Frontdoor(US:FTDR)2021-10-28 16:00Financial Performance - For the three months ended September 30, 2021, the company generated revenue of $471 million, net income of $76 million, and Adjusted EBITDA of $122 million, compared to $440 million, $49 million, and $91 million for the same period in 2020[100]. - For the nine months ended September 30, 2021, total operating revenue was $1,263 million, with 69% derived from existing customer renewals, 16% from new home service plan sales related to real estate transactions, and 12% from direct-to-consumer sales[101]. - Adjusted EBITDA for the nine months ended September 30, 2021, was $272 million, up from $238 million in the same period of 2020[100]. - Revenue for the three months ended September 30, 2021, was $471 million, a 7% increase from $440 million in the same period of 2020[125]. - Revenue for the nine months ended September 30, 2021, reached $1,263 million, reflecting a 10% increase compared to $1,151 million in 2020[127]. - Renewal revenue for the three months ended September 30, 2021, was $328 million, an 8% increase from $303 million in 2020[126]. - Net income for the three months ended September 30, 2021, was $76 million, an increase of 55.1% compared to $49 million for the same period in 2020[146]. - Adjusted EBITDA for the three months ended September 30, 2021, was $122 million, up 34.1% from $91 million in 2020, driven by a $24 million increase in revenue[148]. Customer Metrics - The company had over two million active home service plans across all 50 states and the District of Columbia as of September 30, 2021[99]. - The number of home service plans as of September 30, 2021, was 2.23 million, with a customer retention rate of 74%, down from 76% in 2020[130]. - The company reported a customer retention rate calculated as the ratio of ending home service plans to the sum of beginning home service plans, new sales, and acquired accounts[120]. Market Conditions - Macroeconomic conditions, including home sales and consumer confidence, continue to affect customer spending patterns and overall financial performance[106]. - The company experienced increased appliance claims due to higher usage driven by customers spending more time at home during the COVID-19 pandemic, impacting costs and customer retention[109]. Operating Expenses - The company faces inflationary pressures on operating expenses, including contractor costs and employee wages, which may impact profitability[116]. - Cost of services rendered for the three months ended September 30, 2021, decreased to $217 million from $225 million in 2020[131]. - Selling and administrative expenses for the three months ended September 30, 2021, were $138 million, up from $129 million in 2020[134]. - Interest expense for the three months ended September 30, 2021, was $7 million, a 50% decrease from $14 million in 2020[142]. Debt and Financing - Loss on extinguishment of debt for the nine months ended September 30, 2021, was $31 million, primarily related to the redemption of debt[144]. - The company recorded a loss on extinguishment of debt of $30 million in the second quarter of 2021 due to the redemption of $634 million of the Prior Term Loan Facility[161]. - Net cash used for financing activities was $407 million for the nine months ended September 30, 2021, compared to $6 million in 2020[175]. - The company had $248 million of available borrowing capacity under the Amended Revolving Credit Facility as of September 30, 2021[156]. - As of September 30, 2021, future scheduled long-term debt payments total $636 million, with estimated payments for 2022 through 2026 being $4 million, $17 million, $17 million, $17 million, $17 million, and $205 million respectively[179]. - Estimated future interest payments total $118 million as of September 30, 2021, with annual estimates for 2022 through 2026 being $6 million, $24 million, $24 million, $23 million, $19 million, and $10 million respectively[179]. - The estimated debt balance at the end of each fiscal year from 2021 through 2026 is projected to decrease from $632 million to $359 million[179]. - The weighted-average interest rate on estimated debt balances is expected to range from 2.2% to 4.0% from 2021 to 2026[179]. - The company is exposed to market risks including interest rate changes, which are managed through a combination of variable-rate and fixed-rate debt[183]. Cash Flow and Equity - Cash and cash equivalents totaled $309 million as of September 30, 2021, down from $597 million as of December 31, 2020[156]. - Net cash provided from operating activities was $142 million for the nine months ended September 30, 2021, compared to $154 million for the same period in 2020[168]. - Capital expenditures for the nine months ended September 30, 2021, were $23 million, with expectations for full-year expenditures to be approximately $30 million to $35 million[172]. - The company announced a three-year repurchase authorization of up to $400 million of outstanding shares, with $25 million spent on repurchases as of September 30, 2021[162]. - Total shareholders' equity increased to a surplus of $62 million as of September 30, 2021, compared to a deficit of $61 million as of December 31, 2020, primarily driven by $122 million of net income generated during the nine months ended September 30, 2021[180]. - Cash and cash equivalents decreased during the nine months ended September 30, 2021, primarily due to debt payments and stock repurchases, offset by cash provided from operating activities[181]. - The company repurchased 542,227 shares at an average price of $46.11 per share, totaling an aggregate cost of $25 million under a three-year repurchase authorization of up to $400 million[191]. Revenue Sources - The company’s revenue is primarily generated from annual home service plan agreements, with revenue recognized over time based on the costs expected to be incurred[115]. - The increase in direct-to-consumer revenue for the nine months ended September 30, 2021, was driven by improved price realization and growth in first-year home service plans[128]. - The increase in other revenue was attributed to growth in ProConnect and Streem, contributing to overall revenue growth[126]. Deferred Revenue - Deferred revenue decreased during the nine months ended September 30, 2021, reflecting a decline in first-year real estate home service plans and a shift in customer payment mix[181]. - The company has no significant off-balance sheet arrangements as of September 30, 2021[180].