Frontdoor, Inc. (FTDR) on Q2 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, welcome to Frontdoor's Second Quarter 2021 Earnings Call. Today's call is being recorded and broadcast on the Internet. Beginning today's call is Matt Davis, Vice President of Investor Relations and Treasurer, and he will introduce the other speakers on the call. At this time, we will begin today's call. Please go ahead, Mr. Davis. Matt Davis: Thank you, operator. Good afternoon everyone and thank you for joining Frontdoor's second quarter 2021 earnings conference call. Joining me today are Frontdoor's Chief Executive Officer, Rex Tibbens; and Frontdoor's Chief Financial Officer, Brian Turcotte. The press release and slide presentation that will be used during today's call can be found on the Investor Relations section of Frontdoor's website, which is located at investors.frontdoorhome.com. As stated on Slide 2 of the presentation, I'd like to remind you that this call and webcast may contain forward-looking statements. These statements are subject to various risks and uncertainties which could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's filings with the SEC. Please refer to the Risk Factors section in our filings for a more detailed discussion of our forward-looking statements and the risks and uncertainties related to such statements. All forward-looking statements are made as of today, August 4 and except as required by law, the company undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. We will also reference certain non-GAAP financial measures throughout today's call. We have included definitions of these terms and reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures in our press release and the appendix to the presentation in order to better assist you in understanding our financial performance. I'll now turn the call over to Rex for opening comments. Rex? Rex Tibbens: Thanks Matt and good afternoon everyone. This month marks the 50th anniversary of our largest brand, American Home Shield. I want to take a moment to say thank you to all the team members who built the business over the last 50 years and for the platform they provided us. Today, our team looks forward to transform the company and the industry over the next year 50 years. Since COVID-19 emerged early last year, we have navigated through unique and challenging market conditions and proven that we have a solid and resilient business model that offers Homeowners Protection, peace of mind and convenience. Over this time, we have executed a number of strategic initiatives to drive growth and improve the customer and contractor experience. These initiatives coupled with a lower than expected level of service requests, drove solid second quarter financial results. Now, turning to Slide 4 in our 2021 objectives. Despite some market driven challenges in our real estate channel, we are on pace to deliver the highest level of total company annual revenue growth we have seen as a standalone company. This momentum should continue into next year as we target double-digit revenue growth in 2022 as a result of investments in our direct to consumer channel, executing customer retention initiatives and the continued scaling of our emerging businesses. We are still aiming for double-digit growth for this year though will be somewhat dependent on the real estate inventory and our ability to grow other channels. In our direct to consumer or DTC channel, our new product line-up remains a big hit with customers as evidenced by higher than originally forecasted sales of our Platinum product. As a reminder, our new products were launched in the second quarter of this year to provide better coverage options to our customers. Due to the success of the initial launch, we are continuing to evaluate further additions to our offering and believe the demand for premium products remains very strong. Additionally, we are continuously testing our dynamic pricing models to further optimize customer pricing and we expand our dynamic pricing initiatives will continue to seek the optimal balance between customer growth in gross margin. Finally, our investments in DTC marketing and customer conversion optimization continue to pay dividends driving double-digit revenue growth and a very attractive marketing efficiency. Our real estate is a great channel for us. We continue to see growth opportunities in our DTC channel to better help us reach our long term growth objectives. Our second objective is advance automation initiatives across the business. We recently announced the hiring of Tony Bacos to serve as Senior Vice President and Chief Digital Officer to help accelerate progress on this front. You recently served as Vice President and Chief Technology Officer for Amazon Fashion and held multiple leadership roles during a 7-year tenure with Amazon. Prior to Amazon, he held leadership roles at Nike, Symantec and the region's Group. Tony will be responsible for the strategy and execution of technology initiatives and investments across the organization and will play a critical role in Frontdoor's continued digital transformation. He will drive our digital first strategy specifically aimed at improving our service delivery process through technology and data. On prior calls, I covered some of