Q4 2024 Frontdoor Inc Earnings Call and Investor Day

February 27, 2025

Only five Investor Day, My name is Matt Davies and I'm, the Vice President of Investor Relations and Treasurer for front door. We are about to get started but before we begin I want to cover off on a few items first front doors fourth quarter and full year 2024 earnings press release as well as our 10-K was real.

Matt Davis: Thank you again for joining us today. For those of you on the webcast, we will begin starting in approximately two minutes.

Earlier this morning before market opening Additionally.

Additionally, the Investor day slides that will be used during today's presentation can be found on the investor Relations section of front doors website, which is located at investors Dot front door home Dot com.

As stated in the presentation and on the screens behind me I'd like to remind you that this investor day presentation and webcast may contain forward looking statements. These.

These statements are subject to various risks and uncertainties, which could cause actual results to differ materially from those discussed here today.

These risk factors are explained in detail in the company's filings with the SEC. Please refer to the risk factors section in our filings for a more detailed discussion of our forward looking statements and the risks and uncertainties related to such statements all.

All forward looking statements are made as of today February 27th and except as required by law. The company undertakes no obligation to update any forward looking statements, whether a result of new information future events or otherwise.

We will also reference certain non-GAAP financial measures throughout today's presentation.

We have included definitions of these terms and reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures in the appendix to today's presentation in order to better assist you in understanding our financial performance.

Finally, I would like to remind all investors how to best reach front or if you have any questions or would like to set up a call with us.

We ask that you reach out to the Investor Relations Department.

Best way to do that is through our email IR at front door home Dot Com you can also call us at 90170 $151 99.

Thank you again for joining us today for those of you on the webcast. We will begin starting in approximately two minutes.

Yeah.

Okay.

Good morning, everybody I'm Bill Cobb and thank you for being here in person and to those of you who are joining us on the webcast My leadership team and I have been working hard on our strategy and plans for 2025 and beyond and we'll be sharing a lot today.

But before I get to the agenda and our presenters I want to share a few key points upfront.

As you know I became the CEO in June of 2022 some 33 months ago back.

Back then the company was at an inflection point.

We're in one of the most challenging macroeconomic environments in the company's history.

Inflation supply chain issues softening real estate market and other headwinds as a result membership was in decline.

Gross margins were at historic lows of 43%, we had not yet fully implemented our pricing actions and most importantly, we needed to implement process improvement and business transformation initiatives I saw these as imperatives, we needed to move the company to a more proactive mindset and approach.

As such we embarked on several decisive actions to transform our business.

First and foremost we focused on our number one strategic priority member growth, we stabilized our core business American home shield by investing significant resources, especially in technology in marketing.

This work positioned <unk> for growth and the rebrand and marketing campaign, we launched last year is doing exactly what we want it we're seeing positive momentum in our new member count and Kathy Collins will talk about this later.

We enhanced our margins in 2022 our gross margins were at an all time low of 43%.

But now through a lot of hard work and our process improvement and business transformation initiatives. We finished 2024 with a gross margin of 54% an all time high.

By the way Youre going to hear that term all time high a few more times today.

We improve retention rates for 2022 our retention rate was 75, 7% today, that's grown to 78, 5% another all time high.

We explored strategic M&A, we completed the acquisition of 210 homebuyers warranty in December.

We will go into more details this morning, but in the simplest terms the acquisition of 210, Diversifies our business through their new home structural warranty and through their home warranty business.

210 brings in more members.

Our revenue and more EBITDA.

In fact, we are even more optimistic now about two turns impact than we originally estimated.

We expanded our non warranty business. This is one of the things I am most proud of.

'twenty 'twenty four revenue from our non warranty services also referred to as on demand was $107 million and we know there is more we can do.

And here's another point I am very proud of we returned a lot of excess cash to shareholders through share buybacks, we exhausted the previous $400 million authorization in August of last year, and we are now operating under a new three year $650 million authorization that began last September.

Over the past three months following the acquisition of 210, we have bought back approximately $80 million worth of shares.

And when you add all of these actions up we delivered we did what we said we would do.

And the investment community has reacted very favorably.

Thank you by the way.

When I became CEO in June of 2022, our share price was $24 15.

We hit a low point in December of 2022, when the share price sank to $19 55.

But we've been on a predominantly upward trends since then.

At our Investor day here two years ago, the share price was $29 46.

We ended yesterday at $57 17, a share that's a 137% increase in our stock price since I started now.

Now with all of these improvements in our shift to a more proactive mindset today front door incorporated is a fundamentally different company, we have dramatically improved execution, which has stabilized our business our process improvement initiatives have us operating very efficiently.

Better than ever before.

We are in a very strong financial position last year, our gross margins were the highest they have ever been.

Most importantly, we are laser focused on our core business home warranties.

So that's a look back at what happened since I came on board as CEO and where we are today, let's now transition to the future and why we believe front door is positioned for long term growth.

Let's start with our vision for the future a future in which front door is well positioned to grow in both the warranty and non warranty sides of our business.

To be a leader not just in home warranties, but in the entire home services industry.

We are evolving the front door model from only repair or place to win new vision, one of home protection repair and care realize through home warranty.

What this means in practice is that we are a full service provider for both our members through home warranties as well as members and nonmembers through our non warranty on demand services.

Our vision reflects our commitment to delivering sustainable unit and revenue growth over the long haul with our home warranty members, serving as the foundation to expand our business.

Our vision also underscored underscores front doors unique ability to provide homeowners with reliable high quality solutions for their repair and maintenance needs in a modern consumer centric manner.

So let's move to how we're bringing this vision to life through the topics our presenters will share this morning.

For our new investors most much of today will serve as a primer on the fundamentals of our business for.

For those more familiar with front door I think you'll find today to be a great refresher on many of the things we've shared over the preceding months.

Speaker Change: Our first presenter will be re Tang, our vice president of pricing and analytics Ray will discuss what our home warranty is how it works and how we're optimizing our subscription based business model using dynamic pricing.

Speaker Change: George West Yellow, our vice President of strategy and integration will share how front door is uniquely positioned in the home services industry and prime for growth George will discuss why we are even more excited about the 210 acquisition and what it will do for our business.

Speaker Change: Next step Kathy Collins, our chief revenue Officer.

Kathy Collins: The last time, you heard from Cathy she was the CMO, but her portfolio has significantly broadened Kathy will discuss our business construct along with our go to market strategies.

Then we will hear from Evan Iverson, who has also been promoted since you last saw him from V. P of contracted relations to Chief operating officer.

Kathy Collins: Evan will give you an in depth look at our nationwide network of independent contractors are enhancements to customer service and key technology investments investments and finally, the park, even though <unk> all been waiting for our Chief Financial Officer, Jessica Ross, who will provide a full readout of our fourth quarter and full year 2024.

Kathy Collins: <unk> performance and our full year 2025, and long term outlook.

Speaker Change: So with that I'll now turn the floor over to Ray Tang.

Speaker Change: Thank you Bill and good morning, everyone I'm Ray Tang Vice president of pricing.

Speaker Change: Yeah.

Speaker Change: And what you know invest in what you understand that's why we want you to know the fundamentals of our home warranty business model.

Speaker Change: What a home warranty is and how it works.

Speaker Change: Home warranty is a high engagement product with homeowners is a subscription based model and that model has critical non intuitive implications on our financials.

Speaker Change: We optimize this model to create value for our shareholders.

Speaker Change: We protect homeowners from unexpected breakdowns for up to 29 systems and appliances through our contract we will repair or replace these covered items when breakdowns happen due to normal wear and tear.

Speaker Change: Bae systems, I'm, referring to electrical plumbing heating and cooling HVAC.

Speaker Change: Appliances include refrigerator washer dryer dolton microwave garbage disposal.

Speaker Change: And more.

Speaker Change: Home warranty starts with the homeowner choosing the coverage that best fits their needs and then paying their fee monthly or annually.

Speaker Change: It is different by homeowner so our coverage is not one size fits all.

Speaker Change: After we welcome and onboard the number the next most significant interaction is when a covered item breaks at that point the number well request service through automated channels, such as our mobile app or online portal or by talking to in Asia.

Lining up renewal rates and average monthly prices shows that a home warranty is a subscription with high engagement driving a high renewal rate with a price that demonstrates homeowners value what we deliver.

Speaker Change: At the same time, they will also pay us a trade service fee or tricky.

Speaker Change: We will assign a contractor who will go to the home to diagnose and resolve the issue.

As a recurring revenue business, where our agreements are typically 12 months long.

Speaker Change: After the service request is completed we will pay for cost covered by the warranty.

It's critical to understand the timing implications of pricing and trade service fee actions on our financials.

Speaker Change: A key difference between our category and insurance or other types of warranties is the likelihood that a homeowner uses our product.

The key phrase is 112 at a time.

Youre looking at represents our financial results by year across the top.

Speaker Change: Whether you're talking about title insurance term life insurance warranty on your car car insurance or homeowner's insurance. These are all products that cover what might happen.

And the months in which sales or renewals are made down the side if.

If we sell a unit in January we will recognize the revenue from that unit over the entire year 112 at a time, if we sell a unit in July we will recognize half of our revenue in that year and the remaining half of our revenue in the next year.

Speaker Change: Warranty covers what will inevitably happen that's why our members on average place around to service requests each year.

Speaker Change: A high engagement product coupled with a subscription based model drive the high renewal rate in our business and our financials, we describe to first year channels, where we sell home warranties direct to the consumer.

We don't change price or trade service fees until a member buys a new contract or renews. So it takes a full year for these changes to flow through our entire portfolio.

Speaker Change: Or through a real estate transaction.

Speaker Change: After members from our first year channels renew they flow into our third and largest channel renewals.

If you couple that with a 12 months it takes for a contract to complete the total amount of time for pricing and trade service fee impacts to show up in our financials is nearly 24 months.

Speaker Change: Once a number of news they are much more likely to stay with us with a 79% renewal rate after that first year.

See that visually going corner to corner and the two boxes I'm highlighting.

Speaker Change: Kathy Collins will cover our go to market strategy for each channel in greater depth.

If we initiate a price change in January of this year.

Speaker Change: Unlike mandatory insurance home warranty is a discretionary purchase.

Then we won't finish realizing the impact of that change until late 2026.

Speaker Change: We assess the strength of our renewal rate not just against our historical performance, but also against other popular categories such as streaming services.

For example, if we initiate a 5% price increase in January of 2025, we will only realize half of that or two 5% in 2025 and the remaining two 5% in 2026.

Speaker Change: If you were to compare the renewal rate equivalent which is the inverse of monthly churn of well known streaming services versus American home Shield, our flagship home warranty brand we are among the best.

There are three takeaways tied to the 112th dynamic any implications on our financial results. The first is what I just finished covering that pricing and trade service fee actions take nearly 24 months to fully roll into the P&L.

Speaker Change: In addition to renewal rate, we also look at price, where the price of a home warranty is up to seven times higher than streaming on a monthly basis.

Second it drives stability and predictability in our financial results.

Speaker Change: Lining up renewal rates and average monthly prices shows that a home warranty is a subscription with high engagement driving a high renewal rate with a price that demonstrates homeowners value what we deliver.

Third the units, we sold or renewed and pricing actions. We took in 2024 will drive nearly half of our revenue in 2025.

We drive value for shareholders by optimizing our home warranty model.

Speaker Change: As a recurring revenue business, where our agreements are typically 12 months long.

We optimize for lifetime value balancing three important business objectives member count revenue and.

Speaker Change: Critical to understand the timing implications of pricing and trade service fee actions on our financials.

Speaker Change: The key phrase is 112 at a time.

Gross profit, we use price elasticity as a key metric to drive the best outcomes for the business.

Speaker Change: Table you are looking at represents our financial results by year across the top and the months in which sales or renewals are made down the side if.

We look at lifetime value by each of our first your channels and direct to consumer lifetime value was about $1200 per member.

Speaker Change: If we sell a unit in January we will recognize the revenue from that unit over the entire year 112 at a time.

Even though this channel has a lower first year margin the.

The high renewal rate more than makes up for that real.

Real estate on the other hand has a higher first year margin, but a lower renewal rate yielding an approximate 650 dollar lifetime value per member, we still consider this to be an attractive lifetime value.

We sell a unit in July we will recognize half of the revenue in that year and the remaining half of the revenue in the next year.

Speaker Change: We don't change price or trade service fees until a member buys a new contract or renews. So it takes a full year for these changes to flow through our entire portfolio.

One of the important drivers of price elasticity as the service experience. The service experience is tied to how much a member values their home warranty.

Speaker Change: If you couple that with a 12 months it takes for a contract to complete the total amount of time for pricing and trade service fee impacts to show up in our financials is nearly 24 months.

When members use the product they receive tangible value fixing a physical asset.

And and emotional benefits peace of mind.

Speaker Change: You can see that visually going corner to corner and the two boxes I'm highlighting.

The combination of tangible and emotional benefit makes members more inelastic to price.

Speaker Change: If we initiate a price change in January of this year.

Because the service experience plays an important role in transitioning members to be more inelastic the reverse is true as well.

Speaker Change: And then we won't finish realizing the impact of that change until late 2026.

Speaker Change: For example, if we initiate a 5% price increase in January of 2025, we will only realize half of that or two 5% in 2025 and the remaining two 5% in 2026.

First year members are more elastic to price because they have not yet had an opportunity to place a service request.

This is particularly true for direct to consumer and less so for real estate.

Speaker Change: There are three takeaways tied to the <unk> dynamic any implications on our financial results. The first is what I just finished covering that pricing and trade service fee actions take nearly 24 months to fully roll into the P&L.

Being more elastic to price is not necessarily a bad thing, where we encounter more elastic demand we can use price to grow members revenue and lifetime value, particularly in our strategic use of discounts.

Speaker Change: Second it drives stability and predictability in our financial results.

On the other end of the spectrum, where demand is more inelastic, we can use price to achieve more gross profit more revenue and more lifetime value because renewal members value their home warranty the most.

Speaker Change: Third the units, we sold or renewed and pricing actions. We took in 2024 will drive nearly half of our revenue in 2025.

Measuring price elasticity is only useful if you have a capability to deploy prices that match claims risk and therefore value to the member.

Speaker Change: We drive value for shareholders by optimizing our home warranty model.

Speaker Change: We optimize for lifetime value balancing three important business objectives member count revenue.

Dynamic pricing is how we do that.

This is a capability that we have built and enhanced since the spinoff combining internal and external data machine learning based pricing models built by our in house data science team and a sophisticated pricing platform to drive significant revenue and gross profit growth.

Speaker Change: And gross profit, we use price elasticity as a key metric to drive the best outcomes for the business.

Speaker Change: We look at lifetime value by each of our first your channels and direct to consumer lifetime value was about $200 per member.

For dynamic pricing to be effective we have to accomplish two things.

Speaker Change: Even though this channel has a lower first year margin the.

Speaker Change: The high renewal rate more than makes up for that real.

Can really predict risk and value and match prices accordingly.

Real estate on the other hand has a higher first year margin, but a lower renewal rate, yielding an approximate $650 lifetime value per member, we still consider this to be an attractive lifetime value.

This graph shows how accurately we predict risk and value for renewal members.

The horizontal axis represents predicted claims cost the vertical axis represents actual claims cost.

