10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________

FORM 10-Q

________________________________________________

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

For the quarterly period ended March 31, 2021

or

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

For the transition period from                    to                    

Commission file number 001-38617

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frontdoor, inc.

(Exact name of registrant as specified in its charter)

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

150 Peabody Place, Memphis, Tennessee 38103

(Address of principal executive offices) (Zip Code)

901-701-5000

(Registrant’s telephone number, including area code)

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

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

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

Yes  x  No  o

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

Yes  x  No  o

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

Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
			Emerging growth company o

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

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

Yes  o  No  x

The number of shares of the registrant’s common stock outstanding as of April 30, 2021: 85,685,092 shares of common stock, par value $0.01 per share.

frontdoor, inc.

Quarterly Report on Form 10-Q

GLOSSARY OF TERMS AND SELECTED ABBREVIATIONS

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

Term/Abbreviation	Definition
2020 Form 10-K	frontdoor, inc. Annual Report on Form 10-K for the year ended December 31, 2020
2026 Notes	6.750% senior notes in the aggregate principal amount of $350 million
AOCI	Accumulated other comprehensive income or loss
ASC	FASB Accounting Standards Codification
ASC 740	ASC Topic 740, Income Taxes
ASU	FASB Accounting Standards Update
Credit Agreement	The agreements governing the Term Loan Facility and the Revolving Credit Facility
Credit Facilities	The Term Loan Facility together with the Revolving Credit Facility
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	U.S. Financial Accounting Standards Board
HVAC	Heating, ventilation and air conditioning
Indenture	The indenture and supplemental indenture between frontdoor, inc. and Wilmington Trust, National Association as trustee, that governs the 2026 Notes
IRS	Internal Revenue Service
Omnibus Plan	frontdoor, inc. 2018 Omnibus Incentive Plan
ProConnect	Our membership-based home services business, which includes on-demand home services offerings, marketed under the American Home Shield ProConnect and HSA ProConnect brand names and other names
Revolving Credit Facility	$250 million revolving credit facility
SEC	U.S. Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
Spin-off	Terminix’s separation and distribution of the ownership and operations of the businesses operated under the American Home Shield, HSA, OneGuard and Landmark brand names into frontdoor, inc., which was completed on October 1, 2018
Streem	Streem, LLC, our technology business that uses augmented reality, computer vision and machine learning to provide services
Term Loan Facility	$650 million senior secured term loan facility
Terminix	Terminix Global Holdings, Inc. (formerly known as ServiceMaster Global Holdings, Inc.), a Delaware corporation, and its consolidated subsidiaries
U.S. or United States	United States of America
U.S. GAAP	Accounting principles generally accepted in the United States of America

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

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

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

TABLE OF CONTENTS

	Page ‎No.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations and Comprehensive Income	3
Condensed Consolidated Statements of Financial Position	4
Condensed Consolidated Statements of Changes in (Deficit) Equity	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7
Cautionary Statement Concerning Forward-Looking Statements	16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
Item 4. Controls and Procedures	28
Part II. Other Information
Item 1. Legal Proceedings	29
Item 1A. Risk Factors	29
Item 6. Exhibits	30
Signature	31

 
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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In millions, except per share data)

	Three Months Ended
	March 31,
	2021		2020
Revenue	$	329	$	294
Cost of services rendered		181		147
Gross Profit		148		147
Selling and administrative expenses		118		105
Depreciation and amortization expense		9		8
Restructuring charges		1		3
Interest expense		13		15
Interest and net investment income		—		(2)
Loss on extinguishment of debt		1		—
Income before Income Taxes		5		17
Provision for income taxes		1		4
Net Income	$	5	$	13
Other Comprehensive Income (Loss), Net of Income Taxes:
Net unrealized gain (loss) on derivative instruments		7		(15)
Total Comprehensive Income (Loss)	$	12	$	(2)
Earnings per Share:
Basic	$	0.06	$	0.15
Diluted	$	0.06	$	0.15
Weighted-average Common Shares Outstanding:
Basic		85.4		85.1
Diluted		86.0		85.4

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

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3

Condensed Consolidated Statements of Financial Position (Unaudited)

(In millions, except share data)

	As of
	March 31,		December 31,
	2021		2020
Assets:
Current Assets:
Cash and cash equivalents	$	538	$	597
Receivables, less allowance of $2 in each period		4		5
Prepaid expenses and other assets		30		24
Total Current Assets		573		626
Other Assets:
Property and equipment, net		61		60
Goodwill		512		512
Intangible assets, net		167		170
Operating lease right-of-use assets		20		15
Deferred customer acquisition costs		20		19
Other assets		3		3
Total Assets	$	1,355	$	1,405
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts payable	$	66	$	55
Accrued liabilities:
Payroll and related expenses		19		23
Home service plan claims		85		90
Interest payable		3		9
Other		32		32
Deferred revenue		227		187
Current portion of long-term debt		7		7
Total Current Liabilities		439		403
Long-Term Debt		868		968
Other Long-Term Liabilities:
Deferred taxes		41		38
Operating lease liabilities		23		18
Other long-term obligations		30		40
Total Other Long-Term Liabilities		94		96
Commitments and Contingencies (Note 8)
Shareholders' Equity:
Common stock, $0.01 par value; 2,000,000,000 shares authorized; 85,680,630 shares issued and 85,679,700 shares outstanding at March 31, 2021 and 85,477,779 shares issued and outstanding at December 31, 2020		1		1
Additional paid-in capital		49		46
Accumulated deficit		(70)		(75)
Accumulated other comprehensive loss		(26)		(33)
Total Deficit		(46)		(61)
Total Liabilities and Shareholders' Equity	$	1,355	$	1,405

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

4

Condensed Consolidated Statement of Changes in (Deficit) Equity (Unaudited)

(In millions)

	Three Months Ended
	March 31,
	2021		2020
Common Stock
Balance at beginning of period	$	1	$	1
Balance at end of period		1		1
Additional Paid-in Capital
Balance at beginning of period		46		29
Exercise of stock options		1		—
Taxes paid related to net share settlement of equity awards		(4)		(1)
Stock-based employee compensation		6		3
Balance at end of period		49		31
Accumulated Deficit
Balance at beginning of period		(75)		(188)
Net income		5		13
Balance at end of period		(70)		(174)
Accumulated Other Comprehensive Loss
Balance at beginning of period		(33)		(21)
Other comprehensive income (loss), net of tax		7		(15)
Balance at end of period		(26)		(36)
Total Deficit	$	(46)	$	(178)

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

 
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5

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

	Three Months Ended
	March 31,
	2021		2020
Cash and Cash Equivalents at Beginning of Period	$	597	$	428
Cash Flows from Operating Activities:
Net Income		5		13
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization expense		9		8
Stock-based compensation expense		6		3
Restructuring charges		1		3
Payments for restructuring charges		(1)		(3)
Loss on extinguishment of debt		1		—
Change in working capital, net of acquisitions:
Receivables		1		3
Prepaid expenses and other current assets		1		2
Accounts payable		11		7
Deferred revenue		40		40
Accrued liabilities		(8)		(15)
Accrued interest payable		(6)		(6)
Current income taxes		(8)		4
Net Cash Provided from Operating Activities		52		60
Cash Flows from Investing Activities:
Purchases of property and equipment		(7)		(8)
Purchases of available-for-sale securities		—		(2)
Sales and maturities of available-for-sale securities		—		7
Net Cash Used for Investing Activities		(7)		(3)
Cash Flows from Financing Activities:
Payments of debt		(102)		(2)
Other financing activities		(3)		(1)
Net Cash Used for Financing Activities		(105)		(3)
Cash (Decrease) Increase During the Period		(59)		54
Cash and Cash Equivalents at End of Period	$	538	$	482

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements.

 
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frontdoor, inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

Frontdoor is the leading provider of home service plans in the United States, as measured by revenue, and operates under the American Home Shield, HSA, OneGuard and Landmark brands. Our customizable home service plans help customers protect and maintain their homes, typically their most valuable asset, from costly and unplanned breakdowns of essential home systems and appliances. Our home service plan customers subscribe to an annual service plan agreement that covers the repair or replacement of major components of more than 20 home systems and appliances, including electrical, plumbing, central HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops, as well as optional coverages for electronics, pools, spas and pumps. Our operations also include our ProConnect on-demand home services business and Streem, a technology platform that uses augmented reality, computer vision and machine learning to, among other things, help home service professionals more quickly and accurately diagnose breakdowns and complete repairs. At March 31, 2021, we had over two million active home service plans across all 50 states and the District of Columbia.

We recommend that the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated and combined financial statements and the notes thereto included in our 2020 Form 10-K. The accompanying condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for any interim period are not indicative of the results that might be achieved for a full year.

Impact of the COVID-19 Pandemic

On March 11, 2020, the World Health Organization (“WHO”) characterized the novel coronavirus disease (“COVID-19”) as a pandemic, and on March 13, 2020, the United States declared a national emergency concerning the outbreak. The broader implications of the COVID-19 pandemic on our results of operations and overall financial performance remain uncertain. In response to the COVID-19 pandemic, we have taken a number of steps to protect the well-being of our employees, customers and contractors, and we continue to respond to the real-time needs of our business. The COVID-19 situation remains very fluid, and we continue to adjust our response in real time.

While we did not experience a material impact on our results of operations and overall financial performance during the first quarter of 2020, during the first quarter of 2021, our financial condition and results of operations were adversely impacted by the COVID-19 pandemic as follows:

Revenue in the first-year real estate channel has continued to be adversely impacted by the decline in U.S. existing home sales in the second quarter of 2020. Due to the annual nature of our home service plan agreements, the impact of this decline carried forward into the first quarter of 2021. Additionally, a strong existing home seller’s market has constrained demand for home service plans in this channel.

We experienced an increase in appliance and plumbing claims primarily due to the increased usage of home systems and appliances driven by state and local shelter at home orders and recommendations. In addition, industry-wide availability challenges in the appliance trade have caused increased cost pressure, and, more specifically, appliance parts availability challenges drove additional replacements, contributing to the increased costs.

We incurred incremental wages at our customer care centers due to a higher number of service requests in the appliance and plumbing trades, which is primarily a result of customers sheltering at home in response to COVID-19.

f Note 2. Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the audited consolidated and combined financial statements included in our 2020 Form 10-K. There have been no material changes to the significant accounting policies for the three months ended March 31, 2021.

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Note 3. Revenue

We enter into annual home service plan agreements with our customers. We have one performance obligation, which is to provide for the repair or replacement of essential home systems and appliances, as applicable per the contract. We recognize revenue at the agreed upon contractual amount over time using the input method in proportion to the costs expected to be incurred in performing services under the contracts. Those costs bear a direct relationship to the fulfillment of our obligations under the contracts and are representative of the relative value provided to the customer. As the costs to fulfill the obligations of the home service plans are incurred on an other-than-straight-line basis, we utilize historical evidence to estimate the expected claims expense and related timing of such costs. This adjustment to the straight-line revenue creates a contract asset or contract liability, as described under the heading “Contract balances” below. We regularly review our estimates of claims costs and adjust our estimates when appropriate. We derive substantially all of our revenue from customers in the United States.

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

___

	Three Months Ended
	March 31,
(In millions)	2021		2020
Renewals	$	224	$	200
Real estate(1)		57		56
Direct-to-consumer(1)		41		35
Other		8		3
Total	$	329	$	294

_____________________________

(1)First-year revenue only.

Renewals

Revenue from all customer renewals, whether initiated via the real estate or direct-to-consumer channel, are classified as renewals above. Customer payments for renewals are received either at the commencement of the renewal period or in installments over the contract period.

Real estate

Real estate home service plans are sold through annual contracts in connection with a real estate sale, and payments are typically paid in full at closing. First-year revenue from the real estate channel is classified as real estate above.

Direct-to-consumer

Direct-to-consumer home service plans are sold through annual contracts when customers request a service plan in response to marketing efforts or when third-party resellers make a sale. Customer payments are received either at the commencement of the contract or in installments over the contract period. First-year revenue from the direct-to-consumer channel is classified as direct-to-consumer above.

Costs to obtain a contract with a customer

We capitalize the incremental costs of obtaining a contract with a customer, primarily sales commissions, and recognize the expense using the input method in proportion to the costs expected to be incurred in performing services under the contract, over the expected customer relationship period. Deferred customer acquisition costs were $20 million and $19 million as of March 31, 2021 and December 31, 2020, respectively. Amortization of these deferred acquisition costs was $4 million for each of the three months ended March 31, 2021 and 2020. There were no impairment losses in relation to these capitalized costs.

Contract balances

Timing of revenue recognition may differ from the timing of invoicing to customers. Contracts with customers, including contracts resulting from customer renewals, are generally for a period of one year. We record a receivable related to revenue recognized on services once we have an unconditional right to invoice and receive payment in the future related to the services provided. All accounts receivable are recorded within Receivables, less allowances, in the accompanying condensed consolidated statements of financial position. We invoice our monthly-pay customers on a straight-line basis over the contract term. As a result, a contract asset is created when revenue is recognized on monthly-pay customers before being billed.

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Deferred revenue represents a contract liability and is recognized when cash payments are received in advance of the performance of services, including when the amounts are refundable. Amounts are recognized as revenue in proportion to the costs expected to be incurred in performing services under our contracts. Deferred revenue was $227 million and $187 million as of March 31, 2021 and December 31, 2020, respectively, and as of March 31, 2021, includes a net contract liability of $45 million related to the recognition of monthly-pay customer revenue on an other-than-straight-line basis to match the timing of cost recognition.

Changes in deferred revenue for the three months ended March 31, 2021 were as follows:

(In millions)	Deferred Revenue
Balance as of December 31, 2020	$	187
Deferral of revenue		123
Recognition of deferred revenue		(84)
Balance as of March 31, 2021	$	227

There was approximately $71 million of revenue recognized in the three months ended March 31, 2021 that was included in the deferred revenue balance as of December 31, 2020.

Note 4. Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment on an annual basis or more frequently if circumstances indicate a potential impairment. An assessment for impairment is performed on October 1 of every year. The balance of goodwill was $512 million as of March 31, 2021 and December 31, 2020. There were no goodwill or trade name impairment charges recorded in the three months ended March 31, 2021 and 2020. There were no accumulated impairment losses recorded as of March 31, 2021 and December 31, 2020.

The table below summarizes the other intangible asset balances:

	As of March 31, 2021						As of December 31, 2020
(In millions)	Gross		Accumulated ‎Amortization		Net		Gross		Accumulated ‎Amortization		Net
Trade names(1)	$	141	$	—	$	141	$	141	$	—	$	141
Customer relationships		173		(171)		1		173		(171)		2
Developed technology		25		(8)		18		25		(6)		19
Other		37		(29)		7		37		(29)		8
Total	$	375	$	(208)	$	167	$	375	$	(205)	$	170

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(1)Not subject to amortization.

Amortization expense was $3 million for each of the three months ended March 31, 2021 and 2020. The following table outlines expected amortization expense for existing intangible assets for the remainder of 2021 and the next five years:

(In millions)
2021 (remainder)	$	8
2022		8
2023		6
2024		4
2025		—
2026		—
Total	$	26

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Note 5. Leases

We have operating leases primarily for our corporate offices, customer care centers and engineering and technology campuses. Our leases have remaining lease terms of two years to 14 years, some of which include options to extend the leases for up to five years. Renewal options that are reasonably certain to be exercised are included in the lease term. An incremental borrowing rate is used in determining the present value of lease payments unless an implicit rate is readily determinable. Incremental borrowing rates are determined based on our secured borrowing rating and the lease term.

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

	As of
	March 31,		December 31,
	2021		2020
Weighted-average remaining lease term (years)	9		9
Weighted-average discount rate	5.5	%	6.0	%

We recognized operating lease expense of $1 million for each of the three months ended March 31, 2021 and 2020. These expenses are included in Selling and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

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

z
	Three Months Ended
	March 31,
(In millions)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities(1)	$	1	$	3
Leased assets obtained in exchange for new lease liabilities		6		—

_____________________________

(1)For the three months ended March 31, 2020, amounts include $2 million of lease termination costs related to the decision to consolidate certain operations of Landmark Home Warranty, LLC (“Landmark”) with those of OneGuard Home Warranties (“OneGuard”). See Note 7 to the accompanying condensed consolidated financial statements for further information.

Supplemental balance sheet information related to operating leases is as follows:

	As of
	March 31,		December 31,
(In millions)	2021		2020
Operating lease right-of-use assets	$	26	$	21
Less lease incentives		(6)		(6)
Operating lease right-of-use assets, net	$	20	$	15
Other accrued liabilities	$	4	$	3
Operating lease liabilities		23		18
Total operating lease liabilities	$	26	$	21

The following table presents maturities of our operating lease liabilities as of March 31, 2021.

(In millions)
2021 (remainder)	$	4
2022		5
2023		5
2024		3
2025		2
2026		2
Thereafter		12
Total lease payments		34
Less imputed interest		(8)
Total	$	26

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Note 6. Income Taxes

As required by ASC 740, we compute interim period income taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss from operations before income taxes, except for significant unusual or infrequently occurring items. Our estimated tax rate is adjusted each quarter in accordance with ASC 740. The effective tax rate on income was 9.8 percent and 25.0 percent for the three months ended March 31, 2021 and 2020, respectively. The decrease in the effective tax rate for the three months ended March 31, 2021 compared to 2020 is primarily due to excess tax benefits for share-based awards.

We are subject to taxation in the United States, various states and foreign jurisdictions. Pursuant to the terms of the tax matters agreement entered into with Terminix in connection with the Spin-off, we are not subject to federal examination by the IRS or examination by state taxing authorities where a unitary or combined state income tax return is filed for the years prior to 2018. We are not subject to state and local income tax examinations by tax authorities in jurisdictions where separate income tax returns are filed for the years prior to 2016. Substantially all of our income before income taxes for the three months ended March 31, 2021 and 2020 was generated in the United States.

Our policy is to recognize potential interest and penalties related to our tax positions within the tax provision. Total interest and penalties included in the accompanying condensed consolidated statements of operations and comprehensive income are immaterial.

Note 7. Restructuring Charges

We incurred restructuring charges of $1 million ($1 million, net of tax) and $3 million ($2 million, net of tax) for the three months ended March 31, 2021 and 2020, respectively.

For the three months ended March 31, 2021, restructuring charges primarily comprised accelerated depreciation of certain technology systems driven by efforts to enhance our technological capabilities. For the three months ended March 31, 2020, restructuring charges comprised lease termination costs and severance and other costs related to the decision to consolidate certain operations of Landmark with those of OneGuard.

