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Summary of Frontdoor FY Conference Call (November 18, 2025) Company Overview - **Company**: Frontdoor (NasdaqGS:FTDR) - **Industry**: Home Warranty Services - **Business Model**: Frontdoor operates a recurring revenue model through home warranties, covering 29 systems and appliances with over 2 million members and 17,000 contractors. The service is initiated via a call or app, with a trade service fee charged for repairs or replacements [9][10]. Key Points Market Dynamics - **Total Addressable Market (TAM)**: The home services market is approximately $500 billion, with an addressable market for home warranties estimated at 15 million homes in the U.S. Currently, about 5 million home warranties are sold, with Frontdoor holding a 40% market share [11][12]. - **Impact of COVID-19**: The pandemic shifted the market dynamics, affecting the traditional real estate channel, which has seen a decline in transactions [11][12]. Real Estate Channel - **Current Trends**: Existing home sales are at a cyclical trough, with inventory increasing but still low. Frontdoor targets about 200,000-210,000 units this year, down from nearly 500,000 six years ago [13][15]. - **Growth Strategy**: The company is enhancing its sales force and introducing promotional pricing to attract real estate agents and customers [16][17]. Direct-to-Consumer (DTC) Channel - **Performance**: The DTC business has shown strong growth, particularly among millennials and Hispanic demographics. The advertising campaign has improved brand relevance and customer engagement [19][20]. - **Future Outlook**: The company anticipates positive growth in customer accounts by 2026, driven by both DTC and real estate channels [23][25]. Retention and Renewal Rates - **Improvement in Retention**: Retention rates have improved by 300 basis points due to better contractor performance and initiatives like autopay and auto-renewal [31][34]. - **Operational Execution**: Focus on member experience and operational discipline has been key to maintaining retention rates and managing cancellations [35][36]. Revenue Growth and Margins - **Revenue Projections**: The company expects 3% organic revenue growth this year, with further expansion anticipated in 2026 and 2027 [40][41]. - **Margin Management**: Frontdoor has achieved record margins through dynamic pricing strategies and strong contractor relationships, managing inflation effectively [65][66]. Non-Warranty Business Expansion - **New Offerings**: The company is expanding into non-warranty services, starting with HVAC and planning to include appliances, roofs, and water heaters by 2026. This strategy aims to increase share of wallet among existing members [45][50]. - **Contractor Relationships**: Strong relationships with contractors allow for competitive pricing and improved customer satisfaction [58][59]. Capital Allocation and M&A Strategy - **Focus on Growth**: The company aims to maintain a strong balance sheet while considering share repurchases and potential M&A opportunities, particularly focusing on integrating the recently acquired 2-10 business [83][89]. AI and Technology Integration - **AI Utilization**: Frontdoor is leveraging AI to enhance service request processing and sales interactions, improving efficiency and customer experience [95][106]. Additional Insights - **Market Recovery**: A recovery in the real estate market could positively impact revenue but may also introduce inflationary pressures [73][74]. - **Long-term Strategy**: The company is focused on sustainable growth through operational excellence, customer retention, and strategic pricing [72][71].

MEMPHIS, Tenn.--(BUSINESS WIRE)--Frontdoor, Inc. (NASDAQ: FTDR), the nation's leading provider of home warranties, proudly announces that Kathy Collins, Senior Vice President and Chief Revenue Officer, was recognized by the Stevie® Awards for Women in Business. During an awards ceremony held on November 10 in New York City, Collins received a Silver Stevie Award in the "Female Executive of the Year – Consumer Services – 11 to 2,500 Employees†category. Established in 2002, the Stevie Awards cel. ...

Core Viewpoint - Frontdoor (NASDAQ: FTDR) has experienced a significant stock price drop of 16%, now trading at $55, raising concerns about its durability in changing economic cycles despite its operational strength and profitability [1][12]. Company Overview - Frontdoor operates with a market capitalization of approximately $4 billion, providing home warranty services, on-demand repairs, and technology-driven diagnostics using AI and computer vision [2]. - The company has a commendable operational history, but its market performance suggests underlying issues [2]. Financial Performance - Frontdoor's operating margin stands at 19.5%, net margin at 13.1%, and cash flow margin at 17%, with a debt-to-equity ratio of 25.2% and a cash-to-assets ratio of 25.9% [7]. - The stock has shown significant volatility, dropping 66% during the inflation shock of 2022, compared to a 25% decline in the S&P 500 [5][8]. Market Sensitivity - The company's operations are closely tied to U.S. housing activity, making it vulnerable to downturns in home transactions and consumer spending [9]. - Historical data indicates that during market corrections, FTDR's stock has dropped by 60-65% from its peaks, suggesting potential downside risks if economic conditions worsen [10][11]. Growth Prospects - Frontdoor's average annual growth rate is 6%, with 8.7% revenue growth over the trailing twelve months, which is only in line with market growth and does not justify premium pricing [14]. - The company lacks a compelling growth narrative compared to technology-focused firms, which may limit its appeal to investors [9]. Investor Sentiment - Recent stock performance reflects how quickly investor sentiment can shift, as evidenced by the recent 16% decline [9]. - Despite solid balance sheet indicators, FTDR's stock has shown weak resilience during downturns, making it sensitive to changes in housing market conditions [14].