Speaker Change: One of the important drivers of pricing elasticity is the service experience. The service experience is tied to how much a member values their home warranty.

A highly accurate predictive model will look like a straight line up into the right.

That's the trend you're seeing.

Without your predictions the next step is to align price to that prediction.

Speaker Change: When members use the product they receive tangible value fixing a physical asset and an emotional benefits peace of mind.

This next graph shows two lines predicted claims cost and the renewal price applied to the members next contract.

Speaker Change: The combination of tangible and emotional benefits makes members more inelastic to price.

While we have three channels, we do not have three price points, it's a price spectrum when the claims risk and the value of the member receives is lower we price lower and vice versa.

Speaker Change: Because of the service experience plays an important role in transitioning members to be more inelastic the reverse is true as well.

When we build the capability, we built to drive a tangible result, and dynamic pricing is no exception since 2018 prices increased 6% compounded annually.

Speaker Change: First year members are more elastic to price because they have not yet had an opportunity to place a service request. This.

Speaker Change: This is particularly true for direct to consumer and less so for real estate.

Flatlined trends may look boring on a chart in our case, it's amazing.

Speaker Change: Being more elastic to price is not necessarily a bad thing, where we encounter more elastic demand we can use price to grow members revenue and lifetime value, particularly in our strategic use of discounts.

Despite the substantial increase in price a renewal rate within each of our three channels has been very stable the stability that you're seeing is even better than what we would expect according to pure price elasticity at front door. We are one team. It took the combined efforts across the company to make this happen.

Speaker Change: On the other end of the spectrum, where demand is more inelastic, we can use price to achieve more gross profit more revenue and more lifetime value because renewal members value their home warranty.

Putting together when we just looked at price and renewal rates, we are confident that dynamic pricing to driving revenue and gross profit growth, while maintaining strong renewal rates.

Speaker Change: Okay.

Speaker Change: Measuring price elasticity is only useful if you have a capability to deploy prices that match claims risk and therefore value to the member.

Speaker Change: Dynamic pricing is how we do that.

I mentioned earlier that when a member places a service request. They also pay a trade service fee.

Speaker Change: This is a capability that we have built and enhanced since the spin off combining internal and external data machine learning based pricing models built by our in house data science team and a sophisticated pricing platform to drive significant revenue and gross profit growth.

Trade service fees or another form of price, we used to maintain our long term home warranty gross margin expectations.

This shows up as an offset to gross claims cost embedded in the cost of services rendered in the income statement.

Speaker Change: For dynamic pricing to be effective we have to accomplish two things.

We intentionally used trade service fees to mitigate the impact of inflation.

Speaker Change: Accurately predict risk and value.

Speaker Change: And match prices accordingly.

In 2018, the vast majority of our portfolio was on 75 dollar trade service fee or less.

Speaker Change: This graph shows how accurately we predict risk and value for renewal members.

In 2020 for the vast majority of our portfolio was split between $100 and 125 dollar trade service fees.

Speaker Change: The horizontal axis represents predicted claims cost the vertical axis represents actual claims cost.

Speaker Change: A highly accurate predictive model looked like a straight line up into the right.

In summary.

Home warranty is a high engagement product with recurring revenue that is stable.

Speaker Change: That's the trend you're seeing.

Speaker Change: Without your predictions the next step is to align price to that prediction.

And predictable.

We deliver a quality service experience that works in harmony with our subscription based model to drive greater retention from first year into renewals.

Speaker Change: In this next graph shows two lines predicted claims cost and the renewal price applied to the members next contract.

Lastly, we made decisions to optimize for lifetime value balancing member count and revenue.

Speaker Change: While we have three channels, we do not have three price points, it's a price spectrum.

Speaker Change: When the claims risk and the value of the member receives as lower re price lower and vice versa.

And gross profit.

With that I'm happy to welcome George Costello, who will cover our industry strategic priorities and recent acquisition.

Speaker Change: When we build the capability, we built to drive a tangible result, and dynamic pricing is no exception since 2018 prices increased 6% compounded annually.

Yeah.

Matt Davis: Thank you Ray good morning, everyone I'm, George Guastello, Vice President of strategy and integration I laid all strategic planning for the company I'm also responsible for the integration of our <unk> acquisition.

Speaker Change: Flatline trend may look boring on a chart in our case, it's amazing.

Speaker Change: Despite the substantial increase in price a renewal rate within each of our three channels has been very stable the stability that you're seeing is even better than what we would expect according to pure price elasticity.

Matt Davis: 2024 was a record setting year for front door, and we're going to build on that momentum and it starts with the home services industry, which is large and attractive front door is the only company positioned to truly capitalize on its immense opportunities our 2025 strategic priorities.

Speaker Change: At front door, we are one team it took the combined efforts across the company to make this happen.

Speaker Change: Putting together, what we just looked at price and renewal rates. We are confident that dynamic pricing is driving revenue and gross profit growth, while maintaining strong renewal rates.

Matt Davis: They provide the blueprint to deliver aggressive growth and our 210 acquisition it will turbocharge our progress.

Speaker Change: I mentioned earlier that when a member places a service request. They also pay a trade service fee.

Matt Davis: Now home services, it is a massive and growing $500 billion industry.

Speaker Change: Trade service fees or another form of price, we used to maintain our long term home warranty gross margin expectations.

Matt Davis: It includes both warranty and non warranty services.

Matt Davis: Front door aggressively competes in both categories those.

Speaker Change: This shows up as an offset to gross claims cost embedded in the cost of services rendered in the income statement.

Matt Davis: There's a vast total addressable market of more than 130 million homes and the fuel that feeds. This industry is that each of these homes require maintenance and repair and they rely on contractors and experts to deliver that service.

Speaker Change: We intentionally use trade service fees to mitigate the impact of inflation.

Speaker Change: In 2018, the vast majority of our portfolio was on 75 dollar trade service fee or less.

Speaker Change: In 2020 for the vast majority of our portfolio was split between $100 and 125 dollar trade service fees.

Matt Davis: Front doors is uniquely positioned to win in this space and continue to create value for homeowners and investors.

Speaker Change: In summary.

Matt Davis: Now within the home services the home warranty category presents a big opportunity for growth is.

Speaker Change: Home warranty is a high engagement product with recurring revenue that is stable.

Speaker Change: And predictable.

Matt Davis: It is currently valued at about $4 billion and covers 5 million homes.

Speaker Change: We deliver a quality service experience that works in harmony with our subscription based model to drive greater retention from first year into renewals.

Matt Davis: That is only 6% of owner occupied homes, which is woefully underpenetrated.

Speaker Change: Lastly, we made decisions to optimize for lifetime value balancing member count and revenue.

Matt Davis: Front door as the clear leader in this category.

We deliver 46% category revenue share we have more than 2 million members. Our network of 17000 independent contractors manage about 4 million service requests annually and our scaled subscription based model delivers consistent predictable recurring revenue.

Speaker Change: And gross profit.

Speaker Change: With that I'm happy to welcome George Costello, who will cover our industry strategic priorities and recent acquisition.

Speaker Change: Yeah.

Thank you Ray good morning, everyone I'm, George Guastello, Vice President of strategy and integration I laid all strategic planning for the company I'm also responsible for the integration of our <unk> acquisition.

Matt Davis: <unk>.

Matt Davis: We will accelerate our leadership position in this category.

Matt Davis: Now the non warranty category.

Matt Davis: This is a large and fast growing repairs maintenance replacements alone. It was valued at about $250 billion and here's something I need to note non warranty services. Our transactional these are maintenance repairs replacements improvements that do not require.

Speaker Change: 2024 was a record setting year for front door, and we're going to build on that momentum and it starts with the home services industry, which is large and attractive front.

Speaker Change: <unk> front door is the only company positioned to truly capitalize on its immense opportunities our 2025 strategic priorities. They provide the blueprint to deliver aggressive growth and our <unk> acquisition. It will turbocharge our progress now.

Matt Davis: Membership or a subscription.

Matt Davis: The non warranty category is highly fragmented.

Players today face challenges like unreliable service service quality issues and negative feedback from customers and the contractors in.

Speaker Change: Now home services. It is a massive and growing $500 billion industry and includes both warranty and non warranty services.

Matt Davis: And here's what's critical non warranty providers continue to operate unprofitably.

Speaker Change: Front door aggressively competes in both categories.

Matt Davis: The graph shows two of the biggest players in this space arent, making money.

Speaker Change: There's a vast total addressable market of more than 130 million homes and the fuel that feeds. This industry is that each of these homes require maintenance and repair and they rely on contractors and experts to deliver that service.

Matt Davis: In fact, we believe nobody is making money at scale.

Matt Davis: Until now.

Matt Davis: Front door has the solution to solve this puzzle.

Matt Davis: Front doors unmatched size scale brand awareness provides advantages that others have not been able to replicate.

Speaker Change: Front door is uniquely positioned to win in this space and continue to create value for homeowners and investors.

Speaker Change: Our 2 million plus members minimize our acquisition costs are extensive contractor network. It allows us to avoid the costs to scale and our brand awareness make sure that we stay top of mind with consumers.

Speaker Change: Now within the home services, the home warranty category presents a big opportunity for growth.

Speaker Change: It is currently valued at about $4 billion and covers 5 million homes.

Speaker Change: That is only 6% of owner occupied homes, which is woefully underpenetrated.

Speaker Change: All of this enables us to profitably accelerate non warranty revenue growth to our existing warranty members.

Speaker Change: Front door as the clear leader in this category.

Speaker Change: We deliver 46% category revenue share we have more than 2 million members. Our network of 17000 independent contractors manage about 4 million service requests annually and our scaled subscription based model delivers consistent predictable recurring revenue.

Speaker Change: And here's what the unlock is.

Speaker Change: As our member base grows so does our ability to drive non warranty revenue.

Speaker Change: Now, let's briefly turn to our growth priorities to catalyst for our growth is built on three key strategic priorities.

Speaker Change: First grow and retain new warranty members accelerated.

<unk>.

Speaker Change: We will accelerate our leadership position in this category.

Accelerating new warranty member growth in the near term is our top priority and it serves as the cornerstone of our long term success.

Speaker Change: Now the non warranty category.

Speaker Change: This is a large and fast growing repairs maintenance replacements alone is valued at about $250 billion and here's something I need to note non warranty services. Our transactional these are maintenance repairs replacements improvements that do not require.

Speaker Change: Scale non warranty revenue, we will accelerate growth in non warranty services and complementary revenue streams to our warranty members.

Speaker Change: And third optimize the integration of 210 to.

Speaker Change: <unk> 10 is key to our plans and it provides growth and synergies.

Speaker Change: Membership or a subscription.

Speaker Change: The non warranty category is highly fragmented.

Speaker Change: Now Kathy Collins will provide more insights on our first two priorities shortly but first let's talk about 210.

Speaker Change: Players today face challenges like unreliable service service quality issues and negative feedback from customers and the contractors in.

Speaker Change: I led the acquisition of 210, and we chose this company because it provides front door four key benefits one warranty member growth to distribution three revenue diversification and significant synergies.

Speaker Change: And here's what's critical non warranty providers continue to operate unprofitably.

Speaker Change: The graph shows two of the biggest players in this space.

Speaker Change: Arent, making money.

Speaker Change: In fact, we believe nobody is making money at scale.

Speaker Change: For those of you not familiar with to 10. The company has a great fit for us it directly aligns with our core warranty business. It's been in business for 40, plus years and it provides home warranties in 43 states.

Speaker Change: Until now front door has the solution to solve this puzzle.

Speaker Change: Doors unmatched size scale brand awareness provides advantages that others have not been able to replicate.

Speaker Change: The acquisition provides immediate home warranty growth.

Speaker Change: We get more than 170000 home warranty members.

Speaker Change: Complementary real estate direct to consumers and renewal channels, an attractive recurring revenue stream.

Speaker Change: And increased scale in the home warranty category.

Speaker Change: All of this enables us to profitably accelerate non warranty revenue growth.

Speaker Change: 210 is also the largest provider of new homes structural warranties to builders. They cover about one in every five newly constructed homes.

Speaker Change: Two our existing warranty members.

Speaker Change: Here's what the unlock is.

Speaker Change: As our member base grows so does our ability to drive non warranty revenue.

Speaker Change: The product provides builders and homeowners up to 10 years of insurance back protection for structural defects on a home as well as workmanship and systems coverage and they're sold to 19000 homebuilders.

Speaker Change: Now, let's briefly turn to our growth priorities to catalyst for our growth is built on three key strategic priorities.

Speaker Change: First grow and retain new warranty members.

Speaker Change: These structural warranties are available nationally across 48 states.

Speaker Change: Accelerating new warranty member growth in the near term is our top priority and it serves as a cornerstone of our long term success.

Speaker Change: Here's how the product works.

Speaker Change: A homeowner gets one year workmanship protection for issues like flooring cabinetry finishings within our home two years protections for systems issues anything like plumbing or electrical system issues.

Speaker Change: Second scale non warranty revenue, we will accelerate growth in non warranty services and complementary revenue streams to our warranty members.

Speaker Change: 210 will help the homeowner relay the issues to the builder, who is the responsible party for resolution.

Speaker Change: And third optimize the integration of 210.

Speaker Change: 210 is key to our plans and it provides growth and synergies.

Speaker Change: For the builder to Tyndall 10 handles all of the administrative responsibilities.

Speaker Change: Kathy Collins will provide more insights on our first two priorities shortly but first let's talk about 210.

Speaker Change: The homeowner also received up to 10 years of insurance back protection for potential structural issues with the home.

Speaker Change: I led the acquisition of 210, and we chose this company because it provides front door four key benefits one warranty member growth to distributions three revenue diversification and significant synergies.

Speaker Change: In the event of a covered structural claim to 10, we'll manage the repair process fixing the issue for the homeowner and significantly reducing the builders post construction risks.

Speaker Change: With two turns industry, leading new homes structural warranty, we now have expanded distribution with access to over 1 million new homeowners and 19000 homebuilders. This opens up an exciting new sales channel for both our core home warranties and non warranty services like our growing new HVAC.

Speaker Change: The acquisition provides immediate home warranty growth.

Speaker Change: We get more than 170000 home warranty members.

Speaker Change: Back program.

Two turns new home structural warranty also diversifies, our revenue stream into an attractive adjacent category.

Speaker Change: Complementary real estate direct to consumers and renewal channels and attractive recurring revenue stream.

Speaker Change: The average cost for the products about $500 about 88% of sales are to existing homebuilders.

Speaker Change: And increased scale in the home warranty category.

Speaker Change: 10 is also the largest provider of new homes structural warranties to builders. They cover about one in every five newly constructed homes.

Speaker Change: And to tell sent to 10 sells the product through a combination of field and inside sales associates.

Speaker Change: Lastly, the acquisition of <unk> provide significant operational synergies, we will immediately operate to tend more effectively using front doors proven infrastructure and expertise in.

Speaker Change: The product provides builders and homeowners up to 10 years of insurance back protection for structural defects on a home as well as workmanship system some coverage.

Speaker Change: And they are sold to 19000 homebuilders. These.

Speaker Change: In 2025, we expect to unlock significant synergies delivering over $10 million. This year and expect a 30 plus million dollar run rate by 2028.

Speaker Change: These structural warranties are available nationally across 48 states.

Speaker Change: Now here's how the product works.

