[PART I. FINANCIAL INFORMATION](index=4&type=section&id=Part%20I.%20Financial%20Information) This section presents unaudited financial statements, management's analysis, market risk, and internal controls [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents unaudited condensed consolidated financial statements, including operations, position, equity, and cash flows, with detailed notes [Condensed Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) This section details financial performance, including revenue, gross profit, net income, and EPS Key Financial Highlights (Three Months Ended September 30) | Metric | 2023 (Millions) | 2022 (Millions) | Change (%) | | :----------------------------- | :-------------- | :-------------- | :--------- | | Revenue | $524 | $484 | 8% | | Gross Profit | $268 | $210 | 27% | | Net Income | $71 | $28 | 154% | | Basic EPS | $0.89 | $0.34 | 162% | | Diluted EPS | $0.89 | $0.34 | 162% | Key Financial Highlights (Nine Months Ended September 30) | Metric | 2023 (Millions) | 2022 (Millions) | Change (%) | | :----------------------------- | :-------------- | :-------------- | :--------- | | Revenue | $1,414 | $1,322 | 7% | | Gross Profit | $708 | $565 | 25% | | Net Income | $163 | $63 | 159% | | Basic EPS | $2.01 | $0.77 | 161% | | Diluted EPS | $2.00 | $0.77 | 159% | [Condensed Consolidated Statements of Financial Position](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Position) This section outlines the company's assets, liabilities, and equity at specific points in time Financial Position Highlights (September 30, 2023 vs. December 31, 2022) | Metric | Sep 30, 2023 (Millions) | Dec 31, 2022 (Millions) | Change (Millions) | | :-------------------------- | :---------------------- | :---------------------- | :---------------- | | Total Current Assets | $429 | $330 | +$99 | | Total Assets | $1,168 | $1,082 | +$86 | | Total Current Liabilities | $364 | $364 | $0 | | Long-Term Debt | $580 | $592 | -$12 | | Total Shareholders' Equity | $171 | $61 | +$110 | [Condensed Consolidated Statements of Changes in Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity%20(Deficit)) This section tracks changes in shareholders' equity, including net income, stock compensation, and share repurchases - **Total Shareholders' Equity** increased from **$47 million** as of September 30, 2022, to **$171 million** as of September 30, 2023, for the nine-month period[20](index=20&type=chunk) - Key drivers for the nine months ended September 30, 2023, include **net income** of **$163 million**, **stock-based compensation expense** of **$21 million**, and **common stock repurchases** of **$(76) million**[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary (Nine Months Ended September 30) | Activity | 2023 (Millions) | 2022 (Millions) | Change (Millions) | | :-------------------------------- | :-------------- | :-------------- | :---------------- | | Net Cash Provided from Operating Activities | $139 | $80 | +$59 | | Net Cash Used for Investing Activities | $(23) | $(25) | +$2 | | Net Cash Used for Financing Activities | $(88) | $(74) | -$14 | | Cash Increase (Decrease) During the Period | $28 | $(19) | +$47 | | Cash and Cash Equivalents at End of Period | $320 | $244 | +$76 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, revenue, assets, liabilities, and equity - The **notes** provide detailed explanations of the **financial statements**, covering **accounting policies**, **revenue disaggregation**, **asset impairment**, **debt structure**, and **equity changes**[25](index=25&type=chunk) - No **material changes** to **significant accounting policies** occurred during the nine months ended September 30, 2023[27](index=27&type=chunk) - The company adopted **ASU 2020-04** in March 2023 to replace **LIBOR** with **SOFR** for **Credit Facilities**, which did not materially impact the **consolidated financial statements**[29](index=29&type=chunk) [Note 1. Description of Business](index=8&type=section&id=Note%201.%20Description%20of%20Business) This section provides a high-level description of Frontdoor's business as a leading home service plan provider - **Frontdoor** is the **leading provider of home service plans** in the United States, primarily operating under the **American Home Shield brand**[26](index=26&type=chunk) - The company offers customizable annual service plans covering repair or replacement of major home systems and appliances, along with on-demand home services via its **Streem technology app**[26](index=26&type=chunk) - As of September 30, 2023, **Frontdoor** had **2.0 million active home service plans** across all brands[26](index=26&type=chunk) [Note 2. Significant Accounting Policies](index=8&type=section&id=Note%202.