Sign in
FI

Frontdoor, Inc. (FTDR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered double‑digit top-line growth and margin expansion: revenue rose 14% to $618M; gross profit margin increased 60 bps to 57%; adjusted EBITDA grew 18% to $195M; GAAP diluted EPS was $1.42 and adjusted diluted EPS was $1.58 . Versus Q2, revenue was flat (+0.2%), margins and EPS eased (gross margin 57% vs 58%; GAAP diluted EPS $1.42 vs $1.48; adj. EBITDA $195M vs $199M) .
  • The quarter beat S&P Global consensus on both EPS and revenue: Q3 adjusted EPS $1.58 vs consensus $1.51*; revenue $618M vs $611.0M*; Q2 also posted beats (adj. EPS $1.63 vs $1.455*; revenue $617M vs $602.6M*) — reinforcing estimate momentum. Management raised full‑year revenue to $2.075–$2.085B and adjusted EBITDA to $545–$550M . Values retrieved from S&P Global.
  • Strategic drivers: strong contribution from the 2‑10 acquisition, sequential real estate member growth for the first time since 2020, and robust non‑warranty programs (new HVAC outlook lifted to $125M, up 44% YoY) .
  • Catalyst watch: guidance raise; CEO signaling a reassessment of long‑term margin targets next quarter; continued share repurchases ($215M YTD through Oct); and CFO transition to Jason Bailey effective Nov 10, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Revenue +14% to $618M with broad-based channel strength; price +3% and volume +12% primarily from 2‑10; adjusted EBITDA +18% to $195M; gross margin +60 bps to 57% .
  • Real estate turning the corner: ending member count grew sequentially for the first time in five years; management highlighted promotional efforts and a buyer’s market tailwind; “We are firing on all cylinders” and “real estate member count grew sequentially in Q3” .
  • Non‑warranty momentum: new HVAC revenue outlook raised to $125M (+44% YoY); appliance replacement pilot expanding with 2026 nationwide target; “every sale is a relatively CAC‑free opportunity” .

What Went Wrong

  • QoQ moderation: GAAP diluted EPS fell to $1.42 from $1.48; adjusted EBITDA dipped to $195M from $199M; gross margin fell to 57% from 58% .
  • Inflation ticked toward ~4% (low‑to‑mid single digits), with appliance costs up; tariffs had limited impact given domestic equipment sourcing .
  • Higher SG&A and promotional pricing pressured DTC revenue in Q4 outlook and full‑year assumptions; FY SG&A raised to $670–$675M; DTC revenue growth assumption ~3% reflects unit growth over price; home warranty member count expected to decline ~2% in 2025 .

Financial Results

Key P&L Metrics (USD, oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($MM)$426 $617 $618
Gross Profit ($MM)$235 $356 $353
Gross Profit Margin %55.0% 58.0% 57.0%
Net Income ($MM)$37 $111 $106
Diluted EPS (GAAP) ($)$0.49 $1.48 $1.42
Adjusted EBITDA ($MM)$100 $199 $195
Adjusted Diluted EPS ($)$0.64 $1.63 $1.58

Actual vs Consensus (S&P Global) — EPS and Revenue

MetricQ2 2025Q3 2025
Revenue Actual ($MM)$617 $618
Revenue Consensus Mean ($MM)$602.6*$611.0*
EPS Actual (Adjusted Diluted) ($)$1.63 $1.58
Primary EPS Consensus Mean ($)$1.45479*$1.51063*
Revenue – # of Estimates6*6*
Primary EPS – # of Estimates5*5*

Values retrieved from S&P Global.

Segment Revenue Breakdown (USD, oldest → newest)

ChannelQ1 2025Q2 2025Q3 2025
Renewals ($MM)$333 $461 $461
Real Estate (First‑Year) ($MM)$27 $44 $43
Direct‑to‑Consumer (First‑Year) ($MM)$32 $56 $54
Other ($MM)$33 $56 $59
Total Revenue ($MM)$426 $617 $618

KPIs (end of period, oldest → newest)

KPIQ1 2025Q2 2025Q3 2025
Home Warranties (MM)2.10 2.09 2.11
Renewals (MM)1.58 1.58 1.58
First‑Year DTC (MM)0.31 0.31 0.32
First‑Year Real Estate (MM)0.21 0.20 0.21
Increase/(Reduction) in Home Warranties+7% +7% +8%
Customer Retention Rate79.9% 79.7% 79.4%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$2.055–$2.075B $2.075–$2.085B Raised
Gross Profit MarginFY 202555–56% ~55.5% Narrowed (mid‑point)
SG&AFY 2025$660–$670M $670–$675M Raised
Adjusted EBITDAFY 2025$530–$550M $545–$550M Raised (mid‑point)
Capital ExpendituresFY 2025~$35M ~$30M Lowered
Annual Effective Tax RateFY 2025~24% ~25% Raised
Other RevenueFY 2025$180–$190M ~$190M Raised (top end)
DTC Channel Revenue GrowthFY 2025Low single‑digit increase ~3% increase Clarified/Raised
Real Estate Channel Revenue GrowthFY 2025High single‑digit increase ~12% increase Raised
Renewal Channel Revenue GrowthFY 2025~10% increase ~10% increase Maintained
Home Warranty Member CountFY 2025Decline 1–3% Decline ~2% Narrowed
RevenueQ4 2025—$415–$425M New
Adjusted EBITDAQ4 2025—$50–$55M New

