Summary of Frontdoor FY Conference Call (November 18, 2025) Company Overview - **Company**: Frontdoor (NasdaqGS:FTDR) - **Industry**: Home Warranty Services - **Business Model**: Frontdoor operates a recurring revenue model through home warranties, covering 29 systems and appliances with over 2 million members and 17,000 contractors. The service is initiated via a call or app, with a trade service fee charged for repairs or replacements [9][10]. Key Points Market Dynamics - **Total Addressable Market (TAM)**: The home services market is approximately $500 billion, with an addressable market for home warranties estimated at 15 million homes in the U.S. Currently, about 5 million home warranties are sold, with Frontdoor holding a 40% market share [11][12]. - **Impact of COVID-19**: The pandemic shifted the market dynamics, affecting the traditional real estate channel, which has seen a decline in transactions [11][12]. Real Estate Channel - **Current Trends**: Existing home sales are at a cyclical trough, with inventory increasing but still low. Frontdoor targets about 200,000-210,000 units this year, down from nearly 500,000 six years ago [13][15]. - **Growth Strategy**: The company is enhancing its sales force and introducing promotional pricing to attract real estate agents and customers [16][17]. Direct-to-Consumer (DTC) Channel - **Performance**: The DTC business has shown strong growth, particularly among millennials and Hispanic demographics. The advertising campaign has improved brand relevance and customer engagement [19][20]. - **Future Outlook**: The company anticipates positive growth in customer accounts by 2026, driven by both DTC and real estate channels [23][25]. Retention and Renewal Rates - **Improvement in Retention**: Retention rates have improved by 300 basis points due to better contractor performance and initiatives like autopay and auto-renewal [31][34]. - **Operational Execution**: Focus on member experience and operational discipline has been key to maintaining retention rates and managing cancellations [35][36]. Revenue Growth and Margins - **Revenue Projections**: The company expects 3% organic revenue growth this year, with further expansion anticipated in 2026 and 2027 [40][41]. - **Margin Management**: Frontdoor has achieved record margins through dynamic pricing strategies and strong contractor relationships, managing inflation effectively [65][66]. Non-Warranty Business Expansion - **New Offerings**: The company is expanding into non-warranty services, starting with HVAC and planning to include appliances, roofs, and water heaters by 2026. This strategy aims to increase share of wallet among existing members [45][50]. - **Contractor Relationships**: Strong relationships with contractors allow for competitive pricing and improved customer satisfaction [58][59]. Capital Allocation and M&A Strategy - **Focus on Growth**: The company aims to maintain a strong balance sheet while considering share repurchases and potential M&A opportunities, particularly focusing on integrating the recently acquired 2-10 business [83][89]. AI and Technology Integration - **AI Utilization**: Frontdoor is leveraging AI to enhance service request processing and sales interactions, improving efficiency and customer experience [95][106]. Additional Insights - **Market Recovery**: A recovery in the real estate market could positively impact revenue but may also introduce inflationary pressures [73][74]. - **Long-term Strategy**: The company is focused on sustainable growth through operational excellence, customer retention, and strategic pricing [72][71].

Financial Highlights - Q3 2025 revenue reached $618 million, a 14% increase year-over-year[17, 43] - Gross profit for Q3 2025 was $353 million, with a gross profit margin of 57%[17, 46] - Net income for Q3 2025 increased by 5% to $106 million[17, 49] - Adjusted EBITDA for Q3 2025 increased by 18% to $195 million[17, 49] - Year-to-date free cash flow increased by 64%[55] Business Performance - Organic direct-to-consumer member count grew by 8% compared to the prior year[17] - Real estate member count increased sequentially for the first time in five years[17] - The company repurchased $215 million of shares year-to-date through October 31[17, 59] - Retention rates are near all-time highs at 79.4%[32] Outlook - Q4 2025 revenue is projected to be between $415 million and $425 million[61] - Q4 2025 adjusted EBITDA is projected to be between $50 million and $55 million[61]

Core Viewpoint - Frontdoor, Inc. has appointed Jason Bailey as the new Senior Vice President and Chief Financial Officer, succeeding Jessica Ross, who will remain as an advisor until the end of 2025 to ensure a smooth transition [1]. Company Summary - Jason Bailey has been appointed as the Senior Vice President and Chief Financial Officer of Frontdoor, Inc. [1] - Jessica Ross, the former CFO, resigned effective November 10, 2025, but will continue to assist the company until December 31, 2025 [1].

