Frontdoor(US:FTDR)2022-05-05 16:00Financial Performance - For the three months ended March 31, 2022, the company generated revenue of $351 million, net income of $2 million, and Adjusted EBITDA of $25 million, compared to $329 million, $5 million, and $36 million for the same period in 2021[86]. - Revenue for the three months ended March 31, 2022, was $351 million, a 7% increase from $329 million in the same period of 2021[111]. - Net income decreased by 69% to $2 million compared to $5 million in the prior year[122]. - Adjusted EBITDA was $25 million, down from $36 million, reflecting increased contract claims costs and higher operating expenses[123]. - Free cash flow for the three months ended March 31, 2022, was $39 million, down from $45 million in the same period of 2021, indicating a decline of approximately 13.3%[144]. Revenue Sources - 70% of the total operating revenue for Q1 2022 was derived from existing customer renewals, while 13% came from new home service plan sales related to real estate transactions and 13% from direct-to-consumer sales[87]. - Renewal revenue increased by $23 million (10%) to $247 million, while real estate revenue decreased by $11 million (20%) to $45 million[111]. Customer Metrics - The company had 2.2 million active home service plans across all 50 states and the District of Columbia as of March 31, 2022[85]. - The number of home service plans decreased by 3% to 2.19 million, and the customer retention rate declined to 74.1% from 75.1%[114]. - The company reported a customer retention rate calculated as the ratio of ending home service plans to the sum of beginning plans, new sales, and acquired accounts[106]. Cost and Expenses - Cost of services rendered rose to $207 million, an increase of 14% from $181 million, primarily due to inflationary pressures and contract claims costs[116]. - Selling and administrative expenses increased to $125 million, up 6% from $118 million, driven by higher sales and marketing costs[117]. Cash Flow and Liquidity - Cash and cash equivalents totaled $255 million as of March 31, 2022, down from $262 million at the end of 2021[127]. - Available liquidity was $340 million, consisting of $92 million in unrestricted cash and $248 million in borrowing capacity[127]. - Net cash provided from operating activities was $47 million for the three months ended March 31, 2022, compared to $52 million for the same period in 2021, reflecting a decrease of approximately 9.6%[137]. - Net cash used for investing activities was $8 million in Q1 2022, slightly higher than $7 million in Q1 2021[139]. - Net cash used for financing activities decreased significantly to $47 million in Q1 2022 from $105 million in Q1 2021, primarily due to reduced debt repayments[141]. Shareholder Actions - The company has repurchased 3,643,468 shares at an aggregate cost of $143 million under a three-year repurchase authorization of up to $400 million[130]. - Total shareholders' equity showed a deficit of $20 million as of March 31, 2022, compared to a surplus of $2 million as of December 31, 2021, primarily due to stock repurchases[146]. - The company repurchased a total of 3,643,468 outstanding shares at an aggregate cost of $143 million under its share repurchase program as of March 31, 2022[156]. Market Conditions - The ongoing COVID-19 pandemic has created uncertainty regarding its impact on the company's financial performance, with increased service-related costs expected due to higher home system usage[91]. - The company continues to monitor macroeconomic conditions, including inflation and labor availability, which may adversely affect demand for its services[89]. - The company is exposed to macroeconomic risks including inflation and global supply chain challenges, which could adversely impact future operations[147]. Operational Challenges - The company experienced challenges in customer retention due to industry-wide supply chain issues and inflation affecting contractor costs[95]. - Seasonal fluctuations significantly impact the company's revenue, with approximately 21% of revenue recognized in Q1 2021, driven by increased service requests during the pandemic[92]. - Deferred revenue increased during Q1 2022, reflecting a net contract liability related to customer revenue recognition[146]. Performance Metrics - Adjusted EBITDA margin is a key performance metric, defined as Adjusted EBITDA divided by revenue, which helps in comparing operating performance across periods[104]. - There were no material changes in internal control over financial reporting during the most recently completed fiscal quarter[150].