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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________

FORM 10-Q

________________________________________________

 | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

or

 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38617

________________________________________________

Frontdoor, Inc.

(Exact name of registrant as specified in its charter)

Delaware |  | 82-3871179
(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)

3400 Players Club Parkway, Memphis, Tennessee 38125

(Address of principal executive offices) (Zip Code)

901-701-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class | Trading Symbol | Name of Each Exchange on which Registered
Common stock, par value $0.01 per share | FTDR | The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  No 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  | Accelerated filer  | Non-accelerated filer  | Smaller reporting company 
|  |  | Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  No 

As of April 24, 2026 there were 70,234,922 shares outstanding of the registrant’s common stock, par value $0.01 per share.

Frontdoor, Inc.

Quarterly Report on Form 10-Q

GLOSSARY OF TERMS AND SELECTED ABBREVIATIONS

In order to aid the reader, we have included certain defined terms and abbreviations used throughout this Quarterly Report on Form 10-Q as set forth below:

Term / Abbreviation | Definition
2025 Form 10-K | Frontdoor, Inc. Annual Report on Form 10-K for the year ended December 31, 2025
2-10 HBW | 2-10 Holdco, Inc. and its subsidiaries
2-10 HBW Acquisition | Acquisition by Frontdoor, Inc. of all of the issued and outstanding common stock of 2-10 HBW completed on December 19, 2024
AOCI | Accumulated other comprehensive income or loss
ASC | FASB Accounting Standards Codification
ASU | FASB Accounting Standards Update
Credit Agreement | The agreements governing the Credit Facilities
Credit Facilities | The Term Loan Facilities together with the Revolving Credit Facility
Exchange Act | The Securities Exchange Act of 1934, as amended
FASB | U.S. Financial Accounting Standards Board
home warranty | A home service contract, sometimes called a residential service contract, home warranty or home protection contract, provides for the repair and/or replacement of certain home systems and appliances for breakdowns that occur as a result of normal wear and tear
HVAC | Heating, ventilation and air conditioning
IRS | Internal Revenue Service
NASDAQ | Nasdaq Global Select Market
new home builder warranty | A written warranty, or a collection of warranties, a builder provides to a new home buyer to define the standards for certain workmanship, distribution systems (e.g., electrical, piping or venting), and/or structural elements in a new home, and which may be backed by insurance and/or surety coverage
Omnibus Plan | Frontdoor, Inc. 2018 Omnibus Incentive Plan
Revolving Credit Facility | $250 million revolving credit facility
SEC | The U.S. Securities and Exchange Commission
Securities Act | Securities Act of 1933, as amended
SOFR | Secured Overnight Financing Rate
Term Loan A | $418 million term loan A facility
Term Loan B | $800 million term loan B facility
Term Loan Facilities | The Term Loan A together with the Term Loan B
U.S. or United States | United States of America
U.S. GAAP | Accounting principles generally accepted in the United States of America

In this Quarterly Report on Form 10-Q, unless the context indicates otherwise, references to “Frontdoor,” “we,” “our,” “us,” and the “company” refer to Frontdoor, Inc. and all of its subsidiaries. Frontdoor is a Delaware corporation with its principal executive offices in Memphis, Tennessee.

We hold various service marks, trademarks and trade names, such as Frontdoor®, American Home Shield®, HSA™, 2-10 HBW®, OneGuard®, Landmark Home Warranty®, and related logos and designs. Solely for convenience, the service marks, trademarks and trade names referred to in this Quarterly Report on Form 10-Q are presented without the SM, ®, and TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these service marks, trademarks and trade names. All service marks, trademarks and trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

Certain amounts presented in the tables in this report are subject to rounding adjustments and, as a result, the totals in such tables may not sum.

1

TABLE OF CONTENTS

| Page
| No.
Part I. Financial Information |
Item 1. Financial Statements (Unaudited) |
Condensed Consolidated Statements of Operations and Comprehensive Income | 3
Condensed Consolidated Statements of Financial Position | 4
Condensed Consolidated Statements of Changes in Equity | 5
Condensed Consolidated Statements of Cash Flows | 6
Notes to the Condensed Consolidated Financial Statements | 7
Cautionary Statement Concerning Forward-Looking Statements | 18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 30
Item 4. Controls and Procedures | 30
Part II. Other Information | 30
Item 1. Legal Proceedings | 30
Item 1A. Risk Factors | 30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 31
Item 5. Other Information | 31
Item 6. Exhibits | 32
Signature | 33

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Frontdoor, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In millions, except per share data)

|  | Three Months Ended |
|  | March 31, |
|  | 2026 |  |  | 2025 |
Revenue |  | $ |  | 451 |  |  | $ |  | 426 |
Cost of services rendered |  |  |  | 203 |  |  |  |  | 191 |
Gross Profit |  |  |  | 248 |  |  |  |  | 235 |
Selling and administrative expenses |  |  |  | 162 |  |  |  |  | 151 |
Depreciation and amortization expense |  |  |  | 20 |  |  |  |  | 23 |
Restructuring charges |  |  |  | 1 |  |  |  |  | 1 |
Interest expense |  |  |  | 19 |  |  |  |  | 19 |
Interest and net investment income |  |  |  | (5 | ) |  |  |  | (6 | )
Income before Income Taxes |  |  |  | 51 |  |  |  |  | 48 |
Provision for income taxes |  |  |  | 10 |  |  |  |  | 11 |
Net Income |  | $ |  | 41 |  |  | $ |  | 37 |
Other Comprehensive Income (Loss), Net of Income Taxes: |  |  |  |  |  |  |  |
Unrealized gain (loss) on derivative instruments, net of income taxes |  |  |  | 4 |  |  |  |  | (7 | )
Total Other Comprehensive Income (Loss), Net of Income Taxes |  |  |  | 4 |  |  |  |  | (7 | )
Comprehensive Income |  | $ |  | 45 |  |  | $ |  | 30 |
Earnings per Share: |  |  |  |  |  |  |  |
Basic |  | $ |  | 0.58 |  |  | $ |  | 0.50 |
Diluted |  | $ |  | 0.57 |  |  | $ |  | 0.49 |
Weighted-average Common Shares Outstanding: |  |  |  |  |  |  |  |
Basic |  |  |  | 70.6 |  |  |  |  | 74.7 |
Diluted |  |  |  | 72.2 |  |  |  |  | 76.3 |

See the accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).

3

Frontdoor, Inc.

Condensed Consolidated Statements of Financial Position (Unaudited)

(In millions, except share data)

