SVP, Global Marketing at Ribbon; Communications Strategist, Community Organizer & Producer.
Generational shifts in the world of technology light up the imagination, fuel innovation and promise greater opportunities for entire communities to Strengthen lives and protect natural resources.
5G is probably the most transformational force I’ve encountered in my decades-long career in the tech and telecom industries because it has the potential to change every experience given the faster speeds, unimagined use cases and numerous promising opportunities to push the envelope and do things in entirely new ways.
Will 5G and related new cloud-based technologies deliver on the potential of Industry 4.0? Will automated systems allow manufacturers to produce better cars, appliances, consumer electronics and virtually every other product? Can it allow them to Strengthen quality and the business bottom line in ways we could never have imagined? Will access to ultra-fast connectivity upend business models in the media, entertainment, sports and interactive gaming domains?
Transformations like these are already well underway, and with billions being spent to develop next-generation digital infrastructure, and a highly sophisticated mobile ecosystem bringing together the hardware, firmware, middleware and software that makes spectrum-based networks work better, one trend in particular stands out for me—and that is network sharing and the double entendre of both technical and social network sharing that I believe could move us forward faster as we aim to narrow and eliminate the digital divide in the U.S. and around the world.
Technically, there are many definitions of network sharing to note.
Gartner, for example, defines network sharing as a “business model in which two or more communications service providers (CSPs) share network resources through joint ownership or by third-party-enabled network sharing (open networks).” Gartner goes on to add the approach is technology-neutral and includes active and passive sharing of infrastructure.
According to an April 2022 post by IDC: “5G network slicing, part of the 3GPP standards developed for 5G, allows for the creation of multiple virtual networks across a single network infrastructure, allowing enterprises to connect with guaranteed low latency. Using principles behind software-defined network and network virtualization, slicing allows the mobile operator to provide differentiated network experience for different sets of end users.”
What really inspires me is a “next-level” approach being taken by the Federal Communications Commission (FCC), as described in a very recently issued Notice of Inquiry regarding the implementation of the Infrastructure Investment and Jobs Act. Chairwoman Jessica Rosenworcel is quoted as saying, “In the very first sentence of the Communications Act, Congress directs the Federal Communications Commission to help make communications services available to ‘all the people of the United States … without discrimination on the basis of race, color, religion, national origin, or sex.’ This language is not new. But it is time to address it with new urgency.”
This is where we see the human side of sharing networks: the opportunity to build enough capacity across the spectrum to support the “bright and shining city on the hill” for all those who live in the United States, from those in the largest cities to those in the most rural areas. With the right understanding of network sharing, private industry can work in partnership with the public sector to create the economies of scale that make super-fast broadband available, affordable and accessible.
But it will take time, hard work and collaboration. We need more business leaders to reach out to policymakers in Washington, D.C., and at the state level to discuss the infrastructure required to make this opportunity a reality. Policymakers, regulators, funding agencies and other politicians should understand that communications are essential to our future and that government has a role in creating a level playing field. Yet there can be challenges with the speed at which change occurs and with alignment on priorities. That’s why business leaders should stay top of mind with these groups.
Perhaps it will take outside-the-box thinking to move things along. There are countless opportunities for network sharing from unexpected areas, like electric co-ops and utilities. They may be able to lay networks, already have advanced infrastructure in place and have the know-how for building, operating and maintaining complex networks. I believe these organizations are well positioned to share network capacity to support gaps across the country.
And at the heart of all these changes, communications professionals should act. Marketers are storytellers skilled at bridging gaps between stakeholders, identifying pain points and bringing communities together to build trust and take action. Whether they’re supporting engagements with the government, connecting organizations or painting a picture of the future, communications experts should seize the opportunity to contribute.
Why is this kind of network sharing important?
5G promises to deliver much more than just higher data rates and more capacity. It could enable new kinds of ultra-reliable, mission-critical services. It could enable doctors to remotely control medical procedures and see their patients online in service of better care for lower costs.
5G could more effectively connect virtually everything, ranging from sensors that can dramatically Strengthen environmental initiatives to drones and robots that can provide public safety and security.
5G could make remote learning more experiential with high-definition video collaboration and learning through virtual reality, augmented reality and extended reality.
Chairwoman Rosenworcel also said, after quoting former Congressman John Lewis, “I’m the first woman ever confirmed as Chair of the FCC. Here’s what I want to leave behind: A diverse agency that is more committed than ever before to realizing the power of broadband for all. I believe this goal is within reach. Now let’s use this proceeding to help make it happen.”
Network sharing and 5G show great promise. Business leaders and communications professionals have a great opportunity before them to help fuel progress.
Forbes Communications Council is an invitation-only community for executives in successful public relations, media strategy, creative and advertising agencies. Do I qualify?
Frontdoor, Inc. (NASDAQ:FTDR) Q2 2022 Earnings Conference Call August 4, 2022 8:30 AM ET
Matt Davis - Vice President, Investor Relations and Treasurer
Bill Cobb - Chairman and CEO
Brian Turcotte - Chief Financial Officer
Conference Call Participants
Ian Zaffino - Oppenheimer
Youssef Squali - Truist Securities
Justin Patterson - KeyBanc
Eric Sheridan - Goldman Sachs
Brian Fitzgerald - Wells Fargo
Ladies and gentlemen, welcome to Frontdoor's Second Quarter 2022 Earnings Call. [Operator Instructions]
Beginning today's call is Matt Davis, Vice President of Investor Relations and Treasurer, and he will introduce the other speakers on the call. At this time, we'll begin today's call. Please go ahead, Mr. Davis.
Thank you, operator. Good morning, everyone, and thank you for joining Frontdoor's Second Quarter 2022 Earnings Conference Call. Joining me today are Frontdoor's Chairman and Chief Executive Officer, Bill Cobb, and Frontdoor's Chief Financial Officer, Brian Turcotte. The press release and slide presentation that will be used during today's call can be found on the Investor Relations section of Frontdoor's website, which is located at investors.frontdoorhome.com.
As stated on Slide 3 of the presentation, I'd like to remind you that this call and webcast may contain forward-looking statements. These statements are subject to various risks and uncertainties, which could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's filings with the SEC. Please refer to the Risk Factors section in our filings for a more detailed discussion of our forward-looking statements and the risks and uncertainties related to such statements. All forward-looking statements are made as of today, August 4. And except as required by law, the company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
We will also reference certain non-GAAP financial measures throughout today's call. We have included definitions of these terms and reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures in our press release and the appendix to the presentation in order to better assist you in understanding our financial performance.
Before I turn the call over to Bill for opening comments, let me start with a brief introduction. As many of you know, Bill has been Chairman since the spin-off of Frontdoor, and he assumed the CEO role at the beginning of June. Bill is a tenured executive, with over 35 years of business experience at world-class market-leading companies. He has served on several boards and was the President and Chief Executive Officer of H&R Block from 2011 to 2017. Prior to that, he had extensive corporate and marketing experience through various leadership roles at eBay, Pepsi and Pizza Hut from 1987 to 2008. You can find more on Bill's background on Frontdoor's website.
I am very pleased to now turn the call over to Frontdoor's new CEO, Bill Cobb, for opening comments. Bill?
Thanks, Matt, and hi, everyone. It is great to be here to speak with all of you. I look forward to getting out and meeting our investors over the next several months, and I'm extremely excited about the opportunity to lead the next phase of Frontdoor's journey.
Let me start on Slide 4 by saying that over the last few months, I have been able to meet with a broader group of Frontdoor's associates, and I continue to be impressed with the level of talent across the organization. I am also very bullish on the company's future, as we know, there is substantial demand for home repair and maintenance services across the United States.
I am confident that we have a great business with a bright long-term future ahead of us. However, we are facing some significant near-term issues that are worse than I expected coming into this position. We are looking at a macroeconomic environment that continues to deteriorate, rapid cost inflation, declining consumer sentiment and a dynamic global backdrop marked by war, rising geopolitical tensions and global supply chain disruptions. So let me state it right up front.
We are lowering our full year 2022 adjusted EBITDA to be in a range of $170 million to $190 million as a result of these factors. These are difficult times, and I have been struck by the magnitude of the impact on our financial outlook. But let me be clear, we will work our way through it and emerge stronger for it. I still completely believe in the future of this company, and the last two months in the job has only increased by conviction despite the tough outlook for 2022.
Frontdoor competes in the growing home services space, has a great recurring revenue business model, a strong management team and a solid foundation as the leader in the home service plan category.
Let's turn to Slide 5, and review some of the changes that are currently underway at Frontdoor as we are moving quickly to Strengthen execution and better balance revenue growth and earnings. Specifically, our teams are working on the following areas: first, we have determined that priority one is to zero in on rebuilding the core home service plan business. We are the leader in the home service plan category.
We offer consumers both peace of mind and budget protection against inevitable and unexpected expenses and the inconvenience of breakdowns to major systems and appliances. Our home service plans do this by leveraging the convenience of our prequalified network of 17,000 contractors that we partner with. This is a great recurring revenue business with significant upside, given our powerful marketplace model.
That means that our new businesses will be transitioning to a supporting role. ProConnect has not performed up to our expectations, and my team is working to complete a full study of how to Strengthen our on-demand offering as it does not make sense to continue to lose money in the current approach. But to be clear, an on-demand offering remains an important element to realizing our long-term potential, and that has not changed.
We are extremely optimistic about how an on-demand approach still gives us the potential to broaden our reach to a much larger pool of customers than what we can capture today under a home service plan. We are looking to go much deeper into this market and completely restate our offering as I think we can execute much better in this area.
Now turning to Streem. We love the Streem technology's ability to remotely troubleshoot issues around the home and provide real-time feedback to our customers and contractors. However, going forward, we will be laser-focused on integrating Streem into the core business and less focus on selling this technology platform to third-party customers. This will have the added benefit of reducing our costs.
Second, we have reorganized key parts of the company to increase our focus on execution. We now have clear and separate teams dedicated to marketing, sales and product, which I will speak to in a moment. They are supported by operations, service, technology and our other internal functions to create a seamless end-to-end operating role. Third, we are working to address the rapid acceleration in claims cost inflation. I have put together a cross-functional team across finance and contractor relations to really dig into this and reevaluate how we can better control our costs.
Brian will go into the details more in a minute. And four, we are undertaking a comprehensive review of our total SG&A expense footprint, which is expected to be completed in the third quarter of this year. While we continue to generate positive cash flow and have a strong balance sheet, we have to adapt to the current business environment and reduce expenses.
Now turning to Slide 6, where I want to share some of the guiding principles that I'm using to look at all aspects of the company. First, we will approach the business with a comprehensive focus on the customer and increased focus on our branding approach. While I generally feel good about our overall approach to growing the business, I don't believe we have executed up to our potential, and we are not growing the market as well as we should.
Our goal is to offer one straightforward, consistently great experience. We operate in a complex category, and we must Strengthen how we go to market. As part of this effort, we are also undertaking a broad customer segmentation study. This will give us better insight into how the customers' view of their home has changed since the start of the pandemic and the work-from-home expansion.
Second, we will have a detailed and focused technology road map as we continue to digitize our business. This group is led by Tony Bacos, our Chief Digital Officer, who is a well-known industry leader that came to us from Amazon. Tony has helped us to really focus our digital priorities at Frontdoor.
We remain committed to investing in our digital transformation as it will help us drive a superior customer and contractor experience as well as cost savings over the long term. Third, we want to simplify all aspects of our business. One of my early impressions since becoming CEO is how complex our legacy internal processes and systems remain.
We want to reinvent how we interact with customers, contractors and other partners to reduce manual work. As we are in the process of reevaluating so many areas of our company, we plan to hold an Investor Day in early March of 2023. This will allow investors to meet the senior leaders of our management team and allow us to share more details on how we are transforming this company.
Now turning to Slide 7 and a quick review of the business. Taking over the CEO role has provided me with a deeper understanding of the challenges our business is facing. As I mentioned earlier, I think we know a much better job of executing, specifically on the overall sales process to drive revenue growth across all of our channels. That is why I reorganized the company to better define roles and focus on building our brand and providing us with an end-to-end view of the consumer.
We hired Kathy Collins as our Chief Marketing Officer. Kathy is an accomplished leader with broad experiences across all facets of marketing. She most recently served as Chief Sales and Marketing Officer for a large medical benefits provider. Prior to that, she held various roles around marketing strategy, product development and client experience at Lee Jeans, Massage Envy and H&R Block. And she specializes in transforming brands of legacy businesses. We also hired Jessica Fields as our Chief Sales Officer. Jes will have responsibility for real estate and direct-to-consumer sales and business development across the Frontdoor portfolio. Jes was previously with Rocket Mortgage, where she was in charge of driving revenue and partnerships across the company. Prior to that, she had a variety of sales experiences at International Bancard and Sears. With her prior real estate experience, Jes is bringing new ideas on how to Strengthen our go-to-market real estate sales efforts.
Additionally, Raj Midha has transitioned to lead home service plan, product and pricing across all of our brands. Raj brings a wealth of home service plan experience, given his leadership roles in marketing, strategy and product development at Frontdoor, American Home Shield and ServiceMaster over the last 13 years.
By realigning these teams, we expect to increase focus on the customer, develop a more consistent sales methodology and Strengthen accountability throughout the sales funnel. As part of this effort, we are evaluating changes to our overall marketing and branding strategy. We are also looking at our products, which should be transparent, simple, easy to understand and use.
While still early days, we have already identified opportunities to execute better and drive more sales over time. In the near term, our revenue growth will be primarily impacted by the challenges we are facing in selling home service plans in our real estate channel. The record low days on market continue to support a strong seller's market which, in turn, makes it difficult for us to attach our home service plan as part of a real estate transaction.
