Slides
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2025 Investor DayFebruary 27, 2025
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Today’s Presenters 2 Bill CobbChairman & ChiefExecutive Officer Ray TongVice President, Pricing & AnalyticsGeorge GuastelloVice President, Strategy & Integration Kathy CollinsChief RevenueOfficerEvan IversonChief Operating OfficerJessica RossChief Financial Officer Matt DavisVice President, Investor Relations & Treasurer
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Matt DavisVice President, Investor Relations & Treasurer 3
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ForwardLookingStatementsThis 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 about Frontdoor’s plans, strategies and prospects. Forward-looking statements can be identified by the use of forward-looking terms such as “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project,” “will,” “shall,” “would,” “aim,” or other comparable terms. These forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Such risks and uncertainties include, but are not limited to: changes in macroeconomic conditions, including inflation, tariffs and global supply chain challenges and changing interest rates, especially as they may affect existing or new home sales, consumer confidence, labor availability or our costs; our ability to successfully implement our business strategies; the ability of our marketing efforts to be successful and cost-effective; our dependence on our first-year direct-to-consumer and real estate acquisition channels and our renewal channel; changes in the source and intensity of competition in our market; our ability to attract, retain and maintain positive relations with third-party contractors and vendors; increases in parts, appliance and home system prices, and other operating costs; changes in U.S. tariffs or import/export regulations; our ability to attract and retain qualified key employees and labor availability in our customer service operations; our dependence on third-party vendors, including business process outsourcers, and third-party component suppliers; cybersecurity breaches, disruptions or failures in our technology systems; our ability to protect the security of personal information about our customers; compliance with, or violation of, laws and regulations, including consumer protection laws, or lawsuits or other claims by third parties, increasing our legal and regulatory expenses; weather, including adverse conditions, Acts of God and seasonality, along with related regulations; our ability to underwrite risks accurately and to charge adequate prices to builder members, as well as our ability to effectively re-insure a large portion of those risks; the availability of reinsurance to manage a substantial portion of our potential loss exposure for our new home structural warranty business; evolving corporate governance and disclosure regulations and expectations; our ability to protect our intellectual property and other material proprietary rights; negative reputational and financial impacts resulting from acquisitions or strategic transactions; a requirement to recognize impairment charges; third-party use of our trademarks as search engine keywords to direct our potential customers to their own websites; inappropriate use of social media by us or other parties to harm our reputation; special risks applicable to operations outside the United States by us or our business process outsource providers; risks related to our acquisition of 2-10 Home Buyers Warranty (the “2-10 HBW Acquisition”), including the risk that the 2-10 HBW Acquisition may not achieve its intended results; any liabilities, losses, or other exposures for which we do not have adequate insurance coverage, indemnification, or other protection; increase in our indebtedness as a result of financing the 2-10 HBW Acquisition; a return on investment in our common stock is dependent on appreciation in the price; inclusion in our certificate of incorporation a forum selection clause that could discourage an acquisition of our company or litigation against us and our directors and officers; the effects of our significant indebtedness, our ability to incur additional debt and the limitations contained in the agreements governing such indebtedness; increases in interest rates increasing the cost of servicing our indebtedness and counterparty credit risk due to instruments designed to minimize exposure to market risks; increased borrowing costs due to lowering or withdrawal of the credit ratings, outlook or watch assigned to us or our credit facilities; and our ability to generate the significant amount of cash needed to fund our operations and service our debt obligations. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of new markets or market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. For a discussion of other important factors that could cause Frontdoor’s results to differ materially from those expressed in, or implied by, the forward-looking statements included in this document, refer to the risks and uncertainties detailed from time to time in Frontdoor’s periodic reports filed with the SEC, including the disclosure contained in Item 1A. Risk Factors in our 2024 Annual Report on Form 10-K filed with the SEC, as such factors may be updated from time to time in Frontdoor’s periodic filings with the SEC. Except as required by law, Frontdoor does not undertake any obligation to update or revise the forward-looking statements to reflect new information or events or circumstances that occur after the date of this presentation or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review Frontdoor’s filings with the SEC, which are available from the SEC’s EDGAR database at sec.gov, and via Frontdoor’swebsite at frontdoorhome.com. Non-GAAP Financial Measures and Other NotesTo supplement Frontdoor’s results presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), we have disclosed the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, and Unrestricted Cash. We define "Adjusted EBITDA" as net income before: depreciation and amortization expense; goodwill and intangibles impairment; restructuring charges; acquisition-related costs; provision for income taxes; noncash stock-based compensation expense; interest expense; loss on extinguishment of debt; and other non-operating expenses. We define “Adjusted EBITDA Margin” as the ratio between Adjusted EBITDA and revenue. We define “Free Cash Flow” as net cash provided from operating activities less property additions. Free Cash Flow is not a measurement of our financial performance or liquidity under U.S. GAAP and does not purport to be an alternative to net cash provided from operating activities or any other performance or liquidity measures derived in accordance with U.S. GAAP . We define “Unrestricted Cash” as cash not subject to third-party restrictions. For additional information related to our third-party restrictions, see “Liquidity and Capital Resources — Liquidity” under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K filed with the SEC. See the Appendix attached hereto for additional information and reconciliations of such non-GAAP financial measures. Management believes these non-GAAP financial measures provide useful supplemental information for its and investors’ evaluation of Frontdoor’s business performance and are useful for period-over-period comparisons of the performance of Frontdoor’s business. While we believe these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP . In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies. Amounts presented in this presentation may not sum due to rounding. © 2025 Frontdoor, Inc. All rights reserved. The following terms, which may be used in this presentation, are trademarks of Frontdoor, Inc. and its subsidiaries: Frontdoor®, American Home Shield®, HSATM, OneGuard®, Landmark Home Warranty®, ProConnect®, Streem®, 2-10 HBW®, and related logos and designs. All other trademarks used herein are the property of their respective owners. 4
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Investor Relations 5 IR@frontdoorhome.com 901-701-5199
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Bill CobbChairman & Chief Executive Officer 6
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In 2022, Frontdoor was at an inflection point… 7 7
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In 2022, Frontdoor was at an inflection point… 8 •In a very challenging macro-economic environment 8
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In 2022, Frontdoor was at an inflection point… 9 •In a very challenging macro-economic environment•Membership in decline 9
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In 2022, Frontdoor was at an inflection point… 10 •In a very challenging macro-economic environment•Membership in decline•Margins at historic lows 10
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In 2022, Frontdoor was at an inflection point… 11 •In a very challenging macro-economic environment•Membership in decline•Margins near historic lows•Pricing actions not fully implemented 11
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In 2022, Frontdoor was at an inflection point… 12 12 •In a very challenging macro-economic environment•Membership in decline•Margins near historic lows•Pricing actions not fully implemented•Need for process improvement and business transformation initiatives
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Number 1 strategic priority Member Growth13 Stabilized our core businessPositioned AHS for growth Now seeing positive momentum in new member count
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We enhanced our margins… 43%2022 Gross Margin 14 54% 2024 Gross MarginAn All Time high!
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We improved retention rates… 75.7%2022 Retention Rate 15 78.5%2024 Retention RateAnother All Time High! Retention rates do not include 2-10.
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We explored strategic M&A… 16 Completed the acquisition of 2-10 Home Buyers Warranty•New Home Structural Warranty diversifies our business•Brings in more members, more revenue and more EBITDA
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We expanded our non-warranty business 17 $107M2024 Non-Warranty RevenueThere is More Runway Ahead!
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We returned excess cash to shareholders through share buybacks… 18 •Exhausted previous $400 million authorization •New 3-year $650 million authorization began in September•Over past three months, bought back ~$80 million of shares
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19 We did what we said we would do!
