Q2 2020 Frontdoor Inc Earnings Call
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Today's call is being recorded and broadcast on the Internet beginning today's call is Matt Davis, Vice President of Investor Relations and Treasurer and he will introduce the other speakers on the call at this time.
Ill begin todays call. Please go ahead Mr. Davis.
Thank you operator.
Afternoon, everyone.
Joining me on second quarter, 2000, <unk> audio conference call.
Joining me today.
All right.
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Oh Officer, Brian.
That's really been play.
And that will be used during today's call. He found on the Investor Relations section.
Well located in about three.
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Well I believe the presentation I'd like to remind you that it's called <unk>.
Hey Board, what you're saying.
These statements are subject to various.
Certainly we could cause actual results could differ materially below.
No.
He's played in the deep detail and to compete with BTIG.
We opened the with the SEC filings for a more detailed discussion.
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Okay.
All forward looking statements made today August.
And except as required by law the company undertakes no obligation to update any forward looking statements.
As a result, north American neutral event.
Right.
We will also reference certain non-GAAP financial measures throughout todays call.
We have included definitely would be farm and reconciliations of the wind up against the library.
Comparable GAAP financials.
We have you looked to the publication.
Understood and understanding our financial performance.
Finally, like most of you you can think work remotely please bear with US we do about the massive audience that you that might occur.
I'll now turn the call over the life opening comment.
Right.
Thanks, Matt Good afternoon, everyone I'd like to start back fretting my appreciation to all of our associates and contractors for their hard work and dedication we manage through challenging external environment.
Also want to thank those on the front lines of the cold and Nike pandemic, especially essential workers and those in the health care field.
You need to being made by the remarkable acts of kindness and professionalism that they can count with local heroes have shown over the last several months.
At the start up to support organizations and the communities where we operate.
Donating to food banks that are sitting there was a need and sourcing PB car contractors.
Now, let's turn to slide for our current business focus.
As you know we've been on a transformational journey here at front door.
I've been transforming the business from a technical operational and cultural perspective.
Pandemic, that's been a true tests or what is working and where we need to increase focus.
During the great financial crisis of 2008 in 2009 recruit top line revenue by 4% and 2% respectively.
That said I'm confident we will still grow our company's topline I roughly 7% this year, a true testimony to the resiliency of our business model and our people.
Well coping lighting has presented issues for many companies, including <unk> is also opened up opportunities.
Given where we are in or evolution and being a transformational company with a strong financial position, we're being opportunistic in our investment strategy.
The main areas, we have focused on leveraging favorable advertising rates as a result of other companies pulling back on their marketing budgets.
Hey, you're seeing an improvement in the efficiency of our broadcast marketing compared with 29 team.
Given that it pretty much adopt a decline in our real estate channel, we feel it's important to ramp up our marketing spend.
The read the efficiencies return to more normalized levels.
The second quarter for example, our marketing efficiency that roughly a two to one ratio. This means that for every point increase in the cost of acquiring a customer or CAC. We achieved the two point increasing its sales and we anticipate a similar level of performance in the third quarter.
The only other unit economics favorable well, we have also increased our unaided brand awareness by over 35% in a single quarter.
We believe this increased brand awareness well have a long term halo effect on both our direct consumer and real estate channels going into next year.
All this investment impacts our near term financial results will provide a long term tailwinds for our direct to consumer channel in terms of revenue growth and possibly impact overall customer retention.
Second I'm pleased to report their customer retention remained stable at 75% in the second quarter on a trailing 12 month basis.
It actually increased slightly versus the prior year period, but still rounded the same number.
As a reminder, customer attention decreased around 200 basis points during the global financial crisis in 2008.
I credits the overall value proposition of our home service plans the focus of our associates investments in technology and improvements in training and processes, we're keeping our attention stable today's certain macroeconomic environment.
We're also making investments to grow our emerging businesses.
Include can do or on the bad offering an expansion of our stream technology platform.
