FTDR 10-K & 10-Q changes, risk factors and insider trading

Changing macroeconomic conditions, including inflation, tariffs, global supply chain challenges and changing interest rates, especially as they may affect existing or new home sales, consumer confidence, demand for our services, labor availability or our costs, may adversely impact our business, financial position, results of operations and cash flows.

While the Federal Reserve decreasedlowered interest rates inthree September,times Novemberover the course of 2024 and Decemberthree times over the course of 2024,2025, it heldhas expressed an expectation that the pace any such decreases may be slower going forward. Accordingly, significant uncertainty remains regarding the timing and extent of future interest ratesrate unchanged in January 2025.changes. The sustained level of higher interest rates has in recent years caused buyer apprehension and affordability concerns, resulting in a decrease in home sales in 2022, 20232023, 2024 and flat home sales in 2025 compared to 2024 and has negatively impacted our business. Although the Federal Reserve lowered interest rates in 2024, it has paused this approach to-date in 2025, and the trajectory of current rates remains uncertain. Changing interest rates could continue to affect mortgage rates and negatively impact our business.

In addition, our financial performance is affected by changes in the services and products we offer to customers. We may incur significant costs to implement our strategies, service and product offerings, which may not succeed in increasing revenue, growing our customer base or growing profitability. For example, in 2025, we incurred significant costs when we acquired 2-10 HBW to access a business opportunity in the new home builder warranty space to complement our existing business and provide cross-selling opportunities for home warranties and our non-warranty services. In addition, in 2024, we incurred significant expense when we relaunched the American Home Shield brand through an updated look and feel. Similarly, in 2023, we launched the Frontdoor app, which required a substantial marketing investment. We cannot provide any assurance that these rebranding initiatives will be effective. An unsuccessful execution of strategies, including the rollout of new, or the adjustment of any existing, services or products or sales and marketing plans, could cause us to reevaluate or change our business strategies and could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

Marketing efforts to increase home warranty and non-warranty sales through our real estate and DTC channels may not be successful or cost-effective.

With respect to our marketing efforts, we may also include certain discounts or other promotional rates in order to attract and retain customers. These efforts may requirebecome increasingmore amountscostly or be offered at increasing frequency over time. Certain factors including the nature and type of our services offered, potential and existing customers’ perception of the value of our services, and other macroeconomic factors like general economic conditions and consumer sentiment may impact our efforts. These efforts may not be successful or cost-effective or remain effective over time.

With respect to our onlinedigital marketing efforts, rapid and frequent changes in the pricing and operating dynamics of search engines, as well as changing policies and guidelines applicable to keyword advertising (which may unilaterally be updated by search engines without advance notice), as well as the use of new or improved technology such as generative artificial intelligence powered search platforms, could adversely affect our paid search engine marketing efforts and free search engine traffic. Such changes could adversely affect paid listings (both their placement and pricing), as well as the ranking of our brands and businesses within paid and organic search results, any or all of which could increase our marketing expenditures (particularly if free traffic is replaced with paid traffic).

We depend on our first-year DTC acquisition and real estate channels for a significant percentage of our home warranty sales.

A significant percentage of our sales areis generated through our first-year real estate customer and DTC home warranty acquisition channels, which feed our renewal channel. In our real estate channel, our strategic relationships with top real estate brokers and agents are important to our business because they provide marketing and information services that are useful to our real estate customer acquisition channel. These brokers and agents are independent parties that we do not control, and we cannot guarantee that our strategic partnership arrangements with them will continue at current levels or at all. An inability to maintain these relationships could have a material adverse effect on our business, financial position, results of operations and cash flows.

We depend on our renewalexisting channelwarranty customer base and strategic partners for a substantialsignificant percentageportion of our non‑warranty sales.

Our third and largest home warranty sales channel is our renewal channel. Sales in this channel are dependent upon the flow of sales from our first-year real estate and DTC channels, as well as our customers’ perceptions of the value of our home warranties, and accordingly, their willingness to renew their plans. Any decrease in sales from period to period in our first-year real estate and DTC channels may have a negative impact on future growth opportunities in our renewal channel. Whether existing customers choose to renew their home warranties is driven by both external factors such as macroeconomic conditionsconditions, our reputation and actions of our competitors, as well as internal factors such as their experience with our home warranties, including whether they have used their home warranties and their satisfaction with any services we provided, and how they perceive the value of our home warranties in light of the cost of a renewal.

