Frontdoor, Inc. Stock Compensation Disclosure

Note 10. Stock-Based Compensation

The Omnibus Plan permits the grant to certain employees, consultants and non-employee directors of Frontdoor different forms of awards, including non-qualified stock options, performance options, RSUs, performance shares, RSAs and deferred share equivalents. Upon adoption, 14,500,000 shares were reserved for grants under the Omnibus Plan. Our compensation committee determines the long-term incentive mix of awards to our employees and may authorize new grants annually. As of December 31, 2025, 7,601,784 shares remain available for future grants.

Stock Options

Stock options are exercisable based on the terms outlined in the applicable award agreement and have generally vested over a period of three years. The grant date fair value of stock options is determined using the Black-Scholes option pricing model with the assumptions noted in the following table. A historical daily measurement of volatility is determined based on our and our peer companies’ average volatility. The risk-free interest rate is determined by reference to the outstanding U.S. Treasury note with a term equal to the expected life of the option granted. The expected life represents the period of time that options are expected to be outstanding and was calculated using the simplified approach.

During the years ended December 31, 2025, 2024 and 2023, we granted options to purchase 684,378 shares, 576,260 shares and 661,231 shares of our common stock, respectively, at weighted-average exercise prices of $38.03 per share, $31.94 per share and $26.67 per share, respectively. The weighted-average grant-date fair values of the options granted during the years ended December 31, 2025, 2024 and 2023 were $16.70 per share, $14.81 per share and $12.49 per share, respectively. During the year ended December 31, 2025, we applied a forfeiture assumption of 15 percent per annum in the recognition of the expense related to these options, with the exception of the options held by our CEO for which we applied a forfeiture rate of zero percent. The total intrinsic value of options exercised was $10 million, $6 million and $1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Performance Options

Performance options are exercisable based on the terms outlined in the applicable award agreement. The grant date fair value of performance options is determined using a Monte Carlo simulation model. In addition to service conditions, the ultimate number of performance options to be earned depends on the achievement of a market condition prior to the fourth anniversary of the grant date, which is based on a share price target. Performance options granted during the year ended December 31, 2023 have a weighted-average service period of approximately 0.8 years from the initial grant date.

During the year ended December 31, 2023 we granted options to purchase 652,004 shares of our common stock with a weighted-average exercise price of $26.42 per share. We did not issue any performance options under the Omnibus Plan during the years ended December 31, 2025 and 2024. The weighted-average grant date fair values of the performance options granted during the year ended December 31, 2023 were $10.40 per share. During the year ended December 31, 2025, we applied a forfeiture assumption of 15 percent per annum in the recognition of the expense related to these performance options, with the exception of the options held by our CEO for which we applied a forfeiture rate of zero percent. The total intrinsic value of options exercised was $4 million and $3 million for the year ended December 31, 2025 and 2024, respectively. No performance options were exercised during the years ended December 31, 2023.

RSUs

RSUs vest based on the terms outlined in the applicable award agreement, which is generally over a period of three years. The grant date fair value of RSUs is determined using the closing market price of our common stock on the trading day that immediately precedes the grant date.

During the years ended December 31, 2025, 2024 and 2023, we granted 805,110 RSUs, 812,939 RSUs and 920,369 RSUs, respectively, with weighted-average grant date fair values of $38.82 per unit, $32.16 per unit and $26.60 per unit, respectively. During the year ended December 31, 2025, we applied a forfeiture assumption of 15 percent per annum in the recognition of the expense related to these RSUs, with the exception of the awards held by our CEO for which we applied a forfeiture rate of zero percent. The total fair value of RSUs vested during the years ended December 31, 2025, 2024 and 2023 was $18 million, $16 million and $13 million, respectively.

Performance Shares

Performance shares vest based on the terms outlined in the applicable award agreement, which is generally after a period of three years. The grant date fair value of performance shares is determined using the closing market price of our common stock on the trading day that immediately precedes the grant date. In addition to service conditions, the ultimate number of performance shares to be earned depends on the achievement of a performance condition, which is based on a revenue target and company-specific operating results. The total number of performance shares that vest will range from 0% to 200% of each target as determined by measuring accumulated aggregate performance at the end of the performance period.

During the years ended December 31, 2025 and 2024, we granted 211,889 and 217,527 performance shares, respectively, with a weighted-average grant date fair value of $40.35 and $31.95 per share, respectively. We did not issue any performance shares under the Omnibus Plan during the year ended December 31, 2023. During the year ended December 31, 2025, we applied a forfeiture assumption of 15 percent per annum in the recognition of the expense related to these performance shares, with the exception of the awards held by our CEO for which we applied a forfeiture rate of zero percent. The total fair value of performance shares vested during the year ended December 31, 2025 and December 31, 2024 was $1 million. No performance shares vested during the years ended December 31, 2023.

ESPP

On March 21, 2019, our board of directors approved and recommended for approval by our stockholders the ESPP, which was approved by our stockholders on April 29, 2019 and became effective for offering periods commencing July 1, 2019. The ESPP is intended to qualify for favorable tax treatment under Section 423 of the Code. Under the plan, eligible employees may purchase common stock, subject to IRS limits, during pre-specified offering periods at a discount established by Frontdoor not to exceed 15 percent of the then current fair market value. A maximum of 1,250,000 shares of our common stock are authorized for sale under the plan. During the years ended December 31, 2025, 2024 and 2023, we issued 20,255 shares, 26,425 shares and 31,288 shares, respectively, under the ESPP. There were 1,027,802 shares available for issuance under the ESPP as of December 31, 2025.

Stock-based compensation expense

We recognized stock-based compensation expense of $34 million ($25 million, net of tax), $26 million ($20 million, net of tax) and $26 million ($22 million, net of tax) for the years ended December 31, 2025, 2024 and 2023, respectively. These charges are included in selling and administrative expenses in the accompanying consolidated statements of operations and comprehensive income.

Stock-based compensation expense for stock options, RSUs and RSAs is recognized over the vesting period of the award using a straight-line vesting method, net of estimated forfeitures. In addition, for performance shares with a performance condition, we evaluate the probability of achieving the performance condition at the end of each reporting period and record the related stock-based compensation expense over the service period. For performance shares and performance options with a market condition, the related stock-based compensation expense is recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided.

As of December 31, 2025, there was $47 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options, performance options, RSUs, performance shares and RSAs. These costs are expected to be recognized over a weighted-average period of 1.86 years.