Financial Performance - For the three months ended September 30, 2025, the company generated revenue of $618 million, net income of $106 million, and Adjusted EBITDA of $195 million, compared to $540 million, $100 million, and $165 million for the same period in 2024[102]. - Revenue for the three months ended September 30, 2025, was $618 million, a 14% increase from $540 million in the same period of 2024[124]. - Net income for the three months ended September 30, 2025, was $106 million, a 5% increase from $100 million in 2024[124]. - Adjusted EBITDA for the three months ended September 30, 2025, was $195 million, up 18% from $165 million in the same period of 2024[144]. - For the nine months ended September 30, 2025, net income increased to $253 million, compared to $226 million for the same period in 2024, reflecting a 12% growth[146]. Revenue Sources - For the nine months ended September 30, 2025, total operating revenue included 76% from existing customer renewals, 7% from new home warranty sales related to existing home transactions, and 9% from direct-to-consumer sales[102]. - The company’s revenue is primarily derived from home warranty contracts, which are typically one year in duration[115]. - Renewal revenue increased by $40 million (9%) to $461 million for the three months ended September 30, 2025, compared to $422 million in 2024[126]. Customer Metrics - The company had approximately 2.1 million active home warranties across all brands in the United States as of September 30, 2025[101]. - The number of home warranties grew to 2.11 million as of September 30, 2025, an 8% increase from 1.95 million in 2024[130]. - The customer retention rate and the number of home warranties are critical metrics for measuring operating performance[121]. - The company reported a customer retention rate of 79.4% as of September 30, 2025, an increase from 77.7% in 2024[130]. Costs and Expenses - Selling and administrative expenses rose to $174 million for the three months ended September 30, 2025, up from $154 million in 2024, reflecting costs associated with the 2-10 HBW Acquisition[135]. - Interest expense increased to $20 million for the three months ended September 30, 2025, compared to $10 million in 2024, driven by a higher debt balance from the 2-10 HBW Acquisition[140]. - Cost of services rendered was $264 million for the three months ended September 30, 2025, up from $235 million in 2024, reflecting inflationary cost pressures[132]. Strategic Acquisitions - The company anticipates continued strategic acquisition opportunities in the fragmented home services industry, having recently acquired 2-10 HBW to expand its customer base and revenue[112]. - The acquisition of 2-10 HBW on December 19, 2024, represented approximately 42% of the company's consolidated total assets and 9% of its consolidated total revenues as of September 30, 2025[172]. Cash Flow and Capital Management - Cash and cash equivalents totaled $563 million as of September 30, 2025, compared to $421 million as of December 31, 2024[150]. - Net cash provided from operating activities for the nine months ended September 30, 2025, was $315 million, an increase of 49% from $212 million in 2024[160]. - Free Cash Flow for the nine months ended September 30, 2025, was $296 million, compared to $181 million for the same period in 2024[167]. - Net cash used for financing activities was $210 million for the nine months ended September 30, 2025, compared to $131 million in 2024[165]. - The company expects capital expenditures for the full year 2025 to be approximately $30 million, focusing on recurring capital needs and technology projects[163]. Share Repurchase Program - The company repurchased 4,545,461 shares at an aggregate cost of $234 million under its share repurchase program as of September 30, 2025[155]. - The company repurchased a total of 4,545,461 shares at an aggregate cost of $234 million, with $416 million remaining available for future repurchase under the program as of September 30, 2025[175]. - The company’s Board of Directors approved a new share repurchase authorization of up to $650 million from September 4, 2024, through September 4, 2027[175]. - During the three months ended September 30, 2025, the average price paid per share for repurchased shares was $60.31[176]. Risk Factors and Controls - The company has not identified any material changes to the risk factors disclosed in its 2024 Form 10-K during the nine months ended September 30, 2025[174]. - The company continues to evaluate additional risks and uncertainties that could materially affect its business and financial condition[174]. - There were no changes to the internal control over financial reporting that materially affected the company during the most recently completed fiscal quarter[172]. - As of September 30, 2025, the company concluded that its disclosure controls and procedures were effective[171]. Market Conditions - The company faces challenges from a declining real estate market, which constrains demand for home warranties[109]. - Inflation continues to impact labor, parts, and equipment costs, which may affect overall financial performance[109]. - Seasonal fluctuations significantly affect revenue, with 21% of revenue recognized in Q1, 29% in Q2, 29% in Q3, and 21% in Q4 of 2024[105].