Speaker Change: Owner gets one year workmanship protection for issues like flooring cabinetry, finishing within our home two years protections for systems issues anything like plumbing, our electrical system issues.

Speaker Change: This will enhance front doors profitability and deliver even more value to our members and shareholders and.

Speaker Change: And specifically for our shareholders applying our expected synergy run rate to 'twenty 'twenty four is adjusted EBITDA.

Speaker Change: 210 will help the homeowner relay the issues to the builder, who is the responsible party for resolution.

Speaker Change: Results in a very attractive purchase price multiple of eight times or lower synergize adjusted EBITDA.

Speaker Change: For the builder to tandem to 10 handles all of the administrative responsibilities.

Speaker Change: So, bringing this all together front door is prime for growth.

Speaker Change: The homeowner also received up to 10 years of insurance back protection for potential structural issues with the home.

Speaker Change: The home warranty services industry is massive it's a $500 billion opportunity front door scale brand awareness and powerful operating model positions us to grow members and expand non warranty services profitably.

Speaker Change: Our subscription based model delivers predictable recurring revenue and now with 210, we get more members more distribution revenue diversification.

Speaker Change: With two tend to industry, leading new homes structural warranty. We now have expanded distribution with access to over 1 million new homeowners and 19000 homebuilders. This opens up an exciting new sales channel for both our core home warranties and non warranty services like our growing new <unk>.

Speaker Change: And powerful synergies.

Speaker Change: Bottom line.

Speaker Change: Front doors in the perfect position to win now and in the future.

Speaker Change: Thank you for coming today, and I'll now turn it over to Kathy Collins, who will share a deeper dive into our go to market strategy and exciting opportunities ahead.

Speaker Change: That program.

Speaker Change: Two turns new home structural warranty also diversifies, our revenue stream into an attractive adjacent category.

Speaker Change: The average cost for the products about $500.

Speaker Change: Yeah.

About 88% of sales are to existing homebuilders.

Speaker Change: Thank you George I am delighted to be here with all of you today to share a variety of important topics about our business the areas I'm going to cover our our high level framework for the warranty on non warranty sides of the business starting on the warranty side will kick off with American home Shield, our leading brand.

Speaker Change: And to tell sent to 10 sells the product through a combination of field and inside sales associates.

Speaker Change: Lastly, the acquisition of 210 provide significant operational synergies, we will immediately operate to tend more effectively using front doors proven infrastructure and expertise in.

Speaker Change: And then a H essence value proposition and how we go to market. We will then shift to our four strategies for growth brand health and campaign results I will end with our non warranty business scope overview and updates.

Speaker Change: In 2025, we expect to unlock significant synergies delivering over $10 million. This year and expect a 30 plus million dollar run rate by 2028.

Speaker Change: So to kick us off I wanted to share a very simple construct that helps organize our strategic priorities.

Speaker Change: This will enhance front doors profitability and deliver even more value to our members and shareholders and.

Speaker Change: At the highest level, we run two businesses warranty our core recurring revenue business and non warranty, which is more transactional in nature.

Speaker Change: And specifically for our shareholders applying our expected synergy run rate to 2024 as adjusted EBITDA.

Speaker Change: Results in a very attractive purchase price multiple of eight times or lower synergize adjusted EBITDA.

Speaker Change: This non warranty business, primarily exists to grow share of wallet, among our 2 million plus warranty members I won't get to the warranty side in just a few minutes, but let's start with warranty.

Speaker Change: So, bringing this all together front door is prime for growth.

Speaker Change: When you look at our brands within this framework, we all know that American home shield is by far our largest it's American home shield plus the other brands in our portfolio, One guard landmark HSA and our newest brand to 10 homebuyers warranty.

Speaker Change: Subscription based model delivers predictable recurring revenue and now with 210, we get more members more distribution revenue diversification.

Speaker Change: All of these brands are being operated as one home warranty business and have their own go to market plans, but today I'm going to focus on American home shield.

Speaker Change: And powerful synergies.

Speaker Change: Bottom line.

Speaker Change: Front doors in the perfect position to win now and in the future.

Speaker Change: American home Shield is the clear number one in the home warranty category, we have the strongest brand recognition by far our unaided brand awareness is 21%, meaning a customer can name is without being prompted that awareness is twice as high as our nearest competitor.

Speaker Change: Thank you for coming today, and I'll now turn it over to Kathy Collins, who will share a deeper dive into our go to market strategy and exciting opportunities ahead.

Thank you George I am delighted to be here with all of you today to share a variety of important topics about our business the areas I'm going to cover our our high level framework for the warranty on non warranty sides of the business.

Speaker Change: Due to the success of our marketing campaign is at an all time high for American home Shield.

Speaker Change: American home Shield also has the largest nationwide network of over 17000 independent contractors and network that we have built with quality contractors over many decades and then we'll go into this area in greater detail.

Speaker Change: Starting on the warranty side will kick off with American home Shield, our leading brands then a H S. Its value proposition and how we go to market.

Speaker Change: Our research is very clear what matters most to homeowners when it comes to a home warranty is that they can trust. The people we deploy to their homes trust them to provide expertise to restore functionality of their systems and appliances and to keep their homes running.

Speaker Change: We will then shift to our four strategies for growth brand health and campaign results I will end with our non warranty business scope overview and updates.

Speaker Change: So to kick us off I wanted to share a very simple concept that helps organize our strategic priorities.

Speaker Change: The term consumers use consistently unprompted is peace of mind when asked the primary reason for purchasing a home warranty virtually half say they bought it for that peace of mind.

Speaker Change: At the highest level, we run two businesses warranty our core recurring revenue business and non warranty, which is more transactional in nature.

Now as Ray pointed out in American home Shield warranty protects up to 29 home systems and appliances from breakdowns due to normal wear and tear. This is the best coverage in the home warranty category.

When you look at our brands within this framework, we all know that American home shield is by far our largest it's American home shield plus the other brands in our portfolio, One guard landmark HSA and our newest brand to 10 homebuyers warranty.

Speaker Change: The value of an AA tests home warranty extends beyond peace of mind. However, in the words of one consumer it's the not knowing that makes homeownership a challenge and wild peace of mind is the key motivator with our members homeowners also stress over unplanned expenses 62.

Speaker Change: All of these brands are being operated as one home warranty business and have their own go to market plans, but today I'm going to focus on American home shield.

Speaker Change: 2% of all homeowners say, they aren't saving enough and about 20%. So they don't have any savings the opportunity is real we can provide value to the people who need it the most thinking.

Speaker Change: Think about the financial impact this way consumers prioritize two key benefits of an a H S home warranty first it protects the homeowner from any significant failure, which could be costly without coverage.

Speaker Change: And our home warranty provides a breadth of coverage of up to 29 home systems and appliances.

Speaker Change: Due to the success of our marketing campaign is at an all time high for American home Shield.

Speaker Change: Without coverage those repairs or replacements could cost thousands of dollars per year.

Speaker Change: American home Shield also has the largest nationwide network of over 17000 independent contractors, our network that we have built with quality contractors over many decades and then we'll go into this area in greater detail.

Speaker Change: So in summary protection peace of mind and cost savings are the core of our value prop and how we position the H S brand to homeowners.

Speaker Change: Okay now, let's get into how we go to market as the American home Shield brands and I want to be really clear our number one priority is new home warranty member acquisition.

Speaker Change: We have two main go to market channels direct to consumer and real estate, so let's start with direct to consumer.

Speaker Change: But first here some background on data see American home shield pioneer the D to C channel about 20 years ago.

Speaker Change: Term consumers use consistently unprompted is peace of mind when asked the primary reason for purchasing a home warranty virtually half say they bought it for that peace of mind.

Speaker Change: As I shared earlier, our home warranty has a strong value proposition for existing homeowners, we market home warranties directly to consumers through digital or performance marketing broadcast direct mail and other channels.

Speaker Change: Now as Ray pointed out in American home Shield warranty protects up to 29 home systems and appliances from breakdowns due to normal wear and tear. This is the best coverage in the home warranty category.

Speaker Change: DTC is an investment in the first year it renews at about 72% at the end of year, one and then becomes profitable in the second year and beyond this channel surpassed the real estate channel in terms of unit volume in 2021 and today is responsible for a little more than six.

Speaker Change: The value of an AA tests home warranty extends beyond peace of mind. However, in the words of one consumer it's the not knowing that makes homeownership a challenge and world Peace of mind is the key motivator with our members homeowners also stress over unplanned expenses 62.

Speaker Change: 80% of our new members not surprisingly the timing of this channel shift aligns with the crash of the real estate market.

Speaker Change: Presenting them all homeowners say, they aren't saving enough and about 20%. So they don't have any savings the opportunity is real we can provide value to the people who need it the most.

Speaker Change: Macroeconomic factors have also challenged direct to consumer growth, including consumer confidence inflation interest rates and overall economic uncertainty.

Speaker Change: Despite those challenges we are extremely pleased with our D to C business. The consumer is resilient and responding we continue to deliver compelling product news new reasons to believe and strength in a myriad of marketing channels I am very happy to report.

Speaker Change: Without coverage those repairs or replacements could cost thousands of dollars per year.

Speaker Change: Through these efforts and more we have been able to grow our D to C member count in the third and fourth quarters of last year.

Speaker Change: So in summary protection peace of mind and cost savings are the core of our value prop and how we position the Hs brand to homeowners.

Speaker Change: Since the end of Q2, we saw more than a 5% increase in member count and double digit growth in units sold in the fourth quarter.

Speaker Change: Okay now, let's get into how we go to market as the American home Shield brands and I want to be really clear our number one priority is new home warranty member acquisition.

Speaker Change: We have started 2025 with great momentum.

Speaker Change: I'm now going to share our plans for acquisition growth and retention.

Speaker Change: We have two main go to market channels direct to consumer real estate, so let's start with direct to consumer.

Speaker Change: So we have identified four strategies to grow our member base first strategically offering deep discounts.

But first here are some background on D to C American home shield pioneer the D to C channel about 20 years ago.

Speaker Change: Targeting new audiences with a higher propensity to buy a home warranty.

Speaker Change: Third campaign, and media optimization and fourth product differentiation.

Speaker Change: Starting with deep discounting.

Speaker Change: A couple of years ago, we recognized that our high lifetime value and renewal rates gave us the ability to test and execute some new pricing strategies in light of the challenging real estate market, we needed to find more ways to bring more members to the a H S brand. So in March of 'twenty two.

Speaker Change: D. C is an investment in the first year it renews at about 72% at the end of year, one and then becomes profitable in the second year and beyond.

Speaker Change: This channel surpassed the real estate channel in terms of unit volume in 2021 and today is responsible for a little more than 60% of our new members.

Speaker Change: Twenty-three, we first ran 50% off and D to C. One to better understand the impact of pricing in the home warranty category.

Speaker Change: Not surprisingly the timing of this channel shift aligns with the crash of the real estate market.

Offering 50% off periodically greatly increases both demand and conversion.

Speaker Change: Macroeconomic factors have also challenged direct to consumer growth, including consumer confidence inflation interest rates and overall economic uncertainty.

Speaker Change: We know that price matters at the point of the initial purchase but some may have had daunting concerns about what would happen one year later at the point of renewal.

Speaker Change: Despite those challenges we are extremely pleased with our D to C business.

Speaker Change: If we offered 50% off as a starting point and then in year two jumped them back to normal pricing would they simply cancel so to that end, we tested several pricing levels ranging from low to high year to increases and what we now know is members are less resistant to price increases once.

Speaker Change: The consumer is resilient and responding we continue to deliver compelling product news, new reasons to believe and strength and a myriad of marketing channels I am very happy to report through these efforts and more we have been able to grow our D to C member counts.

Speaker Change: I have been with us for a year or more and the good news is that we are walking them back to full price and profitability within about two years. So this discounting strategy is working it has given us a boost in membership contributing to that turnaround in Q4, we are at the highest retention rate.

Speaker Change: And the third and fourth quarters of last year.

Speaker Change: Since the end of Q2, we saw more than a 5% increase in member count and double digit growth in units sold in the fourth quarter.

Speaker Change: We have started 2025 with great momentum.

Speaker Change: We've ever seen and we've been able to maintain our overall margin performance due to the timing and length of the promotional period.

Speaker Change: I'm now going to share our plans for acquisition growth and retention.

Speaker Change: So we have identified four strategies to grow our member base first strategically offering deep discounts.

Speaker Change: Deep discounting continues to service nicely and will be a part of our plan going forward.

Speaker Change: Let's now talk about how we are targeting new audiences, those who are more likely to convert.

Speaker Change: Second targeting new audiences with a higher propensity to buy a home warranty.

Speaker Change: Third campaign media optimization.

Speaker Change: The campaign has been very effective in moving the needle on top of funnel metrics such as brand awareness for IHS in fact, like the unaided awareness level I shared earlier aided brand awareness is at an all time high we have always been significantly above the other players in the category.

Speaker Change: And fourth product differentiation star.

Speaker Change: Starting with deep discounting.

Speaker Change: But in the past two years, we have widen that gap, 25% higher than our nearest competitor. So now is the right time for us to shift our focus to the midpoint of the marketing funnel for those of you not familiar with this diagram. The funnel is a visual representation of the customer.

Speaker Change: 2023 we first ran 50% off and D to C. One to better understand the impact of pricing in the home warranty category.

Speaker Change: Offering 50% off periodically greatly increases both demand and conversion.

Speaker Change: Germany depicting the different stages, a potential customer goes through from initially learning about our product or service to making that purchase. So now we are focusing on the midpoint of the funnel, which is all about consideration in trial now.

Speaker Change: We know that price matters at the point of the initial purchase but some may have had daunting concerns about what would happen one year later at the point of renewal.

Speaker Change: Now that they know American home shield, we've gotten our attention. The next step is getting them closer to purchase.

Speaker Change: If we offer 50% off as a starting point and then in year, two and jumped them back to normal pricing when they simply cancel so does that and we tested several pricing levels ranging from low to high increases and what we now know is member.

Speaker Change: We have spent the last several months and deep Quant analysis learning about specific audiences that we can more readily target through media and this work has led us to to audiences in 2025 millennials and Hispanic millennials.

Speaker Change: Members are less resistant to price increases once they havent been with us for a year or more and the good news is that we are walking them back to full price and profitability within about two years. So this discounting strategy is working it has given us a boost in membership contributing to that turned.

Speaker Change: Millennials, who are 29 to 43 years old are the fastest growing cohort of homebuyers and they tend to be quite stressed with home ownership.

Speaker Change: Within the millennial cohort Hispanics are the fastest growing demographic population.

Speaker Change: Around in Q4, we are at the highest retention rate, we've ever seen and we've been able to maintain our overall margin performance due to the timing and length of the promotional periods.

Speaker Change: So with a more targeted focus we can more effectively connect with Hispanic homeowners, there a personalized message and a customized approach.

Speaker Change: Deep discounting continues to service nicely and will be a part of our plan going forward.

Now, let's shift to how we are optimizing our marketing and getting the most out of our investments.

Speaker Change: Let's now talk about how we are targeting new audiences, those who are more likely to convert.

Speaker Change: Simply put brand does matter, we have worked diligently to build brand equity through a positive consistent experience and strong marketing campaigns.

