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What changed in Frontdoor, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Frontdoor, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+355 added−356 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-27)

Top changes in Frontdoor, Inc.'s 2025 10-K

355 paragraphs added · 356 removed · 289 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

196 edited+47 added−36 removed179 unchanged
Biggest changeRevenue from this channel was $125 million, $141 million and $184 million for the years ended December 31, 2024, 2023 and 2022, respectively. Direct-to-consumer channel. We have invested significant resources to develop the DTC channel for home warranties to broaden our reach beyond home real estate transactions.
Biggest changeThose brokers and agents then market our home warranties to home buyers and sellers. 11 In 2025, customers in our real estate channel renewed at a rate of 29 percent after the first contract year. Revenue from this channel was $141 million, $125 million and $141 million for the years ended December 31, 2025, 2024 and 2023, respectively. Direct-to-consumer channel.
We acquire our home warranty customers through awareness driven through the real estate channel and directly by advertising and marketing our brands through our direct-to-consumer (“DTC”) channel.
We acquire our home warranty customers through awareness driven by the real estate channel and directly by advertising and marketing our brands through our direct-to-consumer (“DTC”) channel.
In addition, if we cannot obtain appliance parts to satisfy consumer claims in a timely manner, we may be forced to obtain replacement appliances or systems at a higher cost compared to the cost of appliance parts.
In addition, if we cannot obtain parts to satisfy consumer claims in a timely manner, we may be forced to obtain replacement appliances or systems at a higher cost compared to the cost of appliance parts.
A significant portion of our outstanding indebtedness, including indebtedness incurred under the Credit Facilities, bears interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our indebtedness and could materially reduce our profitability and cash flows.
Increases in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability. A significant portion of our outstanding indebtedness, including indebtedness incurred under the Credit Facilities, bears interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our indebtedness and could materially reduce our profitability and cash flows.
If we were to fail to comply with any applicable law or regulation, we could be subject to substantial fines or damages, be involved in lawsuits, enforcement actions and other claims by third parties or governmental authorities, suffer losses to our reputation and our business or suffer the loss of licenses or registrations or incur penalties that may affect how the business is operated, any of which, in turn, could have a material adverse effect on our financial position, results of operations and cash flows.
In addition, if we were to fail to comply with any applicable law or regulation, we could be subject to substantial fines or damages, be involved in lawsuits, enforcement actions and other claims by third parties or governmental authorities, suffer losses to our reputation and our business or suffer the loss of licenses or registrations or incur penalties that may affect how the business is operated, any of which, in turn, could have a material adverse effect on our financial position, results of operations and cash flows.
These laws and regulations include but are not limited to laws relating to consumer protection, unfair and/or deceptive trading practices, service contracts, home warranties, home service plans, real estate settlement, wage and hour requirements, state contractor laws, the employment of immigrants, labor relations, licensing, building code requirements, workers’ safety, environmental, privacy and data protection, securities, insurance coverages, sales tax collection and remittance, healthcare reforms, employee benefits, marketing (including, without limitation, telemarketing) and advertising.
These laws and regulations include but are not limited to laws relating to consumer protection, unfair and/or deceptive trading practices, service contracts, home warranties, home service plans, real estate settlement services, wage and hour requirements, state contractor laws, the employment of immigrants, labor relations, licensing, building code requirements, workers’ safety, environmental, privacy and data protection, securities, insurance coverages, sales tax collection and remittance, healthcare reforms, employee benefits, marketing (including, without limitation, telemarketing) and advertising.
These federal, state and local laws and regulations include laws relating to consumer protection, unfair and/or deceptive trade practices, service contracts, home warranties, home service plans, real estate settlement, wage and hour requirements, contractors, the employment of immigrants, labor relations, licensing, building code requirements, workers’ safety, environmental protection, privacy and data protection, securities, insurance coverages, sales tax collection and remittance, healthcare, employee benefits, marketing (including, without limitation, telemarketing) and advertising.
These federal, state and local laws and regulations include laws relating to consumer protection, unfair and/or deceptive trade practices, service contracts, home warranties, home service plans, real estate settlement services, wage and hour requirements, contractors, the employment of immigrants, labor relations, licensing, building code requirements, workers’ safety, environmental protection, privacy and data protection, securities, insurance coverages, sales tax collection and remittance, healthcare, employee benefits, marketing (including, without limitation, telemarketing) and advertising.
In certain instances, our technology platform enables homeowners to use their smartphone cameras to engage in a video chat with one of our experts who can remotely see the item that needs attention and capture a variety of important details about the item, potentially helping to reduce the time required for completing repairs and even eliminating the need for a technician to visit the home by offering a simple do-it-yourself solution.
In certain instances, our technology platform enables homeowners to use their smartphone cameras to engage in a video chat with one of our Virtual Experts who can remotely see the item that needs attention and capture a variety of important details about the item, potentially helping to reduce the time required for completing repairs and even eliminating the need for a technician to visit the home by offering a simple do-it-yourself solution.
Additional risks relating to the 2-10 HBW Acquisition and integration of 2-10 HBW into our business, include, among others, the following: • general economic and business conditions; • potential unknown liabilities and unforeseen delays or regulatory conditions associated with the acquisition; • our inability to successfully or timely integrate 2-10 HBW in a manner that permits us to achieve the benefits anticipated to result from the acquisition; • disruption to our and 2-10 HBW’s business and operations and relationships with service providers, customers, employees and other partners; • diversion of significant resources from our core product offerings; • our inability to retain the service of key management and other personnel of 2-10 HBW; • our inability to effectively diversify and expand into a new line of business and execute on cross-selling opportunities for home warranties and our non-warranty services; • our inability to successfully integrate 2-10 HBW into our internal control over financial reporting, which could compromise the integrity of our financial reporting; and • greater than anticipated costs related to the integration of 2-10 HBW’s business and operations into ours.
Additional risks relating to the 2-10 HBW Acquisition and integration of 2-10 HBW into our business, include, among others, the following: • general economic and business conditions; • potential unknown liabilities and unforeseen delays or regulatory conditions associated with the acquisition; • our inability to successfully or timely integrate 2-10 HBW in a manner that permits us to achieve the benefits anticipated to result from the acquisition; • disruption to our and 2-10 HBW’s business and operations and relationships with service providers, customers, employees and other partners; • diversion of significant resources from our core product offerings; 27 • our inability to retain the service of key personnel of 2-10 HBW; • our inability to effectively diversify and expand into a new line of business and execute on cross-selling opportunities for home warranties and our non-warranty services; • our inability to successfully integrate 2-10 HBW into our internal control over financial reporting, which could compromise the integrity of our financial reporting; and • greater than anticipated costs related to the integration of 2-10 HBW’s business and operations into ours.
These warranties also include up to one year of workmanship surety protection and up to two years of systems surety protection. We implement a vigorous underwriting process for builder members, particularly those with whom we enter into multi-year contracts, and for each warranty, relying on engineering expertise and decades of structural claims data to help us assess risk.
These warranties can also include up to one year of workmanship surety protection and up to two years of systems surety protection. We implement a vigorous underwriting process for builder members, particularly those with whom we enter into multi-year contracts, and for each warranty, relying on engineering expertise and decades of structural claims data to help us assess risk.
We believe growing our contractor base within existing service locations and in new geographies, while maintaining service excellence, will drive further penetration of our home warranties and non-warranty home services and differentiate our product offerings relative to competitors. We believe that increased usage of our preferred contractors leads to higher customer retention rates as well as lower costs.
We believe growing our independent contractor base within existing service locations and in new geographies, while maintaining service excellence, will drive further penetration of our home warranties and non-warranty home services and differentiate our product offerings relative to competitors. We believe that increased usage of our independent preferred contractors leads to higher customer retention rates as well as lower costs.
We leverage marketing and information service arrangements and a team of field-based sales associates and leaders who focus on defined geographic areas to train and educate real estate brokers and agents within their territory about the benefits of a home warranty by working directly with real estate offices and participating in broker meetings and national sales events.
We leverage marketing and information service arrangements and a team of internal and field-based sales associates and leaders who focus on defined geographic areas to train and educate real estate brokers and agents within their territory about the benefits of a home warranty by working directly with real estate offices and participating in broker meetings and national sales events.
Long call and service wait times by customers during peak operating times could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows. Our business process outsourcing initiatives increase our reliance on third-party vendors and may expose our business to harm upon the termination or disruption of our third-party vendor relationships.
Long call and service wait times by customers during peak operating times could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows. 20 Our business process outsourcing initiatives increase our reliance on third-party vendors and may expose our business to harm upon the termination or disruption of our third-party vendor relationships.
In addition, we have deployed more sophisticated marketing and media tools to attract customers, including content marketing, online reputation management and social media channels. For our new home structural warranty business, we market through regional sales teams focused on understanding the new home construction business and geographical variations, as well as developing and deepening builder relationships.
In addition, we have deployed more sophisticated marketing and media tools to attract customers, including content marketing, online reputation management and social media channels. For our new home builder warranty business, we market through regional sales teams focused on understanding the new home construction business and geographical variations, as well as developing and deepening builder relationships.
We rely on historical loss data for our business, our builder members and the geographies in which they operate, as well as the experience of our underwriting team and engineering experts, to project future warranty claims and expenses, allocate risks to our reinsurers and set the price for new home structural warranties and other services that we provide to our builder members.
We rely on historical loss data for our business, our builder members and the geographies in which they operate, as well as the experience of our underwriting team and engineering experts, to project future warranty claims and expenses, allocate risks to our reinsurers and set the price for new home builder warranties and other services that we provide to our builder members.
Acts of God, war, terror acts and pandemics or other public health crises, such as COVID-19, may impair our ability to operate or the ability of our business process outsource providers to operate, in particular countries or regions. Risks Related to Our Acquisition of 2-10 Home Buyers Warranty The acquisition may not achieve its intended results.
Acts of God, war, terror acts and pandemics or other public health crises, such as the COVID-19 pandemic, may impair our ability to operate or the ability of our business process outsource providers to operate, in particular countries or regions. Risks Related to Our Acquisition of 2-10 Home Buyers Warranty The acquisition may not achieve its intended results.
We maintain and manage a nationwide network of approximately 17,000 independent professional contractor firms in a wide range of trades and with diverse skills and capabilities. We are selective with onboarding new contractor firms into our nationwide network and continuously monitor service quality through a set of rigorous performance measures, relying heavily on direct customer feedback.
We maintain and manage a nationwide network of approximately 17,000 independent professional contractor firms in a wide range of trades and with diverse skills and capabilities. We are selective with onboarding new contractor firms into our nationwide network and monitor service quality through a set of rigorous performance measures, relying heavily on direct customer feedback.
We also leverage our technology platform to utilize video chat capabilities, augmented reality, computer vision and machining learning to offer real time help to homeowners from our experts who may be able to guide homeowners to fix the repair, reducing the need for an in-home visit from a professional.
We also leverage our technology platform to utilize video chat capabilities, augmented reality, computer vision and machining learning to offer real time help to homeowners from our Virtual Experts who may be able to guide homeowners to fix the repair, reducing the need for an in-home visit from a professional.
