Frontdoor : Press Release Q4 2024

Published: 2025-02-27 07:34:08 ET FTDR

Frontdoor Announces Record Full-Year 2024 Financial Results:

Revenue Increased 4% to $1.84 Billion;

Gross Profit Margin Increased 410 Basis Points to 54%;

Net Income and Adjusted EBITDA Increased 37% and 28%, respectively;

Utilized $160 Million to Repurchase ~4 Million Shares in 2024;

Completed Acquisition of 2-10 Home Buyers Warranty and $1.47 Billion Credit Facility

MEMPHIS, TENN. - February 27, 2025 - Frontdoor, Inc.(NASDAQ: FTDR), the nation's leading provider of home warranties, today announced fourth-quarter and full-year 2024 results.

Financial Results

Three Months Ended

Year Ended

December 31,

(In millions except as noted)

2024

2023

Change

2024

2023

Change

Revenue

383

366

1,843

1,780

Gross Profit

186

177

991

885

Net Income

235

171

Diluted Earnings per Share

0.11

3.01

2.12

42%

Adjusted Net Income(1)

261

186

Adjusted Diluted Earnings per Share(1)

0.27

0.20

3.35

2.30

Adjusted EBITDA(1)

443

346

Home Warranties (number in millions)

2.12

2.00

2.12

2.00

Fourth-Quarter 2024 Summary

Full-Year 2024 Summary

Full-Year 2025 Outlook

"2024 was truly an exceptional year for Frontdoor as we delivered record financial results, our operations performed better than ever and we completed the acquisition of 2-10," said Chairman and Chief Executive Officer Bill Cobb. "This year, we are taking decisive actions to drive long-term growth in home warranty membership, expanding non-warranty services and optimizing the 2-10 integration. These actions will further differentiate us and create long-term shareholder value."

"I am extremely pleased with our record 2024 financial performance, which was driven by higher realized price, lower incidence rates and continued process improvement initiatives," said Chief Financial Officer Jessica Ross. "Looking ahead, our outlook is strong and reflects the addition of 2-10, normal price increases and mid-single digit cost inflation. Our margins remain well above historical averages and we remain committed to deploying capital to repurchase shares."

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Fourth-Quarter 2024 Results

Revenue by Customer Channel

Three Months Ended

December 31,

(In millions)

2024

2023

Change

Renewals

296

285

Real estate (First-Year)

(3)%

Direct-to-consumer (First-Year)

(16

Other

67%

Total

383

366

Fourth-quarter 2024 revenue increased 5% to $383 million, which was comprised of a 4% increase in realized price and 1% increase in volume. This includes $6 million of post-acquisition revenue from 2-10.

Fourth-quarter 2024 net income was $9 million, or diluted earnings per share of $0.11.

Period-over-Period Adjusted EBITDA Bridge

(In millions)

Three Months Ended December 31, 2023

Impact of change in revenue

Contract claims costs

)

Sales and marketing costs

(5)

Three Months Ended December 31, 2024

Fourth-quarter 2024 Adjusted EBITDA(1) of $49 million increased 10% versus the prior year period, and includes:

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Full-Year 2024 Results

Revenue by Customer Channel

Year Ended

December 31,

(In millions)

2024

2023

Change

Renewals

1,437

1,367

Real estate (First-Year)

125

141

(12

Direct-to-consumer (First-Year)

166

194

(14

Other

116

50%

Total

1,843

1,780

Full-year 2024 revenue increased 4% to $1.84 billion, which was comprised of a 6% increase from higher realized price that was partially offset by a 3% decline from lower volume.

Full-year 2024 net income increased 37% to $235 million; diluted earnings per share increased 42% to $3.01.

Period-over-Period Adjusted EBITDA Bridge

(In millions)

Year Ended December 31, 2023

346

Impact of change in revenue

Contract claims costs

Sales and marketing costs

(8)

Customer service costs

General and administrative costs

)

Interest and net investment income

Other

Year Ended December 31, 2024

443

Full-year 2024 Adjusted EBITDA(1) of $443 million was $96 million higher than the prior year, and includes:

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Cash Flow

Year Ended

December 31,

2024

2023

Net cash provided from (used for):

Operating activities

270

202

Investing activities

(622

)

(32

)

Financing activities

447

(137)

Cash increase during the period

Net cash provided from operating activities was $270 million for the 12 months ended December 31, 2024 and was comprised of $312 million in earnings adjusted for non-cash charges, partially offset by $6 million in payments for restructuring charges and $36 million in cash used for working capital.

Net cash used for investing activities was $622 million for the 12 months ended December 31, 2024 and was primarily comprised of the acquisition of 2-10 Home Buyers Warranty and capital expenditures related to technology projects.

Net cash provided from financing activities was $447 million for the 12 months ended December 31, 2024 and was primarily comprised of $1,216 million in new debt related to the 2-10 Home Buyers Warranty acquisition and the refinancing of our credit facility. This was partially offset by $616 million in debt payments and debt issuance costs, as well as $161 million (including taxes and fees) to repurchase approximately 4 million shares.

Free Cash Flow(1) was $231 million for the 12 months ended December 31, 2024.

Cash and cash equivalents and short- and long-term marketable securities as of December 31, 2024 was $474 million and was comprised of $184 million of restricted net assets and $291 million of Unrestricted Cash and marketable securities.

First-Quarter 2025 Outlook

Full-Year 2025 Outlook

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2025 Investor Day

Frontdoor will host its 2025 Investor Day today, February 27, 2025, at 8:00 a.m. Central time (9:00 a.m. Eastern time). During the webcast, Frontdoor, Inc. Chairman & CEO Bill Cobb and his executive leadership team will provide an in-depth discussion of the company's vision, strategy, innovative new service offering, and the 2024 financial results and 2025 financial outlook, followed by a Q&A session. Participants can register for the webcast by

clicking https://www.webcaster4.com/Webcast/Page/3067/52024. Once completed, each participant will receive access details via email. To participate via webcast and view the presentation, visit https://investors.frontdoorhome.com.

The call will be available for replay for approximately 60 days. To view a replay of the webcast, visit the company's https://www.webcaster4.com/Webcast/Page/3067/52024.

About Frontdoor, Inc.

Frontdoor is the industry leader in home warranties and new home structural warranties, and a leading provider of on- demand home repair and maintenance services. As the parent company of two leading brands - American Home Shield and 2-10 Home Buyers Warranty - totaling more than two million members - we bring over 50 years of experience in the home warranty category, a cultivated national network of independent service contractors, and a reputation for delivering quality service and product innovation. American Home Shield, the leader in home warranties, gives homeowners peace of mind, budget protection and convenience, covering up to 29 home systems and appliances from costly and unexpected breakdowns. 2-10 Home Buyers Warranty is the leader in new home structural warranties, providing home builders with coverage for structural failures. These two brands, together with Frontdoor's cutting-edge on-demand services, provide an unbeatable combination that meets the full suite of homeowner repair and maintenance needs. For more information about Frontdoor, Inc., please visit frontdoorhome.com.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, projected future performance and any statements about Frontdoor's plans, strategies and prospects. Forward-looking statements can be identified by the use of forward-looking terms such as "believe," "expect," "estimate," "could," "should," "intend," "may," "plan," "seek," "anticipate," "project," "will," "shall," "would," "aim," or other comparable terms. These forward- looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Such risks and uncertainties include, but are not limited to: changes in macroeconomic conditions, including inflation, tariffs and global supply chain challenges and changing interest rates, especially as they may affect existing or new home sales, consumer confidence, labor availability or our costs; our ability to successfully implement our business strategies; the ability of our marketing efforts to be successful and cost-effective; our dependence on our first-year direct-to- consumer and real estate acquisition channels and our renewal channel; changes in the source and intensity of competition in our market; our ability to attract, retain and maintain positive relations with third-party contractors and vendors; increases in parts, appliance and home system prices, and other operating costs; changes in U.S. tariffs

or import/export regulations; our ability to attract and retain qualified key employees and labor availability in our customer service operations; our dependence on third-party vendors, including business process outsourcers, and third-party component suppliers; cybersecurity breaches, disruptions or failures in our technology systems; our ability to protect the security of personal information about our customers; compliance with, or violation of, laws and regulations, including consumer protection laws, or lawsuits or other claims by third parties, increasing our legal and regulatory expenses; weather, including adverse conditions, Acts of God and seasonality, along with related regulations; our ability to underwrite risks accurately and to charge adequate prices to builder members, as well as our ability to effectively reinsure a large portion of those risks; the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home structural warranty business; evolving corporate governance and disclosure regulations and expectations; our ability to protect our intellectual property and other material proprietary rights; negative reputational and financial impacts resulting from acquisitions or strategic transactions; a requirement to recognize impairment charges;

