Frontdoor Reports Q2 2025 Financial Results
Frontdoor, Inc. , the nation’s leading provider of home service plans, including home warranties, today announced its financial results for the second quarter of fiscal year 2025. The company delivered strong revenue growth, record gross margins, and notable gains in profitability, underscoring the positive momentum driven by its strategic initiatives and the successful integration of recent acquisitions.
Second-Quarter 2025 Highlights: Strong Growth Across the Board
For the quarter ended June 30, 2025, Frontdoor reported revenue of $617 million, a 14% increase compared to the same period in 2024. This growth was the result of both pricing and volume improvements, with a 2% boost from pricing actions and a 12% uplift due to higher volume. The significant increase in volume was largely attributed to the acquisition of 2-10 Home Buyers Warranty (2-10), a move that has quickly proven accretive to both operational scale and customer reach.
Gross profit margin expanded by 130 basis points, reaching a second-quarter record of 58%. This improvement highlights the company’s ongoing focus on operational efficiency and strategic pricing, supported by better service delivery and cost containment.
Net income for the quarter rose 21% year-over-year, totaling $111 million, while diluted earnings per share jumped 26% to $1.48. Adjusted EBITDA climbed 26% to $199 million, driven by higher revenue conversion and disciplined cost management. These results reflect Frontdoor’s continued ability to deliver value to shareholders through both organic and inorganic growth.
Chairman and CEO Bill Cobb emphasized the company’s consistent execution:
“Frontdoor continues to perform exceptionally well, and we delivered another quarter of outstanding financial performance. We organically grew our Direct-to-Consumer member count by 9%, we are successfully scaling non-warranty revenue streams, and the 2-10 integration is ahead of schedule. In short, we are delivering on our strategic objectives and continue to position the business for future success.”
CFO Jessica Ross echoed this confidence in the company’s financial health and momentum:
“We generated nearly $200 million in Adjusted EBITDA in the second quarter, underpinned by excellent operational execution supporting our margin structure. With strong first-half results and increasing confidence in our performance for the second half, we are raising our full-year outlook and returning record amounts of capital to shareholders through share repurchases.”
Segment Performance: Multiple Revenue Streams See Double-Digit Growth
Frontdoor’s revenue growth in Q2 2025 was broad-based across its business lines:
- Renewal Revenue increased 9%, driven by the addition of customers from the 2-10 acquisition and enhanced pricing strategies. This was partially offset by a lower volume of contract renewals in certain legacy segments.
- Real Estate Revenue surged 21% year-over-year, with the 2-10 acquisition contributing meaningfully. Frontdoor continues to expand its presence in the real estate channel by offering services tailored to new home buyers and real estate professionals.
- Direct-to-Consumer Revenue rose 12%, reflecting increased customer acquisition efforts and higher volume. The company pursued a discounting strategy during the quarter to encourage growth in new membership, resulting in slightly lower average prices.
- Other Revenue saw the most significant jump, climbing 63%. This increase was driven by the scaling of Frontdoor’s New HVAC program and the Moen smart water technology initiative. The addition of new structural warranty offerings through 2-10 also contributed to this growth.
Profit Drivers and Expense Management
Second-quarter Adjusted EBITDA growth of 26%, reaching $199 million, was driven by:
- $51 million in higher revenue conversion, reflecting both top-line growth and effective cost control.
- Only $1 million in higher contract claims costs, excluding the impact of claims costs directly tied to revenue growth. This modest increase reflects:
- Low-single-digit inflation in contractor service fees, replacement parts, and equipment.
- A reduced number of service requests per customer, partly due to favorable weather, which contributed to a $5 million net benefit.
- Positive claims development trends, contributing $4 million in savings, though slightly lower than the $5 million in Q2 2024.
Additionally, sales and marketing costs were $3 million lower, driven mainly by timing differences in campaign execution. Other changes in operating expenses—including customer service costs, general and administrative expenses, depreciation, and interest—were largely tied to the integration of 2-10.
Cash Flow and Capital Allocation: Returning Value to Shareholders
For the six-month period ended June 30, 2025, Frontdoor generated $251 million in net cash from operating activities, supported by:
- $208 million in earnings adjusted for non-cash charges.
- $48 million of working capital and long-term insurance-related cash inflows.
- Partially offset by $5 million in restructuring payments, likely tied to the ongoing integration of acquired operations and streamlining of internal processes.
Investing activities provided net cash of $42 million, driven primarily by the sale and maturity of available-for-sale securities, with offsetting expenditures directed at ongoing technology investments.
Financing activities used a total of $153 million in net cash during the first half of 2025. This included $134 million in share repurchases, excluding associated taxes and fees, and $14 million in scheduled debt repayments. These actions reinforce Frontdoor’s commitment to shareholder returns and balance sheet optimization.
As of July 2025, the company has repurchased $150 million worth of shares year-to-date, continuing its aggressive capital return strategy.
Updated 2025 Full-Year Outlook: Upward Revision Reflects Strong H1
Given its strong year-to-date performance and improving visibility into the second half of the year, Frontdoor has updated its 2025 full-year guidance:
- Revenue is now expected to range between $2.055 billion and $2.075 billion, reflecting both organic growth and the full-year impact of the 2-10 acquisition.
- Gross profit margin guidance has been raised to a range of 55% to 56%, supported by pricing, operational discipline, and favorable claims trends.
- Adjusted EBITDA is now expected to be between $530 million and $550 million, compared to prior guidance of $500 million to $520 million.
This upward revision further solidifies the company’s trajectory toward record financial results and long-term strategic success.
