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 June 30, 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 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: At September 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 September 30, 2021 and 2020, we generated revenue, net income and Adjusted EBITDA of $471 million, $76 million and $122 million, respectively, and $440 million, $49 million and $91 million, respectively.
+Added: For the nine months ended September 30, 2021 and 2020, we generated revenue, net income and Adjusted EBITDA of $1,263 million, $122 million and $272 million, respectively, and $1,151 million, $111 million and $238 million, respectively.
+Added: For the nine months ended September 30, 2021, our total operating revenue included 69 percent of revenue derived from existing customer renewals, while 16 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 nine months ended September 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: During the first six months of 2021, our financial condition and results of operations were adversely impacted by the COVID-19 pandemic as follows:
−Removed: The tight existing home sales market continues to constrain demand for home service plans in the first-year real estate channel.
−Removed: 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: During the first nine 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 continued 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 and the corresponding recognition of revenue over this annual period, real estate revenue for the first quarter of 2021 was adversely impacted by the decline in U.S.
existing home sales that occurred in the second quarter of 2020.
−Removed: 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.
−Removed: 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.
−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 spending greater time at home in response to COVID-19.
−Removed: Additionally, due to labor availability challenges, we continue to experience difficulties in hiring and retaining customer care center personnel.
−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 fully resume.
+Added: We continued to experience an increase in appliance claims compared to pre-pandemic levels primarily due to 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 have caused increased cost pressure, and, more specifically, additional appliance replacements due to lack of parts availability, further contributing to the increased costs.
+Added: These industry-wide supply chain challenges also impacted the customer experience, which was reflected in our customer retention rate.
+Added: We incurred incremental customer service wages due to a higher number of service requests in the appliance trade compared to pre-pandemic levels, which was primarily a result of customers spending greater time at home in response to COVID-19.
+Added: Additionally, due to labor availability challenges, we continued to experience difficulties in hiring and retaining customer service personnel.
+Added: Although the economy has improved since the initial outbreak of the pandemic, we are unable to predict the time required for a widespread sustainable economic recovery to take hold .
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.
+Added: We also expect that industry-wide supply chain challenges will continue to contribute to increased costs and impact the customer experience, which may affect customer retention.
Accordingly, the COVID-19 situation remains very fluid, and we continue to adjust our response in real time.
4 unchanged sentences
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.
+Added: Additionally, global supply chain challenges, ranging from raw material inflation to transportation delays and labor shortages, impact our costs and customer experience, and we continue to take actions to mitigate these impacts.
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 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.
+Added: In the first nine months of 2021 and throughout 2020, additional variations were experienced as the COVID-19 pandemic resulted in an elevated level of service requests in the appliance trade compared to pre-pandemic levels 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.
18 unchanged sentences
We anticipate that the highly fragmented nature of the home service plan category will continue to create strategic opportunities for acquisitions.
−Removed: In particular, we intend to focus strategically on underserved regions where we can enhance and expand service capabilities.
Historically, we have used acquisitions to cost-effectively grow our customer base in high-growth geographies, and we intend to continue to do so.
45 unchanged sentences
Adjusted EBITDA and Adjusted EBITDA margin.
−Removed: We evaluate performance and allocate resources based primarily on Adjusted EBITDA, which is a financial measure not calculated in accordance with U.S.
+Added: We evaluate performance based primarily on Adjusted EBITDA, which is a financial measure not calculated in accordance with U.S.
We define Adjusted EBITDA as net income before:
18 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 six months ended June 30, 2021, certain of which are described below.
+Added: There have been no material changes to our critical accounting policies for the nine months ended September 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 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.
+Added: As of September 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 June 30, 2021 Compared to the Three Months Ended June 30, 2020
+Added: Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
Three Months Ended
+Added: September 30,
(In millions)
2 unchanged sentences
Depreciation and amortization expense
−Removed: Restructuring charges
Interest expense
−Removed: Interest and net investment (income) loss
−Removed: Loss on extinguishment of debt
Income before Income Taxes
Provision for income taxes
−Removed: ________________________________
−Removed: * not meaningful
−Removed: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
−Removed: Six Months Ended
+Added: Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
+Added: Nine Months Ended
+Added: September 30,
(In millions)
10 unchanged sentences
* not meaningful
−Removed: 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.