This trend appeared to continue through June based on the most accurate data from the National Association of Realtors. Existing home sales declined 14% year-over-year. Inventory data was mixed as the supply of homes increased to three months from 2.5 months, yet the days on market declined again to just 14 days and all cash offers increased from 23% to 25%. However, we believe that the real estate market has already entered a period of transition.
Mortgage rates have increased to 5.5%, and we are hearing commentary from our real estate brokerage partners that the market dynamics are quickly shifting as multiple offers are diminishing and inspections are becoming the norm once again. Let me be clear. We believe that the sales decline in our real estate channel is not permanent, and we are optimistic that improvements in these leading indicators will result in a more favorable market environment to sell home service plans as the real estate market normalizes.
Regardless of market conditions, I believe that we can do a better job of executing in our real estate channel. Jes is working to change our sales culture and increase accountability. We are prioritizing leads in the strongest markets and aggressively deploying our field sales team to Strengthen conversion. These changes are expected to Strengthen our overall capture rate in all market conditions.
In conclusion, there is a high level of energy across the company as we are moving quickly to make improvements at Frontdoor, and I am confident that we will turn things around. I have already made changes to our leadership team. We are aggressively addressing the challenging economic environment. We are taking steps to Strengthen the execution and substantially reduce costs, and we are reimagining the industry that we founded. Longer term, our opportunity to profitably grow the business has not changed.
We remain extremely confident in the underlying fundamentals for the following reasons: First, demand for home repair and maintenance services continues to grow, and is supported by changing demographics and accurate home nesting trends; second, there is tremendous demand for digital transformation in the home services space; third, there is massive potential to deepen Frontdoor's market penetration as we Strengthen our branding; and finally, there is significant opportunity to grow through our on-demand offering.
I will now turn the call over to Brian to review our financial results.
Thanks, Bill, and good morning, everyone.
Please turn to Slide 8, and I'll review our second quarter 2022 financial results. Second quarter 2022 revenue increased 5% versus the prior year period to $487 million as a result of higher pricing and a mix shift to higher-priced products in our home service plan business, which more than offset a slight decline in customer volume.
Looking at our home service plan channels, second quarter revenue derived from customer renewals increased 10% versus the prior year period due to growth in the number of renewed home service plans and improved price realization. First year real estate revenue decreased 26% versus the prior year period, reflecting a continued decline in the number of home service plans in this channel, offset in part by improved price realization.
The decline in the number of home service plans in this channel was due to the ongoing challenges presented by the seller's market, driven in part by extremely low home inventory levels across the U.S. First year direct-to-consumer, or D2C, revenue increased 15% versus the prior year period due to improved price realization and a mix shift to higher-priced products as the volume was relatively flat.
Second quarter revenue reported in our other channel increased $5 million over the prior year period, primarily driven by ProConnect growth. Gross profit declined 13% in the second quarter versus the prior year period to $211 million, and our gross profit margin was 43%. I'll speak to the inflationary cost pressures that unfavorably impacted gross profit in a moment. Moving down to income statement.
I would point out that as part of our efforts to better match our office space footprint to our current needs and also to reduce operating expense, we are entering into a sublease for our downtown Memphis headquarters. Our plans are to do a smaller and less expensive space, which is more centrally located for our Memphis-based employee population.
While this action resulted in a noncash impairment charge of $11 million in the second quarter related to our headquarters facility operating lease right-of-use assets and leasehold improvements, the cash flow and adjusted EBITDA impacts over the remainder of our lease term are expected to be positive. Net income decreased $7 million in the second quarter of 2022 to $33 million. Adjusted net income decreased $22 million over the prior year period to $44 million. Adjusted EBITDA was $77 million in the second quarter or $37 million lower than the prior year period.
Let's move to the table on Slide 9, and I'll provide context for the year-over-year decline in second quarter adjusted EBITDA. Starting at the top, we had $23 million of favorable revenue conversion in the second quarter of 2022 versus the prior year period. Contract claims costs increased $53 million in the second quarter versus the prior year period, primarily driven by an acceleration of inflationary cost pressures, including rising contract-related expenses and higher parts and equipment costs.
Second quarter claims costs were also unfavorably impacted by approximately $4 million from the extremely hot weather across the country, primarily in May. Additionally, contract claims cost for the second quarter of 2022 include a $7 million unfavorable adjustment related to the adverse cost development of prior period claims.
Sales and marketing costs increased $6 million in the second quarter versus the prior year period, primarily related to increased investments in the DTC channel and ProConnect. And finally, general and administrative costs increased one million dollar in the second quarter, primarily due to increased professional fees. I'll now go into more detail on the significant claims cost inflation we're experiencing as a result of the challenging macroeconomic environment, the effects on the business and our ongoing cost mitigation strategies.
Over the 12 months ended June 2022, the consumer price index increased 9.1%, not only the largest 12-month increase in over 40 years, but also included an acceleration over the last two months of the second quarter. Furthermore, we are seeing cost inflation in home services rising even faster.
For example, in June, our contractors were faced with fuel costs that were up over 60% versus one year ago. We also saw the producing price index for heating and air conditioning equipment and appliances up over 20% and 15%, respectively. It is one of the most challenging environments we've ever faced, and it continues to evolve as issues such as the war in Ukraine and its impact on fuel prices and rolling COVID lockdowns in China impacting the global supply chain. However, we are seeing some green shoots as certain commodity prices are now declining.
For example, cold-rolled steel, a critical component in the manufacture of water heaters and HVAC equipment, declined 20% in June versus the prior year period. Additionally, as I mentioned last quarter, while we have great pricing visibility and an ability to influence our own direct purchases of parts and equipment, we don't have that same level of real-time visibility into our contractor costs.
Our contractors, for the most part, who are small business owners, generally pass along their higher cost to us. And as they can take months to complete their billing process, our ability to identify and manage accelerating contractor costs in the near term is limited. I believe it would be helpful to provide more context as to how the current environment impacts Frontdoor's operations.
The challenging macroeconomic environment, including higher parts and equipment costs and contractor-related inflation, resulted in our second quarter year-over-year cost per service request increasing about 23%, which was much higher than the mid- to high-teens increase we experienced in the first quarter.
We believe the main drivers of this inflation are: first, a rapid acceleration of contractor-related costs, including higher fuel costs, operating costs and labor rates. It also includes a substantial increase in contractor supply parts and equipment costs; second, our product mix now includes broader coverage offerings, such as our new Platinum product, which has both a higher price point and a higher service cost; and third, although still within our projected ranges, we are paying higher prices for parts and equipment we directly source.
As we've mentioned in the past, implementing additional price increases is a lever we can pull to help cover higher inflation, and we've already taken two price increases earlier this year. We will continue to look for opportunities to increase price while minimizing the impact to our customer count. We are currently working on launching an update to our dynamic pricing model. We will take that opportunity to implement a third round of price increases for certain products in the second half of the year. As a result, we are now targeting a 12% to 13% overall price increase in 2022.
However, it's worth noting that with our annual service plan structure, price increases take time to be realized. And while we started the process early this year, they will provide more revenue and gross profit benefit in 2023. I also wanted to remind you that our price testing continues to show that our customers are mostly priced in elastic.
And we expect to be able to continue to increase our price over time to cover inflationary pressures. Beyond price, our top priority is working to Strengthen visibility into our contractor cost trends and then to mitigate the impact of the inflation on our margins. Let me explain some of our initiatives in more detail.
First, we are continuing to Strengthen our processes. These actions primarily focus on how we engage and utilize our contractors, including increasing the percent of total jobs assigned to our preferred contractors. We're also expanding our recruiting efforts to increase our contractor count and create more competition for contractor selection in key markets. Our contract relations team is also improving our end-to-end operating processes in an effort to further mitigate cost increases.
One example is they now require a review of all service risk cost estimates over a certain dollar limit from nonpreferred contractors to manage our cost exposure. Second, we are continuing to maximize our strategic sourcing efforts by broadening the Frontdoor parts and equipment sourcing network and supplying lower cost materials to our contractors than they could have purchased on their own. Another example is offering our contractors direct buy programs for water heaters and HVAC equipment that we purchase at much lower prices.
The added benefit of this program is that it's digital and reduces the number of inbound phone calls from contractors. And third, we are undertaking a comprehensive review of our SG&A expenses and have already identified a number of cost reduction opportunities that will result in over $30 million of improvement to our original full year 2022 SG&A guidance.
Please now turn to Slide 10 for a review of our cash flow and cash position. Net cash provided from operating activities was $94 million for the six months ended June 30, 2022, and was comprised of $68 million in earnings adjusted for noncash charges and $26 million of cash provided from working capital.
Net cash used for investing activities was $19 million and was primarily comprised of technology-related capital expenditures. Net cash used for financing activities was $69 million, primarily driven by $59 million used for share repurchases. Since launching the $400 million share repurchase program last September, we have repurchased $162 million worth of shares or 40% of the total program.
I should note that we continue to prioritize share repurchases in our capital allocation strategy and remain committed to returning cash to our valued shareholders. However, like many other companies, the amount of additional share repurchases, if any, will depend on the macroeconomic environment and how our business performs throughout the rest of 2022. Free cash flow, calculated as net cash provided from operating activities minus property additions, was $75 million for the six months ended June 30, 2022, compared to $104 million for the prior year.
We ended the second quarter of 2022 with $269 million in cash. Restricted net assets totaled $159 million and unrestricted cash totaled $109 million. However, unrestricted cash, combined with $248 million of available capacity under our revolving credit facility, provides us with a solid available liquidity position of $357 million.
I'll now conclude my prepared remarks with our current thoughts regarding the financial outlook for the third quarter and updated full year 2022 provided on Slide 11. We expect our third quarter 2022 revenue to be within a range of $470 million to $480 million, which reflects an increase in direct-to-consumer and renewal channel revenue versus the prior year period, partly offset by approximately 30% decline in real estate channel revenue.
Third quarter adjusted EBITDA is expected to range between $65 million and $75 million, which is below the prior year period and driven by the accelerating inflationary cost trends, the impact of the July heat wave on HVAC claims and the challenging real estate environment.
Turning to our updated full year 2022 outlook, revenue is projected to be within a range of $1.63 billion to $1.65 billion. The full year revenue growth assumptions include upper single-digit revenue growth in the D2C and renewal channels and a nearly 30% decrease in the real estate channel, driven by the historically challenging seller's market and extremely low levels of home inventory.
On a consolidated basis, our core home service plan business revenue growth is now expected to be in the low single digits. Customer count is expected to decline by approximately five percent in 2022, primarily driven by the weakness in first year real estate sales. Additionally, reductions in ProConnect marketing investment in the back half of the year will lower the full year revenue target to $30 million to $35 million.
Our full year 2022 gross profit margin is projected to be between 41% and 42% as a result of the challenging macroeconomic conditions, including an acceleration of inflationary cost pressures, which is partly offset by higher pricing and process improvement efforts. This projection assumes that inflation will be 20% on a cost per service request basis, and the actual number of service requests will be slightly down versus prior year.
We're now targeting full year 2022 SG&A to range between $525 million and $535 million, including a stock compensation expense target of approximately $28 million. The $30 million decrease from our original 2022 guidance primarily relates to the SG&A expense reduction actions I mentioned earlier. Based on these updated inputs, full year 2022 adjusted EBITDA is expected to range between $170 million and $190 million.
With that, I'll now turn the call back over to Bill for closing comments before Matt opens the question-and-answer session. Bill?
A couple of final thoughts. This management team is not pleased with where we are with this outlook. Our Board has directed me to make the changes necessary as quickly as possible. As a result, we are working with a high level of intensity to do everything we can to Strengthen our results for the rest of 2022 and put ourselves in the right footing heading into next year.
With that, I'll now turn the call back over to Matt to open the question-and-answer session. Matt?
A - Matt Davis
Thanks Bill. [Operator Instructions] Please note that our guidance is limited to the outlook we've provided. Operator, let's open the line for questions.
[Operator Instructions] Our first questions comes from Ian Zaffino from Oppenheimer. Your line is now open. Please go ahead.
Great. Thanks For taking my question. Bill, I wanted to ask a few things now that you're in the CEO seat. You mentioned ProConnect really not performing the way it should be. What exactly is going wrong there? Why does it continue to lose money? Is it basically a scaling thing? Is there something else wrong with the product? Maybe help us understand what you identify as the issues there? And maybe what you can do to sort of get it back on the right track? And then I have a follow-up. Thanks.
Yes. I think we have -- starting at the beginning, I think we have a branding issue. The term ProConnect may not have been the best term; and two, it has a ProConnect -- it's a pretty generic item. And we haven't really spent beyond building that brand and explaining really what it is about.
Second, I think we expanded too quickly. We expanded to too many cities and too many trades as opposed to building up our process and the way it happens. So we kind of spread out to, I think, 35 cities or so. We had all of our major trades. And we, in hindsight, probably should have been focused on maybe find us trade in limited number of markets.
Third, I think the way we engage with contractors and their value proposition was not enticing to contractors. So I think we had some trouble getting contractors, and I think they're a little confused by the proposition. So that's why, as I said in the script, there's a whole overhaul that we're looking at in terms of how we go to market. But let me try to step back then, and I can follow up if I didn't fully answer your question. We have the home service plan, which is primarily a repair and replace model.
What we want to do with our on-demand offering is have a repair and maintenance offering so that we are focused on areas that you don't have to access our business, our brand because you don't have a year-long subscription. We think that in tandem, a subscription model, the year -- annual contracts plus an ability to engage with us on a one-off a la carte, whatever you want to call it, basis around repair and maintenance is really an ideal blending of our overall business model.