No dividend guidance mentioned in the materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Margin trajectoryQ1/Q2: record margins, raises to FY margin outlook (55–56%) CEO to reevaluate long‑term margin targets next call Improving; re‑benchmarking
DTC strategyQ1: promotional pricing drove units; DTC revenue down 9% YoY Q3: 5 straight quarters of organic DTC growth; ~8% organic; promotional pricing continues Improving units; pricing dilutive near‑term
Real estate channelQ1: flat; FY high single‑digit growth target Q3: sequential member growth for first time since 2020; FY ~12% growth Turning positive
Non‑warranty (HVAC, appliance)Q1/Q2: scaling HVAC; other rev +63% in Q2 Q3: new HVAC outlook raised to $125M; appliance pilot expanding; 2026 nationwide target Accelerating
Inflation/tariffsQ1/Q2: low single‑digit inflation Q3: inflation ticked toward ~4%; limited tariff impact Mildly worsening costs
Technology/AIQ1/Q2: —Q3: AI in marketing and coverage decisions; app adoption ~20%; 200k service requests; 35k video chats; preferred contractor use 84% Increasing tech leverage
Capital allocationQ1/Q2: buyback target to ~$250M Q3: $215M buybacks YTD through Oct Ongoing returns
ManagementQ1/Q2: —CFO transition to Jason Bailey (effective Nov 10) Leadership change

Management Commentary

  • “We are firing on all cylinders… operational excellence… DTC continues to perform… real estate channel turning the corner… non‑warranty growth continues to be a game changer” — Bill Cobb .
  • “Adjusted EBITDA grew 18% to $195 million… gross profit margin grew 60 basis points to 57%, which includes the benefit of higher price, a lower number of service requests per member and low‑to‑mid‑single digit inflation” — Jessica Ross .
  • “We especially love [HVAC] because every sale is a relatively CAC‑free opportunity across our member base… appliance replacement pilot… nationwide in 2026” — Bill Cobb .
  • “We are reevaluating the long‑term margin targets… will provide more information on our next earnings call” — Bill Cobb .

Q&A Highlights

  • Cost inflation: ticked toward ~4% in Q3, primarily appliance costs; tariffs limited due to domestic equipment; management confident in dynamic pricing and trade service fee levers to offset .
  • Real estate promotions: introduced $100 off in July–August and partner promos; contributed to outpacing market and sequential member growth .
  • Non‑warranty appliance pilot: targeted nationwide rollout in 2026; complexity due to product breadth; early member reception positive .
  • DTC Q4 dynamics: promotional pricing prioritizes unit growth over near‑term revenue; seasonality also weighs on Q4; retention enables margin durability .
  • Organic revenue: mid‑single‑digit in Q3; full‑year organic expected ~3% .
  • Margin framework: long‑term margin targets under reconsideration given sustained execution and pricing/fee tools .

Estimates Context

  • Q3 2025: adjusted EPS $1.58 vs consensus $1.51063*; revenue $618M vs consensus $611.0M* — both beats. EPS estimates count: 5*; revenue estimates count: 6* . Values retrieved from S&P Global.
  • Q2 2025: adjusted EPS $1.63 vs consensus $1.45479*; revenue $617M vs consensus $602.615M* — both beats. EPS estimates count: 5*; revenue estimates count: 6* . Values retrieved from S&P Global.
  • Implications: With FY revenue and adjusted EBITDA raised, sell‑side models likely need higher “Other” revenue (HVAC), stronger real estate channel, and modestly higher SG&A; margin assumptions shift to ~55.5% GP and adjusted EBITDA $545–$550M .

Key Takeaways for Investors

  • Quality beat and raise: Q3 exceeded consensus and management raised FY revenue and EBITDA; near‑term catalysts include margin target re‑set and Q4 outlook execution . Values retrieved from S&P Global.
  • Non‑warranty flywheel: HVAC revenue outlook lifted; appliance pilot progressing toward 2026 national launch; expanding builder access via 2‑10 (19,000 partners) supports TAM expansion .
  • Real estate inflection: sequential member growth after five years; promotional strategy and improving inventory dynamics support FY ~12% channel growth .
  • DTC playbook: promotional pricing builds cohorts for renewal book; expect Q4 seasonal and pricing headwinds to revenue but retention and margin levers offset .
  • Cash generation and capital returns: YTD free cash flow up 64% to $296M; cash $563M; $215M buybacks YTD provide downside support .
  • Watch costs: inflation ticked toward ~4%, notably appliances; management cites dynamic pricing and operational execution to sustain margins .
  • Leadership transition: CFO change to Jason Bailey, an internal veteran, suggests continuity ahead of margin target update next quarter .