FTDR

As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q2. Today, we are looking at consumer discretionary - specialized consumer services stocks, starting with Frontdoor (NASDAQ:FTDR). The Consumer Discretionary sector, by definition, is made up of companies selling non-essential goods and services. When economic conditions deteriorate or tastes shift, consumers can easily cut back or eliminate these purchases. For long-term investors with five-year holding periods, this creates a structural challenge: the sector is inherently hit-driven, with low switching costs and fickle customers. As a result, only a handful of companies can reliably grow demand and compound earnings over long periods, which is why our bar is high and High Quality ratings are rare. Some consumer discretionary companies don’t fall neatly into a category because their products or services are unique. Although their offerings may be niche, these companies have often found more efficient or technology-enabled ways of doing or selling something that has existed for a while. Technology can be a double-edged sword, though, as it may lower the barriers to entry for new competitors and allow them to serve customers better. The 9 consumer discretionary - specialized consumer services stocks we track reported a slower Q2. As a group, revenues missed analysts’ consensus estimates by 0.7% while next quarter’s revenue guidance was 1% above. Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 8.1% since the latest earnings results. Established in 2018 as a spin-off from ServiceMaster Global Holdings, Frontdoor (NASDAQ:FTDR) is a provider of home warranty and service plans. Frontdoor reported revenues of $645 million, up 4.5% year on year. This print was in line with analysts’ expectations, and overall, it was a strong quarter for the company with full-year EBITDA guidance topping analysts’ expectations and a beat of analysts’ EPS estimates. Frontdoor achieved the fastest revenue growth in the group. Unsurprisingly, the stock is up 7.1% since reporting and currently trades at $81.81. Is now the time to buy Frontdoor? Access our full analysis of the earnings results here, it’s free. Founded in 1955 by brothers Henry W. Bloch and Richard A. Bloch, H&R Block (NYSE:HRB) is a tax preparation company offering professional tax assistance and financial solutions to individuals and small businesses. H&R Block reported revenues of $1.14 billion, up 3% year on year, outperforming analysts’ expectations by 2.5%. The business had a very strong quarter with full-year revenue guidance beating analysts’ expectations and full-year EBITDA guidance beating analysts’ expectations. H&R Block achieved the biggest analyst estimate beat and highest full-year guidance raise of the whole group. However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $46.33. Is now the time to buy H&R Block? Access our full analysis of the earnings results here, it’s free. Originally a death care company, Matthews International (NASDAQ:MATW) is a diversified company offering ceremonial services, brand solutions and industrial technologies. Matthews reported revenues of $246 million, down 29.6% year on year, falling short of analysts’ expectations by 7%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates and full-year EBITDA guidance missing analysts’ expectations. Matthews delivered the weakest performance against analyst estimates and slowest revenue growth among its peers. As expected, the stock is down 26.1% since the results and currently trades at $20.43. Read our full analysis of Matthews’s results here. Founded in 1993 and headquartered in Louisiana, Pool (NASDAQ:POOL) is one of the largest wholesale distributors of swimming pool supplies, equipment, and related leisure products. Pool reported revenues of $1.82 billion, up 2.2% year on year. This result was in line with analysts’ expectations. Taking a step back, it was a slower quarter as it produced a significant miss of analysts’ EPS estimates and full-year EPS guidance missing analysts’ expectations. The stock is down 9.3% since reporting and currently trades at $177.91. Read our full, actionable report on Pool here, it’s free. Known by many for its old cable television commercials, WeightWatchers (NASDAQ:WW) is a wellness company offering a range of products and services promoting weight loss and healthy habits. WeightWatchers reported revenues of $162.3 million, down 14.2% year on year. This number topped analysts’ expectations by 2%. Aside from that, it was a satisfactory quarter as it also produced a beat of analysts’ EPS estimates but a miss of analysts’ EBITDA estimates. WeightWatchers had the weakest full-year guidance update in the group. The stock is down 2.7% since reporting and currently trades at $15.00. Read our full, actionable report on WeightWatchers here, it’s free. Over the past year, investors have been forced to repeatedly answer the same question: what is the market’s biggest risk? The answer has changed several times, and each shift has reshaped market leadership. Late in 2025 and early 2026, artificial intelligence became the market’s primary uncertainty. Investors questioned whether AI would erode software pricing power and weaken competitive moats as AI made it easier to replicate once-differentiated products. By the spring, technology took a back seat to geopolitics. The U.S. conflict with Iran briefly became the market’s dominant narrative, raising concerns about oil prices, inflation, and global growth. But as energy markets remained orderly and fears of a prolonged supply disruption faded, investors quickly turned their focus back to fundamentals. Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

Frontdoor’s second quarter saw strong operational execution, with the market reacting positively to robust results across key business areas. Management highlighted that direct-to-consumer and real estate channels both contributed to the first organic growth in total members in five years. CEO William Cobb noted that the company's multi-brand strategy, improvements in digital engagement, and targeted marketing led to a 1% member count increase, while operational improvements in contractor partnerships and app usage underpinned better retention and service ratings. The company also emphasized disciplined cost controls and a dynamic pricing approach as drivers of its margin expansion. Is now the time to buy FTDR? Find out in our full research report (it’s free). Revenue: $645 million vs analyst estimates of $644.8 million (4.5% year-on-year growth, in line) Adjusted EPS: $1.93 vs analyst estimates of $1.77 (9.3% beat) Adjusted EBITDA: $220 million vs analyst estimates of $204.4 million (34.1% margin, 7.6% beat) The company lifted its revenue guidance for the full year to $2.2 billion at the midpoint from $2.18 billion, a 1.1% increase EBITDA guidance for the full year is $592.5 million at the midpoint, above analyst estimates of $574.4 million Operating Margin: 27.9%, up from 26.4% in the same quarter last year Market Capitalization: $5.89 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Mark Hughes (Truist): Asked about price sensitivity in the real estate channel and the impact of selective discounting on attach rates. CEO William Cobb described targeted promotions and local engagement as key, noting the “grinding” nature of the business. Sergio Segura (KeyBanc): Inquired about the drivers behind margin expansion, especially versus last year’s strong results. CFO Jason Bailey attributed the gains to dynamic pricing, favorable weather, and improved contractor management, with incremental improvements compounding over time. Ian Zaffino (Oppenheimer): Sought clarification on real estate channel member growth versus flat existing home sales. Cobb explained that higher attachment rates resulted from local investment and increased agent training, as well as improved technology demonstrations. Michael Rindos (Benchmark Company): Asked about preferred contractor network coverage and its impact on cost and service. Bailey stated the company’s national coverage is strong, with preferred contractors delivering the best service and a 1% change in preferred rate impacting gross profit by $8-10 million. Michael Rindos (Benchmark Company): Queried the status of appliance sales as a new business line. Cobb confirmed expansion beyond pilot in Q4, describing appliances as the next trade to be scaled using the proven HVAC upgrade playbook. In upcoming quarters, our analyst team will monitor (1) the pace of member growth and retention, especially as new product lines are scaled; (2) the impact of expanded marketing spend on customer acquisition and conversion; and (3) progress in scaling non-warranty businesses, including HVAC upgrades and the rollout of appliance sales. Additionally, execution on digital engagement and the competitive landscape in home services will remain key factors to watch. Frontdoor currently trades at $87.58, up from $76.38 just before the earnings. Is there an opportunity in the stock? Find out in our full research report (it’s free for active Edge members). ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively. Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 8:30 a.m. ET Vice President of Investor Relations and Treasurer - Matt Davis Chairman and Chief Executive Officer - William Cobb Senior Vice President and Chief Financial Officer - Jason Bailey Operator: Ladies and gentlemen, welcome to Frontdoor's Second Quarter 2026 Earnings Call. Today's call is being recorded and broadcast on the Internet. Beginning today's call is Mr. Matt Davis, Vice President of Investor Relations and Treasurer, and he will introduce the other speakers on the call. At this time, we'll begin today's call. Please go ahead, Mr. Davis. Matt Davis: Thank you, operator. Good morning, everyone, and thank you for joining Frontdoor's Second Quarter 2026 Earnings Conference Call. Joining me today are Bill Cobb, Chairman and CEO; and Jason Bailey, Senior Vice President and CFO. 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 www.frontdoorhome.com. As stated on Slide 3 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 6, 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 their 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 will now turn the call over to Bill Cobb for opening comments. Bill? William Cobb: Thanks, Matthew, and good morning, everyone. Frontdoor delivered exceptional results in the second quarter across all key areas of the business. At the midyear mark, we are driving member growth with total ending member count up 1%, the first organic growth in 5 years. We are successfully scaling our non-warranty and other business, which is rapidly approaching $0.25 billion in annual revenue. We're delivering structurally higher margins, and we continue to maintain capital discipline. We expect to repurchase approximately $330 million of our stock in 2026, which will complete our latest authorization nearly a year ahead of schedule. Let's turn to Slide 5 to cover the Q2 highlights. Revenue grew 5% to $645 million. Gross profit margin expanded 100 basis points to 59%. Net income grew 13% to $125 million. Adjusted EBITDA increased 10% to $220 million, and we repurchased $181 million worth of shares through July 31. It was truly an outstanding quarter. Mid-single-digit revenue growth combined with continued gross margin strength and SG&A leverage drove a double-digit increase in net income, all resulting in adjusted EPS growth of nearly 20%, which also includes the impact of our share repurchases. This powerful combination shows that our model is working. Let's turn to Slide 6 to take a deeper look at our member count performance. Our direct-to-consumer channel grew 5%. Our real estate channel grew a resounding 7% and our renewal member count was stable due to strong retention rates and sustained growth in our first year channels, another major milestone for our business. Taken together, this translated to total ending member count growth of 1% for the quarter. I want to pause there for a moment because this inflection point is a big deal. Our #1 priority at Frontdoor is to grow and retain home warranty members. And for the first time since 2021, our total ending member count is growing again. This reflects the progress we've made across the business and the execution we're seeing in both our first year channels and our renewals. Let's take a deeper look at how we are driving direct-to-consumer growth on Slide 7. Ending member count in this channel grew 5%, marking our seventh consecutive quarter of year-over-year growth. This kind of consistency proves that our playbook is working. That playbook is built around 2 things: one, growing demands or brand leadership; and two, improving conversion. Starting at the top of the funnel. Our Warrantina campaign is reaching more of our audience than ever. More than 40% of homeowners recall seeing our ads. Our brand health metrics, likability, relevance, differentiation, effect on interest, all continue to improve and outperform the category. We also intentionally pulled forward the timing of our planned marketing spend to align with our selling season, and it is paying off. We continue to shift more of our marketing spend to performance channels where we can be more targeted, more flexible and reach consumers at the right moment. We are also expanding demand through our multi-brand strategy and proving we can accelerate growth by elevating acquired brands to our operating standards. 2-10 is a great example. When we acquired it, we talked to all of you about revenue synergies we believe we could unlock by bringing 2-10 onto our platform, and we're now starting to see those synergies come through. By applying the AHS toolkit, we are meaningfully growing the 2-10 brand. This is exactly the kind of value creation we can drive when we put our full weight behind a smaller brand. Turning to the second area of the playbook: improving conversion. How consumers find us is changing across traditional search engines such as Google and increasingly, AI. We're recreating our content and restructuring our sites to stay prominently positioned and it's already improving our search outcomes. With the assistance of AI tools, we are also reshaping how our inside sales team operates. Real-time enablement tools guide our agents during calls, pinpoint the best time and channel to reach prospects and surface the behaviors that drive conversion. This is helping newer agents ramp faster and sell more efficiently. And finally, promotional pricing continues to be a strategic acquisition tool. Renewal performance of these cohorts continues to hold up as well as, if not better than, our nonpromotional cohorts. That means that the long-term unit economics remain very strong. Let's turn to Slide 8 and the real estate channel, which had a standout quarter as ending member count grew 7%. Let me set the context on the housing environment first. Inventory has improved to 4.5 months of supply from the 2.6 months in 2022. That gives buyers more leverage and is allowing home warranties to be a more frequent part of the home transaction again. But let me be clear, the broader market remains challenged. Existing home sales are still sluggish and are expected to finish around 4 million homes sold for the fourth year in a row as higher mortgage rates and affordability issues continue to limit transactions. Against that backdrop, we are engaging more directly with real estate agents. This means expanding our geographic coverage, running targeted promotions where the opportunity is the greatest, and bringing agents the strongest value proposition in the market. As a result, even though existing home sales remained flat, our attach rate improved 30 basis points versus the prior year period. Put another way, in the second quarter, we attached a home warranty to over 5% of existing homes sold in the United States. Now let's turn to renewals, the foundation of our business, on Slide 9. A decision to renew with us is made across multiple moments during the member journey, and we think about enhancing that journey in 4 stages. It starts with onboarding, the first impression, getting a new member set up quickly, helping them understand their coverage and making that first experience a good one. From there, it's about engagement, the day-to-day of being a member. Every claim we handle well, every contractor who does the job right, that's where trust is built. Then comes the renewal itself, where all the moments of the member journey come together to drive our high retention rates. And finally, post-renewal, because once a member renews, the next journey begins, and we want them with us for years to come. On the next slide, I'll walk through the results for renewals. The proof is in our retention rate. We continue to be near all-time highs in the quarter at 79.6%, a clear sign our strategy is working. Two things are driving it. First, the member experience and nothing is more paramount in this business. Our differentiated technology is designed to get members a faster answer, a faster fix and a better outcome, conveniently and sometimes virtually. Our app is a great example of that, and members are using it more than ever. Active users engaging with our app is up 65% year-over-year and usage of our video chat with an expert feature through the app more than doubled during the quarter. But technology is only part of it. Trust is really earned when something breaks, and that's where our service delivery comes through. We continue to drive strong volume to our preferred contractor network with 84% of our jobs, which delivers a more consistent and higher quality service experience. And our service ratings improved again this quarter, record high 5-star ratings and record low 1-star ratings, a trend we have seen now for 36 straight months. The second driver is operational, the blocking and tackling of the renewal itself. This is where discipline and focus matter, and we continue to raise our game. Our save program keeps getting sharper, reaching members who choose not to renew with the right offer at the right moment to win them back. Autopay is our most effective retention tool, and we are making it an easier choice for our members. Enrollment is now at 85% and near all-time highs. And we're seeing that same autopay benefit as we migrate 2-10 members onto our platform, where enrollment has increased meaningfully. Individually, these are small disciplined improvements. Together, they compound, and that's a large part of what returned us to total member growth this quarter. Now let me turn to non-warranty, which is anchored by our new HVAC upgrade program on Slide 11. This program is a prime example of our strategy to expand share of wallet and deepen our relationship with members. This business has scaled