the specific automation initiatives we are building, launching an appliance purchasing portal, adding our new contractor portal, integrating our supply chain with key vendors and accelerating parts ordering. These initiatives are performing well and we continue to ramp up adoption across our customer and contractor base. I continue to see opportunities as it relates to furthering our digital initiatives that drive both scale and customer experience. Our third objective is to improve customer retention, which is currently at 75% on a rolling 12 month basis. While we expect to see customary Kensey rates improve if global supply chain issues subside, process improvements take hold and new customer growth accelerates. Our retention rates will continue to reflect the impact of the tight supply chain challenges experienced over the last year. That impacted weight on our customer experience and retention due to the difficulties obtaining parts and replacement units. We're expecting that the global supply chain would have improved faster and that's provided some tailwinds to our renewal rates. While we are pleased with the meaningful improvement in availability of parts and equipment over the last several months, availability is still not at pre-pandemic levels. Our other customer retention initiatives include improving the customer experience and key service touch points, removing friction from the renewal process, optimizing our dynamic pricing algorithms and engaging our customers outside of service claims. Speaking of customer engagement, we recently launched a new module in our customer portal that provides our customers access to discounted maintenance services and well tips on how to maintain their homes. We're very pleased with the engagement so far with this new feature, expected to translate into future retention gains. Our final objective for 2021 is to expand and scale our broking businesses of ProConnect and Streem. The expansion of these businesses will diversify our portfolio, accelerate future total company revenue growth. ProConnect remains on track to meet 2021 revenue target of $20 million. If we continue to expand in this new trade such as plumbing electrical across the 35 cities in which ProConnect operates. Additionally, we added maintenance services under the ProConnect banner including HVAC tune ups. We feel our members are looking for more maintenance services not covered under their plan and plan to expand these services in the coming months. ProConnect launched in late 2020 and since that time we have learned that the standalone revenue generation model is working well the market today, but there is more opportunity to cross-sell to existing and prospective home service plan customers as well as increased contracted utilization. Although we are still relatively new in the ProConnect launch, we are pleased with our current progress and expect substantial growth from this business going forward as we gain economies of scale. In regard to Streem, we are renting utilization across our core operations, as well as monetizing our investments by adding new software as a service or SaaS enterprise customers. We continue to target a multipronged usage approach as both contractors and employees in our call centers initiated Streem call and drive adoption. We continue to drive further contractor utilization of Streem and seeing extremely positive customer response as they provide immediate feedback and generally experienced shorter time to service request resolution. The value of Streem also has a real environmental impact. It will look for ways to solve customer problems without rolling a truck which reduces the total carbon footprint related to completing the service request. Now, turning to Slide 5. We'll discuss the real estate channel in more detail. Let's start with the macro data where we've seen the existing home sales market continued tight this year. According to latest June data for the National Association of Realtors or NAR, we have seen the time on market dropped to a record low 17 days. The average price for a single family home has increased 24% over the last year to approximately $370,000 and inventory levels are at near record-low of 2.6 months. With market trends, becoming more extreme, we're seeing increased challenges trying to sell a home service plan as part of the real estate transaction. This has resulted in a relatively flat home service plan unit growth in our real estate channel despite strong existing home sales growth. This trend presents a challenge for the entire home service plan industry. Regardless, others may cause some short-term turbulence, we are leveraging our business model in the following ways. First, in our DTC channel, we launched a new marketing campaign, focused on home buyers. We're also increasing our overall investment in the DTC channel versus our original plan by approximately $5 million to help mitigate the decline in real estate. The advantage of this approach is that DTC customers renew at a rate approximately 3 times higher than that of first year real estate customers, which will provide tailwinds for our renewal channels heading into 2022. I'd like to remind everyone that we won't see the full benefit of these actions until next year as we recognize revenue on a