The pre-tax charges discussed above are reported in “Restructuring charges” in the accompanying condensed consolidated statements of operations and comprehensive income.

As of December 31, 2020, there were $1 million of restructuring charges accrued, which were paid or otherwise settled during the three months ended March 31, 2021. As of March 31, 2021, there were less than $1 million in accrued restructuring charges in the accompanying condensed consolidated statements of financial position.

Note 8. Commitments and Contingencies

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

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

In January 2021, a lawsuit was filed in the Superior Court of the State of Arizona by the Arizona Attorney General (the "AZ Attorney General") against Landmark, alleging, among other things, that Landmark violated the Arizona Consumer Fraud Act by engaging in deceptive, misleading or unfair practices with respect to the provision of expedited services to its customers during extreme temperatures from January 2017 to July 2020. The AZ Attorney General sought $14.7 million in damages plus penalties, costs, interest and attorneys’ fees in this matter. Although Landmark disagreed with the allegations that it violated Arizona law, as litigation is inherently unpredictable, Landmark fully settled this matter with the AZ Attorney General in March 2021 for $1.8 million. As we recorded an estimate of loss with respect to this matter during the year ended December 31, 2020 equal to the amount of the settlement, no additional expense was recognized in the three months ended March 31, 2021.

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

Note 9. Stock-Based Compensation

We recognized stock-based compensation expense of $6 million ($4 million, net of tax) and $3 million ($3 million, net of tax) for the three months ended March 31, 2021 and 2020, respectively. These charges are included in Selling and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

A summary of awards granted under the Omnibus Plan during the three months ended March 31, 2021 is presented below:

	Number of	Weighted Avg.		Weighted Avg.		Weighted Avg.
	Awards	Exercise		Grant Date		Vesting
	Granted	Price		Fair Value		Period
Stock options	245,599	$	54.81	$	28.09	4 years
Restricted stock units	368,202				54.83	3 years
Performance shares(1)	98,017				54.81	3 years

_____________________________

(1)The number of performance shares granted during the three months ended March 31, 2021 represents the target value of the awards. The performance shares contain a performance condition that is based on our revenue target, and the ultimate number of performance shares to be earned depends on the achievement of this performance condition.

As of March 31, 2021, there was $61 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options, restricted stock units (“RSUs”), performance shares and restricted stock awards (“RSAs”). These remaining costs are expected to be recognized over a weighted-average period of 2.68 years.

Note 10. Long-Term Debt

Long-term debt is summarized in the following table:

	As of
	March 31,		December 31,
(In millions)	2021		2020
Term Loan Facility maturing in 2025(1)	$	529	$	629
Revolving Credit Facility maturing in 2023		—		—
2026 Notes(2)		346		346
Less current portion		(7)		(7)
Total long-term debt	$	868	$	968

___________________________________

(1)As of March 31, 2021 and December 31, 2020, presented net of $4 million and $5 million, respectively, in unamortized debt issuance costs and $1 million in unamortized original issue discount paid.

(2)As of March 31, 2021 and December 31, 2020, presented net of $4 million in unamortized debt issuance costs. 

On February 17, 2021, we repaid $100 million of the outstanding principal amount of the Term Loan Facility. In connection with the repayment, we recorded a loss on extinguishment of debt of $1 million, which included the write-off of debt issuance costs and original issue discount. 

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Note 11. Supplemental Cash Flow Information

Supplemental information relating to the accompanying condensed consolidated statements of cash flows is presented in the following table:

	Three Months Ended
	March 31,
(In millions)	2021		2020
Cash paid for (received from):
Interest expense	$	18	$	20
Income tax payments, net of refunds		8		—
Interest income		—		(2)

Note 12. Comprehensive Income (Loss)

Comprehensive income (loss), which includes net income (loss) and unrealized gain (loss) on derivative instruments, is disclosed in the accompanying condensed consolidated statements of operations and comprehensive income and condensed consolidated statements of changes in equity.

The following tables summarize the activity in AOCI, net of the related tax effects.

	Unrealized
	Loss
(In millions)	on Derivatives		Total
Balance as of December 31, 2020	$	(33)	$	(33)
Other comprehensive income (loss) before reclassifications:
Pre-tax amount		7		7
Tax provision (benefit)		2		2
After-tax amount		5		5
Amounts reclassified from accumulated ‎  other comprehensive income (loss)(1)		2		2
Net current period other comprehensive income (loss)		7		7
Balance as of March 31, 2021	$	(26)	$	(26)
Balance as of December 31, 2019	$	(21)	$	(21)
Other comprehensive income (loss) before reclassifications:
Pre-tax amount		(21)		(21)
Tax provision (benefit)		(5)		(5)
After-tax amount		(16)		(16)
Amounts reclassified from accumulated ‎  other comprehensive income (loss)(1)		1		1
Net current period other comprehensive income (loss)		(15)		(15)
Balance as of March 31, 2020	$	(36)	$	(36)

___________________________________

(1)Amounts are net of tax. See reclassifications out of AOCI below for further details.

Reclassifications out of AOCI included the following components for the periods indicated.

	Amounts Reclassified from Accumulated
	Other Comprehensive Income (Loss)
	Three Months Ended
	March 31,				Consolidated Statements of
(In millions)	2021		2020		Operations and Comprehensive Income Location
Loss on interest rate swap contract	$	(3)	$	(1)	Interest expense
Impact of income taxes		1		—	Provision for income taxes
Total reclassifications related to derivatives	$	(2)	$	(1)
Total reclassifications for the period	$	(2)	$	(1)

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Note 13. Derivative Financial Instruments

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

We hedge the interest payments on a portion of our variable rate debt through the use of an interest rate swap agreement. Our interest rate swap contract is classified as a cash flow hedge, and, as such, it is recorded in the accompanying condensed consolidated statements of financial position as either an asset or liability at fair value, with changes in fair value recorded in AOCI. Cash flows related to the interest rate swap contract are classified as operating activities in the accompanying condensed consolidated statements of cash flows.

The effective portion of the gain or loss on our interest rate swap contract is recorded in AOCI. These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement affects earnings. See Note 12 to the accompanying condensed consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in AOCI and for the amounts reclassified out of AOCI and into earnings. As the underlying forecasted transactions occur during the next 12 months, the unrealized hedging loss in AOCI expected to be recognized in earnings is $8 million, net of tax, as of March 31, 2021. The amounts that are ultimately reclassified into earnings will be based on actual interest rates at the time the positions are settled and may differ materially from the amount noted above.

Note 14. Fair Value Measurements

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

The period-end carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The carrying amount of total debt was $875 million and $975 million, and the estimated fair value was $902 million and $1,004 million as of March 31, 2021 and December 31, 2020, respectively. The fair value of our debt is estimated based on available market prices for the same or similar instruments that are considered significant other observable inputs (Level 2) within the fair value hierarchy. The fair values presented reflect the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value estimates presented in this report are based on information available to us as of March 31, 2021 and December 31, 2020.

We value our interest rate swap contract using a forward interest rate curve obtained from a third-party market data provider. The fair value of the contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. The expected future settlements are determined by comparing the contract interest rate to the expected forward interest rate as of each settlement date and applying the difference between the two rates to the notional amount of debt in the interest rate swap contract.

We have not changed our valuation techniques for measuring the fair value of any financial assets and liabilities during the three months ended March 31, 2021. Transfers between levels, if any, are recognized at the end of the reporting period. There were no transfers between levels during the three months ended March 31, 2021 and 2020.

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

				Estimated Fair Value Measurements
(In millions)	Statement of Financial ‎Position Location	Carrying ‎Value		Quoted ‎Prices ‎In Active ‎Markets ‎(Level 1)		Significant ‎Other ‎Observable ‎Inputs ‎(Level 2)		Significant ‎Unobservable ‎Inputs ‎(Level 3)
As of March 31, 2021:
Financial Liabilities:
Interest rate swap contract	Other accrued liabilities	$	10	$	—	$	10	$	—
	Other long-term obligations		24		—		24		—
Total financial liabilities		$	34	$	—	$	34	$	—
As of December 31, 2020:
Financial Liabilities:
Interest rate swap contract	Other accrued liabilities	$	10	$	—	$	10	$	—
	Other long-term obligations		33		—		33		—
Total financial liabilities		$	43	$	—	$	43	$	—

Note 15. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options, RSUs, performance shares and RSAs are reflected in diluted earnings per share by applying the treasury stock method.

Basic and diluted earnings per share are calculated as follows:

	Three Months Ended
	March 31,
(In millions, except per share data)	2021		2020
Net Income	$	5	$	13
Weighted-average common shares outstanding		85.4		85.1
Effect of dilutive securities:
RSUs		0.4		0.1
Stock options(1)		0.2		0.1
Weighted-average common shares outstanding - assuming dilution		86.0		85.4
Basic earnings per share	$	0.06	$	0.15
Diluted earnings per share	$	0.06	$	0.15

___________________________________

(1)Options to purchase 0.3 million shares for the three months ended March 31, 2020 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. There were no such anti-dilutive options for the three months ended March 31, 2021.     

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

You should read this Quarterly Report on Form 10-Q completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this report, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise. For a discussion of other important factors that could cause our results to differ materially from those expressed in, or implied by, the forward-looking statements included in this report, you should refer to the risks and uncertainties detailed from time to time in our periodic reports filed with the SEC, including the disclosure included in Item 1A. Risk Factors in our 2020 Form 10-K.

Factors, risks, trends and uncertainties that make an investment in us speculative or risky and that could cause actual results or events to differ materially from those anticipated in our forward-looking statements include the matters described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this report as well as Item 1A. Risk Factors in our 2020 Annual Report on Form 10-K filed with the SEC, in addition to the following other factors, risks, trends and uncertainties:

risks related to the COVID-19 pandemic;

changes in the source and intensity of competition in our market;

weakening general economic conditions, especially as they may affect existing home sales, unemployment and consumer confidence or spending levels;

our ability to successfully implement our business strategies;

our ability to attract, retain and maintain positive relations with third-party contractors and vendors;

adverse weather conditions and Acts of God;

failure of our marketing efforts to be successful or cost-effective;

our ability to attract and retain key personnel;

our dependence on labor availability, third-party vendors, including business process outsourcers, and third-party component suppliers;

special risks applicable to operations outside the United States by us or our business process outsource providers;

compliance with, or violation of, laws and regulations, including consumer protection laws, increasing our legal and regulatory expenses;

increases in tariffs or changes to import/export regulations;

cybersecurity breaches, disruptions or failures in our technology systems and our failure to protect the security of personal information about our customers;

increases in parts, appliance and home system prices and other operating costs;

our ability to protect our intellectual property and other material proprietary rights;

negative reputational and financial impacts resulting from acquisitions or strategic transactions;

requirement to recognize impairment charges;

failure to maintain our strategic relationships with the real estate brokerages and agents that comprise our real estate customer acquisition channel;

third-party use of our trademarks as search engine keywords to direct our potential customers to their own websites;

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inappropriate use of social media by us or other parties to harm our reputation;

our limited history of operating as an independent company;

tax liabilities and potential indemnification of Terminix for material taxes if the distribution fails to qualify as tax-free;

the effects of our substantial indebtedness and the limitations contained in the agreements governing such indebtedness;

increases in interest rates increasing the cost of servicing our substantial indebtedness; 

increased borrowing costs due to lowering or withdrawal of the ratings, outlook or watch assigned to us, our debt securities or our Credit Facilities;

our ability to generate the significant amount of cash needed to fund our operations and service our debt obligations; and

other factors described in this report and from time to time in documents that we file with the SEC.

Available Information

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

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

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, the audited consolidated and combined financial statements and related notes thereto included in our 2020 Form 10-K and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K. The cautionary statements discussed in “Cautionary Statement Concerning Forward-Looking Statements” and elsewhere in this report should be read as applying to all forward-looking statements wherever they appear in this report. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this report, particularly in “Cautionary Statement Concerning Forward-Looking Statements” as well as those factors discussed in “Risk Factors” included in Part I, Item 1A. “Risk Factors” in our 2020 Form 10-K.

Overview

Frontdoor is the leading provider of home service plans in the United States, as measured by revenue, and operates under the American Home Shield, HSA, OneGuard and Landmark brands. Our customizable home service plans help customers protect and maintain their homes, typically their most valuable asset, from costly and unplanned breakdowns of essential home systems and appliances. Our home service plan customers subscribe to an annual service plan agreement that covers the repair or replacement of major components of more than 20 home systems and appliances, including electrical, plumbing, central HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops, as well as optional coverages for electronics, pools, spas and pumps. Our operations also include our ProConnect on-demand home services business and Streem, a technology platform that uses augmented reality, computer vision and machine learning to, among other things, help home service professionals more quickly and accurately diagnose breakdowns and complete repairs. At March 31, 2021, we had over two million active home service plans across all 50 states and the District of Columbia.

For the three months ended March 31, 2021 and 2020, we generated revenue, net income and Adjusted EBITDA of $329 million, $5 million and $36 million, respectively, and $294 million, $13 million and $47 million, respectively.

For the three months ended March 31, 2021, our total operating revenue included 68 percent of revenue derived from existing customer renewals, while 17 percent and 12 percent were derived from new home service plan sales made in conjunction with existing home resale transactions and direct-to-consumer sales, respectively, and two percent was derived from other revenue streams.

For the three months ended March 31, 2020, our total operating revenue included 68 percent of revenue derived from existing customer renewals, while 19 percent and 12 percent were derived from new home service plan sales made in conjunction with existing home resale transactions and direct-to-consumer sales, respectively, and one percent was derived from other revenue streams.

Key Factors and Trends Affecting Our Results of Operations

Impact of the COVID-19 Pandemic

On March 11, 2020, the WHO characterized COVID-19 as a pandemic, and on March 13, 2020, the United States declared a national emergency concerning the outbreak. The broader implications of the COVID-19 pandemic on our results of operations and overall financial performance remain uncertain. Included under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K are the steps we took in 2020 and have continued to take in response to the COVID-19 pandemic to protect the well-being of our employees, customers and contractors. We continue to respond to the real-time needs of our business.

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While we did not experience a material impact on our results of operations and overall financial performance during the first quarter of 2020, during the first quarter of 2021, our financial condition and results of operations were adversely impacted by the COVID-19 pandemic as follows:

Revenue in the first-year real estate channel has continued to be adversely impacted by the decline in U.S. existing home sales in the second quarter of 2020. Due to the annual nature of our home service plan agreements, the impact of this decline carried forward into the first quarter of 2021. Additionally, a strong existing home seller’s market has constrained demand for home service plans in this channel.

We experienced an increase in appliance and plumbing claims primarily due to the increased usage of home systems and appliances driven by state and local shelter at home orders and recommendations. In addition, industry-wide availability challenges in the appliance trade have caused increased cost pressure, and, more specifically, appliance parts availability challenges drove additional replacements, contributing to the increased costs.

We incurred incremental wages at our customer care centers due to a higher number of service requests in the appliance and plumbing trades, which is primarily a result of customers sheltering at home in response to COVID-19.

Although there are effective vaccines for COVID-19 that have been approved for use, we are unable to predict how widely utilized the vaccines will be, whether they will be effective in preventing the spread of COVID-19 (including its variant strains) and when or if normal economic activity and business operations will resume. We expect that a significant number of people will continue to work remotely from home, which may result in a continued increase in usage of home systems and appliances and demand for our services and a resulting increase in service-related costs. Accordingly, the COVID-19 situation remains very fluid, and we continue to adjust our response in real time. It remains difficult to predict the overall impact the COVID-19 pandemic will have on our business.

Macroeconomic Conditions

Macroeconomic conditions that may affect customer spending patterns, and thereby our results of operations, include home sales, consumer confidence and employment rates. The COVID-19 pandemic has increased economic uncertainty in these areas. We believe our ability to acquire customers through the direct-to-consumer channel helps to mitigate the effects of downturns in the real estate market, while our nationwide presence limits the risk of poor economic conditions in any particular geography.

Seasonality

Our business is subject to seasonal fluctuations, which drives variations in our revenue, net income and Adjusted EBITDA for interim periods. Seasonal fluctuations are primarily driven by a higher number of central HVAC work orders in the summer months. In the first quarter of 2021 and throughout 2020, additional variations were experienced as the COVID-19 pandemic resulted in an elevated level of service requests, primarily in the appliance and plumbing trades, as our customers spent more time at home. In 2020, approximately 20 percent, 28 percent, 30 percent and 22 percent of our revenue, approximately 12 percent, 43 percent, 43 percent and 2 percent of our net income, and approximately 17 percent, 37 percent, 34 percent and 12 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.

Effect of Weather Conditions

The demand for our services, and our results of operations, are affected by weather conditions. Extreme temperatures can lead to an increase in service requests related to home systems, particularly central HVAC systems, resulting in higher claim frequency and costs and lower profitability. Weather conditions that have a potentially favorable impact to our business include mild winters or summers, which can lead to lower home systems claim frequency. For example, unfavorable weather trends, as compared to 2020, negatively impacted contract claims costs in the first quarter of 2021.

While weather variations as described above may affect our business, major weather events and other similar Acts of God, such as hurricanes, flooding and tornadoes, typically do not increase our obligations to provide service. As a rule, repairs associated with such isolated events are addressed by homeowners’ and other forms of insurance as opposed to home service plans that we offer, and such insurance coverage in fact reduces our obligations to provide service to home systems and appliances damaged by insured, catastrophic events.

Tariff and Import/Export Regulations

Changes in U.S. tariff and import/export regulations may impact the costs of parts, appliances and home systems. Import duties or restrictions on components and raw materials that are imposed, or the perception that they could occur, may materially and adversely affect our business by increasing our costs. For example, rising costs due to blanket tariffs on imported steel and aluminum could increase the costs of our parts, appliances and home systems.

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Competition

We compete in the U.S. home service plan category and the broader U.S. home services industry. The home service plan category is highly competitive. 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.

Acquisition Activity

We anticipate that the highly fragmented nature of the home service plan category will continue to create strategic opportunities for acquisitions. In particular, we intend to focus strategically on underserved regions where we can enhance and expand service capabilities. Historically, we have used acquisitions to cost-effectively grow our customer base in high-growth geographies, and we intend to continue to do so. We may also explore opportunities to make strategic acquisitions that will expand our service offering in the broader home services industry. We have also used acquisitions to enhance our technological capabilities. In 2019, we acquired Streem to support the service experience for our customers, reduce costs and create potential new revenue opportunities across a variety of channels. We expect to use Streem’s services in our core home service plan business and in ProConnect’s on-demand business to deliver a superior service experience and reduce our costs. In 2020, we acquired a business to expand our ProConnect on-demand offering via their intellectual capital and know-how, technology platform capabilities and geographic presence.