remarkably fast, growing from $13 million to an expected $170 million in just 4 years, and it comes with little to no customer acquisition cost, and we keep getting better at it. For example, contractor participation, quote rates and win rates are all improving. And we're now applying dynamic pricing to this business, the same approach we use across the rest of our model, weighing many variables to price each offer with precision. But what excites me most is the built-in demand funnel with our existing 2.1 million members, something that other companies would have to spend heavily to create. We have made excellent strides, and there's a lot of runway ahead. We've penetrated just 3% of our member base so far, and HVAC is only the beginning. It's the proof point for our model we can duplicate across other trades over time. In summary, we had a great second quarter. We are firing on all cylinders, and we are extremely optimistic about where this business is heading. With that, I will now turn the call over to Jason to cover the financials in more detail. Jason Bailey: Thanks, Bill. We had an excellent quarter, and I want to start by focusing on how we keep delivering these strong results. It starts with a predictable renewal-driven base that gives us a recurring revenue foundation. On top of that, operational excellence is driving structurally higher margins than just a few years ago. That combination generates a lot of cash where we converted adjusted EBITDA to free cash flow at more than 60%. And we're putting that cash to work, returning around $900 million to shareholders through share repurchases since 2021. This is a durable model that is turning consistent execution into real cash and real returns. So let me take you through the financial results on Slide 14, where you'll see those 4 pieces at work. I'll start briefly with the first half highlights before jumping into the details of the second quarter. The progression of these metrics from left to right tells you in one line that this business model is working: revenue growth, an exceptionally strong margin profile and operating leverage amplified by share repurchases. Through the first 6 months of the year, revenue grew 5% to $1.1 billion. Adjusted EBITDA increased 8% to $324 million. Net income grew 13% to $167 million. And lastly, adjusted diluted EPS grew 17% to $2.66 per share. You will see similar patterns in both our first half and second quarter results. Let's turn to Slide 15 for a deeper look at our Q2 results, starting with revenue. Total revenue grew 5% to $645 million. This was driven by over 3% from higher realized price and over 1% from higher volume. From a channel perspective, renewal revenue grew 4%, driven by higher price from our dynamic pricing model. First year real estate revenue increased by 3%, driven by higher volume as balanced housing market conditions supported higher capture rates, partially offset by lower realized price. First year direct-to-consumer revenue decreased 2% due to lower price from our promotional pricing strategy, partially offset by higher volume from growth in new home warranty members. Lastly, non-warranty and other revenue increased 19% due to both higher volume and price driven by our new HVAC upgrade program. Now moving to gross profit and gross margin on Slide 16. Gross profit increased 5% versus the prior year period to $378 million and gross margin improved approximately 100 basis points to 59%. Revenue conversion added about $16 million, reflecting the results of our dynamic pricing model. We also benefited from lower incidents across our member base. This included approximately $5 million of favorable weather in the quarter as well as the impacts of long-term efforts across HVAC upgrades and tune-ups. Our operational excellence continues to deliver through our supply chain scale, tighter cost controls and smarter job routing across our contractor network, all capabilities that we're now extending to 2-10. This helped offset the impacts from low single-digit cost inflation across labor, parts and equipment and the ongoing revenue mix shift as non-warranty scales. To put it simply, our process improvements and favorable weather more than offset macro cost pressure in the quarter. Turning to Slide 17. Let's review our net income and adjusted EBITDA. For the second quarter, net income grew 13% to $125 million versus the prior year period. Adjusted EBITDA grew 10% to $220 million with adjusted EBITDA margin expanding 200 basis points to 34%. Strong margins have become our expectation, but because any single quarter can move around with weather, seasonality and timing, the trend is best viewed on a full year basis. Let's turn to Slide 18 to look at that margin evolution. The takeaway is clear. This is a fundamentally more profitable business than it was just a few years ago. This improvement has come from 3 things working together. First, pricing. Our dynamic pricing model lets us price to each member's individual risk and usage, catching up on price where we've fallen behind and better aligning price with cost to serve across the book. Alongside that, we've been steadily raising our trade service fees, which further strengthens the underlying economics at the point of service. Second, operational excellence. Preferred contractors are one of our best levers on cost and service, and we now route about 84% of jobs to them, up from about 82% just 3 years ago. On the supply side, our purchasing power lets us source parts and equipment more efficiently than anyone else in the category. And third, operating leverage. We're growing revenue while continuing to be disciplined with how we invest behind it, particularly in marketing, where smarter targeting and better conversion mean each dollar works harder and more of our growth reaches the bottom line. Together, these efforts, combined with our strong retention rates have helped expand our full year adjusted EBITDA margin by roughly 1,400 basis points over a 4-year period from 13% in 2022 to a forecasted 27% this year based on the increased guidance I will cover shortly. It's also why we raised our long-term margin target to the mid-20% range earlier this year. We're currently operating at the high end of that range, helped in part by favorable conditions, but the more important point is that the entire range now sits well above where this business used to operate. That profitability, combined with our capital-light model, generates significant free cash flow. Let's turn to Slide 19 to review our free cash flow and financial position as of quarter end. Through the first half of the year, we generated $233 million of free cash flow, and we continue to expect to convert more than 60% of adjusted EBITDA into free cash flow for the year. We are operating our balance sheet from a position of strength. At the end of the second quarter, we had $472 million of unrestricted cash and total liquidity of $722 million. Taken together with our low leverage, we have ample flexibility to create value through our capital allocation strategy, which we will now turn to on Slide 20. Our capital allocation framework remains anchored in a disciplined approach designed to drive long-term value creation. We are focused on 3 core priorities. First, investing for growth. We start by investing in the business, both organically and through disciplined M&A. Second, maintaining a strong financial profile. We remain committed to maintaining ample liquidity and low leverage, ensuring we can invest in the business while preserving strategic optionality. And third, returning excess cash to shareholders. This business is a strong cash generator and repurchasing shares amplifies how we create value. Let's now turn to the next slide for a deeper look at share repurchases. Given our cash generation and conviction in the returns, we plan to accelerate our share repurchases in the second half. We now expect to buy back approximately $330 million of shares this year, which puts us on track to complete the current authorization in 2026, well ahead of our original time line. Our conviction here isn't new. Repurchasing our shares remains one of the highest return uses of our capital, and we've leaned into it consistently. And the effect compounds. Since 2021, we've deployed approximately $900 million to repurchases, buying back nearly 1/4 of the company and driving more than a 20% benefit to our earnings per share, all while building our cash balance, reducing our net leverage ratio and allocating cash to strategic M&A like 2-10. From here, we will stay disciplined about where every dollar goes. But given the cash this business generates, we are not done returning capital to shareholders, and we'll step up our pace in the second half. Let's now pivot to a discussion on our updated financial outlook on Slide 22, starting with the full year. We are pleased to announce that we are raising our full year financial guidance. We are raising our revenue expectations by $25 million at the midpoint to a range of $2.19 billion to $2.21 billion. This is underpinned by a 3% to 4% increase in realized price and a 1% to 2% increase in volume. By channel, we expect low to mid-single-digit increases in renewal channel revenue, a low single-digit increase in real estate revenue, a low single-digit decrease in direct-to-consumer revenue, and $230 million to $240 million in non-warranty and other revenue. We expect our gross margins to be approximately 55%, and we now expect SG&A of $685 million to $695 million, which reflects a second half step-up in investment that I'll come back to in a moment. We are increasing our adjusted EBITDA expectations by $20 million at the midpoint to a range of $585 million to $600 million. This translates to an adjusted EBITDA margin of approximately 27% at the midpoint. Our adjusted EBITDA outlook considers about $45 million of stock compensation and integration costs and about $20 million of interest income. We also expect capital expenditures of approximately $30 million. Our effective tax rate remains unchanged at approximately 25%. Before I get to the third quarter, let me give you some context on the shape of the second half. At the midpoint, the change to our updated full year guidance compared to our prior outlook implies a $3 million increase to our second half adjusted EBITDA, which is after the impact of the following items. First, we're increasing our marketing spend by more than $10 million weighted towards the third quarter to build on our current momentum. And even after that spend, we still expect to deliver SG&A leverage for the year. Second, we are anticipating the weather benefit from the second quarter to largely reverse in the third quarter, and we saw that start to play out in July. One final point. With the first half complete, roughly 55% of our expected full year adjusted EBITDA is now behind us, in line with the pacing of 2025. This timing is a normal feature of our business, and it's why we point investors to full year performance as the best measure of how we're delivering. Please turn to Slide 23, and we'll review the third quarter outlook. For the third quarter specifically, we expect revenue of $642 million to $652 million. By channel, we expect a low to mid-single-digit increase in renewal revenue, a low single-digit increase in real estate revenue, a low single-digit decrease in direct-to-consumer revenue and an over 20% increase in non-warranty and other revenue. For adjusted EBITDA, we expect to be in the range of $197 million to $207 million. This reflects higher revenue conversion, partially offset by the timing of the weather benefit from Q2 and incremental second half SG&A investment. And while the external environment has grown more complex, our execution, combined with the multiple levers we have to offset inflation, gives us confidence in our ability to deliver another record year in 2026. With that, back to you, Bill. William Cobb: Thank you, Jason. Before we open it up to questions, I want to emphasize 3 key takeaways. First, our total member count is past the inflection point. Even with one of the most challenging housing markets we've seen in a generation, we're growing total member count again. Second, our operating model is doing what we built it to do quarter after quarter, and we are delivering structurally higher margins in line with our long-term targets. And third, we expect to finish our latest share repurchase authorization by the end of this year, almost a full year early. None of these results happen on their own. They happen because 2,000-plus associates and thousands of contractors show up for our members every single day. To all of you, well done. You are the driving force behind this performance. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question is coming from Mark Hughes with Truist. Mark Hughes: In the real estate channel, that 7% growth in member count seems pretty strong in this environment. How much price sensitivity or elasticity do you see there? Is the price useful in terms of trying to improve attachment rates? William Cobb: Yes. We're using -- not at the level of the DTC area, but we do use some discounting in real estate on a selective basis. But really, I think that it is a tough backdrop. We're very pleased with the work that our real estate team did this quarter. And I think it just shows that as we focused more locally and combined it with a lot of education about -- I talked about our app and all the improvements we've made there. I think it's a combination of things. It's a grind, but I think 7% was a good showing for Q2. Mark Hughes: Yes. You talked about kind of refining some of the strategy around 2-10. How do you position 2-10 differently than the American Home Shield brand? What's the dynamic there that differentiates in the mind of potential customers? William Cobb: Yes. It's not really that different. It's just -- we call it our multi-brand strategy. We think that the basic value proposition for home warranty is the same. We're obviously focused on the renewal book of 2-10, which has been very strong, especially as it's come on to the platform. But we've gone after it and it has its strength in certain markets. But we come at it with what we call our multi-brand strategy, which is a consistent strategy driving the value proposition for home warranty. Mark Hughes: Very good. And then I think, Jason, you had alluded to maybe July or July weather. Could you expand on that? Was that -- it seems like there's a lot of hot weather out there. How meaningful was that in terms of the start of the 3Q here? Jason Bailey: Yes, Mark, it was -- what I was really trying to highlight is June was a little milder than we expected, and then we saw some of that come back in July. So we viewed it as a bit of a timing item, and we just wanted everybody to be aware of that as we think about kind of the Q2 and Q3 results combined, if you think about that summer season and when the weather really hits. So that's really what I'm trying to highlight. William Cobb: And it's where the weather hits, too, Mark, because depending on -- as you know, the home warranty business is kind of the smile states. And so depending upon how weather is in California, Texas, Florida, et cetera, it has an impact. But I think we're just trying to show that, in Q3, we had a weather benefit, we estimated about $5 million, and we anticipate, especially the way July started with all the heat, that will reverse in Q3. Mark Hughes: Yes. And then just quickly, were there any reserve gains in the quarter, you didn't call any out? Jason Bailey: Yes. It was about $4 million of favorable cost development. That's part of the beat there, too, Mark. We saw claims costs come in a little better. And so it's $4 million, and I think that compares to about $4 million in the same period a year ago. Operator: Our next question is coming from Sergio Segura with KeyBanc. Sergio Segura: I'll keep it to a few questions here. Maybe first, just talking about and building on Mark's question about weather. Just if you could talk about the EBITDA margin outperformance. I mean you're coming off a record year last year, and we saw some expansion in the first half, and I think you're guiding to expansion for the full year. So could you just talk about the key factors driving the expansion even versus last year's record performance? How much of that is weather and how much of that is just other things within the business driving that performance? Jason Bailey: Yes. And thinking about year-over-year, Sergio, for the quarter, we estimated weather at about a $5 million better impact this year. That helped offset what we're calling low single-digit inflation -- kind of cost inflation at the contract cost level. We had a little bit of other favorable incidents. And then we did have some small benefit as we brought 2-10 onto our platform and kind of normalize -- started to normalize their cost structure towards ours. I'd give a lot of credit to our contractor relations team. They're doing a great job managing costs against -- we were -- I think we were a little conservative coming into the quarter just with uncertain macro, if you think about the news changing daily with world events. But the team is doing a really, really good job there keeping that inflation number down. So I think percent of preferred remains near all-time highs. So both cost and service are doing really, really well there. William Cobb: Yes. The other thing, Sergio, is, and I'm really proud of the company, we make -- and I talked about it in the script that we make these small improvements that compound over time. And it's almost every facet of the business. I went through the renewal journey, and Jason just referenced the contractor relations team and our service ops team. We continue to get better at just operating the company. And I think that, on the margin, it helps us year-over-year. Jason Bailey: Sergio, I'd probably add, too, as we thought about our margin targets, our long-term targets, this was a big part of how we had the confidence to raise that to the mid-20s. Sergio Segura: Yes. Yes, that makes sense. And maybe just one on the raised outlook on both the renewals channel and the realized pricing. Is there any broad-based pricing increase in there? Or is it more just kind of dynamically pricing and you guys are seeing the benefit from that? Jason Bailey: We'd attribute that mostly to the optimization around dynamic pricing, Sergio. We are also seeing continued strong performance in our renewal rates. So I'd say it's a combination of both. But we just get better. As Bill said, it's that incremental investment even in our tools like dynamic pricing where we get better and better each day. Operator: [Operator Instructions] Our next question is coming from Ian Zaffino with Oppenheimer. Ian Zaffino: I