monthly basis. Second, we launched a campaign targeting both real estate agents and homebuyers in order to drive better awareness of our home service plan value proposition. It is more important than ever to help home buyers understand the advantages of having a home service plan at this tight real estate market to help them navigate the current landscape. Many home buyers are waiving inspections and contingencies when they purchase a home. We feel, these customers now more than ever they need our services. Third, we are aggressively expanding our partnership opportunities. We see that there is another growth area for us as we expand into new channels. For example, our partnership with Mr. Cooper, the mortgage finance base is going well, as we grow off a very small base. More to come as we solidify partnerships to further grow and diversify our business. It's important to remember that these actions are addressing what we view as a short-term challenge in the real estate market and our overall growth strategy does not solely rely on rapidly growing our real estate channel. In closing, despite these short term challenges, Frontdoor continues to perform well. We are targeting our largest annual revenue growth as a stand-alone company. Our second quarter gross margins exceeded our expectations and we're delivering solid adjusted EBITDA while investing more in the business. Looking forward, we continue to target sustainable double-digit revenue growth if we execute our strategies to expand our value proposition and as our new initiatives gain traction in 2022 and beyond. I remain excited about the trajectory of our company in driving the next chapter of our digital transformation. I'll now turn the call over to Brian. Brian? Brian Turcotte: Thanks, Rex and good afternoon, everyone. Let's now turn to Slide 6 and I'll review our second quarter 2021 financial results. Revenue increased 11% versus the prior-year period to $462 million driven by approximately 6 percentage points of volume growth and 4 points of higher pricing. Similar to last quarter, I would point out the volume component include strong year-over-year growth in both ProConnect and Streem of in the small base. Looking at our home service plan channels, revenue derived from customer renewals of 9% versus the prior year period due to improved price realization and growth in the number of renewed home service plans. First year real estate revenue was up 4% versus the prior year period primarily due to improved price realization. I'll speak more about our real estate channel in the outlook. First year direct to consumer or DTC revenue was up 12% versus the prior-year period, primarily due to an increase in marketing investments that drove growth in the number of home service plans. Revenue reporting our other channel increased $10 million over the prior year period, primarily due to continued growth at ProConnect and Streem. Gross profit increased 11% in the second quarter versus the prior-year period to $242 million and our gross profit margin was 52% slightly higher than the prior year period. Net income was $40 million, which includes a $30 million debt extinguishment charge related to our recent refinancing. Adjusted net income increased $9 million from the prior year period to $65 million. The primary difference between net income and adjusted net income is the tax effective add-back of the debt extinguishment charge. Adjusted EBITDA was $114 million in the second quarter of 2021 versus $100 million in the prior year period. This was above the top end of our guidance range due to a lower-than-anticipated level of service requests in the quarter and the execution of the cost management initiatives. Let's move to the table on Slide 7 and I'll walk through the adjusted EBITDA bridge from the second quarter 2020 to second quarter 2021. Starting at the top, we had $31 million of favorable revenue conversion in the second quarter versus the prior year period. As a reminder, revenue conversion is calculated using the estimated gross margin impact for both new home service plan revenue and price changes. Contract claims costs increased $6 million in the second quarter versus the prior year period when excluding the impact of the change from higher revenue. The increase over the prior-year period was primarily driven by unfavorable cost trends in the appliance, plumbing and HVAC trades due to industry wide parts and equipment availability challenges and inflation, partly offset by a lower number of service requests across all trades. Additionally, I'm pleased to report that the pandemic driven higher service request trends in 2020 are moderating slightly faster than we originally planned, specifically in our appliance and plumbing trades. While we are still not back to 2019 levels, we do expect this favorable trend to continue in the back half of the year. I'd also like to point out that HVAC service requests were favorable compared with our initial estimates. It is a primary driver of claims costs being lower than expected in the second quarter of 2021. This favorability may be a surprise with some so I'll provide a little more color. Despite cooling degree days being 7% higher across the entire US, weather do not have a meaningful impact on our level HVAC service requests in