Slide 1: Third-Quarter 2024 Earnings Webcast
Third-Quarter 2024 Earnings Webcast November 4, 2024
Slide 2: Today's Speakers
Today’s Speakers Bill Cobb Jessica Ross Matt Davis Chairman & Senior Vice President & Vice President Chief Executive Officer Chief Financial Officer Investor Relations & Treasurer
Slide 3: Forward Looking Statements; Non-GAAP Financial Measures
Forward Looking Statements This presentation 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
Slide 4: We Have Dramatically Improved Performance
We Have Dramatically Improved Performance Gross Margins ▪ Gross margins have risen over 1,000 bps in 2+ years ~ 53% ▪ We are on track to deliver a 43% year of record financial performance. 2022 2024 4
Slide 5: Record Financial Performance in Q3 2024
Record Financial Performance in Q3 2024 Revenue increased 3% to $540M Gross Profit Margin expanded 550 bps to 57% Net Income grew 40% to $100M Adjusted EBITDA(1) grew 29% to $165M Used $119M to repurchase 3.2M shares through August (1) See the Appendix accompanying this presentation for a reconcilia
Slide 6: We Grew DTC Customers in the 3rd Quarter!
We Grew DTC Customers in the 3rd Quarter! DTC Home Warranties ▪ The Marketing Campaign and (in thousands) 271 Discounting Strategy are 270 working 264 ▪ We now expect our annual DTC customer count to be in line with last year Q1 2024 Q2 2024 Q3 2024 6
Slide 7: Our Top Priority: Growth!
Advancing Our Strategic Objectives Our Top Priority: Growth! 1. Grow our home warranty customer base 2. Expand our on-demand business 3. Close the acquisition of 2-10 Home Buyers Warranty 7
Slide 8: Acquisition of 2-10 Home Buyers Warranty
Acquisition of 2-10 Home Buyers Warranty ▪ FTDR integration team continues to work with 2-10 for a smooth transition ▪ California only remaining regulatory approval needed ▪ Acquisition remains on track to close in Q4 8
Slide 9: Business Channel Update
Business Channel Update Home Warranty Category – RE & DTC Momentum in Our On-Demand Business Re al Es Renewals tat e Re The AHS App al Es tat 9
Slide 10: Real Estate: Top Priority: Add More Home Warranty Customers
Top Priority: Add More Home Warranty Customers • Existing home sales remain challenged but inventory improving • First-Year RE customer count down almost 14 percent Real • AHS maintaining leading category share Estate • Expect RE market to improve in 2025 10
Slide 11: Direct to Consumer: Top Priority: Add More Home Warranty Customers
Top Priority: Add More Home Warranty Customers • The AHS marketing campaign is working. ✓ Aided brand awareness now at 54% ✓ Warrantina ad recognition now at 40% ✓ Google searches are up Direct • Phase 2 to improve targeting, build to consideration and grow leads Consumer • Optimizing discount strat
Slide 12: We Have Momentum in Our On-Demand Business
We Have Momentum in Our On-Demand Business • Expect $100M in on-demand revenue this year, driven largely by New HVAC sales Expanding • Expanding partnership with Moen to 7 additional states Revenue • Marketing AHS home warranties through Streams partnerships, such as AARP 12
Slide 13: Retention Rate At Record High 77.7%
Retention Rate At Record High 77.7% • Retention rates have improved 150 basis points to record high 77.7% in Q3 2024 • While channel mix shift is a large driver, our process improvements are helping: ✓ Improving customer service Renewals ✓ Expanding use of preferred contractors ✓ Moving more members
Slide 14: Introducing the American Home Shield App