Last quarter, we announced candid expanded yet geographically and extended it trade offering to include heating and air conditioning plumbing and electrical.
Additionally, in the second quarter, we acquired a business that we expect will further accelerate the development of our on demand business, because they're that'd be a small acquired transit transaction will allow us to leverage their intellectual capital marketing expertise in core technology know how across our on demand business.
We are excited to bring this new talent and expertise on board.
It's also expands our geographic presence for on demand home services and to enter new markets, albeit extremely small scale as the vast majority of these new cities offer unlimited trades.
Acquisition allows our team to learn faster and implement best practices from each business as we move forward.
Your obsessed with constantly improving our customer experience.
Acquisition will help us on this journey, often lowering our cost of customer acquisition, and expanding our trade off or any offerings and geographic reach.
We have been actively developing new partnerships far stream technology.
Plan to monetize streamed through a SAS or software as a service business model.
Given the importance of ensuring the safety delivery of essential home services and other pandemic related concerns we have decided to extend our free screen trial to our key partners.
This is consistent with our long term I said it does help deepen our relationship with those partners.
Overtime, we will look to develop and evolve these arrangements into a mutually beneficial financial and operating model.
We're also beginning to integrate stream into our core home service plan business operations.
It's one of the original value propositions that really piqued my interest in this technology, if we can improve customer service, while reducing costs.
At this point, we expect to have our customer care associates actively using stream with a portion of our customers and contractors bought into the year.
On a combined basis, we did not expect can do and stream to have a material revenue impact. This year it'll continue to develop the operations and expand our presence.
These are emerging businesses that we continue to believe we'll have tremendous future potential.
Now moving to our next focus area improving the customer experience.
Since may customer service levels have been unfavorably impacted by increased demand for service and reduced capacity from our call Center Parkers.
Specifically, we had an external call center partner partner has seen a large decline in their available workforce as a result of travel restrictions from the pandemic.
We've also seen a challenging environment for hiring our call centers. Although these are currently virtual rolls a lot of job cuts are waiting to see the impact.
King has on the economy and the next government stimulus programs.
We're working to increase our service capacity and we expect service level to improve in the third quarter.
At the same time, we're engaged in a range of additional service improvements, including advancing our call center training investing in people improving contractor responsiveness as well as reducing cycle times.
A key part cycle time, with our supply chain or we continue to make improvements the sourcing parts and negotiate new agreements with manufacturers to leverage our purchasing power.
Well several of our vendors are being impacted by little bit 19, we're relatively insulated from a single supplier disruption for our multi vendor diversification strategy.
At front door, we're obsessed with all the customers problems I passionate about improving the customer experience last few months has only strengthen my resolve to advance our self service capabilities and deploy technology solutions to speed the customer resolution process.
We're also journey and I'm committed to transforming the service experience by investing in technology and business processes that will set the standard across the home services industry.
Now turning to slide five.
Front door delivered solid second quarter financial results the second highest gross margin recorded.
These results were in spite of increased service requests.
We began to experience an increase in service from cross activity in May continue throughout June.
Attributable to customer sheltering at home in response to covert lighting in March and April.
The increase was concentrated in appliances, and plumbing and it's consistent with industry wide trends.
We are seeing these higher demand trends continue into July we're evaluating if they increase can be service requests being pulled forward from future periods.
Example, we normally see a rise in our clients volume during the holiday.
The good news for our business that we're seeing strong demand for our services that supports our long term customer value proposition and overall customer retention.
Additionally, our first your real estate sales continued to be impacted back over 19.
While the decline in second quarter existing home sales was better than anticipated a real estate say its continues to face macro headwinds and tight inventory levels and its constrain transaction volume.
Second quarter seasonally adjusted existing home sales from the National Association of Realtors showed an 18% decline versus prior year.
A recent forecast as far as Nick and improve it off these low level for the balance of the year.
This environment, we continue to strengthen our realty partnerships, so that when the existing homesale market improves well being an even stronger position.