Non-GAAP Financial Measures

To supplement our results presented in accordance with U.S. GAAP, we have disclosed non-GAAP financial measures that exclude or adjust certain items. We present within this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section the non-GAAP financial measure of Adjusted EBITDA. See “Results of Operations — Adjusted EBITDA” for a reconciliation of net income to Adjusted EBITDA, as well as “Key Business Metrics — Adjusted EBITDA” for further discussion of Adjusted EBITDA. Management uses Adjusted EBITDA to facilitate operating performance comparisons from period to period. We believe this non-GAAP financial measure provides investors, analysts and other interested parties useful information to evaluate our business performance as it facilitates company-to-company operating performance comparisons. While we believe this non-GAAP financial measure is useful in evaluating our business, it should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same as similarly entitled measures reported by other companies, limiting its usefulness as a comparative measure.

Key Business Metrics

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

revenue,

operating expenses,

net income,

earnings per share,

Adjusted EBITDA, 

Adjusted EBITDA margin,

net cash provided from operating activities,

Free Cash Flow,

growth in number of home service plans, and 

customer retention rate.

Revenue. Home service plan contracts are typically one year in duration. We recognize revenue at the agreed upon contractual amount over time using the input method in proportion to the costs expected to be incurred in performing services under the contracts. Our revenue is primarily a function of the volume and pricing of the services provided to our customers, as well as the mix of services provided. Our revenue volume is impacted by new home service plan sales, customer retention and acquisitions. We derive substantially all of our revenue from customers in the United States.

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

Net Income and Earnings Per Share. The presentation of net income and basic and diluted earnings per share provides measures of performance which are useful for investors, analysts and other interested parties in company-to-company operating performance comparisons. Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potentially dilutive shares of common stock been issued. The dilutive effect of stock options, 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 RSAs are reflected in diluted earnings per share by applying the treasury stock method.

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

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

Growth in Number of Home Service Plans and Customer Retention Rate. We report our growth in number of home service plans and customer retention rate in order to track the performance of our business. Home service plans represent our recurring customer base, which includes customers with active contracts for recurring services. Our customer retention rate is calculated as the ratio of ending home service plans to the sum of beginning home service plans, new home service plan sales and acquired accounts for the applicable period. These measures are presented on a rolling, 12-month basis in order to avoid seasonal anomalies.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K. There have been no material changes to our critical accounting policies for the three months ended March 31, 2021, certain of which are described below.

Goodwill and Intangible Assets

In accordance with applicable accounting standards, goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment on an annual basis, or more frequently, if circumstances indicate a potential impairment. As of March 31, 2021, we do not believe there are any circumstances, including those related to COVID-19, that would indicate a potential impairment of our goodwill or indefinite-lived intangible assets. We will continue to monitor the macroeconomic impacts on our business in our ongoing evaluation of potential impairments. 

‎

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Results of Operations

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

	Three Months Ended				Increase
	March 31,				(Decrease)		% of Revenue
(In millions)	2021		2020		2021 vs. 2020		2021		2020
Revenue	$	329	$	294	12	%	100	%	100	%
Cost of services rendered		181		147	23		55		50
Gross Profit		148		147	1		45		50
Selling and administrative expenses		118		105	13		36		36
Depreciation and amortization expense		9		8	14		3		3
Restructuring charges		1		3	*		—		1
Interest expense		13		15	(11)		4		5
Interest and net investment income		—		(2)	*		—		(1)
Loss on extinguishment of debt		1		—	*		—		—
Income before Income Taxes		5		17	(69)		2		6
Provision for income taxes		1		4	(88)		—		1
Net Income	$	5	$	13	(63)	%	1	%	4	%

________________________________

*     not meaningful

Revenue

We reported revenue of $329 million and $294 million for the three months ended March 31, 2021 and 2020, respectively. Revenue by major customer acquisition channel is as follows:

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

	Three Months Ended
	March 31,
(In millions)	2021		2020		Increase (Decrease)
Renewals	$	224	$	200	$	24	12	%
Real estate(1)		57		56		1	2
Direct-to-consumer(1)		41		35		6	16
Other		8		3		5	*
Total revenue	$	329	$	294	$	35	12	%

________________________________

* not meaningful

(1)First-year revenue only.

Revenue increased 12 percent for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily driven by higher renewal revenue due to improved price realization and growth in the number of renewed home service plans, due, in part, to customer retention initiatives. The increase in real estate revenue primarily reflects improved price realization. Due to the annual nature of our home service plan agreements, real estate revenue has continued to be adversely impacted by the decline in U.S. existing home sales in the second quarter of 2020. Additionally, the strong existing home seller’s market has constrained demand for home service plans in this channel. The increase in direct-to-consumer revenue primarily reflects growth in the number of first-year direct-to-consumer home service plans, mostly driven by increased investments in marketing. The increase in other revenue was driven by growth in ProConnect and Streem.

Number of home service plans, growth in number of home service plans and customer retention rate are presented below.

	As of
	March 31,
(In millions)	2021		2020
Number of home service plans	2.25		2.17
Growth in number of home service plans	4	%	3	%
Customer retention rate	75	%	75	%

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Cost of Services Rendered

We reported cost of services rendered of $181 million and $147 million for the three months ended March 31, 2021 and 2020, respectively. The following table provides a summary of changes in cost of services rendered:

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

(In millions)
Three Months Ended March 31, 2020	$	147
Impact of change in revenue		8
Contract claims costs		26
Three Months Ended March 31, 2021	$	181

The increase in contract claims costs reflects higher incidence in the appliance and plumbing trades, primarily a result of customers sheltering at home in response to the COVID-19 pandemic, increased cost pressures in the appliance trade due to industry-wide availability challenges and inflation, offset, in part, by process improvement benefits. Appliance parts availability challenges continued to drive additional replacements, contributing to the increased cost pressures. Contract claims costs also reflects an unfavorable weather impact of approximately $5 million.

Selling and Administrative Expenses

We reported selling and administrative expenses of $118 million and $105 million for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021 and 2020, selling and administrative expenses comprised sales, marketing and customer service costs of $81 million and $75 million, respectively, and general and administrative expenses of $37 million and $30 million, respectively. The following table provides a summary of changes in selling and administrative expenses:

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

(In millions)
Three Months Ended March 31, 2020	$	105
Sales and marketing costs		5
Customer service costs		2
Stock-based compensation expense		2
General and administrative costs		4
Three Months Ended March 31, 2021	$	118

The increase in sales and marketing costs was primarily driven by higher targeted marketing spend to drive sales growth in the direct-to-consumer channel and ProConnect and investments in Streem. The increase in customer service costs was primarily related to managing a higher number of service requests and investments in customer retention initiatives. General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology.

Depreciation Expense

Depreciation expense was $6 million and $5 million for the three months ended March 31, 2021 and 2020, respectively.

Amortization Expense

Amortization expense was $3 million for each of the three months ended March 31, 2021 and 2020.

Restructuring Charges

Restructuring charges were $1 million and $3 million for the three months ended March 31, 2021 and 2020, respectively.

For the three months ended March 31, 2021, restructuring charges primarily comprised accelerated depreciation of certain technology systems driven by efforts to enhance our technological capabilities. For the three months ended March 31, 2020, restructuring charges comprised lease termination costs and severance and other costs related to the decision to consolidate certain operations of Landmark with those of OneGuard.

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Interest Expense

Interest expense was $13 million and $15 million for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021, the decrease was primarily due to a decline in interest rates on the unhedged portion of our variable rate debt.

Interest and Net Investment Income

Interest and net investment income was less than $1 million and $2 million for the three months ended March 31, 2021 and 2020, respectively, and comprised interest on our investment portfolio.

Loss on Extinguishment of Debt

Loss on extinguishment of debt was $1 million for the three months ended March 31, 2021, which was recorded in connection with the partial repayment of the Term Loan Facility and includes the write-off of debt issuance costs and original issue discount. There were no such charges for the three months ended March 31, 2020.

Provision for Income Taxes

The effective tax rate on income was 9.8 percent and 25.0 percent for the three months ended March 31, 2021 and 2020, respectively. The decrease in the effective tax rate for the three months ended March 31, 2021 compared to 2020 is primarily due to excess tax benefits for share-based awards.

Net Income

Net income was $5 million and $13 million for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2021 compared to 2020, the decrease was driven by the aforementioned operating results, offset, in part, by a decrease in the provision for income taxes as a result of lower income before income taxes.

Adjusted EBITDA

Adjusted EBITDA was $36 million and $47 million for the three months ended March 31, 2021 and 2020, respectively. The following table provides a summary of changes in our Adjusted EBITDA:

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

(In millions)
Three Months Ended March 31, 2020	$	47
Impact of change in revenue		28
Contract claims costs		(26)
Sales and marketing costs		(5)
Customer service costs		(2)
General and administrative costs		(4)
Other		(1)
Three Months Ended March 31, 2021	$	36

The increase in contract claims costs reflects higher incidence in the appliance and plumbing trades, primarily a result of customers sheltering at home in response to the COVID-19 pandemic, increased cost pressures in the appliance trade due to industry-wide availability challenges and inflation, offset, in part, by process improvement benefits. Appliance parts availability challenges continued to drive additional replacements, contributing to the increased cost pressures. Contract claims costs also reflects an unfavorable weather impact of approximately $5 million.

The increase in sales and marketing costs was primarily driven by higher targeted marketing spend to drive sales growth in the direct-to-consumer channel and ProConnect and investments in Streem. The increase in customer service costs was primarily related to managing a higher number of service requests and investments in customer retention initiatives. General and administrative costs increased compared to prior year primarily due to increased personnel costs and investments in technology. Other primarily consists of interest and net investment income.

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A reconciliation of Net Income to Adjusted EBITDA is presented below.

	Three Months Ended
	March 31,
(In millions)	2021		2020
Net Income	$	5	$	13
Depreciation and amortization expense		9		8
Restructuring charges		1		3
Provision for income taxes		1		4
Non-cash stock-based compensation expense		6		3
Interest expense		13		15
Loss on extinguishment of debt		1		—
Adjusted EBITDA	$	36	$	47

Liquidity and Capital Resources

Liquidity

A substantial portion of our liquidity needs are due to debt service requirements on our indebtedness. The Credit Agreement, as well as the Indenture, contain covenants that limit or restrict our ability, including the ability of certain of our subsidiaries, to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates. As of March 31, 2021, we were in compliance with the covenants under the agreements that were in effect on such date. Based on current conditions, we do not believe the COVID-19 pandemic will affect our ongoing ability to meet the covenants in our debt instruments, including our Credit Agreement and Indenture.

Cash and cash equivalents totaled $538 million and $597 million as of March 31, 2021 and December 31, 2020, respectively. Our cash and cash equivalents include balances associated with regulatory requirements in our business. See “—Limitations on Distributions and Dividends by Subsidiaries.” As of March 31, 2021 and December 31, 2020, the total net assets subject to these third-party restrictions was $175 million and $180 million, respectively. As of March 31, 2021, there were $2 million of letters of credit outstanding and $248 million of available borrowing capacity under the Revolving Credit Facility. The letters of credit are posted in lieu of cash to satisfy regulatory requirements in certain states in which we operate. Available liquidity was $611 million at March 31, 2021, consisting of $363 million of cash not subject to third-party restrictions and $248 million of available borrowing capacity under the Revolving Credit Facility. We currently believe that cash generated from operations, our cash on hand and available borrowing capacity under the Revolving Credit Facility at March 31, 2021 will provide us with sufficient liquidity to meet our obligations for the foreseeable future.

On February 17, 2021, we repaid $100 million of outstanding principal amount of the Term Loan Facility. In connection with the repayment, we recorded a loss on extinguishment of debt of $1 million, which included the write-off of debt issuance costs and original issue discount.

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

Limitations on Distributions and Dividends by Subsidiaries

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

25

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

Furthermore, there are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. These restrictions are related to regulatory requirements. 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. We expect that such limitations will be in effect for the foreseeable future. In Texas, we are relieved of the obligation to post 75 percent of our otherwise required reserves because we operate a captive insurer approved by Texas regulators in order to satisfy such obligations. None of our subsidiaries are obligated to make funds available to us through the payment of dividends.

Cash Flows

Cash flows from operating, investing and financing activities, as reflected in the condensed consolidated statements of cash flows included in Part I, Item 1 of this report, are summarized in the following table.

	Three Months Ended
	March 31,
(In millions)	2021		2020
Net cash provided from (used for):
Operating activities	$	52	$	60
Investing activities		(7)		(3)
Financing activities		(105)		(3)
Cash (decrease) increase during the period	$	(59)	$	54

Operating Activities

Net cash provided from operating activities was $52 million for the three months ended March 31, 2021, compared to $60 million for the three months ended March 31, 2020.

Net cash provided from operating activities in 2021 comprised $21 million in earnings adjusted for non-cash charges and a $31 million decrease in cash required for working capital. The decrease in cash required for working capital was driven by growth in our underlying business.

Net cash provided from operating activities in 2020 comprised $25 million in earnings adjusted for non-cash charges and a $35 million decrease in cash required for working capital. The decrease in cash required for working capital was driven by growth in our underlying business.

Investing Activities

Net cash used for investing activities was $7 million and $3 million for the three months ended March 31, 2021 and 2020, respectively.

Capital expenditures were $7 million for the three months ended March 31, 2021, compared to $8 million for the three months ended March 31, 2020, and included recurring capital needs and technology projects. We expect capital expenditures for the full year 2021 relating to recurring capital needs and the continuation of investments in information systems and productivity enhancing technology to be approximately $35 million to $45 million. We have no additional material capital commitments at this time.

Cash flows provided from purchases, sales and maturities of securities, net, for the three months ended March 31, 2020 were $5 million and were driven by the maturities of marketable securities. There were no cash flows provided from purchases, sales and maturities of securities, net, for the three months ended March 31, 2021. There were no sales of marketable securities in the three months ended March 31, 2021 and 2020.

Financing Activities

Net cash used for financing activities was $105 million and $3 million for the three months ended March 31, 2021 and 2020, respectively, and primarily consisted of payments on debt. For the three months ended March 31, 2021, amounts include the partial repayment of $100 million of the Term Loan Facility.

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Contractual Obligations

Our 2020 Form 10-K includes disclosures of our contractual obligations and commitments as of December 31, 2020. We continue to make the contractually required payments, and, therefore, the 2021 obligations and commitments described in our 2020 Form 10-K have been reduced by the required payments.

During the three months ended March 31, 2021, we repaid $100 million of the outstanding principal amount of the Term Loan Facility. This amount was disclosed in our 2020 Form 10-K as a required principal payment in 2025. Based on applicable rates at March 31, 2021 plus specified margins, this partial repayment results in a reduction in interest expense of approximately $12 million in total for the years 2021 through 2025.

Financial Position

The following discussion describes changes in our financial position from December 31, 2020 to March 31, 2021:

Cash and cash equivalents decreased during the three months ended March 31, 2021, primarily due to the repayment of $100 million of outstanding principal amount of the Term Loan Facility, offset, in part, by cash provided from operating activities.

Accounts payable increased during the three months ended March 31, 2021, reflecting the timing of trade payables due to the seasonality of our business.

Deferred revenue increased during the three months ended March 31, 2021, primarily due to the recognition of a contract liability of $45 million related to the recognition of monthly-pay customer revenue on an other-than-straight-line basis to match the timing of cost recognition.

Long-term debt decreased during the three months ended March 31, 2021, due to the repayment of $100 million of outstanding principal amount of the Term Loan Facility.

Off-Balance Sheet Arrangements

As of March 31, 2021, we did not have any significant off-balance sheet arrangements.

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Accordingly, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

27

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The economy and its impact on discretionary consumer spending, labor wages, material costs, home resales, unemployment rates, insurance costs and medical costs could have a material adverse impact on 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. There have been no material changes to the market risk associated with debt obligations and other significant instruments from the risks described in Part II, Item 7A in our 2020 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. The design of any disclosure controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this report, were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

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

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information required with respect to this Part II, Item 1 can be found under Note 8 to the condensed consolidated financial statements included in Part I, Item 1 of this report.

ITEM 1A. RISK FACTORS

For information regarding factors that could affect our business, financial condition or results of operations, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our 2020 Form 10-K. There have been no material changes to the risk factors disclosed in our 2020 Form 10-K. The risks described in our 2020 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations. 
‎

29

ITEM 6. EXHIBITS

Exhibit ‎Number	Description
2.1	Separation and Distribution Agreement, dated as of September 28, 2018, by and between Terminix Global Holdings, Inc. (formerly ServiceMaster Global Holdings, Inc.) and frontdoor, inc. (incorporated by reference to Exhibit 2.1 to Frontdoor’s Current Report on Form 8-K filed on October 1, 2018).
3.1	Amended and Restated Certificate of Incorporation of frontdoor, inc. (incorporated by reference to Exhibit 3.1 to Frontdoor’s Current Report on Form 8-K filed on October 1, 2018).
3.2	Amended and Restated Bylaws of frontdoor, inc. (incorporated by reference to Exhibit 3.2 to Frontdoor’s Current Report on Form 8-K filed on October 1, 2018).
10.1#	Form of Non-Qualified Stock Option Agreement under the frontdoor, inc. Omnibus Plan, effective March 2021.
10.2#	Form of Restricted Stock Unit Agreement under the frontdoor, inc. Omnibus Plan, effective March 2021.
10.3#	Form of Performance Shares Agreement under the frontdoor, inc. Omnibus Plan, effective March 2021.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a - 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13a - 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase
101.PRE*	Inline XBRL Extension Presentation Linkbase
104*	Cover page formatted as Inline XBRL and included in Exhibit 101.

___________________________________

# Denotes management compensatory plans, contracts or arrangements.

* Filed herewith.

