Core Insights - Frontdoor, Inc. is celebrating National Tradesman Day, highlighting the importance of skilled professionals in the home service warranty industry [1] - The company emphasizes the role of independent contractor tradesmen in building trust and communities through their craftsmanship and dedication [1] Company Highlights - Bill Cobb, the chairman of Frontdoor, expresses pride in recognizing the contributions of tradesmen to the industry [1] - The celebration reflects Frontdoor's commitment to working with skilled professionals on a daily basis [1]

MEMPHIS, Tenn.--(BUSINESS WIRE)--With passage of the One Big Beautiful Act in early July, the home energy tax credits for clean energy systems and appliances provided in the Inflation Reduction Act of 2022 will no longer be available after December 31, 2025. Homeowners who purchase a qualifying new Heating, Ventilation and Air Conditioning (HVAC) system after the end of this year will not be eligible for tax credits of up to $3,200.* However, Frontdoor, Inc. (Frontdoor) can help in a big way! ". ...

Core Insights - Investors should consider adding stocks with strong liquidity to their portfolios, as these stocks are associated with business growth and potential maximum returns [1][2] - Four top-ranked stocks identified for potential investment are Remitly Global, Inc. (RELY), Frontdoor, Inc. (FTDR), Pagaya Technologies Ltd. (PGY), and Willdan Group, Inc. (WLDN) [1][9] Liquidity Measures - Current Ratio: Measures current assets against current liabilities; a ratio below 1 indicates more liabilities than assets, while a range of 1-3 is ideal [4] - Quick Ratio: Indicates ability to pay short-term obligations, with a desirable ratio of more than 1 [5] - Cash Ratio: The most conservative measure, focusing on cash and equivalents relative to current liabilities; a ratio greater than 1 is desirable but may indicate inefficiency [6] Screening Parameters - Asset Utilization: A measure of efficiency, calculated as total sales over the last 12 months divided by the average total assets; companies with a ratio higher than their industry average are considered efficient [7][8] - Growth Score: A proprietary metric added to ensure that liquid and efficient stocks also have solid growth potential [8] Company Highlights - **Remitly Global, Inc. (RELY)**: Specializes in digital financial and remittance services, with revenues of $411.9 million for Q2 2025, up 34% year over year; active customers grew 24% to over 8.5 million [12][10] - **Frontdoor, Inc. (FTDR)**: Parent company of home service plan brands, reported revenues of $617 million for Q2 2025, up 14% year over year; DTC member count increased by 9% [15][14] - **Pagaya Technologies Ltd. (PGY)**: Focuses on AI infrastructure for finance, with total revenues of $326 million for Q2 2025, a 30% increase year over year; annualized run-rate for POS and Auto segments reached $1.2 billion and $2 billion, respectively [17][18] - **Willdan Group, Inc. (WLDN)**: Provides consulting services to government and private sectors, with net revenues expected between $340 million and $350 million for 2025; contract revenues jumped 23% year over year [20][21]

Core Viewpoint - Frontdoor (FTDR) is positioned as a strong investment opportunity due to its improving earnings outlook and positive analyst sentiment, which is reflected in rising earnings estimates [1][2]. Earnings Estimate Revisions - The current quarter's earnings estimate for Frontdoor is projected at $1.49 per share, indicating a year-over-year increase of +8.0% [6]. - Over the past 30 days, the Zacks Consensus Estimate for Frontdoor has risen by 16.93%, with four estimates moving higher and no negative revisions [6]. - For the full year, the earnings estimate is expected to be $3.90 per share, representing a +16.4% change from the previous year [7]. - The consensus estimate for the current year has increased by 12.56% during this time frame, with a similar trend of four estimates moving higher and no negative revisions [7][8]. Zacks Rank and Performance - Frontdoor has achieved a Zacks Rank 1 (Strong Buy), indicating strong agreement among analysts regarding the positive earnings revisions [9]. - The Zacks Rank system has a proven track record, with Zacks 1 Ranked stocks averaging an annual return of +25% since 2008 [3]. - Stocks with Zacks Rank 1 and 2 significantly outperform the S&P 500, suggesting a favorable investment environment for Frontdoor [9]. Stock Performance - Frontdoor's stock has gained 6.2% over the past four weeks, reflecting investor confidence driven by solid estimate revisions [10].

Company Overview - Frontdoor (FTDR) currently holds a Momentum Style Score of B, indicating a positive outlook based on its price changes and earnings estimate revisions [2][11] - The company has a Zacks Rank of 1 (Strong Buy), suggesting strong potential for outperformance in the market [3][11] Price Performance - Over the past week, FTDR shares have increased by 7.31%, outperforming the Zacks Building Products - Miscellaneous industry, which rose by 1.82% [5] - In a longer time frame, FTDR's monthly price change is 3.82%, compared to the industry's 8.29% [5] - Over the last three months, FTDR shares have risen by 11.19%, and over the past year, they are up 27.48%, while the S&P 500 has only moved 8.58% and 17.39%, respectively [6] Trading Volume - FTDR's average 20-day trading volume is 730,934 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - In the past two months, four earnings estimates for FTDR have been revised upwards, with no downward revisions, leading to an increase in the consensus estimate from $3.46 to $3.90 [9] - For the next fiscal year, four estimates have also moved upwards without any downward revisions [9]

Core Insights - The article emphasizes the importance of liquidity in assessing a company's ability to meet debt obligations and suggests that companies with adequate liquidity can drive business growth and deliver higher returns [1][2][3] Group 1: Liquidity Measures - Current Ratio: A measure of current assets relative to current liabilities, with an ideal range of 1-3 indicating a healthy balance [4] - Quick Ratio: Indicates a company's ability to pay short-term obligations, with a desirable ratio of more than 1 [5] - Cash Ratio: The most conservative measure, focusing on cash and cash equivalents relative to current liabilities, with a ratio greater than 1 being desirable but potentially indicating inefficiency [6] Group 2: Screening Parameters - Asset Utilization: A measure of efficiency, calculated as total sales over the last 12 months divided by the average total assets, with a higher ratio than the industry average indicating efficiency [7] - Growth Score: A proprietary measure added to ensure that liquid and efficient stocks have solid growth potential, with a score of A or B indicating better performance [8] Group 3: Stock Recommendations - The New York Times Company (NYT): Reported second-quarter 2025 adjusted earnings per share of 58 cents, exceeding estimates, with total revenues of $685.9 million, a 9.7% year-over-year increase [11][12] - Dillard's, Inc. (DDS): Reported second-quarter 2025 net sales of $1.5 billion, up 1.6% year over year, with adjusted earnings per share of $4.66, surpassing estimates by 23% [14][15] - Newmont Corporation (NEM): Achieved second-quarter revenues of approximately $5.32 billion, a 20.8% increase from the prior year, driven by higher gold prices [17][18] - Frontdoor, Inc. (FTDR): Reported revenues of $617 million for the last quarter, a 14% year-over-year increase, with a gross margin expansion of 130 basis points to 58% [20][21]

Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, with Frontdoor (FTDR) identified as a promising candidate due to its favorable growth metrics and strong Zacks Rank [1][2]. Group 1: Earnings Growth - Frontdoor has a historical EPS growth rate of 17.1%, with projected EPS growth of 8.8% for the current year, surpassing the industry average of 8.5% [4]. - Double-digit earnings growth is preferred by growth investors as it indicates strong future prospects and potential stock price gains [3]. Group 2: Asset Utilization - Frontdoor's asset utilization ratio (sales-to-total-assets ratio) stands at 1.03, indicating that the company generates $1.03 in sales for every dollar in assets, which is higher than the industry average of 0.82 [5]. Group 3: Sales Growth - The company's sales are projected to grow by 11.9% this year, significantly outpacing the industry average growth of 0.3% [6]. Group 4: Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for Frontdoor, with the Zacks Consensus Estimate for the current year increasing by 5.3% over the past month [8][7]. Group 5: Overall Assessment - Frontdoor has achieved a Growth Score of A and holds a Zacks Rank 1, indicating it is a potential outperformer and a solid choice for growth investors [10].