We continue to seek to deepen and expand our supplier relationships, improve access to appliances with the highest demand, increase speed of parts acquisition and expand our service provider network. Geographies. A significant percentage of our revenue is concentrated in the western and southern regions of the United States, including California, Florida and Texas.
We continue to seek to deepen and expand our supplier relationships, improve access to appliances with the highest demand, increase speed of parts acquisition and expand our service provider network. 12 Geographies. A significant percentage of our revenue is concentrated in the western and southern regions of the United States, including California, Florida and Texas.
Any inability to attract or retain qualified key executives in a timely manner, or retain or recruit other key personnel, could have a material adverse impact on our business, financial position, results of operations and cash flows. 19 We are dependent on labor availability in our customer service operations.
Any inability to attract or retain qualified key executives in a timely manner, or retain or recruit other key personnel, could have a material adverse impact on our business, financial position, results of operations and cash flows. We are dependent on labor availability in our customer service operations.
We utilize dynamic pricing in our home warranty renewal and DTC channels, which allows us to leverage our proprietary data platform to adjust our plan prices based on factors such as the strength of our contractor network or characteristics of homes in a market.
We utilize dynamic pricing in our home warranty renewal and DTC channels, which allows us to leverage our proprietary data platform to adjust our plan prices based on factors such as the strength of our independent contractor network or characteristics of homes in a market.
We are focused on growing our high-quality nationwide network of qualified professional contractor firms, particularly our base of preferred contractors for home warranty and non-warranty services as our business grows. These firms are in a wide range of trades and possess diverse skills and capabilities.
We are focused on growing our high-quality nationwide network of qualified independent professional contractor firms, particularly our base of preferred contractors for home warranty and non-warranty services as our business grows. These firms are in a wide range of trades and possess diverse skills and capabilities.
This would harm our ability to market our services in order to meet market demand and could materially and adversely affect our reputation, business, financial position, results of operations and cash flows. 20 We have limited control over these parties on which our business depends.
This would harm our ability to market our services in order to meet market demand and could materially and adversely affect our reputation, business, financial position, results of operations and cash flows. We have limited control over these parties on which our business depends.
Our value proposition is attractive to new home builders seeking to transfer the risk of structural failures that may occur within ten years of completion, as well as service offerings for those builders seeking administrative services rather than a full transfer of structural risk.
Our value proposition is attractive to new home builders seeking to transfer the risk of structural failures that may occur within up to ten years of completion, as well as service offerings for those builders seeking administrative services rather than a full transfer of structural risk.
The notional amount steps up in August 2025 by $350 million upon the expiration of the 2018 swap. The notional amount steps down over the term of the agreement on a basis that correlates with the scheduled principal payments on the Amended Term Loan Facilities.
The notional amount stepped up in August 2025 by $350 million upon the expiration of the 2018 swap. The notional amount steps down over the term of the agreement on a basis that correlates with the scheduled principal payments on the Amended Term Loan Facilities.
New Home Structural Warranties. For our new home structural warranty business, we market and sell through inside sales and regional sales teams focused on understanding the new home construction business and geographical variations, as well as developing and deepening builder relationships.
New Home Builder Warranties. For our new home builder warranty business, we market and sell through inside sales and regional sales teams focused on understanding the new home construction business and geographical variations, as well as developing and deepening builder relationships.
Major weather events and other similar Acts of God, or natural disasters such as typhoons, hurricanes, tornadoes, wildfires or earthquakes, may affect the demand for our services and our results of operations.
Nevertheless, major weather events and other similar Acts of God, or natural disasters such as typhoons, hurricanes, tornadoes, wildfires or earthquakes, may affect the demand for our services and our results of operations.
There can be no guarantee that our hedging strategy will be effective, and we may experience credit-related losses in some circumstances. ITEM 1B. UNRE SOLVED STAFF COMMENTS None.
There can be no guarantee that our hedging strategy will be effective, and we may experience credit-related losses in some circumstances. 31 ITEM 1B. UNRE SOLVED STAFF COMMENTS None.
We intend to further grow our home warranty business by making strategic investments to educate consumers on, and remind our current customers of, our compelling value proposition, including targeting homeowners more effectively through a variety of product offerings, messaging and retention programs; further improving and differentiating the customer experience from our category; and optimizing our strategies with respect to real estate brokers, contractor firms and business partners.
We intend to further grow our home warranty business by making strategic investments to educate consumers on, and remind our current customers of, our compelling value proposition, including targeting homeowners more effectively through a variety of product offerings, messaging and retention programs; further improving and differentiating our customer experience from the overall category; and optimizing our strategies with respect to real estate brokers, independent contractor firms and business partners.
As our home warranty customers are predominantly owners of single-family residences, our business is not reliant on any single customer. As of December 31, 2024, we had approximately 2.1 million active home warranties. We believe there is opportunity to market our services to a broader customer base seeking differentiated home warranties, non-warranty services and self-help guidance.
As our home warranty customers are predominantly owners of single-family residences, our business is not reliant on any single customer. As of December 31, 2025, we had approximately 2.1 million active home warranties. We believe there is opportunity to market our services to a broader customer base seeking differentiated home warranties, non-warranty services and self-help guidance.
In addition, at the federal level, we are regulated by the Consumer Financial Protection Bureau, and in certain states, both our home warranty business and the new home structural warranty business are regulated by applicable state insurance regulatory authorities, including but not limited to the California Department of Insurance, District of Columbia department of Insurance, Securities & Banking, the Florida Office of Insurance Regulation, and the Texas Department of Insurance.
In addition, at the federal level, we are regulated by the Consumer Financial Protection Bureau, and in certain states, both our home warranty business and the new home builder warranty business are regulated by applicable state insurance regulatory authorities, including but not limited to the California Department of Insurance, District of Columbia Department of Insurance, Securities & Banking, the Florida Office of Insurance Regulation, and the Texas Department of Insurance.
In addition, we are regulated by the Consumer Financial Protection Bureau and in certain states by the applicable state insurance regulatory authority or other state regulatory bodies, such as the Virginia Department of Agriculture and the Texas Department of Licensing and Regulation, with respect to our home warranty business, and by the Department of Insurance for the District of Columbia and other state insurance bodies, with respect to our new home structural warranty business nationwide.
In addition, we are regulated by the Consumer Financial Protection Bureau and in certain states by the applicable state insurance regulatory authority or other state regulatory bodies, such as the Virginia Department of Agriculture and the Texas Department of Licensing and Regulation, with respect to our home warranty business, and by the Department of Insurance for the District of Columbia and other state insurance bodies, with respect to our new home builder warranty business nationwide.
We believe that leveraging our capabilities to offer upfront diagnostics of home repairs will reduce the time required for completion of repairs. Providing Home Builders and their Customers with High-Quality New Home Structural Warranty Services. With the 2-10 HBW Acquisition, we have expanded our offerings to include industry-leading new home structural warranties.
We believe that leveraging our capabilities to offer upfront diagnostics of home repairs will reduce the time required for completion of repairs. Providing Home Builders and their Customers with High-Quality New Home Builder Warranty Services. With the 2-10 HBW Acquisition, we have expanded our offerings to include industry-leading new home builder warranties.
Our business, financial position, results of operations and cash flows depend on our ability to underwrite and appropriately price the risks of providing new home structural warranties. The role of the pricing function is to ensure that rates are adequate to generate sufficient revenue to pay losses and underwriting expenses and to earn a profit.
Our business, financial position, results of operations and cash flows depend on our ability to underwrite and appropriately price the risks of providing new home builder warranties. The role of the pricing function is to ensure that rates are adequate to generate sufficient revenue to pay losses and underwriting expenses and to earn a profit.
Developing and acting on initiatives within the scope of corporate governance, and collecting, measuring and reporting related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including, the new California climate disclosure rules, and similar proposals by other federal and state regulatory bodies.
Developing and acting on initiatives within the scope of corporate governance, and collecting, measuring and reporting related information and metrics can be costly, difficult and time consuming and are subject to evolving reporting standards, including, the new California climate disclosure rules, and similar proposals by other federal and state regulatory bodies.
Further, we believe our new home structural warranties and our non-warranty home services provide us more opportunities to introduce customers to our overall home warranty value proposition. We intend to leverage our analysis of consumer preferences to offer home warranties that meet the needs of consumers who prefer traditional home warranties, as well as those seeking non-warranty services .
Further, we believe our new home builder warranties and our non-warranty home services provide us more opportunities to introduce customers to our overall home warranty value proposition. We intend to leverage our analysis of consumer preferences to offer home warranties that meet the needs of consumers who prefer traditional home warranties, as well as those seeking non-warranty services .
The telemarketing rules adopted by the Federal Communications Commission pursuant to the Telephone Consumer Protection Act and the Telemarketing Sales Rule issued by the Federal Trade Commission govern our telephone sales practices. In addition, some states and local governing bodies have adopted laws and regulations targeted at direct telephone sales, i.e., “do-not-call” regulations.
The telemarketing rules adopted by the Federal Communications Commission pursuant to the Telephone Consumer Protection Act and the Telemarketing Sales Rule issued by the Federal Trade Commission, or FTC, govern our telephone sales practices. In addition, some states and local governing bodies have adopted laws and regulations targeted at direct telephone sales, i.e., “do-not-call” regulations.
In addition, underpricing insurance policies over time could erode the capital position of one or more of our insurance subsidiaries, constraining our ability to write new business. We depend on the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home structural warranty business.
In addition, underpricing insurance policies over time could erode the capital position of one or more of our insurance subsidiaries, constraining our ability to write new business. We depend on the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home builder warranty business.
As of December 31, 2024, there were $2 million of letters of credit outstanding under our $250 million Revolving Credit Facility, and the available borrowing capacity under the Revolving Credit Facility was $248 million. In addition, we are able to incur additional indebtedness in the future, subject to the limitations contained in the agreements governing our indebtedness.
As of December 31, 2025, there were $2 million of letters of credit outstanding under our $250 million Revolving Credit Facility, and the available borrowing capacity under the Revolving Credit Facility was $248 million. In addition, we are able to incur additional indebtedness in the future, subject to the limitations contained in the agreements governing our indebtedness.
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. On October 24, 2018, we entered into an interest rate swap contract effective October 31, 2018 that expires on August 16, 2025 (the “2018 swap”).
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. On October 24, 2018, we entered into an interest rate swap contract effective October 31, 2018 that expired on August 16, 2025 (the “2018 swap”).
The impact of increases in interest rates could be more significant for us than it would be for some other companies given that our indebtedness obligations are at variable interest rates. As of December 31, 2024, our variable rate indebtedness used the SOFR as a benchmark for establishing the interest rate.
The impact of increases in interest rates could be more significant for us than it would be for some other companies given that our indebtedness obligations are at variable interest rates. As of December 31, 2025, our variable rate indebtedness used the SOFR as a benchmark for establishing the interest rate.
We provide our customers with a compelling value proposition by offering financial protection against unplanned and expensive home repairs, coupled with the convenience of having repairs guaranteed by us and completed by experienced professionals whose quality levels are continuously monitored.
We provide our customers with a compelling value proposition by offering financial protection against unplanned and expensive home repairs, coupled with the convenience of having repairs guaranteed by us and completed by experienced professionals whose quality levels are regularly monitored.