Core Insights - Frontdoor, Inc. celebrates its Chief People Officer, Meredith Diagostino, being recognized as one of Memphis Business Journal's 2025 Women Who Lead, highlighting her positive impact in the Memphis metro area [1] Company Initiatives - Diagostino has played a crucial role in developing and implementing various talent initiatives since joining Frontdoor in 2018, following the company's IPO [1]

Core Insights - Frontdoor reported strong Q2 2025 results with non-GAAP EPS of $1.63, exceeding analyst expectations of $1.44, and GAAP revenue of $617 million, surpassing the estimate of $602.6 million [1][2] - Year-over-year, both profit and sales increased at a double-digit pace, with GAAP revenue rising 14% and net income growing 21% to $111 million [1][2][8] - The company achieved a record gross margin of 58%, up 1.5 percentage points from the previous year, supported by effective cost management and favorable weather conditions [2][7] Financial Performance - Q2 2025 diluted EPS (Non-GAAP) was $1.63, a 28% increase from $1.27 in Q2 2024 [2] - Revenue for Q2 2025 reached $617 million, a 14% increase from $542 million in Q2 2024 [2] - Adjusted EBITDA for the quarter was $199 million, reflecting a 26% increase from $158 million in the prior year [2] Business Operations - Frontdoor provides home warranties and services through brands like American Home Shield and 2-10 Home Buyers Warranty, focusing on household systems and appliances [3] - The company’s strategy includes maintaining leadership in the home warranty sector, growing its renewing customer base, and expanding into non-warranty offerings [4] - The fastest-growing segment, "Other Revenue," increased by 63%, driven by new HVAC programs and smart water shutoff solutions [6] Customer Metrics - The total number of home warranty contracts rose to 2.09 million, a 7% increase from the previous year, with customer retention improving to 79.7% [8] - Direct-to-consumer first-year sales increased by 12%, indicating strong momentum from marketing efforts [5] Future Outlook - Management raised its full-year 2025 revenue guidance to $2.055 to $2.075 billion, with expectations for gross profit margin between 55-56% and adjusted EBITDA of $530-550 million [9] - For Q3 2025, revenue is anticipated to be between $605-615 million, with adjusted EBITDA of $180-190 million [9] - The company plans to return up to $250 million to shareholders through share repurchases, increasing its buyback target [9]

Core Insights - Frontdoor (FTDR) reported $617 million in revenue for Q2 2025, a year-over-year increase of 13.8% and exceeding the Zacks Consensus Estimate of $602.1 million by 2.48% [1] - The company achieved an EPS of $1.63, up from $1.27 a year ago, surpassing the consensus EPS estimate of $1.44 by 13.19% [1] Revenue Performance - Revenue from Renewals was $461 million, slightly above the estimated $458.9 million, reflecting a 9.5% increase year-over-year [4] - Revenue from Other channels reached $56 million, significantly exceeding the estimated $47.45 million, marking a 60% increase compared to the previous year [4] - Direct-to-consumer (First-Year) revenue was $56 million, aligning with the average estimate of $55 million, representing a 12% year-over-year growth [4] - Revenue from Real estate (First-Year) was $44 million, surpassing the estimated $41.4 million, showing a 22.2% increase year-over-year [4] Stock Performance - Over the past month, Frontdoor's shares returned -0.4%, while the Zacks S&P 500 composite increased by 1% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Revenue increased 14% year over year to $617 million, with net income growing 21% to $111 million and adjusted EBITDA rising 26% to $199 million [4][22][26] - For the full year, revenues grew 13% to over $1 billion, net income increased 17% to $148 million, and adjusted EBITDA grew 31% to $300 million [22] Business Line Data and Key Metrics Changes - Direct to consumer (DTC) revenue grew 12%, supported by organic volume growth and the addition of the two ten acquisition [22] - Real estate revenue increased 21%, primarily due to the two ten acquisition [22] - Other revenue grew 63%, driven by success in the new HVAC and Moen programs, as well as the addition of two ten's new home structural business [22] Market Data and Key Metrics Changes - The real estate market remains challenging, with home sales slipping 2.7% month over month to a seasonally adjusted annual rate of 3.93 million, among the lowest in thirty years [8] - The inventory of unsold existing homes rose 18% year over year to 1.53 million homes, indicating a potential transition to a buyer's market [9] Company Strategy and Development Direction - The company focuses on three strategic priorities: growing and retaining home warranty members, scaling revenue from non-warranty business, and optimizing the integration of the two ten Homebuyers Warranty [5][6][18] - The new HVAC program is expected to generate nearly 40% higher revenue than last year, with an increased full-year outlook of $120 million [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment has improved, leading to better-than-expected results in various areas, including gross profit margin and revenue conversion [26][50] - The company is optimistic about the potential for increased home warranty attach rates as the real estate market shows signs of improvement [64] Other Important Information - The company repurchased $150 million worth of shares year to date through July 31, with an increased full-year share repurchase target of approximately $250 million [29][31] - Free cash flow for the first half of the year was $237 million, a 44% increase versus the prior year period [30] Q&A Session Summary Question: What drove the increase in two ten cost synergies from $10 million to $15 million for 2025? - Management indicated that efficiencies were found across all functions, leading to the increase, and confirmed expectations of $30 million in run rate synergies by 2028 [40] Question: Is your guidance all for HVAC or does that include water heaters? - The guidance is currently focused solely on HVAC, with ongoing tests for potential future offerings [41] Question: What contributed to the strong performance in the real estate channel this quarter? - Management attributed the performance to seasonal investments and effective integration of the two ten acquisition [46][48] Question: Are you still expecting $50 million in headwinds for the back half of the year? - Management noted that the macro environment has improved, leading to better-than-anticipated results, and adjusted expectations for the back half of the year [49][50] Question: How is the two ten structural warranty sales process performing? - Management expressed satisfaction with the sales process and noted that the transition has gone smoothly, with good momentum in sales [59][60]