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

 
‎

30

SIGNATURE

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

Date: May 6, 2021

frontdoor, inc.
(Registrant)
By:	/s/ Brian K. Turcotte
	Brian K. Turcotte
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

31

EX-10.1

Exhibit 10.1

FORM AGREEMENT

NON-QUALIFIED STOCK OPTION GRANT NOTICE
UNDER THE
FRONTDOOR, INC.
2018 OMNIBUS INCENTIVE PLAN

frontdoor, inc., a Delaware corporation (the “Company”), pursuant to its 2018 Omnibus Incentive Plan (the “Plan”), hereby grants to the Associate set forth below the number of Non-Qualified Stock Options (“Options”), set forth below.  The Options are subject to all of the terms and conditions as set forth in this grant notice, in the Option Terms and Conditions (attached hereto) (the “Option T&Cs”), and in the Plan, all of which are incorporated herein in their entirety.  Capitalized terms not otherwise defined herein or in the Option T&Cs shall have the meaning set forth in the Plan.

Associate:###PARTICIPANT_NAME###

Grant Date:  ###GRANT_DATE###

Number of

Options:  ###TOTAL_AWARDS###

Option Price:  ###GRANT_PRICE###

Option Period

Expiration Date:  Ten (10) years from the Grant Date

Vesting:Provided that the Associate has not undergone a Termination of employment at the time of each applicable vesting date (or event), the Options will vest as follows:

· 25% of the Options will vest on the first anniversary of the Grant Date; and

· 6.25% of the Options will vest on the next quarterly anniversary of the date of the Grant Date and on each quarterly anniversary of the Grant Date thereafter (such that in the ordinary course, all of the Options will have vested on the fourth anniversary of the Grant Date);

provided,  however,thatin the event that the Associate undergoes a Termination of employment as a result of such Associate’s death or Disability, any unvested Options held by such Associate shall vest as of the date of such Termination.

***

1

FRONTDOOR, INC.

By:
Name:
Title: 

2

[Signature Page to Non-Qualified Stock Option Agreement]

THE UNDERSIGNED ASSOCIATE ACKNOWLEDGES RECEIPT OF THIS NON-QUALIFIED STOCK OPTION GRANT NOTICE, THE TERMS AND CONDITIONS AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF OPTIONS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS NON-QUALIFIED STOCK OPTION GRANT NOTICE, THE TERMS AND CONDITIONS AND THE PLAN.

Associate

________________________________

###PARTICIPANT_NAME###

3

[Signature Page to Non-Qualified Stock Option Agreement]

TERMS AND CONDITIONS
OF
NON-QUALIFIED STOCK OPTIONS
UNDER THE
FRONTDOOR, INC.
2018 OMNIBUS INCENTIVE PLAN

Pursuant to the Non-Qualified Stock Option Grant Notice (the “Grant Notice”) delivered to the Associate (as defined in the Grant Notice), and subject to the terms of these Non-Qualified Stock Option Terms and Conditions (these “Option T&Cs”) and the frontdoor, inc. 2018 Omnibus Incentive Plan (the “Plan”), frontdoor, inc., a Delaware corporation (the “Company”), and the Associate agree as follows.  Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan or the Grant Notice.

1. Grant of Options.  Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Associate the number of Non-Qualified Stock Options (the “Options”) provided in the Grant Notice (with each Option representing the right to purchase one Share), at an Option Price as provided in the Grant Notice.  The Company may make one or more additional grants of Options to the Associate under these Option T&Cs by providing the Associate with a new Grant Notice, which may also include any terms and conditions differing from these Option T&Cs to the extent provided therein.  The Company reserves all rights with respect to the granting of additional Options and makes no implied promise to grant additional Options.

2. Vesting.  Subject to the conditions contained herein and in the Plan, the Options shall vest as provided in the Grant Notice. 

3. Treatment of Options Upon Termination. 

(a) Unless otherwise (x) determined by the Administrator or (y) set forth in the Grant Notice, upon Termination of employment of the Associate:

(i) all vesting with respect to the Options shall cease (after taking into account any vesting of Options as set forth in the Grant Notice); and

(ii) the unvested Options shall be forfeited to the Company by the Associate as of the date of such Termination for no consideration.

(b) All vested Options held by the Associate following a Termination (other than for Cause) shall remain exercisable as follows:

(i) In the event of a Termination as a result of the Associate’s death or Disability or a retirement from active service on or after the Associate reaching normal retirement age, the vested Options shall remain exercisable until the earlier of (x) the first anniversary of the Associate’s Termination, (y) the tenth anniversary of the Grant Date and (z) the date on which the Options are cancelled pursuant to Section 5(a); and

(ii) In the event of a Termination for any other reason (other than for Cause), the vested Options shall remain exercisable until the earlier of (x) the three-month anniversary of the Associate’s

1

Termination, (y) the tenth anniversary of the Grant Date and (z) the date on which the Options are cancelled pursuant to Section 5(a).

(c) Notwithstanding the foregoing, in the event of an Associate’s Termination for Cause, all Options (whether or not then vested or exercisable) shall be forfeited to the Company by the Associate as of the date of such Termination for no consideration.

4. Manner of Exercise.  Subject to such reasonable administrative regulations as the Administrator may adopt from time to time, the exercise of vested Options by the Associate shall be pursuant to procedures set forth in Section 7.3 of the Plan or established by the Administrator from time to time and shall include the Associate specifying the proposed date on which the Associate desires to exercise a vested Option (the “Exercise Date”), the number of Shares with respect to which the Options are being exercised (the “Exercise Shares”) and the aggregate Option Price for such Exercise Shares (the “Exercise Price”) or such other or different requirements as may be imposed by the Company.  Unless otherwise determined by the Administrator, (a) on or before the Exercise Date, the Associate shall deliver to the Company full payment for the Exercise Shares (i) in cash (through wire transfer only), (ii) by personal, certified, or bank cashier check, (iii) if available, through the use of the method set forth in Section 7.3(c)(iii) of the Plan, or (iv) with the consent of the Administrator, through the use of any of the methods described in Sections 7.3(c)(ii) or (iv) of the Plan, in an amount equal to (x) the Exercise Price plus (y) the minimum amount necessary to satisfy any and all Withholding Taxes arising in connection with the exercise of the Option, unless the Company or any Subsidiary employing the Associate has exercised its right under Section 15.11 of the Plan to withhold Shares issuable upon the exercise of the Option to satisfy such Withholding Taxes (notice of the amount which shall be provided by the Administrator as soon as practicable following receipt by the Administrator of the notice of exercise) and (b) upon receipt of such payment of the Exercise Price and the necessary amounts to satisfy Withholding Taxes, the Company shall register the issuance of the Exercise Shares on its records (or direct such issuance to be registered by the Company’s transfer agent).  The Company may require the Associate to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise or (ii) to comply with or satisfy the requirements of the Securities Act, applicable state or non-U.S. securities laws or any other law. 

5. Effect of a Change in Control. 

(a) Unless otherwise (x) determined by the Administrator or (y) set forth in the Grant Notice, no cancellation, acceleration of vesting or other payment shall occur with respect to any Option in connection with a Change in Control occurring prior to the fourth anniversary of the Grant Date, if the Administrator reasonably determines prior to the Change in Control that the Associate shall receive an “Alternative Award” meeting the requirements of the Plan; provided, however, that if within two years following a Change in Control, the Associate’s employment is involuntarily (other than for Cause) terminated or the Associate resigns with Good Reason (as defined below), at a time when any portion of the Alternative Award is unvested, the unvested portion of such Alternative Award shall immediately vest in full and such Associate shall be provided with either cash or marketable stock equal to the fair market value of the stock subject to the Alternative Award on the date of termination (and, in the case of Alternative Awards that are stock options or stock appreciation rights, in excess

2

of the exercise price or base price that the Associate would be required to pay in respect of such Alternative Award).

(b) For purposes hereof, “Good Reason” means, without the Associate’s written consent, the occurrence of any of the following events:

(i) The reduction in any material respect in the Associate’s position(s), authorities or responsibilities that the Associate had with the Company immediately prior to the time of the Change in Control;

(ii) A material reduction in the Associate’s annual rate of base salary, annual target cash bonus opportunity or annual target long-term incentive opportunity, each in effect as of immediately prior to the date of the Change in Control; or

(iii) A material change in the location of the Associate’s location of work which will be at least more than 50 miles from the Associate’s place at work at the Company immediately prior to the date of the Change in Control.

If the Associate determines that Good Reason exists, the Associate must notify the Company in writing, within ninety (90) days following the initial existence of such grounds that the Associate determines constitutes Good Reason, or else such event shall not constitute Good Reason under the terms of the Associate’s employment.  If the Company remedies such event within thirty (30) days following receipt of such notice, the Associate may not terminate employment for Good Reason as a result of such event (the “Cure Period”).  In the event the Company does not timely remedy such event, the Associate must terminate his employment ninety (90) days following the end of the Cure Period.

6. Restriction on Transfer; Non-Transferability of Options.  The Options are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than by will or by the laws of descent and distribution to the estate of the Associate upon the Associate’s death or with the Company’s consent.  Except as otherwise provided herein, no assignment or transfer of the Options, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such attempted assignment or transfer the Options shall terminate and become of no further effect. 

7. Tax Withholding.  Any applicable tax withholding requirements in connection with the Options shall be satisfied in accordance with Section 15.11 of the Plan.

8. Restrictive Covenant Agreement.  The Associate acknowledges and agrees that as a condition of receipt of the grant of the Options the Associate shall execute and deliver to the Company a Noncompetition, Assignment of Work Product and Confidentiality Agreement (the “Restrictive Covenant Agreement”), in the form attached hereto as Exhibit A, the provisions of which are hereby incorporated by reference.  The Associate acknowledges that the Associate has read and understands such covenants, including, specifically, the scope and duration thereof, and acknowledges and agrees that the terms of such Restrictive Covenant Agreement are in consideration for the Associate’s receipt of the grant of the Options under the Grant Notice, the Associate’s receipt of other benefits provided in Grant Notice, these Option T&Cs, the Plan and elsewhere, and the Associate’s access to Confidential Information (as defined in the Restrictive Covenant Agreement).  The Restrictive Covenant Agreement is in addition to and does not supersede any other agreements between the Associate and the Company and its Subsidiaries prohibiting competition with the Company and its

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Subsidiaries.  No provisions in the Plan shall narrow the restrictions of, or terminate, the Restrictive Covenant Agreement and in the event of any inconsistency between the Restrictive Covenant Agreement and the Plan, the Restrictive Covenant Agreement shall govern.  Nothing in the Restrictive Covenant Agreement shall be construed to restrict the right of an attorney to practice law to the extent protected by statute, common law or applicable rules of professional conduct.

9. Miscellaneous.

(a) Incorporation of Forfeiture Provisions.  The Associate acknowledges and agrees that, pursuant to the Plan, he or she shall be subject to the Company’s Clawback Policy and any generally applicable disgorgement or forfeiture provisions set forth in Article XIII of the Plan as of the Grant Date or as required by applicable law after the Grant Date.

(b) Dispute Resolution.  Any dispute or controversy between the Associate and the Company, whether arising out of or relating to these Option T&Cs, the breach of these Option T&Cs, or otherwise, shall be resolved in accordance with the frontdoor We Listen Dispute Resolution Plan then in effect.  Notwithstanding the foregoing, the Associate agrees that the Company may seek a temporary restraining order and/or preliminary injunction in any court of competent jurisdiction, without the posting of a bond, in order to preserve the status quo or to enforce the restrictive covenants contained on the Restrictive Covenant Agreement.

(c) Authorization to Share Personal Data.  The Associate authorizes any Affiliate of the Company that employs the Associate or that otherwise has or lawfully obtains personal data relating to the Associate to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent appropriate in connection with these Option T&Cs or the administration of the Plan.

(d) No Rights as Stockholder; No Voting Rights.  The Associate shall have no rights as a stockholder of the Company with respect to any Options or Shares covered by the Options until the delivery of the Shares and no adjustment shall be made for dividends or distributions or other rights in respect of such Shares for which the record date is prior to the date upon which the Shares are delivered.

(e) No Right to Continued Employment.  Nothing in these Option T&Cs shall be deemed to confer on the Associate any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.

(f) Binding Effect; Benefits.  These Option T&Cs shall be binding upon and inure to the benefit of the parties to these Option T&Cs and their respective successors and assigns.  Nothing in these Option T&Cs, express or implied, is intended or shall be construed to give any person other than the parties to these Option T&Cs or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(g) Waiver; Amendment.

(i) Waiver.  Any party hereto or beneficiary hereof may by written notice to the other party (A) waive compliance with any of the conditions or covenants of the other party contained in these Option T&Cs and (B) waive or modify performance of any of the obligations of the other party under these Terms and Condition.  Except as provided in the preceding sentence, no action taken pursuant to these Option T&Cs, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein.  The waiver by any party hereto or

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beneficiary hereof of a breach of any provision of these Option T&Cs shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.

(ii) Amendment.  These Option T&Cs may not be amended, modified or supplemented orally, but only by a written instrument executed by the Associate and the Company.

(h) Assignability.  Neither these Option T&Cs nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Associate without the prior written consent of the other party.

(i) Applicable Law and Forum.  These Option T&Cs shall be governed by and construed in accordance with the law of the State of Delaware regardless of the application of rules of conflict of law that would apply the laws of any other jurisdiction.  Subject to the dispute resolution provision contained herein, any judicial action to enforce, interpret or challenge these Option T&Cs shall be brought in the federal or state courts located in the State of Delaware, which shall be the exclusive forum for resolving such disputes.  Both parties irrevocably consent to the personal jurisdiction of such courts for purposes of any such action.

(j) Waiver of Jury Trial.  Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding arising out of these Option T&Cs or any transaction contemplated hereby.  Each party (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this section.

(k) Section and Other Headings, etc.  The section and other headings contained in these Option T&Cs are for reference purposes only and shall not affect the meaning or interpretation of these Option T&Cs.

(l) Counterparts.  These Option T&Cs may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.  To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept these Option T&Cs electronically, such acceptance shall constitute the Associate’s signature hereto.

(m) Plan.   The terms and provisions of the Plan are incorporated herein by reference.  In the event of a conflict or inconsistency between the terms and provisions of the Plan or the Grant Notice and the provisions of these Option T&Cs, the Plan or the Grant Notice, as applicable, shall govern and control.

***

5

EX-10.2

Exhibit 10.2

FORM AGREEMENT

RESTRICTED STOCK UNIT GRANT NOTICE
UNDER THE
FRONTDOOR, INC.
2018 OMNIBUS INCENTIVE PLAN

frontdoor, inc., a Delaware corporation (the “Company”), pursuant to its 2018 Omnibus Incentive Plan (the “Plan”), hereby grants to the Associate set forth below the number of Restricted Stock Units (“RSUs”), set forth below.  The RSUs are subject to all of the terms and conditions as set forth in this grant notice, in the Restricted Stock Unit Terms and Conditions (attached hereto) (the “RSU T&Cs”), and in the Plan, all of which are incorporated herein in their entirety.  Capitalized terms not otherwise defined herein or in the RSU T&Cs shall have the meaning set forth in the Plan.

Associate:###PARTICIPANT_NAME###

Grant Date:  ###GRANT_DATE###

Number of

RSUs:  ###TOTAL_AWARDS###

Vesting:Provided that the Associate has not undergone a Termination of employment at the time of each applicable vesting date (or event), the RSUs will vest as follows:

· One third (1/3) of the RSUs will vest on the first anniversary of the Grant Date; and

· One third (1/3) of the RSUs will vest on the second anniversary of the Grant Date; and

· One third (1/3) of the RSUs will vest on the third anniversary of the Grant Date;

provided,  however,thatin the event that the Associate undergoes a Termination of employment as a result of such Associate’s death or Disability, such Associate shall vest with respect to the RSUs that would have vested on the next scheduled vesting date multiplied by a fraction, the numerator of which is the number of days elapsed since (x) the Grant Date, if such Termination of employment occurs on or prior to the first anniversary of the Grant Date, or (y) the most recent prior anniversary of the Grant Date, if such Termination of employment occurs after the first anniversary of the Grant Date, and the denominator of which is 365 (or 366, as applicable).

***

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FRONTDOOR, INC.

By:
Name:
Title: 

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[Signature Page to Time-Based Restricted Stock Unit Award]

THE UNDERSIGNED ASSOCIATE ACKNOWLEDGES RECEIPT OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE TERMS AND CONDITIONS AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF RESTRICTED STOCK UNITS HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS RESTRICTED STOCK UNIT GRANT NOTICE, THE TERMS AND CONDITIONS AND THE PLAN.

Associate

________________________________

###PARTICIPANT_NAME###

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[Signature Page to Time-Based Restricted Stock Unit Award]

TERMS AND CONDITIONS
OF
RESTRICTED STOCK UNITS
UNDER THE
FRONTDOOR, INC.
2018 OMNIBUS INCENTIVE PLAN

Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) delivered to the Associate (as defined in the Grant Notice), and subject to the terms of these Restricted Stock Unit Terms and Conditions (these “RSU T&Cs”) and the frontdoor, inc. 2018 Omnibus Incentive Plan (the “Plan”), frontdoor, inc., a Delaware corporation (the “Company”), and the Associate agree as follows.  Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan and the Grant Notice.

1. Grant of Restricted Stock Units.  Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Associate the number of Restricted Stock Units (the “RSUs”) provided in the Grant Notice.  The Company may make one or more additional grants of Restricted Stock Units to the Associate under these RSU T&Cs by providing the Associate with a new Grant Notice, which may also include any terms and conditions differing from these RSU T&Cs to the extent provided therein.  The Company reserves all rights with respect to the granting of additional Restricted Stock Units and makes no implied promise to grant additional Restricted Stock Units.

2. Vesting.  Subject to the conditions contained herein and in the Plan, the RSUs shall vest as provided in the Grant Notice. 

3. Settlement of RSUs.  Subject to Section 8 hereof, promptly following the date on which any RSUs becomes vested, and in any event no later than March 15th of the calendar year following the calendar year in which such vesting occurs (the “Settlement Date”), the Company shall issue to the Associate or the Associate’s beneficiary, without charge, one (1) share of Company Common Stock for each such vested RSU; provided, however, that the Administrator may, in its sole discretion, elect to (A) pay cash or part cash and part Shares in lieu of issuing only Shares; or (B) defer the issuance of Shares (or cash or part cash and Shares, as the case may be) beyond the Settlement Date if such extension would not cause adverse tax consequences under Section 409A of the Code or any successor provision.  If a cash payment is made in lieu of issuing Shares in respect of such RSUs, the amount of such payment shall be equal to the Fair Market Value per share of the Company Common Stock as of the applicable vesting date (or applicable date of settlement if clause (B) above is applicable).