Our ability to conduct our operations is in part impacted by reliance on a network of third-party contractors. Our future success and financial performance depend substantially on our ability to attract and retain qualified third-party contractors, and their availability, and ensure third-party contractor compliance with our policies, standards and performance expectations. However, these third-party contractors are independent parties that we do not control, and who own, operate and oversee the daily operations of their individual businesses. If third-party contractors do not successfully operate their businesses in a manner consistent with required laws, standards and regulations, we could be subject to claims from regulators or legal claims for the actions or omissions of such third-party contractors. In addition, our relationship with our third-party contractors could become strained (including resulting in litigation) as we impose new standards or assert more rigorous enforcement practices of our existing standards and performance expectations. When a contractor relationship is terminated, there is a risk that we may not be able to enter into a similar agreement with an alternate contractor in a timely manner or on favorable terms. We could incur costs to transition to other contractors, and these costs could materially adversely affect our results of operations and cash flows. We could also fail to provide service to our customers if we lose contractors that we cannot replace in a timely manner, which could lead to customer complaints and possible claims and litigation. InAdditionally, addition,laws and regulations, such as restrictive immigration laws may limit our ability to attract, retain or replace contractors. Furthermore, our third-party contractors interact directly with our customers, and if our third-party contractors do not provide satisfactory services, our retention rate, reputation and business may be adversely affected. In addition, theseThese potential impacts may be exacerbated upon termination of a relationship with a preferred contractor, as approximately 8584 percent of our home warranty service requests were completed by our preferred contractor network in 2024.2025.

We are also dependent on vendors for parts, appliances and home systems and the ability to rely on the pricing for such goods in the contracts we negotiate with these vendors. In recent years, global supply chain challenges, including as a result of pandemics or other public health crises, such as the COVID-19 pandemic, have led to industry-wide price increases for parts and equipment as well as availability challenges across our trades as demand has outpaced production. If we cannot obtain the parts, appliances or home systems from vendors within our existing stable of vendors to satisfy consumer claims in a timely manner, we may be forced to obtain parts, appliances and home systems from other vendors or through our third-party contractors at higher costs, which could have a material adverse impact on our business, financial position, results of operations and cash flows. In addition, if we cannot obtain appliance parts to satisfy consumer claims in a timely manner, we may be forced to obtain replacement appliances or systems at a higher cost compared to the cost of appliance parts.

Our financial performance may be adversely affected by increases in the level of our operating expenses, such as refrigerants, appliances, equipment, parts, raw materials, wages and salaries, employee benefits, healthcare, contractor costs, costs of repair, self-insurance costs and other insurance premiums, as well as various regulatory compliance costs, all of which may be subject to inflationary and other pressures. For example, in recent years, we have experienced a rapid increase in the cost of parts, appliance and home system costs due to inflationinflation, changes in U.S. tariff and import/export regulations and global supply chain challenges, which, in turn, increased our contract claims costs. Such increase in operating expenses, including contract claims costs, could have a material adverse impact on our business, financial position, results of operations and cash flows.

Tariff policies are under continuous review and subject to change. The current U.S. administration has voiced strong concerns about imports from countries that it perceives as engaging in unfair trade practices and couldhas imposemade importgovernmental dutiespolicy orand restrictionsregulatory changes in a variety of areas, including tariffs and other trade barriers on components and raw materials that are applicable to our business from countries it perceives as engaging in unfair trade practices. Such dutiestariffs or restrictions,trade barriers, or the perception that they could occur, may materially and adversely affect our business by increasing our costs or reducing global trade. For example, rising costs due to blanket tariffs on imported steel and aluminumaluminum, couldor blanket tariffs on goods from countries that are key suppliers of replacement parts for appliances and home systems, have increased and may continue to increase the costs of parts associated with our repair and replacement of home systems and appliances, which could have a material adverse effect on our business, financial position, results of operations and cash flows. The United States has proposed, and in some cases has imposed, significant increases to tariffs on goods imported into the U.S, including from countries where we have sourced replacement parts for appliances and home systems covered by our home warranties. Moreover, new tariffs and changes to U.S. trade policy have prompted, and could prompt retaliation from affected countries, potentially triggering the imposition of tariffs on U.S. goods. Such a “trade war” could lead to general economic downturn or could materially and adversely affect the demand for our services, thus negatively impacting our business, financial position, results of operations and cash flows. We cannot predict how or what tariffs will be imposed or what retaliatory measures other countries may take in response to tariffs proposed or imposed by the U.S. There is uncertainty as to further actions that may be taken by the U.S. with respect to U.S. trade policy, including with respect to the proposed tariffs. Further tariffs or countermeasures may increase our costs, decrease our margins or reduce the competitiveness of our products and services.

Our ability to conduct our operations is in part affected by our ability to scale our labor force, including on a seasonal basis in our customer service operations, which may be adversely affected by a number of factors. While we employ both domestic and overseas third-party customer service resources to help fulfill our service and other obligations, the effectiveness of such resources may be adversely affected by the availability of labor in such markets and the continuing viability of contract relations with such third parties. Additionally, laws and regulations, such as restrictive immigration laws may limit our ability to attract, retain or replace talent. In the event of a labor shortage affecting our own customer service personnel or our third-party service providers, we could experience difficulty in responding to customer inquiries in a timely fashion or delivering our services in a high-quality or timely manner and could be forced to increase wages to attract and retain employees, which would result in higher operating costs and reduced profitability. Long call and service wait times by customers during peak operating times could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