Additionally, homeowners who have access to our new home structural warranties represent a natural entry point for marketing our home warranty plans and non-warranty home services, enabling us to offer comprehensive home protection solutions and increase revenue opportunities. Pursuing Selective Acquisitions.
Additionally, homeowners who have access to our new home builder warranties represent a natural entry point for marketing our home warranty plans and non-warranty home services, enabling us to offer comprehensive home protection solutions and increase revenue opportunities. Pursuing Selective Acquisitions.
The notional amount of the agreement is $350 million. On December 19, 2024, in connection with the Amended Credit Facility, we entered into an additional interest rate swap contract, with an initial notional amount of $299 million with additional step up and step down provisions embedded in the contract.
The notional amount of the agreement was $350 million. On December 19, 2024, in connection with the Amended Credit Facility, we entered into an additional interest rate swap contract, with an initial notional amount of $299 million with additional step up and step down provisions embedded in the contract.
Because of our significant indebtedness: • our ability to engage in large acquisitions without raising additional equity or obtaining additional debt financing is limited; • our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future; • a large portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes; • we are exposed to the risk of increased interest rates because a portion of our borrowings are or will be at variable rates of interest; • it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such indebtedness; • we may be more vulnerable to general adverse economic and industry conditions; • we may be at a competitive disadvantage compared to our competitors with proportionately less indebtedness or with comparable indebtedness on more favorable terms and, as a result, they may be better positioned to withstand economic downturns; • our ability to refinance indebtedness may be limited, or the associated costs may increase; • our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited; and • we may be prevented from carrying out capital spending and restructurings that are necessary or important to our growth strategy and efforts to improve operating margins of our business. 28 Increases in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability.
Because of our significant indebtedness: • our ability to engage in large acquisitions without raising additional equity or obtaining additional debt financing is limited; • our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future; • a large portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes; • we are exposed to the risk of increased interest rates because a portion of our borrowings are or will be at variable rates of interest; • it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such indebtedness; • we may be more vulnerable to general adverse economic and industry conditions; 29 • we may be at a competitive disadvantage compared to our competitors with proportionately less indebtedness or with comparable indebtedness on more favorable terms and, as a result, they may be better positioned to withstand economic downturns; • our ability to refinance indebtedness may be limited, or the associated costs may increase; • our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited; and • we may be prevented from carrying out capital spending and restructurings that are necessary or important to our growth strategy and efforts to improve operating margins of our business.
As we continue to refine, scale and leverage our contractor network, we in turn expand our breadth of potential services and enhance our ability to further execute our non-warranty home services delivery model. 8 Our Competitive Strengths We believe the following competitive strengths have been instrumental to our success and position us for future growth: Leader in Large, Fragmented and Underpenetrated Category.
As we continue to refine, scale and leverage our independent contractor network, we will continue to expand our breadth of potential services and enhance our ability to further execute our non-warranty home services delivery model. 8 Our Competitive Strengths We believe the following competitive strengths have been instrumental to our success and position us for future growth: Leader in Large, Fragmented and Underpenetrated Category.
As of December 31, 2024, we had approximately 2.1 million active home warranties across all brands in the United States, including our American Home Shield, HSA, OneGuard, Landmark and 2-10 HBW brands.
As of December 31, 2025, we had approximately 2.1 million active home warranties across all brands in the United States, including our American Home Shield, HSA, OneGuard, Landmark and 2-10 HBW brands.
Our contractors are supported by a designated contractor relations representative who guides them through the process of working with us, from onboarding to the first service call and to continuous monitoring and training. No contractor accounted for more than five percent of our cost of services rendered in 2024.
Our independent contractors are supported by a designated contractor relations representative who guides them through the process of working with us, from onboarding to the first service call and to continuous monitoring and training. No contractor accounted for more than five percent of our cost of services rendered in 2025.
For example, in 2024, we incurred significant expense when we relaunched the American Home Shield brand through an updated look and feel. Similarly, in 2023, we launched the Frontdoor app, which required a substantial marketing investment. We cannot provide any assurance that these rebranding initiatives will be effective.
In addition, in 2024, we incurred significant expense when we relaunched the American Home Shield brand through an updated look and feel. Similarly, in 2023, we launched the Frontdoor app, which required a substantial marketing investment. We cannot provide any assurance that these rebranding initiatives will be effective.
For example, favorable weather trends in 2024 as compared to 2023 resulted in a lower number of home warranty service requests per customer, which favorably impacted contract claims costs.
For example, favorable weather trends in 2025 as compared to 2024 resulted in a lower number of home warranty service requests per customer, which favorably impacted contract claims costs.
Our contractor relations team utilizes a selective process to choose new contractor firms and continuously monitors their service quality. We are also improving the way in which we do business with our contractors by enhancing contractor relations for improved efficiency, allowing our contractors to better focus on our customers’ experience.
Our contractor relations team utilizes a selective process to choose new independent contractor firms and regularly monitors their service quality. We are also improving the way in which we do business with our independent contractors by enhancing contractor relations for improved efficiency, allowing our independent contractors to better focus on our customers’ experience.
This team maintains relationships with industry associations and realtors to continue to introduce new builders to the benefits of our services. For those builders identified as preferred through volume and quality of workmanship, we seek to enter into multi-year contracts. Customers, Contractors, Suppliers and Geographies Customers.
This team maintains relationships with industry associations, builders and realtors to continue to introduce new builders to the benefits of our services. For those builders identified as preferred through volume and experience, we seek to enter into multi-year contracts. Customers, Contractors, Suppliers and Geographies Customers.
The expansion of our home warranty offerings, new branding initiatives, and the utilization of dynamic pricing algorithms, as well as our investments in non-warranty services and new home structural warranties, position us for growth. 7 Our multi-faceted value proposition resonates with a broad consumer demographic.
The expansion of our home warranty offerings, new branding initiatives, and the utilization of dynamic pricing algorithms, as well as our investments in non-warranty services and new home builder warranties, position us for growth. Our multi-faceted value proposition resonates with a broad consumer demographic.
Any decrease in sales from period to period in our real estate and DTC channels may have a negative impact on future growth opportunities in our renewal channel.
Any decrease in sales from period to period in our first-year real estate and DTC channels may have a negative impact on future growth opportunities in our renewal channel.
Whether existing customers choose to renew their home warranties is driven by both external factors such as macroeconomic conditions our reputation and actions of our competitors, as well as internal factors such as their experience with our home warranties, including whether they have used their home warranties and their satisfaction with any services we provided, and how they perceive the value of our home warranties in light of the cost of a renewal.
Whether existing customers choose to renew their home warranties is driven by both external factors such as macroeconomic conditions, our reputation and actions of our competitors, as well as internal factors such as their experience with our home warranties, including whether they have used their home warranties and their satisfaction with any services we provided, and how they perceive the value of our home warranties in light of the cost of a renewal. 18 Our industry is highly competitive.
In particular, we have seven national suppliers of parts, appliances and home systems that each account for more than five percent of our supplier spend.
In particular, we have six national suppliers of parts, appliances and home systems that each account for more than five percent of our supplier spend.
We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames, the anticipated benefits of various new business, growth or other initiatives, including the expected benefits of the 2-10 HBW Acquisition.
We may not successfully implement our business strategies, including achieving our growth objectives. We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames, the anticipated benefits of various new business, growth or other initiatives, including the expected benefits of the 2-10 HBW Acquisition.
We provide our customers with a compelling value proposition by offering financial protection against unplanned and expensive home repairs, coupled with the convenience of having repairs guaranteed by us and completed by experienced professionals whose quality levels are continuously monitored.
We provide our customers with a compelling value proposition by offering financial protection against unplanned and expensive home repairs, coupled with the convenience of having repairs guaranteed by us and completed by professionals whose quality levels are regularly monitored.
Additionally, our range of product offerings—from extensive home warranty coverage to non-warranty services and maintenance to virtual diagnosis—can meet home warranty customer needs, whether they are seeking peace of mind, budget protection, assistance in finding a contractor or want only guidance for a do-it-yourself solution.
Additionally, our range of product offerings—from extensive home warranty coverage to non-warranty services and maintenance to virtual diagnosis—can meet home warranty customer needs, whether they are seeking peace of mind, protection from unexpected repair costs, assistance in finding a contractor or want only guidance for a do-it-yourself solution.
As of December 31, 2024, we had approximately 19,000 builder customers; no builder represented more than five percent of revenue for the new home structural warranty business. 12 Contractors. We have a nationwide network of approximately 17,000 qualified professional contractor firms in a wide range of trades and with diverse skills and capabilities.
As of December 31, 2025, we had approximately 19,000 builder customers; no builder represented more than five percent of revenue for the new home builder warranty business. Contractors. We have a nationwide network of approximately 17,000 qualified professional contractor firms in a wide range of trades and with diverse skills and capabilities.
We have made significant investments in our integrated technology platform, self-service capabilities, business intelligence platforms, customer service operations and contractor management systems, which we believe position us to further improve our customer retention rate. In 2024, customers in our renewal channel for home warranties renewed at a rate of 79 percent.
We have made significant investments in our integrated technology platform, self-service capabilities, business intelligence platforms, customer service operations and contractor management systems, which we believe position us to further improve our customer retention rate. In 2025, customers in our renewal channel for home warranties renewed at a rate of 81 percent.
Even if we find an alternate provider, or choose to insource such services, there are significant risks associated with any transitioning activities.
Even if we find an alternative provider, or choose to insource such services, there are significant risks associated with any transitioning activities.
Our ability to economically justify reinsurance to reduce our risk may depend on our ability to adjust new home structural warranty pricing to fully or partially recover cost.
Our ability to economically justify reinsurance to reduce our risk may depend on our ability to adjust new home builder warranty pricing to fully or partially recover cost.
Marketing efforts to increase sales through our real estate and DTC channels may not be successful or cost-effective. Attracting consumers, professional contractor firms and real estate brokers to our brands and businesses involves considerable expenditures for marketing.
Marketing efforts to increase home warranty and non-warranty sales through our real estate and DTC channels may not be successful or cost-effective. Attracting consumers, professional contractor firms and real estate brokers to our brands and businesses involves considerable expenditures for marketing.
Among other things, such laws and regulations require certain subsidiaries to maintain 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. As of December 31, 2024, the total net assets subject to these regulatory restrictions was $184 million.
Among other things, such laws and regulations require certain subsidiaries to maintain 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. As of December 31, 2025, the total net assets subject to these regulatory restrictions was $151 million.
We also benefit from our predictable and recurring revenue, as our home warranty customers typically sign annual contracts, and 78 percent of our revenue in 2024 was generated through existing customer renewals, which was in line with historical averages. Additionally, 84 percent of our home warranty customers are on a monthly auto-pay program.
We also benefit from our predictable and recurring revenue, as our home warranty customers typically sign annual contracts, and 76 percent of our revenue in 2025 was generated through existing customer renewals, which was in line with historical averages. Additionally, 84 percent of our home warranty customers are on a monthly auto-pay program.
