9 unchanged sentences
Our operations also include our ProConnect on-demand home services business and Streem, a technology platform that uses augmented reality, computer vision and machine learning to, among other things, help home service professionals more quickly and accurately diagnose breakdowns and complete repairs.
−Removed: At March 31, 2021, we had over two million active home service plans across all 50 states and the District of Columbia.
−Removed: For the three months ended March 31, 2021 and 2020, we generated revenue, net income and Adjusted EBITDA of $329 million, $5 million and $36 million, respectively, and $294 million, $13 million and $47 million, respectively.
−Removed: For the three months ended March 31, 2021, our total operating revenue included 68 percent of revenue derived from existing customer renewals, while 17 percent and 12 percent were derived from new home service plan sales made in conjunction with existing home resale transactions and direct-to-consumer sales, respectively, and two percent was derived from other revenue streams.
−Removed: For the three months ended March 31, 2020, our total operating revenue included 68 percent of revenue derived from existing customer renewals, while 19 percent and 12 percent were derived from new home service plan sales made in conjunction with existing home resale transactions and direct-to-consumer sales, respectively, and one percent was derived from other revenue streams.
+Added: At June 30, 2021, we had over two million active home service plans across all 50 states and the District of Columbia.
+Added: For the three months ended June 30, 2021 and 2020, we generated revenue, net income and Adjusted EBITDA of $462 million, $40 million and $114 million, respectively, and $417 million, $49 million and $100 million, respectively.
+Added: For the six months ended June 30, 2021 and 2020, we generated revenue, net income and Adjusted EBITDA of $791 million, $45 million and $150 million, respectively, and $711 million, $62 million and $147 million, respectively.
+Added: For the six months ended June 30, 2021, our total operating revenue included 68 percent of revenue derived from existing customer renewals, while 17 percent and 12 percent were derived from new home service plan sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and three percent was derived from other revenue channels.
+Added: For the six months ended June 30, 2020, our total operating revenue included 69 percent of revenue derived from existing customer renewals, while 18 percent and 12 percent were derived from new home service plan sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and one percent was derived from other revenue channels.
Key Factors and Trends Affecting Our Results of Operations
4 unchanged sentences
We continue to respond to the real-time needs of our business.
−Removed: While we did not experience a material impact on our results of operations and overall financial performance during the first quarter of 2020, during the first quarter of 2021, our financial condition and results of operations were adversely impacted by the COVID-19 pandemic as follows:
−Removed: Revenue in the first-year real estate channel has continued to be adversely impacted by the decline in U.S.
−Removed: existing home sales in the second quarter of 2020.
−Removed: Due to the annual nature of our home service plan agreements, the impact of this decline carried forward into the first quarter of 2021.
−Removed: Additionally, a strong existing home seller’s market has constrained demand for home service plans in this channel.
−Removed: We experienced an increase in appliance and plumbing claims primarily due to the increased usage of home systems and appliances driven by state and local shelter at home orders and recommendations.
−Removed: In addition, industry-wide availability challenges in the appliance trade have caused increased cost pressure, and, more specifically, appliance parts availability challenges drove additional replacements, contributing to the increased costs.
−Removed: We incurred incremental wages at our customer care centers due to a higher number of service requests in the appliance and plumbing trades, which is primarily a result of customers sheltering at home in response to COVID-19.
−Removed: Although there are effective vaccines for COVID-19 that have been approved for use, we are unable to predict how widely utilized the vaccines will be, whether they will be effective in preventing the spread of COVID-19 (including its variant strains) and when or if normal economic activity and business operations will resume.
−Removed: We expect that a significant number of people will continue to work remotely from home, which may result in a continued increase in usage of home systems and appliances and demand for our services and a resulting increase in service-related costs.
+Added: During the first six months of 2021, our financial condition and results of operations were adversely impacted by the COVID-19 pandemic as follows:
+Added: The tight existing home sales market continues to constrain demand for home service plans in the first-year real estate channel.
+Added: Additionally, due to the annual nature of our home service plan agreements, real estate revenue for the first quarter of 2021 was adversely impacted by the decline in U.S.
+Added: existing home sales that occurred in the second quarter of 2020.
+Added: We experienced an increase in appliance and plumbing claims primarily due to the increased usage of home systems and appliances driven by customers spending greater time at home in response to COVID-19.
+Added: In addition, industry-wide parts availability challenges in the appliance trade have caused increased cost pressure, and, more specifically, additional replacements due to lack of parts availability, further contributing to the increased costs.
+Added: We incurred incremental wages at our customer care centers due to a higher number of service requests in the appliance and plumbing trades, which is primarily a result of customers spending greater time at home in response to COVID-19.
+Added: Additionally, due to labor availability challenges, we continue to experience difficulties in hiring and retaining customer care center personnel.
+Added: Although there are effective vaccines for COVID-19 that have been approved for use, we are unable to predict how widely utilized the vaccines will be, whether they will be effective in preventing the spread of COVID-19 (including its variant strains) and when or if normal economic activity and business operations will fully resume.