In conclusion, we are successfully managing through this challenging external environment from position of strength the focus on a long term.
We have a powerful and resilient business model. We're in a strong financial position, we are making investments today. It looks celebrate the trajectory of a revenue growth in the years ahead.
I'll now turn the call over to Brian who will cover our financial results in more detail Brian.
Thank you Rex and good afternoon, everyone, let's now turn to slide six and I'll review, our second quarter financial results.
Revenue increased 8% versus the prior year period to $417 million driven by approximately four points of of higher price increase volume.
If you look at our home service plan channels revenue derived from customer renewals was up 10% versus the prior year period due to growth in that number renewed home service plans driven in part by customer retention improvement initiatives and approve price realizations.
First year direct to consumer revenue was up 7% versus the prior year period, reflecting growth and the number of first year direct to consumer home service plans, mostly driven by increased investments in marketing as well as improved price realizations.
And first your real estate revenue was down 1% versus the prior year period.
Electing a decline in the number first year real estate home service plans due in part to the adverse impact of coping 19, other existing home sales, partially offset by improved price realizations.
I would like to remind everyone that macro factors take about 12 months to cycle through our reported results. This blown some positive or negative impact of our first your lipstick sales in any quarter.
That's a result, our reported revenue was somewhat lag any macroeconomic trends.
Gross profit increased 6% in the second quarter versus the prior year period to $218 million and gross profit margin was 52%.
I think I'm was $49 million and 19% decline versus the prior year period, while adjusted net income was $56 million life were sent declined versus the prior year period.
Adjusted EBITDA was $100 million in the second quarter at the midpoint of our guidance range in the 5% decline versus the prior year period.
We estimate that Kobin 18 negatively impacted our adjusted EBITDA by approximately $13 million in the second quarter.
It's primarily related to additional claims costs and incremental marketing investments, which I'll cover in more detail as I know walk you through the second quarter adjusted EBITDA Bridge on slide seven.
Starting at the top we had 25 million to collars favorable revenue conversion in the second quarter 2020 versus the prior year period.
Adding $16 million from higher price and $9 million from increased volumes.
Excluding the impact of the change from higher revenue contract claims costs increased $13 million and the second quarter 2020 versus the prior year period. This increase in claims cost was mostly due to significantly higher number of service requests primarily in the appliance in plumbing trades as well as normal inflation.
The total cost increase was partially offset by a favorable weather impact of approximately $1 million.
Well as process improvement benefits.
We estimate that $6 million to $8 million of the higher claims costs are related to higher usage from customer sheltering at home.
As Rex mentioned, we believe that some portion of this increase in service claims. It's just timing of request that were pull forward from future periods. However, it's too soon to quantify.
Sales and marketing costs increased $14 million in the second quarter versus the prior year period. This increase was primarily due to investment approximately $12 million and our direct to consumer channels about half were $6 million was directed toward opportunistic marketing investments to increase our direct to consumer customer count growth.
At attractive acquisition costs, while our real estate channel is under pressure from koby by team.
This is efficient spend for us it will help mitigate the impact of the pressure we've seen in the real estate channel at attractive customer acquisition costs. As a reminder, customers acquired in the direct to consumer channel renew after the first year at a rate that is over 2.5 times better than those customers acquired in the real estate Chan.
And accordingly have a higher lifetime values.
The 2 million dollar increase in service cost was primarily driven by investments to enhance the customer experience and increased retention as Rex mentioned earlier. We believe this investment has helped maintain customer retention steady at 75% through the second quarter.
Please now turn to slide eight for review of our cash and cash flow position.
That's cash provided from operating activities for the six months ended June 32020 was relatively flat versus the prior year period $140 million as the change in working capital and adjusted EBITDA were similar to the prior year period.
Net cash used for investing activities was $19 million, an increase of $7 million versus the prior year period.
This was primarily due to an increase in capital expenditures to support investments in technology and a small business acquisition to expand the can do ondemand platform.