Our strategy to increasemaintain profitability,or in part, by reducingreduce our costs of operations includes the implementation of certain business process outsourcing initiatives, including offshore outsourcing of certain aspects of our customer service, administrative and other service operations, some of which are located near regions that have previously been affected by Acts of God, such as earthquakes, wildfires, hurricanes and typhoons, and outsourcing of certain technology development initiatives. Additionally, most of this outsourcing occurs in developing countries. Any disruption, termination or substandard performance of these outsourced services, including possible breaches by third-party vendors of their agreements with us, could delay or limit our ability to successfully implement our business strategies and adversely affect our brands, reputation, customer relationships, financial position, results of operations and cash flows. Also, to the extent a third-party vendor relationship is terminated, there is a risk of disputes or litigation and that we may not be able to enter into a similar agreement with an alternate provider in a timely manner or on terms that are acceptable to us or at all. Even if we find an alternatealternative provider, or choose to insource such services, there are significant risks associated with any transitioning activities. In addition, to the extent we decide to terminate outsourcing services and insource such services, there is a risk that we may not have the capabilities to perform these services internally, resulting in a disruption to our business, which could adversely impact our reputation, businesses, financial position, results of operations and cash flows. We could also incur costs, including personnel and equipment costs, to insource previously outsourced services like these, and these costs could adversely affect our results of operations and cash flows.

We are dependent on a limited number of suppliers for various key components used in the services and products we offer to customers, and the cost, quality and availability of these components are essential to our services. In particular, we have sevensix national suppliers of parts, appliances and home systems that each account for more than five percent of our supplier spend. We are subject to the risk of shortages, increased costs and long lead times in the supply of these components and other materials, and the risk that our suppliers discontinue or modify, or increase the price of, the components used. If the supply of these components were to be delayed or constrained, or if one or more of our main suppliers were to go out of business, alternative sources or suppliers may not be available on acceptable terms or at all. Further, if there were a shortage of supply, the cost of these components may increase and harm our ability to provide our services on a cost-effective basis. In connection with any supply shortages in the future, reliable and cost-effective replacement sources may not be available on short notice or at all, and this may force us to increase prices and face a corresponding decrease in demand for our services. In the event that any of our suppliers was to discontinue production of our key product components, developing alternate sources of supply for these components would be time consuming, difficult and costly. This would harm our ability to market our services in order to meet market demand and could materially and adversely affect our reputation, business, financial position, results of operations and cash flows.

If we failFailure to protect the security of personal information about our customers, associates or third parties, weparties could beresult subjectin tothe interruption of our business operations, private litigation, reputational damage and costly penalties.

These risks include potential damage and disruption from traditional cyber criminals, malicious code (such as viruses and worms), employee theft, negligence or misuse, social engineering, denial-of-service attacks, as well as sophisticated nation-state and nation-state-supported actors, including advanced persistent threat intrusions. Any cyber or similar attack or unauthorized access to our software or systems that we experience could damage our technology systems and infrastructures, lead to the loss, compromise or corruption of data, prevent us from providing our services, erode our reputation and those of our various brands, lead to the termination of advantageous contracts, result in inaccurate reporting of financial information, result in the disclosure of confidential consumer and professional contractor information, result in erroneous payments to malicious actors, expose us to significant liabilities for the violation of data privacy laws, result in the disclosure of confidential and sensitive business information or intellectual property, result in claims or litigation against us and/or otherwise be costly to mitigate or remedy. The frequency of data breaches of companies and governments has increased in recent years as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. In addition, risk from cyber and data security threats is exacerbated with the advancement of artificial intelligence, which malicious third parties are using to create new, sophisticated and more frequent attacks. The occurrence of any of these events could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows. In addition, althoughAlthough we have insurance to mitigate some of these risks, such policies may not cover the particular cyber or similar attack experienced and, even if the risk is covered, such insurance coverage may not be adequate to compensate for related losses.

Additional U.S. states have passed their own comprehensive consumer privacy laws, some of which went into effect in 2023 and 2024 or will go into effect in 2025,laws and other states are considering doing so. Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data. The burdens imposed by the CCPA, CPRA and other similar laws that may be enacted at the federal and state level may require us to further modify our data processing practices and policies and to incur substantial expenditures in order to comply.

Our business strategy includes the pursuit of opportunistic strategic transactions, which could involve acquisitions or dispositions of businesses or assets. For example, in 2024, we acquired 2-10 HBW to access a business opportunity in the new home structuralbuilder warranty space, complement our existing business and provide cross-selling opportunities for home warranties and our non-warranty services. Any future strategic transaction could involve integration or implementation challenges, business disruption or other risks, or change our business profile significantly. Any inability on our part to consolidate and manage growth from acquired businesses or successfully implement other strategic transactions could have an adverse impact on our reputation, business, financial position, results of operations and cash flows. Any acquisition that we make may not provide us with the benefits that were anticipated when entering into such acquisition. The process of integrating an acquired business may create unforeseen difficulties and expenses, including: the diversion of resources needed to integrate new businesses, technologies, products, personnel or systems; the inability to retain employees, customers and suppliers; the assumption of actual or contingent liabilities; failure to effectively and timely adopt and adhere to internal control processes and other policies; write-offs or impairment charges relating to goodwill and other intangible assets; unanticipated liabilities; distraction of senior management from other strategic priorities; and potential expense associated with litigation with sellers of such businesses. Any future disposition transactions could also impact our business and may subject us to various risks, including failure to obtain appropriate value for the disposed businesses and post-closing claims.

