What changed in this filing

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Item 1. Financial Statements

2026-04-30 compared with 2025-11-05 · 120 added, 202 removed, 399 unchanged (45% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Cost of services rendered

6 unchanged sentences

Provision for income taxes

Other Comprehensive Loss, Net of Income Taxes:

Unrealized loss on derivative instruments, net of income taxes

Total Other Comprehensive Loss, Net of Income Taxes

Other Comprehensive Income (Loss), Net of Income Taxes:

Unrealized gain (loss) on derivative instruments, net of income taxes

Total Other Comprehensive Income (Loss), Net of Income Taxes

Comprehensive Income

5 unchanged sentences

(In millions, except share data)

September 30,

Current Assets:

Cash and cash equivalents

Marketable securities

Receivables, less allowance of $ 3 and $ 4 , respectively

Prepaid expenses and other current assets

Contract assets

Assets held for sale

4 unchanged sentences

Operating lease right-of-use assets

Long-term marketable securities

Deferred reinsurance

22 unchanged sentences

2,000,000,000 shares authorized;

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

89,008,654 shares issued and 70,527,394 shares outstanding as of March 31, 2026 and 88,480,560 shares issued and 70,958,215 shares outstanding as of December 31, 2025

Additional paid-in capital

2 unchanged sentences

Less treasury stock, at cost;

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

18,481,260 shares as of March 31, 2026 and 17,522,345 shares as of December 31, 2025

Total Shareholders' Equity

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Common Stock:

5 unchanged sentences

Exercise of stock options

Issuance of common stock related to ESPP

Taxes paid related to net share settlement of equity awards

5 unchanged sentences

Balance at beginning of period

Other comprehensive loss, net of tax

Other comprehensive income (loss), net of tax

Balance at end of period

8 unchanged sentences

(In millions)

Nine Months Ended

September 30,

Three Months Ended

Cash and Cash Equivalents at Beginning of Period

15 unchanged sentences

Purchases of property and equipment

Business acquisitions, net of cash acquired

Purchases of available-for-sale securities

Purchases of short-term investments and available-for-sale securities

Sales and maturities of available-for-sale securities

Net Cash Provided from (Used for) Investing Activities

Net Cash (Used for) Provided from Investing Activities

Cash Flows from Financing Activities:

9 unchanged sentences

Description of Business

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

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

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

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

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

We also offer non-warranty home services via our website and app to our home warranty customers directly and others through partnerships and our subscription-based Frontdoor app.

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

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 HVAC upgrade program and installation of Moen water shut-off devices, and select home maintenance offerings.

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

As of March 31, 2026 , 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.

Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the audited consolidated financial statements included in our 2025 Form 10-K.

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

There have been no material changes to our significant accounting policies during the three months ended March 31, 2026.

Restricted Net Assets

There are regulatory restrictions on certain of our subsidiaries under the laws and regulations of the states in which they operate.

Among other things, such laws and regulations require certain subsidiaries to maintain funded reserves, 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 March 31, 2026, the total assets subject to regulatory restrictions was $ 156 million.

This amount included certificates of deposit of $ 2 million, which are reported in Prepaid expenses and other current assets on the accompanying condensed consolidated statements of financial position.

Real Estate Held for Sale

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

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

We determined that the related assets met the criteria to be classified as held for sale during the third quarter of 2025.

Basis of Presentation

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Newly Issued Accounting Standards

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

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

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

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

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

1 unchanged sentence

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 enhanced disclosures.

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.

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In millions)

1 unchanged sentence

Direct-to-consumer (1)

Non-warranty and other

(1) First-year revenue only.

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

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

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.

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Customer payments for renewals are primarily received in installments over the new contract period.

Real estate home warranties are sold through annual contracts that occur in connection with a real estate sale.

Real estate home warranties are primarily 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.

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

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.

Direct-to-consumer home warranties are primarily 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.

1 unchanged sentence

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

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

Non-warranty and other

Non-warranty and other revenue primarily includes revenue generated by non-warranty home services, including the HVAC upgrade and Moen programs, home maintenance services and new home builder warranties.

Deferred Customer Acquisition Costs

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

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

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

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

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 $ 15 million and $ 14 million as of March 31, 2026 and December 31, 2025, respectively.

