Second Quarter 2026
Filed Aug 6, 2026Frontdoor Reports Second Quarter 2026 Results EPS and Adjusted EPS Increased 19% to $1.76 and $1.93, Respectively; Home Warranty Ending Member Count Increased 1% to 2.11 Million; Raising Full-Year 2026 Outlook Based on Strong Performance
Second-quarter revenue increased 5% to $645 million, net income increased 13% to $125 million, adjusted EBITDA increased 10% to $220 million, and the company raised its full-year 2026 revenue and adjusted EBITDA outlook.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Revenue, three months ended June 30, 2026GAAP | $645 million | – | 5% |
| Gross Profit, three months ended June 30, 2026GAAP | $378 million | – | 6% |
| Gross profit margin, three months ended June 30, 2026GAAP | 59% | – | – |
| Net Income, three months ended June 30, 2026GAAP | $125 million | – | 13% |
| Diluted Earnings per Share, three months ended June 30, 2026GAAP | $1.76 | – | 19% |
| Basic Earnings per Share, three months ended June 30, 2026GAAP | $1.80 | – | – |
| Adjusted Net Income, three months ended June 30, 2026non-GAAP | $137 million | – | 13% |
| Adjusted Diluted Earnings per Share, three months ended June 30, 2026non-GAAP | $1.93 | – | 19% |
| Adjusted Basic Earnings per Share, three months ended June 30, 2026non-GAAP | $1.97 | – | – |
| Adjusted EBITDA, three months ended June 30, 2026non-GAAP | $220 million | – | 10% |
| Number of home warranties, as of June 30, 2026other | 2.11 million | – | 1% |
| Customer retention rate, as of June 30, 2026other | 79.6% | – | – |
| Revenue, six months ended June 30, 2026GAAP | $1,096 million | – | – |
| Gross Profit, six months ended June 30, 2026GAAP | $626 million | – | – |
| Net Income, six months ended June 30, 2026GAAP | $167 million | – | – |
| Diluted Earnings per Share, six months ended June 30, 2026GAAP | $2.33 | – | – |
| Adjusted Net Income, six months ended June 30, 2026non-GAAP | $190 million | – | – |
| Adjusted Diluted Earnings per Share, six months ended June 30, 2026non-GAAP | $2.66 | – | – |
| Adjusted EBITDA, six months ended June 30, 2026non-GAAP | $324 million | – | – |
| Net cash provided from operating activities, six months ended June 30, 2026GAAP | $245 million | – | – |
| Free Cash Flow, six months ended June 30, 2026non-GAAP | $233 million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| RenewalsHigher realized price. | $479 million | – | 4% |
| Real estate (First-Year)Higher volume as balanced housing market conditions supported higher capture rates, partially offset by lower realized price. | $45 million | – | 3% |
| Direct-to-consumer (First-Year)Lower realized price from the promotional pricing strategy, partially offset by higher volume from growth in new home warranty members. | $55 million | – | (2)% |
| OtherPrimarily due to the New HVAC upgrade program. | $67 million | – | 19% |
Third-Quarter 2026 and Full-Year 2026 outlook
- RevenueThird-Quarter 2026: $642 million to $652 million. Full-Year 2026: $2.19 billion to $2.21 billion.
- Gross marginFull-Year 2026: ~55%.
- Operating expensesFull-Year 2026 SG&A: $685 million to $695 million.
- Tax rateFull-Year 2026 annual effective tax rate: approximately 25%.
- NoteThird-Quarter 2026 Adjusted EBITDA: $197 million to $207 million.
- NoteFull-Year 2026 realized price increase: 3% to 4%.
- NoteFull-Year 2026 volume increase: 1% to 2%.
- NoteFull-Year 2026 low-to-mid single digit increase in renewal channel revenue.
- NoteFull-Year 2026 low-single digit decrease in direct-to-consumer channel revenue.
- NoteFull-Year 2026 low-single digit increase in real estate channel revenue.
- NoteFull-Year 2026 non-warranty and other revenue: $230 million to $240 million.
- NoteFull-Year 2026 total home warranty member count to increase approximately 1%, primarily driven by an approximately 5% increase in first-year home warranty member count and strong renewal rates.
- NoteFull-Year 2026 Adjusted EBITDA: $585 million to $600 million.
- NoteFull-Year 2026 Adjusted EBITDA margin: approximately 27%.
- NoteFull-Year 2026 capital expenditures: ~$30 million.
Capital returns
- Completed $181 million of share repurchases year-to-date through July 2026, up over 21% from the same period in the prior year.
- Repurchases of common stock were $152 million for the six months ended June 30, 2026.
- Net cash used for financing activities was primarily comprised of $151 million of share repurchases (excluding taxes and fees) for the six months ended June 30, 2026.
What drove it
- Revenue increased 5% to $645 million and was comprised of ~3% increase from higher realized price delivered through the dynamic pricing model and ~1% increase from higher volume.
- Higher revenue conversion contributed $16 million to both net income and Adjusted EBITDA versus the prior-year period.
- Contract claims costs decreased $7 million, excluding the impact of claims costs related to the change in revenue.
- A lower number of service requests per member included $5 million from favorable weather.
- Other revenue increased 19%, primarily due to the New HVAC upgrade program.
- Real estate revenue increased 3% due to higher volume as balanced housing market conditions supported higher capture rates.
Concerns
- Direct-to-consumer revenue decreased 2% due to lower realized price from the promotional pricing strategy.
- Customer retention rate was 79.6% as of June 30, 2026, compared with 79.7% as of June 30, 2025.