So I think, like I said earlier, this is important to keep our focus on, on-demand. We've got to restage the ProConnect business. And in the interim, we're continuing to support it, albeit at lower levels. So we'll continue to see revenue coming out of this year. And there's been some good work done by the current team on funnel improvements and interaction with our customers and our contractors. So it's going to be important as we go forward, but it just hasn't been executed the way we probably should have.
Okay. Thank you. That's helpful. And then on the real estate side, I know you laid out a bunch of the headwinds you're seeing at the sort of macro. But are you also seeing maybe a share shift inside that market, maybe you're not holding the share like you intended to, you're not growing the share like you want to? And if that's the case, what do you plan to do about it? How do you plan to address that? And then if I just sneak in one other question, maybe for Brian, is third quarter has been very hot so far. What are you assuming as far as headwinds from the weather and increased service calls? Thanks.
Yes. So Ian, let me address the real estate piece because while I won't comment specifically on whether we've lost share or not, let's put it this way, we have to gain share. Our performance in real estate is not to the level notwithstanding a challenging market. And Jes Fields, our new Chief Sales Officer, is all over this.
She has brought in a new sales culture, she's brought in accountability, and she's doing things that are blocking and tackling. She's got now -- everybody has a weekly field sales plan, there's a weekly training module every week that the field agents have to go into. She is completely focused on real estate and not trying to chase a bunch of other opportunities, which maybe we should get to later on.
Right now, we need to fix real estate, and Jes is all over that. She's so much energy and she's really brought a dynamism, if you will, I think that's a word, to our sales process. So I couldn't be more thrilled with her hiring. And I believe she is sort of a no-excuses person, and she believes there are going to be five million to six millions of homes sold this year, and we need to get our fair share of that. Brian, I'll turn it over to you for the other question.
Thanks, Bill, and good morning, Ian. Regarding the third quarter and HVAC claims, we've had the benefit of seeing July, and it was a hot July, but we've built that into our forecast and also maybe a little more hot weather in August. And we start to trail off towards the end of the third quarter, obviously, with HVAC claims. So I think we've built that into our guidance, but we're not sitting pat watching the weather.
As I mentioned in my prepared remarks, we're improving our processes to lower our cost. We're trying to move to the mid-range, mid-80s for our preferred contractors. We're expanding our recruiting for contractors. We're improving the end-to-end processes, as I mentioned in the call. And also on the sourcing side, trying to lower our costs through maximizing our sourcing efforts and purchasing lower cost materials that our contractors could purchase. So we're watching the weather, we're trying to reduce our costs and things we can control. Is that helpful?
Thank you. Our next question comes from Youssef Squali from Truist Securities. Please go ahead. Your line is now open.
Hi. Good morning guys. This is Nick Cronin, on for Youssef. Can you just talk a little bit about the pace of price increases? I think you said you've gone through two already this year with another to go. And any impact you're seeing on customer churn? And then secondly, just for Streem, is that still on track to do $10 million to $15 million this year? I know you called out ProConnect going down. Thanks.
So let me take the price increase piece, and Brian, please augment whatever comments I make. As Brian said, we have taken two price increases, we're planning on a third. We are targeting it, well -- by the time the year ends, we will have taken approximately a 12% to 13% increase in price. Any churn or declines have been as expected, as we've said all along.
We are generally inelastic. We don't take that for granted. So we're doing everything to market and provide value to our customers. But given this incredible inflation and contractor costs, we're somewhat forced into taking pricing beyond what we might normally have expected.
So as you noted, we will have a decline in customers this year, but that is primarily due to the real estate channel. So I feel pretty good about how we're controlling and managing and staging the pricing actions that we're taking. But I'll turn the rest over to you, Brian.
No, I think you covered it well, Bill. I would -- the only thing I'd say, Nick, is that 12% to 13% price increase, if you look at it on an annualized basis, on our revenue base, that increase more than covers the COGS increase we're going to have this year. And although we're not going to see it all this year, as I described in my comments, we'll see the benefits next year. But that just shows the power of pricing with our model.
Got it. And then Streem, is that on pace to do $10 million to $15 million still?
Yes, Streem is not going to track that way again. As Bill described, we're going to view that as a technology play for us. We love the business, but it's more of a technology play supporting our core home service plan business. So we're investing less money into that business to find customers and enterprise customers. So that volume, we -- that revenue will be much lower this year than that.
And you've built that in the guidance -- the revenue guide we gave you, that's included.
That's included in the guidance, yes.
Great. Thanks guys.
It will be less than $10 million.
Our next question comes from Justin Patterson from KeyBanc. Your line is now open. Please go ahead.
Great. Thank you very much. Perhaps just a big picture one around the home service plan opportunity. This is a product that's been in market for quite some time now. How do you think about just the attractiveness of that opportunity? Where you are in market share penetration? And what the incremental investments are to really grow home service plan adoption more meaningfully? Thank you.
Yes. Justin, it's one I ponder every day, if you will. Part of the reason we're doing the customer segmentation study, which we haven't done for a few years, is to state the obvious. The world has changed and certainly the home being so much more a centerpiece of your complete life. We've got to understand those dynamics. The research -- the tracking work we do, there is still a need for repair, home maintenance, replacement of major systems.
So I think the core market, the addressable market -- and we talk a lot about $500 billion total addressable market. I'm trying to get to a real total addressable market for us. We're not going to get into the renovation business. But I do think that between the on-demand area and home service plans, we're going to have a sufficiently large business to try to attack.
So I think the opportunity is still there. I do believe we have to modernize our approach. I think there are some steps we have to take on the product and the offering. We took some steps this year with our Platinum product, which expanded services. We're able to get an additional pricing opportunities there, but we also ran into more service costs, and we launched that in the year where we had all the issues that Brian talked about with contractor costs. So I think there's some rebalancing we need to do.
But I think, overall, the market is still there. As for investment, diving through all of that right now, I think we can still have a very healthy financial model as we go forward. I think we just have to figure out what's the best way to go to market with that in terms of our marketing, our sales effort, and that's really what we're grinding on right now.
Operator. Is there another call?
Our next question comes from Eric Sheridan from Goldman Sachs. Please go ahead. Your line is now open.
Thanks for taking the question. Maybe taking a step back, I know we've talked a lot about the short term on the call. But Bill, you're new to the role you have now in the organization. It's been a couple of months since you took on that role. Can you give us a little bit of your perspective of what you've seen from inside the company? And how you think about your agenda versus maybe what in prior periods the company was focused on? And how you think about affecting change inside the organization? Maybe that's question one.
And then two, just coming back to the real estate. Again, zooming out, understood blocking and tackling renewed focus around gaining share. Can you give us a little bit sense of like how the market share dynamic changes? Like what should we be thinking of in terms of the ramp of putting investments behind wanting to change the dynamic in real estate and actually seeing it come through in the results? And how much of that is in your control as a result of investments versus out of your control just because of the broader real estate environment. Thanks for the back..
Okay. And if I didn't get all that, come back at it. But in terms of my perspective relative to where we were. At the highest level, the strategy has not changed. We still believe that there's a lot of vitality in home service plans. And we still believe that there is an opportunity for us, notwithstanding we may not have executed it particularly well to date in the on-demand piece. So that is the highest level, is unchanged. What has changed is the increased emphasis I put on home service plans. I think, previously, we're really trying to build Streem off the platform as a separate business, if you will, in ProConnect.
And I think I've come to believe that we need to be more centered almost call it one business and use the assets that we have with Streem, use the learning that we have with ProConnect, use the ability for us to evolve the home service plan piece to really build a better offering as we go forward. That is what a couple of minutes ago is what we're grinding on.
So I think the company, generally, the broad population is really excited about the direction we're going in. There's a lot of people who -- I've used the term around the company, let's reinvent the category we invented, and that's a little bit of the mantra that we're using internally as we really are questioning all elements of that. And I think we can have a very exciting modern offering.
We continue to make steps on our digital transformation. It reminds me a little bit of when I walked in to H&R Block, and Block made their major strategic error 15 years before I got there in 2011 when they didn't engage within the digital area. They said it's going to cannibalize their business, they listened to the franchisees. And we didn't really have a very good digital offering. By the time I left there, we had a product that in some reviews was superior to TurboTax. Same situation here. We've been talking about a digital transformation.
I'm really, really impressed with Tony Bacos, the people he's brought in with him in terms of the way he is relentlessly focusing on that. So I think we've got a lot of things lined up here. I've got some new members of the management team that I'm fired up about in terms of marketing and sales. And then Raj, who's working on product and pricing is just -- his experience is just invaluable.
So we're pretty jazzed about our opportunity as we go forward, notwithstanding the no one's happy with where we are in 2022. As far as real estate goes, I think what Jes and I have talked about is we've got to stop worrying about where the market is going. As Jes pointed out, when she presented to our Board last week, we're still going to have five million or six million homes sold next year. That's what our focus needs to be.
We need to be in the game with regard to all those sales. We have just re-upped our partnership with Anywhere, former Realogy. We've got a partnership with HSOA. I was with Jes last week on a sales call with another partner that we're trying to build a trusted partner relationship with.
So we are trying to go at a high level with major real estate houses, and yet -- and also do it, grind it out real estate agent by real estate agent. So as I said a little bit earlier, it's a lot of blocking and tackling. We got to make sure that we have coverage. We got to make sure we have plans. We got to make sure we have targets, and that's really the spirit that Jes has brought forward.
[Operator Instructions] Our next question comes from Brian Fitzgerald from Wells Fargo. Please go ahead Brian.
Thank you. We wanted to ask about the dynamics you're seeing, maybe more in general, in repair, in extensions, in the maintenance, maybe into home improvement over time. With the macro headwinds rising, are you seeing any shifts in consumer behavior resonating through dynamics, getting more frugal, maybe more tolerance for fixing versus replacing, anything you can tell there?
It's a great question, Brian. I think I would describe it right now as swirling winds. I think a lot of people have -- with the downturn in the stock market, with really some uncertainty generally, with the way inflation has impacted people at the grocery store, in restaurant and all the other areas, I don't think we have a full picture of this right now because it has been -- the pace has been brisk. I think, generally, these things normalize. My experience is we're going through the shock, we're going to get through it.
People are going to still want to buy a new home, people still want to their home, people are still going to need to maintain their home, repair systems, et cetera. Let's try and keep talking about the broad perspective for this company is actually quite strong. We have to execute better. There's no doubt about that. But I think that we still see things -- while there's some shocks to the system, we still see things that point to a positive future. And we'll get through this stage both as a company, and, I think in general, as an economy, and then we'll go from there.
That concludes our Q&A session for today. I will now hand back to the management team for closing remarks.
Thank you for participating this morning in our Q2 earnings call. We look forward to speaking with you going forward. Thank you.
Ladies and gentlemen, thank you again for joining Frontdoor's second quarter 2022 earnings call. Today's call is now concluded.
In many homes, the kitchen is a hive of daily activity: Many homeowners and families spend a good chunk of their day there, cooking, eating, chatting, packing lunches, and so on. Out of necessity, kitchens also have long-wearing fixtures and finishes, so in the busyness of everyday life, it’s easy not to notice that a kitchen is slowly aging—until something cracks, breaks, or is suddenly so dingy that kitchen remodeling is necessary. A bright, fresh kitchen can make time spent in your home feel better, even if it’s a simple refresh. But how much does the average kitchen remodel cost?
Kitchen remodels are large projects and can have significant budgets, with a typical cost range of $13,388 to $40,000, so it’s important to really think through the possibilities before making a plan, purchasing materials, and hiring a contractor. These steps can help you decide what scale of kitchen remodel you need and determine a budget that is reasonable to get the kitchen you want while maximizing your return on investment.
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When researching kitchen renovation or kitchen remodeling cost, homeowners will run across several terms whose meanings seem the same, similar—or downright confusing. If you’re planning to work with a contractor, it’s important to make sure you know what you’re asking for by clarifying the lingo of the kitchen project.
So what’s the difference between a kitchen remodel and a kitchen renovation? This is a tricky question. The two terms are often used interchangeably by salespeople and contractors. Technically, a renovation is a project that returns a space to a new state; it is a project that restores a space to look like new, cleaning up finishes, taking care of repairs, and sometimes replacing basic fixtures that have stopped functioning well. A remodel is a larger project that often includes replacing flooring, walls, and ceilings, and it can involve moving the plumbing and electrical connections in a room. However, the dictionary definition doesn’t matter as much as the definition used by contractors a homeowner may interview prior to hiring. Rather than assuming that you and the contractor are on the same page, it’s best to clarify exactly what you mean by “renovation” or “remodel” and check that the contractor has the same idea. Laying everything out on the table right at the beginning prevents confusion (and potentially unexpected costs) later in the project.
Expansion goes a step beyond renovation or remodeling. This type of project includes reframing a space, removing walls, and increasing the overall footprint of a kitchen. Often, an expansion involves combining a disused formal dining space with a smaller kitchen to create a more expansive cooking, eating, and gathering space that is better suited to the family’s lifestyle, or incorporating a kitchen into a great room for a more open plan. Expanding a space comes with a higher price tag because of all of the plumbing, electrical, and framing work that is involved.
Homeowners who look up “cost of kitchen remodel” will likely find there is not a one-size-fits-all answer. Kitchen remodels can cost anywhere between $75 and $250 per square foot, on average. This might seem like a wide range, and it is; the quality of materials often dictates prices, so differences can be significant. This range is a powerful tool as you budget. If you know what your overall maximum budget is and allow a percentage to cover unexpected surprises, you can tailor the choices you make as you select materials for each of the following factors to fit that budget. Dreaming of a granite countertop? Chances are you can have one—but it may mean choosing lower-grade cabinetry or shopping for reduced-price lighting. Inputting these costs into a kitchen remodel cost estimator can help you get a ballpark estimate to work from.