Amortization of deferred customer acquisition costs was $ 3 million and $ 2 million for the three months ended March 31, 2026 and 2025, respectively.

There were no impairment losses related to these capitalized costs during the three months ended March 31, 2026 and 2025.

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 warranty program as deferred policy acquisition costs and amortize these costs over the term of the underlying pattern of insurance risk.

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 $ 3 million and less than $ 1 million as of September 30, 2025 and December 31, 2024, respectively.

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

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

Deferred policy acquisition costs were $ 7 million and $ 5 million as of March 31, 2026 and December 31, 2025, respectively.

Amortization of deferred policy acquisition costs were less than $ 1 million for each of the three months ended March 31, 2026 and 2025.

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.

An allowance is recorded based on amounts anticipated to be collected.

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.

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

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

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

There were no contract assets as of March 31, 2026 and December 31, 2025.

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 nine months ended September 30, 2025 is as follows:

A summary of the changes in deferred revenue, including the long-term portion, for the three months ended March 31, 2026 is as follows:

(In millions)

2 unchanged sentences

Recognition of deferred revenue

Balance as of September 30, 2025

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

Balance as of March 31, 2026

There was approximately $ 33 million of revenue recognized during the three months ended March 31, 2026, that was included in the deferred revenue balance as of December 31, 2025.

Unearned Insurance Premium

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

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 accompanying condensed consolidated statement of financial position.

Deferred Reinsurance

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

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

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 recognized as a reduction to revenue over the term of underlying insurance policies, and the unexpired portion of reinsurance is deferred and recognized as deferred reinsurance on the accompanying condensed consolidated statement of financial position.

Goodwill and Intangible Assets

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

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

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

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

The balance of goodwill was $ 959 million as of March 31, 2026 and December 31, 2025 .

There were no goodwill impairment charges during the three months ended March 31, 2026 and 2025.

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

As of September 30, 2025

As of March 31, 2026

As of December 31, 2025

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Value of business acquired

Home warranty customer relationships

Builder relationships

Developed technology

Customer relationships (2)

(1) Not subject to amortization.

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

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

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

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

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

(2) Customer relationships include homeowner, builder and broker relationships.

(3) Other includes developed technology and other miscellaneous intangibles.

During 2026, we identified all intangible assets that were fully amortized and removed the fully amortized balances from the gross asset and accumulated amortization amounts.

This did not have an impact on the consolidated financial statements.

Amortization expense was $ 12 million and $ 13 million for the three months ended March 31, 2026 and 2025 , respectively.

There were no intangible asset impairment charges during the three months ended March 31, 2026 and 2025 .

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 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:

September 30,

Weighted-average remaining lease term (years)

Weighted-average discount rate

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

We recognized operating lease expense of less than $ 1 million for each of the three months ended March 31, 2026 and 2025.

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

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

September 30,

(In millions)

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

Nine Months Ended

September 30,

Three Months Ended

(In millions)

Cash paid on operating lease liabilities (1)

Right-of-use assets obtained in exchange for lease obligations

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

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

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

The following table presents the maturities of our operating lease liabilities as of March 31, 2026:

(In millions)

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

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

Substantially all of our income before income taxes for the three months ended March 31, 2026 and 2025 was generated in the United States.

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

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

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

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

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

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

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

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

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

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

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

The Bill does not materially impact our effective tax rate.

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

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

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

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

(In millions)

Cash consideration paid

Payment of 2-10 HBW indebtedness

Payment of 2-10 HBW transaction costs

Total purchase price consideration

Acquired 2-10 HBW cash

Total purchase price consideration, net of cash acquired

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 preliminary assessment of the acquisition date fair value, is as follows:

(In millions)

Cash and cash equivalents

Marketable securities

Prepaid expenses and other current assets

Property and equipment, net

Intangible assets

Long-term marketable securities

Deferred reinsurance

Accounts payable

Accrued liabilities:

Payroll and related expenses

Home warranty claims

Deferred revenue

Deferred tax liabilities, net

Unearned insurance premium

Long-term deferred revenue

Other long-term liabilities

Total consideration paid

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

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

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

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

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

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

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

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

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

The effective tax rate on income before income taxes was 19.3 percent and 22.3 percent for the three months ended March 31, 2026 and 2025, respectively.

The decrease in the effective tax rate for the three months ended March 31, 2026 was primarily due to share-based compensation, offset in part by state income taxes.