Speaker Change: The campaign has been very effective in moving the needle on top of funnel metrics such as brand awareness for EHS in fact, like the unaided awareness level I shared earlier aided brand awareness is at an all time high.

Speaker Change: Since our last Investor day, we have done a great deal of work to enhance this already great brands.

Speaker Change: Last April we relaunched the IHS brand through updated iconography and imagery, a new website and the introduction of the warranty and a campaign.

Speaker Change: We have always been significantly above the other players in the category, but in the past two years, we have widen that gap, 25% higher than our nearest competitor.

Speaker Change: This was done after much research telling us the category with in dire need of something breakthrough now.

Speaker Change: So now is the right time for us to shift our focus to the midpoint of the marketing funnel for those of you not familiar with this diagram. The funnel is a visual representation of the customer journey depicting the different stages, a potential customer goes through from initially learning about a product or service to <unk>.

Speaker Change: Now I haven't spoken quite a bit about this category being virtually a sea of sameness with every brand touting the same benefits, having similar logos iconography and value props. This was our time to stand out.

Speaker Change: Enter warranty now.

Speaker Change: Making that purchase so now we are focusing on the midpoint of the funnel, which is all about consideration in trial now.

Speaker Change: And we are seeing strong results to date the campaign featuring comedian Rachel Dratch is memorable funny, which isn't the norm in this category and likable more importantly, its educational and informative, giving consumers a better understanding of it.

Speaker Change: Now that they know American home shield, we've gotten our attention. The next step is getting them closer to purchase.

Speaker Change: We have spent the last several months and deep Quant analysis learning about specific audiences that we can more readily target through media.

Speaker Change: H S home warranty and its benefits.

Speaker Change: The campaign has grown awareness in a relatively short amount of time.

Speaker Change: And this work has led us to to audiences in 2025 millennials and Hispanic millennials.

Speaker Change: Our research shows that two out of five homeowners are familiar with the warranty and a campaign and our likeability is over 80% well above advertising norms.

Speaker Change: Millennials, who are 29 to 43 years old are the fastest growing cohort of homebuyers and they tend to be quite stressed with home ownership.

Speaker Change: So is the marketing working yes. It is we.

Speaker Change: Within the millennial cohort Hispanics are the fastest growing demographic population, so with a more targeted and focused we can more effectively connect with Hispanic homeowners, there a personalized message and a customized approach.

Speaker Change: We are up across the board and outerwear and its brand awareness brand attribute units and retention since the launch of the campaign in Q2.

Speaker Change: And we are keeping the campaign going in 'twenty 'twenty five with some fresh creative so now I am happy to share with you one of our new TV spots, ladies and gentlemen, the world premiere of Dollhouse.

Speaker Change: Now, let's shift to how we are optimizing our marketing and getting the most out of our investments.

Speaker Change: He put brand does matter, we have worked diligently to build brand equity through a positive consistent experience and strong marketing campaigns.

Speaker Change: Hello.

Speaker Change: With our new house.

Speaker Change: What range.

Speaker Change: Since our last Investor day, we have done a great deal of work to enhance this already great brands.

Speaker Change: American home shield, each leaky jewel in nature.

Speaker Change: Kathy.

Speaker Change: April we relaunched the IHS brand through updated iconography and imagery, a new web site and the introduction of the warranty and a campaign.

Speaker Change: And then beyond repair.

Speaker Change: Thank you Catherine items.

Speaker Change: Matt and teach the warranty smart Oh happy family.

Speaker Change: This was done after much research telling us the category with in dire need of something breakthrough now.

Speaker Change: Is that too much.

Speaker Change: American home shield don't worry be warranty.

Alright, let's now transition to our fourth strategy, which is product differentiation American home shield continues to be the driver of innovation in the home warranty category, our D to C and real estate tiered product offerings are the core of our warranty business with a number of add ons and supplemental surge.

Speaker Change: Enter Warren Tina.

Speaker Change: G.

Speaker Change: And we are seeing strong results to date.

<unk> is available we have three tiers of products on the DTC side platinum gold and silver.

Speaker Change: Campaign, featuring comedian Rachel Dratch is memorable funny, which isn't the norm in this category and likable.

Speaker Change: For our real estate members. The three tiers are called complete plus an essential but we think about product more broadly it's all about the experience for our H S members to that end in late October we launched the American home Shield App, a modern solution focused on the member experience.

Speaker Change: More importantly, its educational and informative, giving consumers a better understanding of an H S home warranty and its benefits. The campaign has grown awareness in a relatively short amount of time.

Speaker Change: Our research shows that two out of five homeowners are familiar with the warranty and a campaign and our likeability is over 80% well above advertising norms. So is the marketing working yes. It is.

Speaker Change: <unk>.

Speaker Change: The App serves as a catalyst for future innovation of the member experience, it's available to all members, giving members and efficient mobile first service experience and the App will be foundational the unlocking innovative digital solutions of the future.

Speaker Change: We are up across the board and outerwear and this brand awareness brand attributes units and retention since the launch of the campaign in Q2.

Speaker Change: Members can manage their account submit service requests renew their membership or make changes to their plan and they can access the new HVAC program and more all of this through the convenience of their phone and our communication with members will become more frequent and customized through push notifications.

We have been blown away by the response to the App and the usage in just the first four months to date, we have over 140000 registered users over 44000 service requests have been submitted through the App saving time and other resources for our call centers and the App has a rating of 4.7 stars.

Speaker Change: Oh.

Speaker Change: With our new house.

Speaker Change: Laura.

Speaker Change: Sure Wendy.

Speaker Change: Thank you Julien.

Speaker Change: E D.

Speaker Change: And then beyond repair.

Speaker Change: It just takes your coffee items.

Speaker Change: On Google play and 4.9 in the Apple App store.

Speaker Change: No matter, the warranties Smart Oh happy family.

Speaker Change: We will continue to enhance the member experience through the App based on consumer needs service enhancements and new brand innovation.

Speaker Change: Is that too much.

Speaker Change: American home shield don't worry be warranty.

Speaker Change: So the App is a great example of our product innovation, but today I am beyond thrilled to share with you our latest product feature.

Speaker Change: Alright, let's now transition to our fourth strategy, which is product differentiation American home shield continues to be the driver of innovation in the home warranty category, our D to C and real estate tiered product offerings are the core of our warranty business with a number of add ons and supplemental <unk>.

Speaker Change: H S video chat with an expert that's right members of our top two product tiers, starting today have the opportunity to connect with one of our virtual experts through the Hs App check out this video.

Speaker Change: <unk> is available we have three tiers of products on the DTC side platinum gold and silver.

Speaker Change: So I'm real pleased video chat is now available in the American home Shield Ashford select plan a cast members can chat with prepare expert for lighthouse with home households for no additional cost that's right. It's free when a home system or appliance isn't working right. The expert can provide real time guidance to assess or fix the problem.

Speaker Change: On the site.

Speaker Change: Troubleshoot with confidence all from the a H S. F. C expert will see you know sign up at a H S. Dotcom today.

<unk>.

Speaker Change: The App services are catalysts for future innovation of the member experience, it's available to all members, giving members and efficient mobile first service experience.

Speaker Change: So let me share with you how this feature and functionality came to be two years ago. We launched the front door Act. It included a home warranty product and other features including video chat with an expert.

Speaker Change: Jeff will be foundational the unlocking innovative digital solutions of the future.

Speaker Change: What we have learned in those two years has been invaluable homeowners love our video chat experience and they love our experts. It is an understatement to say this has been a positive experience for front door users. So we decided to bring this to the H S brand.

Speaker Change: We have been blown away by the response to the App and the usage and just the first four months to date, we have over 140000 registered users over 44000 service requests have been submitted through the App saving time and other resources for our call centers and the App has a rating of four seven stars.

Speaker Change: Our experts are highly experienced former contractors, who now work for us They are men and women who are ready to get off the road and take on a new adventure of helping homeowners either fix what's broken or guide them to the right solution. They are experts in the field to plumbing electrical HVAC appliance repair.

On Google play and $4 nine in the Apple App store, we will continue to enhance the member experience really app based on consumer needs service enhancements and new brand innovation.

Speaker Change: Even a generalist category. This has been an amazingly positive experience there.

Speaker Change: The Hs App with video chat means that our golden platinum level members, which is about 87% of our members can get help even faster and easier. It means they can potentially walk through a fix over the video chat, possibly making it less costly for the homeowner.

Speaker Change: So the App is a great example of our product innovation, but today I am beyond thrilled to share with you our latest product feature.

Speaker Change: Hey, H S video chat with an expert that's right members of our top two product tiers, starting today have the opportunity to connect with one of our virtual experts through the H S. App check out this video.

Speaker Change: And importantly, the App with video chat is giving our members a new way to work through an issue and we expect this channel to increase overall member satisfaction as we've seen with the front door brand and it comes at no additional charge for the member.

Speaker Change: So I'm real pleased video chat is now available in the American home shield that for select class age has members can chat with from her expertise for lighthouse with home households for no additional cost that's right it's free.

Speaker Change: We love the fact that not only is this a game changer, but it's something we believe is truly a differentiator in this category.

Speaker Change: Again, the H S video chat feature is launching today, we are notifying IHS members of the new feature. This week you will also be seeing video chat with an expert built into our acquisition marketing channels.

Speaker Change: Home system or appliance isn't working right. The expert can provide real time guidance to assess or fix the problem on the spot.

Speaker Change: Troubleshoot with confidence all from the a H S F C.

Speaker Change: The expert will see you know sign up at a H S dotcom today.

Speaker Change: Now I'd like to share with you one of our other new spots that will be used both in TV and digital platforms. This is ancient manual.

Speaker Change: So let me share with you how this feature and functionality came to be.

Speaker Change: Two years ago, we launched the front door as it included a home warranty product and other features including video chat with an expert.

Speaker Change: Oh.

Speaker Change: Thank you.

Speaker Change: Yes of course I found it.

Speaker Change: All right.

Speaker Change: Oh I need that.

Speaker Change: Yeah.

Speaker Change: Im Dale.

Speaker Change: American home Shield now provides video chat with live repair experts for home fixes over the Paul Let's go fix it up okay deal.

Speaker Change: I need my phone that fix it over video chat on the H S and sign up today in H S Dot com.

Speaker Change: Alright, so moving on from D to C. Let's now talk about the real estate channel.

Speaker Change: To begin here's a little background American home shield's bounded the home warranty category in 1971, specifically through the real estate channel.

Speaker Change: They are experts in the field to plumbing electrical HVAC appliance repair and even a generalist category. This has been an amazingly positive experience. The Hs app with video chat means that our gold and platinum level members, which is about 87% of our members can get help even.

We market home warranties through our Nash nationwide field sales team, many of whom have longstanding relationships with real estate agents sales through this channel are profitable in the first year and these renew at about 30%. After the first year much lower than the D to C channel.

Speaker Change: Aster and easier it means they can potentially walk through effects over the video chat, possibly making it less costly for the homeowner.

Speaker Change: Prior to 'twenty or 'twenty, one when real estate was the key channel for attaching home warranties. It was a fairly common practice for the real estate agent to throw in the warranty to close the deal.

However, since the real estate market boom, and then crashed the world has changed as you can see in 'twenty 'twenty four home sales cratered to one of the lowest levels. We've seen in 40 years. The good news is that despite this greatly reduced inventory we have managed to maintain our category share.

Speaker Change: We love the fact that not only assistant game changer, but it's something we believe is truly a differentiator in this category.

Speaker Change: Again, the H S video chat feature is launching today, we are notifying IHS members of the new feature of this week.

Speaker Change: The chart on the left here shows how real estate home warranty sales and home warranty capture or attach rate have declined in tandem from 2018 through 2023 on the right side you can see that we have maintained our share in spite of those declining sales.

Speaker Change: We'll also be seeing video chat with an expert built into our acquisition marketing channels.

Now I'd like to share with you one of our other new spots that will be used both in TV and digital platforms. This is ancient manual.

Speaker Change: Well there are some positive signs real estate continues to be a tough market.

Speaker Change: [noise] he yeah of course I found it.

Speaker Change: <unk> or the National Association of Realtors reported existing home sales for 'twenty 'twenty four at 4.06 million, which was the lowest number since 1995.

Speaker Change: Oh I need that.

Speaker Change: Yeah.

Speaker Change: I'm Daniel Amir.

Further inventory continues to remain around three and a half months and home prices up 6% year over year to an average of $407000. Although we don't know what our new normal will be this channel remains important and we have been able to maintain our share and our relationships with them.

Speaker Change: Homeserve now provides video chat with live repair experts for home fixtures over the phone.

Speaker Change: Okay jail.

Speaker Change: I need my phone that fix it over video chat on the H S N sign up today and agent Dotcom.

Speaker Change: Alright, so moving on from D to C. Let's now talk about the real estate channel.

Speaker Change: <unk> brokerages are quite strong.

Speaker Change: To begin here's a little background American home shield founded the home warranty category in 1971, specifically through the real estate channel.

Speaker Change: So until then here's what we are doing to drive units and maintain our leadership position in real estate, we're using data technology and automation to build a better way to capture new members.

Speaker Change: We market home warranties through our Nash nationwide field sales team, many of whom have long standing relationships with real estate agents sales through this channel are profitable in the first year and these renew at about 30%. After the first year much lower than the D to C channel.

Speaker Change: For instance, we are analyzing growth markets and optimizing our marketing investment Accordingly, we are placing our best sales talent in high propensity markets and we are identifying those top performing real estate agents and working to customize communications journeys with those agents.

Speaker Change: Prior to <unk> 2021 when real estate was the key channel for attaching home warranties. It was a fairly common practice for the real estate agent to throw in the warranty to close the deal.

Speaker Change: Bottom line the brand and my team are poised for success and we will be ready when the real estate market inevitably comes back now.

Speaker Change: However, since the real estate market boom, and then crashed the world has changed as you can see in 2024 home sales cratered to one of the lowest levels. We've seen in 40 years. The good news is that despite this greatly reduced inventory we have managed to maintain our category share.

Speaker Change: Now, let's move to the heart of our business renewals, specifically, our retention strategies clearly the new App and video chat with an expert or big renewal plays for us, but there is more first let me start with where we are in retention. This slide shows our retention rate for American home shield from 'twenty two.

Speaker Change: The chart on the left here shows how real estate home warranty sales and home warranty capture or attach rate have declined in tandem from 2018 through 2023.

Speaker Change: Two through 2020 four.

Speaker Change: We finished 2024 at an amazing retention rate of 78, 5%.

Speaker Change: On the right side, you can see that we have maintained our share in spite of those declining sales.

Speaker Change: This is an all time high for us, but we're not done.

Speaker Change: We worked cross functionally to ensure that the member experience is not something just one team focuses on wheat all on that one and we have done extensive research to understand why members don't renew.

Speaker Change: Well there are some positive signs real estate continues to be a tough market.

<unk> or the National Association of Realtors reported existing home sales for 'twenty 'twenty four at 4.06 million, which was the lowest number since 1995.

Speaker Change: And those have been become our areas of focus so our three initiatives to grow loyalty and engagement or usage onboarding and autopay sign ups. So members most likely to renew our members who abused our services.

Speaker Change: Further inventory continues to remain around three and a half months and home prices up 6% year over year to an average of $407000. Although we don't know where new normal will be this channel remains important and we have been able to maintain our share and our relationships with the <unk>.