Net cash used for financing activities was $4 million the same as the prior year period is primarily comprised required debt payments.
Free cash flow, which we calculate as net cash provided from operating activities minus property additions was $122 million for the six months ended June 32020.
This $8 million decrease from the prior year period was primarily due to increasing capital expenditures.
Cash and marketable securities totaled $548 million at the ended the second quarter is $64 million increase compared to March 31 2020.
That total restricted net assets required to meet state regulatory reserve requirements totaled $176 million, while the remaining $372 million are considered to be unrestricted.
Our adjusted EBITDA conversion of free cash flow rate is typically higher in the first half of the year because of the timing related to cash payments, specifically cash paid for service request and cash taxes.
This year is no exception as evidenced by our second quarter in June year to date rates being a robust, 70% and 83% respectively.
We anticipate our full year 2020, adjusted EBITDA free cash flow conversion rate to be around 50%.
Our available liquidity at the end of the second quarter was $622 million, which includes the aforementioned $372 million unrestricted cash.
I wasn't available undrawn revolving credit facility of $250 million.
I'll now conclude my prepared remarks, with some comments regarding our financial outlook.
Based on our preliminary July results concurrent forecast for August and September we expect our third quarter 2020 revenue to range between 430, and $440 million or an increase of 6% to 8% versus the prior year period.
We also expect adjusted EBIT ought to range between 90, and $100 million compared to $106 million in the prior year period.
This outlook assumes a continuation of the second quarter trends into the third quarter, including.
An estimate a decline in first year real estate revenue of approximately 7% versus the prior year period, there'll be more than offset by direct to consumer and renewal channel revenue growth.
Senior at higher appliance and plumbing service requests as a result of our customer sheltering at home.
Estimated impact of $8 million to $10 million higher claims costs.
And additional investments totaling $17 million and sales and marketing expense in the third quarter versus the prior year period to accelerate our long term revenue growth about half of which is coping 19 related incremental marketing spend.
Opportunistically add more customers in our direct to consumer channel.
While the real estate channel remains pressured.
The additional marketing investments.
And the projected increase in service requests are the primary drivers of our third quarter, adjusted EBITDA range being lower than the prior year period.
In regard to our full year 2020 outlook, we're projecting revenue to range between 1.4 or five the $1.47 billion were increase of 6% to 8% versus the prior year period.
We will continue to withhold full year adjusted EBITDA guidance due to the uncertain impacted cobot 19 on the overall economy and on various parts of our business.
Specifically, we are still evaluating potential impact increased service requests on our fourth quarter results.
In closing, while we remain optimistic ever but the long term prospects of the business over near term results are being impacted by cold in 19.
In the second quarter, we estimate that cobot 19 negatively impacted our adjusted EBITDA by approximately $13 million is primarily related to the additional service requests.
And incremental marketing investments I previously mentioned.
Likewise, we project that our third quarter outlook is being negatively impacted by approximately $18 million due primarily to those same factors.
In the meantime, even with these challenges we continue to generate meaningful revenue growth.
Active margins and strong cash flows.
Our retention is holding steady.
And we have a substantial and growing liquidity position.
It allows us to take advantage of market opportunities.
We are making productive and efficient investments for the long term health of the business and we will emerge even stronger for the overall macro environment improves.
With that I'll turn the call back over to Matt to open the question and answer session Matt.
Thanks, Brian.
As a reminder, during the question remains intact. We encourage you to answer any questions. You may have but please note the guy who isn't limited to the outlook, we provided in our press release.
Operator, let's open the lines for questions.
Thank you.
We will now begin the question answer session to ask a question you made Chris stars and one on your Touchtone phone for usually speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then to at this time, we will momentarily assembler roster.
Our first question comes from Ralph Schackart from William Blair. Please go ahead.