4. Treatment of RSUs Upon Termination.  Unless otherwise (x) determined by the Administrator or (y) set forth in the Grant Notice, upon Termination of employment of the Associate:

(a) all vesting with respect to the RSUs shall cease (after taking into account any vesting of Restricted Stock Units as set forth in the Grant Notice); and

(b) the unvested RSUs shall be forfeited to the Company by the Associate as of the date of such Termination for no consideration.

5. Effect of a Change in Control. 

(a) Unless otherwise (x) determined by the Administrator or (y) set forth in the Grant Notice, no cancellation, acceleration of vesting or other payment shall occur with respect to any RSU in connection with a Change in Control occurring prior to the third anniversary of the Grant Date, if the Administrator reasonably determines prior to the Change in Control that the Associate shall receive an “Alternative Award” meeting the requirements of the Plan; provided, however, that if within two years following a Change in Control, the

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Associate’s employment is involuntarily (other than for Cause) terminated or the Associate resigns with Good Reason (as defined below), at a time when any portion of the Alternative Award is unvested, the unvested portion of such Alternative Award shall immediately vest in full and such Associate shall be provided with either cash or marketable stock equal to the fair market value of the stock subject to the Alternative Award on the date of termination.

(b) For purposes hereof, “Good Reason” means, without the Associate’s written consent, the occurrence of any of the following events:

(i) The reduction in any material respect in the Associate’s position(s), authorities or responsibilities that the Associate had with the Company immediately prior to the time of the Change in Control;

(ii) A material reduction in the Associate’s annual rate of base salary, annual target cash bonus opportunity or annual target long-term incentive opportunity, each in effect as of immediately prior to the date of the Change in Control; or

(iii) A material change in the location of the Associate’s location of work which will be at least more than 50 miles from the Associate’s place at work at the Company immediately prior to the date of the Change in Control.

If the Associate determines that Good Reason exists, the Associate must notify the Company in writing, within ninety (90) days following the initial existence of such grounds that the Associate determines constitutes Good Reason, or else such event shall not constitute Good Reason under the terms of the Associate’s employment.  If the Company remedies such event within thirty (30) days following receipt of such notice, the Associate may not terminate employment for Good Reason as a result of such event (the “Cure Period”).  In the event the Company does not timely remedy such event, the Associate must terminate his employment ninety (90) days following the end of the Cure Period.

6. Dividend Equivalents.  If the Company pays any cash dividend or similar cash distribution on the Company Common Stock, the Company shall credit to the Associate’s account with additional RSUs in an amount equal to (a) the product of (i) the number of the Associate’s RSUs as of the record date for such distribution times (ii) the per share amount of such dividend or similar cash distribution on Company Common Stock, divided by (b) the Fair Market Value on the date such additional RSUs are so credited, rounded down to the nearest whole number of shares.  If the Company makes any dividend or other distribution on the Company Common Stock in the form of Company Common Stock or other securities, the Company will credit the Associate’s account with that number of additional shares of Company Common Stock or other securities that would have been distributed with respect to that number of shares of Company Common Stock underlying the Associate’s RSUs as of the record date thereof.  Any cash amounts or shares of Company Common Stock or other securities credited to the Associate’s account shall be paid to the Associate on the applicable settlement date.

7. Restriction on Transfer; Non-Transferability of RSUs.  The RSUs are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise).  Except as otherwise provided herein, no assignment or transfer of the RSUs, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest

2

in the assignee or transferee any interest or right herein whatsoever, but immediately upon such attempted assignment or transfer the RSUs shall terminate and become of no further effect. 

8. Tax Withholding.  Any applicable tax withholding requirements in connection with the RSUs shall be satisfied in accordance with Section 15.11 of the Plan.

9. Restrictive Covenant Agreement.  The Associate acknowledges and agrees that as a condition of receipt of the grant of the RSUs the Associate shall execute and deliver to the Company a Noncompetition, Assignment of Work Product and Confidentiality Agreement (the “Restrictive Covenant Agreement”), in the form attached hereto as Exhibit A, the provisions of which are hereby incorporated by reference.  The Associate acknowledges that the Associate has read and understands such covenants, including, specifically, the scope and duration thereof, and acknowledges and agrees that the terms of such Restrictive Covenant Agreement are in consideration for the Associate’s receipt of the grant of the RSUs under the Grant Notice, the Associate’s receipt of other benefits provided in the Grant Notice, these RSU T&Cs, the Plan and elsewhere, and the Associate’s access to Confidential Information (as defined in the Restrictive Covenant Agreement).  The Restrictive Covenant Agreement is in addition to and does not supersede any other agreements between the Associate and the Company and its Subsidiaries prohibiting competition with the Company and its Subsidiaries.  No provisions in the Plan shall narrow the restrictions of, or terminate, the Restrictive Covenant Agreement and in the event of any inconsistency between the Restrictive Covenant Agreement and the Plan, the Restrictive Covenant Agreement shall govern.  Nothing in the Restrictive Covenant Agreement shall be construed to restrict the right of an attorney to practice law to the extent protected by statute, common law or applicable rules of professional conduct.

10. Miscellaneous.

(a) Incorporation of Forfeiture Provisions.  The Associate acknowledges and agrees that, pursuant to the Plan, he or she shall be subject to the Company’s Clawback Policy and any generally applicable disgorgement or forfeiture provisions set forth in Article XIII of the Plan as of the Grant Date or as required by applicable law after the Grant Date.

(b) Dispute Resolution.  Any dispute or controversy between the Associate and the Company, whether arising out of or relating to these RSU T&Cs, the breach of these RSU T&Cs, or otherwise, shall be resolved in accordance with the frontdoor We Listen Dispute Resolution Plan then in effect.  Notwithstanding the foregoing, the Associate agrees that the Company may seek a temporary restraining order and/or preliminary injunction in any court of competent jurisdiction, without the posting of a bond, in order to preserve the status quo or to enforce the restrictive covenants contained on the Restrictive Covenant Agreement.

(c) Authorization to Share Personal Data.  The Associate authorizes any Affiliate of the Company that employs the Associate or that otherwise has or lawfully obtains personal data relating to the Associate to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent appropriate in connection with these RSU T&Cs or the administration of the Plan.

(d) No Rights as Stockholder; No Voting Rights.  The Associate shall have no rights as a stockholder of the Company with respect to any RSUs or Shares covered by the RSUs until the delivery of the Shares.

(e) No Right to Continued Employment.  Nothing in these RSU T&Cs shall be deemed to confer on the Associate any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.

(f) Binding Effect; Benefits.  These RSU T&Cs shall be binding upon and inure to the benefit of the parties to these RSU T&Cs and their respective successors and assigns.  Nothing in these RSU T&Cs,

3

express or implied, is intended or shall be construed to give any person other than the parties to these RSU T&Cs or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(g) Waiver; Amendment.

(i) Waiver.  Any party hereto or beneficiary hereof may by written notice to the other party (A) waive compliance with any of the conditions or covenants of the other party contained in these RSU T&Cs and (B) waive or modify performance of any of the obligations of the other party under these Terms and Condition.  Except as provided in the preceding sentence, no action taken pursuant to these RSU T&Cs, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein.  The waiver by any party hereto or beneficiary hereof of a breach of any provision of these RSU T&Cs shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.

(ii) Amendment.  These RSU T&Cs may not be amended, modified or supplemented orally, but only by a written instrument executed by the Associate and the Company.

(h) Assignability.  Neither these RSU T&Cs nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Associate without the prior written consent of the other party.

(i) Applicable Law and Forum.  These RSU T&Cs shall be governed by and construed in accordance with the law of the State of Delaware regardless of the application of rules of conflict of law that would apply the laws of any other jurisdiction.  Subject to the dispute resolution provision contained herein, any judicial action to enforce, interpret or challenge these RSU T&Cs shall be brought in the federal or state courts located in the State of Delaware, which shall be the exclusive forum for resolving such disputes.  Both parties irrevocably consent to the personal jurisdiction of such courts for purposes of any such action.

(j) Waiver of Jury Trial.  Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding arising out of these RSU T&Cs or any transaction contemplated hereby.  Each party (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this section.

(k) Section and Other Headings, etc.  The section and other headings contained in these RSU T&Cs are for reference purposes only and shall not affect the meaning or interpretation of these RSU T&Cs.

(l) Counterparts.  These RSU T&Cs may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. 

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To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept these RSU T&Cs electronically, such acceptance shall constitute the Associate’s signature hereto.

(m) Plan.   The terms and provisions of the Plan are incorporated herein by reference.  In the event of a conflict or inconsistency between the terms and provisions of the Plan or the Grant Notice and the provisions of these RSU T&Cs, the Plan or the Grant Notice, as applicable, shall govern and control.

***

5

EX-10.3

Exhibit 10.3

FORM AGREEMENT

PERFORMANCE SHARE GRANT NOTICE
UNDER THE
FRONTDOOR, INC. 2018 OMNIBUS INCENTIVE PLAN

frontdoor, inc., a Delaware corporation (the “Company”), pursuant to its 2018 Omnibus Incentive Plan, as may be amended from time to time (the “Plan”), hereby grants to the Associate set forth below the number of Performance Shares set forth below.  The Performance Shares are subject to all of the terms and conditions as set forth in this Performance Share Grant Notice (this “Grant Notice”), in the Performance Share T&Cs (attached hereto), and in the Plan, all of which are incorporated herein in their entirety. 

Associate:	###PARTICIPANT_NAME###
Grant Date:	###GRANT_DATE###
Target Performance Shares:	###TOTAL_AWARDS###
Performance Cycle:	January 1, ____ to December 31, ____
Performance Goal:	Revenue
Performance Goal Levels and Earned Percentage:	Provided that the Associate has not undergone a Termination of employment (except as provided in Section 4(c)(ii) of the Performance Share T&Cs), the number of Performance Shares that will be eligible to vest hereunder (the “Earned Performance Shares”) will be an amount equal to the product of (i) the number of Target Performance Shares as set forth above and granted hereunder multiplied by (ii) the earned vesting percentage that corresponds to the performance level of the Performance Goal achieved during the Performance Cycle, as set forth in the table below (the “Earned Percentage”); provided, that, to the extent that the performance achieved is in between two Performance Goal levels, the Earned Percentage shall be determined based on linear interpolation; provided,  further, that (x) if the performance achieved is less than the Threshold Goal, the Earned Percentage shall be 0%, and (y) if the performance achieved is more than the Maximum Goal, the Earned Percentage shall be capped at 200%.

Performance Goal Level	Revenue	Earned Percentage of Target Performance Shares upon Achievement of Performance Goal
Threshold Goal	$_________	50%
Target Goal	$________	100%
Above Target Goal	$________	150%
Maximum Goal	$________	200%

Certification Date”).

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2 Vesting:	The Earned Performance Shares, as determined in accordance with this Grant Notice, shall vest on the third anniversary of the Grant Date (the “Vesting Date”).  After the completion of the Performance Cycle but before the Vesting Date, the Administrator shall determine and certify the level of achievement, including the Revenue achieved and the Earned Percentage, of the Performance Goal during the Performance Cycle (the date of such certification referred to herein as the “Certification Date”).
Definitions:	Capitalized terms not otherwise defined herein or in the Performance Share T&Cs shall have the meanings set forth in the Plan.  For purposes of this Notice and the Performance Share T&Cs, the following definitions shall apply:
	“Revenue” shall be equal to the Company’s consolidated revenue for the last twelve months of the Performance Cycle, as reported on its consolidated and combined statements of operation and comprehensive income, calculated in conformity with U.S. generally accepted accounting principles (“GAAP”), and as publicly disclosed in the Company’s earnings release or in its filings with the U.S. Securities and Exchange Commission.  Revenue may be adjusted positively or negatively, at the discretion of the Administrator, for Unanticipated Items.
	“Target Vesting Percentage” shall mean an Earned Percentage with respect to the Performance Goal equal to the Target Goal, as set forth in the above table.
	“Unanticipated Items” are items determined by the Administrator in its sole discretion to have been unanticipated items occurring during the Performance Cycle, the impact of which could not have been reasonably anticipated in the ordinary course of business as of the Grant Date, including, without limitation, mergers and investments, divestitures, natural disasters, storms, pandemics, foreign exchange variations, material litigation, material regulatory developments, and changes in GAAP accounting rules or their application; provided,  however, that revenue associated with mergers and acquisitions with less than $_________ for a trailing twelve (12)-month period at the time of the applicable transaction date shall not be an Unanticipated Item excluded from Revenue.

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FRONTDOOR, INC.

By:
Name:

Title: 

4

THE UNDERSIGNED ASSOCIATE ACKNOWLEDGES RECEIPT OF THIS PERFORMANCE SHARE GRANT NOTICE, THE TERMS AND CONDITIONS AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF PERFORMANCE SHARES HEREUNDER, AGREES TO BE BOUND BY THE TERMS OF THIS PERFORMANCE SHARE GRANT NOTICE, THE TERMS AND CONDITIONS AND THE PLAN.

Associate

________________________________

###PARTICIPANT_NAME###

5

TERMS AND CONDITIONS
OF
PERFORMANCE SHARES
UNDER THE
FRONTDOOR, INC. 2018 OMNIBUS INCENTIVE PLAN

Pursuant to the Grant Notice delivered to the Associate (as defined in the Grant Notice), and subject to these Terms and Conditions of Performance Share (these “Performance Share T&Cs”) and the frontdoor, inc. 2018 Omnibus Incentive Plan (the “Plan”), frontdoor, inc., a Delaware corporation (the “Company”), and the Associate agree as follows.  Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan or the Grant Notice.

1. Grant of Performance Shares.  Subject to the terms and conditions set forth herein as well as in the Plan and the Grant Notice, the Company hereby grants to the Associate the number of Target Performance Shares provided in the Grant Notice.  The Company may make one or more additional grants of Performance Shares to the Associate under these Performance Share T&Cs by providing the Associate with a new Grant Notice, which may also include any terms and conditions differing from these Performance Share T&Cs to the extent provided therein.  The Company reserves all rights with respect to the granting of additional Performance Shares and makes no implied promise to grant additional Performance Shares.

2. Vesting.  Subject to the conditions contained herein and in the Plan, the Performance Shares shall vest as provided in the Grant Notice.  

3. Settlement of Performance Shares.  Subject to Section 8 hereof, promptly following the date on which any Performance Shares become vested, and in any event no later than March 15th of the calendar year following the calendar year in which such vesting occurs (the “Settlement Date”), the Company shall issue to the Associate or the Associate’s beneficiary, without charge, one (1) share of Company Common Stock for each such vested Performance Share; provided,however, that the Administrator may, in its sole discretion, elect to (a) pay cash or part cash and part Shares in lieu of issuing only Shares; or (b) defer the issuance of Shares (or cash or part cash and Shares, as the case may be) beyond the Settlement Date if such extension would not cause adverse tax consequences under Section 409A of the Code or any successor provision.  If a cash payment is made in lieu of issuing Shares in respect of such Performance Shares, the amount of such payment shall be equal to the Fair Market Value per share of the Company Common Stock as of the applicable vesting date.

4. Treatment of Performance Shares upon Termination.  Upon any Termination of employment of the Associate:

(a) If such Termination is for Cause or by the Associate without Good Reason (as defined below), in each case, prior to the Vesting Date, all unvested Performance Shares will be forfeited to the Company by the Associate as of the date of such Termination for no consideration. 

(b) If such Termination is (i) by the Company and its Subsidiaries other than for Cause (and other than due to death or Disability) or (ii) by the Associate for Good Reason, in each case, prior to the Vesting Date, a pro rata portion of the Performance Shares granted hereunder (calculated based on a fraction, (x) the numerator of which is the number of days elapsed between the Grant Date and the date of Termination and (y) the denominator of which is the total number of days between the Grant Date and the end of the Performance Cycle) shall continue to be eligible to be earned pursuant to the Grant Notice and settled pursuant to Section 3 hereof (or at such earlier time as the Administrator in its discretion deems necessary to avoid adverse tax consequences under Section 409A or other provisions of the Code), subject to the Associate’s not having violated any restrictive covenant to which the Associate is subject with respect to the Company and its Subsidiaries (including the Restrictive Covenant Agreement).  For purposes hereof, “Good Reason” means, without the Associate’s written consent, the occurrence of any of the following events:

1

(i) The reduction in any material respect in the Associate’s position(s), authorities or responsibilities that the Associate had with the Company immediately prior to the time of the Associate’s notice of Good Reason resignation or the Change of Control, as applicable;

(ii) A material reduction in the Associate’s annual rate of base salary, annual target cash bonus opportunity or annual target long-term incentive opportunity immediately prior to the time of the Associate’s notice of Good Reason resignation or the Change of Control, as applicable; or

(iii) A material change in the location of the Associate’s location of work which will be at least more than fifty (50) miles from the Associate’s place at work at the Company immediately prior to the time of the Associate’s notice of Good Reason resignation or the Change of Control, as applicable.

If the Associate determines that Good Reason exists, the Associate must notify the Company in writing, within ninety (90) days following the initial existence of such grounds that the Associate determines constitutes Good Reason, or else such event shall not constitute Good Reason under the terms of the Associate’s employment.  If the Company remedies such event within thirty (30) days following receipt of such notice (the “Cure Period”), the Associate may not terminate employment for Good Reason as a result of such event.  In the event the Company does not timely remedy such event, the Associate must terminate his employment ninety (90) days following the end of the Cure Period for such termination to constitute a termination for Good Reason.

(c) If such Termination is due to the Associate’s death or Disability, in each case,

(i) more than thirty (30) days prior to the Certification Date, the Performance Shares granted hereunder shall vest based on a Target Vesting Percentage as of such Termination date and be settled pursuant to Section 3 hereof (but in all events within thirty (30) days following the Termination); or

(ii) within thirty (30) days prior to or at any time after the Certification Date but prior to the Vesting Date, the Performance Shares granted hereunder shall vest based on the greater of (i) the Target Vesting Percentage and the (ii) Earned Percentage, and be settled pursuant to Section 3 hereof (but in all events within thirty (30) days following the Termination).

5. Effect of a Change in Control. 

(a) If the Administrator reasonably determines prior to a Change in Control that the Associate shall receive an “Alternative Award” meeting the requirements of the Plan, no cancellation, acceleration of vesting or other payment shall occur with respect to any Performance Share in connection with the Change in Control; provided,  however, that if following a Change in Control, the Associate’s employment is terminated (other than for Cause and other than due to death or Disability) or the Associate resigns for Good Reason, in each case, at a time when any portion of the Alternative Award is unvested, the unvested portion of such Alternative Award shall immediately vest based on the Target Vesting Percentage and the Associate shall be provided with either cash or marketable stock equal to the fair market value of the stock subject to the Alternative Award on the date of Termination; provided, that if such Termination occurs during the last twelve (12) months of the Performance Cycle, the Earned  Percentage shall be the greater of (i) Target Vesting Percentage and (ii) the projected Earned Percentage determined based on the projected performance achievement for the Performance Cycle, as certified by the Administrator in good faith.

