What changed in this filing

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Item 1. Financial Statements

2026-08-06 compared with 2026-04-30 · 85 added, 72 removed, 447 unchanged (26% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Cost of services rendered

20 unchanged sentences

Prepaid expenses and other current assets

Contract assets

Assets held for sale

28 unchanged sentences

2,000,000,000 shares authorized;

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

89,177,293 shares issued and 69,284,644 shares outstanding as of June 30, 2026 and 88,480,560 shares issued and 70,958,215 shares outstanding as of December 31, 2025

Additional paid-in capital

2 unchanged sentences

Less treasury stock, at cost;

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

19,892,649 shares as of June 30, 2026 and 17,522,345 shares as of December 31, 2025

Total Shareholders' Equity

5 unchanged sentences

Three Months Ended

Six Months Ended

Common Stock:

5 unchanged sentences

Exercise of stock options

Issuance of common stock related to ESPP

Taxes paid related to net share settlement of equity awards

16 unchanged sentences

(In millions)

Three Months Ended

Six Months Ended

Cash and Cash Equivalents at Beginning of Period

15 unchanged sentences

Purchases of property and equipment

Business acquisitions, net of cash acquired

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

17 unchanged sentences

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

As of March 31, 2026 , we had approximately 2.1 million active home warranties across all brands in the United States.

As of June 30, 2026 , we had approximately 2.1 million active home warranties across all brands in the United States.

We also offer new home builder warranty solutions, which deliver value to both builders and homeowners through a suite of builder warranty products and support services.

3 unchanged sentences

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

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

There have been no material changes to our significant accounting policies during the six months ended June 30, 2026.

Newly Issued Accounting Standards

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

This guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted, and the guidance can be applied either prospectively or retrospectively.

We are currently evaluating the impact of this ASU on our consolidated financial statements.

In 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) , which modernizes the accounting guidance for the costs to develop software for internal use.

This guidance is effective for annual periods beginning after December 15, 2027.

Early adoption is permitted and the guidance can be applied on a prospective basis, a modified basis for in-process projects or on a retrospective basis.

We are currently evaluating the impact of this ASU on our consolidated financial statements.

Restricted Net Assets

1 unchanged sentence

Among other things, such laws and regulations require certain subsidiaries to maintain funded reserves, minimum capital and net worth requirements, and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can make to us.

As of March 31, 2026, the total assets subject to regulatory restrictions was $ 156 million.

As of June 30, 2026, the total assets subject to regulatory restrictions was $ 157 million.

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

5 unchanged sentences

Upon determining a long-lived asset meets the criteria to be classified as held for sale, we cease depreciation and report such long-lived assets, if material, as Assets held for sale on the accompanying condensed consolidated statements of financial position.

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

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

On April 30, 2026, we completed the sale of 2-10 HBW's corporate office in Aurora, Colorado, that had been previously classified as held for sale.

As of June 30, 2026, we had no real estate classified as held for sale.

Basis of Presentation

2 unchanged sentences

The results of operations for any interim period are not necessarily indicative of the results that might be achieved for the respective full year.

Newly Issued Accounting Standards

This guidance is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted, and the guidance can be applied either prospectively or retrospectively.

We are currently evaluating the impact of this ASU on our consolidated financial statements.

This guidance is effective for annual periods beginning after December 15, 2027.

Early adoption is permitted and the guidance can be applied on a prospective basis, a modified basis for in-process projects or on a retrospective basis.

We are currently evaluating the impact of this ASU on our consolidated financial statements.

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

5 unchanged sentences

Three Months Ended

Six Months Ended

(In millions)

3 unchanged sentences

(1) First-year revenue only.

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

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

We recognize revenue at the agreed upon contractual amount over time using the input method in proportion to the costs expected to be incurred in performing services under the contracts.

3 unchanged sentences

We regularly review our estimates of claims costs and adjust these estimates when appropriate.

Revenue from customer renewals of home warranty contracts, which were previously initiated in the real estate or direct-to-consumer channel, are classified as renewal revenue above.

Revenue from customer renewals of home warranty contracts, which were previously initiated in the real estate or direct-to-consumer channel, are classified as renewal revenue in the immediately preceding table.

Renewals relate to consecutive contract periods and take place at the end of the first year of a real estate or direct-to-consumer home warranty contract and continue to be categorized in our renewal channel thereafter.

2 unchanged sentences

These plans are typically paid in full at closing on the real estate transaction.

First-year revenue from the real estate channel is classified as real estate above.

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

First-year revenue from the real estate channel is classified as real estate in the immediately preceding table.

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

Direct-to-consumer

1 unchanged sentence

Customer payments for direct-to-consumer sales are primarily received in installments over the contract period.

First-year revenue from the direct-to-consumer channel is classified as direct-to-consumer above.

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

First-year revenue from the direct-to-consumer channel is classified as direct-to-consumer in the immediately preceding table.

