Frontdoor, Inc. (NASDAQ:FTDR) Q3 2020 Earnings Conference Call November 4, 2020 4:30 PM ET Company Participants Matt Davis - Vice President of Investor Relations and Treasurer Rex Tibbens - Chief Executive Officer Brian Turcotte - Chief Financial Officer Conference Call Participants Aaron Kessler - Raymond James Ralph Schackart - William Blair Cory Carpenter - JPMorgan Ian Zaffino - Oppenheimer Michael Ng - Goldman Sachs Matt Gaudioso - Compass Point Youssef Squali - Truist Securities Kevin McVeigh - Credit ...

frontdoor, inc. (NASDAQ:FTDR) Q2 2020 Earnings Conference Call August 5, 2020 4:30 PM ET Company Participants Matt Davis – Vice President-Investor Relations and Treasurer Rex Tibbens – Chief Executive Officer Brian Turcotte – Chief Financial Officer Conference Call Participants Ralph Schackart – William Blair Michael Ng – Goldman Sachs Youssef Squali – Truist Cory Carpenter – JPMorgan Brian Fitzgerald – Wells Fargo Ian Zaffino – Oppenheimer Matt Gaudioso – Compass Point Operator Ladies and gentlemen, welcom ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________ FORM 10-Q ________________________________________________ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-38617 ____________________________________ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________ FORM 10-Q ________________________________________________ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-38617 ___________________________________ ...

Part I [Business](index=6&type=section&id=Item%201.%20Business) Frontdoor is the largest U.S. provider of home service plans, generating $1.365 billion in 2019 revenue - Frontdoor is the largest U.S. provider of home service plans by revenue, serving over two million customers annually through a network of approximately 17,000 contractor firms[19](index=19&type=chunk)[20](index=20&type=chunk) - In 2019, the company launched Candu for on-demand home services and acquired Streem, an augmented reality technology firm, to enhance diagnostic capabilities[19](index=19&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) - The business model is characterized by recurring revenue, with **68% of 2019 revenue from existing customer renewals**[21](index=21&type=chunk) 2019 Financial Highlights | Metric | Value (in millions) | | :--- | :--- | | Revenue | $1,365 | | Net Income | $153 | | Adjusted EBITDA | $303 | [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from competition, its 2018 spin-off, and substantial indebtedness - Business risks include intense competition, weakening economic conditions, reliance on third-party contractors, and cybersecurity breaches[77](index=77&type=chunk)[78](index=78&type=chunk)[82](index=82&type=chunk) - Risks from the 2018 spin-off include a limited operating history as a public company and potential tax liabilities[126](index=126&type=chunk)[129](index=129&type=chunk)[134](index=134&type=chunk) - The company has **substantial indebtedness of approximately $992 million** as of year-end 2019, creating interest rate risk and operational limitations[162](index=162&type=chunk)[163](index=163&type=chunk)[165](index=165&type=chunk) - A **one percentage point change in interest rates would alter annual interest expense by approximately $3 million** on the unhedged Term Loan Facility[163](index=163&type=chunk) [Unresolved Staff Comments](index=30&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[173](index=173&type=chunk) [Properties](index=30&type=section&id=Item%202.%20Properties) The company's main properties include a leased corporate headquarters and five customer care centers - The company's corporate headquarters is located in a leased facility in Memphis, Tennessee[174](index=174&type=chunk) - Frontdoor operates five customer care centers, with two owned properties in Iowa and Georgia and three leased facilities in other states[174](index=174&type=chunk) [Legal Proceedings](index=30&type=section&id=Item%203.%20Legal%20Proceedings) The company is subject to ordinary course legal actions not expected to have a material adverse effect - The company is subject to legal and regulatory actions from the ordinary course of business, but management does not expect them to have a material adverse effect on financial results[175](index=175&type=chunk) [Mine Safety Disclosures](index=30&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[176](index=176&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on NASDAQ under 'FTDR', and it does not intend to pay dividends - The company's common stock is listed on the NASDAQ under the symbol 'FTDR'[179](index=179&type=chunk) - Frontdoor does not intend to pay cash dividends in the foreseeable future, prioritizing earnings for debt repayment, share repurchases, and growth[180](index=180&type=chunk) - On December 4, 2019, the company issued **575,370 restricted shares of common stock, valued at $19 million**, for the Streem acquisition[181](index=181&type=chunk)[182](index=182&type=chunk) [Selected Financial Data](index=32&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key financial data showing consistent revenue growth Five-Year Financial Summary (2015-2019) | (In millions) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $1,365 | $1,258 | $1,157 | $1,020 | $917 | | **Gross Profit** | $678 | $572 | $567 | $494 | $449 | | **Net Income** | $153 | $125 | $160 | $124 | $120 | | **Total long-term debt** | $980 | $984 | $9 | $14 | $1 | | **Net cash provided from operating activities** | $200 | $189 | $194 | $155 | $135 | | **Adjusted EBITDA** | $303 | $238 | $259 | $218 | $205 | Reconciliation of Net Income to Adjusted EBITDA (2019 vs 2018) | (In millions) | 2019 | 2018 | | :--- | :--- | :--- | | **Net Income** | $153 | $125 | | Depreciation and amortization | $24 | $21 | | Restructuring charges | $1 | $3 | | Spin-off charges | $1 | $24 | | Provision for income taxes | $51 | $42 | | Non-cash stock-based compensation | $9 | $4 | | Interest expense | $62 | $23 | | Other adjustments | $4 | $(5) | | **Adjusted