Core Insights - Frontdoor reported strong Q2 2025 results with non-GAAP EPS of $1.63, exceeding analyst expectations of $1.44, and GAAP revenue of $617 million, surpassing the estimate of $602.6 million [1][2] - Year-over-year, both profit and sales increased at a double-digit pace, with GAAP revenue rising 14% and net income growing 21% to $111 million [1][2][8] - The company achieved a record gross margin of 58%, up 1.5 percentage points from the previous year, supported by effective cost management and favorable weather conditions [2][7] Financial Performance - Q2 2025 diluted EPS (Non-GAAP) was $1.63, a 28% increase from $1.27 in Q2 2024 [2] - Revenue for Q2 2025 reached $617 million, a 14% increase from $542 million in Q2 2024 [2] - Adjusted EBITDA for the quarter was $199 million, reflecting a 26% increase from $158 million in the prior year [2] Business Operations - Frontdoor provides home warranties and services through brands like American Home Shield and 2-10 Home Buyers Warranty, focusing on household systems and appliances [3] - The company’s strategy includes maintaining leadership in the home warranty sector, growing its renewing customer base, and expanding into non-warranty offerings [4] - The fastest-growing segment, "Other Revenue," increased by 63%, driven by new HVAC programs and smart water shutoff solutions [6] Customer Metrics - The total number of home warranty contracts rose to 2.09 million, a 7% increase from the previous year, with customer retention improving to 79.7% [8] - Direct-to-consumer first-year sales increased by 12%, indicating strong momentum from marketing efforts [5] Future Outlook - Management raised its full-year 2025 revenue guidance to $2.055 to $2.075 billion, with expectations for gross profit margin between 55-56% and adjusted EBITDA of $530-550 million [9] - For Q3 2025, revenue is anticipated to be between $605-615 million, with adjusted EBITDA of $180-190 million [9] - The company plans to return up to $250 million to shareholders through share repurchases, increasing its buyback target [9]

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Frontdoor, Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2025 and 2024, covering operations, financial position, equity, and cash flows [Condensed Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) The Condensed Consolidated Statements of Operations and Comprehensive Income show significant increases in revenue, net income, and comprehensive income for the periods ended June 30, 2025, compared to 2024 Financial Performance (in millions) | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Revenue | $617 | $542 | $1,043 | $920 | | Gross Profit | $356 | $306 | $591 | $500 | | Net Income | $111 | $92 | $148 | $126 | | Comprehensive Income | $106 | $91 | $136 | $126 | | Basic EPS | $1.51 | $1.18 | $2.00 | $1.61 | | Diluted EPS | $1.48 | $1.18 | $1.96 | $1.60 | [Condensed Consolidated Statements of Financial Position](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Position) The Condensed Consolidated Statements of Financial Position indicate increased total assets and shareholders' equity as of June 30, 2025, compared to December 31, 2024 Financial Position (in millions) | Metric | As of June 30, 2025 (in millions) | As of December 31, 2024 (in millions) | | :-------------------------------- | :-------------------------------- | :------------------------------------ | | Total Current Assets | $620 | $488 | | Total Assets | $2,172 | $2,107 | | Total Current Liabilities | $416 | $369 | | Long-Term Debt | $1,157 | $1,170 | | Total Shareholders' Equity | $254 | $239 | [Condensed Consolidated Statements of Changes in Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity%20(Deficit)) The Condensed Consolidated Statements of Changes in Equity reflect an increase in total shareholders' equity to $254 million as of June 30, 2025, from $214 million in 2024 Changes in Equity (in millions) | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Balance at beginning of period (Additional Paid-in Capital) | $153 | $120 | $152 | $117 | | Stock-based compensation expense | $9 | $8 | $17 | $15 | | Net income | $111 | $92 | $148 | $126 | | Other comprehensive loss, net of tax | $(5) | $(1) | $(12) | $0 | | Repurchase of common stock | $(65) | $(45) | $(135) | $(58) | | Total Shareholders' Equity (End of Period) | $254 | $214 | $254 | $214 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows show increased net cash from operating activities and a shift to net cash inflow from investing activities for the six months ended June 30, 2025 Cash Flows (in millions) | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Cash and Cash Equivalents at Beginning of Period | $421 | $325 | | Net Cash Provided from Operating Activities | $251 | $187 | | Net Cash Provided from (Used for) Investing Activities | $42 | $(22) | | Net Cash Used for Financing Activities | $(153) | $(71) | | Cash Increase During the Period | $141 | $93 | | Cash and Cash Equivalents at End of Period | $562 | $419 | [Notes to the Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering business description, accounting policies, revenue, assets, liabilities, and equity components [Note 1. Description of Business](index=8&type=section&id=Note%201.%20Description%20of%20Business) Frontdoor, Inc. is a leading U.S. provider of home and new home structural warranties, primarily under the American Home Shield and 2-10 HBW brands - Frontdoor is the leading provider of home warranties and new home structural warranties in the United States, primarily under the American Home Shield and 2-10 HBW brands[24](index=24&type=chunk) - The company's core business involves customizable annual service plans covering repair/replacement of up to 29 home systems and appliances, and new home structural warranties for builders and owners[24](index=24&type=chunk) - As of June 30, 2025, Frontdoor had approximately **2.1 million active home warranties** across all brands in the United States[24](index=24&type=chunk) [Note 2. Significant Accounting Policies](index=8&type=section&id=Note%202.%20Significant%20Accounting%20Policies) Frontdoor's significant accounting policies remain consistent with its 2024 Form 10-K, with no material changes during the six months ended June 30, 2025 - No material changes to significant accounting policies occurred during the six months ended June 30, 2025[25](index=25&type=chunk) - The company is evaluating the impact of ASU 2023-09 (Income Taxes) on enhanced disclosures, effective for annual periods beginning after December 15, 2024[27](index=27&type=chunk) - The company is evaluating the impact of ASU 2024-03 (Expense Disaggregation Disclosures) on enhanced disclosures, effective for annual periods beginning after December 15, 2026[28](index=28&type=chunk) [Note 3. Revenue](index=9&type=section&id=Note%203.