|  | As of |
|  | March 31, |  |  | December 31, |
|  | 2026 |  |  | 2025 |
Assets: |  |  |  |  |  |  |  |
Current Assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ |  | 603 |  |  | $ |  | 566 |
Receivables, less allowance of $3 and $4, respectively |  |  |  | 10 |  |  |  |  | 10 |
Prepaid expenses and other current assets |  |  |  | 43 |  |  |  |  | 44 |
Assets held for sale |  |  |  | 4 |  |  |  |  | 4 |
Total Current Assets |  |  |  | 661 |  |  |  |  | 624 |
Other Assets: |  |  |  |  |  |  |  |
Property and equipment, net |  |  |  | 54 |  |  |  |  | 57 |
Goodwill |  |  |  | 959 |  |  |  |  | 959 |
Intangible assets, net |  |  |  | 386 |  |  |  |  | 398 |
Operating lease right-of-use assets |  |  |  | 7 |  |  |  |  | 7 |
Deferred reinsurance |  |  |  | 65 |  |  |  |  | 66 |
Deferred customer acquisition costs |  |  |  | 15 |  |  |  |  | 14 |
Other assets |  |  |  | 18 |  |  |  |  | 17 |
Total Assets |  | $ |  | 2,164 |  |  | $ |  | 2,142 |
Liabilities and Shareholders' Equity: |  |  |  |  |  |  |  |
Current Liabilities: |  |  |  |  |  |  |  |
Accounts payable |  | $ |  | 87 |  |  | $ |  | 89 |
Accrued liabilities: |  |  |  |  |  |  |  |
Payroll and related expenses |  |  |  | 32 |  |  |  |  | 47 |
Home warranty claims |  |  |  | 64 |  |  |  |  | 69 |
Income taxes payable |  |  |  | 35 |  |  |  |  | 26 |
Other |  |  |  | 30 |  |  |  |  | 34 |
Deferred revenue |  |  |  | 173 |  |  |  |  | 107 |
Current portion of long-term debt |  |  |  | 29 |  |  |  |  | 29 |
Total Current Liabilities |  |  |  | 451 |  |  |  |  | 402 |
Long-Term Debt |  |  |  | 1,138 |  |  |  |  | 1,144 |
Other Long-Term Liabilities: |  |  |  |  |  |  |  |
Deferred tax liabilities, net |  |  |  | 54 |  |  |  |  | 53 |
Operating lease liabilities |  |  |  | 17 |  |  |  |  | 18 |
Unearned insurance premium |  |  |  | 235 |  |  |  |  | 236 |
Long-term deferred revenue |  |  |  | 18 |  |  |  |  | 19 |
Other long-term liabilities |  |  |  | 22 |  |  |  |  | 27 |
Total Other Long-Term Liabilities |  |  |  | 345 |  |  |  |  | 354 |
Commitments and Contingencies (Note 7) |  |  |  |  |  |  |  |
Shareholders' Equity: |  |  |  |  |  |  |  |
Common stock, $0.01 par value; 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 |  |  |  | 1 |  |  |  |  | 1 |
Additional paid-in capital |  |  |  | 199 |  |  |  |  | 195 |
Retained earnings |  |  |  | 826 |  |  |  |  | 785 |
Accumulated other comprehensive loss |  |  |  | (8 | ) |  |  |  | (12 | )
Less treasury stock, at cost; 18,481,260 shares as of March 31, 2026 and 17,522,345 shares as of December 31, 2025 |  |  |  | (787 | ) |  |  |  | (727 | )
Total Shareholders' Equity |  |  |  | 230 |  |  |  |  | 242 |
Total Liabilities and Shareholders' Equity |  | $ |  | 2,164 |  |  | $ |  | 2,142 |

See the accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).

4

Frontdoor, Inc.

Condensed Consolidated Statement of Changes in Equity (Unaudited)

(In millions)

|  | Three Months Ended |
|  | March 31, |
|  | 2026 |  |  | 2025 |
Common Stock: |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ |  | 1 |  |  | $ |  | 1 |
Balance at end of period |  |  |  | 1 |  |  |  |  | 1 |
Additional Paid-in Capital: |  |  |  |  |  |  |  |
Balance at beginning of period |  |  |  | 195 |  |  |  |  | 152 |
Stock-based compensation expense |  |  |  | 10 |  |  |  |  | 8 |
Exercise of stock options |  |  |  | 4 |  |  |  |  | — |
Taxes paid related to net share settlement of equity awards |  |  |  | (11 | ) |  |  |  | (8 | )
Balance at end of period |  |  |  | 199 |  |  |  |  | 153 |
Retained Earnings: |  |  |  |  |  |  |  |
Balance at beginning of period |  |  |  | 785 |  |  |  |  | 530 |
Net income |  |  |  | 41 |  |  |  |  | 37 |
Balance at end of period |  |  |  | 826 |  |  |  |  | 567 |
Accumulated Other Comprehensive (Loss) Income: |  |  |  |  |  |  |  |
Balance at beginning of period |  |  |  | (12 | ) |  |  |  | — |
Other comprehensive income (loss), net of tax |  |  |  | 4 |  |  |  |  | (7 | )
Balance at end of period |  |  |  | (8 | ) |  |  |  | (8 | )
Treasury Stock: |  |  |  |  |  |  |  |
Balance at beginning of period |  |  |  | (727 | ) |  |  |  | (444 | )
Repurchase of common stock |  |  |  | (61 | ) |  |  |  | (71 | )
Balance at end of period |  |  |  | (787 | ) |  |  |  | (515 | )
Total Shareholders' Equity |  | $ |  | 230 |  |  | $ |  | 198 |

See the accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).

5

Frontdoor, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

|  | Three Months Ended |
|  | March 31, |
|  | 2026 |  |  | 2025 |
Cash and Cash Equivalents at Beginning of Period |  | $ |  | 566 |  |  | $ |  | 421 |
Cash Flows from Operating Activities: |  |  |  |  |  |  |  |
Net Income |  |  |  | 41 |  |  |  |  | 37 |
Adjustments to reconcile net income to net cash provided from operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization expense |  |  |  | 20 |  |  |  |  | 23 |
Deferred income tax benefit |  |  |  | (1 | ) |  |  |  | (1 | )
Stock-based compensation expense |  |  |  | 10 |  |  |  |  | 8 |
Other |  |  |  | (2 | ) |  |  |  | — |
Changes in: |  |  |  |  |  |  |  |
Receivables |  |  |  | — |  |  |  |  | 1 |
Prepaid expenses and other current assets |  |  |  | 1 |  |  |  |  | 3 |
Deferred reinsurance |  |  |  | 1 |  |  |  |  | (1 | )
Deferred customer acquisition costs |  |  |  | (1 | ) |  |  |  | (1 | )
Accounts payable |  |  |  | (2 | ) |  |  |  | 5 |
Deferred revenue |  |  |  | 65 |  |  |  |  | 61 |
Accrued liabilities |  |  |  | (23 | ) |  |  |  | (25 | )
Deferred insurance premiums |  |  |  | (2 | ) |  |  |  | 2 |
Current income taxes |  |  |  | 10 |  |  |  |  | 11 |
Net Cash Provided from Operating Activities |  |  |  | 119 |  |  |  |  | 124 |
Cash Flows from Investing Activities: |  |  |  |  |  |  |  |
Purchases of property and equipment |  |  |  | (6 | ) |  |  |  | (7 | )
Purchases of short-term investments and available-for-sale securities |  |  |  | (2 | ) |  |  |  | (6 | )
Sales and maturities of available-for-sale securities |  |  |  | — |  |  |  |  | 60 |
Net Cash (Used for) Provided from Investing Activities |  |  |  | (7 | ) |  |  |  | 47 |
Cash Flows from Financing Activities: |  |  |  |  |  |  |  |
Repayments of debt |  |  |  | (7 | ) |  |  |  | (7 | )
Repurchases of common stock |  |  |  | (61 | ) |  |  |  | (71 | )
Other financing activities |  |  |  | (7 | ) |  |  |  | (7 | )
Net Cash Used for Financing Activities |  |  |  | (75 | ) |  |  |  | (85 | )
Cash Increase During the Period |  |  |  | 37 |  |  |  |  | 85 |
Cash and Cash Equivalents at End of Period |  | $ |  | 603 |  |  | $ |  | 506 |

See the accompanying Notes to the Condensed Consolidated Financial Statements (Unaudited).

6

Frontdoor, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Description of Business

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 March 31, 2026, we had approximately 2.1 million active home warranties across all brands in the United States. We also offer new home builder warranty solutions, which deliver value to both builders and homeowners through a suite of builder warranty products and support services. We offer flexible builder-backed and insurance-backed warranty options covering workmanship, home distribution systems, and structural components. Additional add-on programs provide service request management for warranties and claims administration for structural warranties.

Note 2. Significant Accounting Policies

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.

Restricted Net Assets

There are regulatory restrictions on certain of our subsidiaries under the laws and regulations of the states in which they operate. 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. 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.

Real Estate Held for Sale

We classify long-lived assets to be sold as held for sale in the period in which all required criteria are met. We initially measure a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale. 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.

7

Basis of Presentation

We recommend that the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 2025 Form 10-K. The accompanying condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for the fair presentation of our financial position, results of operations and cash flows for the interim periods presented. 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

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.

Note 3. 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 derive substantially all of our revenue from customers in the United States.

