Frontdoor — Third Quarter 2026 Earnings Summary

Financial Performance:

• Revenue increased 6% year-over-year to $655 million for the three months ended September 30, 2026, driven by 3% higher realized price and 3% higher volume.
• Gross profit margin was 55% for the quarter.
• Net income increased 10% year-over-year to $116 million.
• Earnings per share (EPS) increased 16% year-over-year to $1.65.
• Adjusted EBITDA increased 5% year-over-year to $205 million.
• Adjusted net income increased 8% year-over-year to $127 million.
• Adjusted EPS increased 15% year-over-year to $1.81.
• Operating cash flow for the nine months ended September 30, 2026, was $318 million.
• Free cash flow for the nine months ended September 30, 2026, was $298 million.
• Cash as of September 30, 2026, totaled $581 million, comprising $430 million in unrestricted cash.
• Long-term debt was $1,125 million as of September 30, 2026, down from $1,144 million as of December 31, 2025.
• Deferred revenue was $101 million as of September 30, 2026, down from $107 million as of December 31, 2025.

Guidance and Future Outlook:

• Raised full-year 2026 revenue guidance to $2.205 billion to $2.215 billion, representing approximately a 6% increase over full-year 2025.
• Raised full-year 2026 Adjusted EBITDA guidance to $590 million to $600 million, with an expected Adjusted EBITDA margin of approximately 27%.
• Full-year 2026 guidance assumes a 4% realized price increase, 2% volume increase, and approximately 1% growth in the number of home warranties.
• Full-year 2026 guidance includes $235 million to $240 million in non-warranty and other revenue.
• Full-year 2026 guidance includes SG&A of $685 million to $695 million and capital expenditures of approximately $30 million.
• Full-year 2026 guidance includes an annual effective tax rate of approximately 24%.
• Fourth-quarter 2026 revenue guidance is $453 million to $463 million.
• Fourth-quarter 2026 Adjusted EBITDA guidance is $62 million to $72 million.

Business Segments and Product Lines:

• Number of home warranties grew 1% year-over-year to 2.14 million.
• Renewal revenue increased 4% year-over-year to $479 million, driven by higher realized price.
• Real estate (First-Year) revenue increased 3% year-over-year to $44 million, driven by higher volume.
• Direct-to-consumer (First-Year) revenue declined 1% year-over-year to $54 million due to lower realized price from promotional pricing, partially offset by higher volume.
• Other revenue increased 32% year-over-year to $78 million, primarily due to the New HVAC upgrade program.
• Customer retention rate was 79.7% as of September 30, 2026, compared to 79.4% in the prior year period.

Market and Competitive Landscape:

• Frontdoor is the nation's leading provider of home warranties and new home builder warranties.
• The company handles approximately 3.8 million service requests for over 2.1 million members through a network of approximately 17,000 qualified and independent service contractors.
• Contract claims costs increased $7 million year-over-year, excluding the impact of claims costs related to the change in revenue.
• Unfavorable weather in the HVAC trade contributed approximately $9 million to higher claims costs.
• Favorable claims cost development was $6 million in the third quarter of 2026, compared to $5 million in the third quarter of 2025.

Risks and Challenges:

• Contract claims costs are impacted by a higher number of service requests per member, normal cost inflation across the contractor network, and replacement parts and equipment costs.
• Direct-to-consumer channel revenue was negatively impacted by a promotional pricing strategy.
• The company faces risks related to weather conditions, seasonality, and adverse environmental regulations.
• Forward-looking statements note risks including macroeconomic conditions, inflation, tariffs, global supply chain challenges, changing interest rates, and labor availability.

Management Commentary and Tone:

• Chairman and CEO Bill Cobb expressed pride in the team's strong results and exceptional service during the hottest summer on record, citing the durability of the business model.
• CFO Jason Bailey highlighted higher revenue, Adjusted EBITDA, and EPS, noting the capital-light business generated strong cash flows.
• Management stated confidence in the business, underscoring a commitment to returning excess cash to shareholders.
• Management expects to complete the existing $650 million share repurchase authorization in November 2026, nearly one year ahead of schedule.

Other Key Points:

• The Board of Directors approved a new $1 billion share repurchase authorization on October 30, 2026, for a 3-year period beginning in November 2026.
• The company completed $259 million of share repurchases through September 2026, an increase of over 30% year-to-date.
• Financing activities for the nine months ended September 30, 2026, included $259 million in share repurchases and $22 million in scheduled debt payments.
• Investing activities for the nine months ended September 30, 2026, included $20 million in capital expenditures related to technology projects.
• The company's family of brands includes American Home Shield, HSA, OneGuard, Landmark, and 2-10 HBW.