Non-warranty and other

2 unchanged sentences

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

Deferred customer acquisition costs were $ 15 million and $ 14 million as of March 31, 2026 and December 31, 2025, respectively.

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

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

Deferred customer acquisition costs were $ 15 million and $ 14 million as of June 30, 2026 and December 31, 2025, respectively.

Amortization of deferred customer acquisition costs was $ 4 million and $ 3 million for the three months ended June 30, 2026 and 2025, respectively, and $ 7 million and $ 6 million for the six months ended June 30, 2026 and 2025 , respectively.

There were no impairment losses related to these capitalized costs during the six months ended June 30, 2026 and 2025.

Deferred Policy Acquisition Costs

2 unchanged sentences

We anticipate that all deferred policy acquisition costs will be recoverable.

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

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

Deferred policy acquisition costs were $ 8 million and $ 5 million as of June 30, 2026 and December 31, 2025, respectively.

Amortization of deferred policy acquisition costs were less than $ 1 million for each of the three and six months ended June 30, 2026 and 2025.

Deferred policy acquisition costs are recorded in Other assets on the accompanying condensed consolidated statement of financial position.

6 unchanged sentences

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

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

Contract assets were $ 9 million as of June 30, 2026.

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

Our contract liabilities consist of deferred revenue which is recognized when cash payments are received in advance of the performance of services, including when the amounts are refundable.

Amounts are recognized as revenue in proportion to the costs expected to be incurred in performing services under our contracts.

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

A summary of the changes in deferred revenue, including the long-term portion, for the six months ended June 30, 2026 is as follows:

(In millions)

2 unchanged sentences

Recognition of deferred revenue

Balance as of March 31, 2026

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

Balance as of June 30, 2026

There was approximately $ 72 million of revenue recognized during the six months ended June 30, 2026, that was included in the deferred revenue balance as of December 31, 2025.

Unearned Insurance Premium

New home builder warranty revenue is recognized over the life of the contract in proportion to the costs expected to be incurred in performing services under the contract.

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

Amounts not earned and recognized to date are recognized as unearned insurance premium on the accompanying condensed consolidated statement of financial position.

1 unchanged sentence

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

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

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

Goodwill and Intangible Assets

1 unchanged sentence

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

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

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

The balance of goodwill was $ 963 million and $ 959 million as of June 30, 2026 and December 31, 2025 , respectively.

There were no goodwill impairment charges during the six months ended June 30, 2026 and 2025.

During the six months ended June 30, 2026 , we identified an additional required payment to 2-10 HBW Acquisition, L.P., a Delaware limited partnership and the seller of 2-10 HBW, under the provisions of the purchase agreement that should have been recognized as part of the purchase price allocation.

This resulted in an increase to goodwill of $ 4 million.

The adjustment was not material to the prior and current period consolidated financial statements.

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

As of March 31, 2026

As of June 30, 2026

As of December 31, 2025

8 unchanged sentences

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

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

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

Amortization expense was $ 12 million for each of the three months ended June 30, 2026 and 2025, and $ 24 million and $ 25 million for the six months ended June 30, 2026 and 2025 , respectively.

There were no intangible asset impairment charges during the six months ended June 30, 2026 and 2025 .

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

4 unchanged sentences

Weighted-average discount rate

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

We recognized operating lease expense of less than $ 1 million for each of the three and six months ended June 30, 2026 and 2025.

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

5 unchanged sentences

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

Three Months Ended

Six Months Ended

(In millions)

1 unchanged sentence

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

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

The following table presents the maturities of our operating lease liabilities as of June 30, 2026:

(In millions)

5 unchanged sentences

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

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

Substantially all of our income before income taxes for the six months ended June 30, 2026 and 2025 was generated in the United States.

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

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

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

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

The effective tax rate on income before income taxes was 24.7 percent and 24.3 percent for the three months ended June 30, 2026 and 2025, respectively, and 23.5 percent and 23.8 percent for the six months ended June 30, 2026 and 2025, respectively.

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

27 unchanged sentences

We currently believe it is unlikely that we would be required to perform or otherwise incur any losses associated with guarantees of our subsidiaries’ obligations.

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

As of June 30, 2026, we had no liability with respect to these guarantees.

Stock-Based Compensation

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

We recognized stock-based compensation expense of $ 11 million ($ 9 million, net of tax) and $ 9 million ($ 7 million, net of tax) for the three months ended June 30, 2026 and 2025, respectively, and $ 21 million ($ 14 million, net of tax) and $ 17 million ($ 12 million, net of tax) for the six months ended June 30, 2026 and 2025, respectively.

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

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

A summary of awards granted under the Omnibus Plan during the six months ended June 30, 2026 is as follows:

Stock options

3 unchanged sentences

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

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

As of June 30, 2026, there was $ 68 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options, restricted stock units (“RSUs”) and performance shares.

These costs are expected to be recognized over a weighted-average period of 2.15 years.

7 unchanged sentences

Total long-term debt

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

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

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

(1) Term Loan A is presented net of unamortized debt issuance costs of $ 4 million and $ 5 million as of June 30, 2026 and December 31, 2025, respectively.