the second quarter of 2001 versus the second quarter of 2020. As a reminder, cooling degree days are metric commonly used to measure energy needed to cool a building and is calculated as the degree of difference between the daily mean temperature at 65 degrees Fahrenheit. The second quarter is a great example of how our service request levels don't always have a linear relationship to national weather trends as a warmer weather in the west is largely offset by cooler weather in the south where we have a higher customer concentration. The sales and marketing costs increased $4 million in the second quarter versus the prior year and primarily included investments to drive growth in the DTC channel, ProConnect and Streem. Customer service costs increased $3 million in the second quarter versus the prior year due to investments in customer retention initiatives and customer growth. And finally, the general initiated cost increased $3 million in the second quarter versus the prior year due to higher personnel costs and investments in technology. Please now turn to Slide 8 for a review of our cash flow and cash position, but before we get into the cash flow details, I want to highlight the efforts of our Treasury and legal teams in regard to our recently completed debt refinancing. We expect this transaction as well as $100 million debt repayment completed in February to reduce ongoing annual cash interest expense by approximately $30 million versus 2020 based on the recent range for interest rates we also lowered our gross debt by approximately $350 million. Turning to cash flow, net cash provided from operating activities was $119 million, a $21 million decrease versus the prior year period as unfavorable changes in working capital were partially offset by higher earnings adjusted for non-cash charges. Net cash used for investing activities was $15 million, a $4 million decrease versus the prior year period primarily due to a decrease in capital expenditures. Net cash used for financing activities was $378 million compared to $4 million in the prior year period and was almost entirely due to reduction in gross debt. Free cash flow calculate as net cash provided from operating activities minus property additions was $104 million in the 6 months ended June 30, 2021, compared to $122 million for the prior year period. We ended the second quarter of 2021 with $322 million in total cash which included restricted net assets of $173 million and unrestricted cash of $150 million. Our unrestricted cash combined with $248 million of available capacity under our revolving credit facility provides us with a solid available liquidity position of $398 million. In addition to our solid liquidity position, Frontdoor continues to have an extremely strong financial position. As you'll recall, we've launched as a public company in October 2018 at nearly 4 times net leverage. We couldn't be more pleased by how far we've come in almost 3 years as our net leverage has improved to 1.8 times. Also, we continue to generate robust free cash flow and we're targeting a full-year 2021 adjusted EBITDA conversion to free cash flow of just under 55%. As I reiterated last quarter, our first priority for capital allocation remains responsibly investing in the business to drive the growth levels we're now demonstrating. However, given the sizable amount with excess cash, we expect to generate again this year, we continue to search for acquisition opportunities in both the home services industry and digital space. I'll now conclude my prepared comments with our third quarter and full year 2021 financial outlook on Slide 9. We expect our third quarter revenue to range between $470 million and $480 million. And adjusted EBITDA to range between $95 million and $105 million. The third quarter outlook compared to the prior year period includes the following assumptions. For revenue, upper single-digit growth from the DTC and renewal channels, along with a slight decrease versus prior year in our real estate channel. I should note that the new revenue initiatives that Rex detailed earlier are expected to have a larger impact over the next several quarters. The claims cost, a continuation of favorable service across levels, specifically as it relates to improvement and pandemic trends in our appliance and plumbing trades offset by ongoing inflation and cost pressure. For SG&A, a $13 million increase in sales and marketing investments to support our growth objectives. This includes the approximately $5 million of incremental B2C spend in the third quarter that Rex mentioned to help offset lower real estate revenue and we will continue to make additional investments in people and technology to support our growth. Turning to the full year, our updated revenue target range is $1.6 billion to $1.62 billion. The change primarily reflects the current challenge posed by impact of the extremely tight existing home sales market on our real estate channel. Despite this challenge, the range implies approximately 9% to 10% total revenue growth versus 2020. Our largest annual growth rate as a standalone company and is comprised of contributions from both price and volume in our home service plan business as well as ProConnect and Streem growth. Our gross profit margin target is in the 