We derive substantially all of our revenue from customers in the United States; however, certain aspects of our customer service operations and other services are conducted outside the United States by business process outsource providers in Colombia, Ghana, Guyana, Mexico, the Philippines and Trinidad and Tobago, and we have a technology collaboration center in India. Accordingly, developments in those parts of the world generally have a more significant effect on our operations than developments in other places. Our operations outside the United States are also subject to special risks, including: fluctuations in currency values and foreign-currency exchange rates, which may affect our net income and the carrying amount of our assets outside the United States; exchange control regulations; changes in local political or economic conditions; other potentially detrimental domestic and foreign governmental practice or policies affecting U.S. companies operating abroad; difficulties in staffing and managing international political instability, operations; and operational and compliance challenges resulting from distance, language and cultural differences. Acts of God, war, terror acts and pandemics or other public health crises, such as COVID-19,the COVID-19 pandemic, may impair our ability to operate or the ability of our business process outsource providers to operate, in particular countries or regions.

our inability to retain the service of key management and other personnel of 2-10 HBW;

We do not intend tocurrently pay any cash dividends on our common stock at this point and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

Frontdoor is the leading provider of home warranties and new home structuralbuilder warranties in the United States, as measured by revenue, and operates primarily under the American Home ShieldShield, HSA, OneGuard, Landmark and 2-10 HBW brands. Our customizable home warranties help customers protect and maintain their homes, typically their most valuable asset, from costly and unplanned breakdowns of essential home systems and appliances. Our home warranty customers usually subscribe to an annual service plan agreement that covers the repair or replacement for breakdowns that generally occur as a result of normal wear and tear of major components of up to 29 home systems and appliances, including electrical, plumbing, HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops, as well as optional coverages for electronics, pools, spas and pumps. Our new home structural warranty business provides value to home builders and owners of new homes by providing coverage, including insurance-backed coverage for workmanship, systems and/or structural failures, as well as other post-construction services. We also offer non-warranty home servicesservices, viaincluding our websiteNew HVAC upgrade and appinstallation of Moen water shut-off devices, and select home maintenance offerings. Non-warranty services are marketed to our homeexisting warranty customerscustomer directlybase, andenabling othersincremental throughrevenue partnershipsopportunities andbeyond ourtraditional subscription-basedwarranty Frontdoor app.coverage. As of December 31, 2024,2025, we had approximately 2.1 million active home warranties across all brands in the United States. We also offer new home builder warranty solutions, which deliver value to both builders and homeowners through a suite of builder warranty products and support services. We offer flexible builder-backed and insurance-backed warranty options covering workmanship, home distribution systems, and structural components. Additional add-on programs provide service request management for warranties and claims administration for structural warranties.

On December 19, 2024, we completed the acquisition of all of the issued and outstanding common stock of 2-10 HBW pursuant to a purchase agreement dated June 3, 2024 for aggregate cash consideration of $585 million, subject to certain customary adjustments based on, among other things,including the amount of cash,cash acquired, debt, seller transaction expenses, working capital and regulatory capital in the business of 2-10 HBWHBW. asFollowing the settlement of theall closingcontractual ofadjustments, the transaction.aggregate 2-10cash HBWconsideration ispaid awas leading$580 provider of new home structural warranties that provide home builders insurance-backed coverage and/or administrative services for workmanship, systems and/or structural failures. 2-10 HBW is also a provider of home warranties.million. See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on this acquisition. As a part of the 2-10 HBW Acquisition, we entered into an amendment to our Credit Agreement, which became effective on December 19, 2024. See "Liquidity and Capital Resources” and Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on our liquidity and the debt refinancing transactions.

Our business is subject to seasonal fluctuations, which drive variations in our revenue, net income and Adjusted EBITDA for interim periods. Seasonal fluctuations are primarily driven by a higher number of HVAC work orders with respect to our home warranty business in the summer months. In 2024,2025, approximately 2120 percent, 29 percent, 2930 percent and 21 percent of our revenue, approximately 14 percent, 3944 percent, 4341 percent and four1 percent of our net income, and approximately 1618 percent, 36 percent, 3735 percent and 11 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.

Changes in U.S. tariff and import/export regulations have impacted and may continue to impact the costs of parts, appliances and home systems. Import duties or restrictions on components and raw materials that are imposed, or the perception that they could occur, may materially and adversely affect our business by increasing our costs. For example, rising costs due to blanket tariffs on imported steel and aluminum, or blanket tariffs on goods from countries that are key suppliers of replacement parts for appliances and home systems, couldhave increased and may continue to increase the costs of our parts, appliances and home systems. Recently, the United States has proposed, and in some cases has imposed, significant increases to tariffs on goods imported into the U.S., including from countries where we have sourced replacement parts for appliances and home systems covered by our home warranties. We cannot predict how or what tariffs will be imposed or what retaliatory measures other countries may take in response to tariffs proposed or imposed by the U.S. There is uncertainty as to further actions that may be taken by the U.S. with respect to U.S. trade policy, including with respect to the proposed tariffs. Further tariffs or countermeasures may increase our costs, decrease our margins or reduce the competitiveness of our products and services.

