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Frontdoor, Inc. (FTDR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered broad-based outperformance: revenue rose 14% to $617M, gross margin expanded 130 bps to 58%, net income increased 21% to $111M, and adjusted EBITDA grew 26% to $199M .
  • Wall Street consensus (S&P Global) was exceeded on EPS and revenue; FTDR also raised FY 2025 guidance for revenue, gross margin, and adjusted EBITDA, reinforcing momentum into 2H 2025 .
  • Strategic drivers: stronger renewal pricing and volume from the 2-10 acquisition, scaling non-warranty revenue (New HVAC, Moen), and high DTC promotional activity; CEO and CFO emphasized execution, integration synergies, and liquidity supporting buybacks .
  • Catalysts: guidance raise, continued non-warranty revenue scaling (HVAC outlook lifted to $120M), and faster-than-planned 2-10 synergies; capital allocation updated to ~$250M buybacks in 2025 .

What Went Well and What Went Wrong

What Went Well

  • Gross margin reached a second-quarter record 58% (+130 bps YoY) on process improvements, favorable weather, and pricing; CFO highlighted adjusted EBITDA margin at ~32%, up ~300 bps .
  • Non-warranty revenue scaled sharply (+63% YoY), driven by New HVAC and Moen, plus 2-10 structural warranty addition; New HVAC full-year outlook raised to $120M with financing adoption up 75% YTD and <2% membership penetration, implying runway .
  • Management tone confident: “we delivered another quarter of outstanding financial performance” and “we are raising our full-year outlook and returning record amounts of cash to shareholders” (CEO/CFO) .

What Went Wrong

  • Contract claims costs were modestly higher (+$1M YoY excluding revenue impact), with low single-digit cost inflation; CFO flagged 2H headwinds from seasonal adjustments, slight claims increase, and higher SG&A to drive member growth .
  • DTC price realization remained pressured due to discounting strategy to fuel unit growth; price reductions offset some volume gains (explicit in both Q1 and Q2 commentary) .
  • Interest expense increased (primarily due to 2-10 financing), and D&A stepped up with the acquisition; integration costs and higher G&A/customer service tied to 2-10 noted .

Financial Results

Core P&L Trends vs Prior Quarter and Prior Year

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$383 $426 $617
Diluted EPS ($)$0.11 $0.49 $1.48
Adjusted EBITDA ($USD Millions)$49 $100 $199
Gross Profit Margin (%)49% 55% 58%

Q2 2025 Actuals vs S&P Global Consensus

MetricConsensusActualSurprise
Revenue ($USD Millions)$602.6*$617 +$14.4
Primary EPS ($)$1.455*$1.48 +$0.03
EBITDA ($USD Millions)$186.6*$199 +$12.4

Values with asterisk (*) retrieved from S&P Global.

Segment Revenue Breakdown (Customer Channels)

Channel ($USD Millions)Q4 2024Q1 2025Q2 2025
Renewals$296 $333 $461
Real Estate (First-Year)$26 $27 $44
Direct-to-Consumer (First-Year)$31 $32 $56
Other$30 $33 $56
Total$383 $426 $617

Notes: Q2 growth drivers included 2% price and 12% volume, primarily from 2-10 acquisition; “Other” growth from New HVAC, Moen, and New Home Structural Warranty .

KPIs and Operating Metrics

KPIQ4 2024Q1 2025Q2 2025
Home Warranties (Millions)2.12 2.10 2.09
Renewals (Millions)1.60 1.58 1.58
First-Year DTC (Millions)0.31 0.31 0.31
First-Year Real Estate (Millions)0.21 0.21 0.20
Customer Retention Rate (%)79.9 79.9 79.7
Preferred Contractors (% jobs)—85% 84%
Free Cash Flow (YTD / $M)—$117 (Q1) $237 (H1)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$2.03B–$2.05B $2.055B–$2.075B Raised
Gross Profit MarginFY 202554%–55% 55%–56% Raised
Adjusted EBITDAFY 2025$500M–$520M $530M–$550M Raised
SG&AFY 2025$650M–$670M $660M–$670M Narrowed/Up
Other RevenueFY 2025$165M–$175M $180M–$190M Raised
Capital ExpendituresFY 2025~$35M–$45M ~$35M Lowered
Effective Tax RateFY 2025~25% ~24% Lowered
Share RepurchasesFY 2025At least $200M ~$250M Raised
RevenueQ3 2025—~$605M–$615M New
Adjusted EBITDAQ3 2025—~$180M–$190M New