We disaggregate revenue from contracts with customers into major customer acquisition channels. We determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Revenue by major customer acquisition channel for our home warranties and other revenue is as follows:

|  | Three Months Ended |
|  | March 31, |
(In millions) |  | 2026 |  |  | 2025 |
Renewals |  | $ |  | 352 |  |  | $ |  | 333 |
Real estate(1) |  |  |  | 28 |  |  |  |  | 27 |
Direct-to-consumer(1) |  |  |  | 31 |  |  |  |  | 32 |
Non-warranty and other |  |  |  | 41 |  |  |  |  | 33 |
Total |  | $ |  | 451 |  |  | $ |  | 426 |

(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. 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. Those costs bear a direct relationship to the fulfillment of our obligations under the contracts and are representative of the relative fair value of the services provided to the customer. As the costs to fulfill the obligations of the home warranties are incurred on an other-than-straight-line basis, we utilize historical evidence to estimate the expected claims expense and related timing of such costs and make a corresponding adjustment each period to the timing of our related revenue recognition. This adjustment to the straight-line revenue creates a contract asset or contract liability, as described under the heading “Contract Assets and Liabilities” below. We regularly review our estimates of claims costs and adjust these estimates when appropriate.

8

Renewals

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. 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. Customer payments for renewals are primarily received in installments over the new contract period.

Real estate

Real estate home warranties are primarily sold through annual contracts that occur in connection with a real estate sale. 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.

Direct-to-consumer

Direct-to-consumer home warranties are primarily sold through annual contracts that occur in response to our marketing efforts. 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.

Non-warranty and other

Non-warranty and other revenue primarily includes revenue generated by non-warranty home services, including the HVAC upgrade and Moen programs, home maintenance services and new home builder warranties.

Deferred Customer Acquisition Costs

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 Policy Acquisition Costs

We capitalize certain costs related to the issuance of insurance policies, net of ceding commission income from reinsurers, under the new home builder warranty program as deferred policy acquisition costs and amortize these costs over the term of the underlying pattern of insurance risk. Ceding commission amounts, which represent a recovery of policy acquisition costs, are treated as a reduction of deferred policy acquisition costs. 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 are recorded in Other assets on the accompanying condensed consolidated statement of financial position.

Receivables, Less Allowance

We record a receivable due from customers once we have an unconditional right to invoice and receive payment in the future related to the services provided and anticipate the collection of amounts due to us. Contracts for home warranties may be invoiced upfront or monthly in straight-line installment payments over the contract period. The payment terms are determined prior to the execution of the contract.

Contract Assets and Liabilities

Contract assets arise when we recognize revenue for our home warranty contracts prior to a customer being invoiced. 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.

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.

9

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

(In millions) |  |  |
Balance as of December 31, 2025 |  | $ |  | 126 |
Deferral of revenue |  |  |  | 114 |
Recognition of deferred revenue |  |  |  | (49 | )
Balance as of March 31, 2026 |  | $ |  | 191 |

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.

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

Deferred Reinsurance

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.

Note 4. Goodwill and Intangible Assets

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

|  | As of March 31, 2026 |  |  | As of December 31, 2025 |
|  |  |  |  |  | Accumulated |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |
(In millions) |  | Gross |  |  | Amortization |  |  | Net |  |  | Gross |  |  | Amortization |  |  | Net |
Trade names(1) |  | $ |  | 141 |  |  | $ |  | — |  |  | $ |  | 141 |  |  | $ |  | 141 |  |  | $ |  | — |  |  | $ |  | 141 |
Value of business acquired |  |  |  | 148 |  |  |  |  | (37 | ) |  |  |  | 111 |  |  |  |  | 148 |  |  |  |  | (30 | ) |  |  |  | 118 |
Customer relationships(2) |  |  |  | 133 |  |  |  |  | (19 | ) |  |  |  | 114 |  |  |  |  | 321 |  |  |  |  | (213 | ) |  |  |  | 108 |
Other(3) |  |  |  | 31 |  |  |  |  | (11 | ) |  |  |  | 20 |  |  |  |  | 67 |  |  |  |  | (35 | ) |  |  |  | 32 |
Total |  | $ |  | 453 |  |  | $ |  | (67 | ) |  | $ |  | 386 |  |  | $ |  | 676 |  |  | $ |  | (278 | ) |  | $ |  | 398 |

(1)
Not subject to amortization.
(2)
Customer relationships include homeowner, builder and broker relationships.
(3)
Other includes developed technology and other miscellaneous intangibles.

During 2026, we identified all intangible assets that were fully amortized and removed the fully amortized balances from the gross asset and accumulated amortization amounts. 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.

10

Note 5. Leases

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. We also continue to lease certain office space in other geographies, which we have either exited or subleased. Our leases have remaining lease terms ranging from one year to 9 years, some of which include options to extend the leases for up to five years.

The weighted-average remaining lease term and weighted-average discount rate related to our operating leases are as follows:

|  | As of
|  | March 31, |  | December 31,
|  | 2026 |  | 2025
Weighted-average remaining lease term (years) |  |  | 8 |  |  |  |  | 8 |  |
Weighted-average discount rate |  |  | 6.6 |  | % |  |  | 6.6 |  | %

We recognized operating lease expense of less than $1 million for each of the three months ended March 31, 2026 and 2025. These expenses are included in selling and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

Supplemental statement of financial position information related to our operating lease liabilities is as follows:

|  | As of |
|  | March 31, |  |  | December 31, |
(In millions) |  | 2026 |  |  | 2025 |
Other accrued liabilities |  | $ |  | 3 |  |  | $ |  | 3 |
Operating lease liabilities |  |  |  | 17 |  |  |  |  | 18 |
Total operating lease liabilities |  | $ |  | 20 |  |  | $ |  | 20 |

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

|  | Three Months Ended |
|  | March 31, |
(In millions) |  | 2026 |  |  | 2025 |
Cash paid on operating lease liabilities(1) |  | $ |  | 1 |  |  | $ |  | 1 |

(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:

(In millions) |  |  |  |
2026 (remainder)(1) |  |  |  | 2 |
2027(1) |  |  |  | 3 |
2028 |  |  |  | 3 |
2029 |  |  |  | 3 |
2030 |  |  |  | 3 |
Thereafter |  |  |  | 10 |
Total future lease payments(1) |  |  |  | 23 |
Less imputed interest |  |  |  | (5 | )
Total operating lease liabilities(1) |  | $ |  | 18 |

(1)
Amount is presented net of future sublease income totaling $1 million, which relates to the remainder of the year ending December 31, 2026 and the year ending December 31, 2027.

11

Note 6. Income Taxes

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.

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.

On July 4, 2025, the One Big Beautiful Bill Act (the “Bill”) was enacted into U.S. law. Certain provisions are applicable to the Company beginning in 2025, while other provisions will be implemented in future periods. As a result of the Bill, we recognized an increase in our net deferred tax liability and a decrease to our income tax payable resulting from the restoration of full expensing of U.S. research and experimentation expenditures and reinstating the 100% bonus depreciation for eligible assets. We do not expect any current or ongoing material impact to our effective tax rate as a result of the Bill.

Note 7. Commitments and Contingencies

Accruals for home warranty claims are made using internal actuarial projections, which are based on current claims and historical claims experience. Accruals are established based on estimates of the ultimate cost to settle claims. Home warranty claims take approximately three months to settle, on average, and substantially all claims are settled within six months of incurrence. The amount of time required to settle a claim can vary based on a number of factors, including whether a replacement is ultimately required. In addition to our estimates, we engage a third-party actuary to perform an accrual analysis utilizing generally accepted actuarial methods that incorporate cumulative historical claims experience and information provided by us. We regularly review our estimates of claims costs along with the third-party analysis and adjust our estimates when appropriate. We believe that utilizing actuarial methods in our estimation process to account for these liabilities provides a consistent and effective way to measure these judgmental accruals.

Unpaid losses and loss adjustment reserves represent the estimated ultimate cost of settling all new home builder warranty claims and include the estimated costs of claims incurred but not reported as of the balance sheet date. The reserve is based upon the facts of each case and our experience with similar cases. The establishment of appropriate reserves is an inherently uncertain and complex process. Reserve estimates are primarily derived using an actuarial estimation process in which historical loss patterns are applied to actual paid losses and reported losses (paid losses plus individual case reserves established by claim adjusters) to create an estimate of how losses are likely to develop over time. We regularly review our estimates of unpaid losses and adjust our estimates when appropriate. We report our unpaid losses and loss adjustment reserves gross of the amounts related to unpaid losses recoverable from reinsurers and net of amounts ceded to reinsurers.