+Added: We expect that a significant number of people will continue to spend greater time at home, which may result in a continued increase in usage of home systems and appliances and demand for our services and a resulting increase in service-related costs.
Accordingly, the COVID-19 situation remains very fluid, and we continue to adjust our response in real time.
3 unchanged sentences
The COVID-19 pandemic has increased economic uncertainty in these areas.
−Removed: We believe our ability to acquire customers through the direct-to-consumer channel helps to mitigate the effects of downturns in the real estate market, while our nationwide presence limits the risk of poor economic conditions in any particular geography.
+Added: We believe our ability to acquire customers through the direct-to-consumer channel helps to mitigate the effects of challenges in the real estate channel, while our nationwide presence limits the risk of poor economic conditions in any particular geography.
Our business is subject to seasonal fluctuations, which drives variations in our revenue, net income and Adjusted EBITDA for interim periods.
Seasonal fluctuations are primarily driven by a higher number of central HVAC work orders in the summer months.
−Removed: In the first quarter of 2021 and throughout 2020, additional variations were experienced as the COVID-19 pandemic resulted in an elevated level of service requests, primarily in the appliance and plumbing trades, as our customers spent more time at home.
+Added: In the first six months of 2021 and throughout 2020, additional variations were experienced as the COVID-19 pandemic resulted in an elevated level of service requests, primarily in the appliance and plumbing trades, as our customers spent more time at home.
In 2020, approximately 20 percent, 28 percent, 30 percent and 22 percent of our revenue, approximately 12 percent, 43 percent, 43 percent and 2 percent of our net income, and approximately 17 percent, 37 percent, 34 percent and 12 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.
5 unchanged sentences
While weather variations as described above may affect our business, major weather events and other similar Acts of God, such as hurricanes, flooding and tornadoes, typically do not increase our obligations to provide service.
−Removed: As a rule, repairs associated with such isolated events are addressed by homeowners’ and other forms of insurance as opposed to home service plans that we offer, and such insurance coverage in fact reduces our obligations to provide service to home systems and appliances damaged by insured, catastrophic events.
+Added: Generally, repairs associated with such isolated events are addressed by homeowners’ and other forms of insurance as opposed to the home service plans that we offer.
Tariff and Import/Export Regulations
38 unchanged sentences
customer retention rate.
+Added: The majority of our revenue is generated from annual home service plan agreements entered into with our customers.
Home service plan contracts are typically one year in duration.
19 unchanged sentences
We define Adjusted EBITDA as net income before:
−Removed: provision for income taxes;
−Removed: interest expense;
depreciation and amortization expense;
−Removed: non-cash stock-based compensation expense;
restructuring charges;
+Added: provision for income taxes;
+Added: non-cash stock-based compensation expense;
+Added: interest expense;
loss on extinguishment of debt;
12 unchanged sentences
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 2020 Form 10-K.
−Removed: There have been no material changes to our critical accounting policies for the three months ended March 31, 2021, certain of which are described below.
+Added: There have been no material changes to our critical accounting policies for the six months ended June 30, 2021, certain of which are described below.
Goodwill and Intangible Assets
In accordance with applicable accounting standards, goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment on an annual basis, or more frequently, if circumstances indicate a potential impairment.
−Removed: As of March 31, 2021, we do not believe there are any circumstances, including those related to COVID-19, that would indicate a potential impairment of our goodwill or indefinite-lived intangible assets.
+Added: As of June 30, 2021, we do not believe there are any circumstances, including those related to COVID-19, that would indicate a potential impairment of our goodwill or indefinite-lived intangible assets.
We will continue to monitor the macroeconomic impacts on our business in our ongoing evaluation of potential impairments.
Results of Operations
−Removed: Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020
+Added: Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
Three Months Ended
5 unchanged sentences
Interest expense
−Removed: Interest and net investment income
+Added: Interest and net investment (income) loss
Loss on extinguishment of debt
3 unchanged sentences
* not meaningful
−Removed: We reported revenue of $329 million and $294 million for the three months ended March 31, 2021 and 2020, respectively.
+Added: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
+Added: Six Months Ended
+Added: (In millions)
+Added: Cost of services rendered
+Added: Selling and administrative expenses
+Added: Depreciation and amortization expense
+Added: Restructuring charges
+Added: Interest expense
+Added: Interest and net investment (income) loss
+Added: Loss on extinguishment of debt
+Added: Income before Income Taxes
+Added: Provision for income taxes
+Added: ________________________________
+Added: * not meaningful
+Added: We reported revenue of $462 million and $417 million for the three months ended June 30, 2021 and 2020, respectively, and $791 million and $711 million for the six months ended June 30, 2021 and 2020, respectively.
Revenue by major customer acquisition channel is as follows:
−Removed: Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020
+Added: Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
Three Months Ended
7 unchanged sentences
(1) First-year revenue only.
−Removed: Revenue increased 12 percent for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily driven by higher renewal revenue due to improved price realization and growth in the number of renewed home service plans, due, in part, to customer retention initiatives.
