Slide 1: Second-Quarter 2023 Earnings Webcast
Second-Quarter 2023 Earnings Webcast August 2, 2023
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 2
Slide 3: Forward Looking Statements
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: Strong Second Quarter 2023 Results
• Revenue increased 7% to $523M • Gross profit margin increased Strong 840bps to 52% Second • Adjusted EBITDA(1) rose 57% to $121M Quarter 2023 • Repurchased $50M of stock through Results July • Raising our full-year outlook for Revenue, Adjusted EBITDA and Share Repurchases (1) See the Appendix acc
Slide 5: Significant Total Addressable Market; Near-Term Demand Remains Pressured
Significant Total Addressable Market; Near-Term Demand Remains Pressured 13M AHS Segment Opportunity 85M Owner 55M Homeowners Occupied Homes (Frontdoor, Inc 42M Segments) Frontdoor Brand Segments Opportunity 5 Source: 2022 US Census as of Jan. 31, 2023 and Frontdoor consumer segmentation study 2022
Slide 6: Improving Retention Rates Driving Renewals Channel
Improving Retention Rates Driving Renewals Channel • Customer retention rate increased 190 basis points to 76.3% in the second quarter • Renewals customer count increased to 1.55M despite higher price • Taking actions to improve the customer experience and overall processes: o Improving customer eng
Slide 7: Constrained Real Estate Channel Outlook
Constrained Real Estate Channel Outlook • Existing Home Sales continue to decline • Home inventory remains extremely tight • Delayed transition to a more balanced buyer / seller market 7
Slide 8: Improving DTC Demand
Improving DTC Demand • Actions to improve near-term demand: o Optimizing discounting strategy o Increasing marketing investment • Developing longer-term strategy o Update and enhance the AHS brand o Re-evaluate core value proposition o Engage consumers in new and compelling ways 8
Slide 9: Frontdoor Brand Awareness Exceeding Expectations
Frontdoor Brand Awareness Exceeding Expectations • Frontdoor Pro on-demand revenue higher than anticipated • Nearly 950,000 app downloads • Consistently positive customer experience • Building this level of brand awareness cost less than expected; as a result: o Reallocating ~$20M of marketing spend
Slide 10: Second Quarter 2023 Revenue
Second $523M Quarter Q2 Revenue 2023 • Increased 7% compared to prior year period results Revenue o ~9% increase from price o ~2% decline from lower volume 10
Slide 11: Second Quarter 2023 Revenue Mix
• Renewals revenue increased 15% due to improved price realization Second Quarter • Real estate revenue decreased 25% due to lower volume 2023 • Direct-to-Consumer revenue Revenue decreased 11% due to lower Mix volume • Other revenue increased 32% due to an increase in on-demand home services 11
Slide 12: $270M Gross Profit
$270M Gross Profit Second • Gross profit margin increased 840 basis points to 52% Quarter • Higher realized price and process 2023 Gross improvement initiatives Profit • Lower incidence rate, primarily driven by favorable weather • Inflation improved to ~9% vs. ~25% in the prior year period 12
Slide 13: Second Quarter 2023 Net Income & Adjusted EBITDA
Second Quarter $70M $121M 2023 Net Net Income(1) Adjusted EBITDA(1) Income & • Increased $36M • Increased $44M Adjusted over prior year over prior year period period EBITDA (1) See the Appendix accompanying this presentation for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to the nearest
Slide 14: Second Quarter Adjusted EBITDA Bridge
Three Months Ended June 30, 2022 $77 Second Impact of change in revenue(2) 42 Quarter Contract claims costs(3) 18 2023 Sales and marketing costs (16) Adjusted General and administrative costs (6) EBITDA(1) Interest and net investment income 4 Bridge Customer Service Costs 3 Other (1) Three Months En
Slide 15: Q2 2023 Cash Flow
Six Months Ended June 30, Net cash provided from 2023 2022 (used for): Q2 2023 Operating Activities $112 $94 Cash Flow Investing Activities (15) (19) Financing Activities (44) (69) Cash increase during the $52 $6 period 15
Slide 16: Free Cash Flow and Cash Position
Free Cash $96M $344M Flow and Free Cash Flow(1) Total Cash Cash • Increasing • Restricted net Position FY share assets of $158M repurchase target to • Unrestricted ~$100M cash of $186M (1) See the Appendix accompanying this presentation for a reconciliation of Free Cash Flow, a non-GAAP measure, to
Slide 17: Q3 2023 and FY 2023 Outlook
Q3 2023 and FY 2023 Outlook Q3 2023 Outlook Q3 2022 Results Low High Revenue ($ millions) 484 500 515 Adjusted EBITDA ($ millions) (1)(2) 79 80 90 FY 2022 Results FY 2023 Outlook Revenue ($ billions) 1.66 1.73 1.75 Gross Profit Margin (%) 43 45.5% 47.5% SG&A ($ millions) 521 575 590 Adjusted EBITDA
Slide 18: Appendix
Appendix
Slide 19: Q2 2023 Consolidated Results
Three Months Ended Q2 2023 $ millions, except per share amounts 2023 June 30, 2022 Better /(Worse) Consolidated Revenue YOY Growth $ 523 $ 487 $ 36 7% Results Gross Profit % of revenue 270 51.7% 211 43.3% 59 840 pts Note: See elsewhere in this Appendix for a reconciliation of Adjusted Selling and ad
Slide 20: YTD 2023 Consolidated Results
Six Months Ended YTD 2023 $ millions, except per share amounts 2023 June 30, 2022 Better /(Worse) Consolidated Revenue YOY Growth $ 890 $ 838 $ 51 6% Results Gross Profit % of revenue 440 49.5% 355 42.3% 720 bps 85 Note: See elsewhere in this Appendix for a reconciliation of Adjusted Selling and adm
Slide 21: Net Income to Adjusted EBITDA Reconciliations
Net Income to Adjusted EBITDA Reconciliations Three Months Ended Six Months Ended June 30, June 30, ($ millions) 2023 2022 2023 2022 Net Income $ 70 $ 33 $ 91 $ 35 Depreciation and amortization expense 9 8 18 17 Restructuring charges — 12 1 12 Provision for income taxes 23 10 30 12 Non-cash stock-ba
Slide 22: Net Income to Adjusted EBITDA Reconciliations (Cont.)
Net Income to Adjusted EBITDA Reconciliations (Cont.) Three Months Ended Year Ended September 30, December 31, ($ millions) 2022 2021 2022 2021 Net Income $ 28 $ 76 $ 71 $ 128 Depreciation and amortization expense 8 8 34 35 Goodwill and intangibles impairment 14 — 14 — Restructuring charges 5 — 20 3
Slide 23: 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 Six Months Ended June 30, June 30, ($ millions) 2023 2022 2023 2022 Net Cash Provided from Operating Activities $ 52 $ 47 $ 112 $ 94 Property additions (8) (11) (15) (19) Free Cash Flow $ 44 $ 36 $ 96 $