+Added: We reported revenue of $471 million and $440 million for the three months ended September 30, 2021 and 2020, respectively, and $1,263 million and $1,151 million for the nine months ended September 30, 2021 and 2020, respectively.
Revenue by major customer acquisition channel is as follows:
−Removed: Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
+Added: Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
Three Months Ended
+Added: September 30,
(In millions)
6 unchanged sentences
(1) First-year revenue only.
−Removed: 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.
−Removed: The increase in real estate revenue primarily reflects improved price realization.
−Removed: The tight existing home sales market continues to constrain demand for home service plans in this channel.
+Added: Revenue increased seven percent for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily driven by higher renewal revenue due to improved price realization and growth in the number of renewed home service plans.
+Added: The decrease in real estate revenue primarily reflects a decline in the number of first-year real estate home service plans driven by the tight existing home sales market, offset, in part, by improved price realization.
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.
existing home sales that occurred in the second quarter of 2020.
−Removed: 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 direct-to-consumer revenue primarily reflects improved price realization.
The increase in other revenue was driven by growth in ProConnect and Streem.
−Removed: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
−Removed: Six Months Ended
+Added: Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
+Added: Nine Months Ended
+Added: September 30,
(In millions)
6 unchanged sentences
(1) First-year revenue only.
−Removed: 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.
−Removed: The increase in real estate revenue primarily reflects improved price realization.
−Removed: The tight existing home sales market continues to constrain demand for home service plans in this channel.
−Removed: 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: Revenue increased 10 percent for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily driven by higher renewal revenue due to improved price realization and growth in the number of renewed home service plans.
+Added: The increase in real estate revenue primarily reflects improved price realization, offset, in part, by a decline in the number of first-year real estate home service plans driven by the tight existing home sales market.
+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 and third quarters of 2020 was adversely impacted by the decline in U.S.
existing home sales that occurred in the second quarter of 2020.
−Removed: 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 direct-to-consumer revenue primarily reflects improved price realization and 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.
Number of home service plans, growth in number of home service plans and customer retention rate are presented below.
+Added: September 30,
(In millions)
2 unchanged sentences
Customer retention rate
+Added: The number of home service plans and customer retention rate as of September 30, 2021 were negatively impacted by a decline in the number of first-year real estate home service plans, which was driven by the tight existing home sales market, as well as the impact on customer experience of industry-wide supply chain challenges.
Cost of Services Rendered
−Removed: 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: We reported cost of services rendered of $217 million and $225 million for the three months ended September 30, 2021 and 2020, respectively, and $619 million and $572 million for the nine months ended September 30, 2021 and 2020, respectively.
The following tables provide a summary of changes in cost of services rendered:
−Removed: Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
+Added: Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
(In millions)
−Removed: Three Months Ended June 30, 2020
+Added: Three Months Ended September 30, 2020
Impact of change in revenue
Contract claims costs
−Removed: Three Months Ended June 30, 2021
−Removed: 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.
+Added: Three Months Ended September 30, 2021
+Added: The decrease in contract claims costs reflects lower service request incidence across all trades and process improvement benefits, offset, in part, by increased cost pressures across all trades due to industry-wide availability challenges and inflation.
+Added: Contract claims costs also reflect a favorable weather impact of approximately $4 million.
Appliance parts availability challenges continued to drive additional replacements, contributing to the increased cost pressures.
−Removed: 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.
−Removed: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
+Added: Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
(In millions)
−Removed: Six Months Ended June 30, 2020
+Added: Nine Months Ended September 30, 2020
Impact of change in revenue
Contract claims costs
−Removed: Six Months Ended June 30, 2021
−Removed: The increase in contract claims costs reflects increased cost pressures in the appliance and plumbing trades due to industry-wide availability challenges and inflation.
