Frontdoor (FTDR) Q1 2025 earnings summary

Executive summary

• Revenue increased 13% year-over-year to $426 million, with net income up 9% to $37 million and adjusted EBITDA up 41% to $100 million, driven by the 2-10 HBW acquisition and improved pricing.

• Member count grew 7% to 2.1 million, with DTC members up 15% (including 4% organic growth), and customer retention improved to 79.9%.

• Gross profit margin reached a record 55%, up 380 basis points year-over-year, with gross profit at $235 million.

• The company is navigating macroeconomic headwinds, including high interest rates, inflation, and a down real estate market, but continues to outperform.

• Integration of 2-10 Home Buyers Warranty is progressing well, contributing to growth in both warranty and non-warranty segments.

Financial highlights

• Adjusted EPS rose 46% to $0.64, while GAAP EPS increased 13% to $0.49.

• Free cash flow rose 60% to $117 million, with unrestricted cash at $322 million and total liquidity of $570 million.

• Gross profit margin improved to 55% from 51% in Q1 2024; adjusted EBITDA margin reached 23%.

• Net leverage ratio at 1.9x, below the long-term target of 2–2.5x.

• SG&A expenses were $151 million, representing 35.5% of revenue.

Outlook and guidance

• Full-year 2025 revenue guidance raised to $2.03–$2.05 billion, with adjusted EBITDA guidance increased to $500–$520 million.

• Gross margin outlook raised to 54–55%, up over 200 basis points from prior guidance.

• 2025 share repurchase target increased to at least $200 million.

• Second quarter 2025 revenue expected at $600–$605 million, with adjusted EBITDA of $185–$190 million.

• Capital expenditures for 2025 projected at $35–$45 million, focused on technology and recurring needs.