment, gross 176 157 Less accumulated depreciation ( 119 ) ( 84 ) Property and equipment, net $ 57 $ 73 Depreciation of property and equipment wa s $ 36 million, $ 35 million and $ 32 million for the years ended December 31, 2025, 2024 and 2023, respectively. Property and equipment are recorded at cost. Property and equipment and intangible assets with finite lives are depreciated on a straight-line basis over their estimated useful lives. These lives are based on our previous experience for similar assets, potential market obsolescence and other industry and business data. Property and equipment and finite-lived intangible assets are tested for recoverability if circumstances indicate a potential impairment. If the carrying amount is no longer recoverable based upon the undiscounted future cash flows of the asset, an impairment loss would be recognized equal to the difference between the carrying amount and the fair value of the asset. Changes in the estimated useful lives could cause us to adjust the carrying values or future expense accordingly. 56 We capitalize the costs directly related to the development of internal-use software for our platforms during the application development stage of the projects. Such costs primarily include payroll and payroll-related costs for engineers and product development employees directly associated with the development project. Our internal-use software is reported at cost less accumulated amortization within property and equipment, net on the consolidated statements of financial position. Amortization begins once the project is ready for its intended use. We amortize the asset on a straight-line basis over the estimated useful life, which is typically a three to seven-year period. 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. We perform our annual assessment for impairment on October 1 of every year. Goodwill and indefinite-lived intangible assets are tested for impairment at the reporting unit level. The Company can elect to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the reporting unit does not pass the qualitative assessment, or if the Company does not elect to perform the initial qualitative assessment, then the reporting unit’s carrying amount is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. The discounted cash flow approach uses expected future operating results. The market approach uses comparable company information to determine revenue and earnings multiples to value our reporting units. Failure to achieve these expected results or market multiples may cause a future impairment of goodwill at the reporting unit. Goodwill and indefinite-lived intangible assets are considered impaired if the carrying amount of the reporting unit exceeds its fair value. See Note 4 to the accompanying consolidated financial statements for information related to our goodwill and intangible assets. As part of business combination accounting, a value of business acquired ("VOBA") intangible asset is established upon the acquisition of blocks of contracts. This intangible represents the present value of estimated net cash flows for the in-force contracts as of the acquisition date. VOBA is amortized as a component of depreciation and amortization expense in the accompanying consolidated statements of operations and comprehensive income in relation to the profit emergence of the underlying acquired contracts. The valuation of VOBA is based on many factors including investment yields, expenses and discount rate. Real Estate Held for Sale We classify long-lived assets to be sold as held for sale in the period in which all required criteria are met. We initially measure a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. Upon determining a long-lived asset meets the criteria to be classified as held for sale, we cease depreciation and report such long-lived assets, if material, as Assets held for sale on the accompanying condensed consolidated statements of financial position. On September 4, 2025, we listed 2-10 HBW's corporate office in Aurora, Colorado for sale. We determined that the related assets met the criteria to be classified as held for sale during the third quarter of 2025. Advertising We expense advertising costs as incurred. Advertising expense for the years ended December 31, 2025, 2024 and 2023 was $ 162 million, $ 170 million and $ 156 million, respectively. Leases We determine if an arrangement is a lease at inception. We recognize a right-of-use (“ROU”) asset and lease liability for all leases with terms of 12 months or more. ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our incremental borrowing rate is determined based on our secured borrowing rating and the lease term. Our operating lease ROU assets are recorded net of lease incentives. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are accounted for separately for our real estate leases. See Note 5 to the accompanying consolidated financial statements for information related to our leases. 57 Restricted Net Assets There are regulatory restrictions on the ability of certain of our subsidiaries to transfer funds to us. The payments of ordinary and extraordinary dividends by our subsidiaries are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can make to us. As of December 31, 2025, the total net assets subject to these regulatory restrictions was $ 151 million. Statutory Financial Information A subsidiary of 2-10 Holdco, Inc., New Home Warranty Insurance Company, a risk retention group, (the "RRG") is required to prepare statutory financial statements in accordance with the laws and regulations in the state jurisdictions in which it operates. We apply the statutory accounting practices prescribed by the National Association of Insurance Commissioners (“NAIC”) as the basis for accounting in the RRG standalone statutory financial statements. These statutory financial statements are prepared on a calendar year basis. For the year ended December 31, 2025, the RRG reported a statutory net loss of $ 0.9 million and statutory capital and surplus of $ 6.3 million. No dividends were declared or paid by the RRG during 2025. As part of its regulatory filings and pursuant to the Risk-Based Capital (“RBC”) requirements of the NAIC, the RRG is required to maintain a minimum capitalization level, as determined based on formulas and other factors incorporating various business risks of the insurance subsidiary. As of December 31, 2025, the RRG’s statutory surplus exceeded the RBC requirement. Financial Instruments and Credit Risk We hedge the interest payments on a portion of our variable rate debt through the use of an interest rate swap contract. We have classified our interest rate swap contract as a cash flow hedge and recorded the hedging instrument in the consolidated statements of financial position as either an asset or liability at fair value. The effect of derivative financial instrument transactions could have a material impact on our financial statements. We do not hold or issue derivative financial instruments for trading or speculative purposes. Financial instruments, which potentially subject us to financial and credit risk, consist principally of receivables. The majority of our receivables have little concentration of credit risk due to the large number of customers with relatively small balances and their dispersion across geographical areas. We maintain an allowance for losses based upon the expected collectability of receivables. See Note 18 to the accompanying consolidated financial statements for information relating to the fair value of financial instruments. Stock-Based Compensation Expense Stock-based compensation expense for non-qualified stock options is estimated at the grant date based on an award’s fair value as calculated by the Black-Scholes option-pricing model and is recognized as expense over the requisite service period. The Black-Scholes model requires various highly judgmental assumptions including expected volatility and option life. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense for future grants may differ materially from that recorded in the current period related to options granted to date. In addition, we estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience. To the extent the actual forfeiture rate is different from the estimate, stock-based compensation expense is adjusted accordingly in the period the forfeiture occurs or the awards vest. See Note 10 to the accompanying consolidated financial statements for more details, including the calculation of stock-based compensation expense for stock options, performance options, RSUs, performance shares and RSAs. Income Taxes Frontdoor files a consolidated U.S. federal income tax return. State and local returns are filed both on a separate company basis and on a combined unitary basis with Frontdoor. Current and deferred income taxes are provided for on a separate company basis. We account for income taxes using an asset and liability approach for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income during the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Valuation allowances are established when management determines that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. The financial effect of changes in tax laws or rates is accounted for in the period of enactment. We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in tax returns. We recognize potential interest and penalties related to unrecognized tax benefits as income tax expense. 58 Newly Issued Accounting Standards In 2023, the FASB issued ASU 2023-09 , Income Taxes (Topic 740), which improves income tax disclosures. The adoption of this standard expands our annual income tax disclosures, including enhanced transparency in the effective tax rate reconciliation and disaggregation of income taxes paid. The adoption does not have a material impact on the consolidated financial statements. This guidance is applied prospectively in our Annual Report on Form 10-K for the year ended December 31, 2025. See Note 6 for the required disclosures. In 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires disclosure, in the notes to the financial statements, of specified information about certain costs and expenses on an annual and interim basis. This guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted, and the guidance can be applied either prospectively or retrospectively. We are currently evaluating the impact of this ASU on our consolidated financial statements. In 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) , which modernizes the accounting guidance for the costs to develop software for internal use. This guidance is effective for annual periods beginning after December 15, 2027. Early adoption is permitted and the guidance can be applied on a prospective basis, a modified basis for in-process projects or on a retrospective basis. We are currently evaluating the impact of this ASU on our consolidated financial statements. 59 Note 3. Revenue The majority of our revenue is generated from home warranty contracts entered into with our customers. Home warranty contracts are typically one year in duration. We derive substantially all of our revenue from customers in the United States. We disaggregate revenue from contracts with customers into major customer acquisition channels. We determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Revenue by major customer acquisition channel for our home warranties and other revenue is as follows: Year Ended December 31, (In millions) 2025(2) 2024 2023 Renewals $ 1,587 $ 1,437 $ 1,367 Real estate (1) 141 125 141 Direct-to-consumer (1) 172 166 194 Non-warranty and other 193 116 77 Total $ 2,093 $ 1,843 $ 1,780 (1) First-year revenue only. (2) The year ended December 31, 2025, includes $ 188 million as a result of the 2-10 HBW Acquisition on December 19, 2024 . Our home warranty contracts have one primary performance obligation, which is to provide for the repair or replacement of essential home systems and appliances, as applicable per the contract. We recognize revenue at the agreed upon contractual amount over time using the input method in proportion to the costs expected to be incurred in performing services under the contracts. Those costs bear a direct relationship to the fulfillment of our obligations under the contracts and are representative of the relative fair value of the services provided to the customer. As the costs to fulfill the obligations of the home warranties are incurred on an other-than-straight-line basis, we utilize historical evidence to estimate the expected claims expense and related timing of such costs and make a corresponding adjustment each period to the timing of our related revenue recognition. This adjustment to the straight-line revenue creates a contract asset or contract liability, as described under the heading “Contract Assets and Liabilities” below. We regularly review our estimates of claims costs and adjust these estimates when appropriate. Renewals Revenue from customer renewals of home warranty contracts, which were previously initiated in the real estate or direct-to-consumer channel are classified as renewal revenue above. Renewals relate to consecutive contract periods and take place at the end of the first year of a real estate or direct-to-consumer home warranty contract and continue to be categorized in our renewal channel thereafter. Customer payments for renewals are primarily received in installments over the new contract period. Real estate Real estate home warranties are sold through annual contracts that occur in connection with a real estate sale. These plans are typically paid in full at closing on the real estate transaction. First-year revenue from the real estate channel is classified as real estate above. At the option of the customer, upon renewal of the contract, the future revenue derived from home warranties sold in this channel is classified as renewal revenue as described above. Direct-to-consumer Direct-to-consumer home warranties are sold through annual contracts that occur in response to our marketing efforts. Customer payments for direct-to-consumer sales are primarily received in installments over the contract period. First-year revenue from the direct-to-consumer channel is classified as direct-to-consumer above. At the option of the customer, upon renewal of the contract, the future revenue derived from home warranties sold in this channel is classified as renewal revenue as described above. Non-warranty and other Non-warranty and other revenue primarily includes revenue generated by non-warranty home services, including the New HVAC upgrade and Moen programs, home maintenance services and new home builder warranties. 60 Deferred Customer Acquisition Costs We capitalize the incremental costs of obtaining a contract with a customer and recognize the related expense using the input method in proportion to the costs expected to be incurred in performing services under the contract, over the expected customer relationship period. Deferred customer acquisition costs were $ 14 million and $ 11 million as of December 31, 2025 and 2024 , respectively. Amortization of deferred customer acquisition costs was $ 12 million, $ 12 million and $ 16 million for the years ended December 31, 2025, 2024 and 2023, respectively. There were no impairment losses related to these capitalized costs during the years ended December 31, 2025, 2024 and 2023. Deferred Policy Acquisition Costs We capitalize certain costs related to the issuance of insurance policies, net of ceding commission income from reinsurers, under the new home builder warranty program as deferred policy acquisition costs and amortize these costs over the term of the underlying pattern of insurance risk. Ceding commission amounts, which represent a recovery of policy acquisition costs, are treated as a reduction of deferred policy acquisition costs. We anticipate that all deferred policy acquisition costs will be recoverable. Deferred policy acquisition costs were $ 5 million and less than $ 1 million as of December 31, 2025 and 2024 , respectively. Amortization of deferred policy acquisition costs were less than $ 1 million for the year ended December 31, 2025. There was no amortization of deferred policy acquisition costs for the year ended December 31, 2024. Deferred policy acquisition costs are recorded in Other assets on the accompanying condensed consolidated statement of financial position. Receivables, Less Allowance We record a receivable due from customers once we have an unconditional right to invoice and receive payment in the future related to the services provided and anticipate the collection of amounts due to us. Contracts for home warranties may be invoiced upfront or monthly in straight-line installment payments