We have certain liabilities with respect to existing or potential claims, lawsuits and other proceedings. We accrue for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified.

Due to the nature of our business activities, we are also at times subject to pending and threatened legal and regulatory actions that arise out of the ordinary course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of any such matters is not expected, individually or in the aggregate, to have a material adverse effect on our business, financial position, results of operations or cash flows. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that our business, financial position, results of operations or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions.

In the normal course of business, we periodically enter into guarantee agreements with our subsidiaries under which we agree to pay all liabilities and claims arising from home warranty service contracts sold by the service contract entity in the applicable states if that entity is unable to or does not perform its obligations. We are not required to recognize liabilities for guarantees issued on behalf of our subsidiaries unless it becomes probable that we will have to perform under the guarantees. 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.

12

Note 8. 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. 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:

|  |  |  |  | Weighted- |  |  | Weighted- |  |  | Weighted- |
|  | Number of |  |  | Average |  |  | Average |  |  | Average |
|  | Awards |  |  | Exercise |  |  | Grant Date |  |  | Vesting |
|  | Granted |  |  | Price |  |  | Fair Value |  |  | Period |
Stock options |  |  | 561,941 |  |  |  | 53.64 |  |  |  | 23.32 |  |  |  | 3.0 |
Restricted stock units |  |  | 486,987 |  |  |  |  |  |  | 53.64 |  |  |  | 3.0 |
Performance shares(1) |  |  | 139,820 |  |  |  |  |  |  | 53.64 |  |  |  | 3.0 |

(1)
The information related to performance shares above assumes 100% of the performance condition, which is based on revenue and Adjusted EBITDA targets, is met. 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. These costs are expected to be recognized over a weighted-average period of 2.36 years.

Note 9. Long-Term Debt

Long-term debt is summarized in the following table:

|  | As of |
|  | March 31, |  |  | December 31, |
(In millions) |  | 2026 |  |  | 2025 |
Term Loan A maturing in 2029(1) |  | $ |  | 387 |  |  | $ |  | 392 |
Term Loan B maturing in 2031(2) |  |  |  | 780 |  |  |  |  | 781 |
Revolving Credit Facility maturing in 2029 |  |  |  | — |  |  |  |  | — |
Total debt |  |  |  | 1,167 |  |  |  |  | 1,173 |
Less current portion |  |  |  | (29 | ) |  |  |  | (29 | )
Total long-term debt |  | $ |  | 1,138 |  |  | $ |  | 1,144 |

(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.

Scheduled Debt Payments

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

(In millions) |  |  |  |
2026 (remainder) |  | $ |  | 22 |
2027 |  |  |  | 29 |
2028 |  |  |  | 29 |
2029 |  |  |  | 342 |
2030 |  |  |  | 8 |
Thereafter |  |  |  | 752 |
Total future scheduled debt payments |  |  |  | 1,182 |
Less unamortized debt issuance costs |  |  |  | (13 | )
Less unamortized discount |  |  |  | (2 | )
Total debt |  | $ |  | 1,167 |

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Note 10. Segments

We operate as one operating and reportable segment. The majority of our revenue is generated from home warranty contracts entered into with our customers. The accounting policies applied to our one operating and reportable segment are described in Note 2 to the audited consolidated financial statements included in our 2025 Form 10-K.

Our chief operating decision maker (“CODM”), who is our Chief Executive Officer, regularly evaluates financial information, primarily revenue, net income and other measures, on a consolidated basis in deciding how to allocate resources and in assessing performance. Additionally, consolidated revenue is one key component of our incentive compensation program.

Information for our one operating and reportable segment is as follows:

|  | Three Months Ended |  |
|  | March 31, |  |
(In millions) |  | 2026 |  |  | 2025 |  |
Revenue |  | $ |  | 451 |  |  | $ |  | 426 |  |
Cost of services rendered |  |  |  | 203 |  |  |  |  | 191 |  |
Sales and marketing costs |  |  |  | 71 |  |  |  |  | 65 |  |
Customer service costs |  |  |  | 30 |  |  |  |  | 28 |  |
General and administrative costs |  |  |  | 61 |  |  |  |  | 58 |  |
Other segment items (1) |  |  |  | 44 |  |  |  |  | 47 |  |
Net Income |  | $ |  | 41 |  |  | $ |  | 37 |  |

(1)
Other segment items include depreciation and amortization expense, restructuring charges, interest expense, interest and net investment income, and provision for income taxes.

|  | As of |
|  | March 31, |  |  | December 31, |
|  | 2026 |  |  | 2025 |
Total Assets |  | $ |  | 2,164 |  |  | $ |  | 2,142 |

Note 11. Supplemental Cash Flow Information

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

|  | Three Months Ended |
|  | March 31, |
(In millions) |  | 2026 |  |  | 2025 |
Cash paid for (received from): |  |  |  |  |  |  |  |
Interest expense |  | $ |  | 18 |  |  | $ |  | 18 |
Interest income |  |  |  | (5 | ) |  |  |  | (6 | )
Income tax payments, net of refunds |  |  |  | 1 |  |  |  |  | 1 |

Note 12. Cash and Marketable Securities

Cash, money market funds and certificates of deposits with maturities of three months or less when purchased are included in Cash and cash equivalents on the accompanying condensed consolidated statements of financial position.

Gains and losses on sales of investments, as determined on a specific identification basis, are included in investment income in the period they are realized. 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.

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Note 13. Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss), unrealized gains (losses) on derivative instruments and unrealized gains (losses) on marketable securities. We disclose comprehensive income (loss) in the accompanying condensed consolidated statements of operations and comprehensive income and condensed consolidated statements of changes in equity.

A summary of the changes in AOCI is as follows:

Balance at December 31, 2025 |  | $ |  | (12 | )
Other comprehensive income before reclassifications: |  |  |  |
Pre-tax amount |  |  |  | 5 |
Tax provision |  |  |  | 1 |
After-tax amount |  |  |  | 3 |
Amounts reclassified from AOCI (1) |  |  |  | 1 |
Total other comprehensive income |  |  |  | 4 |
Balance at March 31, 2026 |  | $ |  | (8 | )

(1)
Amounts are net of income taxes. See the table below on reclassifications out of AOCI for additional information.

A summary of reclassifications out of AOCI is as follows:

|  | Three Months Ended |
|  | March 31, |
(In millions) |  | 2026 |  |  | 2025 |
Loss (gain) on interest rate swap contracts(1) |  | $ |  | (1 | ) |  | $ |  | 1 |
Total reclassifications during the period |  | $ |  | (1 | ) |  | $ |  | 1 |

(1)
Included in interest expense in the accompanying condensed consolidated statements of operations and comprehensive income.
(2)
Included in provision for income taxes in the accompanying consolidated statements of operations and comprehensive income.

Note 14. Derivative Financial Instruments

We currently use a derivative financial instrument to manage risks associated with changes in interest rates by hedging the interest payments on a portion of our variable rate debt through the use of interest rate swap contracts. We do not hold or issue derivative financial instruments for trading or speculative purposes. In designating derivative financial instruments as hedging instruments under accounting standards for derivative instruments, we formally document the relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives to forecasted transactions. We assess at the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsetting the projected cash flows of the associated forecasted transaction.

Our interest rate swap contracts are classified as cash flow hedges, and, as such, are recorded in the accompanying condensed consolidated statements of financial position on an individual basis as either an asset or liability at fair value, with changes in fair value recorded in AOCI. Cash flows related to the interest rate swap contracts are classified as operating activities in the accompanying condensed consolidated statements of cash flows.

The effective portion of the gain or loss on our interest rate swap contracts is recorded in AOCI. These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement affects earnings. 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. 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.

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Note 15. Fair Value Measurements

We estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability. The valuation techniques require inputs that we categorize into a three-level hierarchy, from highest to lowest level of observable inputs, as follows: unadjusted quoted prices for identical assets or liabilities in active markets ("Level 1"); direct or indirect observable inputs, including quoted prices or other market data, for similar assets or liabilities in active markets or identical assets or liabilities in less active markets ("Level 2"); and unobservable inputs that require significant judgment for which there is little or no market data ("Level 3"). When multiple input levels are required for a valuation, we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement, even though we may have also utilized significant inputs that are more readily observable.