48% to 49% range as we expect the benefit of lower than anticipated services levels and cost management efforts to effectively offset lower real estate revenues and a higher inflation impact on claims costs. SG&A is expected to range with $525 million to $535 million or just under 33% of revenue. As a reminder, more than half of the increase versus prior year is comprised of higher sales and marketing investments to drive revenue growth. It also includes investments in service and retention initiatives. I'll also note for those of you who trying to bridge from SG&A to our adjusted EBITDA guidance, that we expect non-cash stock-based compensation to increase approximately $10 million in 2021 versus prior year. Additionally, our 2021 SG&A projection includes approximately $30 million of combined expense for ProConnect and Streem as we invest to ramp their size and scale heading into 2022. Our adjusted EBITDA outlook range remains between $280 million and $300 million, which is consistent with the prior annual guidance despite exceeding our second quarter expectations. This is due to the impact of constrained growth in the real estate channel, incremental DTC marketing investments and claims cost inflation, largely offset by the continued benefit of lower service request levels and our cost control efforts. With that, I'll now turn the call back over to Matt to open the question and answer session. Matt? Matt Davis: Thanks, Brian. As a reminder, during the question-and-answer session, we encourage you to ask any questions that you may have. But please note the guidance is limited to the outlook we provided. Operator, let's open the line for questions. Operator: Thank you. We will now begin the question-and-answer session. Our first question comes from Youssef Squali from Truist. Please go ahead. Nick Cronin: Hi, this is Nick Cronin on for Youssef. Thanks for taking my questions. Two, if I can. I know it's still early, but can you speak to the contribution margin differential between ProConnect in your traditional warranty business and whether one should be higher than the other at scale. And then secondly, what needs to happen to get the real estate segment to grow at double digits and the second half of '21. I know you called out that you still expect this segment to grow 9% to 10% in the year. Thanks. Rex Tibbens: Yes, hi Nick. It's Rex. So for in terms of contribution margin still I think early, early days, we continue to invest in the business. I also think it depends on the trading growth. So I think that overall over time, the contribution margin should get closer to our home service plan margins, but I think it's really dependent on the trade. So things like carpet cleaning, for example, may not be used as profitable as other areas. We also view it as an opportunity to increase our engagement with customers. So while we may do a job for slightly lower margins, when we look at it from a long-term value perspective, it's actually more advantageous for us to do those jobs from an engagement perspective. In terms of your second question, we certainly can't control the real estate market. But as I outlined in my prepared remarks, you were doing a couple of things to really continue to drive revenue in those areas. So certainly as we invested more in direct to consumer, that will help. Secondly, we are actually targeting real estate buyers, as I said before in the remarks, a lot of other customers, our home buyers are buying homes without inspections or contingencies. So I think that's a great, a great population to market towards. And then we continue to focus on partnerships. I mean the real estate space or adjacent to the real estate space such as Mr. Cooper. All that said, we're not totally dependent on our real estate for our growth going forward. So we still have are our largest annual revenue growth for the year, even despite a pretty tight inventory from a real estate perspective. Nick Cronin: Understood, thanks. Operator: The next question comes from Cory Carpenter from JP Morgan. Please go ahead. Unidentified Analyst: It's Brian on for Cory, just wondering if you could expand a bit on some of the drivers of the lower service request volume this quarter and then also, are you back to more normalized pre-COVID levels of service requests and how does your guidance by service request volume in the back half of this year. Thanks. Rex Tibbens: Brian, you take that or do you want me to. Brian Turcotte: I'd happy to, Rex. Hey, Brian, how are you. As I mentioned in my prepared remarks, track on the second quarter was lower than we expected, despite the cooling degree days and also the pandemic related trades of appliance and plumbing are mitigating faster than we thought. So that's all good news for us. And that's a big part of why our instances in our service requests were lower in the second quarter. And looking forward, yes, we're assuming that's continuing as far as the pandemic trades that it's going to continue to abate as we go to the back half of the year and we still have some weeks left for the peak season as far as the HVAC and we'll see how that plays out. But so far, it's been working out pretty well for us. Unidentified Analyst: Perfect, thanks. Operator: The next question comes from Ian Zaffino from Oppenheimer. Please