Introducing the American Home Shield App Members can now… ▪ Quickly access their account and plan information ▪ Make and track their service requests ▪ Take advantage of special offers ▪ Manage their payment information Future app enhancements to come in early 2025 14
Slide 15: Third Quarter 2024 Financial Summary
Third Quarter 2024 Financial Summary ($ millions) Revenue Net Income Adjusted EBITDA(1) +3% +40% +29% 540 165 100 524 128 71 Q3 2023 Q3 2024 Q3 2023 Q3 2024 Q3 2023 Q3 2024 (1) See the Appendix accompanying this presentation for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to the nearest
Slide 16: Third Quarter 2024 Gross Profit Improved 14%
Third Quarter 2024 Gross Profit Improved 14% ($ millions) Gross Profit +14% 306 Gross Profit 268 Margin +550bps to record 57% Q3 2023 Q3 2024 Note: All comparisons versus the prior year period (Q3 2023) 16
Slide 17: Third Quarter 2024 Adjusted EBITDA
Third Quarter 2024 Adjusted EBITDA ($ millions) Three Months Ended September 30, 2023 $128 Impact of change in revenue(2) 17 Contract claims costs(3) 21 Q3 Adjusted Sales and marketing costs 1 General and administrative costs (3) EBITDA(1) Interest and net investment income 1 +29% Other 1 Three Mont
Slide 18: Year-to-Date Q3 2024 Cash Flow
Year-to-Date Q3 2024 Cash Flow ($ millions) Nine Months Ended September 30, August YTD Free Cash Share Repurchases Flow(1) Net cash provided from 2024 2023 (used for): $119M $181M Operating Activities 212 139 Investing Activities (31) (23) Restricted Unrestricted Cash Cash Financing Activities (131)
Slide 19: Q4 2024 and FY 2024 Outlook
Q4 2024 and FY 2024 Outlook Q4 2023 Results Q4 2024 Outlook Revenue ($ millions) 366 ~367 Adjusted EBITDA ($ millions) (1)(2) 45 ~36 FY 2023 Results FY 2024 Outlook Revenue ($ billions) 1.78 ~1.83 Gross Profit Margin (%) 50 ~53 SG&A ($ millions) 581 ~605 Adjusted EBITDA ($ millions) (1)(2) 346 ~430
Slide 20: Q&A
Frontdoor Q&A
Slide 21: We've Executed What We Said We Would Do
We’ve Executed What We Said We Would Do 1 2 Focused on Customer Acquiring 2-10 Growth 3 4 Improved Retention Enhanced Margins Rates 5 6 Completed $400M Share Expanded On-Demand Repurchase Program 21
Slide 22: Appendix
Frontdoor Appendix
Slide 23: Q3 2024 Consolidated Results
Three Months Ended $ millions, except per share amounts September 30, 2024 2023 Better /(Worse) Q3 2024 Revenue $ 540 $ 524 $ 16 YOY Growth 3% Consolidated Gross Profit 306 268 38 % of revenue 56.6% 51.1% 547 pts Results Selling and administrative expenses 154 152 (2) Note: See elsewhere in this App
Slide 24: YTD 2024 Consolidated Results
Nine Months Ended $ millions, except per share amounts September 30, 2024 2023 Better /(Worse) YTD 2024 Revenue $ 1,461 $ 1,414 $ 47 YOY Growth 3% Consolidated Gross Profit % of revenue 806 55.2% 708 50.1% 508 pts 98 Results Selling and administrative expenses % of revenue 456 31.3% 439 31.1% (17) (
Slide 25: Net Income to Adjusted EBITDA Reconciliations
Net Income to Adjusted EBITDA Reconciliations Three Months Ended Nine Months Ended September 30, September 30, ($ millions) 2024 2023 2024 2023 Net Income $ 100 $ 71 $ 226 $ 163 Depreciation and amortization expense 10 $ 9 $ 28 $ 28 Restructuring charges 3 $ 5 $ 5 $ 6 Acquisition-related costs 3 $ —
Slide 26: Net Cash Provided from Operating Activities to Free Cash Flow Reconciliations
Net Cash Provided from Operating Activities to Free Cash Flow Reconciliations Three Months Ended Nine Months Ended September 30, September 30, ($ millions) 2024 2023 2024 2023 Net Cash Provided from Operating Activities $ 25 $ 28 $ 212 $ 139 Property additions (9) (8) (31) (23) Free Cash Flow $ 16 $