Frontdoor, Inc.

Previous wording

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.

Current wording

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.

Previous wording

While the Federal Reserve decreased interest rates in September, November and December of 2024, it held interest rates unchanged in January 2025. The sustained level of higher interest rates has caused buyer apprehension and affordability concerns, resulting in a decrease in home sales in 2022, 2023 and 2024 and has negatively impacted our business. Although the Federal Reserve lowered interest rates in 2024, it has paused this approach to-date in 2025, and the trajectory of current rates remains uncertain. Changing interest rates could continue to affect mortgage rates and negatively impact our business.

Current wording

While the Federal Reserve lowered interest rates three times over the course of 2024 and three times over the course of 2025, it has expressed an expectation that the pace any such decreases may be slower going forward. Accordingly, significant uncertainty remains regarding the timing and extent of future interest rate changes. The sustained level of higher interest rates has in recent years caused buyer apprehension and affordability concerns, resulting in a decrease in home sales in 2022, 2023, 2024 and flat home sales in 2025 compared to 2024 and has negatively impacted our business. Changing interest rates could continue to affect mortgage rates and negatively impact our business.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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. Certain factors including the nature and type of our services offered, potential and existing customers’ perception of the value of our services, and other macroeconomic factors like general economic conditions and consumer sentiment may impact our efforts. These efforts may not be successful or cost-effective or remain effective over time.

Current wording

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. Certain factors including the nature and type of our services offered, potential and existing customers’ perception of the value of our services, and other macroeconomic factors like general economic conditions and consumer sentiment may impact our efforts. These efforts may not be successful or cost-effective or remain effective over time.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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. In our real estate channel, our strategic relationships with top real estate brokers and agents are important to our business because they provide marketing and information services that are useful to our real estate customer acquisition channel. These brokers and agents are independent parties that we do not control, and we cannot guarantee that our strategic partnership arrangements with them will continue at current levels or at all. An inability to maintain these relationships could have a material adverse effect on our business, financial position, results of operations and cash flows.

Current wording

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. In our real estate channel, our strategic relationships with top real estate brokers and agents are important to our business because they provide marketing and information services that are useful to our real estate customer acquisition channel. These brokers and agents are independent parties that we do not control, and we cannot guarantee that our strategic partnership arrangements with them will continue at current levels or at all. An inability to maintain these relationships could have a material adverse effect on our business, financial position, results of operations and cash flows.

Previous wording

We depend on our renewal channel for a substantial percentage of our sales.

Current wording

We depend on our renewal channel for a substantial percentage of our home warranty sales.

Previous wording

Our third and largest home warranty sales channel is our renewal channel. Sales in this channel are dependent upon the flow of sales from our first-year real estate and DTC channels, as well as our customers’ perceptions of the value of our home warranties, and accordingly, their willingness to renew their plans. Any decrease in sales from period to period in our 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.

Current wording

Our largest home warranty sales channel is our renewal channel. Sales in this channel are dependent upon the flow of sales from our first-year real estate and DTC channels, as well as our customers’ perceptions of the value of our home warranties, and accordingly, their willingness to renew their plans. Any decrease in sales from period to period in our first-year real estate and DTC channels may have a negative impact on future growth opportunities in our renewal channel. Whether existing customers choose to renew their home warranties is driven by both external factors such as macroeconomic 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.

Previous wording

Our ability to conduct our operations is in part impacted by reliance on a network of third-party contractors. Our future success and financial performance depend substantially on our ability to attract and retain qualified third-party contractors, and their availability, and ensure third-party contractor compliance with our policies, standards and performance expectations. However, these third-party contractors are independent parties that we do not control, and who own, operate and oversee the daily operations of their individual businesses. If third-party contractors do not successfully operate their businesses in a manner consistent with required laws, standards and regulations, we could be subject to claims from regulators or legal claims for the actions or omissions of such third-party contractors. In addition, our relationship with our third-party contractors could become strained (including resulting in litigation) as we impose new standards or assert more rigorous enforcement practices of our existing standards and performance expectations. When a contractor relationship is terminated, there is a risk that we may not be able to enter into a similar agreement with an alternate contractor in a timely manner or on favorable terms. We could incur costs to transition to other contractors, and these costs could materially adversely affect our results of operations and cash flows. We could also fail to provide service to our customers if we lose contractors that we cannot replace in a timely manner, which could lead to customer complaints and possible claims and litigation. 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. In addition, these potential impacts may be exacerbated upon termination of a relationship with a preferred contractor, as approximately 85 percent of our home warranty service requests were completed by our preferred contractor network in 2024.