Good evening two questions because [noise] Rex I know you talked about you know the increased customer service requested a co bid and appliance in plumbing and how it continued into July just curious how you'll be able to discern you know how much of this it just pull forward of maintenance or.
Breaking appliances, a servicing issues versus you know extra stresses bidding being put on the appliances because people are sheltering in place and.
If it's the latter you know any sense of how long.
Sort of duration of this could continue to drag or do you think you know you're going to the bulk affects over the next quarter too and then just to bolt on a question on the marketing spend inefficiencies, you're saying can you maybe just give a sense about you know where you're seeing the efficiencies between offline and online channels I know TV has been one for you.
But just give a sense. So the payback periods are saying and then how much of that its direct response versus Brent sorry for all the questions. Thanks.
Hi, Thanks, Ralph.
In terms of ER.
Of the.
You know what whether this is you know coded related or how long. This will last rather you know we.
We do think that there's an opportunity that a lot. It's just kind of pull forward and that Ah. Yes, we do see over the holiday said, a you know we see increases in claims for for a appliances as well and we think that because folks or <unk> or at home more than that we are seeing a arise.
Our last conference call, we Didnt or you know that point, we generally see.
That much change and then.
You know as it kept kept drag no longer that's all they started to see the.
The change so in terms of timing you know we're not you know we're not sure. That's why we're so kind of closely monitoring moderated.
I will say that.
Even with the increase a in claims you know we still have one of our highest.
Gross margin in company history. So we're still are still able to manage the cost I'm working more closely watching it.
But.
We're hopeful its pull forward, but we're still a we see somebody from time to truly yeah assess that.
In terms of of the marketing spend you know certainly we've we've gone.
Much deeper or what director Mark.
For the trusts consumer marketing.
We is as I said in my remarks, a very strong kind of two to one CAC ratio. So every point would go up.
And and CAC, we're seeing you know two times.
And unit sales. So this is primarily in broadcast that's what we've got to the strong a increase in our unaided awareness as well and so given that favorability of rates you know we Oh, we felt is the right time to kind of continued to lead into marketing and would have.
Certainly Ah, yes exceeded the EBITDA, if we had haven't decided to leave the marketing Butler, we're playing along game so.
Yeah, that's why we're very much focused and in that space. So that all the marketing is around broadcast and digital.
Okay, great. Thanks Rex.
Yeah.
The next question comes from Michael Inc. from Goldman Sachs. Please go ahead.
Hey, good afternoon. Thanks for the question first just one that the quantification of the Coven 19 impact on EBITDA for this quarter and next I was wondering if you might be able to shed a little bit more laid on.
Ah the MSR increase how much did I sars increase year over year quarter over quarter and would you expect.
As far as to normalize when stayed home measures are listed at some point in the future and then I've a follow up.
Right.
What I'd like.
Right that one please.
Great question Michael.
Well, we spoke with you as Rex mentioned I think it was may six was our our Q1 earnings call. We hadn't really seen any change in incidents and appliance or plumbing, but following that week, we began to dig into the service a question little bit we saw them ramping up from you know incident rates a instances bidding.
Low single digits up to that point in then they popped up a bit.
So what we did was.
We dug into the cohorts a little bit to see if we can find anything you know our customer cohorts are out of balance that was normal we had no crosses unchanged. So we began to think it was you know.
Customer sheltering, increasing use appliances and systems and sure enough we dug into the appliances.
Well I item level, we saw that the appliances you would use.
Sheltering at home or the ones that really jumped almost no ovens ranges microwaves, a washing excuse me dishwashers refrigerators and those that wouldn't change that much like washers and dryers didn't change. So we're pretty convinced that it was just more use.
The normal people weren't sheltering at home so and then we triangulate it with some industry data, we were getting from contractors and vendors who are saying they saw the same rise in the same appliances. So that's what we thought yeah. That's why we think this is sheltering at home and hopefully as much of its pull forward.
So I help.
Yeah that is very helpful. Thank you Ryan and my second question. How can you just talk a little bit about.
