Frontdoor, Inc. Q1 FY2026 earnings call

Key points - Came into 2026 with plan to grow member base, deliver structurally higher margins, and maintain disciplined capital allocation. - Revenue grew 6% to $451 million, gross profit margin 55%, net income grew 11% to $41 million, adjusted EBITDA increased 3% to $104 million, and $60 million worth of shares bought back. - Member count trend moving right, first-year channels growing 3%, anticipating total member count growth of ~1% for the year (first organic growth since 2020). - Direct-to-consumer channel: brand leadership strengthened via Warrantina campaign, demand growing through optimized value proposition, etc., conversions improved. - First-year real estate channel: attach rate improved for eight months, ending member count grew 3%. - Renewals: rates near record highs. - Non-warranty and other: revenue grew 23% with HVAC upgrades driving growth

Revenue grew 6% to $451 million. Gross profit margin was 55%. Net income grew 11% to $41 million. Adjusted EBITDA increased 3% to $104 million. Member count trend is moving in the right direction, with first-year channels growing 3% and anticipating total member count growth of approximately 1% for the year. Direct-to-consumer channel: ending member count grew 3% (sixth consecutive quarter of year-over-year growth), brand leadership strengthened with Warrantina campaign results (unaided awareness up 6% to 28%, purchase consideration up five points to 35%, likelihood to recommend up eight points to 63%), demand growing through optimized value proposition, refined targeting, enhanced performance marketing, and integration of 210 with better SEO and user experience, conversions improved through refined sales funnel. First-year real estate channel: attach rate improved for eight consecutive months, ending member count grew 3% (first organic growth in years). Renewals: renewal rates near record highs. Non-warranty and other: revenue grew 23% year-over-year to $41 million, HVAC upgrades primary driver, quote rates and orders improved by routing more HVAC claims to higher converting contractors

Second quarter 2026: Expected revenue range of $635 million to $650 million (low single digit increase in renewal revenue, mid single digit increase in first year real estate revenue, low single digit decrease in first year direct to consumer revenue, mid-20% increase in non-warranty and other revenue). Expected adjusted EBITDA range of $198 million to $208 million. ### Full year 2026: Reaffirming outlook with key assumptions essentially unchanged. Anticipate 53 to 54% of full year adjusted EBITDA generated in first half. Confident in ability to deliver on expected revenue and adjusted EBITDA growth for the year despite geopolitical environment complexity

Q: Talked about real estate channel, attach rates. Mark Hughes asked about attach rates, where they bottomed out, historically, and if renewal strategy will be moved up like DTC.

A: Attach rates bottomed out in mid-teens, improved to 6% in March, renewal rates improved by 200 basis points in 2025.

Q: Talked about 210 integration. Mark Hughes asked to expand on 210 integration.

A: 210 is integrated onto the platform, allowing for specific initiatives like dynamic pricing and contractor algorithms.

Q: Talked about scaling marketing investments and messaging between warranty and non-warranty. Eric Sheridan asked about marketing messaging.

A: Primary focus on warranty business, but non-warranty has halo effect, marketing funnel starts with broad advertising message, non-warranty is relatively CAC-free marketing.

Q: Talked about real estate promotional strategy and competitors. Jeff Schmidt asked if competitors are responding.

A: Haven't gotten much intelligence of others doing same, focus on local real estate agents.

Q: Talked about customer retention and gross margin outlook. Ian Zoffino asked about customer retention and gross margin.

A: Customer retention down slightly in Q1 due to 210 timing, gross margin has low single-digit inflation in Q1, confident in full year guide.

Q: Talked about four-year outlook and geopolitical impact on costs. Sergio Segura asked about four-year outlook and oil price impact.

A: Reaffirmed annual outlook, monitoring macro conditions, have tools to manage cost.

Q: Talked about renewal rates of promotional cohorts and consumer behavior. Corey Carpenter asked about renewal rates of promotional cohorts and consumer behavior.

A: Renewal rates of promotional cohorts exceed non-promotional, testing discounting strategy, mix of consumers 50% below $100k and 50% above, not seen softness in consumer demand.

Q: Talked about relationship with Skyslope and real estate growth. Mike Rendos asked about relationship with Skyslope and real estate growth.

A: Relationship with Skyslope expanded to over 40 states, not exclusive, seeing success in 'smile states' with real estate growth