%20Revenue) Frontdoor primarily generates revenue from one-year home warranty contracts, recognized over time based on expected service costs and disaggregated by customer acquisition channels - Revenue is primarily generated from one-year home warranty contracts, recognized over time using an input method proportional to expected service costs[30](index=30&type=chunk)[32](index=32&type=chunk) Revenue by Major Customer Acquisition Channel (in millions) | Channel | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Renewals | $461 | $421 | $794 | $719 | | Real estate | $44 | $36 | $71 | $63 | | Direct-to-consumer | $56 | $50 | $88 | $86 | | Other | $56 | $35 | $90 | $52 | | Total | $617 | $542 | $1,043 | $920 | - For the three and six months ended June 30, 2025, revenue includes **$56 million** and **$97 million**, respectively, from the 2-10 HBW Acquisition[32](index=32&type=chunk) [Note 4. Goodwill and Intangible Assets](index=11&type=section&id=Note%204.%20Goodwill%20and%20Intangible%20Assets) Goodwill increased to $972 million due to purchase accounting updates for the 2-10 HBW Acquisition, while intangible assets decreased due to amortization - Goodwill increased to **$972 million** as of June 30, 2025, from $967 million as of December 31, 2024, driven by purchase accounting updates for the 2-10 HBW Acquisition[45](index=45&type=chunk) Intangible Assets Summary (in millions) | Intangible Asset | Net as of June 30, 2025 | Net as of December 31, 2024 | | :-------------------------- | :---------------------- | :-------------------------- | | Trade names | $141 | $141 | | Value of business acquired | $132 | $147 | | Home warranty customer relationships | $33 | $41 | | Builder relationships | $68 | $72 | | Developed technology | $12 | $16 | | Other | $26 | $31 | | Total | $412 | $448 | - Amortization expense was **$12 million** for Q2 2025 (vs. $1 million in Q2 2024) and **$25 million** for H1 2025 (vs. $1 million in H1 2024), primarily due to intangible assets from the 2-10 HBW Acquisition[46](index=46&type=chunk) [Note 5. Leases](index=11&type=section&id=Note%205.%20Leases) Frontdoor holds operating leases for corporate facilities with terms up to ten years, reporting total operating lease liabilities of $21 million as of June 30, 2025 - Operating lease expense was less than **$1 million** for the three months ended June 30, 2025 and 2024, and **$1 million** for the six months ended June 30, 2025 and 2024[48](index=48&type=chunk) Operating Lease Liabilities (in millions) | Metric | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------- | :------------------ | :---------------------- | | Other accrued liabilities | $2 | $2 | | Operating lease liabilities | $19 | $20 | | Total operating lease liabilities | $21 | $22 | Maturities of Operating Lease Liabilities as of June 30, 2025 (in millions) | Year | Amount | | :------------------ | :----- | | 2025 (remainder) | $1 | | 2026 | $3 | | 2027 | $4 | | 2028 | $3 | | 2029 | $3 | | Thereafter | $13 | | Total future lease payments | $26 | | Less imputed interest | $(6) | | Total operating lease liabilities | $20 | [Note 6. Income Taxes](index=12&type=section&id=Note%206.%20Income%20Taxes) The effective tax rate decreased for the periods ended June 30, 2025, primarily due to share-based compensation and acquisition-related transaction costs, with new tax legislation under assessment - The effective tax rate decreased to **24.3%** for Q2 2025 (from 25.8% in Q2 2024) and to **23.8%** for H1 2025 (from 25.4% in H1 2024)[55](index=55&type=chunk) - The decrease in the effective tax rate was primarily due to changes in share-based compensation and acquisition-related transaction costs[55](index=55&type=chunk) - The company is currently assessing the impact of the One Big Beautiful Bill Act, enacted on July 4, 2025, which includes significant tax provisions effective from 2025[53](index=53&type=chunk) [Note 7. Acquisitions](index=12&type=section&id=Note%207.%20Acquisitions) Frontdoor completed the $585 million acquisition of 2-10 HBW on December 19, 2024, contributing significantly to 2025 revenue, with preliminary purchase price allocation ongoing - Frontdoor acquired 2-10 HBW on December 19, 2024, for **$585 million** in cash, adding new home structural warranties and home warranty services[56](index=56&type=chunk) 2-10 HBW Acquisition Consideration (in millions) | Item | Amount | | :------------------------------------ | :----- | | Cash consideration paid | $432 | | Payment of 2-10 HBW indebtedness | $157 | | Payment of 2-10 HBW transaction costs | $15 | | Total purchase price consideration | $604 | | Less: Acquired 2-10 HBW cash | $(24) | | Total purchase price consideration, net of cash acquired | $580 | - The acquisition contributed approximately **$56 million** and **$97 million** to revenue for the three and six months ended June 30, 2025, respectively[32](index=32&type=chunk)[133](index=133&type=chunk) [Note 8. Commitments and Contingencies](index=14&type=section&id=Note%208.%20Commitments%20and%20Contingencies) Frontdoor accrues for home warranty claims and new home structural warranty losses based on actuarial estimates, and management anticipates no material adverse effect from legal actions - Accruals for home warranty claims are based on internal actuarial projections and third-party analysis, with claims typically settled within three to six months[61](index=61&type=chunk) - Unpaid losses and loss adjustment reserves for new home structural warranties are estimated using actuarial methods, applying historical loss patterns to actual and reported losses[62](index=62&type=chunk) - Management believes the disposition of existing or potential legal and regulatory actions is not expected to have a material adverse effect on the company's business, financial position, results of operations, or cash flows[64](index=64&type=chunk) [Note 9. Stock-Based Compensation](index=14&type=section&id=Note%209.%20Stock-Based%20Compensation) Stock-based compensation expense increased for the periods ended June 30, 2025, with $61 million in unrecognized cost remaining to be amortized over 2.45 years Stock-Based Compensation Expense (in millions, net of tax) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30, | $7 | $6 | | Six Months Ended June 30, | $12 | $12 | - As of June 30, 2025, there was **$61 million** of total unrecognized compensation cost related to unvested stock options, performance options, RSUs, and performance shares, to be recognized over a weighted-average period of **2.45 years**[67](index=67&type=chunk) Awards Granted Under Omnibus Plan (Six Months Ended June 30, 2025) | Award Type | Number of Awards Granted | Weighted-Average Exercise Price | Weighted-Average Grant Date Fair Value | Weighted Average Vesting Period (years) | | :------------------ | :----------------------- | :------------------------------ | :------------------------------------- | :-------------------------------------- | | Stock options | 684,378 | $38.03 | $16.70 | 4.0 | | Restricted stock units | 772,493 | N/A | $38.03 | 3.0 | | Performance shares | 182,751 | N/A | $38.03 | 3.0 | [Note 10. Long-Term Debt](index=15&type=section&id=Note%2010.