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third-party use of our trademarks as search engine keywords to direct our potential customers to their own websites; inappropriate use of social media by us or other parties to harm our reputation; special risks applicable to operations outside the United States by us or our business process outsource providers; risks related to our acquisition of 2-10 Home Buyers Warranty (the "2-10 HBW Acquisition"), including the risk that the 2-10 HBW Acquisition may not achieve its intended results; any liabilities, losses, or other exposures for which we do not have adequate insurance coverage, indemnification, or other protection; increase in our indebtedness as a result of financing the 2-10 HBW Acquisition; a return on investment in our common stock is dependent on appreciation in the price; inclusion in our certificate of incorporation a forum selection clause that could discourage an acquisition of our company or litigation against us and our directors and officers; the effects of our significant indebtedness, our ability to incur additional debt and the limitations contained in the agreements governing such indebtedness; increases in interest rates increasing the cost of servicing our indebtedness and counterparty credit risk due to instruments designed to minimize exposure to market risks; increased borrowing costs due to lowering or withdrawal of the credit ratings, outlook or watch assigned to us or our credit facilities; and our ability to generate the significant amount of cash needed to fund our operations and service our debt obligations. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of new markets or market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this news release. For a discussion of other important factors that could cause Frontdoor's results to differ materially from those expressed in, or implied by, the forward-looking statements included in this document, refer to the risks and uncertainties detailed from time to time in Frontdoor's periodic reports filed with the SEC, including the disclosure contained in Item 1A. Risk Factors in our 2024 Annual Report on Form 10-K filed with the SEC, as such factors may be updated from time to time in Frontdoor's periodic filings with the SEC. Except as required by law, Frontdoor does not undertake any obligation to update or revise the forward-looking statements to reflect new information or events or circumstances that occur after the date of this news release or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review Frontdoor's filings with the SEC, which are available from the SEC's EDGAR database at sec.gov, and via Frontdoor's website at frontdoorhome.com.

Non-GAAP Financial Measures

To supplement Frontdoor's results presented in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"), Frontdoor has disclosed the non-GAAP financial measures of Adjusted EBITDA, Free Cash Flow, Adjusted Net Income, Adjusted Diluted Earnings Per Share, and Unrestricted Cash.

We define "Adjusted EBITDA" as net income before depreciation and amortization expense; goodwill and intangibles impairment; restructuring charges; acquisition-related costs; provision for income taxes; non-cash stock-based compensation expense; interest expense; loss on extinguishment of debt; and other non-operating expenses. We believe Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring and acquisition initiatives and equity-based, long- term incentive plans.

We define "Free Cash Flow" as net cash provided from operating activities less property additions. Free Cash Flow is not a measurement of our financial performance or liquidity under U.S. GAAP and does not purport to be an alternative to net cash provided from operating activities or any other performance or liquidity measures derived in accordance with U.S.

GAAP. Free Cash Flow is useful as a supplemental measure of our liquidity. Management uses Free Cash Flow to facilitate company-to-company cash flow comparisons, which may vary from company-to-company for reasons unrelated to operating performance.

We define "Adjusted Net Income" as net income before: amortization expense; restructuring charges; loss on extinguishment of debt; other non-operating expenses; and the tax impact of the aforementioned adjustments. We believe Adjusted Net Income is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by items listed in this definition.

We define "Adjusted Diluted Earnings per Share" as Adjusted Net Income divided by the weighted-average diluted common shares outstanding.

We define "Unrestricted Cash" as cash not subject to third-party restrictions. For additional information related to our third- party restrictions, see "Liquidity and Capital Resources - Liquidity" under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2024 Annual Report on Form 10-K filed with the SEC.

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See the schedules attached hereto for additional information and reconciliations of such non-GAAP financial measures. Management believes these non-GAAP financial measures provide useful supplemental information for its and investors' evaluation of Frontdoor's business performance and are useful for period-over-period comparisons of the performance of Frontdoor's business. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies.

© 2025 Frontdoor, Inc. All rights reserved. The following terms, which may be used in this press release, are trademarks of Frontdoor, Inc. and its subsidiaries: Frontdoor®, American Home Shield®, HSA™, OneGuard®, Landmark Home Warranty®, Streem®, 2-10 HBW®, and related logos and designs. All other trademarks used herein are the property of their respective owners.

For further information, contact:

Investor Relations:

Media:

Matt Davis

Tom Collins

901.701.5199

901.701.5198

[email protected]

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Frontdoor, Inc.

Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In millions, except per share data)

Year Ended

December 31,

2024

2023

2022

Revenue

1,843

1,780

1,662

Cost of services rendered

852

895

952

Gross Profit

991

885

710

Selling and administrative expenses

612

581

521

Depreciation and amortization expense

Goodwill and intangibles impairment

Restructuring charges

Interest expense

Interest and net investment income

(20

)

(16

)

Loss on extinguishment of debt

Income before Income Taxes

309

229

Provision for income taxes

Net Income

235

171

Other Comprehensive (Loss) Income, Net of Income Taxes:

Unrealized (loss) gain on derivative instruments, net of income taxes

)

Total Other Comprehensive (Loss) Income, Net of Income Taxes

(6)

(3)

Comprehensive Income

229

169

Earnings per Share:

Basic

3.05

2.13

0.87

Diluted

3.01

2.12

0.87

Weighted-average Common Shares Outstanding:

Basic

77.0

80.5

81.8

Diluted

78.0

80.9

82.0

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Frontdoor, Inc.

Consolidated Statements of Financial Position (Unaudited)

(In millions, except share data)

As of

December 31,

2024

2023

Assets:

Current Assets:

Cash and cash equivalents

421

325

Marketable securities

Receivables, less allowance of $4 and $5, respectively

Prepaid expenses and other current assets

Total Current Assets

488

363

Other Assets:

Property and equipment, net

Goodwill

967

503

Intangible assets, net

448

143

Operating lease right-of-use assets

Long-term marketable securities

Deferred reinsurance

Reinsurance recoverables

Deferred customer acquisition costs

Other assets

Total Assets

2,107

1,089

Liabilities and Shareholders' Equity:

Current Liabilities:

Accounts payable

Accrued liabilities:

Payroll and related expenses

Home warranty claims

Other

Deferred revenue

123

102

Current portion of long-term debt

Total Current Liabilities

369

331

Long-Term Debt

1,170

577

Other Long-Term Liabilities:

Deferred tax liabilities, net

Operating lease liabilities

Unearned insurance premium

233

Unpaid losses and loss adjustment reserves

Long-term deferred revenue

Other long-term liabilities

Total Other Long-Term Liabilities

329

Commitments and Contingencies

Shareholders' Equity:

Common stock, $0.01 par value; 2,000,000,000 shares authorized; 87,434,468 shares issued and

75,314,243 shares outstanding as of December 31, 2024 and 86,553,387 shares issued and

78,378,511 shares outstanding as of December 31, 2023

Additional paid-in capital

152

117

Retained earnings

530

296

Accumulated other comprehensive (loss) income

Less treasury stock, at cost; 12,120,225 shares as of December 31, 2024 and 8,174,876 shares as

of December 31, 2023

(444

)

(283

)

Total Shareholders' Equity

239

136

Total Liabilities and Shareholders' Equity

2,107

1,089

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Frontdoor, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In millions)

Year Ended

December 31,

2024

2023

2022

Cash and Cash Equivalents at Beginning of Period

325

292

262

Cash Flows from Operating Activities:

Net Income

235

171

Adjustments to reconcile net income to net cash provided from operating

activities:

Depreciation and amortization expense

Deferred income tax benefit

(13

)

(10

)

Stock-based compensation expense

Goodwill and intangibles impairment

Restructuring charges

Payments for restructuring charges

(6)

(7)

(5)

Loss on extinguishment of debt

Other

Changes in working capital:

Receivables

Prepaid expenses and other current assets

)

Accounts payable

)

Deferred revenue

)

(19

)

(35

)

Accrued liabilities

(11)

(7)

Current income taxes

)

Net Cash Provided from Operating Activities

270

202

142

Cash Flows from Investing Activities:

Purchases of property and equipment

(39)

(32)

(40)

Business acquisitions, net of cash acquired

(583

)

Other investing activities

Net Cash Used for Investing Activities

(622

)

(32

)

(35

)

Cash Flows from Financing Activities:

Borrowings of debt, net of discount

1,216

Repayments of debt

(598)

(17)

Debt issuance costs paid

(18

)

Repurchases of common stock

(161

)

(121

)

(59

)

Other financing activities

)

Net Cash Provided from (Used for) Financing Activities

447

(137)

(77)

Cash Increase During the Period

Cash and Cash Equivalents at End of Period

421

325

292

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Disclaimer

Frontdoor Inc. published this content on February 27, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on February 27, 2025 at 12:33:36.288.