Frontdoor delivered a first quarter that exceeded Wall Street’s expectations, with management attributing the outperformance to continued growth in its member base, operational improvements, and product innovation. CEO William Cobb highlighted the company’s ability to increase direct-to-consumer (DTC) members despite a challenging housing market and broader macroeconomic pressures. Initiatives such as targeted marketing for the American Home Shield brand and enhanced digital engagement, including app-based video chat, were emphasized as key contributors to the positive momentum.
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Frontdoor (FTDR) Q1 CY2025 Highlights:
- Revenue: $426 million vs analyst estimates of $417.2 million (12.7% year-on-year growth, 2.1% beat)
- Adjusted EPS: $0.64 vs analyst estimates of $0.38 (69.5% beat)
- Adjusted EBITDA: $100 million vs analyst estimates of $76.22 million (23.5% margin, 31.2% beat)
- The company slightly lifted its revenue guidance for the full year to $2.04 billion at the midpoint from $2.02 billion
- EBITDA guidance for the full year is $510 million at the midpoint, above analyst estimates of $458.8 million
- Operating Margin: 14.1%, in line with the same quarter last year
- Home Service Plans: 2.1 million, up 140,000 year on year
- Market Capitalization: $4.26 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Frontdoor’s Q1 Earnings Call
• Mark Hughes (Truist Securities) asked about the impact of tariffs and new refrigerant standards on HVAC operations. CEO William Cobb explained that while some suppliers are raising prices, supply chain flexibility and built-in guidance conservatism should mitigate risks. • Jeffrey Schmitt (William Blair) questioned the sustainability of the pulsed promotional pricing strategy in DTC. Cobb noted that shorter, targeted promotions are proving effective and sustainable, with member growth taking priority over short-term revenue per unit. • Sergio Segura (KeyBanc) inquired about the drivers of the quarter’s outperformance. CFO Jessica Ross pointed to a mix of stronger renewals and non-warranty revenue, with margin upside from lower-than-expected contract claims costs. • Daniel Pfeiffer (JPMorgan) asked for details on raised gross margin guidance and inflation assumptions. Ross clarified that first half margin improvements were carried into full-year guidance, but mid-single-digit inflation and tariff uncertainty have been factored into the back half outlook. • Isaac Sellhausen (Oppenheimer, for Ian Zaffino) sought clarity on real estate channel growth and retention drivers. Cobb attributed growth mainly to the 2-10 acquisition and highlighted ongoing retention initiatives, including digital engagement and expanded calling programs.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) continued growth and retention of the member base as marketing and digital engagement strategies mature, (2) execution on scaling non-warranty programs like HVAC and Moen partnerships, and (3) management’s ability to protect margins in the face of inflation and tariff-related pressures. Additional attention will be paid to the progress of 2-10 integration and any shifts in the housing market landscape.
Frontdoor currently trades at $57.42, up from $41.09 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).
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