EBITDA** | **$303** | **$238** | Reconciliation to Free Cash Flow (2019 vs 2018) | (In millions) | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided from operating activities | $200 | $189 | | Property additions | $(22) | $(27) | | **Free Cash Flow** | **$178** | **$163** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 8% to $1.365 billion in 2019, driving a 23% increase in net income to $153 million - Revenue growth in 2019 was primarily driven by an **11% increase in renewal revenue**, reflecting growth in home service plans and improved pricing[238](index=238&type=chunk)[239](index=239&type=chunk) - Cost of services rendered remained flat as benefits from process improvements and mild weather were offset by inflation and tariffs[243](index=243&type=chunk)[244](index=244&type=chunk) - The company ended 2019 with **$434 million in cash and short-term securities** and $250 million of available borrowing capacity[261](index=261&type=chunk)[186](index=186&type=chunk) 2019 vs. 2018 Key Results | (In millions) | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $1,365 | $1,258 | 8% | | Gross Profit | $678 | $572 | 18% | | Net Income | $153 | $125 | 23% | | Adjusted EBITDA | $303 | $238 | 27% | [Quantitative and Qualitative Disclosures about Market Risk](index=50&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuation on its variable-rate debt, partially hedged by a swap - The primary market risk is from interest rate changes on variable-rate debt, and the company uses an interest rate swap to hedge a portion of this exposure[289](index=289&type=chunk) - An interest rate swap agreement **fixes the rate on a notional amount of $350 million** of the Term Loan Facility until August 2025[290](index=290&type=chunk) - A one percentage point change in interest rates would result in an **approximate $3 million change in annual interest expense** on the unhedged term loan[291](index=291&type=chunk) [Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains audited financial statements with an unqualified opinion from Deloitte & Touche LLP - The independent auditor, Deloitte & Touche LLP, issued an **unqualified opinion** on the financial statements and internal controls as of December 31, 2019[294](index=294&type=chunk)[295](index=295&type=chunk) - The audit identified the **'Accrual for Home Service Plan Claims' as a Critical Audit Matter** due to significant management judgment required[301](index=301&type=chunk)[302](index=302&type=chunk) Consolidated Statement of Operations (in millions) | | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Revenue | $1,365 | $1,258 | $1,157 | | Gross Profit | $678 | $572 | $567 | | Income before Income Taxes | $204 | $166 | $220 | | **Net Income** | **$153** | **$125** | **$160** | Consolidated Balance Sheet Highlights (in millions) | | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Assets | $1,250 | $1,041 | | Total Liabilities | $1,429 | $1,385 | | Total Deficit | $(179) | $(344) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=82&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[465](index=465&type=chunk) [Controls and Procedures](index=82&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[465](index=465&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2019, an assessment audited and affirmed by Deloitte & Touche LLP[467](index=467&type=chunk)[468](index=468&type=chunk) [Other Information](index=82&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[470](index=470&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=82&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, officers, and governance is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the company's Proxy Statement for the 2020 annual meeting of stockholders[470](index=470&type=chunk) [Executive Compensation](index=83&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the company's Proxy Statement for the 2020 annual meeting of stockholders[471](index=471&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=83&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the company's Proxy Statement for the 2020 annual meeting of stockholders[472](index=472&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=83&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related transactions and director independence is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the company's Proxy Statement for the 2020 annual meeting of stockholders[473](index=473&type=chunk) [Principal Accounting Fees and Services](index=83&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the company's Proxy Statement for the 2020 annual meeting of stockholders[474](index=474&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=84&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the report - This section lists all financial statements, schedules, and exhibits filed with the report[476](index=476&type=chunk) - Includes Schedule I (frontdoor, inc. Parent Condensed Financial Information) and Schedule II (Valuation and Qualifying Accounts)[478](index=478&type=chunk) [Form 10-K Summary](index=84&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for this item - None[479](index=479&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________ FORM 10-Q ________________________________________________ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-36507 _______________________________ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________ FORM 10-Q ________________________________________________ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-36507 ____________________________________ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________ FORM 10-Q ________________________________________________ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-36507 ___________________________________ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________ FORM 10-K ________________________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-36507 ________________________________________________ frontdoor, inc. (Exact na ...