Financial Data and Key Metrics Changes - Revenue increased 14% year-over-year to nearly $2.1 billion, surpassing the $2 billion mark [4][21] - Gross profit margin increased 150 basis points to a record 55% [4][22] - Net income grew 9% to $255 million [4][22] - Adjusted EBITDA grew 25% to $553 million, with an adjusted EBITDA margin expanding more than 200 basis points to 26% [5][22] Business Line Data and Key Metrics Changes - Direct-to-consumer (DTC) revenue grew 4%, with a 3% member growth in the channel [21][9] - First-year real estate revenue grew 13% due to the addition of 2-10 [21] - Non-warranty and other revenue grew 66%, driven by the success of the new HVAC and Moen programs [21] - The new HVAC program revenue grew 48% to $128 million [6][12] Market Data and Key Metrics Changes - Existing home sales volumes remain constrained near historic lows, impacting the ability to sell home warranties [8] - Inventory increased, with average supply exceeding four months for the first time in five years [8] - Over 60% of homes sold below their original list price, the highest level since 2019 [8] Company Strategy and Development Direction - The company aims to grow and retain home warranty members, with expectations for ending member count to grow in 2026 [4][14] - The long-term Adjusted EBITDA margin target has been raised to the mid-20% range [29] - The company is focusing on scaling non-warranty revenue streams and optimizing the integration of the 2-10 acquisition [5][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strategy and team, highlighting the importance of member growth and cash generation [31] - The company anticipates modest growth in existing home sales and expects to maintain strong renewal rates [41][60] - Management is optimistic about the potential of the new appliance upgrade program, although it is still in the pilot stage [47][49] Other Important Information - The company generated record free cash flow of $390 million, reflecting the strength and capital-light nature of the business [23] - Share repurchases totaled $280 million, with plans to complete the current authorization ahead of schedule [5][24] Q&A Session Summary Question: How should pricing growth be viewed with promotional pricing strategies? - Management indicated that the pricing strategy remains unchanged, with no increase in discounting days, but promotional pricing will be tested in the real estate channel [35][37] Question: What are the expectations for existing home sales and attach rates for 2026? - Management anticipates slight growth in existing home sales, modeling a 3% to 4% increase, with attach rates remaining around one-third of the real estate side of the business [41][60] Question: How will SG&A expenses be managed in 2026? - Management expects SG&A expenses to remain flat year-over-year, citing efficiencies gained in marketing and sales [44][45] Question: What is the outlook for the appliance upgrade pilot? - The pilot is expected to launch later in the year, with management optimistic about its revenue potential compared to HVAC [47][49] Question: How does the company view the impact of Assurant entering the home warranty market? - Management believes that Assurant's entry could expand the category, benefiting all players, while emphasizing the company's long-standing relationships and comprehensive service offerings [60][62]