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Core Viewpoint - Frontdoor (FTDR) reported quarterly earnings of $1.58 per share, exceeding the Zacks Consensus Estimate of $1.49 per share, and showing an increase from $1.38 per share a year ago, representing an earnings surprise of +6.04% [1] Financial Performance - The company posted revenues of $618 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.33%, compared to $540 million in the same quarter last year [2] - Over the last four quarters, Frontdoor has consistently exceeded consensus EPS estimates and revenue estimates [2] Stock Performance - Frontdoor shares have increased approximately 20.3% since the beginning of the year, outperforming the S&P 500's gain of 15.1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.13 on revenues of $414.9 million, and for the current fiscal year, it is $3.90 on revenues of $2.07 billion [7] - The trend of estimate revisions for Frontdoor was mixed ahead of the earnings release, which may change following the recent report [6] Industry Context - The Building Products - Miscellaneous industry, to which Frontdoor belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, which may impact stock performance [8] - Another company in the same industry, Construction Partners (ROAD), is expected to report significant earnings growth, with a projected EPS of $1.08, reflecting a year-over-year change of +86.2% [9]

Financial Data and Key Metrics Changes - Revenue increased by 14% year-over-year to $618 million, driven by higher volume and pricing [4][18] - Gross profit margin improved by 60 basis points to 57% [4][18] - Net income grew by 5% to $106 million, while adjusted EBITDA increased by 18% to $195 million [4][19] - Free cash flow rose by 64% to $296 million, with total cash position reaching $563 million [21] Business Line Data and Key Metrics Changes - Direct-to-consumer (DTC) member count grew by 8%, marking five consecutive quarters of organic growth [4][9] - Real estate revenue increased by 21%, primarily due to contributions from the 2-10 acquisition [18] - Non-warranty revenue surged by 73% year-over-year, driven by new HVAC and mowing programs [18][16] Market Data and Key Metrics Changes - The real estate channel saw sequential member count growth for the first time since 2020, indicating a shift towards a buyer's market [12][13] - Existing home sales increased by 4.1% in September, although overall sales remain at a 30-year low [12] - Total housing inventory rose by 14% year-over-year, reaching a five-year high [12] Company Strategy and Development Direction - The company is focused on operational excellence, leveraging pricing actions and operational efficiencies to improve margins [5][8] - Plans to expand non-warranty offerings into other trades, with significant growth potential identified in appliance replacement and other categories [16] - The company is committed to enhancing member experience through technology and continuous innovation [5][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record financial results for 2025, with a strong outlook for revenue and adjusted EBITDA [4][25] - The macro environment is improving, which is expected to support the company's strategic initiatives [33] - Management highlighted the importance of member retention and the effectiveness of marketing strategies targeting younger demographics [10][34] Other Important Information - Jessica Ross, the CFO, announced her resignation, effective November 10, with Jason Bailey set to succeed her [25][26] - The company is increasing its marketing spend in Q4 to drive growth, particularly in the DTC channel [22][34] Q&A Session Summary Question: What drove the increase in cost inflation? - Management clarified that inflation was closer to 4%, primarily due to rising appliance costs, but they are managing through it with dynamic pricing strategies [28][29] Question: What promotional strategies were implemented in the real estate channel? - The company ran specific promotions, including a $100 discount, which helped them outpace the real estate market [30] Question: What are the early observations from the non-warranty pilot program? - The company plans to expand the program nationwide in 2026, with initial feedback being positive [31] Question: What is driving the expected decline in DTC revenue? - The decline is attributed to pricing strategies and seasonal adjustments, but retention rates remain strong [32] Question: How much of the real estate channel's success is due to market conditions versus company initiatives? - Management noted that both the improving macro environment and their promotional strategies contributed to the success [33] Question: What is the outlook for long-term margin targets? - Management indicated that they are reevaluating long-term margin targets due to improved execution and pricing capabilities [36][38]

Financial Highlights - Q3 2025 revenue reached $618 million, a 14% increase year-over-year[17, 43] - Gross profit for Q3 2025 was $353 million, with a gross profit margin of 57%[17, 46] - Net income for Q3 2025 increased by 5% to $106 million[17, 49] - Adjusted EBITDA for Q3 2025 increased by 18% to $195 million[17, 49] - Year-to-date free cash flow increased by 64%[55] Business Performance - Organic direct-to-consumer member count grew by 8% compared to the prior year[17] - Real estate member count increased sequentially for the first time in five years[17] - The company repurchased $215 million of shares year-to-date through October 31[17, 59] - Retention rates are near all-time highs at 79.4%[32] Outlook - Q4 2025 revenue is projected to be between $415 million and $425 million[61] - Q4 2025 adjusted EBITDA is projected to be between $50 million and $55 million[61]

Core Viewpoint - Frontdoor, Inc. has appointed Jason Bailey as the new Senior Vice President and Chief Financial Officer, succeeding Jessica Ross, who will remain as an advisor until the end of 2025 to ensure a smooth transition [1]. Company Summary - Jason Bailey has been appointed as the Senior Vice President and Chief Financial Officer of Frontdoor, Inc. [1] - Jessica Ross, the former CFO, resigned effective November 10, 2025, but will continue to assist the company until December 31, 2025 [1].