The marketing investments that you guys are making you mentioned that half of those are opportunistic.
Is that simply just a mix issue as DTC becomes a larger part of the pie or are these opportunistic marketing investments or.
Spend that has yet to translate into.
Revenue growth or retention will pay off at some point in future. Thank you very much.
Well I'll take that when Michael I'm, you know, it's all it's all a future future revenue right. So as we as we invest more in marketing.
You know last quarter in this quarter.
You know we were Ratably recognized revenue a 12 at a time. So you know the the impact that we'll see from a revenue perspective will be muted this year, but we'll see it more more next year.
So so you take the yeah, the marketing expense in quarter and yellow, you'll see the revenue line and grow as you know that's the customer pays every every month.
In terms of.
You know kind of why we're doing this as I mentioned before you know as rates are favorable.
Yeah, we we don't expect to see.
I see this forever, so it's a great opportunity too.
Kinda lean into to broadcast and digital when yeah, we're getting that kind of strong two to one CAC ratio. So yeah. We think this is a.
Turning to really invest in that business.
Great. Thank you Rex.
Sure.
The next question comes from Youssef Squali from Truest. Please go ahead.
Great. Thank you very much a two questions for me please Rex.
As you think about rolling out a can do kind of.
Broader manner I was wondering if you could share with US just some of the early learnings that you've had so far particularly around pricing rounds unit unit economics profitability and you feel that you have.
I had a good handle enough on it to start aggressively pushing it maybe you know even as early as later this year early next year.
And second maybe Brian you talked about real estate assumptions I'm not sure I I kind of got this correctly, but you mentioned negative 7% or was that for the third quarter.
Growth that you had that you shared then maybe she can just speak to what kind of.
Turnarounds, you're seeing in that metric because I think Q2, you were a negative one I'm just not sure whether you're assuming deterioration in Q3 or four already improvement sorry, I may have missed that.
[noise]. He said I use that's all I'll take a I'll take the first one let Brian to address the real estate question.
In terms of can do.
Our strategy has always been.
Kind of build filled the project last year.
Yeah really start to the scale at this year and really scale and optimizing and 21, we're still very much on track to to do that we plan to spend $15 million to $20 million on.
On the can do this year, we're still on track to do that and in terms of the unit economics.
You know our hypothesis is always beds that.
And this business you know what are the more expensive aspects is supply we already have.
Yeah, I pretty good supply position. So it really comes down to marketing. So we've been very focused on.
Making sure that we feel good about a customer acquisition cost you know I think with our recent acquisition well learn even even more.
Thank you know where it would definitely on track is as it relates to talk to my head. The you know the real or other thing we really need to focused on this year is expanding the trade so.
Right now you know are primarily appliance repair, but as we.
Moving to a electrical plumbing he other things I mentioned in the in my remarks.
It really gives you an opportunity to touch a customer <unk> multiple times so.
We really need that in order to lower our customer acquisition cost and you really prove out the profitability the business. So that's what we're focused on this year.
This isn't going to I think change our plans for this year, but certainly will inform our decisions for scaling then in 2021.
Brian you want to take the real quick question.
Sure and that sorry, if I confused you a bit there Youssef yeah, we were down 1% in Q2 and the forecast that we gave is a minus seven for Q3 and instead, it's a couple of things that come together to enter.
In Q2, we had some of the volume decline a lot as volumes client actually offset by favorable price flowing through.
In Q3, we're not going to have as much price flowing through to offset the volume decline as I think we're at the end of some of the price increases from a year ago sort. The tayloe those were not getting as much terrible flow through price that we had in Q2 and also what you've gone in Q3 going on in Q2, you had if you think about it you had.
You had three months or the April impact your two months to the May impact a one month for the June impact it was a lower units well when you get to Q3, you're gonna have all three months of each of those a previous Q2 months plus your Q3 impact lower unit. So it's building and that's why we think it's gonna be.
Minus 7% however, no are.