−Removed: 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: Nine Months Ended September 30, 2021
+Added: The increase in contract claims costs reflects increased cost pressures across all 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.
Selling and Administrative Expenses
−Removed: 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.
−Removed: 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.
−Removed: 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: We reported selling and administrative expenses of $138 million and $129 million for the three months ended September 30, 2021 and 2020, respectively, $392 million and $358 million for the nine months ended September 30, 2021 and 2020, respectively.
+Added: For the three months ended September 30, 2021 and 2020, selling and administrative expenses comprised sales, marketing and customer service costs of $103 million and $97 million, respectively, and general and administrative expenses of $36 million and $32 million, respectively.
+Added: For the nine months ended September 30, 2021 and 2020, selling and administrative expenses comprised sales, marketing and customer service costs of $280 million and $261 million, respectively, and general and administrative expenses of $111 million and $97 million, respectively.
The following tables provide a summary of changes in selling and administrative expenses:
−Removed: Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
+Added: Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
(In millions)
−Removed: Three Months Ended June 30, 2020
+Added: Three Months Ended September 30, 2020
Sales and marketing costs
2 unchanged sentences
General and administrative costs
−Removed: Three Months Ended June 30, 2021
−Removed: 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.
−Removed: The increase in customer service costs was primarily related to investments in customer retention initiatives and customer growth.
+Added: Three Months Ended September 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.
General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology.
−Removed: Prior year general and administrative costs include incremental direct costs related to COVID-19 of $1 million.
−Removed: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
+Added: Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
(In millions)
−Removed: Six Months Ended June 30, 2020
+Added: Nine Months Ended September 30, 2020
Sales and marketing costs
2 unchanged sentences
General and administrative costs
−Removed: Six Months Ended June 30, 2021
+Added: Nine Months Ended September 30, 2021
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.
−Removed: 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: The increase in customer service costs was primarily related to investments in customer retention initiatives.
General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology.
1 unchanged sentence
Depreciation Expense
−Removed: 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.
+Added: Depreciation expense was $6 million and $5 million for the three months ended September 30, 2021 and 2020, respectively , and $18 million and $16 million for the nine months ended September 30, 2021 and 2020, respectively.
Amortization Expense
−Removed: 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 .
+Added: Amortization expense was $2 million for each of the three months ended September 30, 2021 and 2020 and $8 million and $9 million for the nine months ended September 30, 2021 and 2020, respectively .
Restructuring Charges
−Removed: 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 .
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Restructuring charges were less than $1 million for each of the three months ended September 30, 2021 and 2020 and $2 million and $4 million for the nine months ended September 30, 2021 and 2020, respectively .
+Added: For the three months ended September 30, 2021, restructuring charges primarily comprised severance costs.
+Added: For the three months ended September 30, 2020 restructuring charges primarily comprised accelerated depreciation of certain technology systems driven by efforts to enhance our technological capabilities.
+Added: For the nine months ended September 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 nine months ended September 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 $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 .
−Removed: 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 expense was $7 million and $14 million for the three months ended September 30, 2021 and 2020, respectively, and $32 million and $43 million for the nine months ended September 30, 2021 and 2020, respectively .
+Added: For the three and nine months ended September 30, 2021, the decrease was due to a decline in interest rates on the unhedged portion of our variable rate debt primarily driven by the June 17, 2021 refinancing of the Prior Credit Agreement, the February 17, 2021 partial repayment of the Prior Term Loan Facility and the June 17, 2021 redemption of the 2026 Notes.
Interest and Net Investment (Income) Loss
−Removed: 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.
−Removed: For the three and six months ended June 30, 2021, amounts primarily comprised interest on our cash and cash equivalents balances.
−Removed: 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.
+Added: Interest and net investment (income) loss reflects income of less than $1 million for each of the three months ended September 30, 2021 and 2020, and income of $1 million for the nine months ended September 30, 2021 compared to a loss of $1 million for the nine months ended September 30, 2020.
+Added: For the three and nine months ended September 30, 2021 and the three months ended September 30, 2020, amounts primarily comprised interest on our cash and cash equivalents balances.