over the contract period. The payment terms are determined prior to the execution of the contract. Contract Assets and Liabilities Contract assets arise when we recognize revenue for our home warranty contracts prior to a customer being invoiced. These timing differences are created when the recognition of revenue in proportion to the costs expected to be incurred in performing the services under the contract are accelerated as compared to the recognition of revenue on a straight-line basis over the contract period. There were no contract assets as of December 31, 2025 and 2024. Our contract liabilities consist of deferred revenue which is recognized when cash payments are received in advance of the performance of services, including when the amounts are refundable. Amounts are recognized as revenue in proportion to the costs expected to be incurred in performing services under our contracts. A summary of the changes in deferred revenue, including the long-term portion, for the year ended December 31, 2025 is as follows: (In millions) Balance as of December 31, 2024 $ 135 Deferral of revenue 274 Recognition of deferred revenue ( 283 ) Balance as of December 31, 2025 $ 126 There was approximately $ 109 million of revenue recognized during the year ended December 31, 2025 that was included in the deferred revenue balance as of December 31, 2024. Unearned Insurance Premium New home builder warranty revenue is recognized over the life of the contract in proportion to the costs expected to be incurred in performing services under the contract. Amounts not earned and recognized to date are recognized as unearned insurance premium on the consolidated statement of financial position. Deferred Reinsurance In the normal course of business, we seek to reduce our loss exposure in the new home builder warranty program by reinsuring certain levels of risk with reinsurers. Premiums ceded are expensed over the term of underlying insurance policies, and the unexpired portion of reinsurance is deferred and recognized as deferred reinsurance on the consolidated statement of financial position. 61 Note 4. Goodwill and Intangible Assets 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. We perform our annual assessment for impairment on October 1 of every year. The balance of goodwill was $ 959 million and $ 967 million as of December 31, 2025 and 2024, respectively. During the year ended December 31, 2024, we acquired $ 457 million of goodwill in connection with the 2-10 HBW Acquisition. See Note 7 for additional information on the 2-10 HBW Acquisition. There were no goodwill impairment charges recorded in the years ended December 31, 2025 and 2024. The following table provides a summary of the components of our intangible assets: As of December 31, 2025 2024 (In millions) Gross Accumulated Amortization Net Gross Accumulated Amortization Net Trade names (1) $ 141 $ — $ 141 $ 141 $ — $ 141 Value of business acquired 148 ( 30 ) 118 148 ( 1 ) 147 Homeowner relationships 231 ( 183 ) 48 214 ( 173 ) 41 Builder relationships 38 ( 13 ) 25 73 — 72 Broker relationships 52 ( 18 ) 34 28 ( 16 ) 13 Developed technology 35 ( 17 ) 18 35 ( 19 ) 16 Other 32 ( 17 ) 14 35 ( 17 ) 19 Total $ 676 $ ( 278 ) $ 398 $ 673 $ ( 225 ) $ 448 (1) Not subject to amortization. During the year ended December 31, 2024, in connection with the 2-10 HBW Acquisition, we acquired the following intangible assets: Weighted Average Useful Lives (In millions) (Years) Value of business acquired $ 148 13 Homeowner relationships 58 6 Builder relationships 38 13 Broker relationships 37 15 Developed technology 16 3 Other 15 9 Total $ 312 Amortization expense was $ 53 million, $ 4 million and $ 4 million for the years ended December 31, 2025, 2024 and 2023, respectively. There were no intangible asset impairment charges recorded in the years ended December 31, 2025, 2024 and 2023. The following table outlines expected amortization expense for existing intangible assets for the next five years: (In millions) 2026 $ 49 2027 41 2028 35 2029 30 2030 27 Thereafter 75 Total $ 257 62 Note 5. Leases We have operating leases for our corporate headquarters located in Memphis, Tennessee, a collaboration center located in Scottsdale, Arizona and a technology collaboration center in Pune, India. We also continue to lease certain office space in other geographies, which we have, as indicated below, either exited or subleased. Our leases have remaining lease terms ranging from one year to 9 years , some of which include options to extend the leases for up to five years . The weighted-average remaining lease term and weighted-average discount rate related to our operating leases are as follows: As of December 31, 2025 2024 Weighted-average remaining lease term (years) 8 9 Weighted-average discount rate 6.6 % 6.5 % We recognized operating lease expense of $ 1 million, $ 1 million and $ 3 million for the years ended December 31, 2025, 2024 and 2023, respectively. These expenses are included in selling and administrative expenses in the accompanying consolidated statements of operations and comprehensive income. Supplemental statement of financial position information related to our operating lease liabilities is as follows: As of December 31, (In millions) 2025 2024 Other accrued liabilities $ 3 $ 2 Operating lease liabilities 18 20 Total operating lease liabilities $ 20 $ 22 Supplemental cash flow information related to our operating leases is as follows: Year Ended December 31, (In millions) 2025 2024 2023 Cash paid on operating lease liabilities (1) $ 3 $ 4 $ 4 Right-of-use assets obtained in exchange for lease obligations — 7 — (1) Amount is presented net of cash provided from sublease income. In conjunction with the operating leases of our corporate headquarters located in Memphis, Tennessee, and our collaboration center located in Scottsdale, Arizona, we recognized $ 1 million in tenant improvement allowances during the year ended December 31, 2025, which is a non-cash investing activity. The following table presents the maturities of our operating lease liabilities as of December 31, 2025: (In millions) 2026 (1) $ 3 2027 (1) 3 2028 3 2029 3 2030 3 Thereafter 10 Total future lease payments (1) 24 Less imputed interest ( 6 ) Total operating lease liabilities (1) $ 18 (1) Amount is presented net of future sublease income totaling $ 2 million, which relates to the years ending December 31, 2026 and June 30, 2027 . 63 Closure of Leased Facilities In August 2023, we entered into a new lease in Scottsdale, Arizona and subsequently decided to exit our leased facility in Phoenix, Arizona. Additionally, in November 2023, we decided to exit our leased facilities in Seattle, Washington, Portland, Oregon and Denver, Colorado. As a result of exiting these leased facilities during 2023 , we incurred non-cash impairment charges of $ 5 million for the year ended December 31, 2023 relating to the corresponding operating lease right-of-use assets. Note 6. Income Taxes For the years ended December 31, 2025, 2024 and 2023 , we had $ 2 million, $ 3 million and $ 5 million of unrecognized tax benefits, respectively, all of which would impact the effective tax rate if recognized. The table below summarizes the changes in gross unrecognized tax benefits: (In millions) Balance as of December 31, 2023 $ 5 Decreases in tax positions for current year ( 2 ) Balance as of December 31, 2024 3 Decreases in tax positions for current year ( 1 ) Balance as of December 31, 2025 $ 2 Interest and penalties accrued on the liability for unrecognized tax benefits and recognized as income tax expense are less than $ 1 million as of December 31, 2025. We are subject to taxation in the United States, various states and foreign jurisdictions. Due to expired statutes, the majority of our U.S. federal, state and local income tax returns for the years prior to 2022 are no longer subject to examination by tax authorities. Substantially all of our income before income taxes for the years ended December 31, 2025, 2024 and 2023 was generated in the United States. The reconciliation of income tax computed at the U.S. federal statutory tax rate to our effective income tax rate for the year ended December 31, 2025 is as follows: Year Ended December 31, 2025 U.S . federal statutory tax $ 71 21.0 % State and local income tax , net of federal income tax effects (1) 11 3.3 Tax credits ( 1 ) ( 0.2 ) Nontaxable or nondeductible items 2 0.6 