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

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.

Commitments and Contingencies

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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 all new home structural warranty claims and includes the estimated costs of claims incurred but not reported as of the balance sheet date.

Unpaid losses and loss adjustment reserves represent the estimated ultimate cost of settling all new home builder warranty claims and include 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.

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

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

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

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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 March 31, 2026, we had no liability with respect to these guarantees.

Stock-Based Compensation

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

We recognized stock-based compensation expense of $ 10 million ($ 5 million, net of tax) and $ 8 million ($ 5 million, net of tax) for the three months ended March 31, 2026 and 2025, respectively.

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

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

A summary of awards granted under the Omnibus Plan during the three months ended March 31, 2026 is as follows:

Stock options

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

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

As of March 31, 2026, there was $ 79 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options, restricted stock units (“RSUs”) and performance shares.

These costs are expected to be recognized over a weighted-average period of 2.36 years.

1 unchanged sentence

Long-term debt is summarized in the following table:

September 30,

(In millions)

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Total long-term debt

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

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

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

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

(1) Term Loan A is presented net of unamortized debt issuance costs of $ 5 million as of March 31, 2026 and December 31, 2025.

(2) Term Loan B is presented net of unamortized debt issuance costs of $ 9 million as of March 31, 2026 and December 31, 2025, and unamortized discount of $ 2 million as of March 31, 2026 and December 31, 2025.

As of March 31, 2026, the available borrowing capacity under the Revolving Credit Facility was $ 250 million, and we were in compliance with the covenants under the Credit Agreement.

Scheduled Debt Payments

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

The following table presents future scheduled debt payments as of March 31, 2026:

(In millions)

3 unchanged sentences

Less unamortized discount

We operate as one operating and reportable segment, primarily under the American Home Shield brand.

We operate as one operating and reportable segment.

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

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Three Months Ended

Nine Months Ended

September 30,

(In millions)

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

September 30,

Supplemental Cash Flow Information

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

Nine Months Ended

September 30,

Three Months Ended

(In millions)

5 unchanged sentences

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

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

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

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

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

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

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

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

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

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

During the three months ended March 31, 2025 , there were $ 48 million in proceeds from sales of securities, $ 12 million in maturities and less than $ 1 million in gross realized gains and less than $ 1 million in gross realized losses resulting from sales of available-for-sale securities.

During the three months ended March 31, 2026 , 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 three months ended March 31, 2026 and 2025 .

Comprehensive Income (Loss)

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Balance at December 31, 2025

Other comprehensive loss before reclassifications:

Other comprehensive income before reclassifications:

Pre-tax amount

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Amounts reclassified from AOCI (1)

Total other comprehensive loss

Balance at September 30, 2025

Total other comprehensive income

Balance at March 31, 2026

(1) Amounts are net of income taxes.

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A summary of reclassifications out of AOCI is as follows:

Nine Months Ended

September 30,

Three Months Ended

(In millions)

Gain on interest rate swap contracts (1)

Impact of income taxes (2)

Loss (gain) on interest rate swap contracts (1)

Total reclassifications during the period

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Cash flows related to the interest rate swap contracts are classified as operating activities in the accompanying condensed consolidated statements of cash flows.

The effective portion of the gain or loss on our interest rate swap contracts are recorded in AOCI.

The effective portion of the gain or loss on our interest rate swap contracts is 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 13 to the accompanying condensed consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in AOCI and for the amounts reclassified out of AOCI and into earnings during the periods presented.

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

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 $ 2 million, net of tax, as of March 31, 2026.

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.

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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 consisted of available-for-sale debt securities.

The period-end carrying amounts of short-term marketable securities also approximate fair value and primarily consist of certificates of deposit.

Unrealized gains and losses are reported net of tax as a component of AOCI in the accompanying condensed 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 condensed consolidated statements of operations and comprehensive income.

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

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

There were no other-than-temporary declines in value for the periods ended March 31, 2026 and December 31, 2025.

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.

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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 nine months ended September 30, 2025 .

We did not change our valuation techniques for measuring the fair value of any financial assets and liabilities during the three months ended March 31, 2026.

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

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

There were no transfers between hierarchy levels during the three months ended March 31, 2026.