%20Long-Term%20Debt) Total debt decreased slightly to $1,186 million as of June 30, 2025, with the company maintaining compliance with covenants and $248 million available under its Revolving Credit Facility Long-Term Debt Summary (in millions) | Debt Type | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------- | :------------------ | :---------------------- | | Term Loan A maturing in 2029 | $402 | $412 | | Term Loan B maturing in 2031 | $784 | $788 | | Total debt | $1,186 | $1,199 | | Less current portion | $(29) | $(29) | | Total long-term debt | $1,157 | $1,170 | - As of June 30, 2025, the company had **$248 million** available borrowing capacity under its $250 million Revolving Credit Facility and was in compliance with Credit Agreement covenants[69](index=69&type=chunk) Future Scheduled Debt Payments as of June 30, 2025 (in millions) | Year | Amount | | :-------------------------- | :----- | | 2025 (remainder) | $14 | | 2026 | $29 | | 2027 | $29 | | 2028 | $29 | | 2029 | $342 | | Thereafter | $760 | | Total future scheduled debt payments | $1,203 | [Note 11. Segments](index=15&type=section&id=Note%2011.%20Segments) Frontdoor operates as a single operating and reportable segment, primarily offering home warranty contracts under the American Home Shield brand, with consolidated revenue as a key performance metric - Frontdoor operates as one operating and reportable segment, primarily under the American Home Shield brand, with the majority of revenue from home warranty contracts[71](index=71&type=chunk) - The Chief Executive Officer, as the chief operating decision maker, evaluates financial information on a consolidated basis, with consolidated revenue being a key component of the incentive compensation program[72](index=72&type=chunk) Segment Financial Information (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenue | $617 | $542 | $1,043 | $920 | | Cost of services rendered | $261 | $237 | $452 | $420 | | Sales and marketing costs | $82 | $85 | $147 | $151 | | Customer service costs | $30 | $27 | $58 | $52 | | General and administrative costs | $61 | $54 | $118 | $99 | | Net Income | $111 | $92 | $148 | $126 | | Total Assets (as of period end) | $2,172 (June 30, 2025) | $2,107 (December 31, 2024) | N/A | N/A | [Note 12. Supplemental Cash Flow Information](index=16&type=section&id=Note%2012.%20Supplemental%20Cash%20Flow%20Information) Supplemental cash flow information indicates increased cash paid for interest expense and stable interest income for the six months ended June 30, 2025 Supplemental Cash Flow Information (in millions) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Cash paid for Interest expense | $37 | $19 | | Cash received from Interest income | $(10) | $(10) | | Income tax payments, net of refunds | $28 | $31 | [Note 13. Cash and Marketable Securities](index=16&type=section&id=Note%2013.%20Cash%20and%20Marketable%20Securities) Cash and cash equivalents increased to $562 million as of June 30, 2025, while marketable securities significantly decreased due to sales and maturities - Cash and cash equivalents increased to **$562 million** as of June 30, 2025, from $421 million as of December 31, 2024[16](index=16&type=chunk) - Short- and long-term marketable securities decreased from **$53 million** as of December 31, 2024, to less than **$1 million** as of June 30, 2025, primarily due to sales and maturities[77](index=77&type=chunk) - For the six months ended June 30, 2025, proceeds from sales of securities were **$48 million** and maturities were **$12 million**[78](index=78&type=chunk) [Note 14. Comprehensive Income (Loss)](index=17&type=section&id=Note%2014.%20Comprehensive%20Income%20(Loss)) Comprehensive income (loss) for the six months ended June 30, 2025, included a total other comprehensive loss of $12 million, primarily from derivative instruments - Comprehensive income (loss) consists of net income (loss), unrealized gains (losses) on derivative instruments, and unrealized gains (losses) on marketable securities[79](index=79&type=chunk) Changes in Accumulated Other Comprehensive Income (Loss) (in millions) | Item | Amount | | :------------------------------------ | :----- | | Balance at December 31, 2024 | $0 | | Other comprehensive loss before reclassifications | $(10) | | Amounts reclassified from AOCI | $(2) | | Total other comprehensive loss | $(12) | | Balance at June 30, 2025 | $(13) | Reclassifications Out of AOCI (in millions) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Gain on interest rate swap contracts | $3 | $4 | | Impact of income taxes | $(1) | $(1) | | Total reclassifications during the period | $2 | $3 | [Note 15. Derivative Financial Instruments](index=17&type=section&id=Note%2015.%20Derivative%20Financial%20Instruments) Frontdoor uses interest rate swap contracts as cash flow hedges to manage variable-rate debt interest rate risks, with an estimated $3 million unrealized hedging loss expected to be recognized in earnings - Frontdoor uses interest rate swap contracts as cash flow hedges to manage risks associated with changes in interest rates on variable-rate debt, not for trading or speculative purposes[83](index=83&type=chunk) - Interest rate swap contracts are recorded at fair value on the balance sheet, with changes in fair value recorded in Accumulated Other Comprehensive Income (AOCI)[84](index=84&type=chunk) - An estimated unrealized hedging loss of **$3 million**, net of tax, in AOCI is expected to be recognized in earnings over the next 12 months[85](index=85&type=chunk) [Note 16. Fair Value Measurements](index=18&type=section&id=Note%2016.%20Fair%20Value%20Measurements) Frontdoor categorizes fair value measurements into a three-level hierarchy, with certain assets and liabilities, including derivatives and total debt, measured at fair value - Fair value measurements are categorized into a three-level hierarchy (Level 1, 2, 3) based on the observability of inputs[86](index=86&type=chunk) Estimated Fair Value Measurements (in millions) | Item | Carrying Value (June 30, 2025) | Estimated Fair Value (Level 2) (June 30, 2025) | | :-------------------------- | :------------------------------- | :--------------------------------------------- | | Other assets | $1 | $1 | | Other accrued liabilities | $4 | $4 | | Other long-term liabilities | $14 | $14 | | Total debt | $1,186 | $1,204 | - The fair value of interest rate swap contracts is determined using a forward interest rate curve from a third-party market data provider, classified as Level 2[88](index=88&type=chunk) [Note 17. Share Repurchase Program](index=19&type=section&id=Note%2017.%20Share%20Repurchase%20Program) Frontdoor's Board approved a new $650 million share repurchase authorization on July 26, 2024, with $175 million used to repurchase shares as of June 30, 2025 - A new **$650 million** share repurchase authorization was approved on July 26, 2024, valid through September 4, 2027[90](index=90&type=chunk) - As of June 30, 2025, **3,563,822 shares** were repurchased for **$175 million** under the new program, leaving **$475 million** available[90](index=90&type=chunk) Summary of Share Repurchases (in millions, except per share data) | Period | Number of shares purchased | Average price paid per share | Cost of shares purchased | | :------------------------------------ | :------------------------- | :--------------------------- | :----------------------- | | Three Months Ended June 30, 2025 | 1,414,662 | $45.41 | $64 | | Three Months Ended June 30, 2024 | 1,359,978 | $33.09 | $45 | | Six Months Ended June 30, 2025 | 2,854,745 | $47.01 | $134 | | Six Months Ended June 30, 2024 | 1,760,475 | $32.66 | $58 | [Note 18. Earnings Per Share](index=20&type=section&id=Note%2018.