What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-30 compared with 2025-11-05 · 100 added, 203 removed, 216 unchanged (58% of the section changed)

5 unchanged sentences

“Risk Factors” in our 2025 Form 10-K.

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.

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

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

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.

For the three months ended March 31, 2026 and 2025, we generated revenue, net income and Adjusted EBITDA of $451 million, $41 million and $104 million, respectively, and $426 million, $37 million and $100 million, respectively.

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

For the nine months ended September 30, 2025, our total operating revenue included 76 percent of revenue derived from existing customer renewals, while seven percent and nine percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and nine percent was derived from other revenue channels.

For the nine months ended September 30, 2024, our total operating revenue included 78 percent of revenue derived from existing customer renewals, while seven percent and nine percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and six percent was derived from other revenue channels.

For the three months ended March 31, 2026, our total operating revenue included 78 percent of revenue derived from existing customer renewals, six percent from new home warranty sales made in conjunction with existing home real estate transactions, seven percent derived from direct-to-consumer sales, and nine percent derived from the non-warranty and other revenue channels.

For the three months ended March 31, 2025, our total operating revenue included 78 percent of revenue derived from existing customer renewals, six percent derived from new home warranty sales made in conjunction with existing home real estate transactions, eight percent derived from direct-to-consumer sales, and eight percent was derived from non-warranty and other revenue channels.

Key Factors and Trends Affecting Our Results of Operations

Macroeconomic Conditions

Current macroeconomic conditions, including inflation, U.S.

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

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

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

While these macroeconomic conditions generally impact the United States as a whole, we believe our nationwide presence limits the impact on us of unfavorable economic conditions in any particular region of the United States.

Our financial condition and results of operations for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 continued to be adversely impacted by the following:

• Challenging real estate market conditions, driven by a decline in the number of existing home sales, continue to constrain demand for home warranties.

• Consumer sentiment declined as a result of a broad range of current macroeconomic conditions, including pressure on consumer prices and high interest rates.

While these macroeconomic conditions generally impact the United States as a whole, we believe our nationwide presence mitigates the impact on us of unfavorable economic conditions in any particular region of the United States.

Our financial condition and results of operations for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 continued to be adversely impacted by the following:

• Improving but still challenging real estate market conditions, driven by higher home inventory levels offset by a decline in the number of home resale transactions, continue to impact demand for home warranties.

• Consumer sentiment remains mixed as a result of a broad range of current macroeconomic conditions and volatility, including pressure on consumers' discretionary income and elevated interest rates.

We believe this environment continues to impact demand for home warranties.

• Inflation continues to impact our labor, parts and equipment costs.

• Our labor, parts and equipment costs continue to be impacted by inflation and geopolitical issues.

The ultimate implications of the current macroeconomic conditions on our results of operations and overall financial performance remain uncertain.

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

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

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

Effect of Weather Conditions

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

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

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

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

Generally, repairs associated with such isolated events are addressed by homeowners’ and other forms of insurance, as opposed to the home warranties that we offer.

Generally, repairs or replacements of major systems and appliances associated with such isolated events are addressed by homeowners’ and other forms of insurance, as opposed to the home warranties that we offer.

Tariff and Import/Export Regulations

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

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

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

Acquisition Activity

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

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

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

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

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

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

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

Non-GAAP Financial Measures

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These metrics include:

• operating expenses,

• gross profit,

• gross profit margin,

• net income,

• earnings per share,

• Adjusted EBITDA,

• Adjusted EBITDA margin,

• net cash provided from operating activities,

• Free Cash Flow,

• number of home warranties, and

• customer retention rate.

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

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

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

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

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

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

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Net Income and Earnings Per Share .

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

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

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

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

Net income represents earnings after giving effect to all expenses, other income and expense items, and income taxes.

Earnings per share represents net income attributable to common shareholders divided by the weighted-average number of common shares outstanding during the period and is used to measure profitability on a per-share basis.

The dilutive effect, if any, of non-qualified stock options, performance options, RSUs, performance shares and deferred shared equivalents are reflected in diluted earnings per share by applying the treasury stock method.

Adjusted EBITDA and Adjusted EBITDA Margin.

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restructuring charges;

acquisition-related costs;

acquisition and integration costs;

provision for income taxes;

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

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

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

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

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

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

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Form 10-K.