Most recently, we acquired 2-10 HBW, which provides us more home warranty customers and increased revenue, in addition to opportunities for a new sales channel and a more diversified business portfolio. We have also used acquisitions to enhance our technological capabilities and geographic presence.
Most recently, we acquired 2-10 HBW, which provides us more home warranty customers and increased our revenue, net income and adjusted EBITDA, in addition to opportunities for a new sales channel and a more diversified business portfolio. We have also used acquisitions to enhance our technological capabilities and geographic presence.
As of December 31, 2024, we had $1,199 million of total consolidated long-term indebtedness, including the current portion of long-term debt, outstanding, which is all outstanding under our Term Loan Facilities. These amounts include the incremental borrowings used to finance a portion of the 2-10 HBW Acquisition.
As of December 31, 2025, we had $1,173 million of total consolidated long-term indebtedness, including the current portion of long-term debt, outstanding, which is all outstanding under our Term Loan Facilities. These amounts include the incremental borrowings used to finance a portion of the 2-10 HBW Acquisition.
We include in new employee onboarding training and tips on health and safety risks at home, such as physical risks from poor home office ergonomics. Our regular internal corporate communications feature virtual working tips, employee highlights, health and safety ideas and business discussions, all of which are designed to keep employees connected and engaged. Inclusion and Diversity.
We include in new employee onboarding training and tips on health and safety risks at home, such as physical risks from poor home office ergonomics. Our regular internal corporate communications feature virtual working tips, employee highlights, health and safety ideas and business discussions, all of which are designed to keep employees connected and engaged. Employee Benefits and Talent Development.
We depend on our renewal channel for a substantial percentage of our sales. Our third and largest home warranty sales channel is our renewal channel.
We depend on our renewal channel for a substantial percentage of our home warranty sales. Our largest home warranty sales channel is our renewal channel.
Historically, we have had to increase marketing expenditures over time to attract and retain customers and professional contractors and sustain growth. With respect to our marketing efforts, we may also include certain discounts or other promotional rates in order to attract and retain customers. These efforts may require increasing amounts or be offered at increasing frequency over time.
Historically, we have had to increase marketing expenditures over time to attract and retain customers and professional contractors and sustain growth. With respect to our marketing efforts, we may also include certain discounts or other promotional rates in order to attract and retain customers. These efforts may become more costly or be offered at increasing frequency over time.
In addition, our third-party contractors interact directly with our customers, and if our third-party contractors do not provide satisfactory services, our retention rate, reputation and business may be adversely affected.
Furthermore, our third-party contractors interact directly with our customers, and if our third-party contractors do not provide satisfactory services, our retention rate, reputation and business may be adversely affected.
Our ability to make scheduled payments on, or refinance our obligations under, our indebtedness depends on the financial and operating performance of our subsidiaries and their ability to make distributions and dividends to us, which, in turn, depends on their operating results, cash requirements, financial position and general business conditions and any legal and regulatory restrictions on the payment of dividends to which they may be subject, many of which may be beyond our control. 29 There are regulatory restrictions on the ability of certain of our subsidiaries to transfer funds to us.
Our ability to make scheduled payments on, or refinance our obligations under, our indebtedness depends on the financial and operating performance of our subsidiaries and their ability to make distributions and dividends to us, which, in turn, depends on their operating results, cash requirements, financial position and general business conditions and any legal and regulatory restrictions on the payment of dividends to which they may be subject, many of which may be beyond our control.
This leadership position has been further enhanced by the 2-10 HBW Acquisition in December 2024, the leading provider of new home structural warranties in the United States as measured by revenue. High-Value Service Offerings.
Our leadership position has been further enhanced by the 2-10 HBW Acquisition in December 2024, the leading provider of new home builder warranties in the United States, as measured by revenue. High-Value Service Offerings.
Contractors. Our contractor technology platform makes it easier for contractors to work with us and improves communication between contractors and our customers. Our contractor portal had over 19,000 active users at the end of 2024, and our platform sent approximately 1.3 million “On-My-Way” notifications to customers, letting them know their contractor was en route to their home. Commercial partners.
Contractors. Our contractor technology platform makes it easier for contractors to work with us and improves communication between contractors and our customers. Our contractor portal had over 18,000 active users at the end of 2025, and our platform sent approximately 1.3 million “On-My-Way” notifications to customers, letting them know their contractor was en route to their home.
A significant percentage of our sales are generated through our first-year real estate customer and DTC home warranty acquisition channels, which feed our renewal channel.
A significant percentage of our sales is generated through our first-year real estate and DTC home warranty acquisition channels, which feed our renewal channel.
For the year ended December 31, 2024, we generated 78 percent of our home warranty revenue through existing customer renewals compared to 77 and 72 percent for the years ended December 31, 2023 and 2022, respectively.
For the year ended December 31, 2025, we generated 76 percent of our home warranty revenue through existing customer renewals compared to 78 and 77 percent for the years ended December 31, 2024 and 2023, respectively.
We believe our technology-enabled platform provides a foundation for operational and customer service excellence and differentiation, ultimately driving customer and contractor retention and growth. Diverse, Recurring and Stable Revenue Channels. We acquire new customers for our home warranty business through two channels, real estate and DTC, which are offered nationally.
We believe our technology-enabled platform provides a foundation for operational and customer service excellence and differentiation, ultimately driving customer and contractor retention and growth. Diverse, Recurring and Stable Revenue Channels. We acquire new customers for our home warranty business through two channels, real estate and DTC, which are offered in the continental U.S.
Direct supplier spend, which excludes purchases made by our contractors, made up approximately 23 percent of our cost of services rendered in 2024, and we have multiple national supplier agreements in place. We have seven national suppliers of parts, appliances and home systems that each account for more than five percent of our supplier spend.
Direct supplier spend, which excludes purchases made by our contractors, made up approximately 22 percent of our cost of services rendered in 2025, and we have multiple national supplier agreements in place. We have six national suppliers of parts, appliances and home systems that each account for more than five percent of our supplier spend.
Risks Related to Our Business Changing macroeconomic conditions, including inflation, tariffs, global supply chain challenges and changing interest rates, especially as they may affect existing or new home sales, consumer confidence, labor availability or our costs, may adversely impact our business, financial position, results of operations and cash flows. Our results of operations are dependent upon consumer spending.
Risks Related to Our Business Changing macroeconomic conditions, including inflation, tariffs, global supply chain challenges and changing interest rates, especially as they may affect existing or new home sales, consumer confidence, demand for our services, labor availability or our costs, may adversely impact our business, financial position, results of operations and cash flows.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur COO oversees, among other things, our company’s technology strategy and architecture and the integration and delivery of technology into our operations and service offerings. Our COO has over 10 years of experience supervising teams in implementations of key internal- and external-facing technology systems.
Biggest changeOur CTO oversees, among other things, our company’s technology strategy and architecture and the integration and delivery of technology into our operations and service offerings. Our CTO brings experience in digital transformation, cybersecurity and product development. Prior to joining the Company, our CTO served on our board of directors and worked at a logistics company providing e-commerce delivery services.
This plan outlines the steps we will take to respond to an incident, including identifying and containing the incident, eradicating the threat, recovering our systems and communicating with relevant stakeholders. Board of Directors Oversight of Cybersecurity Risk Our board of directors is responsible for oversight of our enterprise risk management program, which incorporates cybersecurity risk.
This plan outlines the steps we will take to respond to an incident, including identifying and containing the incident, eradicating the threat, recovering our systems and communicating with relevant stakeholders. 32 Board of Directors Oversight of Cybersecurity Risk Our board of directors is responsible for oversight of our enterprise risk management program, which incorporates cybersecurity risk.
In addition to our internal cybersecurity team, our company has retained a third-party security firm to aid in the identification, containment, eradication and recovery of systems, data or both in the event of a material security incident. 31 Risk Management Personnel.
In addition to our internal cybersecurity team, our company has retained a third-party security firm to aid in the identification, containment, eradication and recovery of systems, data or both in the event of a material security incident. Risk Management Personnel.
This includes staying abreast of the latest cybersecurity threats and trends and updating our systems and processes accordingly. 30 Integration with Overall Risk Management. Our cybersecurity processes are integrated into our overall enterprise risk management program and business continuity processes.
This includes staying abreast of the latest cybersecurity threats and trends and updating our systems and processes accordingly. Integration with Overall Risk Management. Our cybersecurity processes are integrated into our overall enterprise risk management program and business continuity processes.
On a daily basis, our information security team monitors, identifies and classifies potential cybersecurity events and is responsible for notifying the COO and CISO of such events as appropriate based on risk to our organization. Our COO and CISO are responsible for notifying executive leadership, other functional teams and our audit committee, as appropriate. Reporting to the Board of Directors.
On a daily basis, our information security team monitors, identifies and classifies potential cybersecurity events and is responsible for notifying the CTO and CISO of such events as appropriate based on risk to our organization. Our CTO and CISO are responsible for notifying executive leadership, other functional teams and our audit committee, as appropriate. Reporting to the Board of Directors.
Our COO and CISO report to the audit committee at least quarterly about the detection, prevention, mitigation and remediation of cybersecurity events, including information about the latest cybersecurity threats, the status of our prevention and detection measures and the effectiveness of our mitigation and remediation efforts, as well as any other cybersecurity risk management activities and the progress of related projects.
Our CTO and CISO report to the audit committee at least quarterly about the detection, prevention, mitigation and remediation of cybersecurity events, including information about the latest cybersecurity threats, the status of our prevention and detection measures and the effectiveness of our mitigation and remediation efforts, as well as any other cybersecurity risk management activities and the progress of related projects.
Among management, our Chief Information Security Officer (“CISO”), together with our Chief Operating Officer (“COO”), is responsible for leading efforts to assess and manage cybersecurity risks.
Among management, our Chief Information Security Officer (“CISO”), together with our Chief Technology Officer (“CTO”), is responsible for leading efforts to assess and manage cybersecurity risks.
Removed
Prior to joining the Company, our COO worked at a multinational public technology company and led teams in solving operations problems with technology. Our COO has a Bachelor’s degree in Chemical Engineering, a Master's degree in Business Administration and a Juris Doctorate. Monitoring Cybersecurity Incidents.
Added
Our CTO has a Bachelor’s degree from the Indian National Defence Academy, and an MBA, MS and a PHD in aerospace engineering from the Georgia Institute of Technology. Monitoring Cybersecurity Incidents.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe these facilities are suitable and adequate to support the needs of our business. We also continue to lease certain office space in Memphis, Tennessee, which previously served as our corporate headquarters, and this office space is now subleased.
Biggest changeOn September 4, 2025, we listed 2-10 HBW's corporate office in Aurora, Colorado for sale. We believe these facilities are suitable and adequate to support the needs of our business. We also continue to lease certain office space in Memphis, Tennessee, which previously served as our corporate headquarters, and this office space is now subleased.
ITEM 2. PROPERT IES Our corporate headquarters is located in Memphis, Tennessee, in a leased facility. We also lease a collaboration center located in Scottsdale, Arizona and a technology collaboration center in Pune, India. As part of the 2-10 HBW Acquisition, we acquired 2-10 HBW's corporate office in Aurora, Colorado.