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

We anticipate that the highly fragmented nature of the home services industry will continue to create strategic opportunities for acquisitions. Historically, we have used acquisitions to grow our customer base in high-growth geographies, and we intend to continue to do so. Most recently, we acquired 2-10 HBW, which provides us more home warranty customers and increased revenue, in addition to opportunities for a new sales channel and a more diversified business portfolio.portfolio as well as more home warranty customers and increased revenue. We have also used acquisitions to enhance our technological capabilities and geographic presence. We may also explore opportunities to make strategic acquisitions that will expand our service offering in the broader home services industry, such as new home structuralbuilder warranties acquired as part of 2-10 HBW. See “— 2-10 HBW Acquisition” for additional information related to the acquisition.

To supplement our results presented in accordance with U.S. GAAP, we have disclosed non-GAAP financial measures that exclude or adjust certain items. We present within this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section the non-GAAP financial measures of Adjusted EBITDA and Free Cash Flow. See “—Results of Operations—Adjusted EBITDA” for a reconciliation of net income to Adjusted EBITDA and “—Liquidity and Capital Resources—Free Cash Flow” for a reconciliation of net cash provided from operating activities to Free Cash Flow, as well as “Key Business Metrics” for further discussion of Adjusted EBITDA and Free Cash Flow. Management uses Adjusted EBITDA and Adjusted EBITDA margin to facilitate operating performance comparisons from period to period, and Adjusted EBITDA is also a component of our incentive compensation program. We believe these non-GAAP financial measures provide investors, analysts and other interested parties useful information to evaluate our business performance as they facilitate company-to-company operating performance comparisons. Management believes Free Cash Flow is useful as a supplemental measure of our liquidity. Management uses Free Cash Flow to facilitate company-to-company cash flow comparisons, which may vary from company to company for reasons unrelated to operating performance. While we believe these non-GAAP financial measures are useful in evaluating our business, they should be considered as supplemental in nature and are not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies, limiting their usefulness as comparative measures.

Revenue. The majority of our revenue is generated from home warranty contracts entered into with our customers. Home warranty contracts are typically one year in duration. 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. Our revenue is primarily a function of the volume and pricing of the services provided to our customers, as well as the mix of services provided. Our revenue volume is impacted by new home warranty sales, customer retention and acquisitions. We also generate revenue through our non-warranty and other revenue channel, which primarily includes revenue from non-warranty home services, including the New HVAC upgrade and Moen programs, home maintenance services and new home builder warranties. We derive substantially all of our revenue from customers in the United States.

Net Income and Earnings Per Share. The presentation of net income and basic and diluted earnings per share provides measures of performance which are useful for investors, analysts and other interested parties in company-to-company operating performance comparisons. Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potentially dilutive shares of common stock been issued. The dilutive effect, if any, of non-qualified stock options, performance options (which are stock options that become exercisable upon the achievement, in whole or in part, of the applicable performance goals, pursuant to the terms of the Omnibus Plan and the award agreement),options, restricted stock units ("RSUs"), performance shares (which are contractual rights to receive a share of our common stock (or the cash equivalent thereof) upon the achievement, in whole or in part, of the applicable performance goals, pursuant to the terms of the Omnibus Plan and the award agreement) and restricted stock awards ("RSAs") are reflected in diluted earnings per share by applying the treasury stock method.

Adjusted EBITDA and Adjusted EBITDA Margin. We evaluate our operating and financial performance primarily based on Adjusted EBITDA, which is a financial measure not calculated in accordance with U.S. GAAP. We define Adjusted EBITDA as net income before: depreciation and amortization expense; goodwill and intangibles impairment; restructuring charges; acquisition-relatedacquisition and integration costs; provision for income taxes; non-cash stock-based compensation expense; interest expense; loss on extinguishment of debt; and other non-operating expenses. We define “Adjusted EBITDA margin” as Adjusted EBITDA divided by revenue. We believe Adjusted EBITDA and Adjusted EBITDA margin are useful for investors, analysts and other interested parties as they facilitate company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring and acquisition initiatives and equity-based, long-term incentive plans.

Number of Home Warranties and Customer Retention Rate. We report on our number of home warranties and customer retention rate as measurements of our operating performance. TheseCustomer measurementsretention arerate is presented on a rolling 12-month basis in order to avoid seasonal anomalies. The number of home warranties is representative of our recurring home warranty customer base and is measured as the number of customers with active contracts as of the respective period-end date. Our customer retention rate is calculated as the ratio of the number of end-of-period home warranty contractswarranties to the sum of the number of beginning-of-periodbeginning home warranty contractswarranties and the number of new home warranty saleswarranties and acquired accounts during the respective period.

