Slide 1: Second-Quarter 2024 Earnings Webcast
Second-Quarter 2024 Earnings Webcast August 1, 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 news release 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 Q2 2024 Financial Performance
Strong Q2 2024 Financial Performance Revenue increased 4% to $542M Gross Profit Margin expanded 470 bps to a record 56% Adjusted EBITDA(1) grew 31% to $158M Free Cash Flow more than doubled to $91M Used $83M to repurchase 2.5M shares YTD through July (1) See the Appendix accompanying this presentati
Slide 5: Advancing Our Strategic Objectives
Advancing Our Strategic Objectives Our top priority: Grow our customer base 1. Increase home warranty sales 2. Continue to expand our on-demand business 3. Close the acquisition of 2-10 Home Buyers Warranty (1) See the Appendix accompanying this presentation for a reconciliation of Adjusted EBITDA,
Slide 6: 2-10 Acquisition Accelerates Growth
2-10 Acquisition Accelerates Growth Acquisition Near-Term Benefits Long-Term Impact 2-10 is a Leading More Customers Improves Long- Provider of Term Growth in Diversification Customer Base, New Home Revenue and Structural Synergies Earnings Warranties (NHSW) 6
Slide 7: On-Demand Business Exceeding Expectations
On-Demand Business Exceeding Expectations • Vision: A consolidated ecosystem for all things home – repair, replace, maintenance – thru access to our contractor network and virtual experts • New HVAC sales outperforming • Growing alternative revenue streams • New Moen partnership a great example of o
Slide 8: Retention Rates Continue to Perform Well
Retention Rates Continue to Perform Well Customer Retention Rates Retention Highlights: 76.3% 76.6% • Mix shift benefit • Improving customer engagement 74.9% • Improving customer service 74.4% • Expanding use of Preferred Contractors 2021 Q2 2022 Q2 2023 Q2 2024 Q2 • Increased customers on autopay 8
Slide 9: Cyclical Issues Impacting Home Warranty Sales
Cyclical Issues Impacting Home Warranty Sales “Consumer confidence in U.S. falls in June as Americans fret about near term prospects” - Associated Press, 6-25-24 Macroeconomic challenges: “McDonald’s global same-stores fell for the first time in nearly four years as inflation- • Consumer sentiment i
Slide 10: Real Estate Channel Remains Challenged
Real Estate Channel Remains Challenged 2024 Projected Existing • Real estate market not improving Home Sales (in millions) • Expectations for 2024 existing home sales have declined from 4.7M to 3.9M 4.7 • Home prices continue to rise, mortgage 3.9 rates remain elevated, and inventory is below averag
Slide 11: Existing Home Sales: Worst Year since 1995
Existing Home Sales: Worst Year since 1995 1995 2023 National Association of Realtors 11 11
Slide 12: Real Estate Channel Remains Challenged
Real Estate Channel Remains Challenged 2024 Projected Existing • Real estate market not improving Home Sales (in millions) • Expectations for 2024 existing home sales have declined from 4.7M to 3.9M 4.7 • Home prices continue to rise, mortgage 3.9 rates remain elevated, and inventory is below averag
Slide 13: AHS Appeals to Multiple Age Groups
AHS Appeals to Multiple Age Groups Total AHS Members | May 2024 Gen Z 18-24 4.5% Gen Y / Millennials 25-34 15.6% 41% Gen Y / Millennials 35-44 21.0% Gen X 45-54 21.6% Gen X / Boomers 55-64 18.3% 59% Boomers 65-74 11.5% Boomers / Silent 75+ 7.4% Source: AHS Q1 Brand & Category Study, Clear Vantage Ma
Slide 14: AHS Appeals to Diverse Range of Incomes
AHS Appeals to Diverse Range of Incomes Total AHS Members | May 2024 Under $35K 9.6% $35K - 49K 8.1% 51% $50K - 74K 16.7% $75K - 99K 16.8% $100K - 149K 23.2% 49% $150K+ 25.8% Source: AHS Q1 Brand & Category Study, Clear Vantage May 2024 14
Slide 15: AHS Appeals to Various Races & Ethnicities
AHS Appeals to Various Races & Ethnicities Total AHS Members | May 2024 European White 54.8% 54.8% African American Black 20.2% 20.2% Hispanic Latino 13.5% 13.5% AsianAsian 6.2% 6.2% Uncoded Uncoded 1.8% 1.8% Other Other 3.5% 3.5% Source: AHS Q1 Brand & Category Study, Clear Vantage May 2024 15
Slide 16: Actions to Improve Home Warranty Sales
Actions to Improve Home Warranty Sales What have we done so far: Relaunched Brand: Brand relaunch is increasing consumer awareness and driving website traffic Discounting Strategy: Working to drive near- term demand What we are working on now: Moving to next phase of brand relaunch Improving
Slide 17: Sizable Growth Opportunities in Home Warranties
Sizable Growth Opportunities in Home Warranties • Large TAM for home warranties • Massive opportunity to educate homeowners • Favorable U.S. demographic trends • Drive demand through new services and technology We remain extremely positive on the long-term demand for home warranties Source: AHS Q1 B
Slide 18: Second Quarter 2024 Financial Summary