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$15 $20 $25 $30 $35 $40 $45 $50 $55 $60 The Street Believes in What We’re Doing 20 $57.17 $29.46$19.55$24.15 Up 137% since June 1, 2022June 1, 2022Dec. 23, 2022Mar. 2, 2023Investor Day Feb. 26,2025 Source: Closing price (NASDAQ: FTDR) on dates indicated.
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Today, Frontdoor, Inc. is a fundamentally different company 21 •Improved execution has stabilized the business… •Operating more efficiently•Financially strong with record gross margins•Laser-focused on our core business
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22 Frontdoor, Inc. is now positioned for long-term growth
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23 The Frontdoor, Inc. Vision
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Our Vision Today 24 •A full-service provider through home warranties and non-warranty services•Committed to sustainable unit and revenue growth •Providing solutions in a modern consumer-centric manner Home Protection, Repair, and Care, Realized through Home Warranty
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25 The Rest of Today’s Agenda…
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Ray TongVice President, Pricing & Analytics 26 Topics•Home warranty and how it works•Subscription-based business model•Model optimization using dynamic pricing
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George GuastelloVice President, Strategy & Integration 27 Topics•Home services industry insights•How Frontdoor is primed for growth •2-10 acquisition and business impact•How it all comes together to deliver our winning strategy
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Kathy CollinsChief Revenue Officer 28 Topics•Construct for warranty and non-warranty businesses•Value proposition and go-to-market strategy for DTC, real estate and renewals•Non-warranty opportunity
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Evan IversonChief Operating Officer 29 Topics•Our nationwide network of independent contractors•Enhancements to our customer service•Improving operations and increasing productivity•Leveraging technology to enhance our warranty and non-warranty businesses
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Jessica RossChief Financial Officer 30 Topics•4th quarter and full year 2024 financial performance•Full year 2025 and long-term outlook
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Ray TongVice President, Pricing & Analytics 31
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32 Home Warranty Overview
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Today’s Topics 33 •What a home warranty is•How a home warranty works•Home warranties address what will happen•The subscription-based model•Optimizing the model
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What a Home Warranty Is 34 •Contract to protect a homeowner from unexpected breakdowns•Covers systems and appliances•Repair or replace covered items that fail due to normal wear and tear
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What Is a Home Warranty? 35 Refrigerators Ranges/Ovens/Cooktops DoorbellsGarage Door Openers Water Heaters Clothes Dryers Cooling Systems Installed Instant Hot/Cold Water DispensersDishwashers PlumbingElectrical Ceiling Fans Clothes Washers Heating Systems Built-in Microwave Ovens Garbage Disposals Ductwork
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How a Home Warranty Works 36 1 2345Member chooses coverage plan and pays monthly or annual fee Member requests service and pays Trade Service FeeWe assignan independentcontractorCovered item breaks We cover the repair or replacement
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Home Warranty is a High Engagement Product 37Source: Insurance Information Institute and management estimates. American Home Shield service request frequency represents approximate frequency of 2024 service requests. Home warranty covers what will happen.Insurance covers what might happen. < 2%< 2%2%6%12% ~200% Title InsuranceTerm LifeInsuranceAuto WarrantyHome InsuranceAuto InsuranceAmerican HomeShield Annual Claims Frequency
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Home Warranty is a High Engagement Product, Driving High Renewal Rate 38Source: Based on 2024 renewal rates. 1st Year AcquisitionRenewals Real EstateRenews at 29% Renews at 79%Direct to ConsumerRenews at 72%
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Renewal Rates Perform Well vs. Other Discretionary Subscriptions Such as Streaming 39Source: Antenna – State of Subscriptions (June 2024), Bloomberg, company annual reports. American Home Shield includes Direct-to-Consumer and Renewals but excludes Real Estate and excludes 2-10. Streaming annual renewal rates equivalents derived from monthly churn over 12 months. 79% 0%20%40%60%80%100% Peacock(HBO) MaxAmazonMusicApple OneDisney BundleSpotifyNetflixAHSSirius Renewal Rate Equivalent
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Home Warranty Price is Up to 7X Higher Than Streaming 40Source: Company websites, company annual reports. Note(s): Average Revenue Per Unit (ARPU) is shown if reportedly publicly. Streaming price ranges shows high, low, and mid-point according to company websites as of January 29, 2025. $0$20$40$60$80$100 Peacock(HBO) MaxAmazonMusicApple OneDisney BundleSpotifyNetflixAHSSirius Average Monthly Price
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High Engagement, High Renewal Rate Subscription That Homeowners Value 41See sources on prior slides. 79% 0%20%40%60%80%100% Peacock(HBO) MaxAmazon MusicApple OneDisney BundleSpotifyNetflixAHSSirius Renewal Rate Equivalent $0$20$40$60$80$100 Peacock(HBO) MaxAmazon MusicApple OneDisney BundleSpotifyNetflixAHSSirius Average Monthly Price
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HomeWarrantyPrice and TradeService FeeChangesOccur1/12th at a Time 42 2024 Financials2025 Financials2026 FinancialsJanFebMarAprMayJunJulAugSepOctNovDecJanFebMarAprMayJunJulAugSepOctNovDecJanFebMarAprMayJunJulAugSepOctNovDecJanFebMarAprMayJunJulAugSepOctNovDec HomeWarrantyPriceandTradeService FeeChangesOccur1/12thataTime
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Implications on Financial Results 43 •Pricing and trade service fee actions take nearly 24 months to fully take effect•1/12th dynamic creates stability and predictability in financial results•Home warranty units sold and pricing actions in 2024 drive almost half of home warranty revenue in 2025 2025 FinancialsJanFebMarAprMayJunJulAugSepOctNovDec Unit Sold / Renewed in 2024Unit Sold / Renewed in 2025
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44 Home Warranty Optimization
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Optimize for Total Lifetime Value, Balancing Member Count, Revenue, and Gross Profit 45Source: Management estimates completed in 2024. Gross ProfitRevenueMember Count Lifetime Value (LTV) Price elasticity is the key metric for making pricing decisions
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Direct to Consumer Has a High Renewal Rate and Lifetime Value Per Member 46Source: Management estimates as of 12/31/2024. 72% Renewal RateLower 1st Year Margin ~$1,200 Lifetime Value per Member
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Real Estate Has Higher 1st Year Margins, Driving an Attractive Lifetime Value 47Source: Management estimates as of 12/31/2024. 29% Renewal RateHigher 1st Year Margin ~$650 Lifetime Value per Member
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Delivering Value Through the Service Experience is a Key Driver of Price Elasticity 48 Service ExperienceMember ValueMoreInelastic We assign an independent contractor
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DifferentPriceElasticitybyChannelAllows Us toAchieveMultipleObjectives 49 RenewalsReal EstateDirect to Consumer More ElasticMore Inelastic MembersRevenueLifetime Value Gross ProfitRevenueLifetime Value
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DynamicPricingAlignsPricewithClaims RiskandMemberValue 50 Pricing Platform Machine Learning Pricing Models Dynamic Pricing External Data Internal Data
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Dynamic Pricing Uses Machine Learning to Accurately Estimate Risk and Value 51Source: Based on management analysis conducted in 2024. $0$200$400$600$800$1,000$1,200$1,400 $0$200$400$600$800$1,000$1,200$1,400 Actual Predicted Predicted vs. Actual Renewal Claims Cost per Member
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Dynamic Pricing Matches Price with Risk and Value for Each Member 52 Lower Risk Higher Risk Renewal Price and Predicted Cost, 2024 Expiring MembersPredicted CostRenewal Price Higher Price Lower Price
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Average Home Warranty Price Has Increased +6% Annually Since 2018 53Source: All home warranty brands from 2018-2024. $0 $200 $400 $600 $800 $1,000 2018201920202021202220232024 Average Home Warranty Price
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Home Warranty Renewal Rates Have Been Stable Since Spinoff 54Source: FTDR 10-K from 2018 through 2024 and management estimates. 0%20%40%60%80%100% 2018201920202021202220232024 Home Warranty Renewal Rate by ChannelDirect-to-ConsumerReal EstateRenewals