See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed.

As of December 31, 2024,2025, we do not believe there are any circumstances that would indicate any other 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.

For the yearyears ended December 31, 2025 and 2024, includes approximately $188 million and $6 millionmillion, respectively, as a result of the 2-10 HBW Acquisition on December 19, 2024.

Revenue increased four14 percent for the year ended December 31, 20242025 compared to the year ended December 31, 2023.2024. The increase in renewal revenue reflects the impact of the 2-10 HBW Acquisition and improved price realization resulting from our prior pricing actions, offset, in part, by a decline in the number of renewed home warranties. The decreaseincrease in real estate revenue primarily reflects athe declineimpact of the 2-10 HBW Acquisition. The increase in direct-to-consumer revenue reflects the impact of the 2-10 HBW Acquisition and an increase in the number of first-year real estatedirect-to-consumer home warranties driven by the challenging real estate market,warranties, offset, in part, by higher price realization. The decrease in direct-to-consumer revenue reflects lower price realization resulting from our effortspromotional strategies to drive incremental sales. The increase in non-warranty and other revenue was primarily driven by the growth in non-warranty home services,services primarilyand impact of new HVAChome sales.builder warranties from the 2-10 HBW Acquisition.

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

The growthdecline in the number of home warranties as of December 31, 20242025 was primarily driven by the 2-10 HBW acquisition, offset, in part, by the challenging real estate market.

The decreaseincrease in contractcost claimsof costsservices primarilyrendered reflectsis due to the impact of higherchange tradein servicerevenue, fees,primarily whichdriven droveby the 2-10 HBW Acquisition and the increase in non-warranty revenue. Contract claims costs were relatively flat, reflecting continued process improvement initiatives, a lower number of home warranty service requests per customer and a lower net cost per service request,customer, a favorable weather impact of $8$7 million,million asand milderhigher weather drove a lower number of home warrantytrade service requests in the HVAC trade, and continued process improvement initiatives, specifically relating to better cost management across our contractor network. The decrease wasfees, offset, in part, by ongoing inflationary cost pressures. Additionally, contract claims costs reflects a $5$7 million favorable adjustment in 20242025 related to the development of prior period claims, compared to a $11$5 million favorable adjustment in 2023.2024.

Sales and marketing costs increased due to the 2-10 HBW Acquisition. Customer service costs increased primarily due to ourthe investment2-10 HBW acquisition and growth in marketingnon-warranty associatedhome withservices. ourAcquisition direct-to-consumerand channel, offset, in part by, a reduction in costs driven by sales optimization efforts. Acquisition-relatedintegration costs are driven by the 2-10 HBW Acquisition and represent direct third-party costs, including legal, accounting and financial advisory fees.fees, as well as post-acquisition systems integration costs. Other general and administrative costs increased primarily due to increased personnel costs.and technology costs including costs from the 2-10 HBW acquisition and professional fees.

Depreciation expense was $35$36 million and $32$35 million for the years ended December 31, 20242025 and 2023,2024, Amortization expense was $53 million and $4 million for the years ended December 31, 2025 and 2024, respectively, with the increase primarily driven by incremental capital expenditures in the period.amortization Amortizationof expenseintangible wasassets $4acquired millionas for eachpart of the years2-10 endedHBW December 31, 2024 and 2023.Acquisition.

Restructuring charges were $4 million and $8 million for the years ended December 31, 2025 and 2024, respectively. In 2025, restructuring charges primarily included $3 million of severance costs. In 2024, restructuring charges included $7 million of severance costs and $1 million of expenses related to the exit of certain operating leases.

During the year ended December 31, 2024, we recorded a loss on extinguishment of debt of $3 million, which included the write-off of unamortized debt issuance costs and original issue discount. See "—Liquidity and Capital Resources—2024 Debt Refinancing” and Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on the debt refinancing transactions. There was no loss on extinguishment of debt recorded in the year ended December 31, 2023.2025.

The effective tax rate on income was 24.124.7 percent and 25.024.1 percent for the years ended December 31, 20242025 and 2023,2024, respectively. The decreaseincrease in the effective tax rate was primarily due to stock-basedstate compensation,and offset,local inincome part, by non-deductible acquisition-related transaction costs.taxes.

Net income was $235$255 million and $171$235 million for the years ended December 31, 20242025 and 2023,2024, respectively, with the increase primarily driven by the operating results discussed throughout “—Results of Operations” above.

Adjusted EBITDA was $443$553 million and $346$443 million for the years ended December 31, 20242025 and 2023,2024, respectively. The following table provides a summary of the changes in our Adjusted EBITDA:

The impact of change in revenue iswas primarily driven by improved price realization,realization and the impact of the 2-10 HBW Acquisition, offset, in part, by the reductionchallenging real estate macro environment and a decline in the number of home warranties, other than the 2-10 HBWrenewed home warranties acquired on December 19, 2024.warranties.