The period-end carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate their fair values due to the short-term maturities of these financial instruments. The period-end carrying amounts of short-term marketable securities also approximate fair value and primarily consist of certificates of deposit. Unrealized gains and losses are reported net of tax as a component of AOCI in the accompanying condensed consolidated statements of financial position. 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. 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.

We determine the fair value of our interest rate swap contracts using a forward interest rate curve obtained from a third-party market data provider. The fair value of each contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. 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. 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.

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:

|  |  |  |  | Estimated Fair Value Measurements |
|  |  |  |  | Quoted |  |  | Significant |  |  |  |
|  |  |  |  | Prices |  |  | Other |  |  | Significant |
|  |  |  |  | in Active |  |  | Observable |  |  | Unobservable |
|  | Carrying |  |  | Markets |  |  | Inputs |  |  | Inputs |
(In millions) |  | Value |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
As of March 31, 2026: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap (Other accrued liabilities ) |  | $ |  | 3 |  |  | $ |  | — |  |  | $ |  | 3 |  |  | $ |  | — |
Interest rate swap (Other long-term liabilities) |  |  |  | 9 |  |  |  |  | — |  |  |  |  | 9 |  |  |  |  | — |
Term Loan A |  |  |  | 387 |  |  |  |  | — |  |  |  |  | 392 |  |  |  |  | — |
Term Loan B |  |  |  | 780 |  |  |  |  | — |  |  |  |  | 790 |  |  |  |  | — |
Total liabilities |  | $ |  | 1,178 |  |  | $ |  | — |  |  | $ |  | 1,194 |  |  | $ |  | — |
As of December 31, 2025: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap (Other accrued liabilities ) |  | $ |  | 4 |  |  | $ |  | — |  |  | $ |  | 4 |  |  | $ |  | — |
Interest rate swap (Other long-term liabilities) |  |  |  | 13 |  |  |  |  | — |  |  |  |  | 13 |  |  |  |  | — |
Term Loan A |  |  |  | 392 |  |  |  |  | — |  |  |  |  | 397 |  |  |  |  | — |
Term Loan B |  |  |  | 781 |  |  |  |  | — |  |  |  |  | 796 |  |  |  |  | — |
Total liabilities |  | $ |  | 1,190 |  |  | $ |  | — |  |  | $ |  | 1,210 |  |  | $ |  | — |

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Note 16. Share Repurchase Program

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

A summary of repurchases of outstanding shares is as follows:

|  | Three Months Ended |
|  | March 31, |
(In millions, except per share data) |  | 2026 |  |  | 2025 |
Number of shares purchased |  |  |  | 958,915 |  |  |  |  | 1,440,083 |
Average price paid per share(1) |  | $ |  | 62.57 |  |  | $ |  | 48.58 |
Cost of shares purchased(1) |  | $ |  | 60 |  |  | $ |  | 70 |

(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.

Note 17. Earnings Per Share

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 of stock options, performance options, RSUs, performance shares and deferred share equivalents are reflected in diluted earnings per share by applying the treasury stock method.

A summary of the calculations of our basic and diluted earnings per share is as follows:

|  | Three Months Ended |
|  | March 31, |
(In millions, except per share data) |  | 2026 |  |  | 2025 |
Net Income |  | $ |  | 41 |  |  | $ |  | 37 |
Weighted-average common shares outstanding: |  |  |  | 70.6 |  |  |  |  | 74.7 |
Effect of dilutive securities: |  |  |  |  |  |  |  |
RSUs(1) |  |  |  | 0.9 |  |  |  |  | 0.9 |
Stock options(2) |  |  |  | 0.4 |  |  |  |  | 0.3 |
Performance options |  |  |  | 0.3 |  |  |  |  | 0.3 |
Weighted-average common shares outstanding - assuming dilution: |  |  |  | 72.2 |  |  |  |  | 76.3 |
Basic earnings per share |  | $ |  | 0.58 |  |  | $ |  | 0.50 |
Diluted earnings per share |  | $ |  | 0.57 |  |  | $ |  | 0.49 |

(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.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, regarding business strategies, market potential, future financial performance, the 2-10 HBW Acquisition and other matters. The words “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project,” “will,” “shall,” “would,” “aim,” and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of our management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Whether any such forward-looking statements are in fact achieved will depend on future events, some of which are beyond our control.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this report, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise. For a discussion of other important factors that could cause our results to differ materially from those expressed in, or implied by, the forward-looking statements included in this report, you should refer to the risks and uncertainties detailed from time to time in our periodic reports filed with the SEC, including the risk factors discussed in Part I, Item 1A. “Risk Factors” in our 2025 Form 10-K.

SUMMARY OF MATERIAL RISKS

Factors, risks, trends and uncertainties that make an investment in us speculative or risky and that could cause actual results or events to differ materially from those anticipated in our forward-looking statements include the matters described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this report as well as Item 1A. Risk Factors in our 2025 Form 10-K filed with the SEC, in addition to the following other factors, risks, trends and uncertainties:

•
changes in macroeconomic conditions, including inflation, tariffs and 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;
•
our ability to successfully implement our business strategies;
•
the ability of our marketing efforts to be successful and cost-effective;
•
our dependence on our first-year direct-to-consumer and real estate acquisition channels and our renewal channel for home warranty sales;
•
our dependence on our existing warranty customer base and strategic partners for non-warranty sales;
•
changes in the source and intensity of competition in our market;
•
our ability to attract, retain and maintain positive relations with third-party contractors and vendors;
•
increases in parts, appliance and home system prices, and other operating costs;
•
changes in U.S. tariffs or import/export regulations;
•
our ability to attract and retain qualified key employees and labor availability in our customer service operations;
•
our dependence on third-party vendors, including business process outsourcers, and third-party component suppliers;
•
weather, including adverse conditions, seasonality, along with related environmental regulations;
•
compliance with, or violation of, laws and regulations, including consumer protection laws, or lawsuits or other claims by third parties, increasing our legal and regulatory expenses;
•
cybersecurity breaches, disruptions or failures in our technology systems;
•
our ability to protect the security of personal information about our customers;
•
technological developments in artificial intelligence;
•
negative reputational and financial impacts resulting from acquisitions or strategic transactions;
•
a requirement to recognize impairment charges on goodwill and intangible assets;

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•
our ability to underwrite risks accurately and to charge adequate prices to builder members, as well as our ability to effectively re-insure a large portion of those risks;
•
the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home builder warranty business;
•
evolving corporate governance and disclosure regulations and expectations;
•
inappropriate use of social media by us or other parties to harm our reputation;
•
our ability to protect our intellectual property and other material proprietary rights;
•
third-party use of our trademarks as search engine keywords to direct our potential customers to their own websites;
•
special risks applicable to operations outside the United States by us or our business process outsource providers;
•
the 2-10 HBW Acquisition may not achieve its intended results;
•
any liabilities, losses, or other exposures for which we do not have adequate insurance coverage, indemnification, or other protection;
•
a return on investment in our common stock is dependent on appreciation in the price;
•
inclusion in our certificate of incorporation a forum selection clause that could discourage an acquisition of our company or litigation against us and our directors and officers;
•
the effects of our significant indebtedness, our ability to incur additional debt and the limitations contained in the agreements governing such indebtedness;
•
increases in interest rates increasing the cost of servicing our indebtedness and counterparty credit risk due to instruments designed to minimize exposure to market risks;
•
increased borrowing costs due to lowering or withdrawal of the credit ratings, outlook or watch assigned to us or our Credit Facilities;
•
our ability to generate the significant amount of cash needed to fund our operations and service our debt obligations; and
•
other factors described in this report and from time to time in documents that we file with the SEC.