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

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

Results of Operations

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

Three Months Ended

September 30,

(In millions)

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Provision for income taxes

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

Nine Months Ended

September 30,

(In millions)

Cost of services rendered

Selling and administrative expenses

Depreciation and amortization expense

Restructuring charges

Interest expense

Interest and net investment income

Income before Income Taxes

Provision for income taxes

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

We reported revenue of $451 million and $426 million for the three months ended March 31, 2026 and 2025, respectively.

The following tables provide a summary of our revenue by major customer acquisition channel for our home warranties and other revenue:

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

Three Months Ended

September 30,

Increase (Decrease)

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Direct-to-consumer (1)

(1) First-year revenue only.

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

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

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

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

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

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

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

Nine Months Ended

September 30,

Increase (Decrease)

(In millions)

Real estate (1)

Direct-to-consumer (1)

Non-warranty and other

(1) First-year revenue only.

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

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

The increase in real estate revenue reflects the impact of the 2-10 HBW Acquisition, offset, in part, by the challenging real estate macro environment.

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

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

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

September 30,

Revenue increased 6 percent for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

The increase in renewal revenue reflects improved price realization resulting from our prior pricing actions.

The decrease in direct-to-consumer revenue reflects lower price realization resulting from our discounting efforts, offset, in part, by an increase in the number of direct-to-consumer home warranties.

The increase in real estate revenue reflects an increase in the number of first-year real estate home warranties, offset, in part, by lower price realization.

The increase in non-warranty and other revenue was primarily driven by growth in our HVAC upgrade program.

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

(In millions)

Number of home warranties

Growth (reduction) in number of home warranties

Growth in number of home warranties (1)

Customer retention rate

(1) As of September 30, 2025, excluding the 2-10 HBW home warranties acquired on December 19, 2024, the number of home warranties was 1.9 million, the reduction in home warranties was one percent and the customer retention rate was 78.1 percent.

The growth in the number of home warranties as of September 30, 2025 was primarily driven by the 2-10 HBW acquisition, offset, in part, by the challenging real estate macro environment and decline in number of renewed home warranties.

(1) As of March 31, 2025, excluding the 2-10 HBW home warranties acquired on December 19, 2024, the reduction in home warranties was one percent.

Cost of Services Rendered

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

The following tables provide a summary of the changes in cost of services rendered:

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

(In millions)

Three Months Ended September 30, 2024

Impact of change in revenue

Three Months Ended September 30, 2025

The increase in contract claims costs primarily reflects inflationary cost pressures, offset, in part, by a lower number of service requests per customer, primarily driven by a favorable weather impact of $6 million.

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

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

We reported cost of services rendered of $203 million and $191 million for the three months ended March 31, 2026 and 2025, respectively.

The following table provides a summary of the changes in cost of services rendered:

(In millions)

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Impact of change in revenue

Contract claims costs

Nine Months Ended September 30, 2025

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

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

Three Months Ended March 31, 2026

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

The increase in contract claims costs primarily reflects inflationary cost pressures and a higher number of service requests per customer, driven by an unfavorable weather impact of $1 million.

Additionally, contract claims costs reflects a $6 million favorable adjustment in the first quarter of 2026 related to the development of prior period claims, compared to a $7 million favorable adjustment in the first quarter of 2025.

Selling and Administrative Expenses

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

We reported selling and administrative expenses of $162 million and $151 million for the three months ended March 31, 2026 and 2025, respectively.

The following table provides a summary of the components of selling and administrative expenses:

Three Months Ended

Nine Months Ended

September 30,

(In millions)

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General and administrative costs

The following tables provide a summary of the changes in selling and administrative expenses:

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

(In millions)

Three Months Ended September 30, 2024

Sales and marketing costs

Customer service costs

Stock-based compensation expense

Acquisition-related costs

Other general and administrative costs

Three Months Ended September 30, 2025

Sales and marketing costs increased due to the 2-10 HBW Acquisition.

Customer service costs increased primarily due to the 2-10 HBW acquisition and growth in non-warranty home services.

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

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

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

The following table provides a summary of the changes in selling and administrative expenses:

(In millions)

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Sales and marketing costs

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Stock-based compensation expense

Acquisition-related costs

Other general and administrative costs

Nine Months Ended September 30, 2025

Sales and marketing costs increased due to the 2-10 HBW Acquisition.

Customer service costs increased primarily due to the 2-10 HBW acquisition and growth in non-warranty home services.

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

Three Months Ended March 31, 2026

Sales and marketing costs increased due to due to our investment in marketing associated with our direct-to-consumer channel.