(b) If the Administrator reasonably determines prior to a Change in Control that the Associate shall not receive an “Alternative Award” meeting the requirements of the Plan, the Performance Shares granted hereunder shall vest immediately prior to the Change in Control based on the Target Vesting Percentage and shall be settled in Shares, which Shares shall be treated in the same manner as other Shares in such Change in Control; provided, that if such Change in Control occurs during the last twelve (12) months of the Performance Cycle, the

2

Earned Percentage shall be the greater of (i) Target Vesting Percentage and (ii) the projected Earned Percentage determined based on the projected performance achievement for the Performance Cycle, as certified by the Administrator in good faith.

6. Dividend Equivalents.  If the Company pays any cash dividend or similar cash distribution on the Company Common Stock, the Company shall credit the Associate’s account with additional Performance Shares in an amount equal to (a) the product of (i) the number of the Associate’s Performance Shares as of the record date for such distribution times (ii) the per share amount of such dividend or similar cash distribution on Company Common Stock, divided by (b) the Fair Market Value on the date such additional Performance Shares are so credited, rounded down to the nearest whole number of shares.  If the Company makes any dividend or other distribution on the Company Common Stock in the form of Company Common Stock or other securities, the Company will credit the Associate’s account with that number of additional shares of Company Common Stock or other securities that would have been distributed with respect to that number of shares of Company Common Stock underlying the Associate’s Performance Shares as of the record date thereof.  Any cash amounts or shares of Company Common Stock or other securities credited to the Associate’s account shall be paid to the Associate on the applicable settlement date.

7. Restriction on Transfer; Non-Transferability of Performance Shares.  The Performance Shares are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise).  Except as otherwise provided herein, no assignment or transfer of the Performance Shares, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such attempted assignment or transfer the Performance Shares shall terminate and become of no further effect. 

8. Tax Withholding.  Any applicable tax withholding requirements in connection with the Performance Shares shall be satisfied in accordance with Section 15.11 of the Plan.

9. Restrictive Covenant Agreement.  The Associate acknowledges and agrees that as a condition of receipt of the grant of the Performance Shares the Associate shall execute and deliver to the Company a Noncompetition, Assignment of Work Product and Confidentiality Agreement (the “Restrictive Covenant Agreement”), in the form attached hereto as Exhibit A, the provisions of which are hereby incorporated by reference.  The Associate acknowledges that the Associate has read and understands such covenants, including, specifically, the scope and duration thereof, and acknowledges and agrees that the terms of such Restrictive Covenant Agreement are in consideration for the Associate’s receipt of the grant of the Performance Shares under the Grant Notice, the Associate’s receipt of other benefits provided in the Grant Notice, these Performance Share T&Cs, in the Plan and elsewhere, and the Associate’s access to Confidential Information (as defined in the Restrictive Covenant Agreement).  The Restrictive Covenant Agreement is in addition to and does not supersede any other agreements between the Associate and the Company and its Subsidiaries prohibiting competition with the Company and its Subsidiaries.  No provisions in the Plan shall narrow the restrictions of, or terminate, the Restrictive Covenant Agreement and in the event of any inconsistency between the Restrictive Covenant Agreement and the Plan, the Restrictive Covenant Agreement shall govern.  Nothing in the Restrictive Covenant Agreement shall be construed to restrict the right of an attorney to practice law to the extent protected by statute, common law or applicable rules of professional conduct.

10. Miscellaneous.

(a) Incorporation of Forfeiture Provisions.  The Associate acknowledges and agrees that, pursuant to the Plan, he or she shall be subject to the Company’s Clawback Policy and any generally applicable disgorgement or forfeiture provisions set forth in Article XIII of the Plan as of the Grant Date or as required by applicable law after the Grant Date.

3

(b) Dispute Resolution.  Any dispute or controversy between the Associate and the Company, whether arising out of or relating to these Performance Share T&Cs, the breach of these Performance Share T&Cs, or otherwise, shall be resolved in accordance with the frontdoor We Listen Dispute Resolution Plan then in effect.  Notwithstanding the foregoing, the Associate agrees that the Company may seek a temporary restraining order and/or preliminary injunction in any court of competent jurisdiction, without the posting of a bond, in order to preserve the status quo or to enforce the restrictive covenants contained in the Restrictive Covenant Agreement.

(c) Authorization to Share Personal Data.  The Associate authorizes any Affiliate of the Company that employs the Associate or that otherwise has or lawfully obtains personal data relating to the Associate to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent appropriate in connection with these Performance Share T&Cs or the administration of the Plan.

(d) No Rights as Stockholder.  The Associate shall have no rights as a stockholder of the Company with respect to any Performance Shares or Shares covered by the Performance Shares until the delivery of the Shares.

(e) No Right to Continued Employment.  Nothing in these Performance Share T&Cs shall be deemed to confer on the Associate any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.

(f) Binding Effect; Benefits.  These Performance Share T&Cs shall be binding upon and inure to the benefit of the parties to these Performance Share T&Cs and their respective successors and assigns.  Nothing in these Performance Share T&Cs, express or implied, is intended or shall be construed to give any person other than the parties to these Performance Share T&Cs or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(g) Waiver; Amendment.

(i) Waiver.  Any party hereto or beneficiary hereof may by written notice to the other party (A) waive compliance with any of the conditions or covenants of the other party contained in these Performance Share T&Cs and (B) waive or modify performance of any of the obligations of the other party under these Performance Share T&Cs.  Except as provided in the preceding sentence, no action taken pursuant to these Performance Share T&Cs, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein.  The waiver by any party hereto or beneficiary hereof of a breach of any provision of these Performance Share T&Cs shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.

(ii) Amendment.  These Performance Share T&Cs may not be amended, modified or supplemented orally, but only by a written instrument executed by the Associate and the Company.

(h) Assignability.  Neither these Performance Share T&Cs nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Associate without the prior written consent of the other party.

(i) Applicable Law and Forum.  These Performance Share T&Cs shall be governed by and construed in accordance with the law of the State of Delaware regardless of the application of rules of conflict of

4

law that would apply the laws of any other jurisdiction.  Subject to the dispute resolution provision contained herein, any judicial action to enforce, interpret or challenge these Performance Share T&Cs shall be brought in the federal or state courts located in the State of Delaware, which shall be the exclusive forum for resolving such disputes.  Both parties irrevocably consent to the personal jurisdiction of such courts for purposes of any such action.

(j) Waiver of Jury Trial.  Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding arising out of these Performance Share T&Cs or any transaction contemplated hereby.  Each party (i) certifies that no representative, agent or attorney of the other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other party have been induced to enter into these Performance Share T&Cs by, among other things, the mutual waivers and certifications in this section.

(k) Section and Other Headings, etc.  The section and other headings contained in these Performance Share T&Cs are for reference purposes only and shall not affect the meaning or interpretation hereof.

(l) Counterparts.  These Performance Share T&Cs may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept these Performance Share T&Cs electronically, such acceptance shall constitute the Associate’s signature hereto.

(m) Plan.   The terms and provisions of the Plan are incorporated herein by reference.  In the event of a conflict or inconsistency between the terms and provisions of the Plan or the Grant Notice and these Performance Share T&Cs, the Plan or the Grant Notice, as applicable, shall govern and control.

***

5

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Rexford J. Tibbens, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of frontdoor, inc. for the period ended March  31, 2021, as filed with the Securities and Exchange Commission on the date hereof;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May6, 2021

/s/ Rexford J. Tibbens

Name: Rexford J. Tibbens

Title: President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Brian K. Turcotte, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of frontdoor, inc. for the period ended March  31, 2021, as filed with the Securities and Exchange Commission on the date hereof;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May6, 2021

/s/ Brian K. Turcotte

Name: Brian K. Turcotte

Title: Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Rexford J. Tibbens, President and Chief Executive Officer of frontdoor, inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Quarterly Report on Form 10-Q for the quarter ended March  31, 2021, (the “Periodic Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of frontdoor, inc.

Date: May6, 2021

/s/ Rexford J. Tibbens

Name: Rexford J. Tibbens

Title: President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Brian K. Turcotte, Senior Vice President and Chief Financial Officer of frontdoor, inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Quarterly Report on Form 10-Q for the quarter ended March  31, 2021, (the “Periodic Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of frontdoor, inc.

Date: May6, 2021

/s/ Brian K. Turcotte

Name: Brian K. Turcotte

Title: Senior Vice President and Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	Apr. 30, 2021
Document and Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Fiscal Period Focus	Q1
Document Transition Report	false
Entity File Number	001-38617
Entity Registrant Name	frontdoor, inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	82-3871179
Entity Address, Address Line One	150 Peabody Place
Entity Address, City or Town	Memphis
Entity Address, State or Province	TN
Entity Address, Postal Zip Code	38103
City Area Code	901
Local Phone Number	701-5000
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	FTDR
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		85,685,092
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Document Fiscal Year Focus	2021
Entity Central Index Key	0001727263

XML

Condensed Consolidated Statement of Operations and Comprehensive Income - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Condensed Consolidated Statement of Operations and Comprehensive Income [Abstract]
Revenue	$ 329	$ 294
Cost of services rendered	181	147
Gross Profit	148	147
Selling and administrative expenses	118	105
Depreciation and amortization expense	9	8
Restructuring charges	1	3
Interest expense	13	15
Interest and net investment income	0	(2)
Loss on extinguishment of debt	1	0
Income before Income Taxes	5	17
Provision for income taxes	1	4
Net Income	5	13
Other Comprehensive Income (Loss), Net of Income Taxes:
Net unrealized gain (loss) on derivative instruments	7	(15)
Total Comprehensive Income (Loss)	$ 12	$ (2)
Earnings per Share:
Basic	$ 0.06	$ 0.15
Diluted	$ 0.06	$ 0.15
Weighted-average Common Shares Outstanding:
Basic	85.4	85.1
Diluted	86.0	85.4

XML

Condensed Consolidated Statements of Financial Position - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Current Assets:
Cash and cash equivalents	$ 538	$ 597
Receivables, less allowance of $2 in each period	4	5
Prepaid expenses and other assets	30	24
Total Current Assets	573	626
Other Assets:
Property and equipment, net	61	60
Goodwill	512	512
Intangible assets, net	167	170
Operating lease right-of-use assets	20	15
Deferred customer acquisition costs	20	19
Other assets	3	3
Total Assets	1,355	1,405
Current Liabilities:
Accounts payable	66	55
Accrued liabilities:
Payroll and related expenses	19	23
Home service plan claims	85	90
Interest payable	3	9
Other	32	32
Deferred revenue	227	187
Current portion of long-term debt	7	7
Total Current Liabilities	439	403
Long-Term Debt	868	968
Other Long-Term Liabilities:
Deferred taxes	41	38
Operating lease liabilities	23	18
Other long-term obligations	30	40
Total Other Long-Term Liabilities	94	96
Commitments and Contingencies (Note 8)
Shareholders' Equity:
Common stock, $0.01 par value; 2,000,000,000 shares authorized; 85,680,630 shares issued and 85,679,700 shares outstanding at March 31, 2021 and 85,477,779 shares issued and outstanding at December 31, 2020	1	1
Additional paid-in capital	49	46
Accumulated deficit	(70)	(75)
Accumulated other comprehensive loss	(26)	(33)
Total Deficit	(46)	(61)
Total Liabilities and Shareholders' Equity	$ 1,355	$ 1,405

XML

Condensed Consolidated Statements of Financial Position (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Condensed Consolidated Statements of Financial Position [Abstract]
Allowance for receivables (in dollars)	$ 2	$ 2
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	2,000,000,000	2,000,000,000
Common stock, shares issued (in shares)	85,680,630	85,477,779
Common stock, shares outstanding (in shares)	85,679,700	85,477,779

XML

Condensed Consolidated Statements of Changes in (Deficit) Equity - USD ($) $ in Millions	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Loss [Member]	Total
Balance at beginning of period at Dec. 31, 2019	$ 1	$ 29	$ (188)	$ (21)
Net income			13		$ 13
Taxes paid related to net share settlement of equity awards		(1)
Stock-based employee compensation		3
Other comprehensive income (loss), net of tax				(15)	(15)
Balance at end of period at Mar. 31, 2020	1	31	(174)	(36)	(178)
Balance at beginning of period at Dec. 31, 2020	1	46	(75)	(33)	(61)
Net income			5		5
Exercise of stock options		1
Taxes paid related to net share settlement of equity awards		(4)
Stock-based employee compensation		6
Other comprehensive income (loss), net of tax				7	7
Balance at end of period at Mar. 31, 2021	$ 1	$ 49	$ (70)	$ (26)	$ (46)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Condensed Consolidated Statements of Cash Flows [Abstract]
Cash and Cash Equivalents at Beginning of Period	$ 597	$ 428
Cash Flows from Operating Activities:
Net Income	5	13
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization expense	9	8
Stock-based compensation expense	6	3
Restructuring charges	1	3
Payments for restructuring charges	(1)	(3)
Loss on extinguishment of debt	1	0
Change in working capital, net of acquisitions:
Receivables	1	3
Prepaid expenses and other current assets	1	2
Accounts payable	11	7
Deferred revenue	40	40
Accrued liabilities	(8)	(15)
Accrued interest payable	(6)	(6)
Current income taxes	(8)	4
Net Cash Provided from Operating Activities	52	60
Cash Flows from Investing Activities
Purchases of property and equipment	(7)	(8)
Purchases of available-for-sale securities	0	(2)
Sales and maturities of available-for-sale securities	0	7
Net Cash Used for Investing Activities	(7)	(3)
Cash Flows from Financing Activities
Payments of debt	(102)	(2)
Other financing activities	(3)	(1)
Net Cash Used for Financing Activities	(105)	(3)
Cash (Decrease) Increase During the Period	(59)	54
Cash and Cash Equivalents at End of Period	$ 538	$ 482

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2021

Basis of Presentation [Abstract]

Basis of Presentation

Note 1. Basis of Presentation

Frontdoor is the leading provider of home service plans in the United States, as measured by revenue, and operates under the American Home Shield, HSA, OneGuard and Landmark brands. Our customizable home service plans help customers protect and maintain their homes, typically their most valuable asset, from costly and unplanned breakdowns of essential home systems and appliances. Our home service plan customers subscribe to an annual service plan agreement that covers the repair or replacement of major components of more than 20 home systems and appliances, including electrical, plumbing, central HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops, as well as optional coverages for electronics, pools, spas and pumps. Our operations also include our ProConnect on-demand home services business and Streem, a technology platform that uses augmented reality, computer vision and machine learning to, among other things, help home service professionals more quickly and accurately diagnose breakdowns and complete repairs. At March 31, 2021, we had over two million active home service plans across all 50 states and the District of Columbia.

We recommend that the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated and combined financial statements and the notes thereto included in our 2020 Form 10-K. The accompanying condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for any interim period are not indicative of the results that might be achieved for a full year.

Impact of the COVID-19 Pandemic

On March 11, 2020, the World Health Organization (“WHO”) characterized the novel coronavirus disease (“COVID-19”) as a pandemic, and on March 13, 2020, the United States declared a national emergency concerning the outbreak. The broader implications of the COVID-19 pandemic on our results of operations and overall financial performance remain uncertain. In response to the COVID-19 pandemic, we have taken a number of steps to protect the well-being of our employees, customers and contractors, and we continue to respond to the real-time needs of our business. The COVID-19 situation remains very fluid, and we continue to adjust our response in real time.

While we did not experience a material impact on our results of operations and overall financial performance during the first quarter of 2020, during the first quarter of 2021, our financial condition and results of operations were adversely impacted by the COVID-19 pandemic as follows:

Revenue in the first-year real estate channel has continued to be adversely impacted by the decline in U.S. existing home sales in the second quarter of 2020. Due to the annual nature of our home service plan agreements, the impact of this decline carried forward into the first quarter of 2021. Additionally, a strong existing home seller’s market has constrained demand for home service plans in this channel.

We experienced an increase in appliance and plumbing claims primarily due to the increased usage of home systems and appliances driven by state and local shelter at home orders and recommendations. In addition, industry-wide availability challenges in the appliance trade have caused increased cost pressure, and, more specifically, appliance parts availability challenges drove additional replacements, contributing to the increased costs.

We incurred incremental wages at our customer care centers due to a higher number of service requests in the appliance and plumbing trades, which is primarily a result of customers sheltering at home in response to COVID-19.

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Significant Accounting Policies [Abstract]

Significant Accounting Policies

f Note 2. Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the audited consolidated and combined financial statements included in our 2020 Form 10-K. There have been no material changes to the significant accounting policies for the three months ended March 31, 2021.

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Revenue

3 Months Ended

Mar. 31, 2021

Revenue [Abstract]

Revenue

Note 3. Revenue

We enter into annual home service plan agreements with our customers. We have one performance obligation, which is to provide for the repair or replacement of essential home systems and appliances, as applicable per the contract. We recognize revenue at the agreed upon contractual amount over time using the input method in proportion to the costs expected to be incurred in performing services under the contracts. Those costs bear a direct relationship to the fulfillment of our obligations under the contracts and are representative of the relative value provided to the customer. As the costs to fulfill the obligations of the home service plans are incurred on an other-than-straight-line basis, we utilize historical evidence to estimate the expected claims expense and related timing of such costs. This adjustment to the straight-line revenue creates a contract asset or contract liability, as described under the heading “Contract balances” below. We regularly review our estimates of claims costs and adjust our estimates when appropriate. We derive substantially all of our revenue from customers in the United States.

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

___

	Three Months Ended
	March 31,
(In millions)	2021		2020
Renewals	$	224	$	200
Real estate(1)		57		56
Direct-to-consumer(1)		41		35
Other		8		3
Total	$	329	$	294

_____________________________

(1)First-year revenue only.

Renewals

Revenue from all customer renewals, whether initiated via the real estate or direct-to-consumer channel, are classified as renewals above. Customer payments for renewals are received either at the commencement of the renewal period or in installments over the contract period.

Real estate

Real estate home service plans are sold through annual contracts in connection with a real estate sale, and payments are typically paid in full at closing. First-year revenue from the real estate channel is classified as real estate above.