Installation and labor costs for a kitchen remodel average out to between $3,500 and $6,000, accounting for 15 to 20 percent of the total project budget. This is a negotiable cost, depending on what work a homeowner may be able to complete themselves and whether the contractor is open to reducing the fee in exchange for the help.
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Doors and windows are another variable cost factor, depending on the configuration of the kitchen. In general, they can account for about 4 percent of the budget, or about $920 on average. In a kitchen that opens to a deck, this will be a larger portion of the budget, while in an open-plan kitchen with no windows or just a small one, it may be less.
Approximately 10 percent of a kitchen remodel budget can be planned to go toward hiring one of the best countertop installers. The national average places that dollar figure around $2,300, but the cost will depend on the homeowner’s choices of material (natural stone, for example, will be significantly more expensive per square foot than laminate) and on the total square footage of countertop needed in the kitchen layout. Countertop materials include:
Custom edge routing, honing of natural stone, and the shape and number of cuts will also affect the price of the countertop. As it is one of the most eye-catching and often-used features in a kitchen, the countertop is an area where homeowners often choose to splurge on higher-end material, but if there are other priorities in the remodel, a lower-grade choice can help save money.
The cost of backsplash installation can run anywhere from $150 for a small kitchen remodel up to $10,000 for a larger and more complex project. The price will vary depending on the size of the backsplash, the materials, and labor. Some experienced DIYers feel comfortable installing a simple tile backsplash themselves. But for those who do not have tiling experience or want a more elaborate pattern, it may be worth it to let a contractor handle the installation. Ceramic tile is one of the most popular backsplash materials because it is both attractive and relatively affordable (although complex patterns and higher-quality materials can increase the cost). More high-end options like marble can cost up to $50 per square foot before labor.
As with countertops, there are myriad material options in kitchen flooring. Sheet vinyl and vinyl tile, linoleum, and laminate flooring are, in general, the least expensive options, and modern versions of these materials are quite durable and attractive. Ceramic tile and wood, followed by natural stone, are more expensive, and alternative flooring options such as cork and concrete provide additional choices. The selection of flooring will depend on both design preferences, durability requirements, and how the homeowner uses the kitchen. For example, vinyl floors are an easy-care and resilient option for families who often let children empty glasses out of a dishwasher; using concrete or ceramic floors is more likely to result in broken dishes. Natural wood is beautiful and durable, but it won’t wear well for homeowners with dogs. Kitchen flooring costs range between $1,500 and $4,500 with an average cost of $1,610 and make up an average of 7 percent of the total budget.
Lighting is a factor that homeowners often underestimate when building a plan and budget. Kitchens have multiple lighting options and requirements, and while a pretty fixture in the ceiling and a pendant over the sink are helpful for adding ambient lighting, the real workhorses of the kitchen lighting scheme are the task lights: lighting focused on the spot where the cook stands to chop vegetables, over the stove, or illuminating the eating area. Lighting costs anywhere from $500 to $2,000, and it’s advised to have the lighting plan fill about 5 percent of the planned budget, or approximately $1,150.
Refreshing the existing walls and ceiling with paint or wallpaper is an option in any kitchen remodel, but sometimes new materials provide extra benefits that make them worth replacing. New fire- and moisture-resistant drywall can add safety features, while paneling or tongue-in-groove ceilings can change the feel of a kitchen. About 5 percent of the budget will usually go to the walls and ceiling, which translates into an average of $1,150.
If the layout of the kitchen remains largely the same, plumbing costs will be minimal, as the water and gas lines can remain in place. Changing up the look will increase the material and labor costs for plumbing to the higher end of the range. New faucets are a way to brighten and refresh the appearance of the kitchen for relatively minimal cost. Replacing faucets and plumbing costs an average of $920, or 4 percent of the remodel cost. If major pipe rerouting is involved, this percentage will be significantly higher.
The largest portion of the kitchen remodel budget usually goes to cabinetry and hardware. As the most visible and substantial feature of the kitchen design, cabinetry will often determine the style, color palette, and level of detail the rest of the kitchen will require. Therefore, 29 percent of the budget, an average of $6,670, will typically go to the cost of kitchen cabinets and hardware. However, homeowners who choose custom cabinetry or those who plan for more cabinetry than the average amount will see that budget go up; salvage or home improvement store stock cabinets can cost much less. Cabinet hardware is often a shocking expense for remodelers who haven’t purchased it before. Many remodelers are surprised by how many knobs and handles are necessary and by how much such a small piece of a large project can cost. Remember that the hardware is what takes the brunt of everyday use, and price out the cost of quality hardware you like before setting a final budget: It’s not an incidental cost.
At the heart of the kitchen are its appliances, typically including a refrigerator, oven and cooktop or range, dishwasher, microwave, and potentially a ventilation hood. Often, remodelers look to reuse some existing appliances, which is a great option if the appliances are reasonably new. If, however, some need replacement, it’s worth noting that the best appliance deals usually come as a package; the more appliances purchased together, the greater the overall savings. This approach may mean a higher up-front cost, but in the long run, it will offer significant savings. Appliances are available in a wide range of finishes (stainless steel, black stainless steel, black, white, and others) and an even wider spectrum of quality. A low-budget electric range may not offer as many heat settings as a professional-grade six-burner gas stove, but both will get the job done, so the homeowner’s personal style and priorities will dictate whether the appliances are a place to splurge or save. The cost of appliances can vary greatly, from as little as $200 to as much as $5,000 or more, depending on the type and quantity. High-end custom built-in options can cost $10,000 or more. In most cases, the appliances comprise about 14 percent of the total budget, or around $3,220, but again, that number can be skewed by luxury options.
The square footage of the kitchen affects all of the numbers in the budget. Larger spaces require more drywall, more flooring, more paint, and more cabinets. In general, the cost to remodel a kitchen can range from $75 to $250 per square foot. A small kitchen that is less than 70 square feet will cost, on average, between $5,000 and $20,000, while a larger kitchen measuring 200 square feet or more can easily shoot upward of $60,000, because a space that large is likely in a larger home furnished with more luxurious finishes, so it’s likely the design choices will be made to match the existing level of quality.
There can be significant differences in the cost of materials and labor for a kitchen remodel depending on where you live. The West Coast, and California in particular, has some of the highest average costs to remodel a kitchen, with an average cost of $40,000. On the flip side, a kitchen remodel in Ohio costs an average of $16,000. Major cities also tend to skew higher in cost, while smaller cities have a lower overall cost. If you live in an area where costs are higher across the board, it’s especially important to get more than one estimate for your job and negotiate labor costs as much as possible while respecting the contractor’s skills.
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Once you’ve made the big decisions about the fun parts of a kitchen remodel—the parts you can see—you’ll still need to factor in the unseen network of pipes and wires that make the kitchen run, along with the cost of the services of someone to help plan that network efficiently.
If you can imagine the kitchen you’re dreaming of perfectly in your mind and are able to use one of the best kitchen design software options to create a plan, that’s great, and it will save a fair amount of time and money. However, it’s still a good idea to hire a professional kitchen designer to help draw up a formal plan, confirm your measurements, and help identify the small but critical items you may have missed. The average kitchen designer will make up about 4 percent of your budget. This can be even less if you use the services of a certified in-house designer at a home improvement store, whose services may be folded into the cost of the cabinets and appliances or an installation fee and will stay comfortably in the range of $100 to $800. This cost can skyrocket if you hire a certified professional to work on-site, where the expense can reach between $4,400 and $25,000, or about 10 percent of the total project cost. This fee should include 3-D renderings of the project, assistance with and sampling of material and color selections, project coordination with contractors and suppliers, and ongoing support throughout the entire remodel.
Basic fixture installation costs should not be a huge component of the budget; a simple faucet installation averages from $150 to $550, and a sink installation can cost between $100 and $600. A general contractor can perform these installations, or they may even be tasks a homeowner with basic plumbing know-how can tackle to save a bit of money. If, however, the remodel includes a change in the floor plan or moving the plumbing lines, the cost is likely to climb—installing new pipes will require a plumber (about $1,100) and most likely a permit (up to $800), elevating costs further.
Electricians charge approximately $50 to $100 an hour for labor, and if the electrical work is handled as part of the demolition process of the existing kitchen, it’s not a huge job. If the remodel is already well underway when the homeowner realizes that the electrical service needs to be upgraded to accommodate the new, larger refrigerator, or that wires need to be moved, outlets need to be added or upgraded, and permits need to be acquired, the costs to tear out finished work to replace wiring and added expense of rush jobs can be unexpectedly significant. Ideally, hire an electrician at the beginning of the process to advise and coordinate with the contractor from the start.
Moving gas lines is not a small expense, running from $250 to $850 on average. Permits, inspections, and qualified plumbers will add to the overall cost. If the location of the oven or cooktop is only shifting a bit, the flexible tubing on a gas line may mean you don’t need to actually move the supply line. If the appliances are being fully relocated, plan ahead to move the lines prior to installing flooring or drywall.
The ultimate goal of a kitchen remodel is to Strengthen the room’s functionality and visual appeal.
Whether this involves a light refresh or completely gutting the space will depend on the homeowner’s target budget, time frame, and kitchen size.
Fortunately, it isn’t always necessary to completely gut the kitchen and start from scratch. If the layout of your kitchen is well designed but some elements are beginning to look dated, or if your kitchen is less than 70 square feet, you may only need a small remodel. Investing in the cost to paint the cabinets, install new countertops, and refresh certain appliances can go a long way. Small kitchen remodel cost typically falls between $5,000 and $20,000.
If you can’t commit to a full kitchen makeover but your space needs more than just a refresh, a moderate kitchen remodel may be the best option. A kitchen that is considered to be medium size is around 150 and 175 square feet. Some ways to keep the project cost efficient could involve leaving the layout of the room intact but updating the flooring, counters, cabinets, or appliances. You might also want to tackle some of the work yourself, although it’s important to be realistic about what you can take on and what should be left to the professionals. The cost for a medium kitchen remodel will usually fall between $15,000 and $40,000.
If you plan to stay in your home for many years, why not optimize the kitchen to your exact preferences? If you’ve never liked the placement of your appliances or you dream of adding a walk-in pantry, it may be well worth the extra time and cost to have a more functional space in the long run. A kitchen with a lot of square footage (200 feet or more) will give you a luxurious amount of counter space and storage, but it also means that the cost for labor and materials will be significantly higher. A large kitchen remodel may also require rerouting plumbing or gas lines, and possibly some electrical rewiring. Depending on your project the cost to remodel a large kitchen can be as high as $30,000 to $80,000.
A kitchen remodel is no small project—the time and energy required to undergo the remodeling process (not to mention the cost) may cause homeowners to drag their feet. But the longer you wait, the longer you’ll be dealing with an unsightly or dysfunctional space. Some issues like water damage get more severe and more costly the longer you let them go unchecked. If your kitchen has any of the following problems, it’s probably time to start planning your remodel.
Do you find yourself piling groceries on top of the fridge or losing kitchen tools to junk drawers? Are your counters crammed with appliances? This is a pretty good indication that there is insufficient storage in your kitchen. It may be necessary to add cabinets or an extra pantry to accommodate your items. Even if expanding the size of the kitchen isn’t possible, creatively reworking the space to be more efficient can do wonders.
Even the most high-end appliances peter out eventually, and when they do they can become inefficient and even dangerous. If you’ve been dealing with a range that heats unreliably or a fridge that won’t stay cold, your kitchen appliances are likely reaching the end of their life cycle. If they were all installed at the same time, you may even notice them giving out one right after the other. Be encouraged that while replacing each and every appliance is pricey, you’ll probably save on your energy bills when it’s all said and done.
Kitchen cabinets see a lot of action, and it’s normal for them to wear out over time. Sometimes the hinges loosen or fall off, the wood splinters, or they just become dingy. Similarly, tile floors and backsplashes get chipped or broken from use. Not only can these problems give the kitchen a lackluster appearance, but it’s possible for a loose cabinet or sharp tile chip to cause an injury if left in disrepair.
Kitchen floors are especially vulnerable to damage due to heavy traffic and excessive heat and humidity. If your floor’s linoleum is coming unglued or the tile is starting to crack, it’s time to replace it altogether.
We don’t always think about how much we use countertops until they start to chip or crack. Just like a cracked plate or mug can harbor bacteria, cracks in a granite countertop can be home to germs as old food gets stuck in the crevices. Other times, a counter can even start to separate from the wall or its base over time, causing it to become unstable. You’ll want to take care of this immediately to avoid it collapsing altogether.
It’s not uncommon for older kitchens to suffer from water damage, whether it’s a ceiling pipe that has sprung a leak or a drip under the sink that has gone unnoticed. Over time, this can damage drywall and cabinets and create the perfect conditions for mold to grow. If the damage is severe enough, it may take significant repairs to get the space back to a functional and sanitary state.
Some of these numbers are big—some kitchen remodels may require financing or saving before taking the plunge. You may be wondering whether it’s worth it to remodel the kitchen at all. Beyond the appeal of designing the kitchen you’ve always wanted and making necessary repairs, there are other significant and long-term benefits to remodeling the kitchen.
Kitchen remodels provide one of the best returns on investment of any home improvement project. Experts estimate that a quality remodel can recoup between 57 and 78 percent of the project cost by increasing the value of the home. Unless the purpose of the remodel is to put the house on the market immediately (in which case it’s key to look at what kind of upgrades would best suit that purpose), it’s sensible to choose products and materials that you’re comfortable living with and be confident that your investment will pay off if you do eventually decide to sell. The best way to maximize the increase in home value is to work with a contractor or design professional who can guide your choices to maximize their impact.