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

1 unchanged sentence

(In millions)

As of September 30, 2025:

Other accrued liabilities

Other long-term liabilities

As of March 31, 2026:

Interest rate swap (Other accrued liabilities )

Interest rate swap (Other long-term liabilities)

Total liabilities

As of December 31, 2025:

Marketable securities

Long-term marketable securities

Other long-term liabilities

Interest rate swap (Other accrued liabilities )

Interest rate swap (Other long-term liabilities)

Total liabilities

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The repurchase program does not obligate us to acquire any number of shares in any specific period or at all and may be suspended or discontinued at any time at our discretion.

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

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

We repurchased a total of 11,319,091 shares at an aggregate cost of $ 400 million under this previous program, which is included in treasury stock on the accompanying condensed consolidated statements of financial position.

As of March 31, 2026, we had $ 269 million remaining available for future repurchases under this program.

A summary of repurchases of outstanding shares is as follows:

Three Months Ended

Nine Months Ended

September 30,

(In millions, except per share data)

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Cost of shares purchased (1)

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

Earnings Per Share

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Three Months Ended

Nine Months Ended

September 30,

(In millions, except per share data)

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Diluted earnings per share

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

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

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

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

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

(1) RSUs of 12,405 shares and 9,400 shares for the three months ended March 31, 2026 and 2025 , respectively were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

(2) Stock options to purchase 12,488 shares and 102,520 shares for the three months ended March 31, 2026 and 2025 , respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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Risk Factors in our 2025 Form 10-K filed with the SEC, in addition to the following other factors, risks, trends and uncertainties:

• changes in macroeconomic conditions, including inflation, tariffs and global supply chain challenges and changing interest rates, especially as they may affect existing or new home sales, consumer confidence, labor availability or our costs;

• our ability to successfully implement our business strategies;

• the ability of our marketing efforts to be successful and cost-effective;

• our dependence on our first-year direct-to-consumer and real estate acquisition channels and our renewal channel;

• changes in the source and intensity of competition in our market, including risks related to the development, deployment and use of artificial intelligence in our business and industry;

• our dependence on our first-year direct-to-consumer and real estate acquisition channels and our renewal channel for home warranty sales;

• our dependence on our existing warranty customer base and strategic partners for non-warranty sales;

• changes in the source and intensity of competition in our market;

• our ability to attract, retain and maintain positive relations with third-party contractors and vendors;

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• our dependence on third-party vendors, including business process outsourcers, and third-party component suppliers;

• weather, including adverse conditions, seasonality, along with related environmental regulations;

• compliance with, or violation of, laws and regulations, including consumer protection laws, or lawsuits or other claims by third parties, increasing our legal and regulatory expenses;

• cybersecurity breaches, disruptions or failures in our technology systems;

• our ability to protect the security of personal information about our customers;

• compliance with, or violation of, laws and regulations, including consumer protection laws, or lawsuits or other claims by third parties, increasing our legal and regulatory expenses;

• weather, including adverse conditions, Acts of God and seasonality, along with related regulations;

• technological developments in artificial intelligence;

• negative reputational and financial impacts resulting from acquisitions or strategic transactions;

• a requirement to recognize impairment charges on goodwill and intangible assets;

• our ability to underwrite risks accurately and to charge adequate prices to builder members, as well as our ability to effectively re-insure a large portion of those risks;

• the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home structural warranty business;

• the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home builder warranty business;

• evolving corporate governance and disclosure regulations and expectations;

• inappropriate use of social media by us or other parties to harm our reputation;

• our ability to protect our intellectual property and other material proprietary rights;

• negative reputational and financial impacts resulting from acquisitions or strategic transactions;

• a requirement to recognize impairment charges;

• third-party use of our trademarks as search engine keywords to direct our potential customers to their own websites;

• inappropriate use of social media by us or other parties to harm our reputation;

• special risks applicable to operations outside the United States by us or our business process outsource providers;

• risks related to the 2-10 HBW Acquisition, including the risk that the 2-10 HBW Acquisition may not achieve its intended results;

• the 2-10 HBW Acquisition may not achieve its intended results;

• any liabilities, losses, or other exposures for which we do not have adequate insurance coverage, indemnification, or other protection;

• increase in our indebtedness as a result of financing the 2-10 HBW Acquisition;

• a return on investment in our common stock is dependent on appreciation in the price;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements