Frontdoor (NASDAQ:FTDR) executives struck an upbeat tone on the company’s fourth-quarter and full-year 2025 earnings call, highlighting a return to membership stability, expanding profitability, and continued cash generation that has supported elevated share repurchases. Management also guided for revenue and adjusted EBITDA growth in 2026 and raised its long-term adjusted EBITDA margin target.
2025 results: revenue above $2 billion and record profitability
Chairman and CEO Bill Cobb said 2025 delivered “three key takeaways” for investors: the company expects ending member count growth in 2026, it is raising its long-term adjusted EBITDA margin target, and it expects to complete its current share repurchase authorization ahead of schedule.
- Revenue up 14% year-over-year to nearly $2.1 billion
- Gross profit margin up 150 basis points to a record 55%
- Net income up 9% to $255 million
- Adjusted EBITDA up 25% to $553 million
- Record share repurchases totaling $280 million
CFO Jason Bailey added that gross profit dollars rose 17% to more than $1 billion, and adjusted EBITDA margin expanded more than 200 basis points to 26%. Bailey said results also benefited from favorable weather impacts of approximately $7 million in 2025.
Membership trends: stabilization in 2025 and growth expected in 2026
Cobb said Frontdoor “stabilized our member count” in 2025, describing it as an outcome “well ahead of schedule” that strengthened as the year progressed. He pointed to improving conversion in direct-to-consumer (DTC), stronger second-half momentum in the first-year real estate channel, and higher renewal rates.
On the real estate channel backdrop, Cobb described existing home sales as “constrained near historic lows” in 2025 but said market conditions began shifting toward a better buyer-seller balance, including higher inventory and a larger share of homes selling below list price. He said Frontdoor increased localized investment, deepened engagement with real estate agents, and launched promotional pricing in the real estate channel for the first time. Cobb said the company ended 2025 with two consecutive quarters of sequential member growth, “the first time this has happened in the past five years.”
In DTC, Cobb said the channel delivered 3% member growth in 2025, supported by brand positioning, technology enhancements such as the AHS app and virtual experts, targeted marketing using AI, and conversion improvements through website/SEO work, promotional pricing, and AI tools for sales agents.
Looking to 2026, Cobb said the company expects total member count to grow, which would be the “first year of ending member count growth since 2020.” He said growth is expected to be driven primarily by first-year channels, which the company expects to grow about 5% on a combined basis. However, he cautioned that renewal member count is expected to be a modest headwind in 2026 due to lower first-year real estate units in prior years, calling it a temporary dynamic that should flip as more first-year acquisitions flow into the renewal base later in 2027 and beyond.
Renewals and member experience improvements
Management emphasized improved retention. Cobb said renewal rates increased 150 basis points to 75% in 2025 and highlighted improving first-year DTC renewal rates even as members moved from introductory pricing into renewal pricing.
He attributed progress to operational and product initiatives, including:
- Nearly 600,000 member downloads of the AHS app since its October 2024 launch
- About 80,000 video chats completed since launching “video chat with an expert” in February 2025
- Monthly autopay penetration increasing by about 100 basis points to 84%
Cobb also said member feedback improved, with record high five-star reviews and record low one-star reviews in 2025.
Non-warranty expansion: HVAC growth, appliance pilot, and partner programs
Frontdoor continued to scale non-warranty revenue, which management framed as a key strategic priority alongside membership. Cobb said the company’s new HVAC upgrade program grew 48% to $128 million in 2025, while Bailey said non-warranty and other revenue increased 66% for the year, driven by HVAC and the Moen partnership, as well as new home builder revenue from the 2-10 acquisition.
Cobb said the HVAC program had approximately 55,000 installations “programmed to date” across a member base of 2.1 million, and he discussed program margins, stating gross margins are currently around 20%. He said the economics remain attractive due to higher member engagement and retention, contractor adoption, and incremental revenue with “little to no customer acquisition costs.”
On additional initiatives, Cobb said the company launched an appliance upgrade program in select markets and, in Q&A, indicated it is targeting a broader launch “later on in the year, around Q4,” after working through the model. He noted the appliance opportunity differs from HVAC given lower price points and different replacement rates.
Management also discussed monetization opportunities tied to its networks, including 17,000 contractors and 19,000 home builders, but said potential B2B opportunities with builders are “not meaningful in 2026” and remain in development.
Margins, cash flow, buybacks, and 2026 outlook
Bailey said Frontdoor generated record free cash flow of $390 million in 2025, reflecting a “capital-light” model. He reported ample liquidity of about $660 million and a net leverage ratio of 1.4x. Since 2021, the company has used $720 million to repurchase approximately 17 million shares, reducing shares outstanding by about 17% on a net basis.
For 2026, Bailey guided to:
- Revenue of $2.155 billion to $2.195 billion (total growth of about 3% to 5%)
- Gross margin of 54% to 55%
- SG&A of $660 million to $680 million (relatively flat year-over-year)
- Adjusted EBITDA of $565 million to $580 million, with adjusted EBITDA margin around 26%
- Free cash flow conversion in the low 60% range
- CapEx of $30 million to $35 million
- Effective tax rate of approximately 25%
By channel, Bailey said the company expects low single-digit renewal revenue growth (higher price partially offset by volume), a low single-digit decline in first-year DTC revenue due to a “deliberate revenue trade-off” tied to promotional pricing, relatively flat first-year real estate revenue as volume stabilizes, and non-warranty and other revenue of $220 million to $240 million, including about $165 million from HVAC.
For the first quarter of 2026, the company forecast revenue of $440 million to $445 million and adjusted EBITDA of $95 million to $105 million, noting it is lapping a $7 million favorable claims cost development in the prior-year quarter.
Bailey also said the company is raising its long-term adjusted EBITDA margin target from the “low 20% range” to the “mid-20% range,” citing structural improvements in pricing, contractor management, and cost discipline. Management reiterated a longer-term view that revenue growth should accelerate in 2027 and 2028 as first-year growth feeds into the renewal book and as non-warranty scales, translating to $2.5 billion by 2028 and mid- to high-single-digit growth over the long term.
In Q&A, management discussed promotional pricing strategy, indicating Frontdoor does not plan to increase the number of discounting days on its 50% off DTC program, while it plans to “pulse” promotional pricing in real estate at a lower discount level after testing showed improved attach rates. Cobb said the company modeled 2026 existing home sales assumptions around a modest 3% to 4% increase and said real estate share remained about one-third of the channel.
Executives also addressed claims cost inflation and tariffs, reiterating expectations for low single-digit cost inflation and describing mitigation levers including price, trade service fees, and operational execution. Bailey said the company’s biggest tariff exposure is in the appliance trade, particularly circuit boards, while HVAC is “less exposed” due to more domestic manufacturing.
About Frontdoor (NASDAQ:FTDR)
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.