ITEM 2. PROPERT IES Our corporate headquarters is located in Memphis, Tennessee, in a leased facility. We also lease a collaboration center located in Scottsdale, Arizona, and a small footprint in an administrative center in Pune, India. As part of the 2-10 HBW Acquisition, we acquired 2-10 HBW's corporate office in Aurora, Colorado.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The information required with respect to this Item 3 can be found under Note 9 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES None. 32 PA RT II
Biggest changeITEM 3. LEGAL PROCEEDINGS The information required with respect to this Item 3 can be found under Note 9 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURES None. 33 PA RT II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe do not intend to declare or pay cash dividends on our common stock for the foreseeable future. We currently intend to use our future earnings to develop our business and for working capital needs and general corporate purposes, to fund our growth, to repay debt and to repurchase shares of our common stock.
Biggest changeWe have strong recurring cash flows, which give us flexibility in how we allocate capital, and we regularly review the appropriate use of our capital and our future earnings to develop our business and for working capital needs and general corporate purposes, to fund our growth, to repay debt and to repurchase shares of our common stock.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity” in Part II, Item 7 of this report for more information.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity” in Part II, Item 7 of this report for more information.
ITEM 5. MARKET FOR R EGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NASDAQ under the symbol ‘‘FTDR.’’ As of February 20, 2025, there were approximately 8 registered holders of our common stock. Dividends We did not pay any cash dividends in 2024.
ITEM 5. MARKET FOR R EGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NASDAQ under the symbol ‘‘FTDR.’’ As of February 20, 2026, there were approximately 8 registered holders of our common stock.
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 outstanding shares of our common stock over the three-year period from September 4, 2024 through September 4, 2027.
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 outstanding shares of our common stock over the three-year period from September 4, 2024 through September 4, 2027. As of December 31, 2025, we had $329 million remaining available for future repurchases under this program.
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) Oct. 1, 2024 through Oct. 31, 2024 — $ — — $ 650 Nov. 1, 2024 through Nov. 30, 2024 — — — 650 Dec. 1, 2024 through Dec. 31, 2024 709,077 57.82 709,077 609 Total 709,077 $ 57.82 709,077 $ 609 (1) The average price paid per share is calculated on a trade date basis and excludes associated commissions and taxes.
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) Oct. 1, 2025 through Oct. 31, 2025 322,261 66.76 322,261 394 Nov. 1, 2025 through Nov. 30, 2025 973,138 51.38 973,138 344 Dec. 1, 2025 through Dec. 31, 2025 270,337 55.49 270,337 329 Total 1,565,736 $ 55.26 1,565,736 $ 329 (1) The average price paid per share is calculated on a trade date basis and excludes associated commissions and taxes.
Removed
As of December 31, 2024, we repurchased a total of 709,077 outstanding shares at an aggregate cost of $41 million, and we had $609 million remaining available for future repurchases under this program. See “Item 7.
Added
Dividends We did not declare or pay cash dividends on our common stock in 2025.
Added
Declaration or payment of dividends, if any, in the future will be at the discretion of our board of directors from time to time in accordance with applicable law and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the board of directors.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

74 edited+14 added−18 removed62 unchanged
Biggest changeThe following table provides a summary of the changes in our Adjusted EBITDA: (In millions) Year Ended December 31, 2023 $ 346 Impact of change in revenue 60 Contract claims costs 44 Sales and marketing costs (8 ) Customer service costs 1 General and administrative costs (7 ) Interest and net investment income 3 Other 2 Year Ended December 31, 2024 $ 443 The impact of change in revenue is driven by improved price realization, offset, in part, by the reduction in number of home warranties, other than the 2-10 HBW home warranties acquired on December 19, 2024.
Biggest changeAdjusted EBITDA Adjusted EBITDA was $553 million and $443 million for the years ended December 31, 2025 and 2024, respectively. 42 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 Year Ended December 31, 2024 $ 235 $ 443 Impact of change in revenue 164 164 Sales and marketing costs (9 ) (9 ) Customer service costs (13 ) (13 ) Stock-based compensation expense (7 ) — Acquisition and integration costs 8 — Other general and administrative costs (37 ) (37 ) Depreciation and amortization expense (50 ) — Restructuring charges 4 — Interest expense (39 ) — Interest and net investment income 2 3 Provision for income taxes (9 ) — Loss on extinguishment of debt 3 — Other 1 1 Year Ended December 31, 2025 $ 255 $ 553 The impact of change in revenue was primarily driven by improved price realization and the impact of the 2-10 HBW Acquisition, offset, in part, by the challenging real estate macro environment and a decline in the number of renewed home warranties.
See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed. Home Warranty Claims Accruals Home warranty claims costs are expensed as incurred.
See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed. Home Warranty Claims Accruals Home warranty claims costs are expensed as incurred.
See Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the terms and maturities of existing debt obligations. (3) These amounts represent future payments relating to real estate operating leases.
See Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the terms and maturities of existing debt obligations. (3) These amounts represent future payments relating to real estate operating leases. 47
During 2024, as compared to 2023, our financial condition and results of operations continued to be adversely impacted by the following: • Challenging real estate market conditions, driven by a decline in the number of home resale transactions, primarily resulting from high interest rates combined with low home inventory levels, continue to constrain demand for home warranties. • Consumer sentiment remains mixed as a result of a broad range of current macroeconomic conditions, including pressure on consumer prices and high interest rates.
During 2025, as compared to 2024, our financial condition and results of operations continued to be adversely impacted by the following: • Challenging real estate market conditions, driven by a decline in the number of home resale transactions, primarily resulting from high interest rates combined with low home inventory levels, continue to constrain demand for home warranties. • Consumer sentiment remains mixed as a result of a broad range of current macroeconomic conditions, including pressure on consumer prices and high interest rates.
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 evaluate our operating and financial performance primarily based on Adjusted EBITDA, which is a financial measure not calculated in accordance with U.S. GAAP.
See "—Liquidity and Capital Resources—2024 Debt Refinancing” and Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on the debt refinancing transactions. There was no loss on extinguishment of debt recorded in the year ended December 31, 2023.
See "Liquidity and Capital Resources—2024 Debt Refinancing” and Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on the debt refinancing transactions. There was no loss on extinguishment of debt recorded in the year ended December 31, 2025.
We define Adjusted EBITDA as net income before: depreciation and amortization expense; goodwill and intangibles impairment; restructuring charges; acquisition-related 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 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.
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 December 31, 2024, we were in compliance with the covenants under the Credit Agreement.
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 December 31, 2025, we were in compliance with the covenants under the Credit Agreement.
(2) These amounts represent future interest payments related to existing debt obligations based on interest rates and principal maturities specified in the Credit Agreement. Payments related to the Term Loan Facilities are based on applicable variable and fixed interest rates as of December 31, 2024 plus the specified margin in the Credit Agreement for each period presented.
(2) These amounts represent future interest payments related to existing debt obligations based on interest rates and principal maturities specified in the Credit Agreement. Payments related to the Term Loan Facilities are based on applicable variable and fixed interest rates as of December 31, 2025 plus the specified margin in the Credit Agreement for each period presented.
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 structural warranty business faces competition from other providers of new home structural warranties and builders that self-insure.
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 faces competition from other providers of new home builder warranties and builders that self-insure.
As of December 31, 2024, there was $2 million of letters of credit outstanding under our $250 million Revolving Credit Facility, and the available borrowing capacity under the Revolving Credit Facility was $248 million. The letters of credit are posted in lieu of cash to satisfy regulatory requirements in certain states in which we operate.
As of December 31, 2025, there was $2 million of letters of credit outstanding under our $250 million Revolving Credit Facility, and the available borrowing capacity under the Revolving Credit Facility was $248 million. The letters of credit are posted in lieu of cash to satisfy regulatory requirements in certain states in which we operate.
For example, favorable weather trends in 2024 as compared to 2023 resulted in a lower number of home warranty service requests per customer in the HVAC trade, which favorably impacted contract claims costs.
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.
These metrics include: • revenue, • operating expenses, • gross profit, • gross profit margin, • net income, • earnings per share, • Adjusted EBITDA, • Adjusted EBITDA margin, • net cash provided from operating activities, • Free Cash Flow, 36 • number of home warranties, and • customer retention rate. Revenue.
These metrics include: • Revenue, • Operating expenses, • Gross profit, • Gross profit margin, • Net income, • Earnings per share, • Adjusted EBITDA, • Adjusted EBITDA margin, • Net cash provided from operating activities, • Free Cash Flow, 37 • Number of home warranties, and • Customer retention rate. Revenue.
Generally, repairs 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 may impact the costs of parts, appliances and home systems.
Generally, repairs 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.
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 structural warranties acquired as part of 2-10 HBW. See “— 2-10 HBW Acquisition” for additional information related to the acquisition. Non-GAAP Financial Measures To supplement our results presented in accordance with U.S.
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. See “2-10 HBW Acquisition” for additional information related to the acquisition. Non-GAAP Financial Measures To supplement our results presented in accordance with U.S.
We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility as of December 31, 2024 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 cash deposits and short- and long-term marketable securities.
We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility as of December 31, 2025 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 cash deposits.
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. These measurements are presented on a rolling 12-month basis in order to avoid seasonal anomalies.
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.
Most recently, we acquired 2-10 HBW, which provides us more home warranty customers and increased revenue, in addition to opportunities for a new sales channel and a more diversified business portfolio. We have also used acquisitions to enhance our technological capabilities and geographic presence.
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.
For a discussion of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, see “Item 7.
For a discussion of our results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, see “Item 7.
We do not believe current macroeconomic conditions will affect our ongoing ability to meet our debt covenants. Cash and cash equivalents and short- and long-term marketable securities totaled $474 million and $325 million as of December 31, 2024 and 2023, respectively.
We do not believe current macroeconomic conditions will affect our ongoing ability to meet our debt covenants. Cash and cash equivalents and short- and long-term marketable securities totaled $566 million and $474 million as of December 31, 2025 and 2024, respectively.
Our customer retention rate is calculated as the ratio of the number of end-of-period home warranty contracts to the sum of the number of beginning-of-period home warranty contracts and the number of new home warranty sales and acquired accounts during the respective period. 37 Critical Accounting Policies and Estimates This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, which have been prepared in accordance with U.S.
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. 38 Critical Accounting Policies and Estimates This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, which have been prepared in accordance with U.S.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our 2023 Annual Report on Form 10-K filed with the SEC on February 28, 2024, which specific discussion is incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our 2024 Annual Report on Form 10-K filed with the SEC on February 27, 2025, which specific discussion is incorporated herein by reference.
Goodwill and indefinite-lived intangible assets are considered impaired if the carrying amount of the reporting unit exceeds its fair value. 38 As of December 31, 2024, we do not believe there are any circumstances that would indicate any other potential impairment of our goodwill or indefinite-lived intangible assets.
Goodwill and indefinite-lived intangible assets are considered impaired if the carrying amount of the reporting unit exceeds its fair value. 39 As of December 31, 2025, we do not believe there are any circumstances that would indicate any potential impairment of our goodwill or indefinite-lived intangible assets.
