Company Overview - Frontdoor, Inc. (NASDAQ: FTDR) is a leading provider of home warranty plans in the United States, primarily generating revenue through its subsidiary, American Home Shield (AHS), which is the largest home warranty provider in the country [1]. Investment Strategy - The company is positioned as a value investment opportunity, focusing on long-term growth potential at reasonable prices. It is particularly attractive for investors looking for companies undergoing strategic changes that can correct stock prices back to their intrinsic value [1]. Competitive Advantages - The analysis emphasizes the importance of understanding company strategies and competitive advantages, which are crucial for assessing future prospects and potential returns for investors [1].

Core Insights - Frontdoor, Inc. held its Investor Day and announced its Q4 and full-year 2024 earnings results on February 27, 2025 [1] - The earnings press release and 10-K filing were made available before market opening on the same day [3] Company Overview - Key participants in the conference included executives such as Bill Cobb (CEO), Jessica Ross (SVP & CFO), and other senior leaders [1] - The Investor Day presentation included forward-looking statements that are subject to various risks and uncertainties [3][4] Financial Performance - The company provided insights into its financial results for Q4 and the full year of 2024 during the presentation [3] - Detailed financial data and performance metrics were likely discussed, although specific figures were not included in the provided text [3]

Financial Data and Key Metrics Changes - In 2024, Frontdoor achieved a gross margin of 54%, an all-time high compared to a low of 43% in 2022, indicating significant improvement in operational efficiency [16][17][23] - The retention rate increased from 75.7% in 2022 to 78.5% in 2024, marking another all-time high for the company [17][134] - The share price rose from $24.15 when the current CEO took over in June 2022 to $57.17, representing a 137% increase [22] Business Line Data and Key Metrics Changes - The non-warranty services revenue reached $107 million in 2024, showcasing growth in this segment [19] - The acquisition of 210 Homebuyers Warranty is expected to diversify the business and enhance revenue and EBITDA [18][72] Market Data and Key Metrics Changes - The home services industry is valued at approximately $500 billion, with the home warranty category valued at about $4 billion, indicating significant growth potential [61][63] - Frontdoor holds a 46% market share in the home warranty category, with over 2 million members [64] Company Strategy and Development Direction - The company aims to grow in both warranty and non-warranty services, evolving from a repair or replace model to a full-service home protection model [25][80] - Strategic priorities include growing and retaining new warranty members, scaling non-warranty revenue, and optimizing the integration of the 210 acquisition [68][70] Management's Comments on Operating Environment and Future Outlook - The management highlighted the challenges faced in the macroeconomic environment, including high inflation and supply chain issues, but expressed optimism about the company's transformation and growth potential [13][24] - The integration of 210 is expected to unlock significant synergies, enhancing profitability and delivering value to shareholders [78] Other Important Information - The company has returned excess cash to shareholders through share buybacks, with a new authorization of $650 million initiated in September 2024 [20][21] - The launch of the AHS app and the introduction of video chat with experts are expected to enhance member experience and retention [116][124] Q&A Session Summary Question: What are the expectations for the impact of the 210 acquisition? - Management expressed increased optimism about the 210 acquisition's impact, highlighting its potential for member growth and revenue diversification [18][72] Question: How does the company plan to address the challenges in the real estate market? - The company is leveraging data and technology to optimize marketing investments and maintain strong relationships with real estate agents, preparing for a market recovery [132] Question: What strategies are in place to improve member retention? - The company focuses on enhancing member experience through usage, onboarding, and autopay sign-ups, with a strong emphasis on service utilization to drive renewals [134]

Core Insights - Frontdoor (FTDR) reported $383 million in revenue for Q4 2024, a year-over-year increase of 4.6% and an EPS of $0.27, up from $0.20 a year ago [1] - The revenue exceeded the Zacks Consensus Estimate of $368.3 million, resulting in a surprise of +3.99%, while the EPS surprise was +145.45% compared to the consensus estimate of $0.11 [1] Financial Performance Metrics - Customer retention rate was 79.9%, surpassing the estimated 77.3% by analysts [4] - The number of home service plans and home warranties reached 2.12 million, exceeding the average estimate of 1.93 million [4] - Revenue from renewals was $296 million, slightly above the three-analyst average estimate of $291.61 million, reflecting a year-over-year change of +3.9% [4] - Revenue from other channels was $30 million, significantly higher than the $23.99 million average estimate, marking a year-over-year increase of +66.7% [4] - Direct-to-consumer revenue (First-Year) was $31 million, below the average estimate of $29.14 million, indicating a year-over-year decline of -16.2% [4] - Revenue from real estate (First-Year) was $26 million, slightly above the estimated $22.22 million, with no change compared to the year-ago quarter [4] Stock Performance - Frontdoor's shares have returned -8.4% over the past month, compared to the Zacks S&P 500 composite's -2.2% change [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential outperformance against the broader market in the near term [3]