Available Information

Our corporate website address is www.frontdoorhome.com. We use our website as a channel of distribution for company information. We will make available free of charge on the Investor section of our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act. We also make available through our corporate website other reports filed with or furnished to the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act, as well as our Code of Conduct and Financial Code of Ethics. Financial and other material information regarding Frontdoor is routinely posted on our website and is readily accessible. We do not intend for information contained on our website to be part of this Quarterly Report on Form 10-Q.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, the audited consolidated financial statements and related notes thereto included in our 2025 Form 10-K and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Form 10-K. The cautionary statements discussed in “Cautionary Statement Concerning Forward-Looking Statements” and elsewhere in this report should be read as applying to all forward-looking statements wherever they appear in this report. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this report, particularly in “Cautionary Statement Concerning Forward-Looking Statements” as well as the risk factors discussed in Part I, Item 1A. “Risk Factors” in our 2025 Form 10-K.

Overview

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 March 31, 2026, we had approximately 2.1 million active home warranties across all brands in the United States. We also offer new home builder warranty solutions, which deliver value to both builders and homeowners through a suite of builder warranty products and support services. We offer flexible builder-backed and insurance-backed warranty options covering workmanship, home distribution systems, and structural components. Additional add-on programs provide service request management for warranties and claims administration for structural warranties.

For the three months ended March 31, 2026 and 2025, we generated revenue, net income and Adjusted EBITDA of $451 million, $41 million and $104 million, respectively, and $426 million, $37 million and $100 million, respectively. For a reconciliation of net income to Adjusted EBITDA, see “Results of Operations - Adjusted EBITDA.”

For the three months ended March 31, 2026, our total operating revenue included 78 percent of revenue derived from existing customer renewals, six percent from new home warranty sales made in conjunction with existing home real estate transactions, seven percent derived from direct-to-consumer sales, and nine percent derived from the non-warranty and other revenue channels. For the three months ended March 31, 2025, our total operating revenue included 78 percent of revenue derived from existing customer renewals, six percent derived from new home warranty sales made in conjunction with existing home real estate transactions, eight percent derived from direct-to-consumer sales, and eight percent was derived from non-warranty and other revenue channels.

Key Factors and Trends Affecting Our Results of Operations

Macroeconomic Conditions

Current macroeconomic conditions, including inflation, high interest rates, the challenging real estate market, high fuel costs and ongoing global geopolitical issues, may affect existing home sales, consumer sentiment and spending, or labor availability. These conditions may reduce demand for our services, increase our costs or otherwise adversely impact our business. While these macroeconomic conditions generally impact the United States as a whole, we believe our nationwide presence mitigates the impact on us of unfavorable economic conditions in any particular region of the United States.

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

•
Improving but still challenging real estate market conditions, driven by higher home inventory levels offset by a decline in the number of home resale transactions, continue to impact demand for home warranties.
•
Consumer sentiment remains mixed as a result of a broad range of current macroeconomic conditions and volatility, including pressure on consumers' discretionary income and elevated interest rates. We believe this environment continues to impact demand for home warranties.
•
Our labor, parts and equipment costs continue to be impacted by inflation and geopolitical issues.

The ultimate implications of the current macroeconomic conditions on our results of operations and overall financial performance remain uncertain. It remains difficult to predict the overall continuing impact these conditions will have on our business as they may reduce demand for our services, increase our costs or otherwise adversely impact our business.

Seasonality

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

Effect of Weather Conditions

The demand for our services, particularly in our home warranty business, and our results of operations, are affected by weather conditions. Extreme temperatures, typically in the winter and summer months, can lead to an increase in home warranty service requests related to home systems, particularly HVAC systems, resulting in higher costs and lower profitability, while mild temperatures in the winter or summer months can lead to lower home systems claim frequency, resulting in lower costs and higher profitability. For example, favorable weather trends in 2025 as compared to 2024 resulted in a lower number of home warranty service requests per customer in the HVAC trade, which favorably impacted contract claims costs.

While weather variations as described above may affect our business, major weather events and other similar Acts of God, or natural disasters such as hurricanes, tornadoes, typhoons, wildfires or earthquakes, typically do not increase our obligations to provide service. Generally, repairs or replacements of major systems and appliances associated with such isolated events are addressed by homeowners’ and other forms of insurance, as opposed to the home warranties that we offer.

Tariff and Import/Export Regulations

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, have 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.

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Competition

We compete in the U.S. home warranty category and the broader U.S. home services industry. The home warranty category is highly competitive. While we have a broad range of competitors in each locality and region, we are one of the few companies that provide home warranties nationwide. The broader U.S. home services industry is also highly competitive. We compete against businesses providing non-warranty home services directly and those offering leads to contractors seeking to provide non-warranty home services. The principal methods of competition, and by which we differentiate ourselves from our competitors, are quality and speed of service, contract offerings, brand awareness and reputation, customer satisfaction, pricing and promotions, contractor network and referrals. We believe our nationwide network of qualified professional contractor firms, in combination with our large base of contracted customers, differentiate us from other platforms in the home services industry.

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

Acquisition Activity

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 opportunities for a new sales channel and a more diversified business portfolio as well as more home warranty customers and increased revenue. We have also used acquisitions to enhance our technological capabilities and geographic presence. We may also explore opportunities to make strategic acquisitions that will expand our service offering in the broader home services industry, such as new home builder warranties acquired as part of 2-10 HBW.

Non-GAAP Financial Measures

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.

Key Business Metrics

We focus on a variety of indicators and key operating and financial metrics to monitor the financial condition and performance of the continuing operations of our business. These metrics include:

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 home warranty sales and customer retention. We also generate revenue through our non-warranty and other revenue channel, which primarily includes revenue from non-warranty home services, including the HVAC upgrade and Moen programs, home maintenance services and new home builder warranties. We derive substantially all of our revenue from customers in the United States.

Operating Expenses. In addition to changes in our revenue, our operating results are affected by, among other things, the level of our operating expenses. Our operating expenses primarily include contract claims costs and expenses associated with sales and marketing, customer service and general corporate overhead. A number of our operating expenses are subject to inflationary pressures, such as: salaries and wages, employee benefits and healthcare; contractor costs; parts, appliances and home systems costs; tariffs; insurance premiums; and various regulatory compliance costs.

22

Gross Profit and Gross Profit Margin. The presentation of gross profit and gross profit margin provides measures of performance which are primarily a function of the revenue drivers discussed above and contract claims costs drivers, primarily contractor costs and parts, appliances and home systems costs. Gross profit is computed by deducting cost of services rendered from revenue. Gross profit margin is computed as gross profit as a percentage of revenue.

Net Income and Earnings Per Share. Net income represents earnings after giving effect to all expenses, other income and expense items, and income taxes. Earnings per share represents net income attributable to common shareholders divided by the weighted-average number of common shares outstanding during the period and is used to measure profitability on a per-share basis. The dilutive effect, if any, of non-qualified stock options, performance options, RSUs, performance shares and deferred shared equivalents are reflected in diluted earnings per share by applying the treasury stock method.

Adjusted EBITDA and Adjusted EBITDA Margin. 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 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.

Net Cash Provided from Operating Activities and Free Cash Flow. We focus on measures designed to monitor cash flow, including net cash provided from operating activities and Free Cash Flow. Free Cash Flow is a financial measure that is not calculated in accordance with U.S. GAAP and represents net cash provided from operating activities less property additions.

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. Customer retention rate is presented on a rolling 12-month basis in order to avoid seasonal anomalies. The number of home warranties is representative of our recurring home warranty customer base and is measured as the number of customers with active contracts as of the respective period-end date. Our customer retention rate is calculated as the ratio of the number of home warranties to the sum of the number of beginning home warranties and the number of new home warranties and acquired accounts during the respective period.