For a reconciliation of net income to Adjusted EBITDA, see “—Results of Operations—Adjusted EBITDA.” For the year ended December 31, 2024, our total operating revenue included 78 percent of revenue derived from existing customer renewals, while seven percent and nine percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and six percent was derived from other revenue channels.
For a reconciliation of net income to Adjusted EBITDA for these periods, see “—Results of Operations—Adjusted EBITDA.” For the year ended December 31, 2025, our total operating revenue included 76 percent of revenue derived from existing customer renewals, while seven percent and eight percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and nine percent was derived from other revenue channels.
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.
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.
Interest and Net Investment Income Interest and net investment income was $20 million and $16 million for the years ended December 31, 2024 and 2023, respectively. The increase was primarily driven by higher cash and cash equivalents balances.
Interest and Net Investment Income Interest and net investment income was $22 million and $20 million for the years ended December 31, 2025 and 2024, respectively. The increase was primarily driven by higher cash and cash equivalents balances.
Overview Frontdoor is the leading provider of home warranties and new home structural warranties in the United States, as measured by revenue, and operates primarily under the American Home Shield and 2-10 HBW brands.
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 home warranty customers usually subscribe to an annual service plan agreement that covers the repair or replacement of major components of up to 29 home systems and appliances, including electrical, plumbing, HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops, as well as optional coverages for electronics, pools, spas and pumps.
Our 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.
Restructuring Charges Restructuring charges were $8 million and $16 million for the years ended December 31, 2024 and 2023, respectively. In 2024, restructuring charges included $7 million of severance costs and $1 million of expenses related to the exit of certain operating leases.
Restructuring Charges Restructuring charges were $4 million and $8 million for the years ended December 31, 2025 and 2024, respectively. In 2025, restructuring charges primarily included $3 million of severance costs. In 2024, restructuring charges included $7 million of severance costs and $1 million of expenses related to the exit of certain operating leases.
Cash Flows Cash flows from operating, investing and financing activities, as reflected in the audited consolidated statements of cash flows included in Item 8 of this Annual Report on Form 10-K, are summarized in the following table: Year Ended December 31, (In millions) 2024 2023 Net cash provided from (used for): Operating activities $ 270 $ 202 Investing activities (622 ) (32 ) Financing activities 447 (137 ) Cash increase during the period $ 96 $ 34 44 Operating Activities Net cash provided from operating activities was $270 million for the year ended December 31, 2024, compared to $202 million for the year ended December 31, 2023.
Cash Flows Cash flows from operating, investing and financing activities, as reflected in the audited consolidated statements of cash flows included in Item 8 of this Annual Report on Form 10-K, are summarized in the following table: Year Ended December 31, (In millions) 2025 2024 Net cash provided from (used for): Operating activities $ 416 $ 270 Investing activities 31 (622 ) Financing activities (302 ) 447 Cash increase during the period $ 145 $ 96 45 Operating Activities Net cash provided from operating activities was $416 million for the year ended December 31, 2025, compared to $270 million for the year ended December 31, 2024.
See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on this acquisition. 2024 Debt Refinancing We entered into an amendment to our Credit Agreement, which became effective on December 19, 2024, in part, to fund the 2-10 HBW Acquisition.
As a part of the 2-10 HBW Acquisition, we entered into an amendment to our Credit Agreement, which became effective on December 19, 2024. See "Liquidity and Capital Resources” and Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on our liquidity and the debt refinancing transactions.
The increase in other revenue was driven by growth in non-warranty home services, primarily new HVAC sales. 39 The following table provides a summary of the number of home warranties, reduction in number of home warranties and customer retention rate: As of December 31, (In millions) 2024 (1) 2023 Number of home warranties 2.12 2.00 Growth (reduction) in number of home warranties 6 % (6 ) % Customer retention rate 79.9 % 76.2 % (1) As of December 31, 2024, excluding the 2-10 HBW home warranties acquired on December 19, 2024, the number of home warranties was 1.94 million, the reduction in home warranties was three percent and the customer retention rate was 78.5 percent.
The increase in non-warranty and other revenue was primarily driven by the growth in non-warranty home services and impact of new home builder warranties from the 2-10 HBW Acquisition. 40 The following table provides a summary of the number of home warranties, (reduction) growth in number of home warranties and customer retention rate: As of December 31, (In millions) 2025 2024 (1) Number of home warranties 2.11 2.12 (Reduction) growth in number of home warranties — % 6 % Customer retention rate 79.2 % 79.9 % (1) As of December 31, 2024, excluding the 2-10 HBW home warranties acquired on December 19, 2024, the number of home warranties was 1.94 million, the reduction in home warranties was three percent and the customer retention rate was 78.5 percent.
A reconciliation of net income to Adjusted EBITDA is as follows: Year Ended December 31, (In millions) 2024 2023 Net Income $ 235 $ 171 Depreciation and amortization expense 39 37 Restructuring charges (1) 8 16 Acquisition-related costs (1) 17 — Provision for income taxes 74 57 Non-cash stock-based compensation expense (2) 26 26 Interest expense 40 40 Loss on extinguishment of debt (1) 3 — Adjusted EBITDA $ 443 $ 346 (1) We exclude restructuring charges, acquisition-related costs and loss on extinguishment of debt 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.
Reconciliation of Net Income to Adjusted EBITDA A reconciliation of net income to Adjusted EBITDA is as follows: Year Ended December 31, (In millions) 2025 2024 Net Income $ 255 $ 235 Depreciation and amortization expense 89 39 Restructuring charges (1) 4 8 Acquisition and integration costs (1) 8 17 Provision for income taxes 84 74 Non-cash stock-based compensation expense (2) 34 26 Interest expense 79 40 Loss on extinguishment of debt (1) — 3 Other non-operating expenses (1) 1 — Adjusted EBITDA $ 553 $ 443 (1) We exclude restructuring charges, acquisition and integration costs, loss on extinguishment of debt, 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.
We regularly review the statutory reserve requirements to which our regulated entities are 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 regularly review the statutory reserve requirements to which our regulated entities are 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.
(2) For the year ended December 31, 2024, includes approximately $6 million as a result of the 2-10 HBW Acquisition on December 19, 2024. Revenue increased four percent for the year ended December 31, 2024 compared to the year ended December 31, 2023.
(2) For the years ended December 31, 2025 and 2024, includes approximately $188 million and $6 million, respectively, as a result of the 2-10 HBW Acquisition on December 19, 2024. Revenue increased 14 percent for the year ended December 31, 2025 compared to the year ended December 31, 2024.
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 audited consolidated statements of cash flows included in Item 8 of this Annual Report on Form 10-K.
Repurchases of common stock included associated commissions and taxes of $2 million. Free Cash Flow The following table reconciles net cash provided from operating activities, which is the most directly comparable U.S. GAAP measure, to Free Cash Flow using data derived from the audited consolidated statements of cash flows included in Item 8 of this Annual Report on Form 10-K.
Our cash and cash equivalents and short- and long-term marketable securities include balances associated with regulatory requirements in our business. See “—Limitations on Distributions and Dividends by Subsidiaries.” As of December 31, 2024 and 2023, the total net assets subject to these third-party restrictions were $184 million and $157 million, respectively.
Our cash and cash equivalents and short- and long-term marketable securities include balances associated with regulatory requirements in our business. As of December 31, 2025 and 2024, the total net assets subject to these third-party restrictions were $151 million and $184 million, respectively.
Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period.
Gross profit margin is computed as gross profit as a percentage of revenue. Net Income and 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.
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.
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 growth in the number of home warranties as of December 31, 2024 was primarily driven by the 2-10 HBW acquisition, offset, in part, by the challenging real estate market. Cost of Services Rendered We reported cost of services rendered of $852 million and $895 million for the years ended December 31, 2024 and 2023, respectively.
The decline in the number of home warranties as of December 31, 2025 was primarily driven by the challenging real estate market. Cost of Services Rendered We reported cost of services rendered of $936 million and $852 million for the years ended December 31, 2025 and 2024, respectively.
Our revenue is primarily a function of the volume and pricing of the services provided to our customers, as well as the mix of services provided. Our revenue volume is impacted by new home warranty sales, customer retention and acquisitions. We derive substantially all of our revenue from customers in the United States. Operating Expenses.
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, customer retention and acquisitions.
Net Income Net income was $235 million and $171 million for the years ended December 31, 2024 and 2023, respectively, with the increase primarily driven by the operating results discussed throughout “—Results of Operations” above. 41 Adjusted EBITDA Adjusted EBITDA was $443 million and $346 million for the years ended December 31, 2024 and 2023, respectively.
Net Income Net income was $255 million and $235 million for the years ended December 31, 2025 and 2024, respectively, with the increase primarily driven by the operating results discussed throughout “Results of Operations” above.
As of December 31, 2024, we repurchased a total of 709,077 outstanding shares at an aggregate cost of $41 million under this program, which is included in treasury stock on the audited consolidated statements of financial position included in Item 8 of this Annual Report on Form 10-K.
We repurchased a total of 5,402,120 outstanding shares for the year ended December 31, 2025 at an aggregate cost of $280 million, which is included in treasury stock on the audited consolidated statements of financial position included in Item 8 of this Annual Report on Form 10-K.
Net cash provided from operating activities in 2024 comprised $312 million in earnings adjusted for non-cash charges, offset, in part, by $36 million in cash used for working capital and $6 million in payments for restructuring charges.
Net cash provided from operating activities in 2024 comprised $304 million in earnings adjusted for non-cash charges, offset by $34 million in cash used for working capital.
See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on this acquisition. Financing Activities Net cash used for financing activities was $447 million and $137 million for the years ended December 31, 2024 and 2023, respectively.
We received $3 million and paid $583 million, net of cash acquired, for the years ended December 31, 2025 and 2024, respectively, for the 2-10 HBW Acquisition in 2024. See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on this acquisition.
During the year ended December 31, 2023, we made scheduled principal payments of debt of $17 million and purchased outstanding shares of our common stock at an aggregate cost of $121 million. Repurchases of common stock included associated commissions and taxes of $1 million.
During the year ended December 31, 2025, we made other scheduled principal payments of debt of $29 million and purchased outstanding shares of our common stock at an aggregate cost of $283 million. Repurchases of common stock included associated commissions and taxes of $2 million. During the year ended December 31, 2024, we refinanced our Term Loan Facilities.
Investing Activities Net cash used for investing activities was $622 million and $32 million for the years ended December 31, 2024 and 2023, respectively. Capital expenditures were $39 million and $32 million in 2024 and 2023, respectively, and included recurring capital needs and technology projects.
Investing Activities Net cash used for investing activities was $31 million and $622 million for the years ended December 31, 2025 and 2024, respectively. Capital expenditures were $26 million and $39 million in 2025 and 2024, respectively, and included recurring capital needs and technology projects. We have no additional material capital commitments at this time.
The increase in renewal revenue reflects improved price realization resulting from our prior pricing actions, offset, in part, by a decline in the number of renewed home warranties. The decrease in real estate revenue reflects a decline in the number of first-year real estate home warranties driven by the challenging real estate market, offset, in part, by higher price realization.
The increase in renewal revenue reflects the impact of the 2-10 HBW Acquisition and improved price realization resulting from our prior pricing actions, offset, in part, by a decline in the number of renewed home warranties. The increase in real estate revenue primarily reflects the impact of the 2-10 HBW Acquisition.