Changes in valuation allowances 1 0.2 Total tax provision and effective tax rate $ 84 24.7 % (1) State taxes in Virginia, Texas, Florida, Illinois, Arizona, Georgia and Maryland make up the majority of the effect of the state and local tax category. As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the reconciliation of income tax computed at the U.S. federal statutory tax rate to our effective income tax rate is as follows: Year Ended December 31, 2024 2023 Tax at U.S. federal statutory rate 21.0 % 21.0 % State and local income taxes, net of U.S. federal benefit 2.6 2.4 Other permanent items 0.8 0.9 Stock-based compensation 0.3 1.2 Goodwill impairment — — Tax credits ( 0.7 ) ( 0.7 ) Uncertain tax positions — 0.2 Effective rate 24.1 % 25.0 % 64 Income tax expense is as follows: Year Ended December 31, (In millions) 2025 2024 2023 Current: U.S. federal $ 63 $ 63 $ 60 State and local 11 10 10 Total current income taxes 74 74 70 Deferred: U.S. federal 7 — ( 11 ) State and local 2 — ( 3 ) Total deferred income taxes 9 — ( 13 ) Provision for income taxes $ 84 $ 74 $ 57 Significant components of our deferred tax balances are as follows: As of December 31, (In millions) 2025 2024 Long-term deferred tax assets (liabilities): Intangible assets $ ( 106 ) $ ( 115 ) Unearned revenue 40 38 Property and equipment ( 5 ) 9 Deferred customer acquisition costs ( 5 ) ( 3 ) Other assets ( 4 ) ( 5 ) Accrued salaries and wages 9 7 Accrued liabilities 1 2 Other long-term liabilities 6 6 Operating lease liabilities 5 6 Deferred interest expense 5 5 Tax credits and loss carryforwards 3 3 Valuation allowance ( 3 ) ( 2 ) Net long-term deferred tax liabilities $ ( 53 ) $ ( 49 ) On July 4, 2025, the One Big Beautiful Bill Act (the “Bill”) was enacted into U.S. law. Certain provisions are applicable to the Company beginning in 2025, while other provisions will be implemented in future periods. As a result of the Bill, we recognized an increase in our net deferred tax liability and a decrease to our income tax payable resulting from the restoration of full expensing of U.S. research and experimentation expenditures and reinstating the 100% bonus depreciation for eligible assets. We do not expect any current or ongoing material impact to our effective tax rate as a result of the Bill. Note 7. 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 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. 2-10 HBW is a provider of home warranties. 2-10 HBW is also a leading provider of new home builder warranties that offers 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. 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 Note 12 for additional information on the debt refinancing transactions. 65 Total consideration as of December 31, 2025, is as follows: (In millions) Cash consideration paid $ 432 Payment of 2-10 HBW indebtedness 157 Payment of 2-10 HBW transaction costs 15 Total purchase price consideration 604 Less: Acquired 2-10 HBW cash ( 24 ) Total purchase price consideration, net of cash acquired $ 580 A summary of the consideration paid and the amounts of identified assets acquired and liabilities assumed at the acquisition date, as determined based on management's assessment of the acquisition date fair value, is as follows: (In millions) Cash and cash equivalents $ 24 Marketable securities 15 Receivables 4 Prepaid expenses and other current assets 9 Property and equipment, net 5 Goodwill 457 Intangible assets 312 Long-term marketable securities 39 Deferred reinsurance 64 Other assets 9 Accounts payable ( 1 ) Accrued liabilities: Payroll and related expenses ( 8 ) Home warranty claims ( 7 ) Other ( 6 ) Deferred revenue ( 29 ) Deferred tax liabilities, net ( 25 ) Unearned insurance premium ( 232 ) Long-term deferred revenue ( 12 ) Other long-term liabilities ( 13 ) Total consideration paid $ 604 As of December 31, 2025, the purchase price allocation for this acquisition has been finalized. During the year ended December 31, 2025, we made measurement period adjustments to reflect facts and circumstances in existence as of the acquisition date. These adjustments included updates to purchase accounting valuations and a $ 3 million reduction in the 2-10 HBW Acquisition purchase price as a result of the working capital true up provisions in the purchase agreement. The impact of these adjustments was a $ 1 million increase in prepaid expenses and other current assets, a $ 1 million decrease in property and equipment, net, a $ 7 million decrease in goodwill, an $ 3 million increase in intangible assets, a $ 2 million decrease in deferred reinsurance and a $ 2 million decrease in unearned insurance premium. We recognized $ 6 million of revenue and $ 2 million of net loss during the year ended December 31, 2024 related to the operations of 2-10 HBW for the period from December 19, 2024 through December 31, 2024. In conjunction with the 2-10 HBW Acquisition, we recognized acquisition and integration costs of $ 8 million and $ 17 million during the years ended December 31, 2025 and 2024, respectively. These charges represent direct third-party costs, including legal, accounting and financial advisory fees and are included in selling and administrative expenses in the accompanying consolidated statements of operations and comprehensive income. 66 A summary of unaudited pro forma financial information related to our consolidated operating results as if the 2-10 HBW Acquisition occurred as of January 1, 2023 is as follows: Year Ended December 31, (In millions) 2024 2023 Revenue $ 2,028 $ 1,967 Net Income $ 194 $ 131 The unaudited pro forma financial information reflects pro forma adjustments to give effect to certain events management believes to be directly attributable to the acquisition. These pro forma adjustments include amortization and depreciation on acquired property and equipment and intangible assets. Additionally, the debt refinancing transactions that occurred contemporaneously with the closing of the 2-10 HBW acquisition are assumed to have occurred on January 1, 2023 , and historical interest expense associated with repaid borrowings associated with the Prior Credit Facilities have been removed. Note 8. Restructuring Charges We incurred restructuring charges of $ 4 million ($ 3 million, net of tax), $ 8 million ($ 6 million, net of tax) and $ 16 million ($ 12 million, net of tax) for the years ended December 31, 2025, 2024 and 2023, respectively. In 2025, restructuring charges included $ 3 million of severance costs, which related to our continued review and optimization of selling, general and administrative expenses. In 2024, restructuring charges included $ 7 million of severance costs and $ 1 million of expenses related to the exit of certain operating leases. The severance costs related to our continued review and optimization of selling, general and administrative expenses. 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 5 to the accompanying consolidated financial statements, $ 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. The pre-tax charges discussed above are included in restructuring charges in the accompanying consolidated statements of operations and comprehensive income. As of December 31, 2025 and 2024, there were $ 2 million and $ 4 million, respectively, of accrued restructuring charges on the accompanying consolidated balance sheets. During the year ended December 31, 2025, $ 4 million of the prior year accrued restructuring charges were paid or otherwise settled. Note 9. Commitments and Contingencies Accruals for home warranty claims are made using internal actuarial projections, which are based on current claims and historical claims experience. Accruals are established based on estimates of the ultimate cost to settle claims. Home warranty claims take approximately three months to settle, on average, and substantially all claims are settled within six months of incurrence. The amount of time required to settle a claim can vary based on a number of factors, including whether a replacement is ultimately required. In addition to our estimates, we engage a third-party actuary to perform an accrual analysis utilizing generally accepted actuarial methods that incorporate cumulative historical claims experience and information provided by us. We regularly review our estimates of claims costs along with the third-party analysis and adjust our estimates when appropriate. We believe that utilizing actuarial methods in our estimation process to account for these liabilities provides a consistent and effective way to measure these judgmental accruals. Unpaid losses and loss adjustment reserves represent the estimated ultimate cost of settling new home builder warranty claims and includes the estimated costs of claims incurred but not reported as of the balance sheet date. The reserve is based upon the facts of each case and our experience with similar cases. The establishment of appropriate reserves is an inherently uncertain and complex process. Reserve estimates are primarily derived using an actuarial estimation process in which historical loss patterns are applied to actual paid losses and reported losses (paid losses plus individual case reserves established by claim adjusters) to create an estimate of how losses are likely to develop over time. We regularly review our estimates of unpaid losses and adjust our estimates when appropriate. We report our unpaid losses and loss adjustment reserves gross of the amounts related to unpaid losses recoverable from reinsurers and net of amounts ceded to reinsurers. 