Critical Accounting Policies and Estimates

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

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Results of Operations

|  |  |  |  |  |  |  |  |  |  |  |  |  | % of Revenue
|  | Three Months Ended |  |  | Increase |  | Three Months Ended
|  | March 31, |  |  | (Decrease) |  | March 31,
(In millions) |  | 2026 |  |  | 2025 |  |  | % |  | 2026 |  | 2025
Revenue |  | $ |  | 451 |  |  | $ |  | 426 |  |  |  | 6 |  | % |  |  | 100 |  | % |  |  | 100 |  | %
Cost of services rendered |  |  |  | 203 |  |  |  |  | 191 |  |  |  | 7 |  |  |  |  | 45 |  |  |  |  | 45 |  |
Gross Profit |  |  |  | 248 |  |  |  |  | 235 |  |  |  | 5 |  |  |  |  | 55 |  |  |  |  | 55 |  |
Selling and administrative expenses |  |  |  | 162 |  |  |  |  | 151 |  |  |  | 7 |  |  |  |  | 36 |  |  |  |  | 35 |  |
Depreciation and amortization expense |  |  |  | 20 |  |  |  |  | 23 |  |  |  | (11 | ) |  |  |  | 5 |  |  |  |  | 5 |  |
Restructuring charges |  |  |  | 1 |  |  |  |  | 1 |  |  |  | (8 | ) |  |  |  | — |  |  |  |  | — |  |
Interest expense |  |  |  | 19 |  |  |  |  | 19 |  |  |  | (3 | ) |  |  |  | 4 |  |  |  |  | 5 |  |
Interest and net investment income |  |  |  | (5 | ) |  |  |  | (6 | ) |  |  | (17 | ) |  |  |  | (1 | ) |  |  |  | (1 | ) |
Income before Income Taxes |  |  |  | 51 |  |  |  |  | 48 |  |  |  | 7 |  |  |  |  | 11 |  |  |  |  | 11 |  |
Provision for income taxes |  |  |  | 10 |  |  |  |  | 11 |  |  |  | (7 | ) |  |  |  | 2 |  |  |  |  | 2 |  |
Net Income |  | $ |  | 41 |  |  | $ |  | 37 |  |  |  | 11 |  | % |  |  | 9 |  | % |  |  | 9 |  | %

Revenue

We reported revenue of $451 million and $426 million for the three months ended March 31, 2026 and 2025, respectively. The following tables provide a summary of our revenue by major customer acquisition channel for our home warranties and other revenue:

|  | Three Months Ended |  |  |  |  |  |  |  |  |
|  | March 31, |  |  | Increase (Decrease)
(In millions) |  | 2026 |  |  | 2025 |  |  | $ |  |  | %
Renewals |  | $ |  | 352 |  |  | $ |  | 333 |  |  | $ |  | 18 |  |  |  | 6 |  | %
Real estate(1) |  |  |  | 28 |  |  |  |  | 27 |  |  |  |  | 1 |  |  |  | 3 |  |
Direct-to-consumer(1) |  |  |  | 31 |  |  |  |  | 32 |  |  |  |  | (2 | ) |  |  | (5 | ) |
Non-warranty and other |  |  |  | 41 |  |  |  |  | 33 |  |  |  |  | 8 |  |  |  | 23 |  |
Total |  | $ |  | 451 |  |  | $ |  | 426 |  |  | $ |  | 25 |  |  |  | 6 |  | %

(1)
First-year revenue only.

Revenue increased 6 percent for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase in renewal revenue reflects improved price realization resulting from our prior pricing actions. The decrease in direct-to-consumer revenue reflects lower price realization resulting from our discounting efforts, offset, in part, by an increase in the number of direct-to-consumer home warranties. The increase in real estate revenue reflects an increase in the number of first-year real estate home warranties, offset, in part, by lower price realization. The increase in non-warranty and other revenue was primarily driven by growth in our HVAC upgrade program.

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

|  | As of
|  | March 31,
(In millions) |  | 2026 |  | 2025
Number of home warranties |  |  | 2.10 |  |  |  |  | 2.10 |  |
Growth in number of home warranties(1) |  |  | — |  | % |  |  | 7 |  | %
Customer retention rate |  |  | 79.3 |  | % |  |  | 79.9 |  | %

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

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Cost of Services Rendered

We reported cost of services rendered of $203 million and $191 million for the three months ended March 31, 2026 and 2025, respectively. The following table provides a summary of the changes in cost of services rendered:

(In millions) |  |  |  |
Three Months Ended March 31, 2025 |  | $ |  | 191 |
Impact of change in revenue |  |  |  | 7 |
Contract claims costs |  |  |  | 6 |
Three Months Ended March 31, 2026 |  | $ |  | 203 |

The increase in cost of services rendered is due to the impact of change in revenue, primarily driven by the increase in non-warranty revenue. The increase in contract claims costs primarily reflects inflationary cost pressures and a higher number of service requests per customer, driven by an unfavorable weather impact of $1 million. Additionally, contract claims costs reflects a $6 million favorable adjustment in the first quarter of 2026 related to the development of prior period claims, compared to a $7 million favorable adjustment in the first quarter of 2025.

Selling and Administrative Expenses

We reported selling and administrative expenses of $162 million and $151 million for the three months ended March 31, 2026 and 2025, respectively. The following table provides a summary of the components of selling and administrative expenses:

|  | Three Months Ended |
|  | March 31, |
(In millions) |  | 2026 |  |  | 2025 |
Sales and marketing costs |  | $ |  | 71 |  |  | $ |  | 65 |
Customer service costs |  |  |  | 30 |  |  |  |  | 28 |
General and administrative costs |  |  |  | 61 |  |  |  |  | 58 |
Total |  | $ |  | 162 |  |  | $ |  | 151 |

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

(In millions) |  |  |  |
Three Months Ended March 31, 2025 |  | $ |  | 151 |
Sales and marketing costs |  |  |  | 6 |
Customer service costs |  |  |  | 2 |
Stock-based compensation expense |  |  |  | 3 |
Other general and administrative costs |  |  |  | 1 |
Three Months Ended March 31, 2026 |  | $ |  | 162 |

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

Depreciation and Amortization Expense

Depreciation expense was $8 million and $10 million for the three months ended March 31, 2026 and 2025, respectively. Amortization expense was $12 million and $13 million for the three months ended March 31, 2026 and 2025, respectively.

Interest Expense

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

Interest and Net Investment Income

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

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Provision for Income Taxes

The effective tax rate on income before income taxes was 19.3 percent and 22.3 percent for the three months ended March 31, 2026 and 2025, respectively. The decrease in the effective tax rate for the three months ended March 31, 2026 was primarily due to share-based compensation, offset in part by state income taxes.

Net Income

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

Adjusted EBITDA

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

Summary of Changes in Net Income and Adjusted EBITDA

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

(In millions) |  | Net Income |  |  |  | Adjusted EBITDA |
Three Months Ended March 31, 2025 |  | $ |  | 37 |  |  |  | $ |  | 100 |
Impact of change in revenue |  |  |  | 19 |  |  |  |  |  | 19 |
Contract claims costs |  |  |  | (6 | ) |  |  |  |  | (6 | )
Sales and marketing costs |  |  |  | (6 | ) |  |  |  |  | (6 | )
Customer service costs |  |  |  | (2 | ) |  |  |  |  | (2 | )
Stock-based compensation expense |  |  |  | (3 | ) |  |  |  |  | — |
Other general and administrative costs |  |  |  | (1 | ) |  |  |  |  | (1 | )
Depreciation and amortization expense |  |  |  | 2 |  |  |  |  |  | — |
Interest expense |  |  |  | 1 |  |  |  |  |  | — |
Interest and net investment income |  |  |  | (1 | ) |  |  |  |  | (1 | )
Provision for income taxes |  |  |  | 1 |  |  |  |  |  | — |
Three Months Ended March 31, 2026 |  | $ |  | 41 |  |  |  | $ |  | 104 |

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

Reconciliation of Net Income to Adjusted EBITDA

A reconciliation of Net Income to Adjusted EBITDA is as follows:

|  | Three Months Ended |
|  | March 31, |
(In millions) |  | 2026 |  |  | 2025 |
Net Income |  | $ |  | 41 |  |  | $ |  | 37 |
Depreciation and amortization expense |  |  |  | 20 |  |  |  |  | 23 |
Restructuring charges(1) |  |  |  | 1 |  |  |  |  | 1 |
Acquisition and integration costs(1) |  |  |  | 2 |  |  |  |  | 2 |
Provision for income taxes |  |  |  | 10 |  |  |  |  | 11 |
Non-cash stock-based compensation expense(2) |  |  |  | 10 |  |  |  |  | 8 |
Interest expense |  |  |  | 19 |  |  |  |  | 19 |
Adjusted EBITDA |  | $ |  | 104 |  |  | $ |  | 100 |

(1)
We exclude restructuring charges, acquisition and integration costs and other non-operating expenses from Adjusted EBITDA because we believe they do not reflect our ongoing operations and because we believe doing so is useful to investors in aiding period-to-period comparability.
(2)
We exclude non-cash stock-based compensation expense from Adjusted EBITDA because it is a non-cash expense and because it is not used by management to assess ongoing operational performance. We believe excluding this expense from Adjusted EBITDA is useful to investors in aiding period-to-period comparability.