%20Significant%20Accounting%20Policies) This section outlines the significant accounting policies and estimates that require management's judgment - There have been no **material changes** to the company's **significant accounting policies** during the nine months ended September 30, 2023, as described in the **2022 Form 10-K**[27](index=27&type=chunk) - **Frontdoor** adopted **ASU 2020-04** in March 2023 to transition from **LIBOR** to **SOFR** as the benchmark rate for its **Credit Facilities**, which did not have a **material impact** on its **financial statements**[29](index=29&type=chunk) [Note 3. Revenue](index=9&type=section&id=Note%203.%20Revenue) This section analyzes revenue performance, detailing changes by acquisition channel and key drivers Revenue by Major Customer Acquisition Channel (Three Months Ended September 30) | Channel | 2023 (Millions) | 2022 (Millions) | Change ($M) | Change (%) | | :---------------- | :-------------- | :-------------- | :---------- | :--------- | | Renewals | $406 | $356 | $50 | 14% | | Real estate | $40 | $51 | $(12) | (23)% | | Direct-to-consumer | $54 | $64 | $(10) | (16)% | | Other | $24 | $13 | $11 | 85% | | **Total** | **$524** | **$484** | **$40** | **8%** | Revenue by Major Customer Acquisition Channel (Nine Months Ended September 30) | Channel | 2023 (Millions) | 2022 (Millions) | Change ($M) | Change (%) | | :---------------- | :-------------- | :-------------- | :---------- | :--------- | | Renewals | $1,083 | $949 | $134 | 14% | | Real estate | $115 | $153 | $(39) | (25)% | | Direct-to-consumer | $157 | $176 | $(19) | (11)% | | Other | $59 | $44 | $16 | 35% | | **Total** | **$1,414** | **$1,322** | **$91** | **7%** | - **Deferred customer acquisition costs** decreased from **$16 million** as of December 31, 2022, to **$12 million** as of September 30, 2023[38](index=38&type=chunk) [Note 4. Goodwill and Intangible Assets](index=10&type=section&id=Note%204.%20Goodwill%20and%20Intangible%20Assets) This section discusses any impairment charges related to goodwill and intangible assets for the reported periods - The **goodwill balance** remained at **$503 million** as of September 30, 2023, and December 31, 2022, with no **impairment charges** recorded in the three and nine months ended September 30, 2023[45](index=45&type=chunk) - In **Q3 2022**, a **$14 million impairment charge** was recognized for the **Streem reporting unit** (**$9 million goodwill**, **$5 million intangible assets**) due to a strategic shift to integrate **Streem's technology** into the core business rather than selling it as a third-party SaaS platform[44](index=44&type=chunk) - **Total intangible assets, net**, decreased from **$148 million** as of December 31, 2022, to **$144 million** as of September 30, 2

Part I. Financial Information [Financial Statements (Unaudited)](index=4&type=section&id=Item%201%2E%20Financial%20Statements%20(Unaudited)) The company's Q2 2023 profitability significantly increased, driven by revenue growth and cost reductions, strengthening its balance sheet and improving operating cash flow [Condensed Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) In Q2 2023, revenue grew 7% year-over-year to $523 million, while a 9% decrease in service costs drove a 28% rise in gross profit and more than doubled net income Three Months Ended June 30 | Financial Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | $523 million | $487 million | +7.4% | | **Gross Profit** | $270 million | $211 million | +28.0% | | **Net Income** | $70 million | $33 million | +112.1% | | **Diluted EPS** | $0.85 | $0.40 | +112.5% | Six Months Ended June 30 | Financial Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | $890 million | $838 million | +6.2% | | **Gross Profit** | $440 million | $355 million | +23.9% | | **Net Income** | $91 million | $35 million | +160.0% | | **Diluted EPS** | $1.12 | $0.42 | +166.7% | [Condensed Consolidated Statements of Financial Position](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Position) As of June 30, 2023, total assets grew to $1.136 billion, supported by an increase in cash and a substantial rise in total shareholders' equity to $131 million | Balance Sheet Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $344 million | $292 million | | **Total Assets** | $1,136 million | $1,082 million | | **Total Liabilities** | $1,005 million | $1,021 million | | **Total Shareholders' Equity** | $131 million | $61 million | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2023, net cash from operating activities increased to $112 million, while financing cash outflows decreased due to lower share repurchases | Cash Flow Activity (Six Months Ended June 30) | 2023 | 2022 | | :--- | :--- | :--- | | **Net Cash Provided from Operating Activities** | $112 million | $94 million | | **Net Cash Used for Investing Activities** | ($15) million | ($19) million | | **Net Cash Used for Financing Activities** | ($44) million | ($69) million | | **Cash Increase During the Period** | $52 million | $6 million | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail revenue growth from customer renewals, a total debt of $601 million, and an ongoing share repurchase program - The company is the leading provider of home service plans in the U.S., operating primarily under the American Home Shield brand, with **2.1 million active home service plans** as of June 30, 2023[25](index=25&type=chunk) Revenue by Channel | Revenue by Channel (Six Months Ended June 30) | 2023 | 2022 | YoY Change | | :--- | :--- | :--- | :--- | | **Renewals** | $677 million | $593 million | +14.2% | | **Real estate** | $75 million | $102 million | -26.5% | | **Direct-to-consumer** | $103 million | $112 million | -8.0% | | **Other** | $35 million | $31 million | +12.9% | | **Total** | **$890 million** | **$838 million** | **+6.2%** | - Total debt as of June 30, 2023 was **$601 million**, consisting primarily of a $233 million Term Loan A and a $368 million Term Loan B[58](index=58&type=chunk) - Under its share repurchase program, the company bought back **1.1 million shares for $34 million** in the first six months of 2023, with **$205 million remaining** available for future repurchases[76](index=76&type=chunk)[77](index=77&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=20&type=section&id=Item%202%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q2 2023 revenue growth to price realization, while cost reductions from favorable weather significantly boosted gross profit and Adjusted EBITDA [Key Factors and Trends Affecting Our Results of Operations](index=20&type=section&id=Key%20Factors%20and%20Trends%20Affecting%20Our%20Results%20of%20Operations) Performance is influenced by macroeconomic conditions, with a challenging housing market constraining demand while favorable weather trends reduced claims costs - The challenging home seller's market, low inventory, and rising interest rates continued to constrain demand for home service plans in the **first-year real estate channel**[100](index=100&type=chunk) - Contractors faced inflationary pressures from **higher labor, parts, and equipment costs**, which the company is mitigating through preferred contractor usage and direct parts sourcing[100](index=100&type=chunk) - **Favorable weather** in H1 2023 resulted in fewer service requests per customer, which favorably impacted contract claims costs[96](index=96&type=chunk) - The business is seasonal, with a **higher number of HVAC work orders** in the summer months, which drives variations in quarterly revenue and profit[95](index=95&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q2 2023 revenue grew 7% driven by strong pricing in renewals, while lower service costs due to favorable weather significantly increased net income and Adjusted EBITDA - Q2 2023 revenue increased 7% YoY, driven by a **15% increase in renewal revenue** from improved price realization, while real estate and direct-to-consumer revenues declined 25% and 11%, respectively[113](index=113&type=chunk)[114](index=114&type=chunk) - Cost of services rendered in Q2 2023 decreased by 9% YoY, reflecting a **$17 million favorable impact from cooler weather** and a $4 million favorable adjustment for prior period claims[119](index=119&type=chunk) - Selling and administrative expenses increased 16% in Q2 2023, mainly due to **higher sales and marketing costs** associated with the launch of the Frontdoor brand[122](index=122&type=chunk) Key Performance Metrics | Metric (Q2 2023 vs Q2 2022) | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | **Net Income** | $70 million | $33 million | +112% | | **Adjusted EBITDA** | $121 million | $77 million | +57% | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $344 million in cash and $248 million in available credit, supporting operations and continued share repurchases - As of June 30, 2023, the company had **$344 million in cash** and cash equivalents and an available borrowing capacity of **$248 million** under its Revolving Credit Facility[138](index=138&type=chunk) - The company repurchased **$34 million of its common stock** in the first six months of 2023 and has **$205 million remaining** under its share repurchase authorization[143](index=143&type=chunk) Cash Flow Summary | Cash Flow Metric (Six Months Ended June 30) | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash provided from operating activities** | $112 million | $94 million | | **Free Cash Flow** | $96 million | $75 million | [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk profile, primarily related to interest rate changes on its variable-rate debt, has not materially changed since its 2022 Form 10-K - The company is exposed to interest rate changes and manages this risk using variable-rate debt, fixed-rate debt, and an interest rate swap, with **no material changes** to this risk profile since the 2022 Form 