Financial Highlights - Q2 2025 revenue reached $617 million, a 14% increase compared to the prior year period[17, 55] - Gross profit margin for Q2 2025 was 58%, up 130 bps from the prior year period[17, 62] - Net income for Q2 2025 was $111 million, a 21% increase compared to the prior year period[17, 55] - Adjusted EBITDA for Q2 2025 was $199 million, a 26% increase compared to the prior year period[17, 55] - First half of 2025 revenue was $1.043 billion, a 13% increase compared to the prior year period[55] - First half of 2025 adjusted EBITDA was $300 million, a 31% increase compared to the prior year period[55] - The company has $562 million in total cash, including $377 million in unrestricted cash and $185 million in restricted cash[71] Business Performance - Organic direct-to-consumer home warranties grew by 9%[18, 31] - Renewals grew 9% due to the addition of 2-10 and higher price[59] - Real estate increased 21% due to the addition of 2-10[59] - DTC grew 12% as higher volumes were partially offset by lower price[59] - Other revenue grew 63% due to the new HVAC and Moen programs, as well as the addition of 2-10[59] - The company repurchased $150 million of shares year-to-date through July 31[18, 79] Strategic Initiatives - The company is integrating technology advancements into the member experience, with 14% of the member base having downloaded the app in only 8 months[36] - The company is increasing expected cost synergies from the 2-10 acquisition to approximately $15 million in 2025, up from $10 million+[48] - The company is raising its 2025 share repurchase target from $200 million+ to approximately $250 million[79] Outlook - The company expects full year 2025 revenue to be in the range of $2.055 billion to $2.075 billion[80] - The company expects full year 2025 adjusted EBITDA to be in the range of $530 million to $550 million[80]