67 We have certain liabilities with respect to existing or potential claims, lawsuits and other proceedings. We accrue for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified. Due to the nature of our business activities, we are also at times subject to pending and threatened legal and regulatory actions that arise out of the ordinary course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of any such matters is not expected, individually or in the aggregate, to have a material adverse effect on our business, financial position, results of operations or cash flows. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that our business, financial position, results of operations or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions. In the normal course of business, we periodically enter into guarantee agreements with our subsidiaries under which we agree to pay all liabilities and claims arising from home warranty service contracts sold by the service contract entity in the applicable states if that entity is unable to or does not perform its obligations. We are not required to recognize liabilities for guarantees issued on behalf of our subsidiaries unless it becomes probable that we will have to perform under the guarantees. We currently believe it is unlikely that we would be required to perform or otherwise incur any losses associated with guarantees of our subsidiaries’ obligations. As of December 31, 2025, we had no liability with respect to these guarantees. We have contractual obligations to purchase goods or services, which specify significant terms, including fixed or minimum quantities to be purchased and fixed minimum, or variable price provisions. The purchase commitments covered by these arrangements aggregate to approximately $ 29 million for the periods of less than one year. Note 10. Stock-Based Compensation The Omnibus Plan permits the grant to certain employees, consultants and non-employee directors of Frontdoor different forms of awards, including non-qualified stock options, performance options, RSUs, performance shares, RSAs and deferred share equivalents. Upon adoption, 14,500,000 shares were reserved for grants under the Omnibus Plan. Our compensation committee determines the long-term incentive mix of awards to our employees and may authorize new grants annually. As of December 31, 2025, 7,601,784 shares remain available for future grants. Stock Options Stock options are exercisable based on the terms outlined in the applicable award agreement and have generally vested over a period of three years . The grant date fair value of stock options is determined using the Black-Scholes option pricing model with the assumptions noted in the following table. A historical daily measurement of volatility is determined based on our and our peer companies’ average volatility. The risk-free interest rate is determined by reference to the outstanding U.S. Treasury note with a term equal to the expected life of the option granted. The expected life represents the period of time that options are expected to be outstanding and was calculated using the simplified approach. Year Ended December 31, Assumption 2025 2024 2023 Expected volatility 37.7 % 40.5 % 54.9 % Expected dividend yield 0.0 % 0.0 % 0.0 % Expected life (in years) 6.1 6.1 6.1 Risk-free interest rate 4.05 % 4.21 % 3.71 % During the years ended December 31, 2025, 2024 and 2023, we granted options to purchase 684,378 shares, 576,260 shares and 661,231 shares of our common stock, respectively, at weighted-average exercise prices of $ 38.03 per share, $ 31.94 per share and $ 26.67 per share, respectively. The weighted-average grant-date fair values of the options granted during the years ended December 31, 2025, 2024 and 2023 were $ 16.70 per share, $ 14.81 per share and $ 12.49 per share, respectively. During the year ended December 31, 2025, we applied a forfeiture assumption of 15 percent per annum in the recognition of the expense related to these options, with the exception of the options held by our CEO for which we applied a forfeiture rate of zero percent. The total intrinsic value of options exercised was $ 10 million, $ 6 million and $ 1 million for the years ended December 31, 2025, 2024 and 2023, respectively. 68 A summary of option activity under the Omnibus Plan during the year ended December 31, 2025 is presented below: Stock Options Weighted- average Exercise Price Aggregate Intrinsic Value (in millions) Weighted- average Remaining Contractual Term (in years) Outstanding as of December 31, 2024 1,330,031 $ 31.94 $ 30 7.65 Granted to employees 684,378 38.03 Exercised ( 432,358 ) 32.63 Forfeited ( 104,624 ) 34.53 Expired ( 4,516 ) 34.22 Outstanding as of December 31, 2025 1,472,911 $ 34.38 $ 34 8.03 Exercisable as of December 31, 2025 466,632 33.03 12 6.55 Performance Options Performance options are exercisable based on the terms outlined in the applicable award agreement. The grant date fair value of performance options is determined using a Monte Carlo simulation model. In addition to service conditions, the ultimate number of performance options to be earned depends on the achievement of a market condition prior to the fourth anniversary of the grant date, which is based on a share price target. Performance options granted during the year ended December 31, 2023 have a weighted-average service period of approximately 0.8 years from the initial grant date. During the year ended December 31, 2023 we granted options to purchase 652,004 shares of our common stock with a weighted-average exercise price of $ 26.42 per share. We did no t issue any performance options under the Omnibus Plan during the years ended December 31, 2025 and 2024. The weighted-average grant date fair values of the performance options granted during the year ended December 31, 2023 were $ 10.40 per share. During the year ended December 31, 2025, we applied a forfeiture assumption of 15 percent per annum in the recognition of the expense related to these performance options, with the exception of the options held by our CEO for which we applied a forfeiture rate of zero percent. The total intrinsic value of options exercised was $ 4 million and $ 3 million for the year ended December 31, 2025 and 2024, respectively. No performance options were exercised during the years ended December 31, 2023. A summary of performance options activity under the Omnibus Plan during the year ended December 31, 2025 is presented below: Performance Options Weighted- average Grant Date Fair Value Outstanding as of December 31, 2024 645,194 $ 10.69 Granted to employees — — Exercised ( 142,558 ) 10.60 Forfeited — — Outstanding as of December 31, 2025 502,636 $ 10.71 RSUs RSUs vest based on the terms outlined in the applicable award agreement, which is generally over a period of three years . The grant date fair value of RSUs is determined using the closing market price of our common stock on the trading day that immediately precedes the grant date. During the years ended December 31, 2025, 2024 and 2023, we granted 805,110 RSUs, 812,939 RSUs and 920,369 RSUs, respectively, with weighted-average grant date fair values of $ 38.82 per unit, $ 32.16 per unit and $ 26.60 per unit, respectively. During the year ended December 31, 2025, we applied a forfeiture assumption of 15 percent per annum in the recognition of the expense related to these RSUs, with the exception of the awards held by our CEO for which we applied a forfeiture rate of zero percent. The total fair value of RSUs vested during the years ended December 31, 2025, 2024 and 2023 was $ 18 million, $ 16 million and $ 13 million, respectively. 