go ahead. Ian Zaffino: Hi, a couple of questions. As far as how you think about pricing and recovery, are you assuming ongoing inflation and increases in inflation, not just on your cost but also how you kind of go-to-market taking price, are you coming in a position right now given all the inflation to maybe pre-emptively take price? That will be the first question. And then on the acquisition front and that you mentioned that, how are you thinking of acquisitions versus buybacks, what size acquisition would be in sweet spot, and maybe where would you want to go with leverage. Thanks. Rex Tibbens: Sure. I'll take -- this is Rex. I'll take the first one and I'll hand over to Brian. In terms of pricing, I think that pricing is one of the key assets of the company. And when you think about, we have the ability to continually look at testing price from a geography perspective, from a risk perspective and we've been doing that really since last year. So I think we, we've pricing for inflation, if we see things change, we have the ability to move on pricing pretty, pretty quickly. And pricing also confirms that really customers are primarily in Elastic as it relates to price, and so we had the ability to really I think use gross margin as the lever for growth and for profitability. So between those two things, it looks like we're pretty well positioned; thanks to non-dynamic pricing. Brian, you want talk about leverage or sorry leverage, but our overall capital allocation strategy? Brian Turcotte: Sure. Thanks, Rex. Ian, how are you? As I mentioned, we're still acquisitive. We're going to invest in our business responsibly first and foremost to grow it even faster than we are now, hopefully. And, but we are acquisitive in the areas of home services in the digital space as I mentioned, but things assets of price each day. So we're looking long and hard and Rex and I are both in final agreement that we don't want to overpay for anything as stewards of investor capital. So we're going to be very careful when we look at things and so we're still looking. The good news is, although we lowered our cash by $213 million quarter-to-quarter through our debt repayment, we still have $150 million cash and we build that pretty quickly this year with our conversion from EBITDA to free cash flow. So, and -- if we look at something of scale; we can obviously lever up as needed as well. So that's sort of our stack ranking right now, how we're going to use our cash if that's helpful. Ian Zaffino: Thank you. Operator: The next question comes from Matthew Gaudioso from Compass Point. Please go ahead. Matthew Gaudioso: Thank you. Good afternoon, guys. Just a question on customer service. I know the investments there take a little bit of times of flow through in the form of the retention rate. I'm just wondering how you can, wondering, I mean if you could share any color on how those investments are going, whether you feel like they're having an impact. And then can you remind me of the sensitivity of what each percentage point of retention rate means for the top line? Thanks. Rex Tibbens: Sure. So, hi, it's Rex. In terms of, we've been on a really digital journey for a number of years now, really trying to leverage both data and technology to really not just change the customer experience, but it's all it overall. And that's one of the reasons we acquired Streem. So we think that as we continue to make investments that allow us to touch customers sooner, allow us to change the overall cycle time as it relates to fixing their issue and those investments will pay off from a retention perspective over time. Right now, as the supply chain gets better than we expect that to be, certainly better for us from a retention perspective. So, it definitely takes time and I still say we're, this is a journey that will be on for a while as customers' expectations continue to change. Brian, you will talk about the what point of retention is worth. Brian Turcotte: Sure. Thanks, Rex. Yes, it's 1 percentage points worth about $15 to $20 million of incremental revenue on an annualized basis, and that will always depend on in year impact on the timing of when we actually get that benefit, but it's about 15 to 20 million. Matthew Gaudioso: Great, thanks. Operator: The next question comes from Michael Ng from Goldman Sachs. Please go ahead. Michael Ng: Great, thanks for the question. I just have 2. First, I was wondering if you could just give us a more detailed update around ProConnect, has higher pacing in terms of the number and type of jobs you're offering on that and the market expansion there. Thanks. Rex Tibbens: Sure, Michael. So, as you know, we launched in 35 cities primarily in appliances as we, as we move out towards the end of the year. We're adding both plumbing and electrical and then really found a bright spot in maintenance services as well. So our growth strategy is not only to target other customers, but also target the other 2.2 million customers we have today. So we're on track for our leading our recognition of $20 million and both from the expansion of trade in stock markets as well as adding incremental maintenance services, we think there is a real opportunity as we move into 2022 as well. Michael Ng: All right, thank you. And I just wanted to