Customer service costs increased primarily due to personnel costs.

Depreciation and Amortization Expense

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

Amortization expense was $13 million and $1 million for the three months ended September 30, 2025 and 2024, respectively, and $38 million and $2 million for the nine months ended September 30, 2025 and 2024, respectively, with the increase primarily driven by the amortization of intangible assets acquired as part of the 2-10 HBW Acquisition.

Restructuring Charges

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

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

Depreciation expense was $8 million and $10 million for the three months ended March 31, 2026 and 2025, respectively.

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

Interest Expense

Interest expense was $20 million and $10 million for the three months ended September 30, 2025 and 2024, respectively, and $59 million and $29 million for the nine months ended September 30, 2025 and 2024, respectively, with the increase driven by the higher debt balance as compared to prior year as a result of financing the 2-10 HBW Acquisition.

Interest expense was $19 million for the three months ended March 31, 2026 and 2025.

Interest and Net Investment Income

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

Interest and net investment income was $5 million and $6 million for the three months ended March 31, 2026 and 2025, respectively.

Provision for Income Taxes

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

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

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

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

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.

Net income was $41 million and $37 million for the three months ended March 31, 2026 and 2025, respectively.

Adjusted EBITDA

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

Adjusted EBITDA was $104 million and $100 million for the three months ended March 31, 2026 and 2025.

Summary of Changes in Net Income and Adjusted EBITDA

The following tables provide a summary of the changes in net income and Adjusted EBITDA:

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

(In millions)

Adjusted EBITDA

Three Months Ended September 30, 2024

Impact of change in revenue

Sales and marketing costs

Customer service costs

Stock-based compensation expense

Acquisition-related costs

Other general and administrative costs

Depreciation and amortization expense

Restructuring charges

Interest expense

Interest and net investment income

Provision for income taxes

Three Months Ended September 30, 2025

The impact of change in revenue was primarily driven by improved price realization and the impact of the 2-10 HBW Acquisition, offset, in part, by a decline in the number of renewed home warranties.

For more information on changes in net income or Adjusted EBITDA, see discussion of individual line items above.

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

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

(In millions)

Adjusted EBITDA

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Impact of change in revenue

3 unchanged sentences

Stock-based compensation expense

Acquisition-related costs

Other general and administrative costs

Depreciation and amortization expense

Restructuring charges

Interest expense

1 unchanged sentence

Provision for income taxes

Nine Months Ended September 30, 2025

The impact of change in revenue was primarily driven by improved price realization and the impact of the 2-10 HBW Acquisition, offset, in part, by the challenging real estate macro environment and a decline in the number of renewed home warranties.

Three Months Ended March 31, 2026

For more information on changes in net income or Adjusted EBITDA, see discussion of individual line items above.

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Three Months Ended

Nine Months Ended

September 30,

(In millions)

1 unchanged sentence

Restructuring charges (1)

Acquisition-related costs (1)

Acquisition and integration costs (1)

Provision for income taxes

1 unchanged sentence

Interest expense

Other non-operating expenses (1)

Adjusted EBITDA

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

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

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

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Liquidity and Capital Resources

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

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

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

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

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

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

The Credit Agreement contains covenants that limit or restrict our ability, including the ability of certain of our subsidiaries, to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates.

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

As of March 31, 2026, we were in compliance with the covenants under the Credit Agreement.

We do not believe current macroeconomic conditions will affect our ongoing ability to meet our debt covenants.

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

Our cash and cash equivalents and short- and long-term marketable securities include balances associated with regulatory requirements in our business.

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

As of September 30, 2025, there was $2 million of letters of credit outstanding under our $250 million Revolving Credit Facility, and the available borrowing capacity under the Revolving Credit Facility was $248 million.

The letters of credit are posted in lieu of cash to satisfy regulatory requirements in certain states in which we operate.

We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility as of September 30, 2025 will provide us with sufficient liquidity to meet our obligations in the short- and long-term.

We closely monitor the performance of our investment portfolio, primarily cash deposits and short- and long-term marketable securities.

Cash and cash equivalents totaled $603 million and $566 million as of March 31, 2026 and December 31, 2025, respectively.

Our cash and cash equivalents include balances associated with regulatory requirements in our business.

As of March 31, 2026 and December 31, 2025, the total assets subject to these third-party restrictions were $156 million and $151 million, respectively.

