Frontdoor, Inc. · NASDAQ:FTDR
Frontdoor — Q3 2023 Earnings Presentation
25 slides from Frontdoor's earnings presentation, Nov 1, 2023
Slide 1: Third-Quarter 2023 Earnings Webcast
Third-Quarter 2023 Earnings Webcast November 1, 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 Third Quarter 2023 Results
• Revenue increased 8% to $524M Strong Third • Gross profit margin increased Quarter 2023 760bps to 51% Results • Adjusted EBITDA(1) increased $48M to $128M • Raising full-year Revenue, Adjusted EBITDA and Share Repurchase outlook (1) See the Appendix accompanying this presentation for a reconciliat
Slide 5: Revitalizing Brand Strategy to Unlock Growth
Revitalizing Brand Strategy to Unlock Growth Home Warranties On-Demand Home Services Brand Update: Brand Update: • Relaunching brand early next year to drive • Engagement through video chat with an consumer awareness expert, maintenance, repairs and upgrades Home Warranty Value Proposition: On-Deman
Slide 6: Growing DTC Demand Remains Top Priority
Growing DTC Demand Remains Top Priority • Macroeconomic conditions impacting demand for home warranties • 2023 Actions: • Increased marketing spend to drive brand awareness • Evolving discounting strategy to maximize conversion • 2024 Strategy: • Relaunching AHS brand early next year • Supported wit
Slide 7: Challenging Real Estate Market Impacting Sales
Challenging Real Estate Market Impacting Sales • Existing home sales Existing Home Sales (M) continue to decline 6.1 5.0 • Home inventory remains tight 4.0 • Real Estate Channel sales continues trending in line with home 2021 2022 2023E sales Source: September 2023 Monthly National Association of Re
Slide 8: Renewal Channel Remains Strong
Renewal Channel Remains Strong • Customer retention rate increased 90 basis points to 76.2% in the third quarter • Renewal customer count remained flat at 1.55M despite higher price • Improving onboarding and increasing engagement 8
Slide 9: Frontdoor Brand Monetization Strategy
Frontdoor Brand Monetization Strategy Frontdoor Brand Has Two Key Components On-demand access to experts, repairs, An app that offers video chats with an maintenance services and systems and expert, how-to content and member appliance upgrades discounts Three Categories of Paid Services Repairs Main
Slide 10: Third Quarter 2023 Revenue
Third $524M Quarter Q3 Revenue 2023 • Increased 8% compared to prior year period results Revenue • ~10% increase from price • ~2% decline from lower volume 10
Slide 11: Third Quarter 2023 Revenue Mix
• Renewal revenue increased 14% due to improved price realization Third • Real estate revenue decreased Quarter 23% due to lower volume 2023 • Direct-to-Consumer revenue decreased 16% due to lower Revenue volume Mix • Other revenue increased $11M due to an increase in on-demand home services 11
Slide 12: $268M Gross Profit Third Quarter 2023
$268M Gross Profit Third • Gross profit margin increased 760 basis points to 51% Quarter • Higher realized price 2023 Gross • Process improvement initiatives Profit • Favorable cost development • Transition to higher service fees • Lower number of service requests per customer 12
Slide 13: Third Quarter 2023 Net Income & Adjusted EBITDA
Third Quarter $71M $128M 2023 Net Net Income Adjusted EBITDA(1) Income & • Increased $43M • Increased $48M 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 U.S
Slide 14: Third Quarter Adjusted EBITDA Bridge
Three Months Ended September 30, 2022 $79 Third Impact of change in revenue(2) 37 Quarter Contract claims costs(3) 22 2023 Sales and marketing costs (10) Adjusted Customer service costs 1 EBITDA(1) General and administrative costs (4) Bridge Interest and net investment income 4 Other (2) Three Month
Slide 15: Q3 2023 Cash Flow
Nine Months Ended September 30, Net cash provided from 2023 2022 (used for): Q3 2023 Operating Activities 139 80 Cash Flow Investing Activities (23) (25) Financing Activities (88) (74) Cash increase/(decrease) 28 (19) during the period 15
Slide 16: Free Cash Flow and Cash Position
Free Cash $116M $320M Flow and Free Cash Flow(1) Total Cash Cash • $75 million of • Restricted net Position share assets of $152M repurchases YTD through • Unrestricted September cash of $167M (1) See the Appendix accompanying this presentation for a reconciliation of Free Cash Flow, a non-GAAP meas
Slide 17: Consistent Capital Allocation Framework
Organic Investments to improve business / drive growth #1: Growth M&A to accelerate growth through Consistent acquisition Capital #2: Maintain A Allocation Strong Financial Maintain appropriate liquidity and net leverage Framework Profile #3: Return Cash Use excess cash to buy back to Shareholders s
Slide 18: Q4 2023 and FY 2023 Outlook
Q4 2023 and FY 2023 Outlook Q4 2023 Outlook Q4 2022 Results Low High Revenue ($ millions) 339 350 360 Adjusted EBITDA ($ millions) (1)(2) 33 20 30 FY 2022 Results FY 2023 Outlook Revenue ($ billions) 1.66 1.765 1.775 Gross Profit Margin (%) 43 48.0 49.5 SG&A ($ millions) 521 580 590 Adjusted EBITDA
Slide 19: Third-Quarter 2023 Earnings Webcast
Third-Quarter 2023 Earnings Webcast November 1, 2023
Slide 20: Appendix
Appendix
Slide 21: Q3 2023 Consolidated Results
Three Months Ended Q3 2023 $ millions, except per share amounts 2023 September 30, 2022 Better /(Worse) Consolidated Revenue YOY Growth $ 524 $ 484 $ 40 8% Results Gross Profit % of revenue 268 51.1% 210 43.5% 57 764 pts Note: See elsewhere in this Appendix for a reconciliation of Adjusted Selling a
Slide 22: YTD 2023 Consolidated Results
Nine Months Ended YTD 2023 $ millions, except per share amounts 2023 September 30, 2022 Better /(Worse) Consolidated Revenue YOY Growth $ 1,414 $ 1,322 $ 91 7% Results Gross Profit % of revenue 708 50.1% 565 42.7% 143 734 bps Note: See elsewhere in this Appendix for a reconciliation of Adjusted EBIT
Slide 23: Net Income to Adjusted EBITDA Reconciliations
Net Income to Adjusted EBITDA Reconciliations Three Months Ended Nine Months Ended Septem ber 30, Septem ber 30, ($ millions) 2023 2022 2023 2022 Net Income $ 71 $ 28 $ 163 $ 63 Depreciation and amortization expense 9 8 28 25 Goodwill and intangibles impairment — 14 — 14 Restructuring charges 5 5 6
Slide 24: Net Income to Adjusted EBITDA Reconciliations (Cont.)
Net Income to Adjusted EBITDA Reconciliations (Cont.) Three Months Ended Year Ended Decem ber 31, Decem ber 31, ($ millions) 2022 2021 2022 2021 Net Income $ 8 $ 7 $ 71 $ 128 Depreciation and amortization expense 9 8 34 35 Goodwill and intangibles impairment — — 14 — Restructuring charges 2 1 20 3 P
Slide 25: 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) 2023 2022 2023 2022 Net Cash Provided from Operating Activities $ 28 $ (14) $ 139 $ 80 Property additions (8) (10) (23) (30) Free Cash Flow $ 20