+Added: For the nine months ended September 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 $30 million and $31 million for t he three and six months ended June 30, 2021, respectively.
−Removed: 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.
−Removed: 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.
−Removed: There were no such charges for the three and six months ended June 30, 2020.
+Added: Loss on extinguishment of debt was $31 million for t he nine months ended September 30, 2021.
+Added: Amounts primarily relate to the June 17, 2021 redemption of the remaining outstanding principal amounts of $534 million of the Prior 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 Prior 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 months ended September 30, 2021 and the three and nine months ended September 30, 2020.
Provision for Income Taxes
−Removed: 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 .
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: The effective tax rate on income was 24.3 percent and 24.8 percent for the three months ended September 30, 2021 and 2020, respectively, and 24.4 percent and 25.1 percent for the nine months ended September 30, 2021 and 2020, respectively .
+Added: The decrease in the effective tax rate for the nine months ended September 30, 2021 compared to 2020 is primarily due to excess tax benefits for share-based awards and income tax credits, offset, in part, by an increase in state income taxes.
+Added: Net income was $76 million and $49 million for the three months ended September 30, 2021 and 2020, respectively, and $122 million and $111 million for the nine months ended September 30, 2021 and 2020, respectively.
+Added: For the three months ended September 30, 2021 compared to 2020, the increase was driven by the aforementioned operating results, offset, in part, by an increase in the provision for income taxes.
+Added: For the nine months ended September 30, 2021 compared to 2020, the increase was driven by the aforementioned operating results, offset in part, by a loss on extinguishment of debt and an increase in the provision for income taxes.
Adjusted EBITDA
−Removed: 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: Adjusted EBITDA was $122 million and $91 million for the three months ended September 30, 2021 and 2020, respectively, and $272 million and $238 million for the nine months ended September 30, 2021 and 2020, respectively .
The following tables provide a summary of changes in our Adjusted EBITDA:
−Removed: Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020
+Added: Three Months Ended September 30, 2021 Compared to the Three Months September 30, 2020
(In millions)
−Removed: Three Months Ended June 30, 2020
+Added: Three Months Ended September 30, 2020
Impact of change in revenue
3 unchanged sentences
General and administrative costs
−Removed: Three Months Ended June 30, 2021
−Removed: 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.
+Added: Three Months Ended September 30, 2021
+Added: The decrease in contract claims costs reflects lower service request incidence across all trades and process improvement benefits, offset, in part, by increased cost pressures across all trades due to industry-wide availability challenges and inflation.
+Added: Contract claims costs also reflect a favorable weather impact of approximately $4 million.
Appliance parts availability challenges continued to drive additional replacements, contributing to the increased cost pressures.
−Removed: 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.
−Removed: 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.
−Removed: The increase in customer service costs was primarily related to investments in customer retention initiatives and customer growth.
+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.
General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology.
−Removed: Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
+Added: Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
(In millions)
−Removed: Six Months Ended June 30, 2020
+Added: Nine Months Ended September 30, 2020
Impact of change in revenue
3 unchanged sentences
General and administrative costs
−Removed: Six Months Ended June 30, 2021
−Removed: The increase in contract claims costs reflects increased cost pressures in the appliance and plumbing trades due to industry-wide availability challenges and inflation.
−Removed: 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: Nine Months Ended September 30, 2021
+Added: The increase in contract claims costs reflects increased cost pressures across all 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.
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.
−Removed: 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: The increase in customer service costs was primarily related to investments in customer retention initiatives.
General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology.
−Removed: Other primarily consists of interest and net investment income.
+Added: Prior year general and administrative costs include incremental direct costs related to COVID-19 of $1 million.
A reconciliation of Net Income to Adjusted EBITDA is presented below.
Three Months Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
(In millions)
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________________________________
−Removed: (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.
−Removed: For the three and six months ended June 30, 2021, such charges were less than $1 million.
+Added: (1) Other non-operating expenses for the nine months ended September 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 $1 million.
+Added: There were no such charges for the three and nine months ended September 30, 2021 and the three months ended September 30, 2020.