Results of Operations Year Ended December 31, Increase (Decrease) % of Revenue (In millions) 2024 2023 2024 vs 2023 2024 2023 Revenue $ 1,843 $ 1,780 4 % 100 % 100 % Cost of services rendered 852 895 (5 ) 46 50 Gross Profit 991 885 12 54 50 Selling and administrative expenses 612 581 5 33 33 Depreciation and amortization expense 39 37 6 2 2 Restructuring charges 8 16 (51 ) — 1 Interest expense 40 40 1 2 2 Interest and net investment income (20 ) (16 ) 18 (1 ) (1 ) Loss on extinguishment of debt 3 — * — — Income before Income Taxes 309 229 35 17 13 Provision for income taxes 74 57 30 4 3 Net Income $ 235 $ 171 37 % 13 % 10 % * not meaningful Revenue We reported revenue of $1,843 million and $1,780 million for the years ended December 31, 2024 and 2023, respectively.
Results of Operations Year Ended December 31, Increase (Decrease) % of Revenue (In millions) 2025 2024 2025 vs 2024 2025 2024 Revenue $ 2,093 $ 1,843 14 % 100 % 100 % Cost of services rendered 936 852 10 45 46 Gross Profit 1,157 991 17 55 54 Selling and administrative expenses 669 612 9 32 33 Depreciation and amortization expense 89 39 128 4 2 Restructuring charges 4 8 (54 ) — — Interest expense 79 40 97 4 2 Interest and net investment income (22 ) (20 ) 11 (1 ) (1 ) Loss on extinguishment of debt — 3 — — — Income before Income Taxes 338 309 9 16 17 Provision for income taxes 84 74 12 4 4 Net Income $ 255 $ 235 9 % 12 % 13 % Revenue We reported revenue of $2,093 million and $1,843 million for the years ended December 31, 2025 and 2024, respectively.
The following table provides a summary of our revenue by major customer acquisition channel for our home warranties and other revenue: Year Ended December 31, Increase (Decrease) (In millions) 2024 (2) 2023 2024 vs 2023 Renewals $ 1,437 $ 1,367 $ 70 5 % Real estate (1) 125 141 (16 ) (12 ) Direct-to-consumer (1) 166 194 (28 ) (14 ) Other 116 77 38 50 Total $ 1,843 $ 1,780 $ 64 4 % (1) First-year revenue only.
The following table provides a summary of our revenue by major customer acquisition channel for our home warranties and other revenue: Year Ended December 31, Increase (Decrease) (In millions) 2025 (2) 2024 2025 vs 2024 Renewals $ 1,587 $ 1,437 $ 150 10 % Real estate (1) 141 125 17 13 Direct-to-consumer (1) 172 166 6 4 Non-warranty and other 193 116 77 66 Total $ 2,093 $ 1,843 $ 250 14 % (1) First-year revenue only.
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.
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.
In 2024, approximately 21 percent, 29 percent, 29 percent and 21 percent of our revenue, approximately 14 percent, 39 percent, 43 percent and four percent of our net income, and approximately 16 percent, 36 percent, 37 percent and 11 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.
In 2025, approximately 20 percent, 29 percent, 30 percent and 21 percent of our revenue, approximately 14 percent, 44 percent, 41 percent and 1 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.
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, could increase the costs of our parts, appliances and home systems. 35 Competition We compete in the U.S. home warranty category and the broader U.S. home services industry.
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.
See Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information related to our indebtedness. 43 2-10 HBW Acquisition On December 19, 2024, we completed the acquisition of all of the issued and outstanding common stock of 2-10 HBW pursuant to a purchase agreement dated June 3, 2024 for aggregate cash consideration of $585 million, subject to certain customary adjustments based on, among other things, the amount of cash, debt, transaction expenses, working capital and regulatory capital in the business of 2-10 HBW as of the closing of the transaction. 2-10 HBW is a leading provider of new home structural warranties that provide home builders insurance-backed coverage and/or administrative services for workmanship, systems and/or structural failures. 2-10 HBW is also a provider of home warranties.
Additionally, on December 19, 2024, we amended and restated our $250 million Revolving Credit Facility. 44 See Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information related to our indebtedness. 2-10 HBW Acquisition On December 19, 2024, we completed the acquisition of all of the issued and outstanding common stock of 2-10 HBW pursuant to a purchase agreement dated June 3, 2024 for aggregate cash consideration of $585 million, subject to certain customary adjustments including the amount of cash acquired, debt, seller transaction expenses, working capital and regulatory capital in the business of 2-10 HBW.
Year Ended December 31, (In millions) 2024 2023 Net cash provided from operating activities $ 270 $ 202 Property additions (39 ) (32 ) Free Cash Flow $ 231 $ 170 45 Contractual Obligations The following table presents our contractual obligations and commitments as of year ended December 31, 2024: (In millions) Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Principal repayments (1) $ 1,218 $ 46 $ 104 $ 417 $ 650 Estimated interest payments (2) 427 71 143 130 83 Non-cancelable operating leases (1)(3) 29 4 7 6 13 Purchase obligations 26 17 9 — — Home warranty claims (1) 74 74 — — — Total $ 1,773 $ 212 $ 264 $ 553 $ 746 (1) These items are included in the audited consolidated statements of financial position included in Item 8 of this Annual Report on Form 10-K.
Year Ended December 31, (In millions) 2025 2024 Net cash provided from operating activities $ 416 $ 270 Property additions (26 ) (39 ) Free Cash Flow $ 390 $ 231 46 Contractual Obligations The following table presents our contractual obligations and commitments as of year ended December 31, 2025: (In millions) Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Principal repayments (1) $ 1,189 $ 29 $ 58 $ 350 $ 752 Estimated interest payments (2) 370 72 139 113 46 Non-cancelable operating leases (1)(3) 26 4 7 5 10 Purchase obligations 82 29 37 16 — Home warranty claims (1) 69 69 — — — Total $ 1,736 $ 203 $ 241 $ 484 $ 808 (1) These items are included in the audited consolidated statements of financial position included in Item 8 of this Annual Report on Form 10-K.
As of December 31, 2024, the estimated debt balance as of each year ending from 2025 through 2029 is $1,172 million, $1,120 million, $1,068 million, $1,016 million and $650 million, respectively, and the weighted-average interest rate on the estimated debt balances is 6.3 percent as of each year ending from 2025 through 2028 and 6.6 percent for the year ending 2029.
As of December 31, 2025, the estimated debt balance as of each year ending from 2026 through 2030 is $1,160 million, $1,131 million, $1,102 million, $760 million and $752 million, respectively, and the weighted-average interest rate on the estimated debt balances is 6.2 percent as of each year ending from 2026 through 2030.
As of December 31, 2024, we had approximately 2.1 million active home warranties across all brands in the United States. For the year ended December 31, 2024, we generated revenue, net income and Adjusted EBITDA of $1,843 million, $235 million and $443 million, respectively.
For the year ended December 31, 2025, we generated revenue, net income and Adjusted EBITDA of $2,093 million, $255 million and $553 million, respectively. For the year ended December 31, 2024, we generated revenue, net income and Adjusted EBITDA of $1,843 million, $235 million and $443 million, respectively.
Acquisition-related costs are driven by the 2-10 HBW Acquisition and represent direct third-party costs, including legal, accounting and financial advisory fees. Other general and administrative costs increased primarily due to increased personnel costs.
Customer service costs increased primarily due to the 2-10 HBW acquisition and growth in non-warranty home services. Acquisition and integration costs are driven by the 2-10 HBW Acquisition and represent direct third-party costs, including legal, accounting and financial advisory fees, as well as post-acquisition systems integration costs.
See Note 2 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on newly issued accounting standards.
Following the settlement of all contractual adjustments, the aggregate cash consideration paid was $580 million. See Note 7 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on this acquisition.
Provision for Income Taxes The effective tax rate on income was 24.1 percent and 25.0 percent for the years ended December 31, 2024 and 2023, respectively. The decrease in the effective tax rate was primarily due to stock-based compensation, offset, in part, by non-deductible acquisition-related transaction costs.
Provision for Income Taxes The effective tax rate on income was 24.7 percent and 24.1 percent for the years ended December 31, 2025 and 2024, respectively. The increase in the effective tax rate was primarily due to state and local income taxes.
The following table provides a summary of the components of selling and administrative expenses: Year Ended December 31, (In millions) 2024 2023 Sales and marketing costs $ 307 $ 299 Customer service costs 104 106 General and administrative costs 201 176 Total $ 612 $ 581 The following table provides a summary of the changes in selling and administrative expenses: (In millions) Year Ended December 31, 2023 $ 581 Sales and marketing costs 8 Customer service costs (1 ) Stock-based compensation expense 1 Acquisition-related costs 17 Other general and administrative costs 7 Year Ended December 31, 2024 $ 612 40 Sales and marketing costs increased primarily due to our investment in marketing associated with our direct-to-consumer channel, offset, in part by, a reduction in costs driven by sales optimization efforts.
The following table provides a summary of the components of selling and administrative expenses: Year Ended December 31, (In millions) 2025 2024 Sales and marketing costs $ 315 $ 307 Customer service costs 117 104 General and administrative costs 236 201 Total $ 669 $ 612 The following table provides a summary of the changes in selling and administrative expenses: (In millions) Year Ended December 31, 2024 $ 612 Sales and marketing costs 9 Customer service costs 13 Stock-based compensation expense 7 Acquisition and integration costs (8 ) Other general and administrative costs 37 Year Ended December 31, 2025 $ 669 41 Sales and marketing costs increased due to the 2-10 HBW Acquisition.
The following table provides a summary of the changes in cost of services rendered: (In millions) Year Ended December 31, 2023 $ 895 Impact of change in revenue 3 Contract claims costs (44 ) Other (2 ) Year Ended December 31, 2024 $ 852 The impact of change in revenue is driven by growth in non-warranty home services, offset, in part, by the reduction in number of home warranties, other than the 2-10 HBW home warranties acquired on December 19, 2024.
The following table provides a summary of the changes in cost of services rendered: (In millions) Year Ended December 31, 2024 $ 852 Impact of change in revenue 86 Other (1 ) Year Ended December 31, 2025 $ 936 The increase in cost of services rendered is due to the impact of change in revenue, primarily driven by the 2-10 HBW Acquisition and the increase in non-warranty revenue.
Depreciation and Amortization Expense Depreciation expense was $35 million and $32 million for the years ended December 31, 2024 and 2023, respectively, with the increase primarily driven by incremental capital expenditures in the period. Amortization expense was $4 million for each of the years ended December 31, 2024 and 2023.
Depreciation and Amortization Expense Depreciation expense was $36 million and $35 million for the years ended December 31, 2025 and 2024, Amortization expense was $53 million and $4 million for the years ended December 31, 2025 and 2024, respectively, with the increase primarily driven by the amortization of intangible assets acquired as part of the 2-10 HBW Acquisition.
In addition, we made other scheduled principal payments of debt of $13 million and purchased outstanding shares of our common stock at an aggregate cost of $161 million. Repurchases of common stock included associated commissions and taxes of $2 million.