%20Earnings%20Per%20Share) Basic and diluted earnings per share increased for the periods ended June 30, 2025, reflecting net income and weighted-average common shares outstanding Earnings Per Share Summary (in millions, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net Income | $111 | $92 | $148 | $126 | | Weighted-average common shares outstanding (Basic) | 73.5 | 77.7 | 74.1 | 78.0 | | Weighted-average common shares outstanding (Diluted) | 74.7 | 78.1 | 75.3 | 78.5 | | Basic earnings per share | $1.51 | $1.18 | $2.00 | $1.61 | | Diluted earnings per share | $1.48 | $1.18 | $1.96 | $1.60 | - Diluted EPS calculations include the effect of RSUs, stock options, and performance options, applying the treasury stock method[93](index=93&type=chunk)[94](index=94&type=chunk) - Certain RSUs, stock options, and performance options were excluded from diluted EPS calculations because their effect would have been anti-dilutive[94](index=94&type=chunk)[95](index=95&type=chunk) [CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS](index=21&type=section&id=Cautionary%20Statement%20Concerning%20Forward-Looking%20Statements) This section warns that forward-looking statements are subject to risks and uncertainties, including macroeconomic conditions and competition, and are not updated unless legally required - The report contains forward-looking statements regarding business strategies, market potential, future financial performance, and the 2-10 HBW Acquisition, which are subject to risks and uncertainties[96](index=96&type=chunk) - Key risks include changes in macroeconomic conditions (inflation, interest rates, real estate), ability to implement business strategies, marketing effectiveness, competition (including AI development), contractor relations, cost increases, cybersecurity, and compliance with laws and regulations[99](index=99&type=chunk)[102](index=102&type=chunk) - The company does not undertake any obligation to update or revise forward-looking statements, except as required by law[97](index=97&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of Frontdoor's financial condition and results of operations for the three and six months ended June 30, 2025, covering business overview, key trends, and liquidity [Overview](index=24&type=section&id=Overview) Frontdoor is the leading U.S. provider of home and new home structural warranties, reporting strong revenue, net income, and Adjusted EBITDA for the six months ended June 30, 2025 - Frontdoor is the leading provider of home warranties and new home structural warranties in the U.S., with approximately **2.1 million active home warranties** as of June 30, 2025[104](index=104&type=chunk) Key Financial Performance (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenue | $617 | $542 | $1,043 | $920 | | Net Income | $111 | $92 | $148 | $126 | | Adjusted EBITDA | $199 | $158 | $300 | $229 | - For the six months ended June 30, 2025, **76%** of revenue was from existing customer renewals, **7%** from real estate, **8%** from direct-to-consumer, and **9%** from other channels[105](index=105&type=chunk) [Key Factors and Trends Affecting Our Results of Operations](index=24&type=section&id=Key%20Factors%20and%20Trends%20Affecting%20Our%20Results%20of%20Operations) Frontdoor's results are influenced by macroeconomic conditions, seasonality, weather, tariffs, competition, and strategic acquisitions like 2-10 HBW [Macroeconomic Conditions](index=24&type=section&id=Macroeconomic%20Conditions) Challenging macroeconomic conditions, including inflation, high interest rates, and a difficult real estate market, continue to constrain demand and increase costs for Frontdoor - Challenging real estate market conditions, driven by a decline in existing home sales, continue to constrain demand for home warranties[112](index=112&type=chunk) - Consumer sentiment declined due to macroeconomic conditions, impacting demand for home warranties[112](index=112&type=chunk) - Inflation continues to impact labor, parts, and equipment costs[112](index=112&type=chunk) [Seasonality](index=25&type=section&id=Seasonality) Frontdoor's business experiences seasonal fluctuations, with higher HVAC work orders in summer months impacting revenue, net income, and Adjusted EBITDA - Business is subject to seasonal fluctuations, primarily driven by higher HVAC work orders in summer months[108](index=108&type=chunk) - In 2024, Q2 and Q3 accounted for **29%** of revenue each, **39%** and **43%** of net income, and **36%** and **37%** of Adjusted EBITDA, respectively[108](index=108&type=chunk) [Effect of Weather Conditions](index=25&type=section&id=Effect%20of%20Weather%20Conditions) Weather conditions significantly affect demand for home warranty services, with extreme temperatures increasing costs and mild temperatures reducing claim frequency - Demand for services and results of operations are affected by weather conditions, especially extreme temperatures impacting HVAC systems[109](index=109&type=chunk) - Favorable weather trends in 2024 led to fewer HVAC service requests and positively impacted contract claims costs[109](index=109&type=chunk) - Major weather events or natural disasters generally do not increase the company's service obligations, as these are typically covered by homeowners' insurance[110](index=110&type=chunk) [Tariff and Import/Export Regulations](index=25&type=section&id=Tariff%20and%20Import%2FExport%20Regulations) Changes in U.S. tariff and import/export regulations could increase costs for parts and systems, potentially impacting Frontdoor's margins and competitiveness - Changes in U.S. tariff and import/export regulations may increase costs for parts, appliances, and home systems[111](index=111&type=chunk) - Proposed or imposed tariffs on imported goods, including from key suppliers of replacement parts, could increase costs, decrease margins, or reduce competitiveness[111](index=111&type=chunk) [Competition](index=26&type=section&id=Competition) Frontdoor operates in highly competitive U.S. home warranty and home services industries, differentiating through service quality, contract offerings, and its contractor network - Frontdoor competes in the highly competitive U.S. home warranty and broader home services industries, facing numerous local and regional competitors[113](index=113&type=chunk) - Differentiation is achieved through quality and speed of service, contract offerings, brand awareness, customer satisfaction, pricing, and a nationwide network of qualified professional contractor firms[113](index=113&type=chunk) - The new home structural warranty business competes with other providers and builders that self-insure[114](index=114&type=chunk) [Acquisition Activity](index=26&type=section&id=Acquisition%20Activity) Frontdoor pursues strategic acquisitions in the fragmented home services industry to expand its customer base, enhance