Sign in
FI

Frontdoor, Inc. (FTDR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue rose 5% to $383M, gross margin reached 49%, and Adjusted EBITDA increased 10% to $49M; diluted EPS was $0.11, flat year-over-year .
  • Management said Q4 exceeded internal guidance by ~$13M, driven by stronger revenue conversion and gross profit, partially offset by ~$7M intentional marketing investments .
  • 2025 guidance introduced: revenue $2.00–$2.04B, gross margin 51.5–53%, Adjusted EBITDA $450–$475M; Q1 2025 revenue $410–$420M and Adjusted EBITDA $70–$80M .
  • Strategic catalysts: completed 2-10 HBW acquisition on Dec 19 and launched AHS app; Investor Day detailed technology (AI authorizations ~90% accuracy) and non-warranty growth engines (HVAC, Moen) .

What Went Well and What Went Wrong

  • What Went Well

    • Price realization and process improvements lifted FY gross margin to a record 54% (+410 bps) and Q4 gross margin to 49%; Adjusted EBITDA rose 28% FY and 10% in Q4 .
    • Non-warranty “Other” revenue grew $12M in Q4 (HVAC upgrades) and ~$38M FY, supporting diversification; Investor Day highlighted expansion of HVAC and Moen partnerships .
    • Membership KPIs improved: home warranties rose to 2.12M with retention at 79.9%; preferred contractors handled 85% of service requests, improving cost/quality .
    • CEO: “2024 was truly an exceptional year… completed the acquisition of 2-10” underlining strategic execution momentum .

  • What Went Wrong

    • Direct-to-consumer first-year revenue fell 16% in Q4 due to lower initial pricing to drive unit sales; Real estate first-year revenue declined 3% on weak housing market .
    • Organic home warranty member count expected to decline 2–4% in 2025 despite 2-10 volume addition; 2025 guide assumes lower realized price and lapping trade service fee increases .
    • Tariff and inflation sensitivities flagged for 2025 (mid-single-digit inflation; raw materials and imported components) potentially pressuring claims costs .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$542 $540 $383
Gross Profit ($USD Millions)$306 $306 $186
Gross Profit Margin (%)56% 57% 49%
Net Income ($USD Millions)$92 $100 $9
Diluted EPS ($USD)$1.18 $1.30 $0.11
Adjusted EBITDA ($USD Millions)$158 $165 $49
Adjusted Diluted EPS ($USD)$1.27 $1.38 $0.27
Q4 YoY ComparisonQ4 2023Q4 2024
Revenue ($USD Millions)$366 $383
Gross Profit ($USD Millions)$177 $186
Net Income ($USD Millions)$9 $9
Diluted EPS ($USD)$0.11 $0.11
Adjusted EBITDA ($USD Millions)$45 $49

Segment Revenue – Q4 2024 vs Q4 2023

Channel ($USD Millions)Q4 2023Q4 2024YoY Change
Renewals$285 $296 +4%
Real estate (First-Year)$26 $26 -3%
Direct-to-consumer (First-Year)$37 $31 -16%
Other$18 $30 +67%
Total$366 $383 +5%

Key KPIs

KPIFY 2023FY 2024
Home warranties (millions)2.00 2.12
Renewals (millions)1.53 1.60
First-Year DTC (millions)0.27 0.31
First-Year Real Estate (millions)0.19 0.21
Customer retention rate (%)76.2% 79.9%

Non-GAAP Reconciliation (Q4 2024)

Item ($USD Millions)Q4 2023Q4 2024
Net Income$9 $9
Acquisition-related costs$0 $8
Loss on extinguishment of debt$0 $3
Restructuring charges$9 $3
Tax impact of adjustments$(2) $(4)
Adjusted Net Income$16 $21
Adjusted Diluted EPS ($)$0.20 $0.27

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD)Q1 2025—$410–$420M New
Adjusted EBITDA ($USD)Q1 2025—$70–$80M New
Revenue ($USD)FY 2025—$2.00–$2.04B New
Gross Profit Margin (%)FY 2025—51.5%–53% New
Adjusted EBITDA ($USD)FY 2025—$450–$475M New
SG&A ($USD)FY 2025—$640–$660M New
Capex ($USD)FY 2025—$35–$45M New
Annual Effective Tax Rate (%)FY 2025—~25% New
Other Revenue ($USD)FY 2025—$155–$165M New
Home warranty member countFY 2025—Decline 2–4% New