Liquidity and Capital Resources
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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.
−Removed: As of June 30, 2021, we were in compliance with the covenants under the agreements that were in effect on such date.
+Added: As of September 30, 2021, we were in compliance with the covenants under the agreements that were in effect on such date.
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.
−Removed: Cash and cash equivalents totaled $323 million and $597 million as of June 30, 2021 and December 31, 2020, respectively.
+Added: Cash and cash equivalents totaled $309 million and $597 million as of September 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 June 30, 2021 and December 31, 2020, the total net assets subject to these third-party restrictions was $173 million and $180 million, respectively.
−Removed: 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.
+Added: See “—Limitations on Distributions and Dividends by Subsidiaries.” As of September 30, 2021, and December 31, 2020, the total net assets subject to these third-party restrictions was $178 million and $180 million, respectively.
+Added: As of September 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 $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.
−Removed: 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.
+Added: Available liquidity was $379 million at September 30, 2021, consisting of $131 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 September 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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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.
−Removed: 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%.
−Removed: In addition, the Amended Revolving Credit Facility replaced the Existing Revolving Credit Facility.
+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 Prior 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 Prior Revolving Credit Facility.
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.
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.
+Added: On September 7, 2021, we announced a three-year repurchase authorization of up to $400 million of outstanding shares of our common stock.
+Added: We expect to fund the share repurchases from net cash provided from operating activities.
+Added: As of September 30, 2021, we have purchased 542,227 outstanding shares at an aggregate cost of $25 million under this program, which is included in treasury stock on the condensed consolidated statements of financial position.
+Added: Purchases under the repurchase program may be made from time to time by the company in the open market at prevailing market prices (including through a Rule 10b5-1 Plan), in privately negotiated transactions, or through any combination of these methods, through September 3, 2024.
+Added: The actual timing, number, manner and value of any shares repurchased will depend on several factors, including the market price of the company’s stock, general market and economic conditions, the company’s liquidity requirements, applicable legal requirements and other business considerations.
+Added: 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.
Limitations on Distributions and Dividends by Subsidiaries
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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: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
(In millions)
5 unchanged sentences
Operating Activities
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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 seasonality and growth in our underlying business.
+Added: Net cash provided from operating activities was $142 million and $154 million for the nine months ended September 30, 2021 and 2020, respectively.
+Added: Net cash provided from operating activities in 2021 comprised $207 million in earnings adjusted for non-cash charges, offset, in part, by $65 million in cash used for working capital.
+Added: Cash used for working capital was driven by seasonality and the impacts on deferred revenue of a decline in the number of first-year real estate home service plans and a shift in the mix of annual-pay customers to monthly-pay customers.
+Added: Net cash provided from operating activities in 2020 comprised $155 million in earnings adjusted for non-cash charges, offset, in part, by $1 million in cash used for working capital.
Investing Activities
−Removed: Net cash used for investing activities was $15 million and $19 million for the six months ended June 30, 2021 and 2020, respectively.
−Removed: 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.
+Added: Net cash used for investing activities was $23 million and $25 million for the nine months ended September 30, 2021 and 2020, respectively.
+Added: Capital expenditures were $23 million and $26 million for the nine months ended September 30, 2021 and 2020, respectively, 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 $35 million.
We have no additional material capital commitments at this time.
−Removed: Cash payments for business acquisitions, net of cash acquired, were $5 million for the six months ended June 30, 2020.
+Added: Cash payments for business acquisitions, net of cash acquired, were $5 million for the nine months ended September 30, 2020.
During the second quarter of 2020, we acquired a business to expand our ProConnect on-demand offering for $5 million in cash.
−Removed: There were no acquisitions for the six months ended June 30, 2021.
−Removed: 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.
−Removed: There were no cash flows provided from purchases, sales and maturities of securities, net, for the six months ended June 30, 2021.
+Added: There were no acquisitions for the nine months ended September 30, 2021.
+Added: Cash flows provided from purchases, sales and maturities of securities, net, for the nine months ended September 30, 2020 were $7 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 nine months ended September 30, 2021.