69 A summary of RSU activity under the Omnibus Plan during the year ended December 31, 2025 is presented below: RSUs Weighted- average Grant Date Fair Value Outstanding as of December 31, 2024 1,311,392 $ 29.68 Granted to employees 805,110 38.82 Vested ( 623,139 ) 29.04 Forfeited ( 150,749 ) 34.07 Outstanding as of December 31, 2025 1,342,614 $ 34.96 Performance Shares Performance shares vest based on the terms outlined in the applicable award agreement, which is generally after a period of three years . The grant date fair value of performance shares is determined using the closing market price of our common stock on the trading day that immediately precedes the grant date. In addition to service conditions, the ultimate number of performance shares to be earned depends on the achievement of a performance condition, which is based on a revenue target and company-specific operating results. The total number of performance shares that vest will range from 0 % to 200 % of each target as determined by measuring accumulated aggregate performance at the end of the performance period. During the years ended December 31, 2025 and 2024, we granted 211,889 and 217,527 performance shares, respectively, with a weighted-average grant date fair value of $ 40.35 and $ 31.95 per share, respectively. We did not issue any performance shares under the Omnibus Plan during the year ended December 31, 2023. During the year ended December 31, 2025, we applied a forfeiture assumption of 15 percent per annum in the recognition of the expense related to these performance shares, with the exception of the awards held by our CEO for which we applied a forfeiture rate of zero percent. The total fair value of performance shares vested during the year ended December 31, 2025 and December 31, 2024 was $ 1 million. No performance shares vested during the years ended December 31, 2023. A summary of performance share activity under the Omnibus Plan during the year ended December 31, 2025 is presented below: Performance Shares Weighted- average Grant Date Fair Value Outstanding as of December 31, 2024 273,207 $ 30.49 Granted to employees 211,889 40.35 Vested ( 81,769 ) 28.82 Forfeited ( 29,440 ) 35.50 Outstanding as of December 31, 2025 373,887 $ 36.43 ESPP On March 21, 2019, our board of directors approved and recommended for approval by our stockholders the ESPP, which was approved by our stockholders on April 29, 2019 and became effective for offering periods commencing July 1, 2019. The ESPP is intended to qualify for favorable tax treatment under Section 423 of the Code. Under the plan, eligible employees may purchase common stock, subject to IRS limits, during pre-specified offering periods at a discount established by Frontdoor not to exceed 15 percent of the then current fair market value. A maximum of 1,250,000 shares of our common stock are authorized for sale under the plan. During the years ended December 31, 2025, 2024 and 2023, we issued 20,255 shares, 26,425 shares and 31,288 shares, respectively, under the ESPP. There were 1,027,802 shares available for issuance under the ESPP as of December 31, 2025. Stock-based compensation expense We recognized stock-based compensation expense of $ 34 million ($ 25 million, net of tax), $ 26 million ($ 20 million, net of tax) and $ 26 million ($ 22 million, net of tax) for the years ended December 31, 2025, 2024 and 2023, respectively. These charges are included in selling and administrative expenses in the accompanying consolidated statements of operations and comprehensive income. 70 Stock-based compensation expense for stock options, RSUs and RSAs is recognized over the vesting period of the award using a straight-line vesting method, net of estimated forfeitures. In addition, for performance shares with a performance condition, we evaluate the probability of achieving the performance condition at the end of each reporting period and record the related stock-based compensation expense over the service period. For performance shares and performance options with a market condition, the related stock-based compensation expense is recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided. As of December 31, 2025, there was $ 47 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options, performance options, RSUs, performance shares and RSAs. These costs are expected to be recognized over a weighted-average period of 1.86 years. Note 11. Employee Benefit Plans We currently maintain a defined contribution plan for the benefit of our employees, the Frontdoor, Inc. 401(k) Plan. Discretionary contributions made on behalf of our employees were $ 5 million, $ 5 million and $ 4 million for the years ended December 31, 2025, 2024 and 2023, respectively. These charges are included in selling and administrative expenses in the accompanying consolidated statements of operations and comprehensive income. Note 12. Long-Term Debt Long-term debt is summarized in the following table: As of December 31, (In millions) 2025 2024 Term Loan A maturing in 2029 (1) $ 392 $ 412 Term Loan B maturing in 2031 (2) 781 788 Revolving Credit Facility maturing in 2029 — — Total debt 1,173 1,199 Less current portion ( 29 ) ( 29 ) Total long-term debt $ 1,144 $ 1,170 (1) Term Loan A maturing in 2026 is presented net of unamortized debt issuance costs of $ 5 million and $ 6 million as of December 31, 2025 and 2024, respectively. (2) Term Loan B maturing in 2028 is presented net of unamortized debt issuance costs of $ 9 million and $ 10 million as of December 31, 2025 and 2024, respectively, and unamortized discount of $ 2 million as of December 31, 2025 and 2024. Credit Facilities On December 19, 2024, we entered into the second amendment to the Credit Agreement, which provides for a $ 418 million Term Loan A maturing December 19, 2029 , an $ 800 million Term Loan B maturing December 19, 2031 and a $ 250 million Revolving Credit Facility terminating December 19, 2029 . The net proceeds from the transaction were used to repay the Prior Term Loan Facilities, including accrued and unpaid interest, to fund the 2-10 HBW Acquisition, which also closed on December 19, 2024, and to pay related fees and expenses of all these transactions with the remainder designated to fund share repurchases or for other general corporate purposes. 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 our $ 250 million Revolving Credit Facility. We are required to make quarterly installment payments on Term Loan A equal to five percent per annum of the original principal amount commencing on the last day of each quarter beginning on March 31, 2025. The interest rates applicable to Term Loan A and the Revolving Credit Facility are based on a fluctuating rate of interest based on the Consolidated First Lien Leverage Ratio (as defined in the Amended Credit Agreement) and measured by reference to either, at our option, (i) an adjusted SOFR plus a margin range of 1.50 percent to 2.00 percent per annum or (ii) an alternate base rate plus a margin range of 0.50 percent to 1.00 percent per annum. 