Current wording

Our ability to conduct our operations is in part impacted by reliance on a network of third-party contractors. Our future success and financial performance depend substantially on our ability to attract and retain qualified third-party contractors, and their availability, and ensure third-party contractor compliance with our policies, standards and performance expectations. However, these third-party contractors are independent parties that we do not control, and who own, operate and oversee the daily operations of their individual businesses. If third-party contractors do not successfully operate their businesses in a manner consistent with required laws, standards and regulations, we could be subject to claims from regulators or legal claims for the actions or omissions of such third-party contractors. In addition, our relationship with our third-party contractors could become strained (including resulting in litigation) as we impose new standards or assert more rigorous enforcement practices of our existing standards and performance expectations. When a contractor relationship is terminated, there is a risk that we may not be able to enter into a similar agreement with an alternate contractor in a timely manner or on favorable terms. We could incur costs to transition to other contractors, and these costs could materially adversely affect our results of operations and cash flows. We could also fail to provide service to our customers if we lose contractors that we cannot replace in a timely manner, which could lead to customer complaints and possible claims and litigation. Additionally, laws and regulations, such as restrictive immigration laws may limit our ability to attract, retain or replace contractors. Furthermore, our third-party contractors interact directly with our customers, and if our third-party contractors do not provide satisfactory services, our retention rate, reputation and business may be adversely affected. These potential impacts may be exacerbated upon termination of a relationship with a preferred contractor, as approximately 84 percent of our home warranty service requests were completed by our preferred contractor network in 2025.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Tariff policies are under continuous review and subject to change. The current U.S. administration has voiced strong concerns about imports from countries that it perceives as engaging in unfair trade practices and could impose import duties or restrictions on components and raw materials that are applicable to our business from countries it perceives as engaging in unfair trade practices. Such duties or restrictions, or the perception that they could occur, may materially and adversely affect our business by increasing our costs or reducing global trade. For example, rising costs due to blanket tariffs on imported steel and aluminum could increase the costs of parts associated with our repair and replacement of home systems and appliances, which could have a material adverse effect on our business, financial position, results of operations and cash flows. Moreover, new tariffs and changes to U.S. trade policy could prompt retaliation from affected countries, potentially triggering the imposition of tariffs on U.S. goods. Such a “trade war” could lead to general economic downturn or could materially and adversely affect the demand for our services, thus negatively impacting our business, financial position, results of operations and cash flows.

Current wording

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

Previous wording

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

Current wording

talent. In the event of a labor shortage affecting our own customer service personnel or our third-party service providers, we could experience difficulty in responding to customer inquiries in a timely fashion or delivering our services in a high-quality or timely manner and could be forced to increase wages to attract and retain employees, which would result in higher operating costs and reduced profitability. Long call and service wait times by customers during peak operating times could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

Weather, including the frequency and intensity of weather conditions, natural disasters and seasonality, as well as related regulations, can affect the demand for our services, our ability to operate and our results of operations and cash flows.

Current wording

Weather, including the frequency and intensity of weather conditions, natural disasters and seasonality, as well as related environmental regulations, can affect the demand for our services, our ability to operate and our results of operations and cash flows.

Previous wording

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. Such weather events could affect our facilities, or those of our major suppliers or business process outsource providers, which could affect our costs, our ability to meet supply requirements, our ability to provide services and our ability to access our data and other records. Extreme or unpredictable weather conditions could materially adversely impact our business, financial position, results of operations and cash flows.

Current wording

Major weather events and other similar Acts of God, or natural disasters are typically addressed by homeowners’ and other forms of insurance as opposed to the home warranties that we offer and therefore do not increase our obligations to provide service. 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. Such weather events could affect our facilities, or those of our major suppliers or business process outsource providers, which could affect our costs, our ability to meet supply requirements, our ability to provide services and our ability to access our data and other records. Extreme or unpredictable weather conditions could materially adversely impact our business, financial position, results of operations and cash flows.

Previous wording

Our business is subject to significant federal, state and local laws and regulations. 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. 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. Some of these laws and regulations require that we obtain regulatory approval prior to implementing changes in our pricing, contract terms and claims handling processes, which may limit or slow our ability to adjust our business strategies to address evolving challenges or opportunities. Failure to comply with such laws and regulations may have a material adverse impact on our business, financial position, results of operations and cash flows. Additionally, a portion of our business operates as an insurance company, and the IRS or state agencies could deem us to be taxed across our company as such, which could adversely impact the timing of our tax payments.

Current wording

Our business is subject to significant federal, state and local laws and regulations. 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. 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. Some of these laws and regulations require that we obtain regulatory approval prior to implementing changes in our pricing, contract terms and claims handling processes, which may limit or slow our ability to adjust our business strategies to address evolving challenges or opportunities. Failure to comply with such laws and regulations may have a material adverse impact on our business, financial position, results of operations and cash flows. Additionally, a portion of our business operates as an insurance company, and the IRS or state agencies could deem us to be taxed across our company as such, which could adversely impact the timing of our tax payments.