Speaker Change: And our real estate segment for example, users renew at twice the rate of non users.

Speaker Change: Across all of our first year members, we have identified ways for them to engage with the brand maybe through a discounted HVAC tune up or a freak carpet cleaning service further we create enhanced member journeys to deliver compelling offers and we often highlight maintenance services, giving them a chance to try us.

Speaker Change: Largest brokerages are quite strong.

Speaker Change: So until then here's what we are doing to drive units and maintain our leadership position in real estate.

Speaker Change: Using data technology and automation to build a better way to capture new members.

Speaker Change: For instance, we are analyzing growth markets and optimizing our marketing investment Accordingly, we are placing our best sales talent and high propensity markets and we are identifying those top performing real estate agents and working to customize communication journeys with those agents.

Speaker Change: If they don't have a repair needs.

Speaker Change: On the real estate side, where renewal rates are significantly lower than D to C. We have come to understand the importance of onboarding.

Speaker Change: In many cases homeowners don't even know they have a home warranty and have not used yet. So we continue to take steps to welcome them to the H S brand through a consistent emails and other communications. This is a complete member journey, including the education of benefits and follow ups with relevant offers.

Speaker Change: Bottom line the brand and my team are poised for success and we will be ready when the real estate market inevitably comes back now.

Speaker Change: Now, let's move to the heart of our business renewals, specifically, our retention strategies clearly in the new App and video chat with an expert or big renewal plays for us, but there is more.

Speaker Change: And finally monthly Autopay as our last area of renewal focus if we can get a member on autopilot Autopay excuse me our chances of keeping them are significantly higher than if they are not and although 84% of our members today are on Autopay. We continue to test offers to get that other.

Speaker Change: First let me start with where we are in retention. This slide shows our retention rate for American home shield from 'twenty to 'twenty two through 2020. Four we finished 2024 at an amazing retention rate of 78, 5%. This is an all time high for us, but we're not done.

Speaker Change: 16% signed up.

Alright, now, let's switch to the non warranty side of the business, where we are currently offering non warranty products and services in two distinct ways.

Speaker Change: We worked cross functionally to ensure that the member experience is not something just one team focuses on we all on that one and we have done extensive research to understand why members don't renew and those have been become our areas of focus so our three initiatives to grow loyalty and engagement are you.

Speaker Change: First to our 2 million plus members through programs such as our new HVAC initiative, and second B to B to C or business partnerships, such as our Melon initiative. So let me say a little bit about each of those we have built our new HVAC program from scratch to a near.

Speaker Change: Synch, Onboarding and Autopay sign ups, so members most likely to renew our members who abused our services.

Speaker Change: 87 million dollar business in 'twenty, 'twenty, four and as we've expanded and marketed the program we continue to see significant growth.

Speaker Change: And our real estate segment for example, users renew at twice the rate of non users.

Speaker Change: What a differentiator. This has been this program is all about membership benefits by being in a H S. Member you have access to the best deals because of the partnerships that we have built over the years, both in terms of suppliers and contractors.

Speaker Change: Across all of our first year members, we have identified ways for them to engage with the brand maybe through a discounted HVAC tune up or a free carpet cleaning service further we create enhanced member journeys to deliver compelling offers and we often highlight maintenance services, giving them a chance to try it.

Speaker Change: We are very optimistic about this offering and expect 20 twenty-five revenue to come in at an even stronger level.

Speaker Change: So if they don't have a repair needs.

Speaker Change: The life of an HVAC system is around 15 years, and we can help guide our members when the opportunity and timing are right. The.

Speaker Change: On the real estate side, where renewal rates are significantly lower than D. C. We have come to understand the importance of onboarding.

Speaker Change: The prices are greatly reduced because of the large unit quantities and brands that flow through our business today.

Speaker Change: In many cases homeowners don't even though they have a home warranty and have not used yet. So we continue to take steps to welcome them to the Hs brands through consistent emails and other communications. This is a complete member journey, including the education of benefits and follow ups with relevant offers.

Speaker Change: Environmental efficiencies of new regulatory standards on refrigerants also come into play with newer systems.

Speaker Change: Expansion of this program could be a material strategic opportunity for front door.

Speaker Change: And finally monthly auto pay is our last area of renewal focus if we can get a member on autopilot auto pay excuse me our chances of keeping them are significantly higher than if they are not in although 84% of our members today are on Autopay. We continue to test offers to get that other.

Speaker Change: Some investors have asked how big could this be so we have sized the opportunity based on a number of different categories appliances hot water heaters and roof replacements. We believe this can and will be a major growth engine for a front door. We believe programs across these four categories provide a new.

Speaker Change: They're 16% signed up.

Speaker Change: Nearly 2 billion dollar opportunity, creating even more value for our members over time.

Speaker Change: Alright, now, let's switch to the non warranty side of the business, where we are currently offering non warranty products and services in two distinct ways.

Speaker Change: This chart shows how we can get to that $2 billion and a non warranty total addressable market within our member base across those categories categories of HVAC roof replacement appliances and hot water heaters.

Speaker Change: First to our 2 million plus members through programs, such as our new HVAC initiatives and second B to B to C or a business partnership such as our Melon initiative.

Speaker Change: One you see the rate we believe members could proactively replace these items online to the average price of each service and from that we are able to derive the opportunity size online three so the total across those four categories comes to about $2 billion in Tam.

Speaker Change: So let me say a little bit about each of those.

Speaker Change: We have built our new HVAC program from scratch to nearly 87 million dollar business in 'twenty 'twenty, four and as we've expanded and marketed the program we continue to see significant growth.

Speaker Change: What a differentiator. This is that this program is all about membership benefits by being in a H S. Member you have access to the best deals because of the partnerships that we have built over the years. Both in terms of suppliers and contractors. We are very optimistic about this offering and <unk>.

Speaker Change: Within our member base.

Speaker Change: Now, let's talk about business partnerships that leverage our network of around 17000 independent contractors.

Speaker Change: Our partnership with Mylan is a fantastic example of where this opportunity can take us.

Speaker Change: As you May know in some states insurance companies are beginning to require an accessible water shutoff valves complete with smart phone alerts to mitigate any flooding issues. We started this partnership in the state of California and made it very easy for homeowners basically Moe M D.

Speaker Change: About 2025 revenue to come in at an even stronger level.

Speaker Change: The life of an HVAC system is around 15 years, and we can help guide our members when the opportunity and timing are right.

The prices are greatly reduced because of the large unit quantities and brands that flow through our business today.

Speaker Change: <unk> ships, the valve and unnecessary parts to the hall. However, as we've seen so many times before homeowners arent sure how to install these nor do they want to learn.

Speaker Change: Environmental efficiencies of new regulatory standards on refrigerants also come into play with newer systems.

Speaker Change: Enter our plumbing contractors, they are able to install the device in a short amount of time completing the job for mowing the insurance provider and the homeowner. This is a perfect example of our size and scale, providing an opportunity that many of our competitors competitors could not execute our.

Speaker Change: Expansion of this program could be a material strategic opportunity for front door.

Speaker Change: Network provides virtually national coverage.

Speaker Change: And in the spirit of successful partnerships, we have figured out yet another new revenue stream as well as introduce the front door business to more homeowners.

Speaker Change: Nearly 2 billion dollar opportunity, creating even more value for our members over time.

Speaker Change: Since the California launch in June we have extended the 13 more states for a current total of 14 with another six states expected by the end of this quarter.

Speaker Change: So summarizing the non warranty side of the business. We have built a 100 million dollar plus business by accessing just a small portion of our 2 million plus members. We will continue to tap into this loyal base and will let their input guide us to what's next continuing to build HVAC applying.

Speaker Change: One you see the rate we believe members could proactively replace these items online to the average price of each service and from that we are able to derive the opportunity size on line three so the total across those four categories comes to about $2 billion in Tam.

Speaker Change: Since water heaters roof replacements, and we will continue to leverage b to B to C partnerships and are currently in active conversations with other potential partners.

Speaker Change: Within our member base.

Speaker Change: Now, let's talk about business partnerships that leverage our network of around 17000 independent contractors.

Speaker Change: I'm sure you can tell that we are bullish about our growth trajectory for both the warranty and non warranty sides of our business. What I Hope you take away is this American home shield is the category leader by far our core business is our warranty business led by the American home Shield.

Speaker Change: Our partnership with them all and it's a fantastic example of where this opportunity can take us.

Speaker Change: This year, we are laser focused on those four growth strategies deep discounting precise targeting conversion marketing and product innovation led by the App and video chat and our non warranty business as a growth engine with a focus on growing share of wallet, among our 2 million plus members and.

Speaker Change: Drop ships the bell the necessary parts to the hall, however, as we've seen so many times before homeowners arent sure how to install these nor do they want to learn.

Speaker Change: Wishing strong corporate partnerships our brand name recognition combined with our National network of contractors are strong reasons for homeowners to turned a front door for all of their home protection repair and care needs.

Speaker Change: Thank you so much for your engagement. This morning at this time I would like to introduce my friend of a night person.

Speaker Change: Network provides virtually national coverage.

Speaker Change: And in the spirit of successful partnerships, we have figured out yet another new revenue stream as well as introduce the front door business Tomorrow homeowners.

Speaker Change: Yeah.

Even Iverson: Thank you Kathy excuse me. Thank you Kathy and good morning, everyone I'm, even iverson Chief operating officer of front door.

Even Iverson: My job is focused on how our contractor network service operations and technology come together to better serve our members and grow our business opt.

Speaker Change: Since the California launch in June we have extended the 13 more states for a current total of 14 with another six states expected by the end of this quarter.

Even Iverson: Operations plays a major role in our strategic focus and we are operating better than ever.

Speaker Change: So summarizing the non warranty side of the business. We have built a 100 million dollar plus business by accessing just a small portion of our 2 million plus members. We will continue to tap into this loyal base and will let their input and guide us to what's next continuing to build HVAC applying.

Even Iverson: Leveraging our unmatched nationwide network of independent contractors, driving efficiency and experience through disciplined service operations and delivering business value through pragmatic reliable technology investments.

Speaker Change: Since water heaters roof replacements, and we will continue to leverage b to B to C partnerships and are currently in active conversations with other potential partners.

Even Iverson: But before I detail our strategy, let's reset to when I spoke to you in 2023.

Even Iverson: C. P. I was at 8% the highest in 40 years, which was especially pronounced in home services with appliance up 12% and each Bac up 22%.

Even Iverson: And net this was a 16% increase in our cost per service request.

Even Iverson: At the time I explained the aggressive actions, we were taking to help us get out of the inflation trap and those remain core elements of our approach today.

Even Iverson: Coverage optimization supply management.

Even Iverson: Geographic optimization and cost control and planning improvements.

Even Iverson: When I spoke to you in 2023 I told you how we were working through coverage optimization, specifically, how we were managing our exposure across our marketing strategy pricing and products.

Speaker Change: <unk> strong corporate partnerships our brand name recognition combined with our National network of contractors are strong reasons for homeowners to turned a front door for all of their home protection repair and care needs.

Speaker Change: A great examples what Ray explained to you earlier on how we think about trade services fees and what we priced in the cost of product.

Speaker Change: Thank you so much for your engagement. This morning at this time I would like to introduce my friend of a night person.

Speaker Change: It helped us fight inflation and remains a key focus today.

Speaker Change: Supplier strategy is a foundational element of our business and we continue to work tirelessly to ensure we are buying the right parts systems and appliances.

Even Iverson: Thank you Kathy excuse me. Thank you Kathy and good morning, everyone I'm, even iverson Chief operating officer, our front door.

Speaker Change: And aggregating volume across both suppliers and contractors to ensure we get the greatest value possible from our scale.

Even Iverson: My job is focused on how our contractor network service operations and technology come together to better serve our members and grow our business.

Speaker Change: This helped us escape the inflation trap and remains as critical today.

Even Iverson: Operations plays a major role in our strategic focus and we are operating better than ever.

Speaker Change: And at the heart of dynamic pricing is a wealth of data on cost and performance of not just markets, but individual homes as Ray explained this is critical to matching price with cost.

Speaker Change: And finally, we implemented reviews for high cost jobs changed incentives for field managers and changed our budgeting approach.

Even Iverson: But before I detail our strategy, let's reset to when I spoke to you in 2023.

Speaker Change: Our results speak for themselves, we have seen significant reductions in the impact of inflation on our net cost per claim with slightly deflationary results in 2024.

Even Iverson: CPI was at 8% the highest in 40 years, which was especially pronounced in home services with appliance up 12% and HVAC up 22%.

Speaker Change: This tremendous performance all starts with our contractors.

And then just.

Even Iverson: Teen percent increase in our cost per service request.

Our approach to contractors is different our model is built on partnership not just working with them a recipe is simple.

Even Iverson: At the time I explained the aggressive actions, we were taking to help us get out of the inflation trap and those remain core elements of our approach today.

Speaker Change: We offer real value we coach them.

Speaker Change: We are transparent in our feedback and we show we care.

Even Iverson: <unk> optimization supply management.

Speaker Change: Which results in engage contractors, who want and value our work.

Even Iverson: Geographic optimization and cost control and planning improvements.

Speaker Change: If there's any secret sauce to recruiting a new contractor. It's this we're not trying to sell them leads we bring them real work real member problems for them to solve and we pay them quickly.

Even Iverson: When I spoke to you in 2023 I told you how we were working through coverage optimization.

Even Iverson: Specifically, how we were managing our exposure across our marketing strategy pricing and products.

Speaker Change: A great example is what Ray explained to you earlier on how we think about trade services fees and what we priced in the cost of product.

Speaker Change: And once contractors are in our system, we have a dedicated team of roughly 100 field managers that cokes contractors on how to work with our systems and grow contractors businesses through the multiple channels of revenue, but our value proposition creates and leverage proven best practices.

Even Iverson: It helped us fight inflation and remains a key focus today.

Even Iverson: Supplier strategy is a foundational element of our business and we continue to work tirelessly to ensure we are buying the right parts systems and appliances.

Speaker Change: And we coach them on how they are performing for members and front door. The screenshot you see as a new self service scorecard, we are rolling out within our network.

Even Iverson: And aggregating volume across both suppliers and contractors to ensure we get the greatest value possible from our scale.

Speaker Change: This is the actual screen a contractor will see.

Even Iverson: This helped us escape the inflation trap and remains as critical today.

It allows our contractors to see their performance both against their targets and peers in the markets and understand exactly how they need to improve to be more competitive.

Even Iverson: And at the heart of dynamic pricing is a wealth of data on cost and performance not just markets, but individual homes as Ray explained this is critical to matching price cost.

Speaker Change: And we get their input through our pro Council. It helps us understand what is working what isn't and helps us shape our strategic focus.

Even Iverson: And finally, we implemented reviews for high cost jobs changed incentives for field managers and changed our budgeting approach.

Speaker Change: That is the magic of our model, we work hard to create jobs contractors want and in turn.

Even Iverson: Our results speak for themselves, we have seen significant reductions in the impact of inflation on our net cost per claim with slightly deflationary results in 2024.

Speaker Change: They provide better customer service and they deliver better costs for front door everyone wins.

Speaker Change: And the contractors that consistently perform the best on cost quality and leveraging best practices are designated as preferred contractors, representing about 4000 of our 17000 strong contractor network.