technology, and diversify service offerings, as exemplified by 2-10 HBW - The fragmented home services industry presents strategic opportunities for acquisitions to grow customer base, enhance technology, and expand service offerings[115](index=115&type=chunk) - The acquisition of 2-10 HBW provided more home warranty customers, increased revenue, a new sales channel, and a more diversified business portfolio[115](index=115&type=chunk) [Non-GAAP Financial Measures](index=26&type=section&id=Non-GAAP%20Financial%20Measures) Frontdoor uses non-GAAP financial measures, Adjusted EBITDA and Free Cash Flow, to evaluate business performance and liquidity, supplementing GAAP results - Frontdoor uses non-GAAP financial measures, Adjusted EBITDA and Free Cash Flow, to supplement U.S. GAAP results[116](index=116&type=chunk) - Adjusted EBITDA and Adjusted EBITDA margin are used to facilitate operating performance comparisons and are components of the incentive compensation program[116](index=116&type=chunk) - Free Cash Flow is used as a supplemental measure of liquidity to facilitate cash flow comparisons[116](index=116&type=chunk) [Key Business Metrics](index=26&type=section&id=Key%20Business%20Metrics) Frontdoor monitors key operating and financial metrics including revenue, expenses, profitability, and customer retention to assess performance and customer base trends - Key business metrics include revenue, operating expenses, gross profit, net income, earnings per share, Adjusted EBITDA, Free Cash Flow, number of home warranties, and customer retention rate[117](index=117&type=chunk)[126](index=126&type=chunk) - Revenue is primarily driven by the volume and pricing of home warranty services, impacted by new sales, customer retention, and acquisitions[118](index=118&type=chunk) - Customer retention rate is calculated as the ratio of end-of-period home warranty contracts to the sum of beginning-of-period contracts and new sales/acquired accounts, presented on a rolling 12-month basis[124](index=124&type=chunk) [Critical Accounting Policies and Estimates](index=27&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Frontdoor's critical accounting policies and estimates remain consistent with its 2024 Form 10-K, with no material changes during the six months ended June 30, 2025 - There have been no material changes to critical accounting policies during the six months ended June 30, 2025[125](index=125&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Frontdoor reported strong financial performance for the three and six months ended June 30, 2025, with significant increases in revenue, gross profit, and net income driven by price realization and the 2-10 HBW Acquisition [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=29&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) For the three months ended June 30, 2025, revenue increased 14% to $617 million and net income rose 21% to $111 million, driven by price realization and the 2-10 HBW Acquisition Financial Performance (Three Months Ended June 30, in millions) | Metric | 2025 | 2024 | Increase (Decrease) % | | :-------------------------------- | :--- | :--- | :-------------------- | | Revenue | $617 | $542 | 14% | | Cost of services rendered | $261 | $237 | 10% | | Gross Profit | $356 | $306 | 16% | | Selling and administrative expenses | $172 | $167 | 3% | | Depreciation and amortization expense | $21 | $9 | 134% | | Interest expense | $20 | $10 | 101% | | Net Income | $111 | $92 | 21% | - Revenue increased **14%** due to improved price realization and the 2-10 HBW Acquisition, partially offset by a decline in renewed home warranties[131](index=131&type=chunk) - Depreciation and amortization expense increased by **134%** primarily due to the amortization of intangible assets acquired in the 2-10 HBW Acquisition[142](index=142&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=29&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) For the six months ended June 30, 2025, revenue grew 13% to $1,043 million and net income increased 17% to $148 million, driven by price realization and the 2-10 HBW Acquisition Financial Performance (Six Months Ended June 30, in millions) | Metric | 2025 | 2024 | Increase (Decrease) % | | :-------------------------------- | :--- | :--- | :-------------------- | | Revenue | $1,043 | $920 | 13% | | Cost of services rendered | $452 | $420 | 8% | | Gross Profit | $591 | $500 | 18% | | Selling and administrative expenses | $323 | $302 | 7% | | Depreciation and amortization expense | $44 | $18 | 145% | | Interest expense | $39 | $20 | 100% | | Net Income | $148 | $126 | 17% | - Revenue increased **13%** due to improved price realization and the 2-10 HBW Acquisition, partially offset by a challenging real estate market and a decline in renewed home warranties[133](index=133&type=chunk) - Contract claims costs decreased primarily due to process improvement initiatives, better cost management across the contractor network, and higher trade service fees, partially offset by inflationary pressures[138](index=138&type=chunk) [Adjusted EBITDA](index=35&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA significantly increased for the three and six months ended June 30, 2025, reaching $199 million and $300 million, primarily due to increased revenue from price realization and the 2-10 HBW Acquisition Adjusted EBITDA (in millions) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three Months Ended June 30, | $199 | $158 | | Six Months Ended June 30, | $300 | $229 | - The increase in Adjusted EBITDA was primarily driven by the impact of change in revenue, reflecting improved price realization and the 2-10 HBW Acquisition[149](index=149&type=chunk)[150](index=150&type=chunk) [Summary of Changes in Net Income and Adjusted EBITDA](index=35&type=section&id=Summary%20of%20Changes%20in%20Net%20Income%20and%20Adjusted%20EBITDA) This summary details the drivers of changes in Net Income and Adjusted EBITDA for the three and six months ended June 30, 2025, highlighting revenue, claims costs, and operating expenses Summary of Changes in Net Income and Adjusted EBITDA (Three Months Ended June 30, in millions) | Item | Net Income | Adjusted EBITDA | | :------------------------------------ | :--------- | :-------------- | | Three Months Ended June 30, 2024 | $92 | $158 | | Impact of change in revenue | $51 | $51 | | Contract claims costs | $(1) | $(1) | | Sales and marketing costs | $3 | $3 | | Customer service costs | $(2) | $(2) | | Stock-based compensation expense | $(2) | $0 | | Acquisition-related costs | $4 | $0 | | Other general and administrative costs | $(9) | $(9) | | Depreciation and amortization expense | $(12) | $0 | | Restructuring charges | $1 | $0 | | Interest expense | $(10) | $0 | | Interest and net investment income | $(1) | $0 | | Provision for income taxes | $(4) | $0 | | Three Months Ended June 30, 2025 | $111 | $199 | Summary of Changes in Net Income and Adjusted EBITDA (Six Months Ended June 30, in millions) | Item | Net Income | Adjusted EBITDA | | :------------------------------------ | :--------- | :-------------- | | Six Months Ended June 30, 2024 | $126 | $229 | | Impact of change in revenue | $83 | $83 | | Contract claims costs | $7 | $7 | | Sales and marketing costs | $4 | $4 | | Customer service costs | $(6) | $(6) | | Stock-based compensation expense | $(2) | $0 | | Acquisition-related costs | $2 | $0 | | Other general and administrative costs | $(19) | $(19) | | Depreciation and amortization expense | $(26) | $0 | | Restructuring charges | $1 | $0 | | Interest expense | $(19) | $0 | | Interest and net investment income | $0 | $2 | | Provision for income taxes | $(3) | $0 | | Other | $1 | $1 | | Six Months Ended June 30, 2025 | $148 | $300 | [Reconciliation of Net Income to Adjusted EBITDA](index=36&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) This section reconciles Net Income to Adjusted EBITDA, detailing adjustments for non-cash and non-operating items to provide a clearer view of operational performance Reconciliation of Net Income to Adjusted EBITDA (in millions) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net Income | $111 | $92 | $148 | $126 | | Depreciation and amortization expense | $21 | $9 | $44 | $18 | | Restructuring charges | $0 | $1 | $0 | $1 | | Acquisition-related costs | $2 | $6 | $4 | $6 | | Provision for income taxes | $36 | $32 | $46 | $43 | | Non-cash stock-based compensation expense | $9 | $8 | $17 | $15 | | Interest expense | $20 | $10 | $39 | $20 | | Other non-operating expenses | $1 | $0 | $1 | $0 | | Adjusted EBITDA | $199 | $158 | $300 | $229 | - Restructuring charges, acquisition-related costs, and other non-operating expenses are excluded from Adjusted EBITDA to reflect ongoing operations and aid comparability[151](index=151&type=chunk) - Non-cash stock-based compensation expense is excluded from Adjusted EBITDA as it is a non-cash expense not used by management to assess ongoing operational performance[152](index=152&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Frontdoor's liquidity is driven by debt service requirements, with $562 million in cash and $248 million available under its Revolving Credit Facility as of June 30, 2025, supported by increased operating cash flows [Liquidity](index=36&type=section&id=Liquidity) Frontdoor's liquidity, comprising $562 million in cash and $248 million available under its Revolving Credit Facility, is deemed sufficient to meet short- and long-term obligations - As of June 30, 2025, cash and cash equivalents totaled **$562 million**, and available borrowing capacity under the Revolving Credit Facility was **$248 million**[154](index=154&type=chunk) - The company believes current liquidity is sufficient to meet short- and long-term obligations[154](index=154&type=chunk) - Regulatory restrictions on distributions and dividends by subsidiaries exist, requiring minimum capital and net worth[162](index=162&type=chunk) [Share Repurchase Program](index=38&type=section&id=Share%20Repurchase%20Program) Frontdoor's Board approved a new $650 million share repurchase authorization on July 26, 2024, with $175 million utilized as of June 30, 2025, and future repurchases funded by operating activities - A new **$650 million** share repurchase authorization was approved on July 26, 2024, for the period from September 4, 2024, through September 4, 2027[159](index=159&type=chunk) - As of June 30, 2025, **$175 million** was used to repurchase **3,563,822 shares**, with **$475 million** remaining available[159](index=159&type=chunk) - Future share repurchases are expected to be funded from net cash provided from operating activities[159](index=159&type=chunk) [Limitations on Distributions and Dividends by Subsidiaries](index=38&type=section&id=Limitations%20on%20Distributions%20and%20Dividends%20by%20Subsidiaries) Frontdoor relies on subsidiary distributions, which are subject to operating results, financial condition, and legal/regulatory restrictions, including minimum capital requirements and dividend limitations - Frontdoor depends on subsidiaries to distribute funds for its obligations and expenses[160](index=160&type=chunk) - Subsidiary distributions are subject to operating results, cash requirements, financial condition, and legal/regulatory restrictions[160](index=160&type=chunk) - State laws and regulations require certain subsidiaries to maintain minimum capital and net worth, limiting dividend payments to the parent company[162](index=162&type=chunk) [Cash Flows](index=38&type=section&id=Cash%20Flows) For the six months ended June 30, 2025, net cash from operating activities increased to $251 million, investing activities generated $42 million, and financing activities resulted in a $153 million outflow Summary of Cash Flows (Six Months Ended June 30, in millions) | Activity | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Net cash provided from (used for) Operating activities | $251 | $187 | | Net cash provided from (used for) Investing activities | $42 | $(22) | | Net cash used for Financing activities | $(153) | $(71) | | Cash increase during the period | $141 | $93 | [Operating Activities](index=39&type=section&id=Operating%20Activities) Net cash provided from operating activities increased to $251 million for the six months ended June 30, 2025, driven by higher earnings adjusted for non-cash charges and working capital - Net cash provided from operating activities was **$251 million** for H1 2025, up from $187 million in H1 2024[165](index=165&type=chunk) - For H1 2025, operating cash flow comprised **$208 million** in earnings adjusted for non-cash charges and **$48 million** from working capital and long-term insurance-related accounts, offset by **$5 million** in restructuring payments[166](index=166&type=chunk) [Investing Activities](index=39&type=section&id=Investing%20Activities) Net cash provided from investing activities was $42 million for the six months ended June 30, 2025, primarily due to marketable securities sales and acquisition purchase price finalization - Net cash provided from investing activities was **$42 million** for H1 2025, compared to net cash used of $22 million for H1 2024[168](index=168&type=chunk) - Key drivers for H1 2025 included **$60 million** from sales and maturities of available-for-sale securities and **$3 million** from the 2-10 HBW Acquisition purchase price finalization[169](index=169&type=chunk) - Capital expenditures were **$14 million** for H1 2025, with full-year 2025 projections of **$25 million to $35 million**[169](index=169&type=chunk) [Financing Activities](index=39&type=section&id=Financing%20Activities) Net cash used for financing activities increased to $153 million for the six months ended June 30, 2025, mainly due to common stock repurchases and scheduled debt payments - Net cash used for financing activities was **$153 million** for H1 2025, up from $71 million in H1 2024[171](index=171&type=chunk) - For H1 2025, this included **$135 million** for common stock repurchases and **$14 million** for scheduled debt principal payments[171](index=171&type=chunk) [Free Cash Flow](index=39&type=section&id=Free%20Cash%20Flow) Free Cash Flow, a non-GAAP measure, increased to $237 million for the six months ended June 30, 2025, calculated as net cash from