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Dynamic Pricing Enables Revenue and Gross Profit Growth While Maintaining Renewal Rates 55See sources on prior slides. $0$200$400$600$800$1,000 2018201920202021202220232024 Average Home Warranty Price 0%20%40%60%80%100% 2018201920202021202220232024 Renewal Rate by ChannelDirect-to-ConsumerReal EstateRenewals
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Trade Service Fees Are a Variation of Price Used to Optimize Home Warranty Gross Margin 56 RevenueCost of Services RenderedGross Profit Gross CostLess TradeService Fees Contractor, parts,and equipment invoices Collected from members when they place a service request Member requests service and pays Trade Service Fee
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We Intentionally Use Trade Service Fees to Mitigate Claims Cost Inflation 57Note: All home warranty brands are shown for 2018. All home warranty brands except for 2-10 are shown for 2024. 0%20%40%60%80%100% 2018 2024 Trade Service Fee Mix<= $75$85-$100$125
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Home Warranty Model Summary 58 •Home warranty is a high-engagement product with recurring revenue that provides stability and predictability in our financial results•The service experience drives retention from 1st Year into Renewals•Optimize for total lifetime value dollars, balancing member count, revenue, and gross profit
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George GuastelloVice President, Strategy & Integration 59
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Our Strategic Foundation for Success 60 Frontdoor’s leadership position in the Home Services Industry Our strategic growth priorities 2-10 acquisition as a strategic asset
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Home Services is an Attractive $500B+ Industry 61Source: 2023 and 2024 industry research including US census, company filings and reports, ClearVantage and IBISWorld. Management estimates. Ongoing demand for repairs, maintenance and improvements $500B+ Total Addressable Market 87MOwner-Occupied U.S. Homes 132MOccupied U.S. Homes Need for technical expertise to deliver servicesFrontdoor is uniquely positioned to lead and create value for homeowners and investors
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Home WarrantyCategory 62 A Big Growth Opportunity•~$4 billion home warranty category•~5 million home warranty customers•A largely underpenetrated and highly profitable opportunity 5MWarranty Customers 87MOwner-Occupied U.S. Homes Source: 2023 and 2024 industry research including US census, company filings and reports, ClearVantage and IBISWorld. Management estimates.
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Frontdoor is the Clear Leader in the Untapped and Highly Profitable Home Warranty Category 63Source: ClearVantage February 2024 and management estimates based on 2023 data. Category share is based on revenue, member count and independent contractor count as of December 31, 2024. Company A Company B Company C Company DCompany EOther small and regional players Estimated category share by brand (% category revenue as of 2023) •2 million+ members ~17,000 independent contractorsConsistent, recurring, predictable revenue model Frontdoor~46%
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Non-Warranty Services – A Large Addressable Category 64 Transactional 132MOccupied U.S. Homes 25%Home Repair & Replacement55%Home Improvement 20%Home Maintenance Source: 2023 and 2024 industry research including US census, company filings and reports, ClearVantage and IBISWorld. Management estimates. Doesn’t require a subscription Nearly $250B repair, replacement & maintenance revenue
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Non-Warranty Category is Fragmented with Many Challenges65Source: 2023 and 2024 independent research. Analysis of online consumer feedback, including Google reviews, Better Business Bureau ratings, and Yelp, as well as ratings from third-party industry review sites. Unreliable ServiceService Quality IssuesNegative Feedback
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Non-Warranty Competitors Continue to Operate Unprofitably – Two Examples 66Source: Public company filings and independent research. $1,359M -$40M2023 Revenue2023 Net Income2023 Revenue2023 Net Income $430M -$134M Frontdoor is Positioned to Win in the Non-Warranty Space Company ACompany B
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Frontdoor Has Key Advantages in the Non-Warranty Category 67 2M+ members minimize acquisition costs Minimal costs to scale existing contractor networkBrand awareness keeps us top of mind
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68 Frontdoor will accelerate Non-Warranty revenue offerings to existing Home Warranty Members As our member base increases, so does our opportunity to drive non-warranty growth
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69 Our Strategic Growth Priorities
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Our Path Forward is Laser Focused on 3 Core Priorities 70 Grow and Retain New Warranty MembersScale Non-Warranty RevenueOptimize the Integration of 2-10
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71 •More members +•More distribution•Diversifies revenue stream•Synergies
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A Leading Provider of Home Warranties 72 Directly aligns with our core warranty business Available in 43 StatesStable, ~40-year business
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Home Warranty Growth2-10 provides strong alignment with Frontdoor’s strategic priorities 73 170K+ Home Warranty members As of December 31, 2024.. Real Estate, DTC and Renewals channelsAttractive Recurring RevenueIncreased Scale
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A New Home Structural Warranty Offers Home Builders a Way to Mitigate Post-Construction Risks 74Source: 2023 and 2024. Company estimates. Penetration is a measure of New Home enrollments compared to total new single-family homes sold, reported monthly by the U.S. Census Bureau. ~1 in 5 new homes Up to 10-Year protection19,000 home buildersAvailable in 48 States
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New Home Structural Warranty Coverage 75 1 Workmanship Coverage 2 Home Systems Coverage 10Structural Defects CoverageBuilder Financial ResponsibilityInsurance Coverage Year Year Year
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Distribution for Warranty and Non-Warranty 76Includes homes covered by structural and home warranties as of December 31, 2024. ; Access to 1M+ homes 19K home buildersNew sales channel for home warranties and non-warranty services
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Portfolio Diversification 772-10 fiscal year 2024 results. ~$500 avg cost Sales of NHSW through Field and Inside Sales Associates ~88% of revenue is from repeat builders2-10’s NHSW diversifies into an attractive adjacent category
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We will Leverage Frontdoor’s Proven Expertise and Infrastructure to Drive Efficiencies and Unlock Substantial Synergies 78 $30M+By 2028 $10Min 2025 Expected Synergies
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2-10 Investment Synergies and Valuation 79*This financial measure is a non-GAAP measure. Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure and the Appendix for a reconciliation to the nearest GAAP financial measure. 2024 Adjusted EBITDA*:$45M2024 Revenue:$191M$585M Purchase Price 8x or Lower Synergized Adjusted EBITDA* by 2028 $30M+ Run-Rate Synergies+
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Frontdoor is Primed for Long-term Growth 80 Big opportunity in the underpenetrated home warranty category Will leverage our scale, brand awareness and operating model to grow warranty and non-warranty businessesScaled subscription-based model delivers consistent, predictable, recurring revenue Acquisition of 2-10 gives us even more momentum
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Kathy CollinsChief Revenue Officer 81
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Today’s Topics 82 •Business Framework for Warranty and Non-Warranty•Warranty: American Home Shield•Value Proposition and Go-to-Market•Four Growth Strategies•Brand Health and Campaign Results•Non-Warranty•Scope and Definition•Business Overview and Updates
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Simplified Go-to-Market Construct 83 Warranty SolutionsNon-Warranty Solutions FRONTDOOR, INC. •Core business•Recurring revenue•More transactional•Exists to grow share of wallet with members
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Frontdoor, Inc. Warranty Brands 84 Warranty SolutionsNon-Warranty Solutions FRONTDOOR, INC.
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85 21% Unaided Brand Awareness Twice as high as our nearest competitorAll Time HighSource: Q3 2024 AHS brand study conducted by ClearVantage.
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86 AHS Has the Largest Network of Independent Contractors
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87 Our Members Trust AHS to…•Provide expertise•Restore their systems & appliances•Keep their homes running Source: 5-Star member survey, Oct-Dec 2024.