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Many older kitchens were designed with one cook in mind, while in many households today there may be several people congregating in the kitchen at once. Adding work spaces, dedicated storage for appliances, and creative spaces for appliances that are used daily can reduce the time spent preparing and cleaning up meals and allow for better use of shared space.
If your kitchen was very trendy when it was last decorated, it probably feels like it has a date stamp on it, and if it’s not a popular trend, you might be anxious to update. A remodel is an opportunity to bring the kitchen into a more contemporary style and to choose to work with today’s trends or choose a timeless, classic look that will age well.
Older appliances use far more water, gas, and electricity than they really need. Energy-efficient models will lower utility bills and are kinder to the planet, as are many of the sustainable options for flooring, countertops, and cabinetry.
Adding ground fault circuit interrupter (GFCI) outlets to a kitchen reduces the likelihood of electrical shocks in a place where water and electricity are often side by side. Many older kitchens are not up to current codes, so updating and acquiring the necessary permits to modernize the safety of the kitchen will both increase the safety of your home and increase the home’s value (homeowners, however, may not be aware that permits are a hidden cost associated with common remodeling projects). A kitchen remodel also offers an opportunity to reconfigure the storage to be more efficient, reducing the number of sharp items on the counter and providing good lighting for tasks involving knives and hot pans.
A kitchen remodel, whether big or small, is a huge undertaking with a lot of moving parts. Homeowners who search for “kitchen remodel labor cost” may try to mitigate the cost by looking for parts of the project they can do themselves. If you’ve tackled many other renovation or construction projects before, you may be able to complete part of the remodel independently. However, for the vast majority of homeowners, this will be a job for a professional contractor. Even if you feel confident that you can complete a small portion like installing tile or painting kitchen cabinets, you risk jeopardizing another part of the project by doing something incorrectly or out of order. The possibility that you’ll need to bring in a contractor mid-job to handle a challenge that your DIY skills can’t address can result in completed work being torn out or budgets soaring past their stop point. And there’s always the possibility that you’ll irreparably damage your home—or yourself.
Working with a carefully chosen contractor buys you access to professional resources and suppliers (which can save both hassle and money), assures you of polished results, and results in a job completed more quickly. Most importantly, leaving the potentially dangerous elements of a remodel such as plumbing and electrical work to the pros will ensure that they are completed safely and effectively. Of course, there’s the possibility of conflicts with your contractor, but asking the right questions and checking references before hiring should alleviate the likelihood of that happening.
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Many of the opportunities to save on kitchen remodeling costs are in the selections you’ll make during planning—deciding on economy-, middle-, or luxury-grade materials, choosing higher- or lower-end appliances, and negotiating with contractors or suppliers. There are some other ways to economize and get the most out of your budget.
A general contractor that you trust can be an invaluable partner in the remodeling process, helping you keep everything in perspective and keeping much of the stress off your plate. To choose the right contractor, ask friends, relatives, and neighbors for recommendations, ask the contractor for references, actually call the references, and hire the contractor whose style and manner you feel most comfortable with. Remember, this is someone who will be spending a lot of time in your home, so your comfort with the contractor is important. Before getting started, make sure you have answers to the following questions:
Kitchen remodels are exciting, but they can also be a little scary (so many decisions!) and overwhelming. Budgeting thoughtfully and deciding on your priorities, along with working with carefully chosen professionals, should make the process smoother. To help you get started as you plan your project, here are some questions that remodelers often ask as they’re just beginning the process
The first decision you’ll need to make before you create a budget is the degree of remodel you plan to do. A reasonable budget for a minor remodel using quality but economical materials will be between $10,000 and $15,000, but it may require you to do some of the work yourself. A midrange remodel, including higher-grade materials and more help from professionals, could be budgeted between $15,000 and $40,000, while a major remodel with high-end appliances, custom cabinetry, and luxury finishes can stretch beyond $80,000. On average, the range for a kitchen remodel will cost between $13,388 and $40,000.
In an average kitchen remodel, replacing the cabinets costs between $4,000 and $13,000 with an average cost of $11,100. The cost could reach as high as $30,000 or more in a high-end kitchen remodel. The cabinet grade you select and the linear footage of cabinets in the kitchen will affect the total cost.
In general, the cabinets and their hardware are the most expensive component of a kitchen remodel. They account for approximately 29 percent of the overall budget, or about $6,670 on average. There are options to make this less expensive: Assembling a collection of stock cabinets and adding molding can be less expensive than custom or semi-custom work, and refacing the existing cabinets can vastly reduce the cost. To an extent, the most expensive element of a kitchen remodel is what you choose to prioritize; custom natural stone countertops can eclipse the cost of basic cabinetry if that’s where you’ve chosen to push the budget.
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A home warranty can be a great investment, but not everyone needs one. Determine which option is right for your home.
07/26/2022 12:00 am
Home warranties cover costly repairs and replacements if major systems and appliances break down. These contracts can provide a lot of value, but they’re not for everyone. This guide explains when a home warranty is worth it and provides recommendations for top home warranty companies based on our team’s extensive research.
A home warranty covers repairs and replacements if your home’s systems or appliances break down from regular wear and tear. It’s an annual plan paid in monthly installments called premiums or one lump sum. Warranties also give homeowners access to a network of vetted contractors, ensuring work done to your home is professional and timely.
Items covered under a home warranty vary by provider but plans typically include major systems, appliances or a combination of both.
Systems ensure your home remains functional, providing necessary heating, cooling and plumbing. Here are the systems a home warranty is likely to protect:
Appliances allow you to perform daily household tasks, such as washing dishes or doing laundry. A damaged appliance may not affect your home’s comfort, but it can disrupt your day.
Here are the appliances commonly covered under a home warranty:
There are some items not included in standard coverage. Many providers offer these as add-ons to a standard plan for an additional fee:
Though home warranties aren’t necessary for everyone, they can be helpful to new homeowners who are unfamiliar with local contractors and want access to a vetted network.
Warranties are also a good idea for homeowners with a small or nonexistent emergency fund, as they protect you from unexpected repair costs. Here are some other circumstances when you may want a home warranty.
Potential home buyers may ask the current residents to purchase a warranty to ensure the home’s older appliances will be covered when they move in. Alternatively, some home sellers purchase a warranty on their own to add property value and sweeten the deal in a tough real estate market.
Many people who own old homes get a home warranty to protect their aging appliances and systems. Most providers don’t protect items with preexisting conditions, but they cover old items still in working condition.
A home warranty may not be worth it for those who just purchased a new home or new systems and appliances, as the manufacturer’s warranty should cover these items for a few years.
They may sound similar, but a home warranty and home insurance policy are not the same thing. Read about the differences below.
Most mortgage lenders require homeowners insurance, as it covers damage from accidents and natural disasters such as fire, lightning or hailstorms. It also includes liability protection if someone is injured on your property. For example, if someone slips and falls inside your home, liability protection pays for their medical bills up to a certain dollar amount.
Home insurance providers are regulated by the National Association of Insurance Commissioners (NAIC).
A home warranty covers systems and appliances damaged from regular wear and tear. While a warranty isn’t required for a mortgage or loan, it can save you money and provide peace of mind.
Unlike homeowners insurance, home warranties aren’t regulated by a federal governing body. Each state has its own regulations, which can lead to inconsistent coverage across the country.
Researching the top home warranty providers can help you better understand your options. We recommend starting with the companies outlined in the chart below.
|Provider||Average Monthly Premium*||Service Fee|
|American Home Shield||$34.99–$79.99||$75–$125|
|America’s First Choice Home Club||$37.92–$59.58||$75–$125|
|Liberty Home Guard||$49.99–$59.99||$65–$125|
|Cinch Home Services||$34.99–$67.99||$75–$150|
*These ranges are based on quotes we received for a three-bedroom home in Atlanta, Ga.
Not every home warranty plan will suit your needs. Here are some factors to consider before enrolling in coverage.
Based on hundreds of hours of research, these are our two top home warranty providers:
As a veteran service provider with more than 50 years of experience, American Home Shield has a proven track record of helping homeowners across the country. The provider has near-nationwide availability, serving every state except Alaska.
What we like about American Home Shield:
✅ Additional benefits, such as appliance discounts, on select plans
✅ Option between $75, $100 and $125 service call fee
What we don’t like about American Home Shield:
❌ Higher monthly premium than most providers
❌ Repairs guaranteed for only 30 days
American Home Shield offers three plans: ShieldSilver, ShieldGold and ShieldPlatinum. Coverage increases with each plan, with the most comprehensive plan, ShieldPlatinum, covering more than 20 systems and appliances.
Here’s what we were quoted for each plan based on a $100 service fee:
Between the company’s club benefits and plan-length workmanship guarantee, America’s First Choice Home Club (AFC Home Club) customers can feel confident that their home appliances and systems are protected. The provider offers four plans, ensuring nearly everyone can find the coverage they need.
What we like about America’s First Choice Home Club:
✅ Access to identity theft protection and other exclusive benefits
✅ 24/7 customer service
What we don’t like about America’s First Choice Home Club:
❌ Customers must file a claim within one day of noticing an issue
❌ $75 cancellation fee
America’s First Choice Home Club has four plans: the Systems Plan, Silver Plan, Gold Plan and Platinum Plan. Each tier offers more coverage than the previous one, with its most comprehensive plan, the Platinum Plan, covering 20 systems and appliances.
Here’s a breakdown of the cost per plan based on a $100 service fee:
A home warranty is a wise investment for those who own aging homes or have a limited emergency fund and want protection from unexpected repair costs. It’s also a good option for new homeowners who have limited knowledge about systems and appliances and want access to a vetted network of technicians.
A home warranty may not be worth it for those who own a new home or recently purchased new systems and appliances.
If you’re interested in home warranty coverage, we recommend American Home Shield and America’s First Choice Home Club. American Home Shield is an industry veteran with three comprehensive plans and high coverage caps. America’s First Choice Home Club provides 24/7 customer service and a lifetime workmanship guarantee.
We researched and requested personalized quotes for nearly 40 home warranty providers, calculated average prices and compared the most commonly covered items in the industry. We analyzed thousands of customer reviews across multiple review aggregators, including BestCompany, Trustpilot, Google Reviews and Better Business Bureau (BBB). We also listened to hours of customer service calls to determine customers’ most significant pain points and what features are most important to them.
We divided our review process into six primary categories to help us select the best home warranty companies to recommend to our readers:
QNAP has had a rough run of it lately on the cybersecurity front, with cybercrime groups continually targeting known vulnerabilities in its network-attached storage (NAS) devices and serious vulnerabilities coming to light several times already in 2022.
QNAP offerings and other NAS options provide centralized, shared file storage that can be accessed by multiple users and client devices on a local area network (LAN). They also offer a popular alternative to cloud backups and storage for smaller companies — and tend to house treasure troves of data.
According to Shodan, there are almost 300,000 QNAP devices directly connected to the Internet. And — to put it simply — attackers appreciate the large population.
Given this, attackers see NAS customers as a golden opportunity, according to a Dark studying roundtable of security professionals, as evidenced by a bonanza of accurate QNAP-related cyberattack activity.
The multilevel-extortion threat known as the Deadbolt ransomware, in particular, is beating up on QNAP customers. Just last month, for example, the company flagged a new Deadbolt campaign going after its hardware — the second spate of such attacks in the past few weeks.
Other cybercrime groups are also taking aim at vulnerable devices: Earlier this year, QNAP was targeted by a wave of attacks using a new ransomware strain called eCh0raix.
Ransomware gangs are usually looking to exploit known bugs, such as critical flaws disclosed in April in Netatalk that affect QNAP and Synology firmware (CVE-2022-0194; CVE-2022-23122; CVE-2022-23125). These, which remain unpatched on certain NAS devices, allow remote code execution (RCE).
Another exploitable (but patched) flaw is a cross-site request forgery (CSRF) vulnerability (CVE-2021-34360) disclosed earlier this year in QNAP NAS devices running Proxy Server, which allows remote code injection.
It's worth noting that more sophisticated threats have options to pivot deeper into the network at patch-avoiding organizations as well: In March, the Taiwan-based QNAP said that its devices contained the severe Linux kernel vulnerability known as "Dirty Pipe," which is a privilege-escalation flaw that was deemed serious enough to warrant an alert from the US Cybersecurity and Infrastructure Security Agency (CISA). Of course, QNAP isn't alone in being vulnerable to that particular bug, but it contributes to the gear's attractiveness as a target.
In all, CISA has at least 10 QNAP vulnerabilities listed as being actively exploited by adversaries in its Known Exploited Vulnerability (KEV) Catalog.
Dark studying spoke to a slate of security researchers about why QNAP devices are in the crosshairs of so much cyber-activity, and what companies can do about it.
QNAP devices are attractive to cybercriminals for a number of reasons, including the fact that QNAP storage appliances are most often utilized by small to midsize (SMBs) businesses with very small (or non-existent) IT and security teams. This often translates to a lack of manpower for installing patches, among other downsides — creating large pools of devices that are ripe for exploitation.
"Storage devices that can be a core piece of an organization's operations that are easy to exploit create a perfect storm for ransomware gangs looking to ensure a quick payout to their extortion demands," says Chris Clements, vice president of solutions architecture at Cerberus Sentinel.
Also, the main mission attackers take on when exploiting vulnerabilities is, most often than not, data gathering. Historically, NAS products have been used by companies who prefer to take the route of an on-premises storage with a need for heavy use and storage capabilities, rather than a third-party handover of sensitive data, according to Brad Hong, customer success lead at Horizon3.ai.
"Since QNAP-branded NAS are quite literally a lateral extension of the organization's brain, even sometimes serving as the sole disaster-recovery storage, and make up about 54% of the NAS market share, it's only natural that its OS is a prime target for attackers," says Hong. "Imagine being able to circumvent all the strenuous steps of the cyber kill chain across every single enterprise, and instead using one key that fits more than half of the industry — effectively, it becomes a single vulnerability that negates all relevant cyber-stacks."