Even Iverson: This tremendous performance all starts with our contractors.

Even Iverson: Our approach to contractors is different our model is built on partnership not just working with them.

Speaker Change: These 4000 preferred contractor's performed 85% of our service requests in 2024.

Even Iverson: Our recipe is simple.

Even Iverson: We offer real value we coach them weird.

Speaker Change: We see savings in excess of 50% from our preferred contractors.

Even Iverson: We are transparent in our feedback and we show we care.

Even Iverson: Which results in engaged contractors, who want and value our work.

Speaker Change: And in part by volume aggregation.

Speaker Change: Best practice impact of tools and systems for example, procurement or self service tools.

Even Iverson: If there's any secret sauce to recruiting a new contractor. It's this we're not trying to sell them leads we bring them real work real member problems for them to solve and we pay them quickly.

Speaker Change: And the contractors value the full range of revenue opportunities of our work that I previously explained.

Speaker Change: And we are finding that members serviced by our preferred contractors are more likely to renew.

Even Iverson: And once contractors are in our system, we have a dedicated team of roughly 100 field managers that cokes contractors on how to work with our systems and grow contractors businesses through the multiple channels of revenue, but our value proposition creates and leverage proven best practices.

Speaker Change: 180 basis points improvement in our renewal rates.

Speaker Change: Increasing the percentage of jobs that go to preferred contractors has been key to our improvement since I last presented to this group in March 2023.

Speaker Change: And most importantly members like this approach as evidenced by their reading of our contractors at four five stars another all time high.

Even Iverson: And we coach them on how they are performing for members and front door. The screenshot you see as a new self service scorecard, we are rolling out within our network.

Speaker Change: And contractors aren't just working with us on our home warranty work. They are the engine that allows us to grow our non warranty they're willing to help us grow revenue faster to take a leap of faith to try new offerings and that willingness allows us to grow quickly.

Even Iverson: This is the actual screen a contractor will see.

Even Iverson: It allows our contractors to see their performance both against their targets and peers in the markets and understand exactly how they need to improve to be more competitive.

Even Iverson: And we get their input through our pro Council. It helps us understand what is working.

Speaker Change: They were critical in building, our new HVAC program to an 87 million dollar business.

Even Iverson: What isn't and helps us shape, our strategic focus.

Speaker Change: And our plumbers supported us in getting our moen Flo offering in the market delivering about $5 million of revenue in 2024.

Even Iverson: That is the magic of our model, we work hard to create jobs contractors want and in turn.

Speaker Change: As I said.

Even Iverson: They provide better customer service and they deliver better cost for front door.

Speaker Change: It all starts with our contractors they deliver for both members and front door.

Even Iverson: Everyone wins.

Speaker Change: Now, let's turn to how we're optimizing our service operations.

Even Iverson: And the contractors that consistently perform the best on cost to quality and leveraging best practices are designated as preferred contractors, representing about 4000 of our 17000 strong contractor network.

Speaker Change: Going back to the pandemic it forced us to go remote.

Speaker Change: And it was a significant challenge for us to solve.

Speaker Change: And we saw this as hold times, where speed to answer exceeded 40 minutes in our peak summer season.

Even Iverson: These 4000 preferred contractor's performed 85% of our service requests in 2024.

Speaker Change: But by the time, we got to a second peak of the pandemic, we'd gotten our bearings.

Even Iverson: We see savings in excess of 50% from our preferred contractors.

Speaker Change: And we have gotten better every year since and this isn't just a function of throwing head counted problems. We are getting better in our most complex and important processes like authorizations and appliance replacements, where we have to review and approve work for members ensuring they get.

Even Iverson: Driven in part by volume aggregation.

Even Iverson: Best practice impact of tools and systems for example, procurement or self service tools.

Even Iverson: And their contractors value the full range of revenue opportunities of our works that I previously explained.

Speaker Change: The coverage and value of their American home shield warranty.

Even Iverson: And we are finding that members serviced by our preferred contractors are more likely to renew.

Speaker Change: We are delivering real productivity gains by handling more calls per hour.

Even Iverson: 180 basis points improvement in our renewal rates.

Speaker Change: And we have made these improvements with equal or better member experiences as shown by our members ratings of our authorizations in appliance agents.

Increasing the percentage of jobs that go to preferred contractors has been key to our improvement since I last presented to this group in March 2023.

Speaker Change: Taken in conjunction with the improvements in the contractor network. The net result is a continued upward trend in all time high of overall H S. Five star member ratings.

Even Iverson: And most importantly members like this approach as evidenced by their reading of our contractors at four five stars another all time high.

Speaker Change: And that is service operations performing better than ever for our members.

Even Iverson: And contractors aren't just working with us on our home warranty work. They are the engine that allows us to grow our non warranty they're willing to help us grow revenue faster to take a leap of faith to try new offerings and that willingness allows us to grow quickly.

Speaker Change: And finally, it's been about six months since I took over technology and my focus has been on ensuring we're delivering business value with our technology investments.

Speaker Change: We shifted our approach from a focus heavy on transformation and prioritizing pie in the sky initiatives and tech debt to focusing on reliability supporting the business and.

Even Iverson: They were critical in building, our new HVAC program to an $87 million business.

Even Iverson: And our plumbers supported us in getting our moen Flo offering in the market delivering about $5 million of revenue in 2024.

Speaker Change: And capitalizing on our existing strengths.

Speaker Change: We are now tracking and holding ourselves accountable by focusing on prioritizing reliability across all teams.

Even Iverson: As I said.

Even Iverson: It all starts with our contractors they deliver for both members and front door.

Speaker Change: Measuring and monitoring progress to know when and where things are breaking so we can address them and making continuous improvement rooted in all we do.

Even Iverson: Now, let's turn to how we're optimizing our service operations.

Even Iverson: Going back to the pandemic it forced us to go remote.

Even Iverson: And it was a significant challenge for us to solve.

Speaker Change: While we are not yet at our goal we are steadily improving.

Even Iverson: And we saw this as hold times, where speed to answer exceeded 40 minutes in our peak summer season.

Speaker Change: I am tremendously proud of the team's work on this the progress we are making now reflected in our 2020 for uptime of 99.887%.

But by the time, we got to our second peak of the pandemic, we've got more bearish.

Even Iverson: And we have gotten better every year since and this isn't just a function of throwing head counted problems. We are getting better in our most complex and important processes like authorizations and appliance replacements, where we have to review and approve work for members, ensuring they get the coverage and value.

Speaker Change: And now lets discuss some examples of how tech is supporting the business.

Speaker Change: We built our new HVAC program on a technology stack that works rather than waiting for a perfect approach.

Speaker Change: We built our mowing on our existing non warranty platform, which allowed us to get to market quickly.

Speaker Change: Their American home Shield warranties.

And we have used the same approach to improve member experience.

We are delivering real productivity gains by handling more calls per hour.

Speaker Change: We've reduced transfers and contractor assignments by 40%, ensuring the right contractor shows up the first time to get the member problems solved with both great customer service and low cost.

Speaker Change: And we have made these improvements with equal or better member experiences as shown by our members ratings of our authorizations in appliance agents.

Speaker Change: Taken in conjunction with the improvements in the contractor network. The net result is a continued upward trend in all time high of overall H S. Five star member ratings.

Speaker Change: And we have gone from issuing paper checks to digital payments, which has shortened the time members wait for payments by 90% a significant member benefit.

Speaker Change: And that is service operations performing better than ever for our members.

Speaker Change: And a portion of our service operations are driven by self service experiences that we built for members such as the shopping portal, where they can now select a new appliance, which in turn has reduced inbound call volume for appliance replacements by 45% and self service orders have gone up.

Speaker Change: And finally, it's been about six months since I took over technology and my focus has been on ensuring we are delivering business value with our technology investments.

Speaker Change: We shifted from a focus heavy on transformation and prioritizing pie in the sky initiatives and tech debt to focusing on reliability supporting the business and.

In short.

Speaker Change: Our technology is stable and dependable is supporting the growth in our warranty and non warranty businesses.

Speaker Change: And is making us more efficient and productive for our contractors members and associates.

Speaker Change: And capitalizing on our existing strengths.

Speaker Change: We are now tracking and holding ourselves accountable by focusing on prioritizing reliability across all teams.

Speaker Change: And this doesn't mean, we're resigned to incremental improvements everyone asks me about AI.

Speaker Change: We are testing AI and a number of environments and our service operations focused on assisting service agents and inside sales.

Speaker Change: Measuring and monitoring progress, so when and where things are breaking so we can address them and making continuous improvement rooted in all we do.

Speaker Change: Our authorizations process is a great example, where our AI model navigates permutations of 4 million plus job items across five major trades and more than 25 contract types.

Speaker Change: Well, we are not yet in our goal we are steadily improving.

Speaker Change: I am tremendously proud of the team's work on the.

Speaker Change: The progress we are making now reflected in our 2020 for uptime of 99.887%.

Speaker Change: It is now approaching 90% accuracy.

Speaker Change: While we are value focused in our technology, we are still looking for ways Tech can transform our business.

Speaker Change: And now lets discuss some examples of how tech is supporting the business.

Speaker Change: And as Kathy mentioned, the launch of American home Shield App with virtual expert support is another great example, that our technology portfolio is a great mix of value, leading innovation with tactical pragmatic improvement.

Speaker Change: We built our new HVAC program on a technology stack that works rather than waiting for a perfect approach.

Speaker Change: We built our mowing on our existing non warranty platform, which allowed us to get to market quickly.

Speaker Change: Front door represents a unique opportunity to invest in a strong growing business in the home services industry with an unrivaled contractor network and approach.

Speaker Change: And we have used the same approach to improve member experience.

Speaker Change: We've reduced transfers and contractor assignments by 40% ensuring the right contractor showed up the first time to get the member problems solved with both great customer service and low cost.

Speaker Change: Disciplined and results driven operations.

And tech that focuses on driving our business value every day.

Speaker Change: And we have gone from issuing paper checks to digital payments, which has shortened the time members wait for payments by 90% a significant member benefit.

Speaker Change: Front door stands out from the rest.

Jessica Ross: And now I would like to introduce Jessica Ross, our Chief Financial Officer.

Jessica Ross: Thank you Ivan and good morning, everyone.

Jessica Ross: Last year was an exceptional year for our company, we acquire to tend to drive growth and we completed a new 1.47 billion dollar credit facility, creating a solid financial foundation for years to come.

Jessica Ross: With that let's jump into our record fourth quarter results, which demonstrated a continuation of our outstanding financial performance.

Speaker Change: In short our technology is stable and dependable is supporting the growth in our warranty and non warranty businesses.

Speaker Change: And it is making us more efficient and productive for our contractors members and associates.

Jessica Ross: Q4 revenue increased 5% to $383 million.

Jessica Ross: Primarily driven by the addition of 210 as well as better than expected revenue from non warranty services.

Speaker Change: And this doesn't mean, we're resigned to incremental improvements everyone asks me about AI.

Speaker Change: We are testing AI and a number of environments and our service operations focused on assisting service agents and inside sales.

Jessica Ross: Net income was flat at $9 million, which is a great outcome. Considering it includes transaction costs associated with the 210 acquisition and related debt financing in December.

Speaker Change: Our authorizations process is a great example, where our AI model navigates permutations of 4 million plus job items across five major trades and more than 25 contract sites.

Jessica Ross: Adjusted EBITDA increased 10% to $49 million.

Jessica Ross: We also beat our fourth quarter guidance by approximately $13 million, which was driven by better than expected revenue conversion and gross profit, partially offset by about $7 million of intentional marketing investments.

Speaker Change: And it is now approaching 90% accuracy.

Speaker Change: Well, we are value focused in our technology, we are still looking for ways to transform our business.

Jessica Ross: Now turning to gross profit, which increased 5% to $186 million and gross profit margin improved to a fourth quarter record of 49%.

Speaker Change: Front door represents a unique opportunity to invest in a strong growing business in the home services industry.

Jessica Ross: As you can see we delivered another quarter of strong financial performance and we could not be more proud.

Speaker Change: With an unrivaled contractor network and approach.

Jessica Ross: Now moving to our 2024 full year financial results.

Speaker Change: Disciplined and results driven operations.

Jessica Ross: Full year 2024 revenue increased 4% to $1.84 billion.

Speaker Change: And tech that focuses on driving our business value every day.

Jessica Ross: Net income increased 37% to $235 million and adjusted EBITDA increased 28% to an all time high of $443 million.

Speaker Change: Front door stands out from the rest.

Speaker Change: And now I would like to introduce Jessica Ross, our Chief Financial Officer.

Jessica Ross: Thank you Ivan and good morning, everyone.

Jessica Ross: This was an undeniable an exceptional year for Frank door.

Jessica Ross: Last year was an exceptional year for our company, we acquire to tend to drive crowd and we completed a new 1.47 billion dollar credit facility, creating a solid financial foundation for years to come.

Jessica Ross: Full year gross profit increased 12% to $991 million and gross profit margin improved 410 basis points to a record 54%.

Jessica Ross: This was driven by the progress Evan mentioned dynamic pricing capability and our train service fee initiatives.

Jessica Ross: With that let's jump into our record fourth quarter results, which demonstrated a continuation of our outstanding financial performance.

Jessica Ross: Now, let's dive into the 'twenty 'twenty four adjusted EBITA bridge, starting at the top we had $60 million of favorable revenue conversion.

Jessica Ross: Q4 revenue increased 5% to $383 million, primarily driven by the addition of 210 as well as better than expected revenue from non warranty services.

Jessica Ross: Contract claims costs decreased $44 million.

Jessica Ross: Sales and marketing increased $8 million driven by intentional investments made in the fourth quarter to drive member growth in 2025.

Jessica Ross: Net income was flat at $9 million, which is a great outcome. Considering it includes transaction costs associated with the 210 acquisition and related debt financing in December.

Jessica Ross: General and administrative costs increased $7 million, primarily driven by increased professional fees and personnel costs.

Adjusted EBITDA increased 10% to $49 million.

Jessica Ross: These spending increases were partially offset by $6 million at favorable interest income and other items.

Jessica Ross: In summary, adjusted EBITDA increased to a record $443 million, which is nearly 100 million dollar increase.

Jessica Ross: Now turning to gross profit, which increased 5% to $186 million and gross profit margin improved to a fourth quarter record of 49%.

Jessica Ross: This is a 28% increase year over year.

Jessica Ross: Now, let's review our statement of cash flows with.

Jessica Ross: With record earnings come record cash flows.

Jessica Ross: Net cash provided from operating activities was $270 million for the 12 months ended December 31st as a result of our exceptionally strong earnings.

Jessica Ross: As you can see we delivered another quarter of strong financial performance and we could not be more proud.

Jessica Ross: Now moving to our 2020 for full year financial results.

Jessica Ross: Net cash used for investing activities was $622 million and was primarily comprised of funds used to acquire Chi Tak.

Jessica Ross: Full year 2024 revenue increased 4% to $1.84 billion.

Jessica Ross: Net cash flows from financing activities were $447 million.

Jessica Ross: Net income increased 37% to $235 million and adjusted EBITDA increased 28% to an all time high of $443 million.

Jessica Ross: And was primarily driven by our new debt issuance, which was a great success.

Jessica Ross: As a result of our strong performance free cash flow increased 36% to $231 million for the 12 months ended in 2024.