Direct-to-consumer

Direct-to-consumer home service plans are sold through annual contracts when customers request a service plan in response to marketing efforts or when third-party resellers make a sale. Customer payments are received either at the commencement of the contract or in installments over the contract period. First-year revenue from the direct-to-consumer channel is classified as direct-to-consumer above.

Costs to obtain a contract with a customer

We capitalize the incremental costs of obtaining a contract with a customer, primarily sales commissions, and recognize the expense using the input method in proportion to the costs expected to be incurred in performing services under the contract, over the expected customer relationship period. Deferred customer acquisition costs were $20 million and $19 million as of March 31, 2021 and December 31, 2020, respectively. Amortization of these deferred acquisition costs was $4 million for each of the three months ended March 31, 2021 and 2020. There were no impairment losses in relation to these capitalized costs.

Contract balances

Timing of revenue recognition may differ from the timing of invoicing to customers. Contracts with customers, including contracts resulting from customer renewals, are generally for a period of one year. We record a receivable related to revenue recognized on services once we have an unconditional right to invoice and receive payment in the future related to the services provided. All accounts receivable are recorded within Receivables, less allowances, in the accompanying condensed consolidated statements of financial position. We invoice our monthly-pay customers on a straight-line basis over the contract term. As a result, a contract asset is created when revenue is recognized on monthly-pay customers before being billed.

Deferred revenue represents a contract liability and is recognized when cash payments are received in advance of the performance of services, including when the amounts are refundable. Amounts are recognized as revenue in proportion to the costs expected to be incurred in performing services under our contracts. Deferred revenue was $227 million and $187 million as of March 31, 2021 and December 31, 2020, respectively, and as of March 31, 2021, includes a net contract liability of $45 million related to the recognition of monthly-pay customer revenue on an other-than-straight-line basis to match the timing of cost recognition.

Changes in deferred revenue for the three months ended March 31, 2021 were as follows:

(In millions)	Deferred Revenue
Balance as of December 31, 2020	$	187
Deferral of revenue		123
Recognition of deferred revenue		(84)
Balance as of March 31, 2021	$	227

There was approximately $71 million of revenue recognized in the three months ended March 31, 2021 that was included in the deferred revenue balance as of December 31, 2020.

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Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets

Note 4. Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment on an annual basis or more frequently if circumstances indicate a potential impairment. An assessment for impairment is performed on October 1 of every year. The balance of goodwill was $512 million as of March 31, 2021 and December 31, 2020. There were no goodwill or trade name impairment charges recorded in the three months ended March 31, 2021 and 2020. There were no accumulated impairment losses recorded as of March 31, 2021 and December 31, 2020.

The table below summarizes the other intangible asset balances:

	As of March 31, 2021						As of December 31, 2020
(In millions)	Gross		Accumulated ‎Amortization		Net		Gross		Accumulated ‎Amortization		Net
Trade names(1)	$	141	$	—	$	141	$	141	$	—	$	141
Customer relationships		173		(171)		1		173		(171)		2
Developed technology		25		(8)		18		25		(6)		19
Other		37		(29)		7		37		(29)		8
Total	$	375	$	(208)	$	167	$	375	$	(205)	$	170

___________________________________

(1)Not subject to amortization.

Amortization expense was $3 million for each of the three months ended March 31, 2021 and 2020. The following table outlines expected amortization expense for existing intangible assets for the remainder of 2021 and the next five years:

(In millions)
2021 (remainder)	$	8
2022		8
2023		6
2024		4
2025		—
2026		—
Total	$	26

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Leases

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Leases

Note 5. Leases

We have operating leases primarily for our corporate offices, customer care centers and engineering and technology campuses. Our leases have remaining lease terms of two years to 14 years, some of which include options to extend the leases for up to five years. Renewal options that are reasonably certain to be exercised are included in the lease term. An incremental borrowing rate is used in determining the present value of lease payments unless an implicit rate is readily determinable. Incremental borrowing rates are determined based on our secured borrowing rating and the lease term.

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

	As of
	March 31,		December 31,
	2021		2020
Weighted-average remaining lease term (years)	9		9
Weighted-average discount rate	5.5	%	6.0	%

We recognized operating lease expense of $1 million for each of the three months ended March 31, 2021 and 2020. These expenses are included in Selling and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

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

z
	Three Months Ended
	March 31,
(In millions)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities(1)	$	1	$	3
Leased assets obtained in exchange for new lease liabilities		6		—

_____________________________

(1)For the three months ended March 31, 2020, amounts include $2 million of lease termination costs related to the decision to consolidate certain operations of Landmark Home Warranty, LLC (“Landmark”) with those of OneGuard Home Warranties (“OneGuard”). See Note 7 to the accompanying condensed consolidated financial statements for further information.

Supplemental balance sheet information related to operating leases is as follows:

	As of
	March 31,		December 31,
(In millions)	2021		2020
Operating lease right-of-use assets	$	26	$	21
Less lease incentives		(6)		(6)
Operating lease right-of-use assets, net	$	20	$	15
Other accrued liabilities	$	4	$	3
Operating lease liabilities		23		18
Total operating lease liabilities	$	26	$	21

The following table presents maturities of our operating lease liabilities as of March 31, 2021.

(In millions)
2021 (remainder)	$	4
2022		5
2023		5
2024		3
2025		2
2026		2
Thereafter		12
Total lease payments		34
Less imputed interest		(8)
Total	$	26

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Income Taxes

3 Months Ended

Mar. 31, 2021

Income Taxes [Abstract]

Income Taxes

Note 6. Income Taxes

As required by ASC 740, we compute interim period income taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss from operations before income taxes, except for significant unusual or infrequently occurring items. Our estimated tax rate is adjusted each quarter in accordance with ASC 740. The effective tax rate on income was 9.8 percent and 25.0 percent for the three months ended March 31, 2021 and 2020, respectively. The decrease in the effective tax rate for the three months ended March 31, 2021 compared to 2020 is primarily due to excess tax benefits for share-based awards.

We are subject to taxation in the United States, various states and foreign jurisdictions. Pursuant to the terms of the tax matters agreement entered into with Terminix in connection with the Spin-off, we are not subject to federal examination by the IRS or examination by state taxing authorities where a unitary or combined state income tax return is filed for the years prior to 2018. We are not subject to state and local income tax examinations by tax authorities in jurisdictions where separate income tax returns are filed for the years prior to 2016. Substantially all of our income before income taxes for the three months ended March 31, 2021 and 2020 was generated in the United States.

Our policy is to recognize potential interest and penalties related to our tax positions within the tax provision. Total interest and penalties included in the accompanying condensed consolidated statements of operations and comprehensive income are immaterial.

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Restructuring Charges

3 Months Ended

Mar. 31, 2021

Restructuring Charges [Abstract]

Restructuring Charges

Note 7. Restructuring Charges

We incurred restructuring charges of $1 million ($1 million, net of tax) and $3 million ($2 million, net of tax) for the three months ended March 31, 2021 and 2020, respectively.

For the three months ended March 31, 2021, restructuring charges primarily comprised accelerated depreciation of certain technology systems driven by efforts to enhance our technological capabilities. For the three months ended March 31, 2020, restructuring charges comprised lease termination costs and severance and other costs related to the decision to consolidate certain operations of Landmark with those of OneGuard.

The pre-tax charges discussed above are reported in “Restructuring charges” in the accompanying condensed consolidated statements of operations and comprehensive income.

As of December 31, 2020, there were $1 million of restructuring charges accrued, which were paid or otherwise settled during the three months ended March 31, 2021. As of March 31, 2021, there were less than $1 million in accrued restructuring charges in the accompanying condensed consolidated statements of financial position.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 8. Commitments and Contingencies

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

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

In January 2021, a lawsuit was filed in the Superior Court of the State of Arizona by the Arizona Attorney General (the "AZ Attorney General") against Landmark, alleging, among other things, that Landmark violated the Arizona Consumer Fraud Act by engaging in deceptive, misleading or unfair practices with respect to the provision of expedited services to its customers during extreme temperatures from January 2017 to July 2020. The AZ Attorney General sought $14.7 million in damages plus penalties, costs, interest and attorneys’ fees in this matter. Although Landmark disagreed with the allegations that it violated Arizona law, as litigation is inherently unpredictable, Landmark fully settled this matter with the AZ Attorney General in March 2021 for $1.8 million. As we recorded an estimate of loss with respect to this matter during the year ended December 31, 2020 equal to the amount of the settlement, no additional expense was recognized in the three months ended March 31, 2021.

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

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2021

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 9. Stock-Based Compensation

We recognized stock-based compensation expense of $6 million ($4 million, net of tax) and $3 million ($3 million, net of tax) for the three months ended March 31, 2021 and 2020, respectively. These charges are included in Selling and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

A summary of awards granted under the Omnibus Plan during the three months ended March 31, 2021 is presented below:

	Number of	Weighted Avg.		Weighted Avg.		Weighted Avg.
	Awards	Exercise		Grant Date		Vesting
	Granted	Price		Fair Value		Period
Stock options	245,599	$	54.81	$	28.09	4 years
Restricted stock units	368,202				54.83	3 years
Performance shares(1)	98,017				54.81	3 years

_____________________________

(1)The number of performance shares granted during the three months ended March 31, 2021 represents the target value of the awards. The performance shares contain a performance condition that is based on our revenue target, and the ultimate number of performance shares to be earned depends on the achievement of this performance condition.

As of March 31, 2021, there was $61 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options, restricted stock units (“RSUs”), performance shares and restricted stock awards (“RSAs”). These remaining costs are expected to be recognized over a weighted-average period of 2.68 years.

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Long-Term Debt

3 Months Ended

Mar. 31, 2021

Long-Term Debt [Abstract]

Long-Term Debt

Note 10. Long-Term Debt

Long-term debt is summarized in the following table:

	As of
	March 31,		December 31,
(In millions)	2021		2020
Term Loan Facility maturing in 2025(1)	$	529	$	629
Revolving Credit Facility maturing in 2023		—		—
2026 Notes(2)		346		346
Less current portion		(7)		(7)
Total long-term debt	$	868	$	968

___________________________________

(1)As of March 31, 2021 and December 31, 2020, presented net of $4 million and $5 million, respectively, in unamortized debt issuance costs and $1 million in unamortized original issue discount paid.

(2)As of March 31, 2021 and December 31, 2020, presented net of $4 million in unamortized debt issuance costs. 

On February 17, 2021, we repaid $100 million of the outstanding principal amount of the Term Loan Facility. In connection with the repayment, we recorded a loss on extinguishment of debt of $1 million, which included the write-off of debt issuance costs and original issue discount. 

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Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2021

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Note 11. Supplemental Cash Flow Information

Supplemental information relating to the accompanying condensed consolidated statements of cash flows is presented in the following table:

	Three Months Ended
	March 31,
(In millions)	2021		2020
Cash paid for (received from):
Interest expense	$	18	$	20
Income tax payments, net of refunds		8		—
Interest income		—		(2)

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Comprehensive Income (Loss)

3 Months Ended

Mar. 31, 2021

Comprehensive Income (Loss) [Abstract]

Comprehensive Income (Loss)

Note 12. Comprehensive Income (Loss)

Comprehensive income (loss), which includes net income (loss) and unrealized gain (loss) on derivative instruments, is disclosed in the accompanying condensed consolidated statements of operations and comprehensive income and condensed consolidated statements of changes in equity.

The following tables summarize the activity in AOCI, net of the related tax effects.

	Unrealized
	Loss
(In millions)	on Derivatives		Total
Balance as of December 31, 2020	$	(33)	$	(33)
Other comprehensive income (loss) before reclassifications:
Pre-tax amount		7		7
Tax provision (benefit)		2		2
After-tax amount		5		5
Amounts reclassified from accumulated ‎  other comprehensive income (loss)(1)		2		2
Net current period other comprehensive income (loss)		7		7
Balance as of March 31, 2021	$	(26)	$	(26)
Balance as of December 31, 2019	$	(21)	$	(21)
Other comprehensive income (loss) before reclassifications:
Pre-tax amount		(21)		(21)
Tax provision (benefit)		(5)		(5)
After-tax amount		(16)		(16)
Amounts reclassified from accumulated ‎  other comprehensive income (loss)(1)		1		1
Net current period other comprehensive income (loss)		(15)		(15)
Balance as of March 31, 2020	$	(36)	$	(36)

___________________________________

(1)Amounts are net of tax. See reclassifications out of AOCI below for further details.

Reclassifications out of AOCI included the following components for the periods indicated.

	Amounts Reclassified from Accumulated
	Other Comprehensive Income (Loss)
	Three Months Ended
	March 31,				Consolidated Statements of
(In millions)	2021		2020		Operations and Comprehensive Income Location
Loss on interest rate swap contract	$	(3)	$	(1)	Interest expense
Impact of income taxes		1		—	Provision for income taxes
Total reclassifications related to derivatives	$	(2)	$	(1)
Total reclassifications for the period	$	(2)	$	(1)

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2021

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

Note 13. Derivative Financial Instruments

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

We hedge the interest payments on a portion of our variable rate debt through the use of an interest rate swap agreement. Our interest rate swap contract is classified as a cash flow hedge, and, as such, it is recorded in the accompanying condensed consolidated statements of financial position as either an asset or liability at fair value, with changes in fair value recorded in AOCI. Cash flows related to the interest rate swap contract are classified as operating activities in the accompanying condensed consolidated statements of cash flows.

The effective portion of the gain or loss on our interest rate swap contract is recorded in AOCI. These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement affects earnings. See Note 12 to the accompanying condensed consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in AOCI and for the amounts reclassified out of AOCI and into earnings. As the underlying forecasted transactions occur during the next 12 months, the unrealized hedging loss in AOCI expected to be recognized in earnings is $8 million, net of tax, as of March 31, 2021. The amounts that are ultimately reclassified into earnings will be based on actual interest rates at the time the positions are settled and may differ materially from the amount noted above.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2021

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 14. Fair Value Measurements

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

The period-end carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The carrying amount of total debt was $875 million and $975 million, and the estimated fair value was $902 million and $1,004 million as of March 31, 2021 and December 31, 2020, respectively. The fair value of our debt is estimated based on available market prices for the same or similar instruments that are considered significant other observable inputs (Level 2) within the fair value hierarchy. The fair values presented reflect the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value estimates presented in this report are based on information available to us as of March 31, 2021 and December 31, 2020.

We value our interest rate swap contract using a forward interest rate curve obtained from a third-party market data provider. The fair value of the contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. The expected future settlements are determined by comparing the contract interest rate to the expected forward interest rate as of each settlement date and applying the difference between the two rates to the notional amount of debt in the interest rate swap contract.

We have not changed our valuation techniques for measuring the fair value of any financial assets and liabilities during the three months ended March 31, 2021. Transfers between levels, if any, are recognized at the end of the reporting period. There were no transfers between levels during the three months ended March 31, 2021 and 2020.

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

				Estimated Fair Value Measurements
(In millions)	Statement of Financial ‎Position Location	Carrying ‎Value		Quoted ‎Prices ‎In Active ‎Markets ‎(Level 1)		Significant ‎Other ‎Observable ‎Inputs ‎(Level 2)		Significant ‎Unobservable ‎Inputs ‎(Level 3)
As of March 31, 2021:
Financial Liabilities:
Interest rate swap contract	Other accrued liabilities	$	10	$	—	$	10	$	—
	Other long-term obligations		24		—		24		—
Total financial liabilities		$	34	$	—	$	34	$	—
As of December 31, 2020:
Financial Liabilities:
Interest rate swap contract	Other accrued liabilities	$	10	$	—	$	10	$	—
	Other long-term obligations		33		—		33		—
Total financial liabilities		$	43	$	—	$	43	$	—

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Earnings Per Share

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Earnings Per Share

Note 15. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options, RSUs, performance shares and RSAs are reflected in diluted earnings per share by applying the treasury stock method.

Basic and diluted earnings per share are calculated as follows:

	Three Months Ended
	March 31,
(In millions, except per share data)	2021		2020
Net Income	$	5	$	13
Weighted-average common shares outstanding		85.4		85.1
Effect of dilutive securities:
RSUs		0.4		0.1
Stock options(1)		0.2		0.1
Weighted-average common shares outstanding - assuming dilution		86.0		85.4
Basic earnings per share	$	0.06	$	0.15
Diluted earnings per share	$	0.06	$	0.15

___________________________________

(1)Options to purchase 0.3 million shares for the three months ended March 31, 2020 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. There were no such anti-dilutive options for the three months ended March 31, 2021.     

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Revenue (Tables)

3 Months Ended

Mar. 31, 2021

Revenue [Abstract]

Disaggregation of Revenue From Contracts With Customers

___

	Three Months Ended
	March 31,
(In millions)	2021		2020
Renewals	$	224	$	200
Real estate(1)		57		56
Direct-to-consumer(1)		41		35
Other		8		3
Total	$	329	$	294

_____________________________

(1)First-year revenue only.

Movement in Deferred Revenue

(In millions)	Deferred Revenue
Balance as of December 31, 2020	$	187
Deferral of revenue		123
Recognition of deferred revenue		(84)
Balance as of March 31, 2021	$	227

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets [Abstract]

Schedule of Other Intangible Asset Balances for Continuing Operations

	As of March 31, 2021						As of December 31, 2020
(In millions)	Gross		Accumulated ‎Amortization		Net		Gross		Accumulated ‎Amortization		Net
Trade names(1)	$	141	$	—	$	141	$	141	$	—	$	141
Customer relationships		173		(171)		1		173		(171)		2
Developed technology		25		(8)		18		25		(6)		19
Other		37		(29)		7		37		(29)		8
Total	$	375	$	(208)	$	167	$	375	$	(205)	$	170

___________________________________

(1)Not subject to amortization.

Schedule of Expected Amortization Expense for Intangible Assets

(In millions)
2021 (remainder)	$	8
2022		8
2023		6
2024		4
2025		—
2026		—
Total	$	26

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Leases (Tables)

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Weighted Average Remaining Lease Term and Discount Rate

	As of
	March 31,		December 31,
	2021		2020
Weighted-average remaining lease term (years)	9		9
Weighted-average discount rate	5.5	%	6.0	%

Supplemental Cash Flow Related to Leases

z
	Three Months Ended
	March 31,
(In millions)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities(1)	$	1	$	3
Leased assets obtained in exchange for new lease liabilities		6		—

_____________________________

(1)For the three months ended March 31, 2020, amounts include $2 million of lease termination costs related to the decision to consolidate certain operations of Landmark Home Warranty, LLC (“Landmark”) with those of OneGuard Home Warranties (“OneGuard”). See Note 7 to the accompanying condensed consolidated financial statements for further information.