10-K[159](index=159&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - Based on an evaluation as of June 30, 2023, the CEO and CFO concluded that the company's **disclosure controls and procedures were effective**[160](index=160&type=chunk) - There were **no changes during Q2 2023** that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[161](index=161&type=chunk) Part II. Other Information [Legal Proceedings](index=32&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is subject to ordinary course legal actions that are not expected to have a material adverse effect on its financial condition or results - The company is subject to various legal proceedings arising in the ordinary course of business, but management **does not expect them to have a material adverse effect** on the company's financials[54](index=54&type=chunk)[162](index=162&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A%2E%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - **No material changes** have occurred to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K[163](index=163&type=chunk) [Issuer Purchases of Equity Securities](index=32&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) In Q2 2023, the company repurchased approximately 1.1 million shares for $34 million, with $205 million remaining under its repurchase authorization Share Repurchases in Q2 2023 | Period (2023) | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April | 0 | $0.00 | | May | 439,478 | $31.29 | | June | 634,381 | $31.53 | | **Total Q2** | **1,073,859** | **$31.43** | - As of June 30, 2023, **$205 million remained available** for future repurchases under the company's stock repurchase program, which runs through September 3, 2024[164](index=164&type=chunk) [Other Information](index=33&type=section&id=Item%205%2E%20Other%20Information) On July 28, 2023, the company's board adopted amended and restated bylaws to update procedures for stockholder director nominations - On July 28, 2023, the company adopted amended and restated bylaws to update provisions regarding stockholder director nominations, including requirements related to the **SEC's universal proxy Rule 14a-19**[166](index=166&type=chunk) [Exhibits](index=35&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amended bylaws and required CEO and CFO certifications - The list of exhibits filed with the report includes the company's **Amended and Restated Bylaws** and required CEO/CFO certifications[170](index=170&type=chunk)

First-Quarter 2023 Earnings Webcast frontdoor. May 4, 2023 2 Chairman & Chief Executive Officer Senior Vice President & Chief Financial Officer Vice President Investor Relations & Treasurer This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, projected future performance and any statements about Frontdoor's plans, strategies and prospects ...

Financial Data and Key Metrics Changes - First quarter revenue increased by 4% year-over-year to $367 million, driven by a 10% increase in pricing, which offset a 5% decline in volume [28][30] - Gross profit for the quarter rose by $26 million to $170 million, resulting in a gross profit margin increase of 540 basis points to 46% [28][30] - Net income increased by $20 million to $22 million, with adjusted net income also rising by $20 million to $23 million [28][30] - Free cash flow for the first quarter was $52 million, with a projection of approximately $100 million for the full year [29] Business Line Data and Key Metrics Changes - Revenue from customer renewals increased by 13% year-over-year, while first-year real estate revenue decreased by 28% due to a decline in home service plans sold [28] - First-year DTC revenue decreased by 5% compared to the prior year, attributed to pricing and marketing challenges [28][30] - Preferred contractor utilization rose by 270 basis points to a 10-year high of 84% [24][28] Market Data and Key Metrics Changes - The real estate channel saw a 22% decline in existing home sales year-over-year, with inventory levels remaining low [44] - Customer retention rates improved by 180 basis points to 75.9% despite a targeted price increase of 11% in 2023 [44] Company Strategy and Development Direction - The company is focused on two growth engines: American Home Shield and the new Frontdoor brand, with significant investments in marketing and branding [26][30] - The launch of the Frontdoor app aims to enhance customer engagement and streamline home maintenance services [41][42] - The company is pivoting its discounting strategy to improve customer acquisition and retention in the DTC channel [27][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term business outlook despite caution regarding the immediate revenue profile of the new Frontdoor brand [40][30] - The company is monitoring inflation, SG&A investments, and other variables as it evaluates the second half of the year [30] - Management