Group 1 - Frontdoor reported quarterly earnings of $0.27 per share, exceeding the Zacks Consensus Estimate of $0.11 per share, and showing an increase from $0.20 per share a year ago, representing an earnings surprise of 145.45% [1] - The company achieved revenues of $383 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 3.99%, and up from $366 million year-over-year [2] - Frontdoor has consistently outperformed consensus EPS estimates over the last four quarters, achieving this four times [2] Group 2 - The stock has gained approximately 4.6% since the beginning of the year, outperforming the S&P 500's gain of 1.3% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The trend of estimate revisions for Frontdoor is currently favorable, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Group 3 - The current consensus EPS estimate for the upcoming quarter is $0.42 on revenues of $382.36 million, and for the current fiscal year, it is $3.20 on revenues of $1.95 billion [7] - The Building Products - Miscellaneous industry, to which Frontdoor belongs, is currently ranked in the bottom 25% of over 250 Zacks industries, which may impact stock performance [8] - Another company in the same industry, Quanex Building Products, is expected to report a quarterly loss of $0.06 per share, with a significant year-over-year change of -133.3% [9]

Financial Performance - For the year ended December 31, 2024, Frontdoor generated revenue of $1,843 million, net income of $235 million, and Adjusted EBITDA of $443 million[34]. - The company generated 78 percent of its home warranty revenue through existing customer renewals, compared to 77 percent in 2023 and 72 percent in 2022[63]. - The renewal revenue for home warranties was $1,437 million, $1,367 million, and $1,203 million for the years ended December 31, 2024, 2023, and 2022, respectively[64]. - The company’s revenue is primarily derived from home warranty contracts, which are typically one year in duration, and recognized over time based on service costs incurred[215]. - The company experienced seasonal fluctuations, with approximately 21% of revenue recognized in Q1, 29% in Q2, 29% in Q3, and 21% in Q4 of 2024[206]. - The company’s labor, parts, and equipment costs are affected by inflation, impacting overall profitability[209]. - Operating expenses are influenced by inflationary pressures, including salaries, contractor costs, and regulatory compliance costs[216]. - Gross profit is calculated by deducting the cost of services rendered from revenue, with gross profit margin expressed as a percentage of revenue[217]. - Adjusted EBITDA is defined as net income before various expenses, with Adjusted EBITDA margin calculated as Adjusted EBITDA divided by revenue[219]. - Free Cash Flow represents net cash provided from operating activities less property additions, serving as a key cash flow measure[220]. Customer Base and Market Position - As of December 31, 2024, Frontdoor had approximately 2.1 million active home warranties across all brands in the United States[29]. - Approximately 78% of Frontdoor's revenue in 2024 was generated through existing customer renewals, with 84% of home warranty customers on a monthly auto-pay program[31][43]. - Frontdoor's home warranty category currently represents approximately $4 billion in annual revenue, with only about 6% household penetration in the U.S.[34]. - The company aims to grow its home warranty customer base by targeting homeowners more effectively and optimizing strategies with real estate brokers and contractors[50]. - In 2024, approximately 1.1 million U.S. homes were sold with a home warranty, with revenue from the real estate channel amounting to $125 million, $141 million, and $184 million for the years ended December 31, 2024, 2023, and 2022, respectively[60]. - The direct-to-consumer channel generated revenue of $166 million, $194 million, and $219 million for the years ended December 31, 2024, 2023, and 2022, respectively, with a renewal rate of 72 percent[62]. Acquisitions and Strategic Initiatives - The acquisition of 2-10 HBW in December 2024 expanded Frontdoor's builder partnerships to approximately 19,000, enhancing its position in the new home structural warranty market[28]. - The company completed the acquisition of 2-10 HBW on December 19, 2024, for an aggregate cash consideration of $585 million, enhancing its customer base and revenue opportunities[202]. - The company anticipates strategic acquisition opportunities in the fragmented home services industry, having recently acquired 2-10 HBW to expand its customer base and revenue[58]. - The company faces risks related to the integration of 2-10 HBW, which may include unforeseen difficulties and increased costs[149]. Technology and Innovation - The company plans to leverage its technology platform, including video chat and augmented reality, to enhance customer service and reduce the need for in-home visits[41][42]. - The company continues to invest in digital innovation, with approximately 46 percent of home warranty direct-to-consumer sales made online in 2024[73]. - The company has implemented a cybersecurity risk management strategy to protect its systems and data from potential threats, integrating it into its overall enterprise risk management program[176]. Regulatory and Compliance Risks - The company faces risks related to regulatory compliance, which could adversely affect its operations and financial position[86]. - The California Consumer Privacy Act (CCPA) and the California Privacy Rights Act (CPRA) impose new compliance requirements that may increase operational costs[126]. - The company is subject to various federal, state, and local laws that could increase legal and regulatory expenses, impacting financial performance[128]. - Evolving corporate governance regulations may increase administrative expenses and require significant management resources to ensure compliance[140]. Economic and Market Conditions - The company’s financial performance is influenced by macroeconomic conditions, including inflation and interest rates, which have negatively impacted home sales in recent years[93]. - The Federal Reserve's interest rate decisions have led to buyer apprehension, affecting home sales and consequently the company’s business[94]. - Consumer demand for home warranty services is influenced by macroeconomic conditions, including interest rates and inflation, as well as marketing efforts[104]. - Increased operating costs due to inflation and global supply chain challenges have led to a rise in contract claims costs, adversely impacting financial performance[111]. Workforce and Employee Relations - As of December 31, 2024, the company’s workforce is composed of 63% female, 37% male, and 42% racially/ethnically diverse employees[80]. - The company has engaged in a review and update of employee benefits and vacation programs in 2024 to enhance healthcare coverage[81]. - The company faces challenges in attracting and retaining qualified key employees, which could impact operational success and financial performance[114]. Debt and Financial Obligations - As of December 31, 2024, the company had $1,199 million in total consolidated long-term indebtedness, which includes borrowings for the 2-10 HBW acquisition[160]. - The company does not intend to pay cash dividends in the foreseeable future, focusing instead on business development and debt repayment[155]. - The company has significant variable rate indebtedness, with a one percentage point increase in interest rates resulting in approximately $6 million increase in annual interest expense on Term Loan Facilities and $3 million on the Revolving Credit Facility as of December 31, 2024[163]. - The company’s ability to generate sufficient cash flows from operations to service its debt obligations is uncertain, which may force it to delay capital expenditures or restructure its debt[169].