+Added: Revenue increased 11 percent for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily driven by higher renewal revenue due to improved price realization and growth in the number of renewed home service plans, due, in part, to customer retention initiatives.
The increase in real estate revenue primarily reflects improved price realization.
−Removed: Due to the annual nature of our home service plan agreements, real estate revenue has continued to be adversely impacted by the decline in U.S.
−Removed: existing home sales in the second quarter of 2020.
−Removed: Additionally, the strong existing home seller’s market has constrained demand for home service plans in this channel.
+Added: The tight existing home sales market continues to constrain demand for home service plans in this channel.
+Added: Additionally, due to the annual nature of our home service plan agreements, real estate revenue for the prior year was adversely impacted by the decline in U.S.
+Added: existing home sales that occurred in the second quarter of 2020.
The increase in direct-to-consumer revenue primarily reflects growth in the number of first-year direct-to-consumer home service plans, mostly driven by increased investments in marketing.
The increase in other revenue was driven by growth in ProConnect and Streem.
+Added: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
+Added: Six Months Ended
+Added: (In millions)
+Added: Increase (Decrease)
+Added: Real estate (1)
+Added: Direct-to-consumer (1)
+Added: Total revenue
+Added: ________________________________
+Added: * not meaningful
+Added: (1) First-year revenue only.
+Added: Revenue increased 11 percent for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily driven by higher renewal revenue due to improved price realization and growth in the number of renewed home service plans, due, in part, to customer retention initiatives.
+Added: The increase in real estate revenue primarily reflects improved price realization.
+Added: The tight existing home sales market continues to constrain demand for home service plans in this channel.
+Added: Additionally, due to the annual nature of our home service plan agreements, real estate revenue for both the first quarter of 2021 and the second quarter of 2020 was adversely impacted by the decline in U.S.
+Added: existing home sales that occurred in the second quarter of 2020.
+Added: The increase in direct-to-consumer revenue primarily reflects growth in the number of first-year direct-to-consumer home service plans, mostly driven by increased investments in marketing.
+Added: The increase in other revenue was driven by growth in ProConnect and Streem.
Number of home service plans, growth in number of home service plans and customer retention rate are presented below.
4 unchanged sentences
Cost of Services Rendered
−Removed: We reported cost of services rendered of $181 million and $147 million for the three months ended March 31, 2021 and 2020, respectively.
−Removed: The following table provides a summary of changes in cost of services rendered:
−Removed: Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020
+Added: We reported cost of services rendered of $221 million and $200 million for the three months ended June 30, 2021 and 2020, respectively, and $402 million and $347 million for the six months ended June 30, 2021 and 2020, respectively.
+Added: The following tables provide a summary of changes in cost of services rendered:
+Added: Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
(In millions)
−Removed: Three Months Ended March 31, 2020
+Added: Three Months Ended June 30, 2020
Impact of change in revenue
Contract claims costs
−Removed: Three Months Ended March 31, 2021
−Removed: The increase in contract claims costs reflects higher incidence in the appliance and plumbing trades, primarily a result of customers sheltering at home in response to the COVID-19 pandemic, increased cost pressures in the appliance trade due to industry-wide availability challenges and inflation, offset, in part, by process improvement benefits.
+Added: Three Months Ended June 30, 2021
+Added: The increase in contract claims costs reflects increased cost pressures in the appliance, plumbing and HVAC trades due to industry-wide availability challenges and inflation, offset, in part, by lower service request incidence across all trades and process improvement benefits.
Appliance parts availability challenges continued to drive additional replacements, contributing to the increased cost pressures.
−Removed: Contract claims costs also reflects an unfavorable weather impact of approximately $5 million.
+Added: Results for the prior year reflect higher service request incidence in the appliance and plumbing trades compared to 2021, which was primarily a result of customers sheltering at home in response to COVID-19.
+Added: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
+Added: (In millions)
+Added: Six Months Ended June 30, 2020
+Added: Impact of change in revenue
+Added: Contract claims costs
+Added: Six Months Ended June 30, 2021
+Added: The increase in contract claims costs reflects increased cost pressures in the appliance and plumbing trades due to industry-wide availability challenges and inflation.
+Added: Additionally, contract claims costs reflect higher service request incidence in the first quarter of 2021 primarily in the appliance trade driven by customers continuing to spend greater time at home and in the HVAC trade driven by unfavorable weather trends, offset, in part, by process improvement benefits.
+Added: Appliance parts availability challenges continued to drive additional replacements, contributing to the increased cost pressures.
Selling and Administrative Expenses
−Removed: We reported selling and administrative expenses of $118 million and $105 million for the three months ended March 31, 2021 and 2020, respectively.
−Removed: For the three months ended March 31, 2021 and 2020, selling and administrative expenses comprised sales, marketing and customer service costs of $81 million and $75 million, respectively, and general and administrative expenses of $37 million and $30 million, respectively.
