Frontdoor (FTDR) Q1 2025 earnings summary

Executive summary

• Revenue rose 13% year-over-year to $426 million in Q1 2025, 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 increased 7% to 2.1 million, with DTC members up 15% (including 4% organic growth) and retention at 79.9%.

• Gross profit grew 21% to $235 million, with gross margin up 380 bps to a record 55%.

• The company continues to outperform despite macroeconomic headwinds, including high interest rates, inflation, and a weak real estate market.

• Strategic focus on growing and retaining warranty members, scaling non-warranty revenue, and integrating 2-10 HBW.

Financial highlights

• Adjusted EPS increased 46% to $0.64; GAAP EPS up 13% to $0.49.

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

• Gross profit margin improved to 55% (up from 51% year-over-year); adjusted EBITDA margin rose to 23%.

• Net leverage ratio at 1.9x, below 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 outlook up to $500–$520 million.

• Gross margin guidance increased to 54–55%, up 200 bps, assuming mid-single-digit cost inflation and $15 million weather impact.

• Q2 2025 revenue expected at $600–$605 million, adjusted EBITDA at $185–$190 million.

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

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