The risks to businesses from a successful compromise are myriad, researchers note, especially since by their very nature NAS appliances are often the primary data storage medium or are responsible for housing backups. Thus, successfully encrypting a storage appliance with ransomware can mean that the victim loses not only data, but also the source of backups and thus the ability to recover.
"The successful exploitation of a QNAP device, which often serves simultaneously as the heart and backbone of an organization, is akin to walking right into a HQ and swiping all its data," Horizon3.ai's Hong explains.
Roger Grimes, data-driven defense evangelist at KnowBe4, notes that a compromise not only means that the attacker has immediate access to data, but that the threat actor can use the initial exploitation to gain further access to the victim's logon credentials and broader network environment. Thus, he says, using security fundamentals should be a must-do.
"Basically, if defenders use strong log-on credentials, keep it patched, and follow the vendor's configuration recommendations, it can be as secure as any other cyber-product," he notes. "But according to CISA's KEV reporting, only three of the 10 reported exploited vulnerabilities have occurred since 2020. Most of the exploits are from things fixed by the vendor and patched years ago."
Cerberus Sentinel's Clements points out that appliances in general can also often lag significantly behind patching cadences of desktop or server systems, because most vendors lack a centralized mechanism for scheduling and deploying fixes for serious security flaws.
"Patches need to be manually applied by administrators," he says. "And patching storage appliances can also be disruptive not only because they require reboots, during which time important data can be inaccessible to a business, but often security patches are distributed by appliance vendors as part of larger firmware updates that can alter or even remove existing functionality that an organization may depend on."
But KnowBe4's Grimes notes that a simple administrative change could help the issue.
"Most of today's QNAP devices have an automatic patching feature, but it won't automatically apply the patch and reboot without the admin's consent," he explains. "Patching and rebooting takes time and causes operational interruption to the data on the device. So, they have to ask for approval. It would benefit QNAP and really every device in the world if the vendor was allowed to patch and reboot without permission."
QNAP customers would need to accept that patching is going to happen and expect small amounts of operational interruption during the patching process, he adds, pointing out that they could even control when the automatic patching happens.
While customers bear responsibility for their own patching, what about QNAP's rash of security bugs (and spotty track record in patching them quickly)?
"Of course, QNAP can help by doing better, more secure coding," Grimes says. "Many of the announced vulnerabilities have been because QNAP didn't do secure development lifecycle (SDL) coding and simple security reviews. Many of the flaws over the last few years are so basic that it just shows you that QNAP wasn't concentrating enough on making sure they had less vulnerable code."
Horizon3.ai's Hong highlighted the vendor’s own history of being slow to patch disclosed vulnerabilities.
"There's a larger conversation to be had here about legislation that should be passed to ensure vendors are doing their part to protect security, not just market share," he says. "One notorious example goes back in 2020 when an unauthenticated RCE and arbitrary file write exploit took more than seven months to be patched and, even then, only came after its four month disclosure grace-period expired and the exploit was finally made public."
Mike Parkin, senior technical engineer at Vulcan Cyber, has a different take, though.
"It's hard to say whether QNAP has just suffered a run of bad luck with exposed vulnerabilities or there is as actual issue keeping the systems secure, though I lean towards bad luck," he says. "Hopefully, updates from QNAP will make the devices more secure and the user community will take notice and review their own deployments to make sure they were done securely."
QNAP did not respond to a request for comment for this article.
When it comes to best practices for defense, the basics are the place to start, researchers said, including regular patching as explained above. But other measures are important too, like keeping appliances off the Internet and using strong, unique log-on credentials.
"Generally, organizations should minimize their public attack surface," says Jake Williams, executive director of cyber-threat intelligence at Scythe. "Many vulnerabilities in networking gear and other appliances are only exploitable when the administrative interface is exposed to the Internet (something almost universally discouraged by device vendors)."
If they must be accessible via the Internet, appliances should be behind other security measures, according to Satnam Narang, senior staff research engineer at Tenable. "Ideally, you don't want to expose your NAS devices publicly, so keep them behind a router and a firewall and utilize (if available) built-in VPN functionality for remote access," he says.
Another issue that's fixable is the use of Universal Plug and Play (UPnP), which is a network protocol that allows devices to automatically set port-forwarding rules for themselves, meaning these devices are directly accessible from the Internet, sometimes without user knowledge.
"UPnP is used for a variety of purposes, including gaming and streaming content, with the protocol allowing convenience of quickly connecting devices to a network, but at a security cost," says Chris Morgan, senior cyber-threat intelligence analyst at Digital Shadows. "QNAP has clarified that in the wake of attacks targeting their NAS devices, UPnP should be disabled. Port forwarding, which also assists users in direct communication requests, should also be disabled."
Beyond the simple steps, researchers also note that technology approaches are also available, such as encryption for data.
"All organizations should invest in encrypting their sensitive data at rest, and preferably with unique encryption keys per file or object," says Scott Bledsoe, CEO at Theon Technology. "With granular encryption of data at rest, the compromise of a single encryption key will only result in a single item of information from being disclosed, and will prevent large-scale disclosure of sensitive information."
And finally, Ryan McCurdy, vice president of marketing at Bolster, explains that people-based or legacy approaches are nearly impossible to scale with the massive volume of data on the Web, all of which could be a conduit for an attack on NAS devices.
"Throwing bodies and point solutions at this problem no longer works," he says. "In order to scale, it's critical that companies take a platform approach and leverage automation to detect, analyze, and take down fraudulent sites and content across the Web, social media, app stores, marketplaces, and the Dark Web."
RD.com, Getty images (2)
For some, shopping is a form of entertainment, a pastime that brings joy—one of life’s simple pleasures. Unfortunately, your spending habits can cause major damage to the planet. According to reports from the United Nations, the clothing industry contributes up to 10% of the pollution that is causing climate change. In fact, the global fashion industry, with its emphasis on fast fashion, produces around 2.1 billion tonnes of greenhouse gas emissions annually, which is more than the emissions of all international flights and maritime shipping combined. While some businesses are trying to offset this environmental damage by focusing on sustainability and relying less on fossil fuels, you can also do your part by learning how to recycle (trust us, you can recycle anything!), upcycle clothes and sell your unwanted stuff. Yep, that’s right—there are plenty of people who will think your trash is actually a treasure!
Not only will selling your old items ensure your space is decluttered and organized, but participating in this sort of circular business model is the best way to practice sustainable living and reduce your carbon footprint … while also generating extra income. Luckily, this is easier than ever, thanks to the growing popularity of online marketplaces. According to ThredUP’s latest report, by 2026, the global secondhand market is expected to grow by 127%, and the U.S. market alone could reach $82 billion.
On board? Great. Now you just need to know where to sell your unwanted stuff. Learn how to make the most money with the best places to sell clothes online, and read on for more resources on where to unload everything from books to electronics to furniture.
You may not think twice about tossing last season’s garb in the garbage, but the harm it causes adds up quicker than you realize. According to the Environmental Protection Agency (EPA), Americans send more than 11 million tons of textile waste to landfills each year. And the Council for Textile Recycling reports that the average person throws away 70 pounds of clothing and other textiles annually. “Anything we can do, no matter how small the impact we think it is, can help the earth,” says Deanna Thompson, creator of Closet Full of Cash. Reducing waste and consumption should always be a priority.
Curious just how much damage you might be causing to the environment? The EPA has a handy Household Carbon Footprint Calculator to estimate your annual greenhouse gas emissions. Spoiler alert: The number will likely be eye-opening, but something as simple as donating or selling your unwanted stuff can make a real difference.
Here’s one big reason for that: Selling and buying used goods reduces the demand for new items, and that should decrease the creation of new products and lessen the use of the harmful resources involved in production. “You can buy so many items secondhand, such as books, clothing, electronics, toys and furniture,” says Stephanie Moram, CEO and founder of Good Girl Gone Green. “The possibilities are endless, but the impact and ripple effect created is enormous.” The trick is learning where to sell unwanted stuff to get the biggest bang for your buck.
We’ve all heard the saying “one man’s trash is another man’s treasure,” and that’s never been more true than for the secondhand market. There’s a buyer for just about anything you can imagine, and established marketplaces are accessible and easy to use, as well as have built-in audiences of loyal shoppers.
While that’s true for both online and brick-and-mortar marketplaces, online options definitely have one big advantage: scale. “You can reach so many more buyers than, say, with a yard sale or garage sale,” notes Leah Ingram, who runs the Real Sophisticated Consumer blog and has written 15 books on smart shopping. “So if you want to sell your items more quickly, and possibly for more money, I would definitely recommend using an online marketplace.”
Iuliia Bondar/Getty Images
In addition to having your items seen by a wider audience, there’s also the safety factor. If you’re dealing with an online marketplace, you don’t have to worry about meeting anyone in person, and the marketplace will handle all the monetary transactions. “Using a marketplace comes with advantages like seller protections, credit card processing, tax and customer service,” says Jade Myers, owner of Fashion Without Trashin, who runs an online shop as well as a brick-and-mortar store.
There are a plethora of options to choose from, and not all of them are on the up-and-up. The Federal Trade Commission (FTC) offers the following tips for navigating the online resale space.
“Probably the biggest thing to remember when selling used items is you can’t expect to get 100% of what you paid for something,” says Ingram. Even if it’s new clothing with the tags still attached, she reveals she’s never been able to get back the original value. And if you price things too high, they won’t sell.
To figure out pricing, do your homework. Visit various online resale marketplaces to determine how popular a product is and its going rate, as well as figure out what kind of return a designer or style generally garners. But remember: Just because you find a lot of similar listings for sale, it doesn’t mean you’ll make bank. To see if it’s something people are actually buying, do a search for the exact item you want to sell, then filter your results by “sold.” You’ll be able to see if it’s in demand, plus the going prices.
Next, take into consideration the condition of the item, and always be honest and upfront about any flaws. Seasonality is also important when it comes to clothing and shoes. Think about the weather and what’s going to sell during the current season. If you’re trying to hawk a winter coat in the summer, you won’t make much. Classic pieces that never go out of style (think: trench coats, black leggings, etc.) will always be easier to sell. Resale trends are constantly fluctuating, so many sites have sections that list their most popular brands and designers, as well as the most sought-after styles of the moment.
Also look to pop culture for clues. If there’s a trend that’s going viral on TikTok, a popular celebrity craze or even a fad from a Netflix show, take advantage of that momentum and list accordingly. You’ll have a better chance of a quick sale.
If you’re trying to find out where to sell unwanted stuff without a lot of effort, there are places that will do all the work to photograph, price and list for you. Consider thredUP for women’s and kids’ clothing, handbags, shoes and accessories. Request a “clean out kit” and send the bag back (for free!) filled with any gently used pieces. Similarly, The RealReal, which is best for designer garb, allows you to arrange a home pickup or drop-off, or request a free shipping label to send in your goodies; they handle everything from there. This service is also free.
Thompson’s tip for items that have a high value, especially handbags: “I will send pictures to either Fashionphile or Rebag, and they will make a cash offer. They provide a label, and all I need to do is box it up and ship it to them. As soon as they confirm that they have received the bag, I get paid.”
And eBay has a “Trading Assistants” directory, where you can hire local experienced members to sell your items for a fee. For a more comprehensive and personal approach, Portland-based startup Sella will sell anything that fits in the trunk of a car. You can meet up with a local rep or use their mail-in service. Experts will confirm your pieces are worth selling, recommend a pricing strategy (you get final say), respond to buyers and craft compelling listings, which are posted across five platforms including Craigslist, eBay and OfferUp. The hassle-free service charges a flat rate of $5.99 per item, plus 20 cents a day until it sells.
RD.com, Getty Images, via craiglist.org, via Facebook.com, via instagram.com, via eBay.com
When considering where to sell unwanted stuff, Craigslist is regarded as one of the best options for reaching local people. The No. 1 ranked classified site by traffic, it generates a whopping $660 million in revenue yearly. While some listings are free, the site recently started charging nominal rates to combat scams and fake postings for cars, jobs and select services, depending on the item and your location.
According to Thompson, Craigslist is particularly great for appliances, cars and large furniture, while Ingram says she’s had luck unloading old children’s toys and housewares. Myers adds that she likes to buy and sell event tickets here.
A pioneer of circular commerce, eBay has steadily remained a favorite resale site for more than 25 years. With 147 million active buyers, it’s easy to see why. The site makes it a cinch to connect to an international audience with eBay’s Global Shipping Program. All you have to do is send your item to eBay’s domestic shipping center, and they’ll take care of the rest.
According to a accurate commerce report from the company, Americans have an average of 36 household items that can be sold on eBay for around $3,600—all things that would otherwise be donated or thrown out. “You can find a buyer for absolutely anything you have to sell, and it is easy to list,” says Thompson. “Plus, eBay keeps you safe, and they handle the transactions so you don’t have to.” Just make sure to avoid these common eBay scams.
A hot tip from Myers: eBay is great for selling collectible and vintage items and high-end designer fashion. The brand is now also focusing on its positive economic impact and enhancing sustainability practices. Last year, eBay avoided 1.5 million metric tons of carbon emissions and kept 47,000 metric tons of waste out of landfills.
If you already spend a ton of time on this social media site, you might as well make some money while doing so: More than 1 billion users buy and sell goods on Facebook Marketplace each month. Simply create a public listing, then share it to groups or your own network. If you aren’t comfortable meeting up locally to exchange goods, you can use a shipping option or a pickup or drop-off service. No seller fees or taxes sweeten the deal.
