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Home warranty company Frontdoor (NASDAQ:FTDR) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 3% year on year to $378 million. The company expects next quarter's revenue to be around $535 million, in line with analysts' estimates. It made a non-GAAP profit of $0.43 per share, improving from its profit of $0.28 per share in the same quarter last year.
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Frontdoor (FTDR) Q1 CY2024 Highlights:
- Revenue: $378 million vs analyst estimates of $376.7 million (small beat)
- Adjusted EBITDA: $71 million vs analyst estimates of $47 million (big beat)
- EPS (non-GAAP): $0.43 vs analyst estimates of $0.20 ($0.23 beat)
- Revenue Guidance for Q2 CY2024 is $535 million at the midpoint, roughly in line with what analysts were expecting
- The company reconfirmed its revenue guidance for the full year of $1.83 billion at the midpoint (in line)
- The company raised its adjusted EBITDA guidance for the full year of $365 million at the midpoint (above expectations)
- Gross Margin (GAAP): 51.3%, up from 46.3% in the same quarter last year
- Free Cash Flow of $73 million, up 35.2% from the previous quarter
- Market Capitalization: $2.40 billion
Established in 2018 as a spin-off from ServiceMaster Global Holdings, Frontdoor (NASDAQ:FTDR) is a provider of home warranty and service plans.
Specialized Consumer ServicesSome 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 do serve customers better.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. Frontdoor's annualized revenue growth rate of 6.9% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Frontdoor's recent history shows the business has slowed as its annualized revenue growth of 5% over the last two years is below its five-year trend.
This quarter, Frontdoor grew its revenue by 3% year on year, and its $378 million of revenue was in line with Wall Street's estimates. The company is guiding for revenue to rise 2.3% year on year to $535 million next quarter, slowing from the 7.4% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 3.9% over the next 12 months, an acceleration from this quarter.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Frontdoor has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 8.9%, subpar for a consumer discretionary business.
Frontdoor's free cash flow came in at $73 million in Q1, equivalent to a 19.3% margin and up 40.4% year on year.
Key Takeaways from Frontdoor's Q1 Results We were impressed by how significantly Frontdoor blew past analysts' adjusted EBITDA and EPS expectations this quarter. While its full-year revenue guidance was maintained, the company raised its full year adjusted EBITDA guidance, showing that growth is as expected but it's coming in more profitably. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 4.8% after reporting and currently trades at $32.25 per share.