Supplemental Balance Sheet Information Related to Leases

	As of
	March 31,		December 31,
(In millions)	2021		2020
Operating lease right-of-use assets	$	26	$	21
Less lease incentives		(6)		(6)
Operating lease right-of-use assets, net	$	20	$	15
Other accrued liabilities	$	4	$	3
Operating lease liabilities		23		18
Total operating lease liabilities	$	26	$	21

Maturities of Lease Liabilities

(In millions)
2021 (remainder)	$	4
2022		5
2023		5
2024		3
2025		2
2026		2
Thereafter		12
Total lease payments		34
Less imputed interest		(8)
Total	$	26

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2021

Stock-Based Compensation [Abstract]

Summary of Awards Granted

	Number of	Weighted Avg.		Weighted Avg.		Weighted Avg.
	Awards	Exercise		Grant Date		Vesting
	Granted	Price		Fair Value		Period
Stock options	245,599	$	54.81	$	28.09	4 years
Restricted stock units	368,202				54.83	3 years
Performance shares(1)	98,017				54.81	3 years

_____________________________

(1)The number of performance shares granted during the three months ended March 31, 2021 represents the target value of the awards. The performance shares contain a performance condition that is based on our revenue target, and the ultimate number of performance shares to be earned depends on the achievement of this performance condition.

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2021

Long-Term Debt [Abstract]

Schedule of Long-Term Debt

	As of
	March 31,		December 31,
(In millions)	2021		2020
Term Loan Facility maturing in 2025(1)	$	529	$	629
Revolving Credit Facility maturing in 2023		—		—
2026 Notes(2)		346		346
Less current portion		(7)		(7)
Total long-term debt	$	868	$	968

___________________________________

(1)As of March 31, 2021 and December 31, 2020, presented net of $4 million and $5 million, respectively, in unamortized debt issuance costs and $1 million in unamortized original issue discount paid.

(2)As of March 31, 2021 and December 31, 2020, presented net of $4 million in unamortized debt issuance costs. 

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2021

Supplemental Cash Flow Information [Abstract]

Schedule of Supplemental Information Relating to the Accompanying Condensed Consolidated Statements of Cash Flows

	Three Months Ended
	March 31,
(In millions)	2021		2020
Cash paid for (received from):
Interest expense	$	18	$	20
Income tax payments, net of refunds		8		—
Interest income		—		(2)

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Comprehensive Income (Loss) (Tables)

3 Months Ended

Mar. 31, 2021

Comprehensive Income (Loss) [Abstract]

Summary of the Activity in AOCI, Net of the Related Tax Effects

	Unrealized
	Loss
(In millions)	on Derivatives		Total
Balance as of December 31, 2020	$	(33)	$	(33)
Other comprehensive income (loss) before reclassifications:
Pre-tax amount		7		7
Tax provision (benefit)		2		2
After-tax amount		5		5
Amounts reclassified from accumulated ‎  other comprehensive income (loss)(1)		2		2
Net current period other comprehensive income (loss)		7		7
Balance as of March 31, 2021	$	(26)	$	(26)
Balance as of December 31, 2019	$	(21)	$	(21)
Other comprehensive income (loss) before reclassifications:
Pre-tax amount		(21)		(21)
Tax provision (benefit)		(5)		(5)
After-tax amount		(16)		(16)
Amounts reclassified from accumulated ‎  other comprehensive income (loss)(1)		1		1
Net current period other comprehensive income (loss)		(15)		(15)
Balance as of March 31, 2020	$	(36)	$	(36)

___________________________________

(1)Amounts are net of tax. See reclassifications out of AOCI below for further details.

Schedule of Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

	Amounts Reclassified from Accumulated
	Other Comprehensive Income (Loss)
	Three Months Ended
	March 31,				Consolidated Statements of
(In millions)	2021		2020		Operations and Comprehensive Income Location
Loss on interest rate swap contract	$	(3)	$	(1)	Interest expense
Impact of income taxes		1		—	Provision for income taxes
Total reclassifications related to derivatives	$	(2)	$	(1)
Total reclassifications for the period	$	(2)	$	(1)

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Measurements [Abstract]

Schedule of the Carrying Amount and Estimated Fair Value of the Company's Financial Instruments that are Recorded at Fair Value on a Recurring Basis

				Estimated Fair Value Measurements
(In millions)	Statement of Financial ‎Position Location	Carrying ‎Value		Quoted ‎Prices ‎In Active ‎Markets ‎(Level 1)		Significant ‎Other ‎Observable ‎Inputs ‎(Level 2)		Significant ‎Unobservable ‎Inputs ‎(Level 3)
As of March 31, 2021:
Financial Liabilities:
Interest rate swap contract	Other accrued liabilities	$	10	$	—	$	10	$	—
	Other long-term obligations		24		—		24		—
Total financial liabilities		$	34	$	—	$	34	$	—
As of December 31, 2020:
Financial Liabilities:
Interest rate swap contract	Other accrued liabilities	$	10	$	—	$	10	$	—
	Other long-term obligations		33		—		33		—
Total financial liabilities		$	43	$	—	$	43	$	—

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2021

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Earnings Per Share

	Three Months Ended
	March 31,
(In millions, except per share data)	2021		2020
Net Income	$	5	$	13
Weighted-average common shares outstanding		85.4		85.1
Effect of dilutive securities:
RSUs		0.4		0.1
Stock options(1)		0.2		0.1
Weighted-average common shares outstanding - assuming dilution		86.0		85.4
Basic earnings per share	$	0.06	$	0.15
Diluted earnings per share	$	0.06	$	0.15

___________________________________

(1)Options to purchase 0.3 million shares for the three months ended March 31, 2020 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. There were no such anti-dilutive options for the three months ended March 31, 2021. 

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Basis of Presentation (Narrative) (Details) item in Millions	Mar. 31, 2021 state item
Number of States in which Entity Operates | state	50
Minimum [Member]
Number of active home service plans | item	2

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Revenue (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Capitalized Contract Cost, Net	$ 20		$ 19
Capitalized Contract Cost, Amortization	4	$ 4
Capitalized Contract Cost, Impairment Loss	0	$ 0
Deferred revenue	$ 227		$ 187
Contracts with customers, period	1 year
Revenue recognized	$ 71
Monthly-Pay-Customer [Member]
Deferred revenue	$ 45

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Revenue (Disaggregation of Revenue from Contracts with Customers) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Disaggregation of Revenue [Line Items]
Reportable segment revenues		$ 329	$ 294
Renewals [Member]
Disaggregation of Revenue [Line Items]
Reportable segment revenues		224	200
Real Estate [Member]
Disaggregation of Revenue [Line Items]
Reportable segment revenues	[1]	57	56
Direct-To-Consumer [Member]
Disaggregation of Revenue [Line Items]
Reportable segment revenues	[1]	41	35
Revenue, Other [Member]
Disaggregation of Revenue [Line Items]
Reportable segment revenues		$ 8	$ 3

[1] First-year revenue only.

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Revenue (Movement in Deferred Revenue) (Details) $ in Millions	3 Months Ended
	Mar. 31, 2021 USD ($)
Revenue [Abstract]
Balance as of December 31, 2020	$ 187
Deferral of revenue	123
Recognition of deferred revenue	(84)
Balance as of March 31, 2021	$ 227

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Goodwill and Intangible Assets (Narrative) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Indefinite-lived Intangible Assets [Line Items]
Goodwill	$ 512,000,000		$ 512,000,000
Goodwill impairment charges	0	$ 0
Accumulated impairment loss	0		$ 0
Amortization expense	3,000,000	3,000,000
Trade Names [Member]
Indefinite-lived Intangible Assets [Line Items]
Intangible asset impairment charges	$ 0	$ 0

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Goodwill and Intangible Assets (Schedule of Other Intangible Asset Balances for Continuing Operations) (Details) - USD ($) $ in Millions		Mar. 31, 2021	Dec. 31, 2020
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Gross		$ 375	$ 375
Accumulated Amortization		(208)	(205)
Net		167	170
Customer-Relationships [Member]
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Gross		173	173
Accumulated Amortization		(171)	(171)
Net		1	2
Developed Technology [Member]
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Gross		25	25
Accumulated Amortization		(8)	(6)
Net		18	19
Other [Member]
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Gross		37	37
Accumulated Amortization		(29)	(29)
Net		7	8
Trade Names [Member]
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Gross	[1]	141	141
Accumulated Amortization	[1]
Net	[1]	$ 141	$ 141

[1] Not subject to amortization.

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Goodwill and Intangible Assets (Schedule of Expected Amortization Expense for Intangible Assets) (Details) $ in Millions	Mar. 31, 2021 USD ($)
Goodwill and Intangible Assets [Abstract]
2021 (remainder)	$ 8
2022	8
2023	6
2024	4
2025	0
2026	0
Total	$ 26

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Leases (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Lessee, Lease, Description [Line Items]
Operating lease expense	$ 1	$ 1
Maximum [Member]
Lessee, Lease, Description [Line Items]
Leases, Remaining Lease Term Years	14 years
Leases, Renewal Term	5 years
Minimum [Member]
Lessee, Lease, Description [Line Items]
Leases, Remaining Lease Term Years	2 years

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Leases (Weighted Average Remaining Lease Term and Discount Rate) (Details)	Mar. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Weighted-average remaining lease term (years)	9 years	9 years
Weighted-average discount rate	5.50%	6.00%

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Leases (Supplemental Cash Flow Related to Leases) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	[1]	$ 1	$ 3
Leased assets obtained in exchange for new lease liabilities		6
Lease termination cost		$ 2

[1] For the three months ended March 31, 2020, amounts include $2 million of lease termination costs related to the decision to consolidate certain operations of Landmark Home Warranty, LLC (“Landmark”) with those of OneGuard Home Warranties (“OneGuard”). See Note 7 to the accompanying condensed consolidated financial statements for further information.

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Leases (Supplemental Balance Sheet Information Related to Lease) (Details) - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Leases [Abstract]
Operating lease right-of-use assets	$ 26	$ 21
Less lease incentives	(6)	(6)
Operating lease right-of-use assets, net	20	15
Other accrued liabilities	4	3
Operating lease liabilities	23	18
Total operating lease liabilities	$ 26	$ 21

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Leases (Maturities of Lease Liabilities) (Details) - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Leases [Abstract]
2021 (remainder)	$ 4
2022	5
2023	5
2024	3
2025	2
2026	2
Thereafter	12
Total lease payments	34
Less imputed interest	(8)
Total	$ 26	$ 21

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Income Taxes (Narrative) (Details)	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Taxes [Abstract]
Effective tax rate on income from continuing operations (as a percent)	9.80%	25.00%

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Restructuring Charges (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Restructuring Cost and Reserve [Line Items]
Restructuring charges	$ 1	$ 3
Restructuring charges, net of tax	1
Maximum [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges		3
Restructuring charges, net of tax		$ 2
Restructuring Reserve	$ 1		$ 1

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Commitments and Contingencies (Narrative) (Details) - Arizona Attorney General [Member] - USD ($)	1 Months Ended	3 Months Ended
	Jan. 31, 2021	Mar. 31, 2021
Loss Contingencies [Line Items]
Amount seeking in damages	$ 14,700,000
Settlement amount		$ 1,800,000
Additional expense		$ 0

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Stock-Based Compensation (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Stock-Based Compensation [Abstract]
Stock-based compensation expense	$ 6	$ 3
Stock-based compensation expense, net of tax	4	$ 3
Total unrecognized compensation costs related to non-vested stock options, restricted share units and performance shares	$ 61
Weighted-average period of recognition of stock-based compensation cost	2 years 8 months 4 days

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Stock-Based Compensation (Summary of Awards Granted) (Details)	3 Months Ended
	Mar. 31, 2021 $ / shares shares
Number of Awards Granted
Granted (in shares) | shares	245,599
Weighted Average Exercise Price
Granted (in dollars per share)	$ 54.81
Granted, Weighted Average Grant Date Fair Value (in dollars per share)	$ 28.09
Weighted Average Remaining Contractual Term (in years)
Granted, Weighted Ave Vesting Period	4 years
RSU [Member]
Weighted Average Remaining Contractual Term (in years)
Granted (in shares) | shares	368,202
Granted (in dollars per share)	$ 54.83
Weighted Avg. Vesting Period	3 years
Performance Shares [Member]
Weighted Average Remaining Contractual Term (in years)
Granted (in shares) | shares	98,017	[1]
Granted (in dollars per share)	$ 54.81	[1]
Weighted Avg. Vesting Period	3 years

[1] The number of performance shares granted during the three months ended March 31, 2021 represents the target value of the awards. The performance shares contain a performance condition that is based on our revenue target, and the ultimate number of performance shares to be earned depends on the achievement of this performance condition.

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Long-Term Debt (Narrative) (Details) - USD ($) $ in Millions		3 Months Ended
	Feb. 17, 2021	Mar. 31, 2021	Mar. 31, 2020
Long-Term Debt [Abstract]
Cost of debt purchased	$ 100
Loss on extinguishment of debt	$ 1	$ 1	$ 0

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Long-Term Debt (Schedule of Long-Term Debt) (Details) - USD ($) $ in Millions		Mar. 31, 2021	Dec. 31, 2020
Long-term debt [Line Items]
Less current portion		$ (7)	$ (7)
Total long-term debt		868	968
Term Loan Facility Maturing In 2025 [Member] | Secured Debt [Member]
Long-term debt [Line Items]
Long-term debt	[1]	529	629
Unamortized debt issuance costs		4	5
Unamortized original issue discount		1	1
Revolving Credit Facility Maturing In 2023 [Member]
Long-term debt [Line Items]
Long-term debt		0	0
2026 Notes [Member] | Loans Payable [Member]
Long-term debt [Line Items]
Long-term debt	[2]	346	346
Unamortized debt issuance costs		$ 4	$ 4

[1] As of March 31, 2021 and December 31, 2020, presented net of $4 million and $5 million, respectively, in unamortized debt issuance costs and $1 million in unamortized original issue discount paid.

[2] As of March 31, 2021 and December 31, 2020, presented net of $4 million in unamortized debt issuance costs.

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Supplemental Cash Flow Information (Schedule of Supplemental Information Relating to the Accompanying Condensed Consolidated Statements of Cash Flows) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash paid for (received from):
Interest expense	$ 18	$ 20
Income tax payments, net of refunds	8	0
Interest income	$ 0	$ (2)

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Comprehensive Income (Loss) (Summary of the Activity in AOCI, Net of the Related Tax Effects) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period		$ (33)	$ (21)
Other comprehensive income (loss) before reclassifications:
Pre-tax amount		7	(21)
Tax provision (benefit)		2	(5)
After-tax amount		5	(16)
Amounts reclassified from accumulated other comprehensive income (loss)	[1]	2	1
Net current period other comprehensive income (loss)		7	(15)
Balance at the end of period		(26)	(36)
Unrealized Losses On Derivatives [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period		(33)	(21)
Other comprehensive income (loss) before reclassifications:
Pre-tax amount		7	(21)
Tax provision (benefit)		2	(5)
After-tax amount		5	(16)
Amounts reclassified from accumulated other comprehensive income (loss)	[1]	2	1
Net current period other comprehensive income (loss)		7	(15)
Balance at the end of period		$ (26)	$ (36)

[1] Amounts are net of tax. See reclassifications out of AOCI below for further details.

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Comprehensive Income (Loss) (Schedule of Reclassifications Out of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	$ (13)	$ (15)
Provision for income taxes	(1)	(4)
Net Income	5	13
Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net Income	(2)	(1)
Unrealized Losses On Derivatives [Member] | Amount Reclassified From Accumulated Other Comprehensive Income (Loss)
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	(3)	(1)
Provision for income taxes	1	0
Net Income	$ (2)	$ (1)

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Derivative Financial Instruments (Narrative) (Details) $ in Millions	3 Months Ended
	Mar. 31, 2021 USD ($)
Derivative Financial Instruments [Abstract]
Hedging loss in accumulated other comprehensive income expected to be recognized in earnings, net of tax	$ 8

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Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Fair Value Measurements [Abstract]
Carrying amount of total debt	$ 875		$ 975
Fair value of total debt	902		$ 1,004
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	0	$ 0
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	0	0
Fair Value, Liabilities, Level 1 to Level 2 Transfers, Amount	0	0
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount	0	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net	0	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Transfers, Net	$ 0	$ 0

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Fair Value Measurements (Schedule of the Carrying Amount and Estimated Fair Value of the Company's Financial Instruments that are Recorded at Fair Value on a Recurring Basis) (Details) - Recurring [Member] - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Carrying Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial liabilities	$ 34	$ 43
Carrying Value [Member] | Other Accrued Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap contracts	10	10
Carrying Value [Member] | Other Long-Term Obligation [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap contracts	24	33
Estimated Fair Value [Member] | Quoted Price In Active Markets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial liabilities	0	0
Estimated Fair Value [Member] | Quoted Price In Active Markets (Level 1) [Member] | Other Accrued Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap contracts	0	0
Estimated Fair Value [Member] | Quoted Price In Active Markets (Level 1) [Member] | Other Long-Term Obligation [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap contracts	0	0
Estimated Fair Value [Member] | Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial liabilities	34	43
Estimated Fair Value [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Accrued Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap contracts	10	10
Estimated Fair Value [Member] | Significant Other Observable Inputs (Level 2) [Member] | Other Long-Term Obligation [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap contracts	24	33
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial liabilities	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other Accrued Liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap contracts	0	0
Estimated Fair Value [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other Long-Term Obligation [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap contracts	$ 0	$ 0

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Earnings Per Share (Schedule of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended
		Mar. 31, 2021	Mar. 31, 2020
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Net income		$ 5	$ 13
Weighted-average common shares outstanding		85,400,000	85,100,000
Weighted-average common shares outstanding - assuming dilution		86,000,000.0	85,400,000
Basic earnings per share (in dollars per share)		$ 0.06	$ 0.15
Diluted earnings per share (in dollars per share)		$ 0.06	$ 0.15
Antidilutive securities excluded from computation of diluted earnings per share (in shares)		0	300,000
RSU [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Effect of dilutive securities		400,000	100,000
Stock Options [Member]
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items]
Effect of dilutive securities	[1]	200,000	100,000

[1] Options to purchase 0.3 million shares for the three months ended March 31, 2020 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. There were no such anti-dilutive options for the three months ended March 31, 2021.