Frontdoor’s second quarter delivered strong headline results versus Wall Street expectations, but the market responded negatively, reflecting investor concerns about underlying trends. Management cited robust growth in direct-to-consumer home warranty sales and continued momentum from the new HVAC upgrade program as key drivers. CEO Bill Cobb emphasized the importance of operational improvements, stating that preferred contractor usage and digital engagement features have contributed to high member retention. The integration of the 2-10 acquisition was also highlighted as exceeding synergy targets for the period.
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Frontdoor (FTDR) Q2 CY2025 Highlights:
- Revenue: $617 million vs analyst estimates of $603.3 million (13.8% year-on-year growth, 2.3% beat)
- Adjusted EPS: $1.63 vs analyst estimates of $1.45 (12% beat)
- Adjusted EBITDA: $199 million vs analyst estimates of $186.6 million (32.3% margin, 6.6% beat)
- The company lifted its revenue guidance for the full year to $2.07 billion at the midpoint from $2.04 billion, a 1.2% increase
- EBITDA guidance for the full year is $540 million at the midpoint, above analyst estimates of $509.7 million
- Operating Margin: 26.4%, up from 23.8% in the same quarter last year
- Home Service Plans: 2.09 million, up 140,000 year on year
- Market Capitalization: $4.15 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 From Frontdoor’s Q2 Earnings Call
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Jeffrey Paul Schmitt (William Blair) asked about the increase in 2-10 cost synergy targets. CEO Bill Cobb explained the boost was due to faster operational efficiencies and confirmed longer-term synergy forecasts remain on track.
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Jeffrey Paul Schmitt (William Blair) inquired whether the HVAC upgrade program guidance included other categories like water heaters. Cobb clarified that current figures are solely HVAC, with tests for other categories underway but not yet included in forecasts.
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Sergio Roberto Segura (KeyBanc Capital Markets) questioned the drivers behind strong real estate channel revenue. CFO Jessica Ross attributed this to seasonal revenue recognition practices and improved integration of the 2-10 sales team.
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Sergio Roberto Segura (KeyBanc Capital Markets) asked about margin guidance and whether previous headwinds are still expected. Ross stated that macro factors and cost inflation are coming in more favorably than anticipated, leading to improved outlook.
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Mark Douglas Hughes (Truist) sought updates on 2-10’s structural warranty sales momentum. Cobb reported satisfaction with operations and highlighted opportunities with new homebuilders as a growth area.
Catalysts in Upcoming Quarters
In future quarters, our analysts will be tracking (1) the pace of organic home warranty growth in both direct-to-consumer and real estate channels, (2) sustained expansion and adoption of the HVAC upgrade program as a driver of non-warranty revenue, and (3) execution on cost synergies and cross-selling from the 2-10 acquisition. Additionally, we will monitor how increased housing inventory and evolving market dynamics influence attach rates and member retention.
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