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Peace of Mind88Source: AHS Welcome Survey: July 2, 2024 – August 20, 2024. “it’s just a safety precaution, because you never know. It gives me that peace of mind.” “it’s a relief not to have to worry about a big expense. It’s peace of mind.” “They give me peace of mind. It just relieves the stress and worry.” “It does give me that peace of mind that if something major happens, it’s just a service call.”
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Peace of Mind89Source: AHS Welcome Survey: July 2, 2024 – August 20, 2024. 48% ListAs the Primary Reason for Purchase
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AHS Covers Up to 29 Systems and Appliances 90 Refrigerators Ranges/Ovens/Cooktops DoorbellsGarage Door Openers Water Heaters Clothes Dryers Cooling Systems Installed Instant Hot/Cold Water DispensersDishwashers PlumbingElectrical Ceiling Fans Clothes Washers Heating Systems Built-in Microwave Ovens Garbage Disposals Ductwork
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What’s on Consumers’ Minds 91Source: Bankrate: https://www.bankrate.com/banking/savings/emergency-savings-survey/, September 2024 62%of Americans say they’re behind on savings Nearly1 in 5had no savings at the start of 2024 and still have none “It’s the not knowing that makes home ownership a challenge.”
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Consumer Prioritization of Home Warranty Benefits 92 1Protection from significant and costly failures2Breadth of coverage across systems & appliances
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HEATING UNITUp to $5,600 REFRIGERATORUp to $1,800 Potential Cost of Repairs or Replacement 93Source: Repair/replacement cost is the eightieth percentile as reported in a nationwide survey of homeowners conducted in 2024 by ClearVantage for American Home Shield. AC UNITUp to $6,000 WATER HEATERUp to $2,000 Without a Warranty
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94 AHS Value Proposition •Protection•Peace of Mind•Cost Savings
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95 New Home Warranty Member Acquisition Our No. 1 Priority
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New Member Acquisition 2Primary Ways of Reaching Potential Members 96 Direct to Consumer Real Estate
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Go-to-MarketStrategy 97 Direct to Consumer •We pioneered the DTC channel two decades ago•Strong value proposition for existing homeowners•Marketed directly to consumers through digital/performance, broadcast, direct mail and other channels•DTC is an investment in the first year, renews at 72% at the end of Year One, and then is profitable in the second year and beyondSource: Management analysis as of 12/31/2024.
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Direct to Consumer >60%of New Members 98 61%58%54%49%42%39%37% 39%42%46% 63%61%58%51% New Member Mix Shift: RE1 vs DTC1 Source: Management analysis.
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Macroeconomic Factors 99Source: Wall Street Journal, “The Mood of the American Consumer is Souring,” Feb. 7, 2025. •Consumer confidence•Inflation•Interest rates•Overall economic uncertainty
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Macroeconomic Factors 100 Despite the challenges, consumers are responding to the AHS marketing strategy•Compelling product news•New reasons to believe•Marketing leadership•Omni-channel media approach 2 In-Stream Scrollable Overlay CONFIDENTIAL DOCUMENT While watching the brand spot (:15 or :30), viewers see the overlay and scroll left/right with their remote to engage.IMAGE 1Spot NameFile NameLengthRotationXFAHS2023183_Bees_30_HD_Brand_16x9.mp4:30100% •The image of the woman represents the spot playing.•SPOT: Received
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Our DTC Member Count is Growing!In the second half of 2024, we grew member count by more than 5% 101Actual business results, Q2 - Q4 2024, excluding 2-10. ~260K ~270K ~280K Q2Q3Q4 2024 Ending Member Count by Quarter
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Acquisition and Retention Plans102
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Strategies to Grow Our Member Base 103 1 2 3 Deep DiscountingTargeting New Audiences Campaign and Media OptimizationProduct Differentiation4
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104 Deep Discounting1
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Deep Discounting: A Little History 105 •First ran 50% off in DTC in March 2023•Saw significant increases in both demand and conversion•Would discounting impact renewals?•Tested multiple pricing levels across a broad range
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Deep Discounting is Paying Off! 106 Renewal rates after 50% off are strong! Back to normal pricing & full profitability within ~ 2 years
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Why Do We Believe in Deep Discounts? 107 •Has driven incremental member count•Our retention rate is at an all time high•Maintaining margin strength and stability Deep Discounting is Working
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108 Targeting New Audiences2
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109 AHS is Winning
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110 54% Aided BrandAwareness 25% Higher Than Our Nearest CompetitorAll Time High Source: Q3 2024 AHS brand study conducted by ClearVantage.
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Messages Will be Tailored to the Audience and Stage within the Home Warranty Purchase Journey 111 Awareness 01020304 Consideration Evaluation/Lead Capture Intent/Purchase Top-of-Funnel: TV, Radio, Events Mid-Funnel: Digital Advertising Lower-Funnel: Paid Search, E-mail
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Quant Analysis Has Led Us to Two Audiences 112 Millennials HispanicMillennials
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113 We know Millennials are feeling the squeeze of homeownership •29 – 43 years old•Fastest growing cohort of home buyersSource: 2024 National Association of Realtors Home Buyers and Sellers Generational Trends
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Hispanic Millennials: A Growing Cohort 114Source: MRI/Simmons 2024 0%20%40%60% Boomer (60+) Gen X (44-59) Gen Z/Millennial (18-43) Age/Generation (Index vs. All Homeowners) 0%20%40%60%80% Asian Black/AA Hispanic White/Non Hispanic Race/Ethnicity(Index vs. All Homeowners)
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115 Campaign Media Optimization3
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116 Brand Does Matter
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PROPRIETARY & CONFIDENTIAL ‹#›AMERICAN HOME SHIELD The Sea of Sameness:●Save Money. Save Time!●Peace of Mind●Budget Protection
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PROPRIETARY & CONFIDENTIAL ‹#›AMERICAN HOME SHIELD Educational, informative & growing consumer understanding of an AHS home warranty
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Campaign Awareness 120Source: Q3 2024 AHS brand study conducted by ClearVantage. •2 in 5 consumers now recognize the Warrantina campaign•Likeability is over 80%, well above advertising norms
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Campaign Effectiveness Ad AwarenessUnitsBrand AwarenessRetentionBrand Attributes
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122 Product Differentiation4
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123 Direct to Consumer
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124 It’s All About the Member Experience Real Estate
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The AHS App is a Modern Solution for Partnering with Us 125 •Catalyst for future member experience•Available to all members•Efficient, mobile-first service experience •Foundational to unlocking digital solutions of the future
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Everything in MyAccount — Now Through the App 126 •Account management •Service requests•Renewals and coverage changes•New HVAC program and more Increased Member Messaging with the Support of Push Notifications
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Great Member Response to the App! 127Figures as of Feb. 20, 2025. 140kRegistered Users44kService Requests 4.7Stars 4.9 StarsContinued enhancements based on consumer needs, service enhancements and innovation
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128 Introducing Our Latest Innovation
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129 IntroducingAHS Video Chat with an Expert
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How We Got Here 130 •Launched Frontdoor app in April 2023•Homeowners love video chat and our Experts•Bringing this positive experience to AHS members
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AHS Video Chat with an Expert 131 PlumbingHVAC Electrical Appliances General Repairs
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Video Chat with an Expert Adds Value 132 ShieldPlatinum™ ShieldComplete™ ShieldGold™ ShieldPlus™ Added Convenience for Over 87% of AHS Members
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Enhancing the Member Experience 133 •Increased member satisfaction•No additional charge to members•True category differentiator
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134 Video Chat Launches Today•Member notifications going out this week•Expert video chat being built into member acquisition marketing channels
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New Member Acquisition 2Primary Ways of Reaching Potential Members 135 Direct to Consumer Real Estate
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Go-to-MarketStrategy 136 Real Estate •We invented the home warranty category 54 years ago through the RE channel•Marketing through ~110 field sales professionals who build relationships with RE brokers•Sales through RE is profitable in the first year and renews at 29% after the first year Source: Management analysis as of 12/31/2024.