We exclude restructuring charges, acquisition-related costsacquisition and integration costs, loss on extinguishment of debtdebt, and other non-operating expenses from Adjusted EBITDA because we believe they do not reflect our ongoing operations and because we believe doing so is useful to investors in aiding period-to-period comparability.

For information regarding factors that could affect our business, financial condition or results of operations, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our 2025 Form 10-K. There have been no material changes to the risk factors disclosed in our 2025 Form 10-K during the threesix months ended MarchJune 31,30, 2026. The risks described in our 2025 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial could also materially and adversely affect our business, financial condition or results of operations.

Frontdoor is the leading provider of home warranties and new home builder warranties in the United States, as measured by revenue, and operates primarily under the American Home Shield, HSA, OneGuard, Landmark and 2-10 HBW brands. Our customizable home warranties help customers protect and maintain their homes, typically their most valuable asset, from costly and unplanned breakdowns of essential home systems and appliances. Our home warranty customers usually subscribe to an annual service plan agreement that covers the repair or replacement for breakdowns that generally occur as a result of normal wear and tear of major components of up to 29 home systems and appliances, including electrical, plumbing, HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops, as well as optional coverages for pools, spas and pumps. We also offer non-warranty home services, including our HVAC upgrade program and installation of Moen water shut-off devices, and select home maintenance offerings. Non-warranty services are primarily marketed to our existing warranty customer base, enabling incremental revenue opportunities beyond traditional warranty coverage. As of MarchJune 31,30, 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. We offer flexible builder-backed and insurance-backed warranty options covering workmanship, home distribution systems, and structural components. Additional add-on programs provide service request management for warranties and claims administration for structural warranties.

For the three months ended MarchJune 31,30, 2026 and 2025, we generated revenue, net income and Adjusted EBITDA of $451$645 million, $41$125 million and $104$220 million, respectively, and $426$617 million, $37$111 million and $100$199 million, respectively. For the six months ended June 30, 2026 and 2025, we generated revenue, net income, and Adjusted EBITDA of $1,096 million, $167 million, $324 million, respectively, and $1,043 million, $148 million and $300 million, respectively. For a reconciliation of net income to Adjusted EBITDA, see “Results of Operations - Adjusted EBITDA.”

For the threesix months ended MarchJune 31,30, 2026, our total operating revenue included 7876 percent of revenue derived from existing customer renewals, sixseven percent from new home warranty sales made in conjunction with existing home real estate transactions, seveneight percent derived from direct-to-consumer sales, and nineten percent derived from the non-warranty and other revenue channels. For the threesix months ended MarchJune 31,30, 2025, our total operating revenue included 7876 percent of revenue derived from existing customer renewals, sixseven percent derived from new home warranty sales made in conjunction with existing home real estate transactions, eight percent derived from direct-to-consumer sales, and eightnine percent was derived from non-warranty and other revenue channels.

Our financial condition and results of operations for the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months ended MarchJune 31,30, 2025 continued to be adversely impacted by the following:

Our critical accounting policies and estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Form 10-K. There have been no material changes to our critical accounting policies during the threesix months ended MarchJune 31,30, 2026.

We reported revenue of $451$645 million and $426$617 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $1,096 million and $1,043 million for the six months ended June 30, 2026 and 2025, respectively. The following tables provide a summary of our revenue by major customer acquisition channel for our home warranties and other revenue:

Revenue increased 65 percent for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. The increase in renewal revenue reflects improved price realization resulting from our prior pricing actions. The decrease in direct-to-consumer revenue reflects lower price realization resulting from our discounting efforts, offset, in part, by an increase in the number of direct-to-consumer home warranties. The increase in real estate revenue reflects an increase in the number of first-year real estate home warranties, offset, in part, by lower price realization. The increase in non-warranty and other revenue was primarily driven by growth in our HVAC upgrade program.

As of MarchJune 31,30, 2025, excluding the 2-10 HBW home warranties acquired on December 19, 2024, the reduction in home warranties was onetwo percent.

We reported cost of services rendered of $203$267 million and $191$261 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively.respectively, and $470 million and $452 million for the six months ended June 30, 2026 and 2025. The following tabletables providesprovide a summary of the changes in cost of services rendered:

The increase in cost of services rendered is due to the impact of change in revenue, primarily driven by the increase in non-warranty revenue. The increasedecrease in contract claims costs primarily reflects inflationary cost pressures and a higherlower number of service requests per customer, driven by ana unfavorablefavorable weather impact of $1$5 million.million, offset, in part, by inflationary cost pressures. Additionally, contract claims costs reflects a $6$4 million favorable adjustment in each of the firstsecond quarterquarters of 2026 and 2025 related to the development of prior period claims, compared to a $7 million favorable adjustment in the first quarter of 2025.claims.

We reported selling and administrative expenses of $162$176 million and $151$172 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $338 million and $323 million for the six months ended June 30, 2026 and 2025, respectively. The following table provides a summary of the components of selling and administrative expenses:

The following tabletables providesprovide a summary of the changes in selling and administrative expenses:

Sales and marketing costs increased due to due to our investment in marketing associated with our direct-to-consumer channel. Customer service costs increased primarily due to personnel costs. Other general and administrative costs decreased due to lower professional fees, offset, in part, by increased personnel costs.