−Removed: The following table provides a summary of changes in selling and administrative expenses:
−Removed: Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020
+Added: We reported selling and administrative expenses of $136 million and $125 million for the three months ended June 30, 2021 and 2020, respectively, $254 million and $229 million for the six months ended June 30, 2021 and 2020, respectively.
+Added: For the three months ended June 30, 2021 and 2020, selling and administrative expenses comprised sales, marketing and customer service costs of $97 million and $90 million, respectively, and general and administrative expenses of $39 million and $35 million, respectively.
+Added: For the six months ended June 30, 2021 and 2020, selling and administrative expenses comprised sales, marketing and customer service costs of $178 million and $164 million, respectively, and general and administrative expenses of $76 million and $65 million, respectively.
+Added: The following tables provide a summary of changes in selling and administrative expenses:
+Added: Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
(In millions)
−Removed: Three Months Ended March 31, 2020
+Added: Three Months Ended June 30, 2020
Sales and marketing costs
2 unchanged sentences
General and administrative costs
−Removed: Three Months Ended March 31, 2021
−Removed: The increase in sales and marketing costs was primarily driven by higher targeted marketing spend to drive sales growth in the direct-to-consumer channel and ProConnect and investments in Streem.
−Removed: The increase in customer service costs was primarily related to managing a higher number of service requests and investments in customer retention initiatives.
+Added: Three Months Ended June 30, 2021
+Added: The increase in sales and marketing costs was primarily driven by increased investments to drive sales growth in the home service plan direct-to-consumer channel, ProConnect and Streem.
+Added: The increase in customer service costs was primarily related to investments in customer retention initiatives and customer growth.
General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology.
+Added: Prior year general and administrative costs include incremental direct costs related to COVID-19 of $1 million.
+Added: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
+Added: (In millions)
+Added: Six Months Ended June 30, 2020
+Added: Sales and marketing costs
+Added: Customer service costs
+Added: Stock-based compensation expense
+Added: General and administrative costs
+Added: Six Months Ended June 30, 2021
+Added: The increase in sales and marketing costs was primarily driven by increased investments to drive sales growth in the home service plan direct-to-consumer channel, ProConnect and Streem.
+Added: The increase in customer service costs was primarily related to managing a higher number of service requests, investments in customer retention initiatives and customer growth.
+Added: General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology.
+Added: Prior year general and administrative costs include incremental direct costs related to COVID-19 of $1 million.
Depreciation Expense
−Removed: Depreciation expense was $6 million and $5 million for the three months ended March 31, 2021 and 2020, respectively.
+Added: Depreciation expense was $6 million and $5 million for the three months ended June 30, 2021 and 2020, respectively , and $12 million and $10 million for the six months ended June 30, 2021 and 2020, respectively.
Amortization Expense
−Removed: Amortization expense was $3 million for each of the three months ended March 31, 2021 and 2020 .
+Added: Amortization expense was $3 million and $4 million for the three months ended June 30, 2021 and 2020, respectively, and $6 million and $7 million for the six months ended June 30, 2021 and 2020, respectively .
Restructuring Charges
−Removed: Restructuring charges were $1 million and $3 million for the three months ended March 31, 2021 and 2020, respectively .
−Removed: For the three months ended March 31, 2021, restructuring charges primarily comprised accelerated depreciation of certain technology systems driven by efforts to enhance our technological capabilities.
−Removed: For the three months ended March 31, 2020, restructuring charges comprised lease termination costs and severance and other costs related to the decision to consolidate certain operations of Landmark with those of OneGuard.
+Added: Restructuring charges were $1 million for each of the three months ended June 30, 2021 and 2020 and $2 million and $4 million for the six months ended June 30, 2021 and 2020, respectively .
+Added: For the three months ended June 30, 2021 and 2020, restructuring charges primarily comprised accelerated depreciation of certain technology systems driven by efforts to enhance our technological capabilities.
+Added: For the six months ended June 30, 2021, restructuring charges comprised $1 million of accelerated depreciation of certain technology systems driven by efforts to enhance our technological capabilities and $1 million of severance and other costs.
+Added: For the six months ended June 30, 2020, restructuring charges comprised $2 million of lease termination costs and $1 million of severance and other costs related to the decision to consolidate the operations of Landmark with those of OneGuard, which was completed during the first quarter of 2020, as well as $1 million of accelerated depreciation of certain technology systems.
Interest Expense
−Removed: Interest expense was $13 million and $15 million for the three months ended March 31, 2021 and 2020, respectively.
−Removed: For the three months ended March 31, 2021, the decrease was primarily due to a decline in interest rates on the unhedged portion of our variable rate debt.
−Removed: Interest and Net Investment Income
−Removed: Interest and net investment income was less than $1 million and $2 million for the three months ended March 31, 2021 and 2020, respectively, and comprised interest on our investment portfolio.
+Added: Interest expense was $12 million and $14 million for the three months ended June 30, 2021 and 2020, respectively, and $25 million and $29 million for the six months ended June 30, 2021 and 2020, respectively .