noted that while the first quarter results were strong, they will not raise the full-year outlook at this time due to uncertainties in the market [40] Other Important Information - The company plans to return approximately $80 million to shareholders through its existing share repurchase program in 2023 [29] - The anticipated second quarter revenue is projected to be between $505 million and $520 million, reflecting a nearly 15% increase in the renewal channel [30] Q&A Session All Questions and Answers Question: Can you provide insights on consumer engagement with the new app? - Management noted that the app has been downloaded over 165,000 times, with positive feedback on the user experience and video chat feature [41][50] Question: What are the expectations for consumer appetite for subscription services in a potential recession? - Management believes the product offers high value, which could resonate well with consumers even in a recessionary environment [51][52] Question: How is the consolidation of brands under American Home Shield progressing? - Management indicated that the consolidation is ongoing and on track, but it will take time due to existing renewal products [50] Question: What is the outlook for the DTC channel regarding price versus volume? - Management acknowledged challenges in the DTC channel due to previous price increases but is optimistic about early sales trends following a pivot in discounting strategy [67]

Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Frontdoor, Inc. reported Q1 2023 revenue of **$367 million** and net income of **$22 million**, a significant increase from **$2 million** in Q1 2022 [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail revenue recognition, assets, debt, and leases, including a LIBOR to SOFR transition and **$238 million** available for share repurchases Revenue by Customer Acquisition Channel (Q1) | Channel | 2023 Revenue (in millions) | 2022 Revenue (in millions) | | :--- | :--- | :--- | | **Renewals** | $278 | $247 | | **Real estate** | $33 | $45 | | **Direct-to-consumer** | $44 | $46 | | **Other** | $11 | $13 | | **Total** | $367 | $351 | - In March 2023, the company amended its Credit Facilities to replace LIBOR with SOFR as the benchmark interest rate, with the transition effective in March 2023 for Term Loan A and the Revolving Credit Facility, and June 2023 for Term Loan B[53](index=53&type=chunk) - As of March 31, 2023, the company had **$238 million** remaining available for future repurchases under its **$400 million** share repurchase authorization. No shares were repurchased in Q1 2023, while **1.1 million** shares were repurchased for **$40 million** in Q1 2022[68](index=68&type=chunk)[69](index=69&type=chunk) - The effective tax rate for Q1 2023 was **25.2%**, a significant decrease from **51.1%** in Q1 2022, primarily due to impacts of share-based awards and state income taxes on limited pre-tax income in the prior year[45](index=45&type=chunk) Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | | :--- | :--- | :--- | | **Revenue** | $367 | $351 | | **Gross Profit** | $170 | $144 | | **Income before Income Taxes** | $29 | $3 | | **Net Income** | $22 | $2 | | **Diluted EPS** | $0.27 | $0.02 | Condensed Consolidated Statements of Financial Position | Metric | As of March 31, 2023 (in millions) | As of December 31, 2022 (in millions) | | :--- | :--- | :--- | | **Total Current Assets** | $381 | $330 | | **Total Assets** | $1,128 | $1,082 | | **Total Current Liabilities** | $396 | $364 | | **Total Liabilities** | $1,045 | $1,021 | | **Total Shareholders' Equity** | $83 | $61 | Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2023 (in millions) | Three Months Ended March 31, 2022 (in millions) | | :--- | :--- | :--- | | **Net Cash Provided from Operating Activities** | $60 | $47 | | **Net Cash Used for Investing Activities** | ($8) | ($8) | | **Net Cash Used for Financing Activities** | ($7) | ($47) | | **Cash Increase (Decrease) During the Period** | $45 | ($8) | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes **4%** revenue growth to renewals, improving gross profit to **46%** and Adjusted EBITDA to **$54 million** [Key Factors and Trends](index=19&type=section&id=Key%20Factors%20and%20Trends) Macroeconomic conditions and a challenging housing market constrained demand, while favorable Q1 2023 weather positively impacted claims costs - A challenging home seller's market, with low inventory and rising interest rates, constrained demand for home service plans in the first-year real estate channel[90](index=90&type=chunk) - Contractors continued to face inflation in labor, fuel, and parts costs. Frontdoor is mitigating these impacts by increasing direct sourcing of parts and utilizing lower-cost preferred contractors[90](index=90&type=chunk) - Favorable weather trends in Q1 2023 compared to Q1 2022 had a positive impact on contract claims costs[86](index=86&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q1 2023 revenue increased **4%** to **$367 million** due to renewals, with gross profit up **18%** and net income surging to **$22 million** Revenue Channel Performance (Q1 2023 vs Q1 2022) | Channel | 2023 Revenue (in millions) | 2022 Revenue (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | **Renewals** | $278 | $247 | +13% | | **Real estate** | $33 | $45 | -28% | | **Direct-to-consumer** | $44 | $46 | -5% | | **Total** | $367 | $351 | +4% | - Cost of services rendered decreased from **$207 million** to **$197 million**, primarily due to a **$6 million** favorable adjustment for prior period claims (vs. a **$9 million** unfavorable adjustment in Q1 2022) and a **$6 million** favorable weather impact[106](index=106&type=chunk) Net Income to Adjusted EBITDA Reconciliation (Q1) | Metric | 2023 (in millions) | 2022 (in millions) | | :--- | :--- | :--- | | **Net Income** | $22 | $2 | | Depreciation and amortization | $9 | $8 | | Restructuring charges | $1 | $0 | | Provision for income taxes | $7 | $2 | | Non-cash stock-based compensation | $5 | $6 | | Interest expense | $10 | $7 | | **Adjusted EBITDA** | $54 | $25 | - The total number of home service plans decreased by **4%** to **2.09 million** as of March 31, 2023, from **2.19 million** a year prior, impacted by declines in new real estate and direct-to-consumer plans. However, the customer retention rate improved to **75.9%** from **74.1%**[105](index=105&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity strengthened with cash and cash equivalents rising to **$337 million**, net cash from operations improving to **$60 million** - As of March 31, 2023, the company had cash and cash equivalents of **$337 million** and an available borrowing capacity of **$248 million** under its Revolving Credit Facility[119](index=119&type=chunk) Free Cash Flow (Q1) | Metric | 2023 (in millions) | 2022 (in millions) | | :--- | :--- | :--- | | **Net cash provided from operating activities** | $60 | $47 | | Property additions | ($8) | ($9) | | **Free Cash Flow** | $52 | $39 | - Net cash used in financing activities was **$7 million** in Q1 2023, compared to **$47 million** in Q1 2022, primarily because the company did not repurchase any common stock in Q1 2023, unlike the **$40 million** spent in the prior-year period[135](index=135&type=chunk)[136](index=136&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risks from the 2022 Annual Report, with primary exposure to interest rate changes managed - There have been no material changes to the market risk associated with debt obligations from the risks described in the 2022 Form 10-K[139](index=139&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls - Based on an evaluation as of March 31, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[140](index=140&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[141](index=141&type=chunk) Part II. Other Information [Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings information is in Note 7, with management expecting no material adverse effect from pending actions - Information regarding legal proceedings is located in Note 7 to the condensed consolidated financial statements[142](index=142&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the 2022 Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the 2022 Form 10-K during the three months ended March 31, 2023[143](index=143&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No common stock repurchases occurred in Q1 2023, with **$238 million** remaining available under authorization - The company did not repurchase any shares during the three months ended March 31, 2023[144](index=144&type=chunk) - As of March 31, 2023, **$238 million** remained available for future repurchases under the company's **$400 million** share repurchase program, which runs through September 3, 2024[144](index=144&type=chunk) [Exhibits](index=30&type=section&id=Item%206.%20Exhibits) Lists filed exhibits, including CEO/CFO certifications and various agreements, notably Amendment No. 1 to the Credit Agreement

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________________________________________ FORM 10-K ________________________________________________ For the transition period from to Commission file number 001-38617 ________________________________________________ Frontdoor, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) Delaware 82-3871179 3400 Players Club Parkway, M ...

frontdoor. Third-Quarter 2022 Earnings Webcast November 3, 2022 Today's Speakers Bill Cobb Chairman & Chief Executive Officer Brian Turcotte Senior Vice President & Chief Financial Officer Matt Davis Vice President Investor Relations & Treasurer 2 Forward Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, projected fu ...