Financing Activities
−Removed: Net cash used for financing activities was $378 million and $4 million for the six months ended June 30, 2021 and 2020, respectively.
−Removed: On February 17, 2021, we repaid $100 million of outstanding principal amount of the Existing Term Loan Facility.
−Removed: Additionally, on June 17, 2021, we entered into the Amended Credit Agreement.
−Removed: 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: Net cash used for financing activities was $407 million and $6 million for the nine months ended September 30, 2021 and 2020, respectively.
+Added: During the nine months ended September 30, 2021, we borrowed $638 million, net of discount, under the Amended Term Loan Facilities, made scheduled principal payments of debt and finance lease obligations of $5 million and redeemed the remaining outstanding principal amounts of $634 million of the Prior Term Loan Facility and $350 million of the 2026 Notes.
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.
+Added: In addition, we repurchased $25 million of common stock.
+Added: During the nine months ended September 30, 2020, we made scheduled principal payments of debt and finance lease obligations of $5 million.
Contractual Obligations
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On June 17, 2021, we entered into the Amended Credit Agreement.
−Removed: 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.
−Removed: 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.
−Removed: 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: 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 Prior Term Loan Facility and $350 million of the 2026 Notes.
+Added: As of September 30, 2021, future scheduled long-term debt payments total $636 million, and estimated long-term debt payments for the remainder of 2021 and for each fiscal year from 2022 through 2026 are $4 million, $17 million, $17 million, $17 million, $17 million and $205 million, respectively.
+Added: Additionally, as of September 30, 2021, future estimated interest payments, which are based on the applicable rates at September 30, 2021 plus the specified margin in the Amended Credit Agreement, total $118 million;
estimated interest payments for the remainder of 2021 and for each fiscal year from 2022 through 2026 are $6 million, $24 million, $24 million, $23 million, $19 million and $10 million, respectively;
3 unchanged sentences
Financial Position
−Removed: The following discussion describes changes in our financial position from December 31, 2020 to June 30, 2021:
−Removed: 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.
−Removed: Accounts payable increased during the six months ended June 30, 2021, reflecting the timing of trade payables due to the seasonality of our business.
−Removed: 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.
−Removed: 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.
−Removed: Current portion of long-term debt increased during the six months ended June 30, 2021, reflecting our debt refinancing transactions.
−Removed: Long-term debt decreased during the six months ended June 30, 2021, reflecting our debt refinancing transactions.
−Removed: 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.
−Removed: 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: The following discussion describes changes in our financial position from December 31, 2020 to September 30, 2021:
+Added: Cash and cash equivalents decreased during the nine months ended September 30, 2021, primarily due to payments of debt, net of borrowings, and repurchases of common stock, offset, in part, by cash provided from operating activities.
+Added: The contract asset is due to the recognition of monthly pay customer revenue on an other-than-straight-line basis to match the timing of cost recognition.
+Added: Accounts payable increased during the nine months ended September 30, 2021, reflecting the timing of trade payables due to the seasonality of our business.
+Added: Deferred revenue decreased during the nine months ended September 30, 2021, reflecting a decline in the number of first-year real estate home service plans, a shift in the mix of annual-pay customers to monthly-pay customers and the recognition of previously deferred amounts on an other-than-straight-line basis to match the timing of cost recognition.
+Added: Current portion of long-term debt increased during the nine months ended September 30, 2021, reflecting the refinancing of our debt.
+Added: Long-term debt decreased during the nine months ended September 30, 2021, reflecting payments of debt, net of borrowings.
+Added: Other long-term liabilities decreased during the nine months ended September 30, 2021, primarily due to the change in the valuation of our interest rate swap.
+Added: Total shareholders’ equity was a surplus of $62 million as of September 30, 2021 compared to a deficit of $61 million as of December 31, 2020.
+Added: The increase was primarily driven by the $122 million of net income generated during the nine months ended September 30, 2021.
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 June 30, 2021, we did not have any significant off-balance sheet arrangements.
+Added: As of September 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.
1 unchanged sentence
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.