Second Quarter 2024 Financial Summary ($ millions) Revenue Net Income Adjusted EBITDA(1) +4% +32% +31% 542 92 158 523 70 121 Q2 2023 Q2 2024 Q2 2023 Q2 2024 Q2 2023 Q2 2024 (1) See the Appendix accompanying this presentation for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to the nearest
Slide 19: Second Quarter 2024 Gross Profit Improved 13%
Second Quarter 2024 Gross Profit Improved 13% ($ millions) Gross Profit +13% 306 Gross Profit Margin +470bps 270 to 56% Q2 2023 Q2 2024 Note: All comparisons versus the prior year period (Q2 2023) 19
Slide 20: Second Quarter 2024 Adjusted EBITDA
Second Quarter 2024 Adjusted EBITDA ($ millions) Three Months Ended June 30, 2023 $121 Impact of change in revenue(2) 17 Contract claims costs(3) 17 Sales and marketing costs 3 Q2 Adjusted Customer service costs - EBITDA(1) General and administrative costs (2) +31% Interest and net investment income
Slide 21: Second Quarter 2024 Cash Flow
Second Quarter 2024 Cash Flow ($ millions) Six Months Ended June 30, Restricted Unrestricted Cash Cash Net cash provided from 2024 2023 (used for): $167M $252M Operating Activities 187 112 Investing Activities (22) (15) Free Cash July YTD Share Flow(1) Repurchases Financing Activities (71) (44) Cash
Slide 22: Frontdoor has Strong Financial Position
Frontdoor has Strong Financial Position • #1: Grow: Target completing 2-10 acquisition in Q4 2024 $422M $340M • #2: Maintain strong financial profile: Pro forma net leverage ratio targeted 1.5x Net Debt / to be in the mid 2x range after the 2- EBITDA 10 acquisition 0.85x Net Debt / EBITDA • #3: Retu
Slide 23: Q3 2024 and FY 2024 Outlook
Q3 2024 and FY 2024 Outlook Q3 2024 Outlook Q3 2023 Results Low High Revenue ($ millions) 524 530 545 Adjusted EBITDA ($ millions) (1)(2) 128 130 140 FY 2023 Results FY 2024 Outlook Revenue ($ billions) 1.78 1.81 1.84 Gross Profit Margin (%) 50 51 SG&A ($ millions) 581 605 615 Adjusted EBITDA ($ mil
Slide 24: Investor Day Changing to February 27, 2025
Investor Day Changing to February 27, 2025 24
Slide 25: Executing On What We Said We Would Do
Executing On What We Said We Would Do • Explore Acquisitions: Acquiring 2-10 to accelerate growth • Drive Customer Growth: Relaunched AHS brand to gain more customers • Position Real Estate Channel: Preparing for expected turnaround • Improve Retention Rates: Continuing to improve processes • Expand
Slide 26: FTDR is Significantly Under-Valued
FTDR is Significantly Under-Valued 20.0x ~18x 15.0x Average: ~12x Frontdoor 10.0x ~9x peak multiple 5.0x Frontdoor current multiple 0.0x Sep-18Jan-19May-19Aug-19Dec-19Apr-20 Jul-20 Nov-20Mar-21 Jul-21 Oct-21Feb-22Jun-22Sep-22Jan-23May-23Aug-23Dec-23Apr-24 Jul-24 Source: FactSet as of 7/29/2024; anal
Slide 27: Q&A
Frontdoor Q&A
Slide 28: Appendix
Frontdoor Appendix | a | i ; Pr J 4 | | — ee iE
Slide 29: Q2 2024 Consolidated Results
Three Months Ended $ millions, except per share amounts June 30, Q2 2024 Revenue $ 2024 542 $ 2023 523 Better /(Worse) $ 19 Consolidated YOY Growth Gross Profit 306 270 4% 35 Results % of revenue Selling and administrative expenses 56.4% 167 51.7% 162 470 pts (5) Note: See elsewhere in this Appendix
Slide 30: YTD 2024 Consolidated Results
Six Months Ended $ millions, except per share amounts June 30, YTD 2024 Revenue $ 2024 920 $ 2023 890 Better /(Worse) $ 31 Consolidated YOY Growth Gross Profit 500 440 3% 60 Results % of revenue Selling and administrative expenses 54.3% 302 49.5% 287 480 pts (15) Note: See elsewhere in this Appendix
Slide 31: Net Income to Adjusted EBITDA Reconciliations
Net Income to Adjusted EBITDA Reconciliations Three Months Ended Six Months Ended June 30, June 30, ($ millions) 2024 2023 2024 2023 Net Income $ 92 $ 70 $ 126 $ 91 Depreciation and amortization expense 9 $ 9 $ 18 $ 18 Restructuring charges 1 $ — $ 1 $ 1 Acquisition-related costs 6 $ — $ 6 $ — Provi
Slide 32: Net Income to Adjusted EBITDA Reconciliations (Cont.)
Net Income to Adjusted EBITDA Reconciliations (Cont.) Three Months Ended Twelve Months Ended September 30, December 31, ($ millions) 2023 2022 2023 2022 Net Income $ 71 $ 28 $ 171 $ 71 Depreciation and amortization expense 9 8 37 34 Goodwill and intangibles impairment — 14 — 14 Restructuring charges
Slide 33: 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) 2024 2023 2024 2023 Net Cash Provided from Operating Activities $ 103 $ 52 $ 187 $ 112 Property additions (12) (8) (22) (15) Free Cash Flow $ 91 $ 44 $ 164
Slide 34: Net Debt and TTM Adjusted EBITDA Reconciliation
Net Debt and TTM Adjusted EBITDA Reconciliation Three Months Ended June 30, (in millions) 2024 2023 Term Loan A $ 221 $ 234 Term Loan B 369 372 Total Debt - Face Value (A) 590 606 Discounts and issuance costs (4) (5) Total Debt - Book Value 586 601 LCs Outstanding (B) 2 2 Available cash (C) 252 186