71 We are required to make quarterly installment payments on Term Loan B equal to one percent per annum of the original principal amount commencing on the last day of each quarter beginning on March 31, 2025. The interest rates applicable to Term Loan B are based on a fluctuating rate of interest measured by reference to either, at our option, (i) an adjusted SOFR plus a margin of 2.25 percent per annum or (ii) an alternate base rate plus a margin of 1.25 percent per annum. The obligations under the Credit Agreement are guaranteed by certain subsidiaries (collectively, the “Guarantors”) and are secured by substantially all of the material tangible and intangible assets of Frontdoor and the Guarantors, subject to certain customary exceptions. The terms of the Revolving Credit Facility entered into on December 19, 2024 are substantially the same as the terms of the Prior Revolving Credit Facility, except for the extended maturity. The Revolving Credit Facility provides for senior secured revolving loans and stand-by and other letters of credit. As of December 31, 2025 , we had $ 2 million of letters of credit outstanding under the Revolving Credit Facility. The letters of credit are posted in lieu of cash to satisfy regulatory requirements in certain states in which we operate. The Credit Agreement contains covenants that limit or restrict our ability, including the ability of certain of our subsidiaries, to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates; therefore, from time to time, our ability to draw on the Revolving Credit Facility may be limited. As of December 31, 2025, the available borrowing capacity under the Revolving Credit Facility was $ 248 million. As of December 31, 2025, we were in compliance with the covenants under the Credit Agreement. Interest Rate Swaps On October 24, 2018, we entered into an interest rate swap contract effective October 31, 2018 that expired on August 16, 2025. The notional amount of the agreement is $ 350 million. Under the terms of the agreement, we paid a fixed rate of interest of 3.028 percent on the notional amount, and received 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 Term Loan Facilities was 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 stepped up in August 2025 by $ 350 million upon the expiration of the company's other interest rate swap contract. The total notional amount as of December 31, 2025 is approximately $ 632 million. 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. Scheduled Debt Payments The following table presents future scheduled debt payments as of December 31, 2025: (In millions) 2026 $ 29 2027 29 2028 29 2029 342 2030 8 Thereafter 752 Total future scheduled debt payments 1,189 Less unamortized debt issuance costs ( 14 ) Less unamortized discount ( 2 ) Total debt $ 1,173 Note 13. Segments We operate as one operating and reportable segment. The majority of our revenue is generated from home warranty contracts entered into with our customers. The accounting policies applied to our one operating and reportable segment are described in Note 2. Our chief operating decision maker (“CODM”), who is our Chief Executive Officer , regularly evaluates financial information, primarily revenue, net income and other measures, on a consolidated basis in deciding how to allocate resources and in assessing performance. Additionally, consolidated revenue is one key component of our incentive compensation program. 72 Information for our one operating and reportable segment is as follows: Year Ended December 31, (In millions) 2025 2024 2023 Revenue $ 2,093 $ 1,843 $ 1,780 Cost of services rendered 936 852 895 Sales and marketing costs 315 307 299 Customer service costs 117 104 106 General and administrative costs 236 201 176 Other segment items (1) 235 145 133 Net Income $ 255 $ 235 $ 171 Total Assets $ 2,142 $ 2,107 $ 1,089 (1) Other segment items include depreciation and amortization expense, restructuring charges, interest expense, interest and net investment income, loss on extinguishment of debt and provision for income taxes. Note 14. Supplemental Cash Flow Information Supplemental information relating to our accompanying consolidated statements of cash flows is as follows: Year Ended December 31, (In millions) 2025 2024 2023 Cash paid for (received from): Interest expense $ 75 $ 39 $ 38 Interest income ( 22 ) ( 19 ) ( 16 ) Cash paid for income taxes: U.S Federal $ 35 $ — $ — U.S State and local 13 — — Total cash paid for (received from) income taxes $ 49 $ — $ — Cash paid during the period for (received from) income taxes (prior to ASU 2023-09) $ — $ 82 $ 72 Individual jurisdictions equaling 5% or more of the total income taxes paid (received) for the year ended December 31, 2025 include U.S. Federal at $ 35 million. No state or foreign jurisdiction exceeded the threshold. 73 Note 15. Cash and Marketable Securities Cash, money market funds and certificates of deposits with maturities of three months or less when purchased are included in Cash and cash equivalents in the accompanying consolidated and combined statements of financial position. As of December 31, 2024, short- and long-term marketable securities primarily consisted of certificates of deposit, corporate bonds, mortgage-backed securities and U.S. government obligations and are classified as available-for-sale securities. We disposed of our marketable securities during the year ended December 31, 2025. The amortized cost, fair value and gross unrealized gains and losses of our marketable securities are as follows: (In millions) Amortized Cost Gross Unrealized Gain Gross Unrealized Losses Fair Value As of December 31, 2024 Certificates of deposit $ 12 $ — $ — $ 12 Corporate bonds 14 — — 14 Mortgage-backed securities 12 — — 12 U.S. government and municipal obligations 14 — — 14 Total assets $ 53 $ — $ — $ 53 Gains and losses on sales of investments, as determined on a specific identification basis, are included in investment income in the period they are realized. We periodically review our portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which the issuer competes. During the year ended December 31, 2025, there were $ 48 million in proceeds from sales of securities, $ 12 million in maturities and less than $ 1 million each in gross realized gains and gross realized losses resulting from sales of available-for-sale securities. During the year ended December 31, 2024, there were no proceeds, maturities, gross realized gains and gross realized losses resulting from sales of available-for-sale securities. There were no impairment charges due to other than temporary declines in the value of certain investments for the years ended December 31, 2025, 2024, and 2023. Note 16. Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss), unrealized gains (losses) on derivative instruments and unrealized gains (losses) on marketable securities. We disclose comprehensive income (loss) in the accompanying consolidated statements of operations and comprehensive income and consolidated statements of changes in equity. A summary of the changes in AOCI is as follows: (In millions) Balance as of December 31, 2023 $ 6 Other comprehensive income (loss) before reclassifications: Pre-tax amount — Tax provision (benefit) — After-tax amount — Amounts reclassified from AOCI 1) ( 6 ) Net current period other comprehensive income (loss) ( 6 ) Balance as of December 31, 2024 $ — Other comprehensive income (loss) before reclassifications: Pre-tax amount ( 13 ) Tax provision (benefit) ( 4 ) After-tax amount ( 10 ) Amounts reclassified from AOCI (1) ( 2 ) Net current period other comprehensive income (loss) ( 12 ) Balance as of December 31, 2025 $ ( 12 ) (1) Amounts are net of income taxes. See the table below on reclassifications out of AOCI for additional information. 74 A summary of reclassifications out of AOCI is as follows: Year Ended December 31, (In millions) 2025 2024 2023 Gain (loss) on interest rate swap contracts (1) $ 3 $ 8 $ 7 Impact of income taxes (2) ( 1 ) ( 2 ) ( 2 ) Total reclassifications during the period $ 2 $ 6 $ 5 (1) Included in interest expense in the accompanying consolidated statements of operations and comprehensive income. (2) Included in provision for income taxes in the accompanying consolidated statements of operations and comprehensive income. Note 17. Derivative Financial Instruments We currently use a derivative financial instrument to manage risks associated with changes in interest rates by hedging the interest payments on a portion of our variable rate debt through the use of interest rate swap contracts. We do not hold or issue derivative financial instruments for trading or speculative purposes. In designating derivative financial instruments as hedging instruments under accounting standards for derivative instruments, we formally document the relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives to forecasted transactions. We assess at the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsetting the projected cash flows of the associated forecasted transaction. Our interest rate swap contracts are classified as cash flow hedges, and, as such, are recorded in the accompanying consolidated statements of financial position on an individual basis as either an asset or liability at fair value, with changes in fair value recorded in AOCI. Cash flows related to the interest rate swap contracts are classified as operating activities in the