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Liquidity and Capital Resources

Liquidity

Frontdoor is a holding company that derives its operating cash flow from its operating subsidiaries. Our principal sources of liquidity include cash flows generated from operating activities of our subsidiaries and borrowing availability under our Revolving Credit Facility. We have accessed the debt capital markets both opportunistically and as necessary to support the growth of our business, desired leverage levels, and other capital allocation priorities. We believe we have ample liquidity under the Revolving Credit Facility and are generating substantial Free Cash Flow, which together support both organic operations and other capital allocation priorities as they arise. We believe that our liquidity sources are sufficient to satisfy our anticipated operating and debt service requirements over the next twelve months and thereafter for the foreseeable future.

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

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

We closely monitor the performance of our investment portfolio, primarily consisting of cash deposits. We regularly review applicable statutory reserve requirements to which our regulated entities may be subject and any changes to such requirements. These reviews may result in identifying current reserve levels above or below minimum statutory reserve requirements, in which case we may adjust our reserves. The reviews may also identify opportunities to satisfy certain regulatory reserve requirements through alternate financial vehicles.

We have a diversified investment strategy for our cash investments and give priority to the major financial institutions that serve as lenders under the Credit Agreement. Generally, our cash deposits may be redeemed on demand and are maintained with major financial institutions with solid credit ratings, although our holdings exceed insured limits in substantially all of our accounts.

We may, from time to time, issue new debt, repurchase or otherwise retire or extend our debt and/or take other steps to reduce our debt or otherwise improve our financial position, gross and net leverage, results of operations or cash flows. These actions may include new debt issuance, open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and/or opportunistic refinancing of debt. The amount of debt that may be issued, repurchased or otherwise retired or refinanced, if any, and the price of such issuances, repurchases, retirements or refinancings will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations.

Share Repurchase Program

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. We repurchased a total of 7,070,122 outstanding shares for the three months ended March 31, 2026 at an aggregate cost of $381 million under this program, which is included in treasury stock on the condensed consolidated statements of financial position included in Part I, Item 1 of this Quarterly Report on Form 10-Q. As of March 31, 2026, we had $269 million remaining available for future repurchases under this program. We expect to fund future share repurchases from net cash provided from operating activities.

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Limitations on Distributions and Dividends by Subsidiaries

We depend on our subsidiaries to distribute funds to us so that we may pay obligations and expenses, including satisfying obligations with respect to indebtedness. The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements, financial condition and general business conditions, as well as restrictions under the laws of our subsidiaries’ jurisdictions.

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

Furthermore, there are regulatory restrictions on certain of our subsidiaries to transfer funds to us. The payments of ordinary and extraordinary dividends by certain of our subsidiaries (through which we conduct our business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain subsidiaries to maintain funded reserves, minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can pay to us. None of our subsidiaries are obligated to make funds available to us through the payment of dividends.

Cash Flows

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

|  | Three Months Ended |
|  | March 31, |
(In millions) |  | 2026 |  |  | 2025 |
Net cash provided from (used for): |  |  |  |  |  |  |  |
Operating activities |  | $ |  | 119 |  |  | $ |  | 124 |
Investing activities |  |  |  | (7 | ) |  |  |  | 47 |
Financing activities |  |  |  | (75 | ) |  |  |  | (85 | )
Cash increase during the period |  | $ |  | 37 |  |  | $ |  | 85 |

Operating Activities

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

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

Net cash provided from operating activities for the three months ended March 31, 2025 comprised $67 million in earnings adjusted for non-cash charges and $57 million in cash provided from working capital. Cash provided from working capital was primarily driven by seasonality, offset, in part, by payments of accrued bonuses.

Investing Activities

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

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

For the three months ended March 31, 2025, cash provided from sales and maturities of available-for-sale securities was $60 million, and purchases of available-for-sale securities was $6 million. Capital expenditures were $7 million for three months ended March 31, 2025, and included recurring capital needs and technology projects.

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Financing Activities

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

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

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

Free Cash Flow

The following table reconciles net cash provided from operating activities, which we consider to be the most directly comparable U.S. GAAP measure, to Free Cash Flow using data derived from the condensed consolidated statements of cash flows in Part 1, Item 1 of this Quarterly Report on Form 10-Q:

|  | Three Months Ended |
|  | March 31, |
(In millions) |  | 2026 |  |  | 2025 |
Net cash provided from operating activities |  | $ |  | 119 |  |  | $ |  | 124 |
Property additions |  |  |  | (6 | ) |  |  |  | (7 | )
Free Cash Flow |  | $ |  | 114 |  |  | $ |  | 117 |

Contractual Obligations

Our 2025 Form 10-K includes disclosures of our contractual obligations and commitments as of December 31, 2025. We continue to make the contractually required payments associated with these commitments. There are no significant additions to our obligations and commitments since those reported in the 2025 Form 10-K.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of interest rate changes and manage this exposure through the use of variable-rate and fixed-rate debt and by utilizing an interest rate swap. There have been no material changes to the market risk associated with debt obligations and other significant instruments from the risks described in Part II, Item 7A in our 2025 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated (pursuant to Rule 13a-15(b) of the Exchange Act) the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of March 31, 2026. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2026.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting, as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information required with respect to this Part II, Item 1 can be found under Note 7 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

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 three months ended March 31, 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.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

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. As of March 31, 2026, we had $269 million remaining available for future repurchase under this program. See Liquidity and Capital Resources – Liquidity in Part I, Item 2 of this Quarterly Report on Form 10-Q for more information.

Period |  | Total number of shares purchased |  |  | Average price paid per share(1) |  |  | Total number of shares purchased as part of publicly announced plans or programs |  |  | Maximum dollar value of shares that may yet be purchased under the plans or programs (in millions) |
Jan. 1, 2026 through Jan. 31, 2026 |  |  | 252,552 |  |  | $ |  | 59.39 |  |  |  | 252,552 |  |  | $ |  | 314 |
Feb. 1, 2026 through Feb 28, 2026 |  |  | 404,325 |  |  |  |  | 61.83 |  |  |  | 404,325 |  |  |  |  | 289 |
Mar. 1, 2026 through Mar. 31, 2026 |  |  | 302,038 |  |  |  |  | 66.22 |  |  |  | 302,038 |  |  |  |  | 269 |
Total |  |  | 958,915 |  |  | $ |  | 62.57 |  |  |  | 958,915 |  |  | $ |  | 269 |

(1)
The average price paid per share is calculated on a trade date basis and excludes associated commissions and taxes.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

No Rule 10b5-1 trading arrangements or “non-Rule 10b5-1 trading arrangements” (as defined by S-K Item 408(c)) were entered into or terminated by our directors or officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) during the first quarter of 2026.

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ITEM 6. EXHIBITS

Exhibit Number |  | Description
3.1 |  | Restated Certificate of Incorporation of Frontdoor, Inc. (incorporated by reference to Exhibit 3.1 to Frontdoor’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021).
3.2 |  | Amended and Restated Bylaws of Frontdoor, Inc. (incorporated by reference to Exhibit 3.2 to Frontdoor’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023).
31.1* |  | Certification of Chief Executive Officer pursuant to Rule 13a - 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* |  | Certification of Chief Financial Officer pursuant to Rule 13a - 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** |  | Certification of Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2** |  | Certification of Chief Financial Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* |  | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH* |  | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104* |  | Cover page formatted as Inline XBRL and included in Exhibit 101.

* Filed herewith.

** Furnished herewith.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by Frontdoor in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | FRONTDOOR, INC.
Date: April 30, 2026 |  | By: | /s/ Jason L. Bailey
|  |  | Name: | Jason L. Bailey
|  |  | Title: | Senior Vice President and Chief Financial Officer (principal financial officer)

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