Note: Q4 2024 guidance provided in Q3 materials was ~$367M revenue and ~$36M Adjusted EBITDA; actuals beat at $383M revenue and $49M Adjusted EBITDA .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4/Investor Day)Trend
AI/Technology initiativesFrontdoor app; tech supports on-demand growth AHS app launched; brand relaunch driving awareness AI assisting authorization with ~90% accuracy; AHS app adds video chat; 99.887% uptime Expanding capability
Supply chain/inflationTrade service fee transition offsets inflation; cost control Net cost per request flat; weather favorable; preferred contractor mix 2025 guide assumes mid-single-digit inflation; tariff sensitivity (steel/aluminum/imported components) Inflation risk re-emerging
Real estate channelPersistent headwinds; attach rates down; waiting for rebound Inventory improving; mortgage rates easing; still floundering; attach rate teens FY25 expects ~10% real estate revenue increase; mix shift toward renewals/DTC Cautious improvement
Product/non-warrantyHVAC ramp; Moen pilot in CA HVAC ~$85M 2024; Moen expanding to 7 states HVAC ~$100M in 2025; Moen ~$15M; TAM ~$2B across categories Scaling
Membership/RetentionRetention 76.6%; auto-pay 86% Retention 77.7% record; DTC count stabilized Retention 79.9%; preferred contractors 85% jobs; member count to decline 2–4% in 2025 KPIs strong; near-term count headwind
Regulatory/legalRisk factors (tariffs, macro) Standard forward-looking risks Investor Day flags tariffs moving; structural warranty reinsurance availability Monitoring

Management Commentary

  • CEO Bill Cobb: “2024 was truly an exceptional year… we delivered record financial results… and we completed the acquisition of 2-10” .
  • CFO Jessica Ross: “Record 2024 financial performance… driven by higher realized price, lower incidence rates and continued process improvement initiatives” .
  • CFO on Q4 beat: “We also beat our fourth quarter guidance by approximately $13 million… driven by better-than-expected revenue conversion and gross profit partially offset by about $7 million of intentional marketing investments” .
  • COO Evan Iverson on operations: “Preferred contractors performed 85% of our service requests in 2024… we see savings in excess of 50% from our preferred contractors” .

Q&A Highlights

  • 2-10 integration and synergy opportunity: Management emphasized cultural fit, process integration under single home warranty unit, and cross-sell potential to 1M structural warranty members and 19K builders; synergy opportunity described as “real” (no precise dollar confirmation) .
  • Volume/Claims outlook: 2024 service requests ~3.6M; targeting ~4.9M in 2025; preferred contractor mix mid-80s target .
  • Interest/Debt: Total debt service about $110M; interest expense ~$80M with new credit facility laddering maturities to 2029 .
  • Tariffs: Sensitivity to imported parts and raw materials (steel, aluminum) embedded in mid-single-digit inflation assumptions; sourcing agreements used to mitigate timing impact .
  • Mix evolution: Focus on renewals and DTC; non-warranty viewed as incremental growth engine (HVAC, Moen) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS, revenue, and EBITDA was unavailable at time of retrieval due to data access limits.
  • Company guidance vs actual: Q4 revenue guided at ~$367M and Adjusted EBITDA ~$36M; actual revenue $383M and Adjusted EBITDA $49M, a meaningful beat on both metrics .
  • Forward estimates likely incorporate 2-10 volume addition, lower realized price, and member count decline (2–4%) alongside margin normalization to ~52% gross margin in 2025 .

Key Takeaways for Investors

  • Q4 execution was solid with revenue and EBITDA beats vs company guidance; margin discipline continues despite targeted marketing spend to drive DTC growth .
  • 2025 is a transition year: headline growth (~10% revenue) driven by 2-10 and non-warranty, with gross margin guided to 51.5–53% versus record 54% in 2024; build positions for medium-term unit growth .
  • Non-warranty businesses (HVAC ~$100M, Moen ~$15M) are scaling and provide diversified growth levers beyond core warranty cycles .
  • Operational efficiency via preferred contractors (85% of jobs) and tech (AI authorizations, app-driven self-service) is a durable tailwind to claims costs and customer experience .
  • Macro/real estate attach rates remain the key swing factor; guidance embeds conservative inflation/tariffs assumptions and modest real estate improvement .
  • Capital allocation remains shareholder-friendly: buybacks continue under $650M authorization; new debt structure extends maturities, supporting flexibility .
  • Near-term trading: Positive surprise vs guidance and strategic clarity may support sentiment; be mindful of tariff headlines and housing data flow as catalysts to claims inflation and channel mix .