+Added: For the three and six months ended June 30, 2021, the decrease was due to a decline in interest rates on the unhedged portion of our variable rate debt, the February 17, 2021 partial repayment of the Existing Term Loan Facility and the June 17, 2021 redemption of the 2026 Notes.
+Added: Interest and Net Investment (Income) Loss
+Added: Interest and net investment (income) loss reflects income of less than $1 million for the three months ended June 30, 2021 compared to a loss of $3 million for the three months ended June 30, 2020, and income of $1 million for the six months ended June 30, 2021 compared to a loss of $1 million for the six months ended June 30, 2020.
+Added: For the three and six months ended June 30, 2021, amounts primarily comprised interest on our cash and cash equivalents balances.
+Added: For the three and six months ended June 30, 2020, amounts primarily comprised a $3 million loss on investment, offset, in part, by interest on our cash and cash equivalents balances.
Loss on Extinguishment of Debt
−Removed: Loss on extinguishment of debt was $1 million for t he three months ended March 31, 2021, which was recorded in connection with the partial repayment of the Term Loan Facility and includes the write-off of debt issuance costs and original issue discount.
−Removed: There were no such charges for the three months ended March 31, 2020.
+Added: Loss on extinguishment of debt was $30 million and $31 million for t he three and six months ended June 30, 2021, respectively.
+Added: Amounts primarily relate to the June 17, 2021 redemption of the remaining outstanding principal amounts of $534 million of the Existing Term Loan Facility and $350 million of the 2026 Notes and include a “make-whole” redemption premium of $21 million on the 2026 Notes and the write-off of $9 million of debt issuance costs and original issue discount.
+Added: Additionally, $1 million relates to the February 17, 2021 partial repayment of the Existing Term Loan Facility and includes the write-off of debt issuance costs and original issue discount.
+Added: There were no such charges for the three and six months ended June 30, 2020.
Provision for Income Taxes
−Removed: The effective tax rate on income was 9.8 percent and 25.0 percent for the three months ended March 31, 2021 and 2020, respectively.
−Removed: The decrease in the effective tax rate for the three months ended March 31, 2021 compared to 2020 is primarily due to excess tax benefits for share-based awards.
−Removed: Net income was $5 million and $13 million for the three months ended March 31, 2021 and 2020, respectively.
−Removed: For the three months ended March 31, 2021 compared to 2020, the decrease was driven by the aforementioned operating results, offset, in part, by a decrease in the provision for income taxes as a result of lower income before income taxes.
+Added: The effective tax rate on income was 26.0 percent and 25.5 percent for the three months ended June 30, 2021 and 2020, respectively, and 24.5 percent and 25.4 percent for the six months ended June 30, 2021 and 2020, respectively .
+Added: The decrease in the effective tax rate for the six months ended June 30, 2021 compared to 2020 is primarily due to excess tax benefits for share-based awards.
+Added: Net income was $40 million and $49 million for the three months ended June 30, 2021 and 2020, respectively, and $45 million and $62 million for the six months ended June 30, 2021 and 2020, respectively.
+Added: For the three and six months ended June 30, 2021 compared to 2020, the decrease was driven by the loss on extinguishment of debt, offset in part, by the aforementioned operating results and a decrease in the provision for income taxes.
Adjusted EBITDA
−Removed: Adjusted EBITDA was $36 million and $47 million for the three months ended March 31, 2021 and 2020, respectively.
−Removed: The following table provides a summary of changes in our Adjusted EBITDA:
−Removed: Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020
+Added: Adjusted EBITDA was $114 million and $100 million for the three months ended June 30, 2021 and 2020, respectively, and $150 million and $147 million for the six months ended June 30, 2021 and 2020, respectively .
+Added: The following tables provide a summary of changes in our Adjusted EBITDA:
+Added: Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
(In millions)
−Removed: Three Months Ended March 31, 2020
+Added: Three Months Ended June 30, 2020
Impact of change in revenue
3 unchanged sentences
General and administrative costs
−Removed: Three Months Ended March 31, 2021
−Removed: The increase in contract claims costs reflects higher incidence in the appliance and plumbing trades, primarily a result of customers sheltering at home in response to the COVID-19 pandemic, increased cost pressures in the appliance trade due to industry-wide availability challenges and inflation, offset, in part, by process improvement benefits.
+Added: Three Months Ended June 30, 2021
+Added: The increase in contract claims costs reflects increased cost pressures in the appliance, plumbing and HVAC trades due to industry-wide availability challenges and inflation, offset, in part, by lower service request incidence across all trades and process improvement benefits.
Appliance parts availability challenges continued to drive additional replacements, contributing to the increased cost pressures.
−Removed: Contract claims costs also reflects an unfavorable weather impact of approximately $5 million.
−Removed: The increase in sales and marketing costs was primarily driven by higher targeted marketing spend to drive sales growth in the direct-to-consumer channel and ProConnect and investments in Streem.
−Removed: The increase in customer service costs was primarily related to managing a higher number of service requests and investments in customer retention initiatives.
+Added: Results for the prior year reflect higher service request incidence in the appliance and plumbing trades compared to 2021, which was primarily a result of customers sheltering at home in response to COVID-19.