(2) Term Loan B is presented net of unamortized debt issuance costs of $ 8 million and $ 9 million as of June 30, 2026 and December 31, 2025, respectively, and unamortized discount of $ 2 million as of June 30, 2026 and December 31, 2025.

As of June 30, 2026, the available borrowing capacity under the Revolving Credit Facility was $ 250 million, and we were in compliance with the covenants under the Credit Agreement.

Scheduled Debt Payments

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

The following table presents future scheduled debt payments as of June 30, 2026:

(In millions)

10 unchanged sentences

Three Months Ended

Six Months Ended

(In millions)

7 unchanged sentences

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

Three Months Ended

Six Months Ended

(In millions)

7 unchanged sentences

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

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

During the three months ended March 31, 2026 , there were no proceeds, maturities, gross realized gains and gross realized losses resulting from sales of available-for-sale securities.

There were no impairment charges due to other-than-temporary declines in the value of certain investments for the three months ended March 31, 2026 and 2025 .

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

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

During the three and six months ended June 30, 2026, there were no proceeds, maturities, gross realized gains and gross realized losses resulting from sales of available-for-sale securities.

There were no impairment charges due to other-than-temporary declines in the value of certain investments for the six months ended June 30, 2026 and 2025 .

Comprehensive Income (Loss)

2 unchanged sentences

A summary of the changes in AOCI is as follows:

Unrealized Gains (Losses) on Derivative Instruments, Net

Gains (Losses) on Foreign Currency Transactions, Net

Total Accumulated Other Comprehensive Income (Loss)

Balance at December 31, 2025

Other comprehensive income before reclassifications

Pre-tax amount

Tax provision

After-tax amount

Amounts reclassified from AOCI (1)

Total other comprehensive income

Balance at March 31, 2026

Balance at June 30, 2026

(1) Amounts are net of income taxes.

1 unchanged sentence

A summary of reclassifications out of AOCI is as follows:

Three Months Ended

Six Months Ended

(In millions)

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

Impact of income taxes (2)

Total reclassifications during the period

12 unchanged sentences

See Note 13 to the accompanying condensed consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in AOCI and for the amounts reclassified out of AOCI and into earnings during the periods presented.

As the underlying forecasted transactions occur during the next 12 months, we estimate the unrealized hedging loss in AOCI expected to be recognized in earnings is $ 2 million, net of tax, as of March 31, 2026.

As the underlying forecasted transactions occur during the next 12 months, we estimate the unrealized hedging loss in AOCI expected to be recognized in earnings is $ 1 million, net of tax, as of June 30, 2026.

The amounts ultimately reclassified into earnings during the next 12 months will be determined based on the actual interest rates in effect at the time the positions are settled, and as a result, they could differ materially from our estimate noted above.

10 unchanged sentences

Any unrealized losses where the decline in value is other than temporary are reported in interest and net investment income in the accompanying condensed consolidated statements of operations and comprehensive income.

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

There were no other-than-temporary declines in value for the periods ended June 30, 2026 and December 31, 2025.

The fair value of our debt was estimated based on available market prices for the same or similar instruments that are considered significant other observable inputs (Level 2) within the fair value hierarchy and was based on information available to us as of the respective period-end dates.

2 unchanged sentences

The expected future settlements are determined by comparing the contract interest rates to the expected forward interest rate as of each settlement date and applying the difference between these two rates to the notional amounts of debt in the interest rate swap contracts.

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

We did not change our valuation techniques for measuring the fair value of any financial assets and liabilities during the six months ended June 30, 2026.

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

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

There were no transfers between hierarchy levels during the six months ended June 30, 2026.

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

1 unchanged sentence

(In millions)

As of March 31, 2026:

As of June 30, 2026:

Interest rate swap (Other accrued liabilities )

10 unchanged sentences

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

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

As of June 30, 2026, we had $ 178 million remaining available for future repurchases under this program.

A summary of repurchases of outstanding shares is as follows:

Three Months Ended

Six Months Ended

(In millions, except per share data)

2 unchanged sentences

Cost of shares purchased (1)

(1) The average price paid per share and the cost of shares purchased are calculated on a trade date basis and exclude associated commissions and taxes of $ 1 million for each of the three months ended March 31, 2026 and 2025 .

Earnings Per Share

4 unchanged sentences

Three Months Ended

Six Months Ended

(In millions, except per share data)

6 unchanged sentences

Diluted earnings per share

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

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

(1) RSUs of 746 shares and 1,304 shares for the three months ended June 30, 2026 and 2025, respectively, and 247,827 shares and 389,970 shares for the six months ended June 30, 2026 and 2025 , respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

(2) Stock options to purchase 552,923 shares and 770,881 shares for the three months ended June 30, 2026 and 2025 , respectively, and 284,198 shares and 438,547 shares for the six months ended June 30, 2026 and 2025 , respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

55 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements