Frontdoor(US:FTDR)2021-02-22 16:00Financial Performance - For the year ended December 31, 2020, the company generated revenue of $1,474 million, net income of $112 million, and Adjusted EBITDA of $270 million[25]. - The company experienced an 8% annual revenue growth from 2019 to 2020, despite the adverse impact of the COVID-19 pandemic on the broader economy[36]. - The company generated net cash from operating activities of $207 million for the year ended December 31, 2020, compared to $200 million in 2019[37]. - The company generated $636 million, $610 million, and $578 million in revenue from the real estate channel for the years ended December 31, 2020, 2019, and 2018, respectively, with a renewal rate of 27% after the first contract year[50]. - In 2020, the direct-to-consumer channel generated $822 million, $746 million, and $674 million in revenue for the years ended December 31, 2020, 2019, and 2018, respectively, with a renewal rate of 76% after the first contract year[52]. Customer Metrics - As of December 31, 2020, the company had over 2 million active home service plans across all 50 states and the District of Columbia[22]. - The company had 2.2 million customers as of December 31, 2020, maintaining a customer retention rate of 76%, up from 73% in 2010[53][54]. - Approximately 69% of the company's revenue in 2020 was recurring, driven by high customer retention rates[23]. - Approximately 72% of the company's customers are on a monthly auto-pay program, which historically leads to higher renewal rates[36]. - Approximately 1.4 million homes sold in 2020 included a home service plan out of approximately 5.6 million homes sold[50]. Operational Insights - The company operates within a $400 billion U.S. home services industry, with the home service plan category representing approximately $3 billion[26]. - The company had approximately 17,500 pre-qualified professional contractor firms in its nationwide network, with 82% of service requests completed by preferred contractors[24]. - The contractor network consists of approximately 17,500 pre-qualified professional contractor firms employing an estimated 62,000 technicians, with 95% planning to maintain or expand their relationship with the company[55]. - The company has implemented dynamic pricing for the majority of its renewal and direct-to-consumer customers, aiming to attract previously priced-out customers[43]. - The company anticipates pursuing selective acquisitions to expand service capabilities in underserved regions and enhance technological capabilities[48]. Technology and Innovation - The company’s technology platform, including the Streem technology, enhances service efficiency and customer experience, particularly during the COVID-19 pandemic[32]. - The company plans to leverage its Streem technology platform to enhance diagnostics and reduce repair times, potentially creating a new revenue channel[42]. - In 2020, approximately 40% of direct-to-consumer sales were entered online, and over 50% of service requests were made online or through an interactive voice response system[59]. Market and Economic Factors - The company is exposed to market risks related to discretionary consumer spending, labor wages, and material costs, which could impact future operations[266]. - The company's operations are significantly affected by seasonality, with extreme temperatures leading to increased service requests and costs, while mild temperatures can reduce claim frequency[67]. - Direct supplier spend accounted for approximately 20% of the cost of services rendered in 2020, with a focus on improving supplier relationships due to increased demand during the COVID-19 pandemic[56]. - The company has experienced variations in service requests due to the COVID-19 pandemic, particularly in appliance and plumbing trades, as customers spent more time at home[67]. Debt and Financial Management - As of December 31, 2020, the company had a total debt of $700 million, with $350 million at a fixed interest rate of 3.1% and $286 million at a variable rate averaging 5.1%[272]. - A one percentage point increase in interest rates would result in an approximate $3 million change in annual interest expense on both the Term Loan Facility and the Revolving Credit Facility[270]. - The company entered into an interest rate swap agreement with a notional amount of $350 million, fixing the interest rate at 3.0865% until August 2025[269]. - The average rate paid on interest rate swaps during the year ended December 31, 2020, was 3.1%, while the average rate received was 0.6%[272]. Regulatory and Compliance Risks - Regulatory compliance increases operating costs and could lead to fines or loss of licenses, adversely affecting the company's financial position[70]. - The company maintains insurance coverage deemed appropriate for its business, including workers' compensation and property insurance[69]. - The company holds various trademarks and service marks, including Frontdoor and American Home Shield, and plans to continue investing in research and development to enhance its product offerings[68].