Summary of Frontdoor (FTDR) FY Conference Call - May 13, 2025 Company Overview - Frontdoor is the only publicly traded home warranty company, operating on a subscription-based model that protects homeowners from inevitable breakdowns in their homes [4][5] - The company covers 29 systems and appliances, including HVAC equipment, and offers three service plans [5] - Frontdoor has a member base of over 2,100,000 and aims to leverage this for non-warranty initiatives, including partnerships and new service programs [6] Core Business and Financial Performance - The company has seen a record year of profitability and expects continued growth in 2025, having stabilized its core home warranty business [9][12] - Frontdoor reported $117 million in free cash flow in Q1, with projected revenues exceeding $2 billion [12] - The company has diversified its revenue streams and improved customer retention rates, achieving record levels [11] Industry Insights - The home warranty industry has been stagnant, with a total addressable market (TAM) of 15 million home service plans in the U.S. [14] - The company aims to increase market penetration through innovative marketing and improved value propositions [17][18] - Frontdoor has introduced a video chat feature that allows homeowners to troubleshoot issues, resulting in 17% of users resolving problems without needing a service call [16][50] Non-Warranty Initiatives - Frontdoor has launched a new HVAC program projected to become a $100 million business by 2025, offering members significant discounts on new equipment [20][22] - The company is expanding its non-warranty services to include water heaters and roof repairs [20] Macro Environment and Tariffs - In Q1, Frontdoor experienced zero inflation and no immediate impact from tariffs, although future price increases from suppliers are anticipated [26][28] - The company has built protections into its guidance to account for potential tariff impacts and inflation [32][33] Customer Acquisition Channels - The real estate market has faced challenges, with a forecast of 4 million homes sold in 2025, down from 6 million in previous years [37][38] - Direct-to-consumer (DTC) channels have shown organic growth, with a 4% increase in Q1 and a total growth of 15% including the acquisition of two ten [41][42] Pricing Strategy - The average price of a home service plan has increased from over $700 to nearly $900, with a 4% price increase planned for the year [60] - Frontdoor employs a dynamic pricing strategy that allows for tailored pricing based on individual customer circumstances, contributing to strong retention rates [62][64] Acquisition of Two Ten - The acquisition of Two Ten is expected to yield $10 million in synergies in the first year, with potential for $30 million in the coming years [56] - This acquisition enhances Frontdoor's access to new markets and customer bases, particularly in the home structural warranty sector [54] Retention and Member Experience - The company has achieved an all-time high retention rate, driven by improved contractor relationships and a focus on member experience [57] - Approximately 84% of members are on monthly auto-pay, which supports renewal rates [59] Capital Allocation Strategy - Frontdoor maintains a strong financial profile with a leverage ratio of 1.9, allowing for aggressive share repurchases and continued investment in growth [73][75] - The company has increased its share repurchase program from $180 million to over $200 million [73] Future Outlook - Frontdoor is focused on leveraging its core business while expanding into non-warranty services, aiming for a more diversified revenue stream [85][86] - The management expresses confidence in the resilience of its business model and the potential for future growth through innovation and partnerships [85][86]

Financial Data and Key Metrics Changes - Revenue increased by 13% to $426 million, net income grew by 9% to $37 million, and adjusted EBITDA rose by 41% to $100 million [4][18][19] - Member count grew by 7% to 2.1 million members [5] - Gross profit increased by 21% to $235 million, with a gross profit margin improvement of 380 basis points to a record 55% [20] Business Line Data and Key Metrics Changes - Direct-to-Consumer (DTC) channel member count increased by 15% to 310,000, with organic growth of 4% [7][10] - Real estate channel faced challenges, with a 6% decline in first-year organic member count [11][12] - Non-warranty revenue is growing, with expectations for HVAC program revenue at $105 million and new home structural warranty revenue at $44 million for 2025 [15][16] Market Data and Key Metrics Changes - Existing home sales decreased by 5.9% to an annual rate of 4.02 million, while the median sales price for existing homes rose to $403,700 [11] - The 30-year mortgage rate averaged nearly 7% as of mid-April, contributing to consumer market challenges [11] Company Strategy and Development Direction - The company’s strategic priorities include growing the member base, scaling revenue from non-warranty business, and optimizing the integration of the 2-10 Homebuyers Warranty [5][6] - The marketing campaign and relaunch of the American Home Shield brand are yielding positive results, particularly among millennials [9] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic challenges, including high interest rates and declining consumer confidence [5][29] - The company raised its full-year revenue outlook by $20 million and adjusted EBITDA by nearly $50 million, reflecting strong operational performance [18][34] Other Important Information - The company reported a record free cash flow of $117 million for the first quarter, with a free cash flow yield of 9% [27] - The company plans to increase share repurchases to at least $200 million for 2025, indicating confidence in its valuation [31] Q&A Session Summary Question: Impact of tariffs on HVAC equipment - Management indicated minimal inflation in Q1, with HVAC costs actually down, and expressed confidence in managing potential tariff impacts [42] Question: Trends in service requests - The increase in service requests was primarily driven by the addition of the 2-10 Homebuyers Warranty, with expectations to normalize around 4 million for the year [53][54] Question: Sustainability of promotional pricing strategy - The company is adopting a pulsing promotional strategy, which is expected to be sustainable while prioritizing member growth [56][57] Question: Drivers of outperformance in renewals revenue - Outperformance was attributed to stronger renewals and non-warranty revenue, particularly from HVAC and Moen partnerships [62][63] Question: Confidence in raising gross margin guidance - The company raised its gross margin guidance based on strong Q1 performance and expectations of flat inflation, while accounting for potential tariff impacts [76][80]