Jessica Ross: This was an undeniable an exceptional year for Frank door.

Jessica Ross: Full year gross profit increased 12% to $991 million and gross profit margin improved 410 basis points to a record 54%.

Jessica Ross: We also used $160 million to repurchase nearly 4 million shares last year.

Jessica Ross: We ended the year with $474 million in cash and marketable securities.

Jessica Ross: This is driven by the progress Evan mentioned ion NAMIC pricing capabilities, and our train service fee initiatives.

Jessica Ross: This is comprised of $184 million at restricted assets and $291 million of unrestricted assets.

Jessica Ross: Now, let's dive into the 'twenty 'twenty four adjusted EBITA Bridge.

Jessica Ross: Now.

Jessica Ross: Starting at the top we had $60 million of favorable revenue conversion.

Jessica Ross: Let me spend a few minutes talking about the way we deploy our capital.

Jessica Ross: We have an exceptional business model that generates a lot of cash and has low capex requirements.

Jessica Ross: Contract claims costs decreased $44 million.

Jessica Ross: Sales and marketing increased $8 million driven by intentional investments made in the fourth quarter can drive member growth in 2025.

Jessica Ross: This unique combination gives a significant flexibility when it comes to capital allocation.

Jessica Ross: It is important to note that we have maintained a very consistent capital allocation strategy over time.

Jessica Ross: General and administrative costs increased $7 million, primarily driven by increased professional fees and personnel costs.

Jessica Ross: Our first priority has always been crowd.

These spending increases were partially offset by $6 million favorable interest income and other items.

Jessica Ross: After that we want to maintain a strong financial profile.

Jessica Ross: And finally, we want to return all excess cash to you our shareholders.

Jessica Ross: In summary, adjusted EBITDA increased to a record $443 million, which is nearly 100 million dollar increase.

Jessica Ross: Let's dive into each of these in a bit more detail.

Jessica Ross: We are a growth company and we will continue to prioritize crowd.

Jessica Ross: This is a 28% increase year over year.

Jessica Ross: That can come in the form of investments to find organic growth across marketing non warranty services as well as process improvements and technology investments to scale our business.

Jessica Ross: Now, let's review our statement of cash flows.

Jessica Ross: With record earnings kind of record cash flows.

Jessica Ross: Net cash provided from operating activities was $270 million for the 12 months ended December 31st as a result of our exceptionally strong earnings.

Jessica Ross: Our M&A strategy remains focused on opportunities to grow our core business as evidenced by the recent acquisition of Chi Tak.

Jessica Ross: Net cash used for investing activities was $622 million and was primarily comprised of funds used to acquire she can.

Jessica Ross: Our second priority is to maintain a strong financial profile.

Jessica Ross: Goals here are simple and sure we have enough cash and liquidity to run the business.

Jessica Ross: Net cash flow from financing activities were $447 million and was primarily driven by our new debt issuance, which was a great success.

Jessica Ross: And maintain a prudent leverage ratio.

Jessica Ross: We continue to target a net leverage ratio of two to 2.5 times adjusted EBITDA.

Jessica Ross: As a result of our strong performance free cash flow increased 36% to $231 million for the 12 months ended 2024.

Jessica Ross: We successfully completed a 1.47 billion dollar credit facility in December which funded the 210 acquisition and refinanced all of our existing debt, while extending our debt maturities to 2029.

Jessica Ross: We also used $160 million to repurchase nearly 4 million shares last year.

Jessica Ross: The result is a very attractive that tower, we don't have to worry about refinancing anytime soon and can remain laser focused on driving the business forward.

Jessica Ross: We ended the year with $474 million in cash and marketable securities.

Jessica Ross: This is comprised of $184 million at restricted assets and $291 million unrestricted assets.

Jessica Ross: And finally, our third objective is to return excess cash to shareholders.

Jessica Ross: Now.

Jessica Ross: Let me spend a few minutes talking about the way we deploy our capital.

Jessica Ross: We completed our prior three year $400 million share repurchase authorization in 2024 and.

Jessica Ross: We have an exceptional business model that generates a lot of cash and has low capex requirements.

Jessica Ross: And our board approved a new three year $650 million program that started in September.

Jessica Ross: This unique combination gives us significant flexibility when it comes to capital allocation.

Jessica Ross: And I am very proud and we have a history of buying back shares.

Jessica Ross: It is important to note that we have maintained a very consistent capital allocation strategy over time.

Jessica Ross: Since 2021 we have returned approximately $480 million to shareholders by buying back 12.7 million shares at an average price of $38 per share.

Jessica Ross: Our first priority has always been crowding.

Jessica Ross: After that we want to maintain a strong financial profile.

Jessica Ross: To put this in perspective. This represents approximately 15% of total shares outstanding over the last four years.

Jessica Ross: And finally, we want to return all excess cash to you our shareholders.

Jessica Ross: Let's dive into each of these in a bit more detail.

Jessica Ross: This includes approximately $80 million and our current program and just the last three months.

Jessica Ross: We are growth company, and we will continue to prioritize crowd.

Jessica Ross: That can come in the form of investments to fund organic growth across marketing non warranty services as well as process improvements and technology investments to scale our business.

Jessica Ross: Now for those of you that might be newer to our story, let me take a moment to share a few historical financial highlights with you.

Jessica Ross: First I'd like to call out our consistent revenue growth over time.

Jessica Ross: Our M&A strategy remains focused on opportunities to grow our core business as evidenced by the recent acquisition of Chi Tak.

Jessica Ross: Looking back to 2008, we have delivered a revenue CAGR of over 7%.

Jessica Ross: Our second priority is to maintain a strong financial profile.

Jessica Ross: I want to highlight the durability of our revenue model here.

Jessica Ross: Even through all of the challenges and uncertainties over the last two decades, including the global financial crisis in 2008, Covid high inflation and significant volatility in the housing market. We have continued to deliver consistent revenue growth over time.

Jessica Ross: Goals are simple and sure we have enough cash and liquidity to run the business.

Jessica Ross: And maintain a prudent leverage ratio.

Jessica Ross: We continue to target a net leverage ratio of two to two five times adjusted EBITDA.

Jessica Ross: We successfully completed a 1.47 billion dollar credit facility in December which funded the <unk> acquisition and refinance all of our existing debt, while extending our debt maturities to 2029.

Jessica Ross: Moving onto our historical member count, which is a bit more nuanced. We want went public in 2018 and crew members over the next two years primarily to DTC.

Jessica Ross: However in the years that followed the housing market dramatically changed it became a seller's market.

Jessica Ross: The result is a very attractive debt tower.

Jessica Ross: We don't have to worry about refinancing anytime soon and can remain laser focused on driving our business forward.

Jessica Ross: Inventory reached an all time low and existing home sales have become more volatile declining to the lowest level in 30 years.

Jessica Ross: And finally, our third objective is to return excess cash to shareholders.

Jessica Ross: As a result, our sales in home warranties and the real estate channel are less than half of what they were in 2018.

Jessica Ross: We completed our prior three year $400 million share repurchase authorization in 2024.

Jessica Ross: And 'twenty 'twenty four our acquisition of cheap can shove a member count.

Jessica Ross: Board approved a new three year $650 million program.

Jessica Ross: <unk> in September.

Jessica Ross: And we are very excited about the value that she's had acquisition adds to our business as well as the growth strategies Kathy outlined earlier.

Jessica Ross: And I am very proud and we have a history of buying back shares.

Jessica Ross: Since 2021 we have returned approximately $480 million to shareholders by buying back $12 7 million shares at an average price of $38 per share.

Jessica Ross: Now turning to our gross margin history, which has averaged 48% over the past seven years.

Jessica Ross: As you can see here, we went from the worst of times in 2022 to now record gross margins and 2024 as a result of the work driven by this executive leadership team to turn the business around over the past two years.

Jessica Ross: To put this in perspective. This represents approximately 15% of total shares outstanding over the last four years.

Jessica Ross: This includes approximately $80 million under our current program and just the last three months.

Jessica Ross: As I shared earlier, we have a business model that does not require significant capital investment.

Jessica Ross: Now for those of you that might be newer to our story, let me take a moment to share a few historical financial highlights with you.

Jessica Ross: Our capital spending runs at around 2% of revenue related primarily to a technology investments to drive growth and scale.

Jessica Ross: First I'd like to call out our consistent revenue growth all of our time.

Jessica Ross: In addition to our consistent revenue growth. We have also delivered strong levels of adjusted EBITDA going from $238 million in 2018 to a record $443 million in 2024.

Jessica Ross: Looking back to 2008, we have delivered a revenue CAGR of over 7%.

Jessica Ross: I want to highlight the durability of our revenue model here.

Jessica Ross: Even through all of the challenges and uncertainties over the last two decades, including the global financial crisis in 2008, Covid high inflation is significant volatility in the housing market. We have continued to deliver consistent revenue growth all the time.

Jessica Ross: Not only have we grown adjusted EBITDA by nearly 11% annually over the last seven years, we've averaged a 19% margin during the same period.

Jessica Ross: I'd like to call out, but since bill took the CEO position in 2022, adjusted EBITDA has more than doubled.

Jessica Ross: Moving on to our historical member count, which is a bit more nuanced. We want went public in 2018 and crew members over the next two years primarily through D C.

Jessica Ross: And finally as I've said before this business generates a lot of cash. This is a core strength of our business one of the metrics. We look at is the percentage of free cash flow to adjusted EBITDA, which averaged 56% over this period.

Jessica Ross: However in the years that followed the housing market dramatically changed it became a seller's market inventory reached an all time low and existing home sales have become volatile declining to the lowest level in 30 years.

Jessica Ross: To summarize we have demonstrated a consistent history of strong financial performance overtime.

Jessica Ross: Which leads me to what I know you all have been waiting for our full year and first quarter 2025 outlet.

Jessica Ross: As a result, our sales in home warranties and the real estate channel I less than half of what they were in 2018.

Jessica Ross: Before I get into the details of our outlet I want to provide some context on the main drivers impacting our estimate.

Jessica Ross: In 2020 for our acquisition of cheap 10 shelf our member count.

Jessica Ross: Starting with our revenue assumptions.

Kathy Collins: And we are very excited about the value that she can acquisition adds to our business as well as the growth strategies Kathy outlined earlier.

Jessica Ross: I mentioned this earlier our home warranty member Count has recently been in decline due to the challenging real estate environment.

Kathy Collins: Now turning to our gross margin history, which has averaged 48% over the past seven years.

Jessica Ross: And the decline in front store channels is negatively impacting our renewal base.

Jessica Ross: Additionally, we are lapping double digit price increases, which has been a major contributor to our revenue growth over the last few years.

Kathy Collins: As you can see here, we went from the worst of times in 2022 to now record gross margins in 2024 as a result of the work driven by this executive leadership team to turn the business around over the past few years.

Jessica Ross: As a result, 2025 will be a transition year for member count and organic revenue growth.

Kathy Collins: As I shared earlier, we have a business model that does not require significant capital investment.

Jessica Ross: Now for the good news. Despite these headwinds we still expect to see revenue growth of approximately 10% in 2025.

Our capital spending runs at around 2% of revenue related primarily to the technology investments to drive growth and scale.

Jessica Ross: Even by 210 and non warranty services.

Jessica Ross: Additionally, we expect gross margin of approximately 52% and adjusted EBITDA margin of approximately 23% both of which remain significantly above our historical averages.

Kathy Collins: In addition to our consistent revenue growth. We have also delivered strong levels of adjusted EBITDA going from $238 million in 2018 to a record $443 million in 2024.

Jessica Ross: We have done a lot of work over the past few years to ensure that our margin and profitability metrics remained strong and we will continue to benefit from these efforts in 2025.

Kathy Collins: Not only have we grown adjusted EBITDA by nearly 11% annually over the last seven years, we've averaged 19% margin during the same period.

Jessica Ross: There is clearly a lot to celebrate here.

Speaker Change: I'd like to call out that sense Bill took the CEO position in 2022, adjusted EBITDA has more than doubled.

Jessica Ross: So now let's move to the outlook details, which includes the addition of 210.

Jessica Ross: Starting with revenue, we expect an increase of about 10% for a range of 2 billion to $2.04 billion.

Speaker Change: And finally as I said before this business generates a lot of cash this is a core strength of our business.

Jessica Ross: This includes a 2% to 4% increase in realized price.

Speaker Change: One of the metrics. We look at is the percentage of free cash flow to adjusted EBITDA, which averaged 56% over this period.

Speaker Change: We initiated a mid single digit price increase late last year, and I would like to reiterate what race shared earlier.

Speaker Change: To summarize we have demonstrated a consistent history of strong financial performance overtime.

Speaker Change: It takes up to 24 months for our price increases to fully work through realized revenue.

Which leads me to what I know you all have been waiting for our full year and first quarter 2025 outlet.

Speaker Change: Our realized price increase in 2025 is a reflection of our prior pricing actions, which have been intentionally lower as we have been focused on driving higher member counts.

Speaker Change: Before I get into the details of our outlets I want to provide some context on the main drivers impacting our estimate.

Speaker Change: The remaining 6% to 8% increases driven by volume primarily from the 210 acquisition and other revenue, partially offset by lower organic growth in home warranty.

Speaker Change: Starting with our revenue assumptions.

Speaker Change: I mentioned this earlier our home warranty member Count has recently been in decline due to the challenging real estate environment.

Speaker Change: Other revenue includes approximately $100 million of new HVAC sales.

Speaker Change: And the decline in fresh or channels is negatively impacting our renewal base.

Speaker Change: $15 million related to Marlin, and about $40 million related to 210, new homes structural warranty business.

Speaker Change: Additionally, we are lapping double digit price increases, which has been a major contributor to our revenue growth over the last few years.

Speaker Change: Moving onto gross profit, where we are estimating a full year margin of 51.5% to 53%.

Speaker Change: As a result, 2025 will be a transition year for member count.

Speaker Change: And organic revenue growth.

Speaker Change: Now for the business. Despite these headwinds we still expect to see revenue growth of approximately 10% in 2025.

Speaker Change: It's 400 basis points above our historical average.

This includes the impact of lapping prior price and trade service fee increases.

Speaker Change: Driven by 210 and non warranty services.

Speaker Change: Mid single digit inflation, which includes some uncertainty around tariffs and.

Speaker Change: Additionally, we expect gross margin of approximately 52% and adjusted EBITDA margin of approximately 23%.

Speaker Change: And an increase in the number of service requests per member and normal weather.

Speaker Change: Now, let's turn to our full year SG&A outlook, which we expect to be in the range of 640 million to $660 million.

Both of which remain significantly above our historical averages.

Speaker Change: We have done a lot of work over the past few years to ensure that our margins and profitability metrics remained strong and we will continue to benefit from these efforts in 2025.

Speaker Change: This is an increase over 'twenty 'twenty four due to the addition of 210.

Speaker Change: Normal inflation and includes approximately $30 million of stock based compensation and $8 million of one time costs associated with the Q10 integration.

Speaker Change: There is clearly a lot to celebrate here.

Speaker Change: So now let's move to the outlook details, which includes the addition of 210.

Speaker Change: Based on all of these inputs, we are setting our full year 2025, adjusted EBITDA range to be between 450 and $475 million.