Previous wording

We are also subject to various federal, state and local laws and regulations designed to protect consumers, including laws governing deceptive trade practices, consumer privacy and fraud, the collection and use of consumer data, telemarketing and other forms of solicitation. From time to time, we have received and we expect that we may continue to receive inquiries or investigative demands from regulatory bodies, including the Consumer Financial Protection Bureau and state attorneys general and other state agencies. 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 implementation of these marketing regulations requires us to rely more extensively on other marketing methods and channels and may have a material adverse impact on our business, financial position, results of operations and cash flows.

Current wording

We are also subject to various federal, state and local laws and regulations designed to protect consumers, including laws governing deceptive trade practices, consumer privacy and fraud, the collection and use of consumer data, telemarketing and other forms of solicitation. From time to time, we have received and we expect that we may continue to receive inquiries or investigative demands from regulatory bodies, including state attorneys general and other federal and state agencies. 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. The implementation of these marketing regulations requires us to rely more extensively on other marketing methods and channels and may have a material adverse impact on our business, financial position, results of operations and cash flows.

Previous wording

If we fail to protect the security of personal information about our customers, associates or third parties, we could be subject to interruption of our business operations, private litigation, reputational damage and costly penalties.

Current wording

Failure to protect the security of personal information about our customers, associates or third parties could result in the interruption of our business operations, private litigation, reputational damage and costly penalties.

Previous wording

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

Current wording

These risks include potential damage and disruption from traditional cyber criminals, malicious code (such as viruses and worms), employee theft, negligence or misuse, social engineering, denial-of-service attacks, as well as sophisticated nation-state and nation-state-supported actors, including advanced persistent threat intrusions. Any cyber or similar attack or unauthorized access to our software or systems that we experience could damage our technology systems and infrastructures, lead to the loss, compromise or corruption of data, prevent us from providing our services, erode our reputation and those of our various brands, lead to the termination of advantageous contracts, result in inaccurate reporting of financial information, result in the disclosure of confidential consumer and professional contractor information, result in erroneous payments to malicious actors, expose us to significant liabilities for the violation of data privacy laws, result in the disclosure of confidential and sensitive business information or intellectual property, result in claims or litigation against us and/or otherwise be costly to mitigate or remedy. The frequency of data breaches of companies and governments has increased in recent years as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. In addition, risk from cyber and data security threats is exacerbated with the

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

We may be required to recognize impairment charges.

Current wording

We may be required to recognize impairment charges on goodwill and intangible assets due to reasons including, among other things, adverse changes in the business climate, expected operating changes, and adverse actions or assessments by regulators.

Previous wording

Success in our new home structural warranty business depends on our ability to underwrite risks accurately and to charge adequate prices to builder members, as well as our ability to effectively reinsure a large portion of those risks.

Current wording

Success in our new home builder warranty business depends on our ability to underwrite risks accurately and to charge adequate prices to builder members, as well as our ability to effectively reinsure a large portion of those risks.

Previous wording

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.

Current wording

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.

Previous wording

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. As a result, our ability to price accurately is subject to a number of risks and uncertainties, including, without limitation: the availability of sufficient reliable data; uncertainties inherent in estimates and assumptions, generally; our ability to conduct a complete and accurate analysis of available data; our ability to timely predict both the severity and frequency of losses with reasonable accuracy; our ability to predict changes in certain operating expenses with reasonable certainty; our ability to retain builder members for multi-year periods and to predict builder member retention accurately; our ability to attract a sufficient number of builder members to allocate risks and price accurately in the event of homebuilder industry consolidation; unanticipated court decisions, legislation or regulatory action; ongoing changes in our claim settlement practices; and unanticipated increases in the cost of reinsurance or an unwillingness of our reinsurers to continue to provide reinsurance coverage to us at the levels for which we have planned.

Current wording

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. As a result, our ability to price accurately is subject to a number of risks and uncertainties, including, without limitation: the availability of sufficient reliable data; uncertainties inherent in estimates and assumptions, generally; our ability to conduct a complete and accurate analysis of available data; our ability to timely predict both the severity and frequency of losses with reasonable accuracy; our ability to predict changes in certain operating expenses with reasonable certainty; our ability to retain builder members for multi-year periods and to predict builder member retention accurately; our ability to attract a sufficient number of builder members to allocate risks and price accurately in the event of homebuilder industry consolidation; unanticipated court decisions, legislation or regulatory action; ongoing changes in our claim settlement practices; and unanticipated increases in the cost of reinsurance or an unwillingness of our reinsurers to continue to provide reinsurance coverage to us at the levels for which we have planned.

Previous wording

We depend on the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home structural warranty business.

Current wording

We depend on the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home builder warranty business.

Previous wording

If reinsurance is unavailable to us at current levels and prices, our ability to write new business may be limited. Market conditions impact the availability and cost of the reinsurance we purchase. Reinsurance may not remain continuously available to us to the same extent and on the same terms and rates as were historically available or is currently available. 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. If we cannot maintain our current level of reinsurance or purchase new reinsurance protection in amounts we consider sufficient at acceptable prices, we would have to either accept an increase in our exposure, reduce our insurance exposure or seek other alternatives.

Current wording

If reinsurance is unavailable to us at current levels and prices, our ability to write new business may be limited. Market conditions impact the availability and cost of the reinsurance we purchase. Reinsurance may not remain continuously available to us to the same extent and on the same terms and rates as were historically available or is currently available. 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. If we cannot maintain our current level of reinsurance or purchase new reinsurance protection in amounts we consider sufficient at acceptable prices, we would have to either accept an increase in our exposure, reduce our insurance exposure or seek other alternatives.

Previous wording

Evolving governance rules, regulations and stakeholder expectations have resulted in, and may continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. 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. If our corporate governance, environmental or other related data, processes or reporting are incomplete, inaccurate or criticized, our reputation, business, financial performance and growth could be adversely affected.

Current wording

Evolving governance rules, regulations and stakeholder expectations have resulted in, and may continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations. 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. If our corporate governance, environmental or other related data, processes or reporting are incomplete, inaccurate or criticized, our reputation, business, financial performance and growth could be adversely affected.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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. As a result, we did not pay cash dividends in 2024, and we do not expect to pay any cash dividend for the foreseeable future. All decisions regarding the payment of dividends will be made by our board of directors from time to time in accordance with applicable law. There can be no assurance that we will have sufficient surplus under Delaware law to be able to pay any dividends at any time in the future. An insufficient surplus may result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capital expenditures or increases in reserves. If we do not pay dividends, the price of the shares of our common stock must appreciate for you to receive a gain on your investment. This appreciation may not occur. Further, you may have to sell some or all of your shares of our common stock to generate cash flow from your investment.

Current wording

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. As a result, we did not declare or pay cash dividends on our common stock in 2025, and we do not currently pay any cash dividends. All decisions regarding the payment of dividends will be made by our board of directors from time to time in accordance with applicable law. There can be no assurance that we will have sufficient surplus under Delaware law to be able to pay any dividends at any time in the future. An insufficient surplus may result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capital expenditures or increases in reserves. If we do not pay dividends, the price of the shares of our common stock must appreciate for you to receive a gain on your investment. This appreciation may not occur. Further, you may have to sell some or all of your shares of our common stock to generate cash flow from your investment.

Previous wording

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.

Current wording

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.

Previous wording

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. As of December 31, 2024, each one percentage point change in interest rates would result in an approximately $6 million change in the annual interest expense on the Term Loan Facilities after considering the impact of the effective interest rate swap. Assuming all revolving loans were fully drawn as of December 31, 2024, each one percentage point change in interest rates would result in an approximately $3 million change in annual interest expense on the Revolving Credit Facility. 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.

Current wording

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. 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. 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.

Previous wording

There are regulatory restrictions on the ability of certain of our subsidiaries to transfer funds to us. The payments of ordinary and extraordinary dividends by certain of our subsidiaries (through which we conduct our business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain subsidiaries to maintain 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. We expect that such limitations will be in effect for the foreseeable future. None of our subsidiaries are obligated to make funds available to us through the payment of dividends. If we cannot receive sufficient distributions from our subsidiaries, we may not be able to meet our obligations to fund general corporate expenses or service our debt obligations.

Current wording

There are regulatory restrictions on the ability of certain of our subsidiaries to transfer funds to us. The payments of ordinary and extraordinary dividends by certain of our subsidiaries (through which we conduct our business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain subsidiaries to maintain 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 expect that such limitations will be in effect for the foreseeable future. None of our subsidiaries are obligated to make funds available to us through the payment of dividends. If we cannot receive sufficient distributions from our subsidiaries, we may not be able to meet our obligations to fund general corporate expenses or service our debt obligations.

Previous wording

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”). 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 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. We entered into these interest rate swap contracts 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 agreements could have a material impact on our financial statements. There can be no guarantee that our hedging strategy will be effective, and we may experience credit-related losses in some circumstances.

Current wording

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 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. 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. We entered into these interest rate swap contracts 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 agreements could have a material impact on our financial statements. There can be no guarantee that our hedging strategy will be effective, and we may experience credit-related losses in some circumstances.