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U.S. Home Sales 1984–2025 137Source: https://tradingeconomics.com/united-states/existing-home-sales (last visited January 2025).
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Home Warranty Category Attach Rate Has Declined Significantly Since 2020…Yet AHS Has Held Its Share 138Source: California Dept. of Insurance filings, NHSCA data, and AHS sales results. AHS Has Maintained 1/3Share of the CategoryRE1 Sales and Category Capturehave declined >50%... -70%-60%-50%-40%-30%-20%-10%0%201820192020202120222023RE HW Sales vs Category Capture % Change Real Estate Home Warranty Sales Attach Rate -70%-60%-50%-40%-30%-20%-10%0%10% 201820192020202120222023 RE HW Sales vs AHS Category Share % Change Since 2018 Real Estate Home Warranty Sales AHS Share
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The Real Estate Market Today 139Source: https://nar.realtor/research-and-statistics/housing-statistics/existing-home-sales; https://tradingeconomics.com/united-states/existing-home-sales (last visited January 2025). This Channel Remains Important •Continues to be a tough market•Have maintained our share NAR reported existing home sales at 4.06MInventory continues to be around 3.5 monthsAverage home price up 6% YOY to $407K Relationships with brokerage firms are strong
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How Are We Driving Units within Real Estate?140
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How We’re Driving RE Units 141 TECHNOLOGY AUTOMATION DATA
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We Are Poised for Success 142 Using data and automation to: •Optimize our investment•Place our best sales talent in high propensity markets•Identify top performing real estate agents•Customize communication journeys with those agentsTECHNOLOGY AUTOMATION DATA We will be ready when the real estate market comes back.
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Retention Strategies143
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Retention Rates 2022–2024 144 74.5% 74.0% 76.5% 78.5% All TimeHigh!Jan ‘22Jan ‘23Jan ‘24 Dec ‘24 December 2024 retention rate does not include 2-10.
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How We Build Loyalty & Engagement 145 UsageOnboardingAutopay We have done extensive research on why members don’t renew
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Usage and Engagement Lead to Renewals 146 Real Estate Users Renew at a Rate 2xThat of Non-Users Source: Management analysis for fiscal year ended 2024.
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Usage and Engagement Lead to Renewals 147 •Discounted HVAC tune-up •Free carpet cleaning •Enhanced member journeys•Maintenance services
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Onboarding 148 •Not all homeowners aware they have a warranty•Welcome and frequent reminders •Education of benefits and relevant offers
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Autopay Members on monthly autopay are significantly more likely to renew 149 84%of Members on Monthly Autopay For fiscal year ended 2024.
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150 Non-Warranty
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Non-Warranty Business Initiatives 151 New HVAC/Programs for AHS MembersBusiness Partnerships Leveraging Contractor Base
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New HVAC Program 152For fiscal year ended 2024. •Built from scratch to nearly a $87M business •Significant growth YOY•Leveraging our partnerships and scale to get members the best deals•Very optimistic about 2025 revenue
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New HVAC Program Member Benefits 153 •Greatly reduced prices Environmental considerationsPotential expansion into new categories:•Appliances•Hot water heaters•Roof replacement
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The Opportunity for HVAC, Appliances, Water Heaters and Roof Replacement? 154 ~$2 B
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How We Get to ~$2B 155 ApplianceRoofHVAC Water Heater ~5%ProactiveReplacement Rate~4%~7%~7%Average Price~$6,000~$8,000~$800~$850Opportunity Size~$650M~$680M~$450M~$100M23 1 2.1M Members Source: Modernize.com, Bankrate.com, BobVila.com, Angi.com, Homewyse.com, and management estimates as of Jan 15, 2025.
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Non-Warranty Business Initiatives 156 Business Partnerships Leveraging Contractor Base
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Background on Frontdoor–Moen Partnership 157 •Some insurance companies are requiring installation of smart water shut-off valve •Partnership started in California•Moen drop-ships the valve but many homeowners don’t want to do the installation
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Frontdoor–Moen Partnership 158 •Our contractors install Moen shutoff valves in short amount of time•Nationwide network of plumbers
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Frontdoor–Moen Partnership 159 •New revenue stream•Introduces the Frontdoor business to more homeowners•Now active in 14 states with more states later this year
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Summary of Non-Warranty Business $100M+Business 160For fiscal year ended 2024. •We will continue to leverage our customer base for more opportunities: •We will continue to leverage B2B2C partnerships with active conversations underway AppliancesWater Heaters Roof replacements HVAC
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161 Positive Outlook for Growth Trajectory
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162 •We are the category leader•We are committed to our core warranty business•Deep discounting•Targeting new audiences•Campaign media optimization•Product differentiation•Non-Warranty is a growth engine•We will continue to drive growth across businesses
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Evan IversonChief Operating Officer 163
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Strategic Focus 164 Powering success with our independent contractors Driving value through smart-tech Optimizing service operations
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Macroeconomic Challenges: Impact of Inflation 45 Highestinflation in 40 years8%CPI Source: Bloomberg; Full year 2022, dated Feb. 14, 2023 Reset: March 2023Inflation Was Our Top Priority 165
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166 Home Services Inflation Rising Faster than Overall Economy 46 12%2022 applianceinflation 22%2022 HVACinflation Source: Bureau of Labor Statistics PPI industry data for major household appliance manufacturing; PPI industry data for Air-conditioning, refrigeration, and forcedair heating equipment mfg; https://www.bls.gov/ces/; https://data.bls.gov/timeseries/PCU333415333415; https://data.bls.gov/timeseries/PCU335220335220 Reset: March 2023Inflation Was Our Top Priority
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167 Reset: March 2023Inflation Was Our Top Priority
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My Commitment: Aggressive Action 168 Coverage optimization Supply management Geographic optimizationCost control and planning
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My Commitment: Aggressive Action 169 Managing exposure across marketing, pricing and products Coverage Optimization
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My Commitment: Aggressive Action 170 Leveraging our volume discounts with suppliers and contractors Supply Management
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My Commitment: Aggressive Action 171 Matching market cost and pricing with dynamic pricing Geographic Optimization
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My Commitment: Aggressive Action 172 •Reviewing high-cost jobs•Changed incentives for field managers•Changed budgeting approach Cost Control & Planning Improvements
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Our Results Tell the Story… 173Based on gross cost per claim less trade service fee for each year. 16% 5% <0%202220232024 YoY Net Claim Inflation
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174 It All Starts With Our Contractors
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175 We Partner Differently
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Our Partnership Is Simple 176 1: Offer real value2: Coach them3: Provide feedback4: Show we careWork Contractors want!
