• Revenue: Increased 13% to $426 million.
• Net Income: Grew 9% to $37 million.
• Adjusted EBITDA: Increased 41% to $100 million.
• Member Count: Grew 7% to 2.1 million members.
• Gross Profit Margin: Improved 380 basis points to 55%.
• Earnings Per Share (GAAP): Increased 13% to $0.49 per share.
• Adjusted Earnings Per Share: Increased 46% to $0.64 per share.
• Free Cash Flow: Increased 60% to $117 million.
• Cash Position: Ended the quarter with $506 million in cash.
• Share Repurchases: $70 million returned to shareholders in the first three months of the year.
• Full Year Revenue Outlook: Increased to $2.03 billion to $2.05 billion.
• Full Year Adjusted EBITDA Outlook: Increased to $500 million to $520 million.

• Warning! GuruFocus has detected 4 Warning Signs with FTDR.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Frontdoor Inc (NASDAQ:FTDR) reported a 13% increase in revenue to $426 million for the first quarter of 2025.
• Net income grew by 9% to $37 million, and adjusted EBITDA increased by 41% to $100 million.
• The company saw a 7% growth in its member count, reaching 2.1 million members.
• Frontdoor Inc (NASDAQ:FTDR) successfully integrated the 2-10 Home Buyers Warranty, contributing to its growth.
• The company raised its full-year revenue outlook by $20 million and adjusted EBITDA by nearly $50 million.

Negative Points

• The real estate channel remains a headwind, with a 6% decline in first-year organic real estate member count.
• Reported DTC revenue was down 9% for the quarter due to promotional pricing strategies.
• The macroeconomic environment, including high interest rates and trade wars, poses ongoing challenges.
• Frontdoor Inc (NASDAQ:FTDR) anticipates mid-single-digit cost inflation due to tariffs and macroeconomic uncertainties.
• The company expects an unfavorable weather impact of approximately $15 million compared to the prior year.

Q & A Highlights

Q: Bill, what about the tariffs? Any impact on HVAC equipment or anything else that's important for your Home Warranty business? A: Bill Cobb, CEO: We've had virtually no inflation in Q1, with HVAC contributing significantly to that. However, some suppliers are raising prices, and we're adjusting our supply sources accordingly. We believe we've built sufficient conservatism into our second-half guidance to cover potential tariff impacts.

Q: How about the latest thinking on the new refrigerant, the impact on repairs, and potential sales in the on-demand business? A: Bill Cobb, CEO: We're managing the transition to new equipment standards well. While we may need to replace whole systems, we've secured old equipment and are adapting to new standards. Our teams have done a great job managing this transition, and we've raised our guidance for the year.

Q: The reserve gains in the quarter, how much of that was from Home Warranty versus 2-10? A: Jessica Ross, CFO: The favorable development was about $7 million, primarily from Frontdoor, though we didn't break it out specifically between 2-10 and the rest of the company.

Q: On the number of service requests, they were higher due to unfavorable weather. Do you still expect them to normalize to 4 million for the year? A: Jessica Ross, CFO: The increase was driven by the addition of 2-10. We still anticipate about 4 million service requests for the year.

Q: Unit growth in the direct channel continues to be good. How sustainable is the current promotional strategy? A: Bill Cobb, CEO: We've shifted to a pulsing strategy with shorter duration promotions, which has been successful. We plan to continue this approach, accepting a revenue offset to prioritize member count growth, supported by strong renewal rates.

Q: What drove the outperformance in the quarter, particularly in renewals revenue? A: Jessica Ross, CFO: The outperformance was driven by non-warranty revenue, particularly HVAC and Moen, and stronger renewals due to improved member experience. The margin beat was largely due to better-than-expected contract claims costs and revenue conversion.

Q: How do you manage supplier price increases and potential inflation impacts? A: Bill Cobb, CEO: We monitor suppliers closely and adjust our purchasing strategies. Some contracts are locked in through 2025, and our supply chain team is managing costs effectively. We're prepared to be nimble in response to any changes.

Q: What drives the expected growth in the real estate channel, given current home sales trends? A: Bill Cobb, CEO: The growth is primarily driven by the addition of 2-10, which has a strong real estate portfolio. Improved unit performance also contributes, though the primary driver is 2-10.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.