operating activities less property additions Free Cash Flow Reconciliation (Six Months Ended June 30, in millions) | Metric | 2025 | 2024 | | :------------------------------------ | :--- | :--- | | Net cash provided from operating activities | $251 | $187 | | Property additions | $(14) | $(22) | | Free Cash Flow | $237 | $164 | [Contractual Obligations](index=40&type=section&id=Contractual%20Obligations) No significant additions to Frontdoor's contractual obligations and commitments have occurred since the 2024 Form 10-K, with required payments continuing - No significant additions to contractual obligations and commitments since the 2024 Form 10-K[174](index=174&type=chunk) [Financial Position](index=40&type=section&id=Financial%20Position) Significant changes in financial position include increased cash, decreased marketable securities, increased contract assets, and decreased intangible assets, with total shareholders' equity rising to $254 million - Cash and cash equivalents increased due to operating activities and marketable securities sales, offset by capital expenditures, debt payments, and share repurchases[175](index=175&type=chunk) - Contract assets increased, reflecting revenue recognition on a non-straight-line basis to match cost timing[175](index=175&type=chunk) - Accounts payable and accrued home warranty claims increased due to seasonality, while deferred revenue decreased[175](index=175&type=chunk) - Total shareholders' equity increased to **$254 million** as of June 30, 2025, primarily driven by net income, partially offset by common stock repurchases[175](index=175&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Frontdoor manages interest rate risk through a mix of variable-rate and fixed-rate debt and interest rate swap contracts, with no material changes to market risks since the 2024 Form 10-K - Frontdoor is exposed to interest rate changes and manages this risk using variable-rate and fixed-rate debt, and interest rate swap contracts[176](index=176&type=chunk) - No material changes to market risks associated with debt obligations and other significant instruments have occurred since the 2024 Form 10-K[176](index=176&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Frontdoor's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting, excluding the 2-10 HBW acquisition assessment - Disclosure controls and procedures were effective as of June 30, 2025, as concluded by management, CEO, and CFO[177](index=177&type=chunk) - No material changes to internal control over financial reporting occurred during the most recently completed fiscal quarter[178](index=178&type=chunk) - The assessment of internal controls for 2-10 HBW (acquired December 19, 2024) was omitted, representing approximately **44%** of consolidated total assets and **9%** of consolidated total revenues[178](index=178&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=41&type=section&id=Item%201.%20Legal%20Proceedings) Information on legal proceedings is incorporated from Note 8, where management does not expect current legal and regulatory actions to have a material adverse effect on the company - Information on legal proceedings is found in Note 8 to the condensed consolidated financial statements[179](index=179&type=chunk) - Management, based on legal counsel, does not expect the disposition of existing or potential legal matters to have a material adverse effect on the company's business, financial position, results of operations, or cash flows[64](index=64&type=chunk) [ITEM 1A. RISK FACTORS](index=41&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2024 Form 10-K occurred during the six months ended June 30, 2025, though additional unknown risks could still adversely affect the business - No material changes to the risk factors disclosed in the 2024 Form 10-K occurred during the six months ended June 30, 2025[180](index=180&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial could materially and adversely affect the business[180](index=180&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Frontdoor's Board approved a new $650 million share repurchase authorization on July 26, 2024, with $175 million used to repurchase shares as of June 30, 2025 - A new **$650 million** share repurchase authorization was approved on July 26, 2024, for the period from September 4, 2024, through September 4, 2027[181](index=181&type=chunk) - As of June 30, 2025, **$175 million** was used to repurchase **3,563,822** outstanding shares, with **$475 million** remaining available[181](index=181&type=chunk) Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) | Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Maximum dollar value of shares that may yet be purchased under the plans or programs (in millions) | | :------------------------------------ | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------------- | | Apr. 1, 2025 through Apr. 30, 2025 | 889,258 | $39.36 | 889,258 | $504 | | May 1, 2025 through May 31, 2025 | 277,510 | $54.05 | 277,510 | $489 | | Jun. 1, 2025 through Jun. 30, 2025 | 247,894 | $57.44 | 247,894 | $475 | | Total | 1,414,662 | $45.41 | 1,414,662 | $475 | [ITEM 6. EXHIBITS](index=43&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the 2-10 HBW Share Purchase Agreement, corporate documents, and CEO/CFO certifications, with agreements not providing factual information beyond their terms - Exhibits include the Share Purchase Agreement for 2-10 HBW, corporate organizational documents, an offer letter, and certifications from the CEO and CFO[185](index=185&type=chunk) - Agreements and documents filed as exhibits are not intended to provide factual information or other disclosure beyond their specific terms[186](index=186&type=chunk) [SIGNATURE](index=44&type=section&id=Signature) The report is duly signed by Jessica P. Ross, Senior Vice President and Chief Financial Officer of Frontdoor, Inc., on August 5, 2025 - The report was signed by Jessica P. Ross, Senior Vice President and Chief Financial Officer, on August 5, 2025[191](index=191&type=chunk)

Core Insights - Frontdoor (FTDR) reported $617 million in revenue for Q2 2025, a year-over-year increase of 13.8% and exceeding the Zacks Consensus Estimate of $602.1 million by 2.48% [1] - The company achieved an EPS of $1.63, up from $1.27 a year ago, surpassing the consensus EPS estimate of $1.44 by 13.19% [1] Revenue Performance - Revenue from Renewals was $461 million, slightly above the estimated $458.9 million, reflecting a 9.5% increase year-over-year [4] - Revenue from Other channels reached $56 million, significantly exceeding the estimated $47.45 million, marking a 60% increase compared to the previous year [4] - Direct-to-consumer (First-Year) revenue was $56 million, aligning with the average estimate of $55 million, representing a 12% year-over-year growth [4] - Revenue from Real estate (First-Year) was $44 million, surpassing the estimated $41.4 million, showing a 22.2% increase year-over-year [4] Stock Performance - Over the past month, Frontdoor's shares returned -0.4%, while the Zacks S&P 500 composite increased by 1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]