We borrowed $1,216 million and used a portion of the proceeds to repay $585 million of principal on the Prior Term Loan Facilities. In addition, we made other scheduled principal payments of debt of $13 million and purchased outstanding shares of our common stock at an aggregate cost of $161 million.
We will continue to monitor the macroeconomic impacts on our business in our ongoing evaluation of potential impairments. Newly Issued Accounting Standards New accounting rules and disclosure requirements can significantly impact our reported results and the comparability of our financial statements.
We will continue to monitor the macroeconomic impacts on our business in our ongoing evaluation of potential impairments.
The dilutive effect, if any, of non-qualified stock options, performance options (which are stock options that become exercisable upon the achievement, in whole or in part, of the applicable performance goals, pursuant to the terms of the Omnibus Plan and the award agreement), restricted stock units ("RSUs"), performance shares (which are contractual rights to receive a share of our common stock (or the cash equivalent thereof) upon the achievement, in whole or in part, of the applicable performance goals, pursuant to the terms of the Omnibus Plan and the award agreement) and restricted stock awards ("RSAs") are reflected in diluted earnings per share by applying the treasury stock method.
The dilutive effect, if any, of non-qualified stock options, performance options, restricted stock units ("RSUs"), performance shares and restricted stock awards ("RSAs") are reflected in diluted earnings per share by applying the treasury stock method. Adjusted EBITDA and Adjusted EBITDA Margin.
Net cash provided from operating activities in 2023 comprised $242 million in earnings adjusted for non-cash charges, offset, in part, by $7 million in payments for restructuring charges and $33 million in cash used for working capital.
Net cash provided from operating activities in 2025 comprised $386 million in earnings adjusted for non-cash charges and $30 million in cash used for working capital. Cash provided from working capital was primarily driven by the timing of trade payables and accrued income taxes.
The decrease in direct-to-consumer revenue reflects lower price realization resulting from our efforts to drive incremental sales.
The increase in direct-to-consumer revenue reflects the impact of the 2-10 HBW Acquisition and an increase in the number of direct-to-consumer home warranties, offset, in part, by lower price realization resulting from our promotional strategies to drive incremental sales.
Selling and Administrative Expenses We reported selling and administrative expenses of $612 million and $581 million for the years ended December 31, 2024 and 2023, respectively.
Additionally, contract claims costs reflects a $7 million favorable adjustment in 2025 related to the development of prior period claims, compared to a $5 million favorable adjustment in 2024. Selling and Administrative Expenses We reported selling and administrative expenses of $669 million and $612 million for the years ended December 31, 2025 and 2024, respectively.
See "—Liquidity and Capital Resources—2024 Debt Refinancing” and Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on our liquidity and the debt refinancing transactions. 34 Key Factors and Trends Affecting Our Results of Operations Macroeconomic Conditions Current macroeconomic conditions, including inflation, high interest rates, the challenging real estate market, and ongoing global geopolitical issues, may affect existing home sales, consumer sentiment or labor availability.
For the year ended December 31, 2024, our total operating revenue included 78 percent of revenue derived from existing customer renewals, while seven percent and nine percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and six percent was derived from other revenue channels. 35 Key Factors and Trends Affecting Our Results of Operations Macroeconomic Conditions Current macroeconomic conditions, including inflation, high interest rates, the challenging real estate market, and ongoing global geopolitical issues, may affect existing home sales, consumer sentiment or labor availability.
The decrease in contract claims costs primarily reflects the impact of higher trade service fees, which drove a lower number of home warranty service requests per customer and a lower net cost per service request, a favorable weather impact of $8 million, as milder weather drove a lower number of home warranty service requests in the HVAC trade, and continued process improvement initiatives, specifically relating to better cost management across our contractor network.
Contract claims costs were relatively flat, reflecting continued process improvement initiatives, a lower number of service requests per customer, a favorable weather impact of $7 million and higher trade service fees, offset, in part, by inflationary cost pressures.
For the year ended December 31, 2023, our total operating revenue included 77 percent of revenue derived from existing customer renewals, while eight percent and 11 percent were derived from new home warranty sales made in conjunction with existing home real estate transactions and direct-to-consumer sales, respectively, and four percent was derived from other revenue channels. 2-10 HBW Acquisition On December 19, 2024, we completed the acquisition of all of the issued and outstanding common stock of 2-10 HBW pursuant to a purchase agreement dated June 3, 2024 for aggregate cash consideration of $585 million, subject to certain customary adjustments based on, among other things, the amount of cash, debt, transaction expenses, working capital and regulatory capital in the business of 2-10 HBW as of the closing of the transaction. 2-10 HBW is a leading provider of new home structural warranties that provide home builders insurance-backed coverage and/or administrative services for workmanship, systems and/or structural failures. 2-10 HBW is also a provider of home warranties.
On December 19, 2024, we completed the acquisition of all of the issued and outstanding common stock of 2-10 HBW pursuant to a purchase agreement dated June 3, 2024 for aggregate cash consideration of $585 million, subject to certain customary adjustments including the amount of cash acquired, debt, seller transaction expenses, working capital and regulatory capital in the business of 2-10 HBW.
We believe excluding this expense from Adjusted EBITDA is useful to investors in aiding period-to-period comparability. 42 Liquidity and Capital Resources Liquidity A substantial portion of our liquidity needs are due to debt service requirements on our indebtedness.
We believe excluding this expense from Adjusted EBITDA is useful to investors in aiding period-to-period comparability. 43 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 expect to fund future share repurchases from net cash provided from operating activities. On September 3, 2024, our previous repurchase authorization of up to $400 million expired.
As of December 31, 2025, we had $329 million remaining available for future repurchases under this program. We expect to fund future share repurchases from net cash provided from operating activities.
Removed
Our new home structural warranty business provides value to home builders and owners of new homes by providing coverage, including insurance-backed coverage for workmanship, systems and/or structural failures, as well as other post-construction services. We also offer non-warranty home services via our website and app to our home warranty customers directly and others through partnerships and our subscription-based Frontdoor app.
Added
We also offer non-warranty home services, including our New HVAC upgrade and installation of Moen water shut-off devices, and select home maintenance offerings. Non-warranty services are marketed to our existing warranty customer base, enabling incremental revenue opportunities beyond traditional warranty coverage.
Removed
For the year ended December 31, 2023, we generated revenue, net income and Adjusted EBITDA of $1,780 million, $171 million and $346 million, respectively.
Added
As of December 31, 2025, we had approximately 2.1 million active home warranties across all brands in the United States. We also offer new home builder warranty solutions, which deliver value to both builders and homeowners through a suite of builder warranty products and support services.
Removed
Gross profit margin is computed as gross profit as a percentage of revenue. Net Income and Earnings Per Share . The presentation of net income and basic and diluted earnings per share provides measures of performance which are useful for investors, analysts and other interested parties in company-to-company operating performance comparisons.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+2 added−11 removed1 unchanged
Biggest changeWe believe our exposure to interest rate fluctuations could be material to our overall results of operations. A significant portion of our outstanding debt, including indebtedness under the Amended Credit Facilities, bears interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our indebtedness and could materially reduce our profitability and cash flows.
Biggest changeAs a result, increases in interest rates would increase the cost of servicing our indebtedness and could materially reduce our profitability and cash flows.
As of December 31, 2024, each one percentage point change in interest rates would result in an approximate $6 million change in the annual interest expense on our Term Loan Facilities after considering the impact of the interest rate swap.
As of December 31, 2025, each one percentage point change in interest rates would result in an approximate $6 million change in the annual interest expense on our Term Loan Facilities after considering the impact of the interest rate swap. 48
We entered into an interest rate swap contract in the normal course of business to manage interest rate risks, with a policy of matching positions. The effect of derivative financial instrument transactions under the agreement could have a material impact on our financial statements. We do not hold or issue derivative financial instruments for trading or speculative purposes.
The effect of derivative financial instrument transactions under the agreement could have a material impact on our financial statements. We do not hold or issue derivative financial instruments for trading or speculative purposes.
These conditions may reduce demand for our services, increase our costs or otherwise adversely impact our business, which could have a material adverse impact on our future results of operations. 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.
These conditions may reduce demand for our services, increase our costs or otherwise adversely impact our business, which could have a material adverse impact on our future results of operations.
Removed
On October 24, 2018, we entered into an interest rate swap contract effective October 31, 2018 that expires on August 16, 2025. The notional amount of the agreement is $350 million.
Added
Interest Rate 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. We entered into an interest rate swap contract in the normal course of business to manage interest rate risks, with a policy of matching positions.
Removed
Under the terms of the agreement, we will pay a fixed rate of interest of 3.028 percent on the notional amount, and we will receive a floating rate of interest (based on SOFR, subject to a floor of zero percent) on the notional amount.
Added
See Note 12 to the audited consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further information on our use of interest rate swaps. A significant portion of our outstanding debt, including indebtedness under the Amended Credit Facilities, bears interest at variable rates.
Removed
As a result, through August 16, 2025, $350 million of the Amended Term Loan Facilities is fixed at a rate of 3.028 percent, plus the incremental borrowing margin of 2.25 percent. In connection with the Amended Credit Facility, we entered into an additional interest rate swap contract effective December 19, 2024 that expires on December 31, 2029.
Removed
The initial notional amount of the agreement is $299 million with additional step up and step down provisions embedded in the contract. The notional amount steps up in August 2025 by $350 million upon the expiration of the company's other interest rate swap contract described above.
Removed
The notional amount steps down over the term of the agreement on a basis that correlates with the scheduled principal payments on the Amended Term Loan Facilities.
Removed
Under the terms of the agreement, we will pay a fixed rate of interest of 4.140 percent on the notional amount, and we will receive a floating rate of interest (based on SOFR, subject to a floor of zero percent) on the notional amount.
Removed
As a result, a portion of the outstanding principal balance on the Amended Term Loan Facilities in an amount that correlates with the then current notional amount of this interest rate swap contract is fixed at a rate of 4.140 percent, plus the incremental borrowing margin of 2.25 percent.
Removed
Assuming all revolving loans were fully drawn as of December 31, 2024, each one percentage point change in interest rates would result in an approximate $3 million change in annual interest expense on our Revolving Credit Facility.
Removed
The impact of increases in interest rates could be more significant for us than it would be for some other companies because of our significant indebtedness.
Removed
The following table summarizes information about our debt as of December 31, 2024 (after considering the impact of the effective interest rate swaps), including the principal cash payments and related weighted‑average interest rates by expected maturity dates based on applicable rates as of December 31, 2024.
Removed
(In millions) 2025 2026 2027 2028 2029 Thereafter Total Fair Value Debt: Variable rate $ 29 29 29 29 342 111 569 565 Average interest rate 6.3 % 6.3 % 6.3 % 6.3 % 6.2 % 6.6 % 6.3 % Fixed rate $ 17 23 23 23 23 539 649 645 Average interest rate 6.4 % 6.4 % 6.4 % 6.4 % 6.4 % 6.4 % 6.4 % During the year ended December 31, 2024, the average interest rates paid and received on the interest rate swaps, before the application of the applicable borrowing margin, were 3.0 percent and 5.2 percent, respectively. 47

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