just wanted to drill down a little bit more on the real estate business and member [ count ]. So nice growth there. But can you tell us maybe -- because if we look at it, existing home sales were kind of flat, but yet your customer count grew. How much of that was driven by, let's just say, attachment rate or maybe just market share gains? And maybe specifically, can you tell us what kind of this local strategy is and what people are doing on your side to sign more real estate customers up? William Cobb: Yes. The local strategy -- we had been investing a lot of money in MSAs and kind of changed our strategy on that. We still have a couple, but we wanted to take that money and effectively invest it at the local level with the local franchisees and brokers and really as opposed to trying to write the big check to the corporate area. We really wanted to put that money into the field. And that has really helped. And it's a number of issues. We've had a number -- an increase in the number of sessions we've had with agents. And really, the catalyst for that is also showcasing our technology, both the app and the video chat with an expert. We do have -- did introduce discounting about 9 months ago or so, which is having an effect because it gives people something to sell against. So -- because I think a lot of the times with the real estate agent, it's more a matter of having them -- giving them something to sell. And then finally, we touched on the inventory levels increasing. So what that does is it has an ability for people to -- sellers to begin to attach a home warranty more than they did a few years back. So that combination of things, but it's a grinding business. I mean it's one that our agents are out grinding against, calling on agents and brokers every day. And that's why I said in the call, I'm really proud of the -- our real estate leadership, our real estate -- our market managers, et cetera, who are doing this every day for us. And so being able to drive against that attach rate, how many more home warranties can you generate is really, I think, what combined to drive it up 7%. Ian Zaffino: Okay. And then on the HVAC upgrade side, that's [ actually ] going very well. How do you feel about future growth in that business and what you're seeing? And maybe you could touch upon margins a little bit. And then any kind of comments on how the business performs with refrigerant changes? There's the 410A changes or at least implementations of that. So maybe any color there, too. William Cobb: Yes. I'll start and then, Jason, you can kick in on the margin stuff. I think we're on to something here, and we think we've refined the model. As we said, we're applying our pricing tools now. We're getting more targeted geographically. When we first started this, we just would go anywhere to do it. But now we're engaging contractors all across the country. We've continued to increase the number of contractors participating. And I think we mentioned in one of the slides, we've penetrated about 3% of the business over time. And that's -- if we start back and you add up all the revenue, and I think it's -- Jason, you did this the other day, it's like $450 million of historic revenue we've done here, which is up against about $60 million, $65 million -- 60,000 or 65,000 of our customers. So we think the penetration rates can go very high here because HVAC equipment wears out and it wears out at different times. And so we think we're getting to a point where we continue to drive that. And the downstream effect is really positive because with newer equipment there, we reduce claims. So with that, I'll let Jason talk about the margin profile. Jason Bailey: Yes, Ian, we're pretty excited about this business opportunity. As Bill mentioned, it started with our scale and purchasing power around equipment, and we found a way to monetize that and increase share of wallet. I think we've said before, the margins are lower than our home warranty product. They're probably low 20%, I'd say, is where we are right now. But as we've implemented dynamic pricing, we look to move that up over time. And then as Bill mentioned, we get the ancillary benefit kind of as that new equipment rolls into the system. One other part of your question, you asked about the impact of refrigerant. We're constantly monitoring that. I wouldn't say it's had a big impact one way or the other on our ability to sell and implement the upgrade program. And we're constantly aware of that as a normal part of our business even on the home warranty side. Operator: Our next question is coming from Michael Rindos with Benchmark Company. Michael Rindos: Can you comment more on the real estate side? Are there any particular brokers that you're more or less aligned with, given that industry continues to consolidate? William Cobb: Yes, I probably wouldn't comment directly on which -- with the size of our business, we have to deal across all brokers. I think there's been a lot of talk about the fact that we no longer have an MSA with Compass. We still continue to do a lot of business with Compass. As you know, that's not an exclusive arrangement. We had it for years. So we have a great history with a lot of their agents and brokers. So we're dealing with virtually all of the companies and -- because I think we have to, to run a national business like that. Michael Rindos: Okay. And when you talk about your service providers and your preferred contractors, can you comment a little bit on how you feel about your coverage there over major MSAs? Is this something that the company might consider improving? Or is it comfortable with its level of coverage of preferred contractors? What's the direction there and the impact on the cost side? William Cobb: We have about 17,000 contractors in our network, of which about 4,000 are what we call preferred contractors. It's national coverage. We don't limit where we service clients. So we feel that we're constantly refreshing that amount because we do rate our contractors on both cost and quality. So we want to make sure the service experience is the most important part. But I think we have national coverage. And like I said -- like Jason said, [ Jacobs ] our guy who runs contractor relations, that they do a nice job of bringing on new contractors, bringing some up to the preferreds. With retirements and such, we have to keep feeding that group. But I think -- I don't know, Jason, if you want to add anything. Jason Bailey: Yes. I think I'd just echo your comments, Bill. I'd say we have very -- directly, Michael, we have very good coverage in major MSAs, as you would expect. As Bill said, that mid-80s is near all-time company highs. We like that percentage. It's both a combination of cost and quality. I'd highlight our preferreds deliver our best service experience on average. So we like that. The last piece I'd say, you asked about the impact, we estimate a 1% change in the preferred rate is somewhere between $8 million and $10 million worth of gross profit. And so we stay focused on that and the execution there has been terrific by the team. Michael Rindos: Got it. And I didn't hear any comments on appliance sales. I thought that was part of the strategy somewhat along the HVAC. Is that still ongoing? William Cobb: Yes. That's our next trade that we're moving into. It's moving out of pilot now. We're expanding it more in Q4. So -- yes, so we're on pace to what we had said. We feel good about the pilot, how it's going. We think we've established the essence of the model with HVAC. It's different because it's a lower price point, but there are a lot more appliances, obviously, in the home. So we think it will be a good business, but we're in motion on that. And it's going to be the second trade that we start to expand nationally. Michael Rindos: Got you. And just lastly, when you talk about dynamic pricing, can you expand a little bit on that? What are the dynamics that contribute to dynamic pricing? Jason Bailey: Yes. So we've refined our dynamic pricing models over the last 4 to 5 years. And I'd say our primary focus there is in the renewal book, as you would expect. There are multiple -- I think we're now up to over 60... William Cobb: I think it's 65 factors. Jason Bailey: Yes, over 60 factors that go into the model. But the easiest way I'd say it is you could think about things like geography where the home is based, size of the home, past experience with us and then things we learn about the home over time. So we take all those factors, and that allows us to get much more precise on the amount or price we can charge a customer and any related impact on retention. So we think there's a really nice balance there. And that's something we think we are very differentiated on against our competitors. William Cobb: And like with all machine learning tools, it gets better over time as it gets more information, et cetera. So it's constantly evolving, and we think we're getting better and better at it. And obviously, I think it's -- the proof point is that our retention rates continue to be so strong. Operator: [Operator Instructions] As we have no further questions at this time, this will conclude our question-and-answer session and today's call. You may disconnect your lines at this time. William Cobb: Thanks, everybody. Operator: Sorry, sir, continue. William Cobb: No, I just said thanks, everybody. Operator: Thank you. You may disconnect your lines at this time, and we thank you for your participation, and have a great day. Before you buy stock in Frontdoor, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Frontdoor wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $400,209!