Moram even declares it her overall favorite resale destination. “As both a buyer and seller, it is one of the easiest ways to sell and buy your stuff,” she says. “You can find anything from clothing to appliances, and toys to kitchen items.” Myers also notes that the site has improved exponentially over the last few years. “I like that you can see reviews for both buyers and sellers now,” she says. But it’s still important to be wary of Facebook Marketplace scams and follow safety strategies to keep transactions secure.
To get your products in front of as many eyeballs as possible, turn to Instagram: People can buy your goods directly from your photos and videos. There are more than a billion monthly active users, and a accurate survey found that 80% of respondents use the social media mammoth to decide whether or not to make a purchase. Nearly half the people surveyed use the app to shop weekly. You can set up a store directly through Instagram’s Commerce Manager, or choose from more than a dozen supported platforms.
“Instagram is great for selling from a connected website—from Shopify, you can upload your entire catalog of goods and it automatically updates when items sell or get added,” explains Myers.
Iuliia Bondar/Getty Images
According to NARTS (The Association of Resale Professionals) there are currently more than 25,000 resale, consignment and not-for-profit shops in the United States. These retail destinations eliminate some of the headaches associated with traditional resale, like meeting up with strangers from the internet and dealing with shipping. They also handle the entire process, from displaying your items to advertising to customers (many of whom are established clientele ready to spend). Plus, store owners are experienced professionals who know the real value of their merchandise, so you can rely on their pricing. For consignment, once your items sell, you are paid (and you don’t have to worry about returns). Other stores like Buffalo Exchange, Plato’s Closet and Once Upon a Child will offer you cash on the spot for your stuff.
“Depending on the item you are selling, it may sell faster and easier in person,” says Moram. “Some people prefer to see the clothing or appliance they are purchasing versus seeing a picture.” Thompson agrees: “Selling in person means you can sell something in minutes and get paid just as quickly. Most people think of marketplaces like Craigslist or Meta, but also think about your local pawn shop. Most pawn shops take almost anything of value and are highly regulated by local and federal governments. You can get cash immediately, and if you don’t want to sell, you can get a loan on your items.” Yet another advantage? You don’t have to worry about problematic packing materials, such as Styrofoam and bubble wrap.
And don’t forget about tried-and-true favorites like garage sales, local flea markets and thrift stores. Ingram says she likes community yard sales for their opportunity to make some quick cash—and that the sale is final. “You show up, set up, hopefully sell some stuff, and then you go home for the day and you’re done,” she explains. “With apps and online marketplaces, you need to constantly monitor listings so you can answer people’s questions.”
For online marketplaces that facilitate in-person selling, Thompson’s favorite pick for where to sell unwanted stuff is Nextdoor. “It’s local, in your neighborhood, and you can list anything from furniture to antiques to electronics,” she says. “It was a huge help when I moved and wanted to thin out my home. I would just post images and people would reply. I always had everything outside so they could look, they paid in cash and I was happy every single time.”
There are some essential safety protocols to follow anytime you take a transaction offline. “Always meet in a public place during the hours of operation of a business in the area,” advises Myers. “Parking lots of grocery stores and shopping malls are good, as well as places like Starbucks.” If possible, have someone go with you, and record the transaction if you are at all uncomfortable, she says.
More tips: Insist on getting paid on the spot. If you use cash apps like Venmo or Zelle, make sure the transaction has gone through, and take a photo of the item being collected in case there are any issues later like a bank dispute.
Thompson adds: “Do not share any personal information with the buyer or seller outside of your name, and always communicate through the app.” For extra safety, meet at your local police department, since most have areas set aside for just this purpose.
There’s a general consensus when it comes to selling anything: Take good photos, be as descriptive as possible, be transparent about the condition and reasonably price your goods. It’s also important to know which marketplaces work better for certain items.
Electronics and appliances: For these items, Moram prefers Facebook Marketplace. Myers agrees, suggesting that you take a video of the item working before trying to sell it. This will help you sell it faster, as well as eliminate disputes down the line, in case a buyer claims it doesn’t work.
Furniture: To give your furniture the best shot of selling, stage it in your home with other pieces and decor, advises Myers. For lower- to mid-range furniture, try Facebook Marketplace, Mercari (which has a local pickup option) and Etsy if it is at least 20 years old. For higher-end furniture, Myers prefers Chairish.
Art: Do your research before deciding where to sell it. “Art is a tricky one,” says Myers. “Some pieces can be surprisingly valuable and would be best sold through an auction house, but for less valuable art, I recommend selling on eBay.”
Books: Bookworms, rejoice! Your treasured tomes may soon have a new home if you list them on specialized websites like BookScouter or Cash4Books. There are also plenty of places to donate unwanted books, if you want to go that route.
Selling your unwanted items isn’t your only environmentally friendly option, of course. Facebook Marketplace has some great groups—including “Buy Nothing”—that allow their members to exchange and trade items. You can search for these groups in your local area, and then all you have to do is post the item you no longer want or need, and someone will pick it up at your house. Thompson loves Freecycle, a nonprofit site that boats nearly 10 million members, if you’re looking to give something away for free. “There are categories for literally anything you have, and trading is done quite often through that platform,” she adds. Do you have garb that’s too beat-up to be sold or given away? Find out how to recycle old clothes (the right way).
Depending on where you live, you may need to charge sales tax, though this generally applies only to businesses or for-profit sales, explains Myers. If you are selling an item at a loss from the original purchase price, you likely won’t be required to collect sales tax, but always consult with a tax professional or visit your state’s tax website to be sure. Some online marketplaces handle it for you and collect sales tax on your behalf.
The closet cleanout trend may have been accelerated by the pandemic, but clearing out clutter should be an activity you commit to year-round. It’s an easy way to earn extra cash, and by giving unwanted items a new life, you’re doing your part to reduce waste and help the environment. If you want to learn about how to shop more responsibly, check out our article on the best sustainable clothing brands to buy.
JOHNSTOWN, Ohio — Just 15 minutes outside of downtown Columbus, the suburbs abruptly evaporate. Past a bizarre mix of soybean fields, sprawling office parks and lonely clapboard churches is a field where the Biden administration — with help from one of the world’s largest tech companies — hopes to turn the U.S. into a hub of microchip manufacturing.
In his State of the Union address in March, President Joe Biden called this 1,000-acre spread of corn stalks and farmhouses a “field of dreams.” Within three years, it will house two Intel-operated chip facilities together worth $20 billion — and Intel is promising to invest $80 billion more now that Washington has sweetened the deal with subsidies. It’s all part of a nationwide effort to head off another microchip shortage, shore up the free world’s advanced industrial base in the face of a rising China and claw back thousands of high-end manufacturing jobs from Asia.
But even as Biden signs into law more than $52 billion in “incentives” designed to lure chipmakers to the U.S., an unusual alliance of industry lobbyists, hard-core China hawks and science advocates says the president’s dream lacks a key ingredient — a small yet critical core of high-skilled workers. It’s a politically troubling irony: To achieve the long-sought goal of returning high-end manufacturing to the United States, the country must, paradoxically, attract more foreign workers.
“For high-tech industry in general — which of course, includes the chip industry — the workforce is a huge problem,” said Julia Phillips, a member of the National Science Board. “It’s almost a perfect storm.”
From electrical engineering to computer science, the U.S. currently does not produce enough doctorates and master’s degrees in the science, technology, engineering and math fields who can go on to work in U.S.-based microchip plants. Decades of declining investments in STEM education means the U.S. now produces fewer native-born recipients of advanced STEM degrees than most of its international rivals.
Foreign nationals, including many educated in the U.S., have traditionally filled that gap. But a bewildering and anachronistic immigration system, historic backlogs in visa processing and rising anti-immigrant sentiment have combined to choke off the flow of foreign STEM talent precisely when a fresh surge is needed.
Powerful members of both parties have diagnosed the problem and floated potential fixes. But they have so far been stymied by the politics of immigration, where a handful of lawmakers stand in the way of reforms few are willing to risk their careers to achieve. With a short window to attract global chip companies already starting to close, a growing chorus is warning Congress they’re running out of time.
“These semiconductor investments won’t pay off if Congress doesn’t fix the talent bottleneck,” said Jeremy Neufeld, a senior immigration fellow at the Institute for Progress think tank.
Given the hot-button nature of immigration fights, the chip industry has typically been hesitant to advocate directly for reform. But as they pump billions of dollars into U.S. projects and contemplate far more expensive plans, a sense of urgency is starting to outweigh that reluctance.
“We are seeing greater and greater numbers of our employees waiting longer and longer for green cards,” said David Shahoulian, Intel’s head of workforce policy. “At some point it will become even more difficult to attract and retain folks. That will be a problem for us; it will be a problem for the rest of the tech industry.”
“At some point, you’ll just see more offshoring of these types of positions,” Shahoulian said.
Microchips (often called “semiconductors” by wonkier types) aren’t anything new. Since the 1960s, scientists — working first for the U.S. government and later for private industry — have tacked transistors onto wafers of silicon or other semiconducting materials to produce computer circuits. What has changed is the power and ubiquity of these chips.
The number of transistors researchers can fit on a chip roughly doubles every two years, a phenomenon known as Moore’s Law. In accurate years, that has led to absurdly powerful chips bristling with transistors — IBM’s latest chip packs them at two-nanometer intervals into a space roughly the size of a fingernail. Two nanometers is thinner than a strand of human DNA, or about how long a fingernail grows in two seconds.
A rapid boost in processing power stuffed into ever-smaller packages led to the information technology boom of the 1990s. And things have only accelerated since — microchips remain the primary driver of advances in smartphones and missiles, but they’re also increasingly integrated into household appliances like toaster ovens, thermostats and toilets. Even the most inexpensive cars on the market now contain hundreds of microchips, and electric or luxury vehicles are loaded with thousands.
It all adds up to a commodity widely viewed as the bedrock of the new digital economy. Like fossil fuels before them, any country that controls the production of chips possesses key advantages on the global stage.
Until fairly recently, the U.S. was one of those countries. But while chips are still largely designed in America, its capacity to produce them has declined precipitously. Only 12 percent of the world’s microchip production takes place in the U.S., down from 37 percent in 1990. That percentage declines further when you exclude “legacy” chips with wider spaces between transistors — the vast majority of bleeding-edge chips are manufactured in Taiwan, and most factories not found on that island reside in Asian nations like South Korea, China and Japan.
For a long time, few in Washington panic about America’s flagging chip production. Manufacturing in the U.S. is expensive, and offshoring production to Asia while keeping R&D stateside was a good way to cut costs.
Two things changed that calculus: the Covid-19 pandemic and rising tensions between the U.S. and China.
Abrupt work stoppages sparked by viral spread in Asia sent shockwaves through finely tuned global supply chains. The flow of microchips ceased almost overnight, and then struggled to restart under new Covid surges and ill-timed extreme weather events. Combined with a spike in demand for microelectronics (sparked by generous government payouts to citizens stuck at home), the manufacturing stutter kicked off a chip shortage from which the world is still recovering.
Even before the pandemic, growing animosity between Washington and Beijing caused officials to question the wisdom of ceding chip production to Asia. China’s increasingly bellicose threats against Taiwan caused some to conjure up nightmare scenarios of an invasion or blockade that would sever the West from its supply of chips. The Chinese government was also pouring billions of dollars into a crash program to boost its own lackluster chip industry, prompting fears that America’s top foreign adversary could one day corner the market.
By 2020 the wheels had begun to turn on Capitol Hill. In January 2021, lawmakers passed as part of their annual defense bill the CHIPS for America Act, legislation authorizing federal payouts for chip manufacturers. But they then struggled to finance those subsidies. Although they quickly settled on more than $52 billion for chip manufacturing and research, lawmakers had trouble decoupling those sweeteners from sprawling anti-China “competitiveness” bills that stalled for over a year.
But those subsidies, as well as new tax credits for the chip industry, were finally sent to Biden’s desk in late July. Intel isn’t the only company that’s promised to supercharge U.S. projects once that money comes through — Samsung, for example, is suggesting it will expand its new $17 billion chip plant outside of Austin, Texas, to a nearly $200 billion investment. Lawmakers are already touting the subsidies as a key step toward an American renaissance in high-tech manufacturing.
Quietly, however, many of those same lawmakers — along with industry lobbyists and national security experts — fear all the chip subsidies in the world will fall flat without enough high-skilled STEM workers. And they accuse Congress of failing to seize multiple opportunities to address the problem.
In Columbus, just miles from the Johnstown field where Intel is breaking ground, most officials don’t mince words: The tech workers needed to staff two microchip factories, let alone eight, don’t exist in the region at the levels needed.
“We’re going to need a STEM workforce,” admitted Jon Husted, Ohio’s Republican lieutenant governor.
But Husted and others say they’re optimistic the network of higher ed institutions spread across Columbus — including Ohio State University and Columbus State Community College — can beef up the region’s workforce fast.
“I feel like we’re built for this,” said David Harrison, president of Columbus State Community College. He highlighted the repeated refrain from Intel officials that 70 percent of the 3,000 jobs needed to fill the first two factories will be “technician-level” jobs requiring two-year associate degrees. “These are our jobs,” Harrison said.
Harrison is anxious, however, over how quickly he and other leaders in higher ed are expected to convince thousands of students to sign up for the required STEM courses and join Intel after graduation. The first two factories are slated to be fully operational within three years, and will need significant numbers of workers well before then. He said his university still lacks the requisite infrastructure for instruction on chip manufacturing — “we’re missing some wafer processing, clean rooms, those kinds of things” — and explained that funding recently provided by Intel and the National Science Foundation won’t be enough. Columbus State will need more support from Washington.
“I don’t know that there’s a great Plan B right now,” said Harrison, adding that the new facilities will run into “the tens of millions.”