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Offer Real Value: Paying Jobs 177Sources: Thumbtack: https://leadcapture.io/blog/thumbtack-lead-cost/,2023; Angie and HomeAdvisor: https://www.getjobber.com/academy/homeadvisor-vs-angi/, April 2024 $0Cost per Job $15-$100Average Cost per Lead$15-$85Average Cost per Lead$10-$50Average Cost per Lead Paid WorkReferrals Only
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Coach Them: ~100 Field Management Professionals 178As of December 31, 2024. Contractor Value Prop Warranty Work Revenue Non-Warranty Revenue Dedicated Account SupportFree Advertising Additional Revenue
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Contractor Scorecard (Example) 179 Transparent Results
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Show We Care: Contractor Council 180 •Collaboration & communication•Alignment & growth•Sharing best practices
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181 When Contractors Want Your Work, Everyone Wins. Cost Member Satisfaction
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We Designate the Best Contractors as “Preferred” 182Source: FTDR Contractor network data, inclusive of 2-10 as of 12/31/24. •Market level designation•Best on quality and cost•Leverage best practices …about 4K of our 17K Contractors
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And Preferred Contractors Complete Most of Our Work… 183Source: FTDR Contractor network data for fiscal year 2024, excludes 2-10. Contractors73% Preferred Contractors27% 85%Service Requests Handled by Preferred Contractors
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…Materially Impacting Cost… 184Source: FTDR Contractor network data for fiscal year 2024, excludes 2-10. ~50%Lower Cost than Non-Preferred Preferred Contractors CostDriven by:•Aggregating volume•Leveraging best practices and tools•Understanding revenue potential
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Members are more likely to renew when a Preferred Contractor handles their service …And We See Renewal Rates Rise 185Claims serviced in 2023, excludes 2-10. ~180bpsImprovement Member Renewal Rate
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81%82%83%84%85%86% 202220232024 % of Service Requests to Preferred ContractorsPrioritizing Preferred Contractors Has Powered Our Improvement 186Source: AHS Service Events to Preferred Contractors between 2022-2024. +220 bps
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And Members Approve! 187Source: Contractor 5-star average rating for 2024. Members Rating of Contractor 4.55-Star Contractor RatingAll Time High!
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188 And Contractors Aren’t Here for Just Warranty Work…
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Our HVAC Contractors Were Critical to Building the New HVAC Program 189Source: AHS New HVAC program revenue between 2022-2024. $14 $51 $87 202220232024 New HVAC Program Revenue ($M)
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Our Plumbers Helped Drive ~$5M in Revenue in Under 6 Months 190Source: Moen partnership revenue in 2024. ~$5M2024 Revenue
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191 It All Starts with Our Contractors: They Deliver for Our Members and Frontdoor!
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192 Optimizing Service Operations2
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Pandemic Forced a Remote Workforce193
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The Initial Challenge Was Intense… 194Source: FTDR Average speed to answer data between 2020-2024. 0 10 20 30 40 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 Average Speed to Answer (min) 2020 2022 20232021 2024
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…But We Got Our Footing by Peak of Year 2… 195Source: FTDR Average speed to answer data between 2020-2024. 0 10 20 30 40 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 Average Speed to Answer (min) 2020 2022 20232021 2024
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…And Have Gotten Better Every Year! 196Source: FTDR Average speed to answer data between 2020-2024. 0 10 20 30 40 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 Average Speed to Answer (min) 2020 2022 20232021 2024
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And We Did This with Fewer Associates… 197Source: AHS Authorization and appliance replacement headcount data from 2021-2024. 399343312233 2021202220232024 Authorization Headcount Headcount 191 149133111 2021202220232024 Appliance Replacement Headcount Headcount
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…With Real Productivity Gains… 198Source: AHS Authorization and appliance replacement performance data from 2021-2024. 3.03.43.73.8 2021202220232024 Authorization Productivity Authorizations per hour 3.23.63.93.9 2021202220232024 Appliance Replacement Productivity calls per hour
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…While Keeping Member Results High! 199Source: AHS Agent average 5-star rating for authorization and appliance replacement processes 2021-2024. 3 4 5 2021202220232024 Agent 5-Star Rating Authorization3 4 5 2021202220232024 Agent 5-Star Rating Appliance
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Together, Service and Contractor Gains Reflect in Members’ View of AHS 200Source: AHS Customer 5-star average rating from 2019 to January 2025. 4 4.1 4.2 4.3 4.4 4.5 2019202020212022202320242025 (YTD) AHS 5-Star Rating Another All Time High!
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201 Delivering Business Value Through Technology3
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Resetting Our Approach to Technology 202 To:•Focus on reliability•Supporting the business•Capitalize on existing strengths From:•Digital Transformation•Lead with technology•Prioritize tech debt
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Focusing on Reliability, Tracking Progress and Driving Improvement 203Source: FTDR system uptime for 2024.. •Prioritizing reliability across teams•Measuring & monitoring progress•Driving continuous improvement 99.887%2024 Uptime
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204 Supporting the Business
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We Built New HVAC Program by Focusing on What Worked, Not Perfection205
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Leveraging Existing Platforms for Moen Got Us in the Market Quickly 206 Non-Warranty Platform
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Elevating Member Experience207
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We Have Improved Our Contractor Assignments 208Reduction based on transfers from 2019-2024. 40%Reduction in Transfers
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Overhauling Our Cash-In-Lieu Process Cut Process Times By >90% 209Reduction based on change in cycle time since 2023. BeforeAfter 30 Days 051015202530 Before Payment Cycle Time 2.7 Days051015202530 Before Payment Cycle Time
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Digital Shopping Has Increased Member Self-Service 45% Reduction in Appliance Replacement Calls 210Source: Appliance replacement service calls between 2023 and 2024. Appliance Replacement Shopping Experience
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Our Technology… 211 •Is stable and dependable•Is supporting our growth•And is making us better every day
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We Still Prioritize Exploring BreakthroughTechnologies… 212Source: 2024 AHS Authorization AI test accuracy percentages 52% 73%81%83%85% Proof of ConceptBaselineIteration 1Iteration 2Iteration 3 AI Authorization Accuracy Percentage
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213 A First in the Home Warranty Industry— Virtual Experts in the AHS App
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Frontdoor Stands Out from the Rest! 214 Unrivaled contractor network and strategyTech that drives business value, every dayDisciplined, results-driven operations
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Jessica RossChief Financial Officer 215
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216 Fourth Quarter Financial Results
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Fourth Quarter 2024 Financial Summary 217 Note: Q4 2024 Revenue, Net Income, and Adjusted EBITDA includes contributions from the 2-10 Home Buyers Warranty acquisition of $6M, ($2M), and $2M, respectively for the period from 12/19/24 to 12/31/24. *This financial measure is a non-GAAP measure. Refer to Non-GAAP Financial Measures in this presentation for a description of this measure and the Appendix for a reconciliation to the nearest GAAP financial measure. Revenue +5% Adjusted EBITDA* +10%Net Income Flat366383 Q4 2023Q4 2024 4549 Q4 2023Q4 2024 99 Q4 2023Q4 2024 ($ millions)
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Fourth Quarter 2024 Adjusted EBITDA* 218 ~$13M Guidance BeatNote: Based on midpoint of guidance range*This financial measure is a non-GAAP measure. Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure and the Appendix for a reconciliation to the nearest GAAP financial measure.