+Added: The increase in sales and marketing costs was primarily driven by increased investments to drive sales growth in the home service plan direct-to-consumer channel, ProConnect and Streem.
+Added: The increase in customer service costs was primarily related to investments in customer retention initiatives and customer growth.
General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology.
+Added: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
+Added: (In millions)
+Added: Six Months Ended June 30, 2020
+Added: Impact of change in revenue
+Added: Contract claims costs
+Added: Sales and marketing costs
+Added: Customer service costs
+Added: General and administrative costs
+Added: Six Months Ended June 30, 2021
+Added: The increase in contract claims costs reflects increased cost pressures in the appliance and plumbing trades due to industry-wide availability challenges and inflation.
+Added: Additionally, contract claims costs reflect higher service request incidence in the first quarter of 2021 primarily in the appliance trade driven by customers continuing to spend greater time at home and in the HVAC trade driven by unfavorable weather trends offset, in part, by process improvement benefits.
+Added: Appliance parts availability challenges continued to drive additional replacements, contributing to the increased cost pressures.
+Added: The increase in sales and marketing costs was primarily driven by increased investments to drive sales growth in the home service plan direct-to-consumer channel, ProConnect and Streem.
+Added: The increase in customer service costs was primarily related to managing a higher number of service requests, investments in customer retention initiatives and customer growth.
+Added: General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology.
Other primarily consists of interest and net investment income.
1 unchanged sentence
Three Months Ended
+Added: Six Months Ended
(In millions)
5 unchanged sentences
Loss on extinguishment of debt
+Added: Other non-operating expenses (1)
Adjusted EBITDA
+Added: ________________________________
+Added: (1) Other non-operating expenses for the three and six months ended June 30, 2020 includes (a) a loss on investment of $3 million, (b) incremental direct costs related to COVID-19 of $1 million, which were temporary in nature and primarily related to incremental health and childcare benefits for our employees and hoteling costs related to our offshore business process outsourcers and (c) acquisition-related transaction costs of less than $1 million.
+Added: For the three and six months ended June 30, 2021, such charges were less than $1 million.
Liquidity and Capital Resources
A substantial portion of our liquidity needs are due to debt service requirements on our indebtedness.
−Removed: The Credit Agreement, as well as the Indenture, contain 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.
−Removed: As of March 31, 2021, we were in compliance with the covenants under the agreements that were in effect on such date.
−Removed: Based on current conditions, we do not believe the COVID-19 pandemic will affect our ongoing ability to meet the covenants in our debt instruments, including our Credit Agreement and Indenture.
−Removed: Cash and cash equivalents totaled $538 million and $597 million as of March 31, 2021 and December 31, 2020, respectively.
+Added: The Amended 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.
+Added: As of June 30, 2021, we were in compliance with the covenants under the agreements that were in effect on such date.
+Added: Based on current conditions, we do not believe the COVID-19 pandemic will affect our ongoing ability to meet the covenants in our debt instruments, including our Amended Credit Agreement.
+Added: Cash and cash equivalents totaled $323 million and $597 million as of June 30, 2021 and December 31, 2020, respectively.
Our cash and cash equivalents include balances associated with regulatory requirements in our business.
−Removed: See “—Limitations on Distributions and Dividends by Subsidiaries.” As of March 31, 2021 and December 31, 2020, the total net assets subject to these third-party restrictions was $175 million and $180 million, respectively.
−Removed: As of March 31, 2021, there were $2 million of letters of credit outstanding and $248 million of available borrowing capacity under the Revolving Credit Facility.
+Added: See “—Limitations on Distributions and Dividends by Subsidiaries.” As of June 30, 2021 and December 31, 2020, the total net assets subject to these third-party restrictions was $173 million and $180 million, respectively.
+Added: As of June 30, 2021, there were $2 million of letters of credit outstanding and $248 million of available borrowing capacity under the Amended Revolving Credit Facility.
The letters of credit are posted in lieu of cash to satisfy regulatory requirements in certain states in which we operate.
−Removed: Available liquidity was $611 million at March 31, 2021, consisting of $363 million of cash not subject to third-party restrictions and $248 million of available borrowing capacity under the Revolving Credit Facility.
−Removed: We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility at March 31, 2021 will provide us with sufficient liquidity to meet our obligations for the foreseeable future.
−Removed: On February 17, 2021, we repaid $100 million of outstanding principal amount of the Term Loan Facility.
−Removed: In connection with the repayment, we recorded a loss on extinguishment of debt of $1 million, which included the write-off of debt issuance costs and original issue discount.
+Added: Available liquidity was $398 million at June 30, 2021, consisting of $150 million of cash not subject to third-party restrictions and $248 million of available borrowing capacity under the Amended Revolving Credit Facility.
+Added: We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Amended Revolving Credit Facility at June 30, 2021 will provide us with sufficient liquidity to meet our obligations for the foreseeable future.
We closely monitor the performance of our investment portfolio.