- Low-single digit cost inflation across the contractor network, replacement parts and equipment partially offset lower contract claims costs.
- Sales and marketing costs increased $3 million, primarily due to increased marketing investments to drive direct-to-consumer channel growth.
- Provision for income taxes increased $6 million, driven by higher earnings.
- Full-year 2026 guidance assumes a low-single digit decrease in direct-to-consumer channel revenue.
What to watch
- Third-quarter 2026 revenue outlook of $642 million to $652 million and Adjusted EBITDA outlook of $197 million to $207 million.
- Execution against the full-year realized price increase assumption of 3% to 4% and volume increase assumption of 1% to 2%.
- Home warranty member-count growth, which is expected to be approximately 1% for full-year 2026, and renewal rates.
- The full-year outlook for $230 million to $240 million in non-warranty and other revenue.
- Contract claims costs, including service-request incidence, weather and cost inflation across the contractor network, replacement parts and equipment.
- Full-year 2026 SG&A outlook of $685 million to $695 million and capital expenditures outlook of ~$30 million.
Balance sheet and cash flow
- Cash and cash equivalents were $627 million as of June 30, 2026, compared with $566 million as of December 31, 2025.
- Cash as of June 30, 2026 was $627 million and was comprised of $155 million of restricted net assets and $472 million of Unrestricted Cash.
- Current portion of long-term debt was $29 million as of June 30, 2026, compared with $29 million as of December 31, 2025.
- Long-Term Debt was $1,131 million as of June 30, 2026, compared with $1,144 million as of December 31, 2025.
- Net cash provided from operating activities was $245 million for the six months ended June 30, 2026, compared with $251 million for the six months ended June 30, 2025.
- Free Cash Flow was $233 million for the six months ended June 30, 2026, compared with $237 million for the six months ended June 30, 2025.
- Purchases of property and equipment were $12 million for the six months ended June 30, 2026.
- Repayments of debt were $14 million for the six months ended June 30, 2026.
- Cash increase during the period was $62 million for the six months ended June 30, 2026.
Analysis
Frontdoor reported second-quarter revenue of $645 million, up 5%, with approximately 3% growth from higher realized price through its dynamic pricing model and approximately 1% from higher volume. Renewal revenue grew 4% on higher realized price, while real estate revenue rose 3% as higher volume and capture rates were partly offset by lower realized price. Other revenue increased 19%, primarily due to the New HVAC upgrade program. Direct-to-consumer revenue declined 2% because promotional pricing reduced realized price, despite higher volume from new home warranty member growth.
Profitability expanded in the quarter. Gross profit increased 6% to $378 million and gross profit margin increased to 59%. Net income rose 13% to $125 million, diluted EPS rose 19% to $1.76, and adjusted EBITDA increased 10% to $220 million. The year-over-year bridge cites $16 million of higher revenue conversion and a $7 million reduction in contract claims costs excluding the revenue-change effect. Favorable weather accounted for $5 million of lower service-request costs, while low-single digit contractor-network, parts and equipment inflation was an offset. Higher income tax expense and higher sales and marketing costs also reduced the year-over-year profit benefit.
The member base reached 2.11 million home warranties as of June 30, 2026, up 1% from 2.09 million. First-Year Direct-To-Consumer home warranties were 0.33 million versus 0.31 million and First-Year Real Estate home warranties were 0.22 million versus 0.20 million, while renewals were 1.57 million versus 1.58 million. Customer retention was 79.6%, compared with 79.7%. The full-year outlook calls for total home warranty member-count growth of approximately 1%, primarily driven by an approximately 5% increase in first-year home warranty members and strong renewal rates.
Cash generation remained substantial over the first six months, though below the prior-year period. Operating cash flow was $245 million and free cash flow was $233 million, versus $251 million and $237 million, respectively. The company repurchased $152 million of common stock in the six-month period and reported $181 million of share repurchases year-to-date through July 2026. Cash and cash equivalents were $627 million as of June 30, 2026, including $472 million of Unrestricted Cash, while long-term debt was $1,131 million and the current portion of long-term debt was $29 million.
Management raised full-year 2026 guidance to revenue of $2.19 billion to $2.21 billion and adjusted EBITDA of $585 million to $600 million. The outlook includes gross profit margin of approximately 55%, SG&A of $685 million to $695 million, adjusted EBITDA margin of approximately 27%, capital expenditures of approximately $30 million and an annual effective tax rate of approximately 25%. Third-quarter guidance calls for revenue of $642 million to $652 million and adjusted EBITDA of $197 million to $207 million. The guide assumes continued price and volume gains but also a low-single digit decrease in direct-to-consumer channel revenue.
Management, verbatim
Frontdoor is delivering exceptional results across all key areas of the business.
Bill Cobb, Chairman and Chief Executive Officer
Our relentless actions to accelerate membership growth are working, our operational discipline is driving record profitability, and we are repurchasing shares at an unprecedented level.
Bill Cobb, Chairman and Chief Executive Officer
Reflecting these strengths, we are raising our full-year 2026 Revenue and Adjusted EBITDA guidance.
Bill Cobb, Chairman and Chief Executive Officer
Not in the filing
stated, not guessed- GAAP operating income was not reported.
- GAAP operating margin was not reported.
- Quarterly operating cash flow was not reported.
- Quarterly free cash flow was not reported.
- Dividend information was not reported.
- Prior-quarter comparisons for reported quarterly metrics were not reported.
- Prior outlook was not provided, so comparison of actual results with prior guidance was not available.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.