A lack of native STEM talent isn’t unique to the Columbus area. Across the country, particularly in regions where the chip industry is planning to relocate, officials are fretting over a perceived lack of skilled technicians. In February, the Taiwanese Semiconductor Manufacturing Corporation cited a shortage of skilled workers when announcing a six-month delay in the move-in date for their new plant in Arizona.
“Whether it’s a licensure program, a two-year program or a Ph.D., at all levels, there is a shortfall in high-tech STEM talent,” said Phillips. The NSB member highlighted the “missing millions of people that are not going into STEM fields — that basically are shut out, even beginning in K-12, because they’re not exposed in a way that attracts them to the field.”
Industry groups, like the National Association of Manufacturers, have long argued a two-pronged approach is necessary when it comes to staffing the high-tech sector: Reevaluating immigration policy while also investing heavily in workforce development
The abandoned House and Senate competitiveness bills both included provisions that would have enhanced federal support for STEM education and training. Among other things, the House bill would have expanded Pell Grant eligibility to students pursuing career-training programs.
“We have for decades incentivized degree attainment and not necessarily skills attainment,” said Robyn Boerstling, NAM’s vice president of infrastructure, innovation and human resources policy. “There are manufacturing jobs today that could be filled with six weeks of training, or six months, or six years; we need all of the above.”
But those provisions were scrapped, after Senate leadership decided a conference between the two chambers on the bills was too unwieldy to reach agreement before the August recess.
Katie Spiker, managing director of government affairs at National Skills Coalition, said the abandoned Pell Grant expansion shows Congress “has not responded to worker needs in the way that we need them to.” Amid criticisms that the existing workforce development system is unwieldy and ineffective, the decision to scrap new upgrades is a continuation of a trend of disinvesting in workers who hope to obtain the skills they need to meet employer demand.
“And it becomes an issue that only compounds itself over time,” Spiker said. “As technology changes, people need to change and evolve their skills.”
“If we’re not getting people skilled up now, then we won’t have people that are going to be able to evolve and skill up into the next generation of manufacturing that we’ll do five years from now.”
Congress finally sent the smaller Chips and Science Act — which includes the chip subsidies and tax credits, $200 million to develop a microchip workforce and a slate of R&D provisions — to the president’s desk in late July. The bill is expected to enhance the domestic STEM pool (at least on the margins). But it likely falls short of the generational investments many believe are needed.
“You could make some dent in it in six years,” said Phillips. “But if you really want to solve the problem, it’s closer to a 20-year investment. And the ability of this country to invest in anything for 20 years is not phenomenal.”
The microchip industry is in the midst of a global reshuffling that’s expected to last a better part of the decade — and the U.S. isn’t the only country rolling out the red carpet. Europe, Canada, Japan and other regions are also panic about their security, and preparing sweeteners for microchip firms to set up shop in their borders. Cobbling together an effective STEM workforce in a short time frame will be key to persuading companies to choose America instead.
That will be challenging at the technician level, which represents around 70 percent of workers in most microchip factories. But those jobs require only two-year degrees — and over a six-year period, it’s possible a sustained education and recruitment effort can produce enough STEM workers to at least keep the lights on.
It’s a different story entirely for Ph.D.s and master’s degrees, which take much longer to earn and which industry reps say make up a smaller but crucial component of a factory’s workforce.
Gabriela González, Intel’s head of global STEM research, policy and initiatives, said about 15 percent of factory workers must have doctorates or master’s degrees in fields such as material and electrical engineering, computer science, physics and chemistry. Students coming out of American universities with those degrees are largely foreign nationals — and increasingly, they’re graduating without an immigration status that lets them work in the U.S., and with no clear pathway to achieving that status.
A National Science Board estimate from earlier this year shows a steadily rising proportion of foreign-born students with advanced STEM skills. That’s especially true for degrees crucial to the chip industry — nearly 60 percent of computer science Ph.D.s are foreign born, as are more than 50 percent of engineering doctorates.
“We are absolutely reliant on being able to hire foreign nationals to fill those needs,” said Intel’s Shahoulian. Like many in the chip industry, Shaoulian contends there simply aren’t enough high-skilled STEM professionals with legal status to simultaneously serve America’s existing tech giants and an influx of microchip firms.
Some academics, such as Howard University’s Ron Hira, suggest the shortage of workers with STEM degrees is overblown, and industry simply seeks to import cheaper, foreign-born labor. But that view contrasts with those held by policymakers on Capitol Hill or people in the scientific and research communities. In a report published in late July by the Government Accountability Office, all 17 of the experts surveyed agreed the lack of a high-skilled STEM workforce was a barrier to new microchip projects in the U.S. — and most said some type of immigration reform would be needed.
Many, if not most, of the foreign nationals earning advanced STEM degrees from U.S. universities would prefer to stay and work in the country. But America’s immigration system is turning away these workers in record numbers — and at the worst possible time.
Ravi (not his real name, given his tenuous immigration status) is an Indian national. Nearly three years ago, he graduated from a STEM master’s program at a prestigious eastern university before moving to California to work as a design verification lead at an international chip company. He’s applied three times for an H-1B visa, a high-skilled immigration program used extensively by U.S. tech companies. But those visas are apportioned via a lottery, and Ravi lost each time. His current visa only allows him to work through the end of year — so Ravi is giving up and moving to Canada, where he’s agreed to take a job with another chip company. Given his skill set, he expects to quickly receive permanent legal status.
“The application process is incredibly simple there,” said Ravi, noting that Canadian officials were apologetic over their brief 12-week processing time (they’re swamped by refugee applications, he said).
If given the choice, Ravi said he would’ve probably stayed in California. But his story now serves as a cautionary tale for his younger brother back home. “Once he sort of completed his undergrad back in India, he did mention that he is looking at more immigration-friendly countries,” Ravi said. “He’s giving Canada more thought, at this point, than the United States.”
Ravi’s story is far from unique, particularly for Indian nationals. The U.S. imposes annual per-country caps on green cards — and between a yearly crush of applicants and a persistent processing backlog, Indians (regardless of their education or skill level) can expect to wait as long as 80 years for permanent legal status. A report released earlier this year by the libertarian Cato Institute found more than 1.4 million skilled immigrants are now stuck in green card backlogs, just a slight drop from 2020’s all-time high of more than 1.5 million.
The chip industry has shared its anxiety over America’s slipping STEM workforce with Washington, repeatedly asking Congress to make it easier for high-skilled talent to stay. But unlike their lobbying for subsidies and tax breaks — which has gotten downright pushy at times — they’ve done so very quietly. While chip lobbyists have spent months telling anyone who will listen why the $52 billion in financial incentives are a “strategic imperative,” they’ve only recently been willing to discuss their immigration concerns on the record.
In late July, nine major chip companies planned to send an open letter to congressional leadership warning that the shortage of high-skilled STEM workers “has truly never been more acute” and urging lawmakers to “enact much-needed green card reforms.” But the letter was pulled at the last minute, after some companies panic about wading into a tense immigration debate at the wrong time.
Leaders in the national security community have been less shy. In May, more than four dozen former officials sent a leader to congressional leadership urging them to shore up America’s slipping immigration edge before Chinese technology leapfrogs ours. “With the world’s best STEM talent on its side, it will be very hard for America to lose,” they wrote. “Without it, it will be very hard for America to win.”
The former officials exhorted lawmakers to take up and pass provisions in the House competitiveness bill that would’ve lifted green card caps for foreign nationals with STEM Ph.D.s or master’s degrees. It’d be a relatively small number of people — a February study from Georgetown University’s Center for Security and Emerging Technology suggested the chip industry would only need around 3,500 foreign-born workers to effectively staff new U.S.-based factories.
“This is such a small pool of people that there’s already an artificial cap on it,” said Klon Kitchen, a senior fellow focused on technology and national security at the conservative American Enterprise Institute.
Kitchen suggested the Republican Party’s wariness toward immigration shouldn’t apply to these high-skilled workers, and some elected Republicans agree. Sen. John Cornyn, whose state of Texas is poised to gain from the expansion of chip plants outside Austin, took up the torch — and almost immediately got burned.
Sen. Chuck Grassley, Iowa’s senior Republican senator, blocked repeated attempts by Cornyn, Democrats and others to include the green card provision in the final competitiveness package. Finding relief for a small slice of the immigrant community, Grassley reasoned, “weakens the possibility to get comprehensive immigration reform down the road.” He refused to budge even after Biden administration officials warned him of the national security consequences in a classified June 16 briefing, which was convened specifically for him. The effort has been left for dead (though a push to shoehorn a related provision into the year-end defense bill is ongoing).
Many of Grassley’s erstwhile allies are frustrated with his approach. “We’ve been talking about comprehensive immigration reform for how many decades?” asked Kitchen, who said he’s “not inclined” to let America’s security concerns “tread water in the background” while Congress does nothing to advance broader immigration bills.
Most Republicans in Congress agree with Kitchen. But so far it’s Cornyn, not Grassley, who’s paid a price. After helping broker a deal on gun control legislation in June, Cornyn was attacked by Breitbart and others on his party’s right flank for telling a Democratic colleague immigration would be next.
“Immigration is one of the most contentious issues here in Congress, and we’ve shown ourselves completely incapable of dealing with it on a rational basis,” Cornyn said in July. The senator said he’d largely given up on persuading Grassley to abandon his opposition to new STEM immigration provisions. “I would love to have a conversation about merit-based immigration,” Cornyn said. “But I don’t think, under the current circumstances, that’s possible.”
Cornyn blamed that in part on the far right’s reflexive outrage to any easing of immigration restrictions. “Just about anything you say or do will get you in trouble around here these days,” he said.
Given that reality, few Republicans are willing to stick their necks out on the issue.
“If you look at the messaging coming out of [the National Republican Senatorial Committee] or [the Republican Attorneys General Association], it’s all ‘border, border, border,’” said Rebecca Shi, executive director of the American Business Immigration Coalition. Shi said even moderate Republicans hesitate to publicly advance arguments “championing these sensible visas for Ph.D. STEM talents for integrated circuits for semiconductors.”
“They’re like … ‘I can’t say those phrases until after the elections,’” Shi said.
That skittishness extends to state-level officials — Ohio’s Husted spent some time expounding on the benefits of “bringing talented people here to do the work in America, rather than having companies leave America to have it done somewhere else.” He suggested that boosting STEM immigration would be key to Intel’s success in his state. But when asked whether he’s taken that message to Ohio’s congressional delegation — after all, he said he’d been pestering them to pass the chip subsidies — Husted hedged.
“My job is to do all I can for the people of the state of Ohio. There are other people whose job it is to message those other things,” Husted said. “But if asked, you heard what my answer is.”
Of course, Republicans also pin some of the blame on Democrats. “The administration ignores the fire at the border and the chaos there, which makes it very hard to have a conversation about controlling immigration flows,” Cornyn said.
And while Democratic lawmakers reject that specific concern, some admit their side hasn’t prioritized STEM immigration as it should.
“Neither team has completely clean hands,” said Sen. Mark Warner, the chair of the Senate Intelligence Committee. Warner noted that Democrats have also sought to hold back STEM immigration fixes as “part of a sweetener” so that business-friendly Republicans would in turn back pathways to citizenship for undocumented immigrants. He also dinged the chip companies, claiming the issue is “not always as straightforward” as the industry would like to frame it and that tech companies sometimes hope to pay less for foreign-born talent.
But Warner still supports the effort to lift green card caps for STEM workers. “Without that high-skilled immigration, it’s not like those jobs are going to disappear,” he said. “They’re just gonna move to another country.”
And despite their rhetoric, it’s hard to deny that congressional Republicans are largely responsible for continued inaction on high-skilled immigration — even as their allies in the national security space become increasingly insistent.
Though they’ve had to shrink their ambitions, lawmakers working to lift green card caps for STEM immigrants haven’t given up. A jurisdictional squabble between committees in July prevented advocates from including in the House’s year-end defense bill a provision that would’ve nixed the caps for Ph.D.s in “critical” STEM fields. They’re now hoping to shoehorn the provision into the Senate’s defense bill instead, and have tapped Republican Sen. Thom Tillis of North Carolina as their champion in the upper chamber.
But Tillis is already facing pushback from the right. And despite widespread support, few truly believe there’s enough momentum to overcome Grassley and a handful of other lawmakers willing to block any action.
“Most members on both sides recognize that this is a problem they need to resolve,” said Intel’s Shahoulian. “They’re just not at a point yet where they’re willing to compromise and take the political hits that come with it.”
The global chip industry is moving in the meantime. While most companies are still planning to set up shop in the U.S. regardless of what happens with STEM immigration, Shahoulian said inaction on that front will inevitably limit the scale of investments by Intel and other firms.
“You’re already seeing that dynamic playing out,” he said. “You’re seeing companies set up offices in Canada, set up offices elsewhere, move R&D work elsewhere in the world, because it is easier to retain talent elsewhere than it is here.”
“This is an issue that will progressively get worse,” Shahoulian said. “It’s not like there will be some drop-dead deadline. But yeah, it’s getting difficult.”
Intel is still plowing ahead in Johnstown — backhoes are churning up dirt, farmers have been bought out of homes owned by their families for generations and the extensive water and electric infrastructure required for eight chip factories is being laid. Whether those bets will pay off in the long-term may rest on Congress’ ability to thread the needle on STEM immigration. And there’s little optimism at the moment.
Sen. Maria Cantwell, the chair of the Senate Commerce Committee, said she sometimes wishes she could “shake everybody and tell them to wake up.” But she believes economic and geopolitical realities will force Congress to open the door to high-skilled foreign workers — eventually.
“I think the question is whether you do that now or in 10 years,” Cantwell said. “And you’ll be damn sorry if you wait for 10 years.”
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