CFO also noted second-half adjusted EBITDA expected ~$60M lower than first half due to seasonality and elevated SG&A to drive member growth .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativesFocus on margin/process improvements; product innovation foundation App/video chat launched; adoption data shared; proactive cost management Expanding AI across marketing, sales, ops; CTO appointment to deepen AI capabilities Increasing scope and organizational emphasis
Supply chain/tariffs/macroInflation managed via fees/process; macro real estate headwinds Flat inflation in Q1; tariff contingency baked into H2; nimble supply chain Low single-digit cost inflation; H2 macro assumptions updated; seasonal claims normalization More favorable than initially expected
Product performance (New HVAC)Strong non-warranty growth (HVAC upgrades) HVAC outlook raised to $105M; expansion with financing options HVAC outlook raised again to $120M; financing usage +75% YTD; penetration <2% Accelerating growth, expanding contractor engagement
Segment/regional trends (Real Estate)Challenging market; YoY decline Expect ~15% Q2 increase aided by 2-10; NAR data shows inventory rising Q2 real estate revenue +21% YoY; attach rates anticipated to benefit from rising inventory Improving with 2-10 and macro inventory
Member experience/retentionRetention ~80%; preferred contractors; innovation pipeline Retention 79.9%; preferred contractors 85%; video chat resolves ~17% issues Retention 79.7%; preferred contractors 84%; early engagement and save programs Sustained high retention, operational refinements
Regulatory/legal/reinsurance (2-10)Completed acquisition; credit facility Structural warranties rev recognized over 10–14 years; stable reserves No notable reserve issues; predictable structural warranty operations Stable, predictable contribution

Management Commentary

  • CEO: “Frontdoor continues to perform exceptionally well… we delivered another quarter of outstanding financial performance… 2-10 integration is ahead of schedule… we are delivering on our strategic objectives and continue to position the business for future success.”
  • CFO: “We generated nearly $200 million in Adjusted EBITDA in the second quarter… raising our full-year outlook and returning record amounts of cash to shareholders through share repurchases.”
  • CEO on HVAC program: “We expect revenue… nearly 40% higher than last year… raising our full year outlook… penetration is currently less than 2%… many reasons to believe this program has much more runway.”
  • CFO on operational execution: “Adjusted EBITDA margin improved to 32%… driven by $51M of favorable revenue conversion… seasonality and higher SG&A in 2H to drive member growth.”
  • CEO on AI: “We are partnering with best-in-class AI providers… already seeing positive results using AI.”

Q&A Highlights

  • 2-10 synergy outlook increased from $10M to $15M for 2025; longer-term $30M+ by 2028 affirmed, with efficiencies across back office, sales/marketing, and service .
  • Gross margin guidance incorporates lower-than-expected macro headwinds; inflation trending low single digit in H2 vs prior mid-to-high assumptions .
  • Real estate outperformance linked to 2-10 integration and sales execution; rising inventory supportive of attach rates .
  • Structural warranty revenue recognition (10–14 years) remains predictable; no notable claims reserve developments called out .
  • Tariffs and supplier pricing monitored; supply chain nimble, with contingency built into H2 outlook .

Estimates Context

  • Q2 2025 results beat consensus on revenue and EPS; Adjusted EBITDA above S&P Global EBITDA consensus, noting definitional differences (company reports Adjusted EBITDA).
  • Outlook raise likely to drive upward revisions to FY 2025 revenue, margin, and EBITDA estimates, particularly in “Other revenue” lines (HVAC, Moen) and gross margin trajectory.
MetricConsensus (Q2 2025)Actual (Q2 2025)Delta
Revenue ($USD Millions)602.6*617 +14.4
Primary EPS ($)1.455*1.48 +0.03
EBITDA ($USD Millions)186.6*199 +12.4

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Execution remains strong with multi-faceted growth drivers (renewals pricing, volume from 2-10, scaled non-warranty revenues); Q2 performance and FY guidance raise are positive sentiment drivers .
  • DTC promotions depress near-term price realization but support unit growth and renewals; evidence of heavy promotional activity into Q3 (e.g., 50% off ShieldGold/Silver) .
  • HVAC upgrade program is a high-visibility growth vector with raised outlook ($120M) and low penetration, supporting “Other revenue” expansion and margin accretion .
  • Integration synergies from 2-10 are arriving ahead of plan ($15M in 2025), improving operating leverage; structural warranties add diversification with long-duration rev recognition .
  • H2 setup: seasonality, slight claims cost increase, and higher SG&A spend to pursue member count growth; gross margin still guided higher to 55–56% for FY 2025 .
  • Capital allocation is shareholder-friendly with buybacks raised to ~$250M; strong H1 free cash flow ($237M) and liquidity underpin flexibility .
  • Narrative momentum: guidance raise plus AI-driven operational improvements and renewed DTC marketing should sustain estimate revisions and support multiple expansion potential .

Appendix: Additional Data Points

  • Period-over-period bridge shows $51M favorable revenue conversion in Q2; claims costs +$1M YoY excluding revenue impact; sales & marketing -$3M timing benefit .
  • Cash: $562M at 6/30/25 (incl. $377M unrestricted); H1 operating cash flow $251M; FCF up 44% to $237M .
  • Q3 2025 outlook: revenue ~$605–$615M; adjusted EBITDA ~$180–$190M .

Sources: Q2 2025 press release and 8-K , Q2 2025 call transcript , Q1 2025 8-K and call , FY 2024 press release , AHS July promotion , CTO appointment . Values with asterisk (*) retrieved from S&P Global.