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,375,393!* Now, it’s worth noting Stock Advisor’s total average return is 964% — a market-crushing outperformance compared to 215% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 13, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Frontdoor (FTDR) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. Revenue: $645 million, up 5% year-over-year. Gross Profit Margin: Expanded 100 basis points to 59%. Net Income: $125 million, up 13% year-over-year. Adjusted EBITDA: $220 million, up 10% year-over-year, with margin expanding 200 basis points to 34%. Total Ending Member Count: Up 1%, the first organic growth in five years. Renewal Revenue: Grew 4%, driven by higher price from dynamic pricing model. First-Year Real Estate Revenue: Increased 3%, driven by higher volume. First-Year Direct-to-Consumer Revenue: Decreased 2% due to lower price from promotional pricing strategy. Non-Warranty and Other Revenue: Increased 19% due to higher volume and price from the HVAC upgrade program. Retention Rate: Near all-time high at 79.6%. Free Cash Flow: $233 million generated in the first half of the year. Share Repurchases: $181 million repurchased through July 31; approximately $330 million expected for 2026. Warning! GuruFocus has detected 5 Warning Sign with FTDR. Is FTDR fairly valued? Test your thesis with our free DCF calculator. Release Date: August 06, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Frontdoor Inc (NASDAQ:FTDR) achieved its first organic growth in total ending member count in five years, up 1% year-over-year. The company delivered strong financial results with revenue up 5% to $645 million and adjusted EBITDA up 10% to $220 million in Q2 2026. Gross profit margin expanded by 100 basis points to 59%, driven by dynamic pricing, operational excellence, and favorable weather. The non-warranty business, anchored by the HVAC upgrade program, is scaling rapidly, with revenue expected to reach $170 million in 2026, up from $13 million four years ago. Frontdoor Inc (NASDAQ:FTDR) plans to accelerate share repurchases to approximately $330 million in 2026, completing its latest authorization nearly a year ahead of schedule. Renewal retention rates remain near all-time highs at 79.6%, supported by strong member experience and operational improvements. The real estate channel saw a standout 7% growth in ending member count, driven by improved attach rates despite a challenging housing market. The company raised its full-year 2026 guidance for revenue and adjusted EBITDA, reflecting confidence in continued execution. The housing market remains challenged, with existing home sales expected to stay around 4 million for the fourth consecutive year, limiting growth potential. First-year direct-to-consumer revenue decreased 2% due to promotional pricing, which could pressure near-term revenue growth. The company anticipates a reversal of the $5 million weather benefit from Q2 in Q3, which could impact quarterly results. Low-single-digit cost inflation across labor, parts, and equipment continues to pressure margins, requiring ongoing mitigation efforts. The non-warranty business has lower margins (low 20%) compared to the core home warranty product, which could dilute overall profitability as it scales. SG&A expenses are expected to increase in the second half due to a step-up in marketing spend, partially offsetting operating leverage. The company faces ongoing complexity from external factors, including world events and macro uncertainty, which could affect performance. Q: In the real estate channel, that 7% growth in member count seems pretty strong in this environment. How much price sensitivity or elasticity do you see there? Is the price useful in terms of trying to improve attachment rates?A: William Cobb (Chairman and CEO): We use some discounting in real estate on a selective basis, but not at the level of the DTC area. The growth is driven by a combination of factors, including a more local focus, education about our app and improvements, and a "grind" by the real estate team. We are very pleased with the 7% showing for Q2. Q: You talked about kind of refining some of the strategy around 2-10. How do you position 2-10 differently than the American Home Shield brand? What's the dynamic there that differentiates in the mind of potential customers?A: William Cobb (Chairman and CEO): It's not really that different. We call it our multi-brand strategy, as the basic value proposition for home warranty is the same. We are focused on the renewal book of 2-10, which has been very strong since coming onto the platform. We are applying the AHS toolkit to meaningfully grow the 2-10 brand, which is exactly the kind of value creation we can drive when we put our full weight behind a smaller brand. Q: I just wanted to drill down a little bit more on the real estate business and member count. So nice growth there. But can you tell us maybe -- because if we look at it, existing home sales were kind of flat, but yet your customer count grew. How much of that was driven by, let's just say, attachment rate or maybe just market share gains? And maybe specifically, can you tell us what kind of this local strategy is and what people are doing on your side to sign more real estate customers up?A: William Cobb (Chairman and CEO): The local strategy involves investing money at the local level with franchisees and brokers rather than writing big checks to corporate areas. This has helped increase the number of sessions with agents. We also introduced discounting about nine months ago, which gives agents something to sell against. Additionally, improving inventory levels allow sellers to attach home warranties more than they did a few years back. It's a grinding business, but the combination of these factors drove the attach rate up 30 basis points and member count up 7%. Q: On the HVAC upgrade side, that's actually going very well. How do you feel about future growth in that business and what you're seeing? And maybe you could touch upon margins a little bit. And then any kind of comments on how the business performs with refrigerant changes? There's the 410A changes or at least implementations of that. So maybe any color there, too.A: William Cobb (Chairman and CEO) and Jason Bailey (SVP and CFO): We are on to something here and have refined the model. We are applying pricing tools and getting more targeted geographically. We have penetrated about 3% of our member base so far, and we think penetration rates can go very high because HVAC equipment wears out at different times. The downstream effect is positive because newer equipment reduces claims. Jason Bailey added that margins are lower than the home warranty product, probably low 20%, but dynamic pricing should move that up over time. The refrigerant changes haven't had a big impact on the ability to sell and implement the upgrade program. Q: And then on the raised outlook on both the renewals channel and the realized pricing. Is there any broad-based pricing increase in there? Or is it more just kind of dynamically pricing and you guys are seeing the benefit from that?A: Jason Bailey (SVP and CFO): We'd attribute that mostly to the optimization around dynamic pricing. We are also seeing continued strong performance in our renewal rates. It's a combination of both, but we just get better with incremental investment in tools like dynamic pricing. Q: Can you comment more on the real estate side? Are there any particular brokers that you're more or less aligned with, given that industry continues to consolidate?A: William Cobb (Chairman and CEO): I probably wouldn't comment directly on which brokers. With the size of our business, we have to deal across all brokers. There's been a lot of talk about the fact that we no longer have an MSA with Compass, but we still continue to do a lot of business with them. We have a great history with a lot of their agents and brokers, and we deal with virtually all of the companies to run a national business. Q: And when you talk about your service providers and your preferred contractors, can you comment a little bit on how you feel about your coverage there over major MSAs? Is this something that the company might consider improving? Or is it comfortable with its level of coverage of preferred contractors? What's the direction there and the impact on the cost side?A: William Cobb (Chairman and CEO) and Jason Bailey (SVP and CFO): We have about 17,000 contractors in our network, of which about 4,000 are preferred contractors. We have national coverage and constantly refresh that amount by rating contractors on both cost and quality. Jason Bailey added that we have very good coverage in major MSAs, and the preferred rate is near all-time company highs at 84%. A 1% change in the preferred rate is estimated to be worth between $8 million and $10 million in gross profit. Q: And I didn't hear any comments on appliance sales. I thought that was part of the strategy somewhat along the HVAC. Is that still ongoing?A: William Cobb (Chairman and CEO): That's our next trade that we're moving into. It's moving out of pilot now, and we're expanding it more