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177186 Q4 2023Q4 2024 Fourth Quarter 2024 Gross Profit 49%Gross Profit Margin Record High 219 Gross Profit+5% ($ millions)Note: Q4 2024 Gross Profit includes contribution of $5M from the 2-10 Home Buyers Warranty acquisition for the period from 12/19/24 to 12/31/24
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220 Full Year 2024 Financial Results
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Full Year 2024 Financial Summary 221*This financial measure is a non-GAAP measure. Refer to Non-GAAP Financial Measures in this presentation for a description of this measure and the Appendix for a reconciliation to the nearest GAAP financial measure. Revenue +4% Adjusted EBITDA* +28%Net Income +37%1,7801,843 20232024 346443 20232024 171235 20232024 ($ millions) An Exceptional Year
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885991 20232024 Full Year 2024 Gross Profit Gross Margin+410 bpsto Record 54% 222 Gross Profit+12% ($ millions)
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Full Year 2024 Adjusted EBITDA* 28% Increase YOY 223 *This financial measure is a non-GAAP measure. Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure and the Appendix for a reconciliation to the nearest GAAP financial measure.(1) Revenue conversion includes the impact of the change in the number of home warranties as well as the impact of year-over-year price changes. The impact of the change in the number of home warranties considers the associated revenue on those plans less an estimate of contract claims costs based on margin experience in the prior year period.(2) Contracts claims costs includes the impact of changes in service request incidence, inflation and other drivers associated with the number of home warranties in the prior year period. The impact on contract claims costs resulting from year-over-year changes in the number of home warranties is included in revenue conversion above. ($ millions)Twelve Months Ended December 31, 2023$346Impact of change in revenue(1) 60Contract claims costs(2) 44Sales and marketing costs(8)General and administrative costs(7)Interest and net investment income3Other 3Twelve Months Ended December 31, 2024$443Twelve Months Ended December 31, 2024$443
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Full Year 2024 Cash Flow 224*This financial measure is a non-GAAP measure. Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure and the Appendix for a reconciliation to the nearest GAAP financial measure. Restricted Cash and Marketable Securities$184MUnrestricted Cash and Marketable Securities$291M Free Cash Flow* $231MShare Repurchases$160MTwelve Months Ended December 31,Net cash provided from (used for):20242023 Operating Activities270202Investing Activities(622)(32)Financing Activities447(137)Cash increase/(decrease) during the period9634 ($ millions)
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225 Strong Free Cash Flow Generation Allows for Flexible Capital Allocation
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Consistent Capital Allocation Framework 226 Growth123Maintain a Strong Financial ProfileReturn Capital to Shareholders
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Priority 227 Disciplined Approach to Capital AllocationOrganic Growth:•Marketing investments to drive home warranty growth •Investments in non-warranty services •Process improvements and technology to scale our business Invest for Growth1
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Priority 228 Disciplined Approach to Capital AllocationInorganic Growth:•M&A focused on core business•Completed 2-10 acquisition in 2024Invest for Growth1
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Priority 229 Disciplined Approach to Capital Allocation •Maintain adequate liquidity•Maintain prudent net leverage ratioMaintain a Strong Financial Profile 2
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Completed $1.47B Credit Facility 230 $350MRate Swap3.03%+225 bps$218M TLASOFR+150 bps 2028202920302031 Debt Maturities and Principal Due $250M Revolving Credit Facility $418M Term Loan A $800M Term Loan B •Funded 2-10 acquisition •Refinanced existing debt•Extended all debt maturities
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Priority 231 Disciplined Approach to Capital Allocation•Continue to prioritize returning excess cash to shareholders•Completed prior $400M share repurchase authorization in 2024•Established new $650M share repurchase authorization thru September 4th, 2027 Return Capital to Shareholders 3
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History of Returning Capital to Shareholders 232 $350MRate Swap3.03%+225 bps$218M TLASOFR+150 bps 10358 120160 4020212022202320242025P Historical Repurchases ($M)~$480M in total share repurchases since 2021 •Bought back 12.7M total shares at an average price of $38•Which represents approximately 15% of total shares outstanding!•Utilized ~$80M of current authorization in the last three months
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233 Strong History of Financial Performance
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Consistent Revenue Growth 234 0.60.71.0 1.51.8 20082012201620202024 Revenue ($B) 7.1% CAGR 7.1% CAGRRevenue Growth Over Last 16 Years
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Historical Member Count (1) 235Note: 2024 Member Count includes contribution of 173K from the 2-10 Home Buyers Warranty acquisition. (1) Member Count refers to the ending member count as of December 31st. 2.112.172.252.212.132.002.12 2018201920202021202220232024 Member Count (Millions) •Recent Decline due to Macro Real Estate Factors•2024 Member Count includes 2-10
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All Time High Gross Margin 236 45%50%49%49%43%50%54% 2018201920202021202220232024 Gross Margin (%) 48% Average Gross Margin Over Last 7 Years 48% Avg.
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Capital Light Business Model 237Note: Percentages reflect capital expenditures as a percentage of revenue. 272232314032392.1%1.6% 2.2%1.9% 2.4%1.8%2.1% 2018201920202021202220232024 Capital Expenditures ($M) •Capex is only ~2% of Revenue
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Record Adjusted EBITDA* 238*This financial measure is a non-GAAP measure. Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure and the Appendix for a reconciliation to the nearest GAAP financial measure. 238 303 270 300 214 346 443 18.9%22.2%18.3%18.7% 12.9% 19.4% 24.1% 2018201920202021202220232024 Adjusted EBITDA* and Adjusted EBITDA Margin* ($M)~11% CAGR 19%Average Adjusted EBITDA Margin* Over the Last 7 years
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MeaningfulFree Cash Flow*Conversion 239*This financial measure is a non-GAAP measure. Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure and the Appendix for a reconciliation to the nearest GAAP financial measure.Note: Percentages represent Free Cash Flow as a percentage of Adjusted EBITDA. 163 178 175 154 102 170 232 2018201920202021202220232024 Free Cash Flow* ($M) •Free Cash Flow* Averaged 56% of Adjusted EBITDA* Over Last 7 Years
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240 Full Year and First Quarter 2025 Outlook
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Historical Factors Constraining Revenue 241 •Home warranty member count has been in decline, primarily due to the challenging real estate environment•The decline in our first-year channels is impacting our renewal base•We are also lapping double-digit price increases•All of this impacts revenue; 2025 will be a transition year
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Growth from 2-10 and Non-Warranty Services Despite Challenges, We Expect Revenue to Grow in 2025 242Percentage based on mid-point of guidance. ~10%YoYImprovement Revenue Growth
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We Expect Margin Outperformance to Continue in 2025 243 48% Historical Average Gross Profit Margin~52%Adjusted EBITDA Margin* ~23%19% Historical Average *Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure. A reconciliation of the forward-looking full year 2025 Adjusted EBITDA Margin outlook to net income margin cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results. Note: Percentages based on the mid-point of guidance range; Historical Average reflects 2018-2024.
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Full Year 2025 Revenue Outlook $2.00B– $2.04B2025 Revenue 244Percentage increase over prior year based on mid-point of guidance. •Increase of ~10% over prior year •~2-4% increase in realized price•~6-8% volume increase driven by the 2-10 acquisition and non-warranty services partially offset by lower organic growth in home warranty•Includes Other Revenue from new HVAC, Moen, and 2-10’s New Home Structural Warranty business
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Full Year 2025 Gross Profit Outlook 51.5% - 53%Gross Profit Margin 245 •Strong gross margins that are above historical averages•Lapping increases in price and trade service fees •Assumes mid-single digit inflation including uncertainty around tariffs•Assumes increase in number of service requests per member and normal weather
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Full Year 2025 SG&A Outlook $640M - $660MSG&A 246 •Includes addition of 2-10 •Assumes normal inflation •Includes $30 million of stock-based compensation and $8 million of 2-10 integration costs
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Full Year 2025 Adjusted EBITDA* Outlook $450M - $475MAdjusted EBITDA* 247 •Strong Adjusted EBITDA Margin* of ~23%•Continued strong cash flow conversion•Includes uncertainty in macroeconomic environment and ~$15 million in interest income *Refer to Non-GAAP Financial Measures n this presentation for a description of this measure. A reconciliation of the forward-looking full year 2025 Adjusted EBITDA outlook to net income cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results. Percentages based on the mid-point of the guidance range.
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Expect Strong Cash Flow and Share Repurchases in 2025 248 *Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure. A reconciliation of the forward-looking full year 2025 Free Cash Flow outlook to Net Cash Provided from Operating Activities cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results. Free Cash Flow* $220M+Share Repurchases$180M+
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Full Year 2025 CAPEX & Tax Rate Outlook 249 CAPEX of ~$40MTax Rate of ~25%
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First Quarter 2025 Outlook 250 *Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure. A reconciliation of the forward-looking first quarter 2025 Adjusted EBITDA outlook to net income cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results. Percentages based on the mid-point of the guidance range. Revenue$410M to $420MAdjusted EBITDA* $70M to $80M~10% IncreaseAbove Prior Year
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Long-Term Financial Outlook 251 Metrics2028FLong-Term Target Revenue$2.5B+Mid-to-high single-digit organic growth Gross Margin~50%~50% Adjusted EBITDA* $550M+ Low 20% *Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure. A reconciliation of the forward-looking full year 2028 Adjusted EBITDA outlook to net income cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results. Percentages based on the mid-point of the guidance range.