accompanying consolidated statements of cash flows. The effective portion of the gain or loss on our interest rate swap contracts are recorded in AOCI. These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement affects earnings. See Note 16 to the accompanying consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in AOCI and for the amounts reclassified out of AOCI and into earnings during the periods presented. As the underlying forecasted transactions occur during the next 12 months, we estimate the unrealized hedging loss in AOCI expected to be recognized in earnings is $ 3 million, net of tax, as of December 31, 2025. The amounts ultimately reclassified into earnings during the next 12 months will be determined based on the actual interest rates in effect at the time the positions are settled, and as a result, they could differ materially from our estimate noted above. Note 18. Fair Value Measurements We estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability. The valuation techniques require inputs that we categorize into a three-level hierarchy, from highest to lowest level of observable inputs, as follows: unadjusted quoted prices for identical assets or liabilities in active markets ("Level 1"); direct or indirect observable inputs, including quoted prices or other market data, for similar assets or liabilities in active markets or identical assets or liabilities in less active markets ("Level 2"); and unobservable inputs that require significant judgment for which there is little or no market data ("Level 3"). When multiple input levels are required for a valuation, we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement, even though we may have also utilized significant inputs that are more readily observable. The period-end carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate their fair values due to the short-term maturities of these financial instruments. The period-end carrying amounts of short- and long-term marketable securities also approximate fair value and primarily consists of available-for-sale debt securities. Unrealized gains and losses are reported net of tax as a component of AOCI in the accompanying consolidated statements of financial position. Any unrealized losses where the decline in value is other than temporary are reported in interest and net investment income in the accompanying consolidated statements of operations and comprehensive income. There were no other than temporary declines in value for the periods ended December 31, 2025 and 2024. The fair value of our debt was estimated based on available market prices for the same or similar instruments that are considered significant other observable inputs (Level 2) within the fair value hierarchy and was based on information available to us as of the respective period end dates. 75 We determine the fair value of our interest rate swap contracts using a forward interest rate curve obtained from a third-party market data provider. The fair value of each contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. The expected future settlements are determined by comparing the contract interest rates to the expected forward interest rate as of each settlement date and applying the difference between these two rates to the notional amounts of debt in the interest rate swap contracts. We did not change our valuation techniques for measuring the fair value of any financial assets and liabilities during the year ended December 31, 2025. Transfers between hierarchy levels, if any, are recognized at the end of the reporting period. There were no transfers between hierarchy levels during the year ended December 31, 2025. The carrying amount and estimated fair value of our financial instruments that are recorded at fair value on a recurring basis for the periods presented are as follows: Estimated Fair Value Measurements (In millions) Carrying Value Quote Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) As of December 31, 2025: Interest rate swap (Other accrued liabilities ) $ 4 $ — $ 4 $ — Interest rate swap (Other long-term liabilities) 13 — 13 — Term Loan A 392 — 397 — Term Loan B 781 — 796 — Total liabilities $ 1,190 $ — $ 1,210 $ — As of December 31, 2024: Marketable securities $ 15 $ 6 $ 9 $ — Interest rate swap (Other assets) 3 — 3 — Long-term marketable securities 38 2 36 — Total assets $ 56 $ 8 $ 48 $ — Interest rate swap (Other long-term liabilities) $ 3 $ — $ 3 $ — Term Loan A 412 — 418 — Term Loan B 788 — 793 — Total liabilities $ 1,202 $ — $ 1,214 $ — Note 19. Capital Stock We are authorized to issue 2,000,000,000 shares of common stock. As of December 31, 2025 , there were 88,480,560 shares of common stock issued and 70,958,215 shares of common stock outstanding. As of December 31, 2024, there were 87,434,468 shares of common stock issued and 75,314,243 shares of common stock outstanding. We have no other classes of equity securities issued or outstanding. Note 20. Share Repurchase Program On July 26, 2024, our Board of Directors approved a new share repurchase authorization of up to $ 650 million of our common stock over the three-year period from September 4, 2024 through September 4, 2027. Purchases under this new repurchase program may be made from time to time by the company in the open market at prevailing market prices (including through a Rule 10b5-1 Plan), in privately negotiated transactions, or through any combination of these methods, through September 4, 2027. The actual timing, number, manner and value of any shares repurchased will depend on several factors, including the market price of the company’s stock, general market and economic conditions, the company’s liquidity requirements, applicable legal requirements and other business considerations. The repurchase program does not obligate us to acquire any number of shares in any specific period or at all and may be suspended or discontinued at any time at our discretion. As of December 31, 2025 , we had $ 329 million remaining available for future repurchases under this program. 76 A summary of repurchases of outstanding shares is as follows: Year Ended December 31, (In millions, except per share data) 2025 2024 2023 Number of shares purchased 5,402,120 3,945,349 3,604,625 Average price paid per share (1) $ 51.81 $ 40.43 $ 33.29 Cost of shares purchased (1) $ 280 $ 160 $ 120 (1) The average price paid per share and the cost of shares purchased are calculated on a trade date basis and exclude associated commissions and taxes of $ 2 million, $ 2 million and $ 1 million for the years ended December 31, 2025, 2024 and 2023, respectively . Note 21. Earnings Per Share 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 of stock options, performance options, RSUs, performance shares and RSAs are reflected in diluted earnings per share by applying the treasury stock method. A summary of the calculations of our basic and diluted earnings per share is as follows: Year Ended December 31, (In millions, except per share data) 2025 2024 2023 Net Income $ 255 $ 235 $ 171 Weighted-average common shares outstanding 73.1 77.0 80.5 Effect of dilutive securities: RSUs (1) 0.7 0.6 0.3 Stock options (2) 0.3 0.2 — Performance options (3) 0.3 0.2 — Weighted-average common shares outstanding - assuming dilution: 74.5 78.0 80.9 Basic earnings per share $ 3.48 $ 3.05 $ 2.13 Diluted earnings per share $ 3.42 $ 3.01 $ 2.12 (1) RSUs of 14,031 shares, 384,580 shares and 507,005 shares for the years ended December 31, 2025, 2024 and 2023 , respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. (2) Stock options to purchase 339,613 shares, 657,029 shares and 1,276,776 shares for the years ended December 31, 2025, 2024 and 2023 , respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. (3) Performance options to purchase 646,230 shares for the year ended December 31, 2023 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. There were no anti-dilutive performance options for the years ended December 31, 2025 and 2024 . 77 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Frontdoor, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Frontdoor, Inc. and subsidiaries (the “Company”) as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2025, of the Company and our report dated February 26, 2026, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Memphis, Tennessee February 26, 2026 78 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.