Their data just follow national Associate for social Realtors are they have a more favorable outlook for Q3, I think they're down only two or 3%.
Which we thought to be lower than that so maybe that's seven isn't as bad if the home existing home resale market comes back stronger, but right now that's our forecast is minus 7%.
Okay, Texas, Yeah. Thank you. Thank you both for the clarification great.
No.
Income from.
Next question comes from Cory Carpenter from JP Morgan. Please go ahead.
Great. Thanks for the questions just back on the higher claims Rex curious if they do linger for the next few quarters and curious you could talk about some of the lenders you have to pool as an offset whether it'd be a he took price increase on were better rental rates on the other side I'd be higher engage customers a real.
Doing and then maybe secondly on can do anymore color you could provide on the acquisition you made this quarter now you plan to integrate that thanks.
Sure Corey so so for.
For the.
Levers you know, we what a great things that we have in our pocket is dynamic pricing so from a.
Pricing perspective.
When it comes to renewals and then later in Q4 as we rollout attracts consumer for first your direct consumer.
You know we were able to continue to tweak the model so that.
We have a good understanding where underlying costs are so from a pricing perspective, I'm less worried about about that front from a cost perspective.
You know we have a sourcing team or this five management team under under Brian they've done a a great job of continuing to.
Grew our network.
Thats replacement or parts.
So you know we don't have a we're not we don't feel the impact as much in terms of our multi vendor strategy. So that we're able to trade off volume for cost.
So we'll continue to pull that lever as well and then he other teams done a great job of.
Continuing to to make sure that for use as many a a preferred contractors as possible.
Even with the increased demand our our sense of preferred as has held in the 80 so.
You know true testimony to the to the team and driving the the cost discipline, there as well so so between those things I Oh, yeah, I'm confident we'll be able to have a enough levers to pull to.
Yes continue to move forward as a business and they can you remind me of your second question.
Yes, the acquisition, which can do and even some more color on that how you plan to integrate it into your offering.
Sure. So so we acquired a selling some assets from from porch small a small acquisition.
The team with the seven years experience that will only help accelerate to our great team.
And you know what we're planning on populate bringing those two teams together.
I guess, a small team. So so it's I think a it won't won't be too disruptive from my from integration perspective, but what we do get is you know more and more and more knowledge on the team a team that as you know worked over the last several years on.
Their marketing CAC. So so we get to bring for pull forward all that in for.
That all the intellectual capital so that.
We can propelled the business he even faster you know the spend it's great. It's been a great acquisition and we're yeah. We're excited about the future and especially for <unk> for 21.
But still it's early days any orally you know.
A month or two into the acquisition, so still certainly to integrate and and pull the team together.
Great. Thank you.
Mm.
Next question is from Brian Fitzgerald from Wells Fargo. Please go ahead.
We want to ask on real estate that there maybe as you point that cobot is driving a lot of housing turnover from urban two suburban and rural a younger buyers getting into the market, specifically and older housing stock and just wondering how you're thinking about that opportunity around housing turnover.
And now you might be able to capitalize on and that shifting demographics from urban areas to two suburban areas.
Well certainly a existing home sales is or is our bread and butter. So.
You know if that trend does does hold on that they'll be a tailwind for our business. Yeah. We do think that Ah you know our our business model is a right you know nothing resilient through the pandemic, but but also as as they demographic start to change for.
The type of home buyers, we think we're well positioned a especially in the the millennial space.
So as folks move.
More from a suburban to or sorry, more from urban and suburban a that that will definitely create a a.
Tell win for US this too early to tell.
How much of a tailwind that would create but yeah. What what are the things that I also think about it when it comes to real estate. It's also inventory.
So we're closely watching or either credible rates right now, but the inventory as well tight so yeah. That's the factor that we're yeah that we're looking at.
Got it thanks Rex.
You bet.
Next question comes from Ian Zaffino from Oppenheimer. Please go ahead [noise].