Financial Data and Key Metrics Changes - Third quarter revenue increased by 3% year-over-year to $484 million, driven by a 5% increase from pricing and changes in customer product mix, which offset a 3% decline in customer volume [22][23] - Gross profit declined by 17% year-over-year to $210 million, with a gross profit margin of 43%, primarily due to a $58 million increase in contract claims costs driven by inflationary pressures [25][26] - Net income decreased by $48 million to $28 million, influenced by the gross profit decline and a $14 million goodwill and intangibles impairment charge [26][28] - Adjusted net income decreased by $32 million to $46 million, with adjusted EBITDA at $79 million, down $42 million from the prior year [28] Business Line Data and Key Metrics Changes - Revenue from customer renewals increased by 8% year-over-year due to improved price realization and growth in renewed Home Service Plans [22] - First-year real estate revenue decreased by 30% year-over-year, reflecting challenges in the seller's market and low home inventory levels [23] - First-year DTC revenue increased by 8% year-over-year, with 11% growth from improved price realization, partially offset by a 3% decline in volume [24] Market Data and Key Metrics Changes - Existing home sales declined nearly 24% year-over-year, with inventory increasing to 3.2 months of supply from 2.4 months in the prior year [16] - The company is monitoring the level of existing home sales closely as a significant decline could shrink the potential pool for Home Service Plan purchases [18] Company Strategy and Development Direction - The company is focused on rebuilding its core Home Service Plan business, improving execution, and reducing SG&A expenses, with a 7% workforce reduction implemented [11][12] - A pricing strategy targeting a 12% to 13% price increase for 2022 is in place, with an 8% realized price increase so far [20][21] - The company is working on business transformation initiatives and enhancing customer experience through consumer segmentation studies [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging macroeconomic environment but sees signs of improvement as they close out 2022 [21] - The company expects fourth quarter revenue to be between $326 million and $336 million, reflecting a mid-single-digit increase in renewal channel revenue [39] - Full year revenue is projected to be between $1.65 billion and $1.66 billion, with a nearly 30% decrease in the real estate channel [40] Other Important Information - The company has raised its full year adjusted EBITDA range to between $185 million and $195 million, reflecting ongoing inflationary pressures [45] - Free cash flow is projected to be approximately $85 million for the year, with a cash position of $244 million at the end of the third quarter [38] Q&A Session Summary Question: Pricing strategy and its benefits - Management confirmed that the realized price increase for 2022 will be 8% and discussed the complexities of revenue recognition [51] Question: Contract claims costs and inflation - Management indicated that inflation from contractors is stabilizing, with the inflation rate on a service request basis remaining consistent with the previous quarter [53][54] Question: 2023 outlook for renewals and DTC channel - Management is not ready to discuss 2023 but will provide more information in March [56] Question: On-demand offering and SG&A reductions - Management expressed optimism about the on-demand business and detailed the areas of SG&A reductions, including workforce optimization and marketing spend [60][62] Question: Lower service request volume - Management attributed lower service request volume to favorable HVAC conditions and a decline in pandemic-related trades [75] Question: Customer satisfaction trends - Management reported stable customer satisfaction metrics and improvements in service operations [88] Question: Home Service Plans in a buyer's market - Management noted that they are not yet in a position to quantify the potential uplift from the shift to a buyer's market [92] Question: Revamped marketing strategy - Management outlined a comprehensive marketing strategy focusing on renewals, conversion, and targeted promotions to drive better outcomes [100]

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, 2022 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 _______________________________ ...

Frontdoor, Inc. (NASDAQ:FTDR) Q2 2022 Earnings Conference Call August 4, 2022 8:30 AM ET Company Participants Matt Davis - Vice President, Investor Relations and Treasurer Bill Cobb - Chairman and CEO Brian Turcotte - Chief Financial Officer Conference Call Participants Ian Zaffino - Oppenheimer Youssef Squali - Truist Securities Justin Patterson - KeyBanc Eric Sheridan - Goldman Sachs Brian Fitzgerald - Wells Fargo Operator Ladies and gentlemen, welcome to Frontdoor's Second Quarter 2022 Earnings Call. [Op ...