Frontdoor (FTDR) Q1 2025 Earnings Call May 01, 2025 08:30 AM ET Speaker0 and gentlemen, welcome to Frontdoor's First Quarter twenty twenty five Earnings Call. Today's call is being recorded and broadcast on the Internet. Beginning today's call is Matt Davis, Vice President of Investor Relations and Treasurer. He will introduce the other speakers on the call. At this time, we will begin today's call. Please go ahead, Mr. Davis. Speaker1 Thank you, operator. Good morning, everyone, and thank you for joining F ...

Financial Data and Key Metrics Changes - Revenue increased by 13% to $426 million, with net income growing by 9% to $37 million and adjusted EBITDA rising by 41% to $100 million [5][19][20] - Member count grew by 7% to 2.1 million members, with a notable increase in the use of preferred contractors to 85% of services performed [6][19] Business Line Data and Key Metrics Changes - Direct-to-Consumer (DTC) channel saw a 15% increase in member count to 310,000, driven by organic growth of 4% and the acquisition of 02/10 [8][11] - Real estate channel faced challenges, with a 6% decline in first-year organic member count, despite signs of improving conditions in the housing market [12][13] 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 [12] - The 30-year mortgage rate averaged nearly 7% as of mid-April, contributing to consumer hesitance in the market [12] Company Strategy and Development Direction - The company’s strategic priorities include growing the member base, scaling revenue from non-warranty businesses, and optimizing the integration of the 02/10 Homebuyers Warranty [6][7] - The marketing campaign and relaunch of the American Home Shield brand are yielding positive results, particularly among millennials [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating macroeconomic challenges, including high interest rates and declining consumer confidence, while maintaining strong operational performance [6][36] - The company raised its full-year revenue outlook by $20 million and adjusted EBITDA by nearly $50 million, reflecting strong financial performance [19][33] 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% [28] - The company plans to increase its share repurchase target to at least $200 million for 2025, indicating confidence in its valuation [32] Q&A Session Summary Question: Impact of tariffs on HVAC equipment - Management noted minimal inflation in Q1, with HVAC costs actually down, and expressed confidence in managing potential tariff impacts [43] Question: Trends in service requests - The increase in service requests was primarily driven by the addition of 02/10, with expectations to normalize around 4 million for the year [54] Question: Sustainability of promotional pricing strategy - The company is adopting a pulsing promotional strategy, which they believe can be sustained while prioritizing member growth [57] Question: Drivers of outperformance in renewals revenue - Outperformance was attributed to stronger renewals and improved member experience, with contributions from both warranty and non-warranty segments [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 [78][80]