Depreciation expense was $8 million and $10$9 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $16 million and $19 million for the six months ended June 30, 2026 and 2025, respectively. Amortization expense was $12 million andfor $13each million forof the three months ended MarchJune 31,30, 2026 and 2025, and $24 million and $25 million for the six months ended June 30, 2026 and 2025, respectively.

Interest expense was $19 million and $20 million for the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively, and $38 million and $39 million for the six months ended June 30, 2026 and 2025, respectively.

Interest and net investment income was $5 million and $6$4 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $11 million and $10 million for the six months ended June 30, 2026 and 2025, respectively.

The effective tax rate on income before income taxes was 19.324.7 percent and 22.324.3 percent for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and 23.5 percent and 23.8 percent for the six months ended June 30, 2026 and 2025, respectively. The decrease in the effective tax rate for the three months ended March 31, 2026 was primarily due to share-based compensation, offset in part by state income taxes.

Net income was $41$125 million and $37$111 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively, and $167 million and $148 million for six months ended June 30, 2026 and 2025, respectively.

Adjusted EBITDA was $104$220 million and $100$199 million for the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively, and $324 million and $300 million for six months ended June 30, 2026 and 2025, respectively.

The following tabletables providesprovide a summary of the changes in net income and Adjusted EBITDA:

A substantial portion of our liquidity needs are due to debt service requirements on our indebtedness. The Credit Agreement contains covenants that limit or restrict our ability, including the ability of certain of our subsidiaries, to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates. As of MarchJune 31,30, 2026, we were in compliance with the covenants under the Credit Agreement. We do not believe current macroeconomic conditions will affect our ongoing ability to meet our debt covenants.

Cash and cash equivalents totaled $603$627 million and $566 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. Our cash and cash equivalents include balances associated with regulatory requirements in our business. As of MarchJune 31,30, 2026 and December 31, 2025, the total assets subject to these third-party restrictions were $156$157 million and $151 million, respectively. As of MarchJune 31,30, 2026, the available borrowing capacity under the Revolving Credit Facility was $250 million. We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility as of MarchJune 31,30, 2026 will provide us with sufficient liquidity to meet our obligations in the short- and long-term.

On July 26, 2024, our Board of Directors approved a new share repurchase authorization of up to $650 million of our common stock over the three-year period from September 4, 2024 through September 4, 2027. Purchases under this repurchase program may be made from time to time by the company in the open market at prevailing market prices (including through Rule 10b5-1 Plans), in privately negotiated transactions, or through any combination of these methods, through September 4, 2027. 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. 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. WeAs of June 30, 2026 we repurchased a total of 7,070,1228,481,501 outstanding shares for the three months ended March 31, 2026 at an aggregate cost of $381$472 million under this program, which is included in treasury stock on the condensed consolidated statements of financial position included in Part I, Item 1 of this Quarterly Report on Form 10-Q. As of MarchJune 31,30, 2026, we had $269$178 million remaining available for future repurchases under this program. We expect to fund future share repurchases from net cash provided from operating activities.

Net cash provided from operating activities was $119$245 million and $124$251 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

Net cash provided from operating activities for the threesix months ended MarchJune 31,30, 20252026 comprised $67$223 million in earnings adjusted for non-cash chargescharges, and $57$22 million in cash provided from working capital. Cash provided from working capital was primarily driven by seasonality, offset, in part, by payments of accrued bonuses.

Net cash used for investing activities was $7$14 million for the threesix months ended MarchJune 31,30, 2026 as compared to net cash provided from investing activities of $47$42 million for the threesix months ended MarchJune 31,30, 2025.

For the threesix months ended MarchJune 31,30, 2026, cash used for purchases of short-term investments was $2 million.million, Capitaland capital expenditures were $6$12 million for threesix months ended MarchJune 31,30, 2026 and included recurring capital needs and technology projects. We have no additional material capital commitments at this time.

For the threesix months ended MarchJune 31,30, 2025, cash provided from sales and maturities of available-for-sale securities was $60 million, and purchases of available-for-sale securities was $6 million.million, and there was $3 million in cash provided from the finalization of the 2-10 HBW Acquisition purchase price. Capital expenditures were $7$14 million for threesix months ended MarchJune 31,30, 2025,2025 and included recurring capital needs and technology projects.

Net cash used for financing activities was $75$169 million and $85$153 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively.

For the threesix months ended MarchJune 31,30, 2026, we made scheduled principal payments of debt of $7$14 million and purchased outstanding shares of our common stock at an aggregate cost of $61$152 million. Repurchases of common stock included associated commissions and taxes of $1$2 million.

For the threesix months ended MarchJune 31,30, 2025, we made scheduled principal payments of debt of $7$14 million and purchased outstanding shares of our common stock at an aggregate cost of $71$135 million. Repurchases of common stock included associated commissions and taxes of $1 million.