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The amount of debt that may be repurchased or otherwise retired or refinanced, if any, and the price of such repurchases, retirements or refinancings will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations.
+Added: On February 17, 2021, we repaid $100 million of outstanding principal amount of the Term Loan Facility.
+Added: In connection with the repayment, we recorded a loss on extinguishment of debt of $1 million, which included the write-off of debt issuance costs and original issue discount.
+Added: On June 17, 2021, we entered into the Amended Credit Agreement, providing for the Term Loan A maturing June 17, 2026, the Term Loan B maturing June 17, 2028 and the Amended Revolving Credit Facility, which terminates June 17, 2026.
+Added: The net proceeds of the transaction, together with cash on hand, were used to redeem the remaining outstanding principal amounts of $534 million of the Existing Term Loan Facility and $350 million of the 2026 Notes at a price of 106.1%.
+Added: In addition, the Amended Revolving Credit Facility replaced the Existing Revolving Credit Facility.
+Added: In connection with the repayments, we recorded a loss on extinguishment of debt of $30 million in the second quarter of 2021, which included a “make-whole” redemption premium of $21 million on the 2026 Notes and the write-off of $9 million of debt issuance costs and original issue discount.
+Added: See Note 10 to the condensed consolidated financial statements included in Part 1, Item 1 of this report for more information related to our indebtedness.
Limitations on Distributions and Dividends by Subsidiaries
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The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements, financial condition and general business conditions, as well as restrictions under the laws of our subsidiaries’ jurisdictions.
−Removed: 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.
+Added: Our subsidiaries are permitted under the terms of the Amended 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 third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us.
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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 report, are summarized in the following table.
−Removed: Three Months Ended
+Added: Six Months Ended
(In millions)
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Operating Activities
−Removed: Net cash provided from operating activities was $52 million for the three months ended March 31, 2021, compared to $60 million for the three months ended March 31, 2020.
−Removed: Net cash provided from operating activities in 2021 comprised $21 million in earnings adjusted for non-cash charges and a $31 million decrease in cash required for working capital.
−Removed: The decrease in cash required for working capital was driven by growth in our underlying business.
+Added: Net cash provided from operating activities was $119 million for the six months ended June 30, 2021, compared to $140 million for the six months ended June 30, 2020.
+Added: Net cash provided from operating activities in 2021 comprised $112 million in earnings adjusted for non-cash charges and an $8 million decrease in cash required for working capital.
+Added: The decrease in cash required for working capital was driven by seasonality and growth in our underlying business, offset, in part, by interest payments made in connection with the redemption of the 2026 Notes.
Net cash provided from operating activities in 2020 comprised $94 million in earnings adjusted for non-cash charges and a $46 million decrease in cash required for working capital.
−Removed: The decrease in cash required for working capital was driven by growth in our underlying business.
+Added: The decrease in cash required for working capital was driven by seasonality and growth in our underlying business.
Investing Activities
−Removed: Net cash used for investing activities was $7 million and $3 million for the three months ended March 31, 2021 and 2020, respectively.
−Removed: Capital expenditures were $7 million for the three months ended March 31, 2021, compared to $8 million for the three months ended March 31, 2020, and included recurring capital needs and technology projects.
+Added: Net cash used for investing activities was $15 million and $19 million for the six months ended June 30, 2021 and 2020, respectively.
+Added: Capital expenditures were $15 million for the six months ended June 30, 2021, compared to $18 million for the six months ended June 30, 2020, and included recurring capital needs and technology projects.
We expect capital expenditures for the full year 2021 relating to recurring capital needs and the continuation of investments in information systems and productivity enhancing technology to be approximately $30 million to $40 million.
We have no additional material capital commitments at this time.
−Removed: Cash flows provided from purchases, sales and maturities of securities, net, for the three months ended March 31, 2020 were $5 million and were driven by the maturities of marketable securities.
−Removed: There were no cash flows provided from purchases, sales and maturities of securities, net, for the three months ended March 31, 2021.
−Removed: There were no sales of marketable securities in the three months ended March 31, 2021 and 2020.
+Added: Cash payments for business acquisitions, net of cash acquired, were $5 million for the six months ended June 30, 2020.
+Added: During the second quarter of 2020, we acquired a business to expand our ProConnect on-demand offering for $5 million in cash.
+Added: There were no acquisitions for the six months ended June 30, 2021.
+Added: Cash flows provided from purchases, sales and maturities of securities, net, for the six months ended June 30, 2020 were $5 million and were driven by the maturities of marketable securities.
+Added: There were no cash flows provided from purchases, sales and maturities of securities, net, for the six months ended June 30, 2021.
Financing Activities
−Removed: Net cash used for financing activities was $105 million and $3 million for the three months ended March 31, 2021 and 2020, respectively, and primarily consisted of payments on debt.
−Removed: For the three months ended March 31, 2021, amounts include the partial repayment of $100 million of the Term Loan Facility.
+Added: Net cash used for financing activities was $378 million and $4 million for the six months ended June 30, 2021 and 2020, respectively.
+Added: On February 17, 2021, we repaid $100 million of outstanding principal amount of the Existing Term Loan Facility.
+Added: Additionally, on June 17, 2021, we entered into the Amended Credit Agreement.
+Added: The net proceeds of the transaction, together with cash on hand, were used to redeem the remaining outstanding principal amounts of $534 million of the Existing Term Loan Facility and $350 million of the 2026 Notes at a price of 106.1%.
+Added: In connection with the repayments, we paid a “make-whole” redemption premium of $21 million on the 2026 Notes and debt issuance costs of $8 million.
Contractual Obligations
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We continue to make the contractually required payments, and, therefore, the 2021 obligations and commitments described in our 2020 Form 10-K have been reduced by the required payments.
−Removed: During the three months ended March 31, 2021, we repaid $100 million of the outstanding principal amount of the Term Loan Facility.
−Removed: This amount was disclosed in our 2020 Form 10-K as a required principal payment in 2025.
−Removed: Based on applicable rates at March 31, 2021 plus specified margins, this partial repayment results in a reduction in interest expense of approximately $12 million in total for the years 2021 through 2025.
+Added: On June 17, 2021, we entered into the Amended Credit Agreement.
+Added: The net proceeds of the transaction, together with cash on hand, were used to redeem the remaining outstanding principal amounts of $534 million of the Existing Term Loan Facility and $350 million of the 2026 Notes.
+Added: As of June 30, 2021, future scheduled long-term debt payments total $640 million, and estimated long-term debt payments for the remainder of 2021 and for each fiscal year from 2022 through 2026 are $8 million, $17 million, $17 million, $17 million, $17 million and $205 million, respectively.
+Added: Additionally, as of June 30, 2021, future estimated interest payments, which are based on the applicable rates at June 30, 2021 plus the specified margin in the Amended Credit Agreement, total $126 million;
+Added: estimated interest payments for the remainder of 2021 and for each fiscal year from 2022 through 2026 are $14 million, $24 million, $24 million, $23 million, $19 million and $10 million, respectively;
+Added: the estimated debt balance as of each fiscal year end from 2021 through 2026 is $632 million, $615 million, $598 million, $581 million, $564 million and $359 million, respectively;
+Added: and the weighted-average interest rate (including the impact of the effective interest rate swap) on the estimated debt balances at each fiscal year end from 2021 through 2026 is expected to be 3.8 percent, 3.9 percent, 3.9 percent, 4.0 percent, 2.2 percent and 2.4 percent, respectively.
+Added: See Note 10 to the condensed consolidated financial statements included in Part 1, Item 1 of this report for the terms and maturities of the Amended Credit Facilities.
Financial Position
−Removed: The following discussion describes changes in our financial position from December 31, 2020 to March 31, 2021:
−Removed: Cash and cash equivalents decreased during the three months ended March 31, 2021, primarily due to the repayment of $100 million of outstanding principal amount of the Term Loan Facility, offset, in part, by cash provided from operating activities.
−Removed: Accounts payable increased during the three months ended March 31, 2021, reflecting the timing of trade payables due to the seasonality of our business.
−Removed: Deferred revenue increased during the three months ended March 31, 2021, primarily due to the recognition of a contract liability of $45 million related to the recognition of monthly-pay customer revenue on an other-than-straight-line basis to match the timing of cost recognition.
−Removed: Long-term debt decreased during the three months ended March 31, 2021, due to the repayment of $100 million of outstanding principal amount of the Term Loan Facility.
+Added: The following discussion describes changes in our financial position from December 31, 2020 to June 30, 2021:
+Added: Cash and cash equivalents decreased during the six months ended June 30, 2021, primarily due to our debt refinancing transactions, offset, in part, by cash provided from operating activities.
+Added: Accounts payable increased during the six months ended June 30, 2021, reflecting the timing of trade payables due to the seasonality of our business.
+Added: Home service plans claims increased during the six months ended June 30, 2021, reflecting the seasonality of contract claims, which increased amounts due to contractors and suppliers.
+Added: Deferred revenue decreased during the six months ended June 30, 2021, reflecting a shift in the mix of annual-pay customers to monthly-pay customers.
+Added: Current portion of long-term debt increased during the six months ended June 30, 2021, reflecting our debt refinancing transactions.
+Added: Long-term debt decreased during the six months ended June 30, 2021, reflecting our debt refinancing transactions.
+Added: Total shareholders’ equity was a surplus of $3 million as of June 30, 2021 compared to a deficit of $61 million as of December 31, 2020.
+Added: The increase was primarily driven by the $45 million of net income generated during the six months ended June 30, 2021 which reduced our accumulated deficit.
+Added: See the condensed consolidated statements of changes in equity (deficit) included in Part I, Item 1 of this report for further information.
Off-Balance Sheet Arrangements
−Removed: As of March 31, 2021, we did not have any significant off-balance sheet arrangements.
+Added: As of June 30, 2021, we did not have any significant off-balance sheet arrangements.
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
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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.