follow up on some of the earlier questions around the strong gross margins in the quarter and the payroll service request levels, would you say that was more of a function of weather, normalization of service requests as reopening continues. I'm just trying to get a better sense of the sustainability of that. And also are you seeing increased levels of customer satisfaction, as the volume normalizes and do you expect any benefits from that as it relates to retention? Thank you. Rex Tibbens: Now, I'll take that the back half and then pass it over to Brian. So from a customer service and retention perspective. Yes. Outside of any supply chain issues, we've worked very hard, the team to focus on both retention as well as cycle time and it really kind of focusing on kind of speed, if you will for and on behalf of customers. Certainly as the supply chain improves and we're able to get the parts and replacements that we need to help customers that will continue to have a retention benefit for us. As it relates to kind of weather versus process improvements that type of thing. Brian, you want to take that one. Brian Turcotte: Sure. I wouldn't say weather was a benefit, but I don't think it was punitive like it could have been in Q2 with the HVAC service requests. But I think the exciting thing was just the mitigation of some of the pandemic related service trades Michael again like plumbing and appliance that they're trailing off, the incident rates are going lower. We're not back to 2019 levels. I think I stated that in my prepared remarks, but they're getting better. So I don't see why that would change going forward. I think people despite the delta variant, I think people are still exiting the home, maybe they're wearing masks, but I don't see as much pressure on our home systems going forward, just my opinion. Does that help? Rex Tibbens: So one of the things I would add is that we focus a lot on preferred contractors and I'm pretty proud of the team that we continue to have a pretty high rate of dispatches with our preferred contractors as well, which always help us from a cost perspective. Michael Ng: Thanks very much for the thoughts, Rex and Brian. Much appreciated. Operator: The next question comes from Robert Coolbrith from Wells Fargo Securities. Please go ahead. Robert Coolbrith: Great. Good afternoon and thanks for taking our questions. A couple more on the real estate channel, we know you're focusing on customer and partner education, but wondering if you could maybe talk also to share opportunities, a lot of agents have the ability, if maybe steer their customer to one of multiple plan providers. So, any thoughts on how you can make sure your top of mind in the channel. And then the second one, final one on real estate, given the sort of market dynamic that you're seeing. We imagine a greater share of planned volumes, our buyer pays or agent pays versus selling pays. So just wondering if you maybe help us think through; how that could potentially impact retention rates beneficiary at some point in the near future? Any color on the mix of buyer versus agent and seller pays and differences in retention? I mean, how that plays out over the next few quarters and prior years? Thank you. Rex Tibbens: Sure. So we're still very much engaged with our brokerage partnerships. We're in all or 10 of the top 10 brokerage firms, we continue to market aggressively to our realtor partners so that we can make sure they have educated on kind of what our plans and the performance of those plans. We're also focusing as I mentioned in my prepared remarks, really a direct consumer marketing effort focused on home buyers. So again, the folks who may have waived inspections or other contingencies. We are, have the ability now to directly market to a lot of those new home buyers. So pretty excited that this may create certainly a new channel for us. But in terms of the real estate channel continue to target value proposition campaign for both brokers and home buyers, we're expanding partnerships as well. From a retention perspective, keep in mind that direct to consumer customers retain about 3:1 to real estate. So we think that there is a real opportunity as we continue to lean into direct consumer, this will also pay future dividends as it relates to retention. Operator: Ladies and gentlemen, thank you for -- thank you, again, for joining Frontdoor second quarter 2021 earnings call. Today's call is now concluded. Rex Tibbens: Thank you, everyone.FTDR Ratings Summary
FTDR Quant Ranking
Related Analysis
Frontdoor Shares Surge 4% on Upgrade
Frontdoor (NASDAQ:FTDR) shares surged more than 4% intra-day today after Truist Securities analysts upgraded the stock from Hold to Buy, setting a price target of $42.00, up from $40.00.
The analysts explained the upgrade by citing a more positive outlook for the company's earnings. They raised the 2023 earnings per share (EPS) estimate to $1.70 from $1.60 and increased the 2024 forecast to $1.92 from $1.80. This optimism is driven by their analysis of Frontdoor-specific Truist Card Data, which supports a more favorable revenue outlook. Additionally, the analysts pointed out a positive claims environment in the third quarter and the potential for improvement in the Real Estate channel in the upcoming quarters.