Group 1 - The upcoming report from Frontdoor (FTDR) is expected to show quarterly earnings of $0.08 per share, a decline of 60% year-over-year, with revenues forecasted at $368.3 million, reflecting a 0.6% increase year-over-year [1] - Over the past 30 days, the consensus EPS estimate for the quarter has been adjusted upward by 0.8%, indicating a reassessment by analysts [1][2] - The 'Revenue by Customer Channel- Renewals' is projected to reach $291.61 million, showing a year-over-year change of +2.3% [4] Group 2 - The 'Revenue by Customer Channel- Other' is estimated at $23.99 million, suggesting a year-over-year increase of +33.3% [4] - The 'Revenue by Customer Channel- Direct-to-consumer (First-Year)' is expected to be $29.14 million, indicating a decline of -21.2% from the prior-year quarter [5] - The 'Customer retention rate' is projected to be 77.3%, an increase from 76.2% reported in the same quarter of the previous year [6] Group 3 - Shares of Frontdoor have shown a return of -2.3% over the past month, compared to a -0.5% change in the Zacks S&P 500 composite [6] - Frontdoor holds a Zacks Rank 2 (Buy), suggesting expectations to outperform the overall market in the near future [6]

Company Overview - Frontdoor (FTDR) is expected to report a year-over-year decline in earnings of 60%, with projected earnings of $0.08 per share for the quarter ended December 2024 [3][12] - Revenue is anticipated to be $368.3 million, reflecting a slight increase of 0.6% from the previous year [3] Earnings Estimates and Trends - The consensus EPS estimate has been revised 0.79% higher in the last 30 days, indicating a reassessment by analysts [4] - The Most Accurate Estimate for Frontdoor is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -166.67%, suggesting a bearish outlook from analysts [10][11] Historical Performance - Frontdoor has a history of beating consensus EPS estimates, having done so in the last four quarters, with a notable surprise of +33.98% in the last reported quarter [12][13] Industry Comparison - Owens Corning (OC), another player in the Zacks Building Products - Miscellaneous industry, is expected to report earnings of $2.87 per share, indicating a year-over-year decline of 10.6%, with revenues projected at $2.78 billion, up 20.5% from the previous year [17] - Owens Corning's consensus EPS estimate has been revised 1.9% higher in the last 30 days, but it also has a negative Earnings ESP of -0.44%, making it difficult to predict an earnings beat [18]

Company Performance - Frontdoor (FTDR) has gained approximately 8.8% year-to-date, outperforming the average gain of 1.4% in the Construction group [4] - The Zacks Consensus Estimate for Frontdoor's full-year earnings has increased by 2.7% over the past quarter, indicating improved analyst sentiment [4] - Frontdoor holds a Zacks Rank of 1 (Strong Buy), suggesting it is poised to outperform the broader market in the next one to three months [3] Industry Comparison - Frontdoor is part of the Building Products - Miscellaneous industry, which has seen an average gain of 7.3% this year, indicating that FTDR is performing better than its industry peers [6] - In contrast, M-tron Industries, Inc. (MPTI), another Construction stock, has increased by 3.5% year-to-date, with a Zacks Rank of 2 (Buy) [5] - The Engineering - R and D Services industry, to which M-tron belongs, has declined by 10.4% year-to-date, highlighting the relative strength of Frontdoor's performance [7]

Technical Analysis - Frontdoor (FTDR) has reached a key level of support and recently crossed above the 20-day moving average, indicating a short-term bullish trend [1] - The 20-day simple moving average (SMA) is favored by traders as it reflects a shorter price history and helps smooth out fluctuations, providing more trend reversal signals compared to longer-term averages [2] Earnings Estimates - Positive earnings estimate revisions for FTDR strengthen the bullish outlook, with no earnings estimates lowered in the past two months and one estimate raised for the current fiscal year, leading to an increase in the consensus estimate [3] Performance Metrics - Over the past four weeks, FTDR has gained 8.5%, and it currently holds a Zacks Rank 1 (Strong Buy), suggesting potential for further price increases [4]