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Substantially Ahead of Prior 2025 Target 252 MetricsPrior 2025 Target (From 2023)2025F Revenue$2,000M$2,000M-$2,040M Gross Profit MarginNA 51.5%-53% Adjusted EBITDA$300M$445M-$465MAdjusted EBITDA* $300M$450M-$475M*Refer to “Non-GAAP Financial Measures" in this presentation for a description of this measure. A reconciliation of the forward-looking full year 2025 Adjusted EBITDA outlook to net income cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, the company is unable to assess the probable significance of the unavailable information, which could have a material impact on its future GAAP financial results.
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253 A Few Final Thoughts…
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Today’s Highlights 254 We are operating the company better than ever Frontdoor delivered record financial results in 2024In 2025, we are focused on growing HW member count and integrating 2-10We are developing Warranty & Non-Warranty as growth engines
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As a Result, FTDR Stock Price Has More than Doubled 255Source: Closing price (NASDAQ: FTDR) on dates indicated. $15 $20 $25 $30 $35 $40 $45 $50 $55 $60 $57.17 $24.15 Up 137% since June 1, 2022June 1, 2022 Feb. 26,2025
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However, FTDR Remains Undervalued 256Source: FactSet data as of 12/31/2024; analysis based on enterprise value compared to next twelve month Adjusted EBITDA estimates. 0.0x 5.0x 10.0x 15.0x 20.0x Sep-18Apr-19Oct-19Apr-20Oct-20May-21Nov-21May-22Nov-22Jun-23Dec-23Jun-24Dec-24 Frontdoor multiple as of 12/31/24 Frontdoor peak multiple ~18x ~11x
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Compelling Investment Thesis 6 Reasons to Believe 257 Leader in the $500B Home Services Industry •Massive total addressable market with significant growth opportunitiesLargest Provider of Home Warranties •Cultivated national contractor network and strong record of innovationAttractive Subscription-Based Recurring Revenue Model •Over 2M members with high margins and strong cash flows 1 2 3
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Compelling Investment Thesis 6 Reasons to Believe 258 Expanding Beyond Warranty Services •Uniquely positioned to drive sustainable long-term growth through non-warranty servicesProven Execution & Superior Financial Performance •Executing better than ever… and our financial results show itConsistent Capital Allocation Strategy•Proven record of returning excess cash to shareholders while maintaining a strong financial position 4 5 6
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259 Questions?
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260 Appendix
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Fourth Quarter 2024 Adjusted EBITDA* Q4 Adjusted EBITDA* +10%261 *See elsewhere in this Appendix for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to the nearest GAAP measure. (1) Revenue conversion includes the impact of the change in the number of home warranties as well as the impact of year-over-year price changes. The impact of the change in the number of home warranties considers the associated revenue on those plans less an estimate of contract claims costs based on margin experience in the prior year period. ($ millions)Three Months Ended December 31, 2023$45 Impact of change in revenue(1) 13 Contracts claims costs(4) Sales and marketing costs(5)Three Months Ended December 31, 2024$49
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Q4 2024 Consolidated Results 262 Three Months Ended December 31,$ millions, except per share amounts20242023Better/(Worse)Revenue $383$366$17YoY Growth 5%Gross Profit $186$177$9% of revenue 48.5%48.3%20ptsSelling and administrative expenses$155$142($14)% of revenue 40.5%38.7%(180pts)Depreciation and amortization expense11 9 (2)Restructuring charges3 9 6Interest expense 11 10 (1)Interest and net investment income(5) (4) -Loss on extinguishment of debt3 0 (3)Income before taxes$6 $11 ($5)Provision for income taxes(2) 3 (5)Net income $9 $9 -Other comprehensive income, net of tax(3) (4) 1Total Comprehensive Income$6 $72$25Earnings Per Share:Basic $0.11$0.11-Diluted $0.11$0.11-Weighted average common shares outstanding:Basic 75.779.1(3.4)Diluted 77.579.7(2.3)Adjusted EBITDA* $49$45$4*See elsewhere in this Appendix for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to the nearest GAAP measure. Note: Amounts presented in the above tables may not sum due to rounding.
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FY 2024 Consolidated Results 263 Twelve Months Ended December 31,$ millions, except per share amounts20242023Better/(Worse)Revenue $1,843$1,780$64YoY Growth 4%Gross Profit $991$885$107% of revenue 53.8%49.7%410ptsSelling and administrative expenses$612$581($31)% of revenue 33.2%32.6%(60)PtsDepreciation and amortization expense39 37 (2)Restructuring charges8 16 8Interest expense 40 40 -Interest and net investment income(20)(16) 3Loss on extinguishment of debt3 0 (3)Income before taxes$309$229$81Provision for income taxes74 57 (17)Net income $235$171$63Other comprehensive income, net of tax(6) (3) (3)Total Comprehensive Income$229$169$60Earnings Per Share:Basic $3.05$2.13$0.92Diluted $3.01$2.12$0.89Weighted average common shares outstanding:Basic 77.080.5(3.6)Diluted 78.080.9(2.9)Adjusted EBITDA* $443$346$96*See elsewhere in this Appendix for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to the nearest GAAP measure. Note: Amounts presented in the above tables may not sum due to rounding.
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Net Income to Adjusted EBITDA Reconciliations 264 Three Months EndedTwelve Months EndedDecember 31,December 31,($ millions) 2024202320242023 Net Income $9 $9 $235 $171 Depreciation and amortization expense11 9 39 37 Restructuring charges39 8 16 Provision for income taxes(2) 374 57 Non-cash stock-based compensation expense6 5 26 26 Interest expense 11 10 40 40 Loss on extinguishment of debt3 3Acquisition-related costs 8 17Adjusted EBITDA$49 $45 $443 $346 Note: Amounts presented in the above tables may not sum due to rounding.
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Net Income to Adjusted EBITDA Reconciliations (Cont.) 265 Year Ended December 31,($ millions)2024202320222021202020192018Net Income$235$171$71$128$112$153$125Depreciation and amortization expense39373435342421Goodwill and intangibles impairment--14----Restructuring charges816203813Spin-off charges-----124Provision for income taxes74572239375142Non-cash stock-based compensation expense 262622251794Affiliate Royalty expense------1Interest expense40403139576223Interest income from Affiliate------(2)Secondary offering costs-----2-Loss on extinguishment of debt3--31---Other non-operating expenses----5--(Gain) loss on insured home service plan claims -----(2)Acquisition-related costs17------Adjusted EBITDA$443$346$214$300$270$303$238Adjusted EBITDA Margin24.1%19.4%12.9%18.7%18.3%22.2%18.9%Note: Amounts presented in the above tables may not sum due to rounding.
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266 Three Months EndedTwelve Months EndedDecember 31,December 31,($ millions) 2024202320242023Net Cash Provided from Operating Activities$59 $63 $270 $202 Property additions (8)(9)(39)(32)Free Cash Flow $51 $54 $231 $170 Free Cash Flow as a Percentage of Adjusted EBITDA52.4%49.1% Net Cash Provided from Operating Activities to Free Cash Flow Reconciliations Twelve Months EndedDecember 31,($ millions) 20222021202020192018Net Cash Provided from Operating Activities$142 $185 $207 $200 $189Property additions(40)(31)(32)(22)(27)Free Cash Flow$102 $154 $175 $178 $163Free Cash Flow as a Percentage of Adjusted EBITDA47.7%51.3%64.8%58.7%68.5%Note: Amounts presented in the above tables may not sum due to rounding.