in Q4. We feel good about the pilot and how it's going. We've established the essence of the model with HVAC, and while it's a lower price point, there are a lot more appliances in the home. It will be the second trade we start to expand nationally. Q: And just lastly, when you talk about dynamic pricing, can you expand a little bit on that? What are the dynamics that contribute to dynamic pricing?A: Jason Bailey (SVP and CFO) and William Cobb (Chairman and CEO): We've refined our dynamic pricing models over the last four to five years, with the primary focus on the renewal book. There are over 60 factors that go into the model, including geography, size of the home, past experience For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved a critical inflection point with 1% total ending member growth, marking the first organic expansion since 2021 despite a challenging housing market. Direct-to-consumer growth of 5% was driven by a dual playbook of brand leadership through the 'Warrantina' campaign and AI-enhanced sales conversion tools. Real estate channel growth of 7% outperformed the broader market by shifting investment to local agent engagement and leveraging improved inventory levels to increase attach rates. Retention rates remained near all-time highs at 79.6%, supported by record-high service ratings and high adoption of automated retention tools like Autopay, now at 85% enrollment. The non-warranty segment, led by the HVAC upgrade program, scaled to an expected $170 million in annual revenue by leveraging the existing 2.1 million member base with zero customer acquisition costs. Structural margin expansion was driven by the dynamic pricing model, which utilizes over 65 factors to align individual member risk with cost to serve. Full-year 2026 revenue guidance was raised to $2.19 billion to $2.21 billion, assuming 3% to 4% realized price increases and 1% to 2% volume growth. Management expects to complete the current $330 million share repurchase authorization by the end of 2026, nearly a year ahead of the original schedule. Third-quarter outlook anticipates a reversal of the $5 million favorable weather benefit seen in Q2 due to extreme heat observed in July. Strategic expansion into appliance sales is moving out of the pilot phase with a planned national rollout starting in the fourth quarter of 2026. Incremental marketing investment of over $10 million is planned for the second half to capitalize on current momentum in the direct-to-consumer channel. The business model successfully offset low single-digit cost inflation in labor and parts through supply chain scale and smarter job routing. Integration of the 2-10 brand is yielding revenue synergies by applying the American Home Shield operating toolkit and migrating members to the core platform. A $4 million favorable cost development (reserve gain) contributed to the Q2 earnings beat, consistent with the prior year's performance. Management flagged that while inventory is improving, existing home sales remain sluggish at approximately 4 million units due to mortgage rate and affordability headwinds. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Growth was attributed to a shift from corporate-level marketing agreements to local field investments and franchisee support. Selective discounting was introduced approximately nine months ago to provide agents with a more competitive value proposition in a 'grinding' market. Current margins for the HVAC upgrade business are in the low 20% range, lower than the core warranty product but expected to rise via dynamic pricing. Management sees significant runway for growth, having only penetrated 3% of the existing member base to date. A $5 million benefit in Q2 resulted from a milder June, but management warned this would likely reverse in Q3 following a very hot start to July. The impact of weather is highly sensitive to specific 'smile states' like California, Texas, and Florida. The network includes 17,000 contractors, with 4,000 designated as 'preferred' who handle 84% of total jobs. Management quantified that every 1% change in the preferred contractor utilization rate impacts gross profit by $8 million to $10 million.

Frontdoor (FTDR) came out with quarterly earnings of $1.93 per share, beating the Zacks Consensus Estimate of $1.78 per share. This compares to earnings of $1.63 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +8.43%. A quarter ago, it was expected that this home services provider would post earnings of $0.66 per share when it actually produced earnings of $0.73, delivering a surprise of +10.61%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Frontdoor, which belongs to the Zacks Building Products - Miscellaneous industry, posted revenues of $645 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 0.44%. This compares to year-ago revenues of $617 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Frontdoor shares have added about 32.4% since the beginning of the year versus the S&P 500's gain of 12.8%. While Frontdoor has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Frontdoor was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.74 on $641.87 million in revenues for the coming quarter and $4.48 on $2.18 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Building Products - Miscellaneous is currently in the top 44% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Construction Partners (ROAD), another stock in the same industry, has yet to report results for the quarter ended June 2026. The results are expected to be released on August 7. This road and highway construction company is expected to post quarterly earnings of $1.06 per share in its upcoming report, which represents a year-over-year change of +30.9%. The consensus EPS estimate for the quarter has been revised 1.1% higher over the last 30 days to the current level. Construction Partners' revenues are expected to be $955.5 million, up 22.6% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Frontdoor Inc. (FTDR) : Free Stock Analysis Report Construction Partners, Inc. (ROAD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Frontdoor Inc.? Here are five stocks we like better. Frontdoor delivered solid Q2 growth: Revenue rose 5% to $645 million, adjusted EBITDA increased 10% to $220 million, and margins expanded. Total ending membership grew 1% year over year, marking the company’s first organic increase in five years. Growth was broad-based across newer channels: Direct-to-consumer membership increased 5% and real estate membership rose 7%, while the HVAC upgrade program helped drive a 19% increase in non-warranty revenue. Retention reached 79.6%, near a record high. Frontdoor raised its 2026 outlook and increased shareholder returns: The company now expects revenue of $2.19 billion to $2.21 billion and adjusted EBITDA of $585 million to $600 million. It also expects to repurchase approximately $330 million of stock in 2026 after buying back $181 million through July 31. Frontdoor (NASDAQ:FTDR) reported second-quarter results that included revenue growth, higher margins and its first year-over-year organic increase in total ending member count in five years, while raising its full-year outlook for revenue and adjusted EBITDA. Revenue rose 5% from a year earlier to $645 million in the second quarter. Net income increased 13% to $125 million, while adjusted EBITDA grew 10% to $220 million. Gross margin expanded about 100 basis points to 59%, and adjusted EBITDA margin increased 200 basis points to 34%. → 3 Drone Stocks That Should Soar After the Summer Slump Chairman and CEO Bill Cobb said the company’s total ending member count increased 1%, marking the first organic member growth since 2021. He attributed the increase to growth in the direct-to-consumer and real estate channels, along with stable renewal membership supported by retention rates. Direct-to-consumer ending member count increased 5%, representing the channel’s seventh consecutive quarter of year-over-year growth. Cobb said Frontdoor has pulled forward marketing spending to coincide with its selling season and continued shifting more spending toward performance marketing channels. The company also cited its multi-brand strategy and efforts to bring the acquired 2-10 Home Buyers Warranty business onto its platform. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth In the real estate channel, ending member count rose 7% despite a sluggish market for existing-home sales. Cobb said higher housing inventory has given buyers more leverage, allowing home warranties to become a more frequent part of transactions. Frontdoor’s attach rate improved 30 basis points year over year, with the company attaching a home warranty to more than 5% of existing homes sold in the U.S. during the quarter. Cobb said Frontdoor has been increasing local engagement with real estate agents and brokers, including targeted promotions and investments at the local level rather than relying primarily on broader metropolitan-area agreements. He also said the company selectively uses discounting in the real estate channel. → Jersey Mike's Serves Fresh Gains After IPO Stumble The company reported a 79.6% retention rate, near an all-time high. Frontdoor said active users of its app increased 65% year over year, while use of its video-chat-with-an-expert feature more than doubled in the quarter. Frontdoor routed 84% of jobs through its preferred contractor network. Cobb said the company recorded its highest level of five-star service ratings and lowest level of one-star ratings, extending a 36-month trend of improvement. The company has approximately 17,000 contractors in its network, including about 4,000 preferred contractors. Chief Financial Officer Jason Bailey said the preferred contractor mix supports both service quality and costs. He estimated that a 1 percentage point change in the preferred contractor rate represents roughly $8 million to $10 million in gross profit. Non-warranty and other revenue increased 19%, driven by Frontdoor’s HVAC upgrade program. Cobb said the program has grown from $13 million in revenue to an expected $170 million in four years and has access to a built-in demand funnel through the company’s 2.1 million members. The company has penetrated about 3% of its member base with the HVAC offering so far. Cobb said contractor participation, quote rates and win rates have improved, and Frontdoor is applying dynamic pricing to the program. Bailey said the HVAC business currently carries margins in the low 20% range, below the core home warranty business, but the company expects pricing initiatives to improve margins over time. Frontdoor is also moving appliance sales out of pilot phase and expects to expand that offering more broadly in the fourth quarter, according to Cobb. Bailey said revenue growth in the quarter was driven by more than 3% from higher realized price and more than 1% from higher volume. Renewal revenue increased 4%, while first-year real estate revenue rose 3%. First-year direct-to-consumer revenue declined 2%, as promotional pricing reduced realized prices despite growth in new members. Gross profit increased 5% to $378 million. The company cited approximately $16 million of revenue conversion from dynamic pricing, lower incident rates, and about $5 million of favorable weather during the quarter. Bailey said favorable cost development contributed about $4 million, while low-single-digit inflation in labor, parts and equipment was offset by operating improvements and favorable weather. For the first half, Frontdoor generated $233 million in free cash flow and ended the second quarter with $472 million of unrestricted cash and $722 million of total liquidity. The company expects to convert more than 60% of adjusted EBITDA into free cash flow for the full year. Frontdoor repurchased $181 million of stock through July 31 and now expects to repurchase approximately $330 million in 2026, completing its current authorization ahead of its original schedule. Bailey said the company has returned approximately $900 million to shareholders through share repurchases since 2021. Frontdoor raised its full-year revenue outlook to $2.19 billion to $2.21 billion, an increase of $25 million at the midpoint. It now expects adjusted EBITDA of $585 million to $600 million, up $20 million at the midpoint, implying an adjusted EBITDA margin of approximately 27% at the midpoint. The company forecast realized price growth of 3% to 4% and volume growth of 1% to 2% for the year. It expects non-warranty and other revenue of $230 million to $240 million. For the third quarter, Frontdoor forecast revenue of $642 million to $652 million and adjusted EBITDA of $197 million to $207 million. Bailey said the outlook incorporates more than $10 million of additional marketing spending in the second half, weighted toward the third quarter, and expects the second-quarter weather benefit to largely reverse in the third quarter. Frontdoor, Inc (NASDAQ:FTDR) is a leading provider of home service plans and repair solutions for residential property owners. The company offers contract-based coverage that helps homeowners manage the cost of repairing and replacing essential household systems and appliances, including heating and cooling, plumbing, electrical wiring, water heaters, washers, dryers, refrigerators and other major kitchen equipment. Frontdoor delivers its services through a nationwide network of independent service professionals and contractors, leveraging a cloud-based platform and call center infrastructure to coordinate service visits and process claims. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Frontdoor Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

MEMPHIS, Tenn., July 09, 2026--(BUSINESS WIRE)--Frontdoor, Inc. (NASDAQ: FTDR), the nation’s leading provider of home warranties, today announced it will release its second quarter financial results and hold a conference call on Thursday, August 6, 2026 at 7:30 a.m. Central time (8:30 a.m. Eastern time). Participants can register for the webcast by clicking https://www.webcaster5.com/Webcast/Page/3067/54187, which will include a slide presentation highlighting the company’s results. Once completed, each participant will receive access details via email. Participants may join via conference call by dialing 888.506.0062 (or international participants, 973.528.0011) and entering conference ID 918875. To participate via webcast and view the presentation, visit https://investors.frontdoorhome.com/. The call will be available for replay for approximately 60 days. To access the replay of this call, please call 877.481.4010 and enter conference passcode 54187 (international participants: 919.882.2331, conference passcode 54187). To view a replay of the webcast, visit https://investors.frontdoorhome.com/. About Frontdoor Frontdoor and its family of brands are on a mission to make life easier for every homeowner through innovative technology and quality customer service. With over 55 years of experience, we are the leading provider of home warranties in the United States, handling approximately 3.8 million service requests for more than 2.1 million members through a network of approximately 17,000 qualified and independent service contractors. We also offer new home builder warranty solutions, which deliver value to both builders and homeowners through a suite of builder warranty products and support services. Our customizable home warranties are annual service plan agreements that cover the repair or replacement for breakdowns due to normal wear and tear of major components. We cover up to 29 home systems and appliances, including electrical, plumbing, HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops, as well as optional coverages for pools, spas and pumps. Our home warranties provide peace of mind, budget protection, convenience, repair expertise and service guarantee. Our non-warranty services provide homeowners greater value through replacement and upgrade programs, as well as other home maintenance offerings. Our 2-10 new home builder warranty solutions offer flexible builder‑backed and insurance‑backed warranty options covering workmanship, home distribution systems and structural components. Frontdoor’s family of brands includes American Home Shield, HSA, OneGuard, Landmark and 2-10 HBW brands. For more information about Frontdoor, Inc., please visit frontdoorhome.com. Forward-Looking Statements This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. These statements are subject to risks, uncertainties, assumptions and other important factors. Readers are cautioned not to put undue reliance on such forward-looking statements because actual results may vary materially from those expressed or implied. The reports filed by Frontdoor pursuant to United States securities laws contain discussions of these risks and uncertainties. Frontdoor assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are advised to review Frontdoor's filings with the United States Securities and Exchange Commission, which are available on the SEC's EDGAR database at www.sec.gov and via Frontdoor’s website at investors.frontdoorhome.com. FTDR-Financial View source version on businesswire.com: https://www.businesswire.com/news/home/20260709865158/en/ Contacts Investor RelationsMatt [email protected] MediaAlison [email protected]

Frontdoor, Inc. (NASDAQ:FTDR) announced a healthy earnings result recently, and the market rewarded it with a strong uplift in the stock price. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. In high finance, the key ratio used to measure how well a company converts reported profits into free cash flow (FCF) is the accrual ratio (from cashflow). To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'. That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future". Frontdoor has an accrual ratio of -0.15 for the year to March 2026. Therefore, its statutory earnings were very significantly less than its free cashflow. Indeed, in the last twelve months it reported free cash flow of US$386m, well over the US$259.0m it reported in profit. Frontdoor shareholders are no doubt pleased that free cash flow improved over the last twelve months. That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. Frontdoor's accrual ratio is solid, and indicates strong free cash flow, as we discussed, above. Because of this, we think Frontdoor's earnings potential is at least as good as it seems, and maybe even better! Better yet, its EPS are growing strongly, which is nice to see. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. You'd be interested to know, that we found 2 warning signs for Frontdoor and you'll want to know about them. Today we've zoomed in on a single data point to better understand the nature of Frontdoor's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.