As of March 31, 2026, the available borrowing capacity under the Revolving Credit Facility was $250 million.

We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility as of March 31, 2026 will provide us with sufficient liquidity to meet our obligations in the short- and long-term.

We closely monitor the performance of our investment portfolio, primarily consisting of cash deposits.

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

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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 repurchased a total of 4,545,461 outstanding shares at an aggregate cost of $234 million under this program, which is included in treasury stock on the condensed consolidated statements of financial position included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of September 30, 2025, we had $416 million remaining available for future repurchases under this program.

We repurchased a total of 7,070,122 outstanding shares for the three months ended March 31, 2026 at an aggregate cost of $381 million under this program, which is included in treasury stock on the condensed consolidated statements of financial position included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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

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

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Our subsidiaries are permitted under the terms of the Credit Agreement and other indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to us.

Furthermore, there are regulatory restrictions on the ability of certain of our subsidiaries to transfer funds to us.

Furthermore, there are regulatory restrictions on certain of our subsidiaries to transfer funds to us.

The payments of ordinary and extraordinary dividends by certain of our subsidiaries (through which we conduct our business) 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 pay to us.

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 pay to us.

None of our subsidiaries are obligated to make funds available to us through the payment of dividends.

Cash flows from operating, investing and financing activities, as reflected in the condensed consolidated statements of cash flows included in Part I, Item 1 of this Quarterly Report on Form 10-Q are summarized in the following table:

Nine Months Ended

September 30,

Three Months Ended

(In millions)

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Operating Activities

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

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

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

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

Cash used for working capital was primarily driven by seasonality, payments of accrued bonuses and a decline in the number of first-year real estate home warranties, which are typically paid for upfront at the time of closing on the home sale.

Net cash provided from operating activities was $119 million and $124 million for the three months ended March 31, 2026 and 2025, respectively.

Net cash provided from operating activities for the three months ended March 31, 2026 comprised $69 million in earnings adjusted for non-cash charges, offset, in part, by $50 million in cash used primarily for working capital.

Cash provided from working capital was primarily driven by seasonality, offset, in part, by payments of accrued bonuses.

Net cash provided from operating activities for the three months ended March 31, 2025 comprised $67 million in earnings adjusted for non-cash charges and $57 million in cash provided from working capital.

Cash provided from working capital was primarily driven by seasonality, offset, in part, by payments of accrued bonuses.

Investing Activities

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

For the nine months ended September 30, 2025, cash provided from sales and maturities of available-for-sale securities was $60 million, purchases of available-for-sale securities was $6 million, and there was $3 million in cash provided from the finalization of the 2-10 HBW Acquisition purchase price.

Capital expenditures were $20 million for nine months ended September 30, 2025 and included recurring capital needs and technology projects.

We expect capital expenditures for the full year 2025 relating to committed, recurring capital needs and the continuation of investments in information systems and productivity enhancing technology to be approximately $30 million.

Net cash used for investing activities was $7 million for the three months ended March 31, 2026 as compared to net cash provided from investing activities of $47 million for the three months ended March 31, 2025.

For the three months ended March 31, 2026, cash used for purchases of short-term investments was $2 million.

Capital expenditures were $6 million for three months ended March 31, 2026 and included recurring capital needs and technology projects.

We have no additional material capital commitments at this time.

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

For the three months ended March 31, 2025, cash provided from sales and maturities of available-for-sale securities was $60 million, and purchases of available-for-sale securities was $6 million.

Capital expenditures were $7 million for three months ended March 31, 2025, and included recurring capital needs and technology projects.

Financing Activities

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

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

Net cash used for financing activities was $75 million and $85 million for the three months ended March 31, 2026 and 2025, respectively.

For the three months ended March 31, 2026, we made scheduled principal payments of debt of $7 million and purchased outstanding shares of our common stock at an aggregate cost of $61 million.

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

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

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

Repurchases of common stock included associated

commissions and taxes of $1 million.

For the three months ended March 31, 2025, we made scheduled principal payments of debt of $7 million and purchased outstanding shares of our common stock at an aggregate cost of $71 million.

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

Free Cash Flow

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GAAP measure, to Free Cash Flow using data derived from the condensed consolidated statements of cash flows in Part 1, Item 1 of this Quarterly Report on Form 10-Q:

Nine Months Ended

September 30,

Three Months Ended

(In millions)

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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 2. Management’s Discussion and Analysis