Great. Thank very much I have done a little bit late so forgive me if I Miss was asked around here, but on a sized pricing and you're you're modeling.
What changes have you been doing or that you anticipate doing as we move more towards work from home people not necessarily going to work staying at home.
You know, we saw a little bit that now, but that seems like it's temporary but at this as actually longer term.
You know how do you move to address that thanks.
Hey in great to hear from me you know the this is this a kinda also fits squarely in our dynamic pricing wheelhouse, we're able to.
We've talked about in the past a only look at a dynamic pricing from a from a geography perspective, but.
In the future, we'll be able to to get even deeper as it relates to usage. So.
You know as we begin to pinpoint people who are.
Maybe using their you know there their home service plan more we'll be able to reflect that and the renewal price you know the other I think a interesting thing is you know unlike insurance, where you hope that that a you'll never have to use that.
As customers needed to use their home service plan that only helps with retention. So are we also think that that should bode well for my retention perspective, but.
In terms of just cost yeah, I mentioned, some some levers before but one larger ones is direct or it dynamic pricing.
We should we still think that yeah, we stuff a lot of a lot of room left with dynamic pricing, but I would continue to a.
The team continues to to refine it and then in Q4 will launch dredge consumer for first year, a direct to consumer customers. As you know we haven't for what we're doing now so.
We think that's going to be a great way too to cut a.
Monitor what happens in the you know the quote unquote do normal Oh work from home.
All right, that's sort of Colorado nutrition.
Yeah. Thank you.
Next question comes from Matt well de also from Compass point. Please go ahead.
Hey, good afternoon guys.
Just to get harder on.
Hey, just stay a two parter Onstream you mentioned that you guys are integrating that more in the core business in the back half of the year can you talk a little bit more about kind of the investments associated to get that fully integrated and operational and then and then just on the partnership with real estate agents can you.
You provide any feedback on how that's going and whether you see that continuing.
Just unter in terms of a virtual touring post post Cove it.
Sure so so far.
For a real key partners what streamlines allows them to do is you on the best use cases is kind of a ahead of the sale.
You can set up the stream with what the potential client you had the opportunity to two annotate hasn't kind of identifier is that.
That may you know.
Mutually agree that they need to a change or that the core or you know yeah, rearranging furniture that that type of thing or so so they're able to have those kinda conversations virtually they're able to to do a you know virtual tours.
And so.
No. It's been very well received by our Realty partners in terms of whereas the go post co that you know still I think as a TBD.
Our our strategy is.
Get the realtors are used to using it.
Good to get them integrate as part of their business and it should be a a lot stickier than than trying to.
Yes introduce it in a you know kind of the.
Non virtual world if he will in terms of how stream integrates into our business. It's just a matter of deploying our technical resources to ensure that a stream is integrated into our call Center systems.
No I were allowed or just affords us a the opportunity to to.
Send a stream request to the customer or be able to capture the video and the notes. So that we can then some that onto to contractors and of course need all the reporting behind that so.
You know not insignificant work, but work that we had planned for.
For the back half of this year.
Great. Thanks.
Thank you.
There are no more questions in the Q. This concludes our question and answer session.
Like to turn the conference back over to Rex Tippins for any closing remarks.
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The conference has now concluded Oh.
Oh, sorry lost a lot Saudi are there for a second thank you operator, and thank you all are investors and analysts to participate on today's call front doors, playing the long game when responding to covert 19.
We are leveraging favorable marketing rates and efficiencies and expanding and deepening our partnerships to improve our growth rate.
In fact, many of our stockholders of assets to take he's very actions over the last few years is critical to understand that these investments and an increase in service request impacts our near term results, but will improve our long term financial profile.
We have a resilient business model in a strong financial position and we were well we will emerge even a stronger after this crisis passes.
I want to thank our team again that are amazing resiliency and flexibility in this environment also that all of you continue to stay safe during this on Preston time.
Thank you again for your continued interest in front door.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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