Speaker Change: Starting with revenue, we expect an increase of about 10% for a range of 2 billion to $2.04 billion.

Speaker Change: This includes a 2% to 4% increase in realized price.

Speaker Change: For those of you trying to bridge down to this range you would have to include interest income of approximately $15 million.

Speaker Change: We initiated a mid single digit price increase late last year, and I would like to reiterate what race shared earlier.

Speaker Change: This results in a strong adjusted EBITDA margin of approximately 23%.

Speaker Change: It takes up to 24 months for our price increases to fully work through the alliance revenue.

Speaker Change: Provide substantial cash flows and just like many other companies we have factored in some additional macroeconomic uncertainty for this year.

Speaker Change: Our realized price increased from 2025 is a reflection of our prior pricing actions, which have been intentionally lower as we have been focused on driving higher member counts.

Speaker Change: As a result of our strong adjusted EBITDA, we expect our free cash flow to be over $220 million in 2025.

Speaker Change: The remaining 6% to 8% increase was driven by volume primarily from the 210 acquisition and other revenue, partially offset by lower organic growth in home warranty.

Speaker Change: And I will continue to point out that this business generates a significant amount of cash.

Speaker Change: This means that we can buy back a lot of stock in.

Speaker Change: Other revenue includes approximately $100 million of new HVAC sales about $15 million related to Mullen and about $40 million related to Japan, new homes structural warranty business.

Speaker Change: In fact, we are currently targeting using over $180 million to repurchase shares this year and we all know that can be a powerful powerful lever for driving our share price.

Speaker Change: Moving onto gross profit, where we are estimating a full year margin of 51.5% to 53%.

Speaker Change: And finally, we expect our full year capital expenditures to be approximately $40 million and the annual effective tax rate to be approximately 25%.

Speaker Change: 400 basis points above our historical average.

Speaker Change: I want to end, our 2025 outlets discussion with our first quarter outlook.

Speaker Change: This includes the impact of lapping prior price and trade service fee increases.

Speaker Change: First quarter revenue is expected to be between $410 million and $420 million or about a 10% increase over the prior year period.

Speaker Change: Mid single digit inflation, which includes some uncertainty around tariffs.

Speaker Change: And an increase in the number of service requests per member and normal weather.

Speaker Change: Adjusted EBITDA is expected to come in between 70 and $80 million. This is slightly above the prior year period.

Speaker Change: Now, let's turn to our full year SG&A outlet, which we expect to be in the range of 640 million to $660 million.

Speaker Change: I would like to conclude by turning to our long term financial outlet.

Speaker Change: This is an increase over 2024 due to the addition of 10.

Speaker Change: These are my favorite slides in the deck and probably will be for investors as well.

Speaker Change: Normal inflation and includes approximately 30 million of stock based compensation and 8 million of one time costs associated with the 210 integration.

Speaker Change: We are growth company, and we expect to grow revenue to at least $2.5 billion and the three year period from 2026 through 2028.

Speaker Change: Based on all of these inputs, we are setting our full year 2025, adjusted EBITDA range to be between 450 and $475 million.

Speaker Change: This is nearly a 25% increase in revenue in that time frame.

Speaker Change: Which includes a turnaround in the real estate market.

Speaker Change: Expansion of our non warranty services.

Speaker Change: For those of you trying to bridge down to this range you would have to include interest income of approximately $15 million.

Speaker Change: And growth across the 210 platform.

Speaker Change: After that our long term revenue growth expectations are in the mid to high single digit growth range, which will be driven by an improvement in member counts.

Speaker Change: This resulted in a strong adjusted EBITDA margin of approximately 23%.

Speaker Change: <unk> substantial cash flows and just like many other companies we have factored in some additional macroeconomic uncertainty for this year.

Speaker Change: Pricing increases to offset normal inflation.

Speaker Change: And continued growth in non warranty services.

Speaker Change: As we look forward to more normalized market conditions for home warranty sales and growth in non warranty services, we would expect gross margins to stabilize around our target of about 50% in 'twenty 'twenty eight and beyond.

Speaker Change: As a result of our strong adjusted EBITDA, we expect our free cash flow to be over $220 million in 2025.

Speaker Change: And I will continue to point out that this business generates a significant amount of cash. This means that we can buy back a lot of stock.

Speaker Change: As we continue to gain leverage and optimize our SG&A spend overtime, we would expect adjusted EBITDA to grow to at least $550 million in 2028.

Speaker Change: In fact, we are currently targeting using over $180 million to repurchase shares this year and we all know that can be a powerful powerful lever for driving our share price.

And then continue to be in that low 20% range after that.

Speaker Change: Our 2025, adjusted our EBITDA outlook range of $450 million to $475 million is amazing progress considering we were targeting only 300 million for 2025 when I first started before you two years ago at Investor Day.

Speaker Change: And finally, we expect our full year capital expenditures to be approximately $40 million and the annual effective tax rate to be approximately 25%.

Speaker Change: I want to end, our 2025 outlets discussion with corner out black.

Speaker Change: First quarter revenue is expected to be between $410 million and $420 million or about a 10% increase over the prior year period.

Bill: With that I will now return the stage to bill.

Thanks Jessica.

Speaker Change: Adjusted EBITDA is expected to come in between 70 and $80 million. This is slightly above the prior year period.

Bill: Okay, we're near the end of the formal presentation, but before we open it up for your questions I do want to close with a few final thoughts first I'm incredibly proud of this world class team you saw on display today and all the people on their teams all of these all time highs and records are attributable attributable or whatever that word is.

Speaker Change: I would like to conclude by turning to our long term financial outlook.

Speaker Change: These are my favorite slides in the deck and probably will be for investors as well.

Speaker Change: We are a growth company and we expect to grow revenue to at least $2.5 billion and the three year period from 2026 2028.

Bill: To their excellence.

Bill: So let me review the highlights from todays presentation, you've heard a lot about process improvements about how we improved execution and today front door is operating better and more efficiently than ever before as a result, we delivered record financial results last year.

Speaker Change: This is nearly a 25% increase in revenue in that time frame, which includes a turnaround in the real estate market.

Speaker Change: Expansion of our non warranty services.

Bill: Going forward. This year, we are entirely focused on growing our home warranty member count and maximizing the value of to 10, as we fully integrate that business.

Speaker Change: And growth across the <unk> 10 platform.

Speaker Change: After that our long term revenue growth expectations are in the mid to high single digit growth range, which will be driven by an improvement in member counts.

Bill: These efforts and more have positioned the company for long term growth through through the warranty and non warranty sides of our business.

Speaker Change: Pricing increases to offset normal inflation and continued growth in non warranty services.

Bill: And it is great to see that all of our effort is paying off for outdoor stock prices more than doubled since the middle of 2022 when I became CEO, we went from about $24 a share to yesterday's ending price of 57 and 17 for sure that's 137% increase over that timeframe and.

Speaker Change: As we continue to gain leverage and optimize our SG&A spend overtime, we would expect adjusted EBITDA to grow to at least $515 million in 2028.

Bill: And Trust me it feels very good to stand here in front of you today and show just how much we've grown shareholder values since our last Investor day.

Bill: And yet front doors stock still remains undervalued from a historic perspective, we are only trading at about 11 times adjusted EBITDA.

Speaker Change: And then continue to be in that low 20% range after that.

Speaker Change: Our 2025, adjusted EBITDA outlook range of $450 million to $475 million is amazing progress considering we were targeting only $300 million for 2025, when I first joined before you two years ago at Investor Day.

Bill: Our goal is to not only grow our earnings but also get back to mid teens multiple.

Bill: So to reiterate and bring home all of you've heard this morning, we have a very compelling investment thesis.

Bill: There are six primary reasons, we believes front door is the stock to own in the home services industry.

Bill Cobb: With that I will now return the stage to bill.

Bill: First as George laid out the home services industry presents a massive opportunity. This is a $500 billion total addressable market with significant growth opportunities.

Speaker Change: Yeah.

Bill Cobb: Thanks Jessica.

Speaker Change: Okay, we're near the end of the formal presentation, but before we open it up for your questions I do want to close with a few final thoughts first I'm incredibly proud of this world class team you saw on display today and all the people on their teams all of these all time highs and records are attributable attributable or whatever that where it is.

Bill: Second we're the largest provider of home warranties, we have cultivated network of around 17000 contractors and a strong record of innovation over our 54 year history.

Bill: <unk> latest being a H S video chat with an expert as we announced today.

Bill Cobb: To their excellence.

Bill: Third front doors core subscription based home warranty business model is extremely attractive.

Bill Cobb: So let me review the highlights from todays presentation, you've heard a lot about process improvements about how we improved execution and today front door is operating better and more efficiently than ever before as a result, we delivered record financial results last year.

Bill: With our $2 1 million members not only does it deliver consistent predictable recurring revenue, but it does so with very high margins and cash flows.

Bill: Fourth we believe we have cracked the code on delivering non warranty services you heard from Cathy just how big we think the non warranty revenue opportunity could be.

Bill Cobb: Going forward. This year, we are entirely focused on growing our home warranty member count and maximizing the value of to 10, as we fully integrate that business.

Bill: Fifth we are executing better than we ever have in our financial results show it in.

Bill Cobb: These efforts and more have positioned the company for long term growth through through the warranty and non warranty sides of our business.

Bill: In the six reason to believe we have a consistent capital allocation strategy. We are investing in to grow the business, both organically and through M&A and we are returning excess cash to shareholders through aggressive share buybacks, while maintaining a strong financial position.

Speaker Change: And it is great to see that all of our effort is paying off for a door stock prices more than doubled since the middle of 2022, when I became CEO. We went from about $24 a share to yesterday's ending price of $57 17 per share that's a 137% increase over that timeframe and.

Bill: That's the core of our investment thesis, but let me leave you with one final thought.

Bill: We run a very straightforward simple capital light business model lots of members lots of cash operated very well consistently and predictably. We are a great bet for your portfolio allocation to home services and on that high note that concludes our <unk>.

Speaker Change: And Trust me it feels very good to stand here in front of you today and show just how much we've grown shareholder values since our last Investor day.

And yet front door stock still remains undervalued from a historic perspective, we are only trading at about 11 times adjusted EBITDA.

Speaker Change: Our goal is to not only grow our earnings but also get back to mid teens multiples.

Speaker Change: Formal presentation, we need just a minute to bring the team up on stage and then we'll be ready to take your questions.

Speaker Change: To reiterate and bring home all of you've heard this morning, we have a very compelling investment thesis.

Bill: Oh.

Bill: [noise].

Speaker Change: There are six primary reasons, we believes front door is the stock to own in the home services industry.

Speaker Change: First as George laid out the home services industry presents a massive opportunity. This is a $500 billion total addressable market with significant growth opportunities.

Speaker Change: Second we're the largest provider of home warranties, we have cultivated network of around 17000 contractors and a strong record of innovation over our 54 year history.

Speaker Change: <unk> latest being a H S video chat with an expert as we announced today.

Speaker Change: Third front doors core subscription based home warranty business model is extremely attractive.

Speaker Change: Our $2 1 million members not only does it deliver consistent predictable recurring revenue, but it does so with very high margins and cash flows.

Cathy Collins: Fourth we believe we have cracked the code on delivering non warranty services you heard from Cathy just how big we think the non warranty revenue opportunity could be.

Cathy Collins: We are executing better than we ever have in our financial results show it.

Cathy Collins: And the six reason to believe we have a consistent capital allocation strategy. We are investing in to grow the business, both organically and through M&A and we are returning excess cash to shareholders through aggressive share buybacks, while maintaining a strong financial position.

Bill: Okay.

Bill: We've just got a text of your first one.

Cathy Collins: So that's the core of our investment thesis, but let me leave you with one final thought.

Speaker Change: <unk> video chat with an expert has occurred this morning so.

Cathy Collins: We run a very straightforward simple capital light business model lots of members lots of cash operated very well consistently and predictably. We are a great bet for your portfolio allocation to home services and on that high note that concludes.

Bill: We're gonna go grab it.

Speaker Change: So for our questions, we're going to do a heavy mix of in the room, but we also have Jason Bally reading some online questions as well from from the Internet. So we're going to go ahead and get started with the room Sergio.

Speaker Change: If Alison if you could walk a microphone up to Sergio for the first question.

Cathy Collins: Our formal presentation, we need just a minute to bring the team up on stage and then we'll be ready to take your questions.

Speaker Change: And then we can go ahead and get started.

Speaker Change: Yes.

Cathy Collins: Uh huh.

Speaker Change: Great. Thanks, guys for the presentation very helpful. Today.

Cathy Collins: [noise].

Speaker Change: I guess the first question I had was on conversion.

Speaker Change: Wait to see I guess, he American home Shield marketing campaign looks like Youre seeing a lot of success there with the.

Speaker Change: Our brand awareness up and you highlighted conversion as a key priority for 2025. So what does that look like this year, where are you focused on whereas the investments needed for the 225 to improve conversion and get that customer count. It would be number one and then the second question would be on the long term outlook Jessica that's my favorite.

Speaker Change: I too soon right now.

Speaker Change: <unk>.

Speaker Change: I guess historically the margin profile of this business has very pretty significantly I think you've done a pretty good job of narrowing down that variability with some of the process improvements that you've made but as we look at over the long term, where do you see that variability I think there's still things that you can't control like weather. So.

Speaker Change: Any thoughts on how that variability is maybe narrowed and where you see that over the long term. Thanks.

Speaker Change: Or would you when you say conversion are you talking about retention or.

Speaker Change: Conversions of customers coming into the funnel and then turning orange potential customers coming to found interfering and so customers only.

Speaker Change: Picked up there okay speaking to conversion one of the things that I mentioned in my presentation was kind of moving down funnel, which we expect will improve our conversion. We have seen there are certain levers we can pull such as the discounting where we haven't seen conversion increased significantly some of our channels are stronger than others. So we believe that kind of going after those.

Cathy Collins: Okay.

Cathy Collins: Thank you.

Cathy Collins: Okay.

Speaker Change: We've just got a text on their first from Hs video chat with an expert has occurred this morning. So.

Cathy Collins: Where to go grab.

Mid funnel channels will help boost that number.

Speaker Change: Okay, and then just on margin I think it is you know I remember when we were here two years ago that was the number one question around because of del pointed out we were at 43%.

Speaker Change: And I think that at that point right, there's the investor community with much more accustomed to the 50%.

Speaker Change: As Alison if you could walk a microphone up to Sergio for the first question.

Speaker Change: And then we can go ahead and get started.

Speaker Change: I do think that long term as I pointed out that is really the model that we're driving towards and I think the variability has historically been around inflation I mean, whether we can never control and then obviously there's also just in terms of number of centers to classify we've been down over the past couple of years, which has also given us some favorability on the incident side, which is also then as booths.

Speaker Change: Yes.

Speaker Change: Great. Thanks, guys for the presentation very helpful. Today.

Speaker Change: I guess the first question I had was on conversion.

Speaker Change: Wait to see.

Speaker Change: American home Shield marketing campaign looks like Youre seeing a lot of success there with the.

Speaker Change: Brand awareness up and you highlighted conversion as a key priority for 2025. So what does that look like this year, where are you focused on whereas the investments needed for the 2025 to improve conversion and get that customer count up would be number one and then the second question would be on the long term outlook Jessica that's my favorite slide.

Speaker Change: To margin, but kind of back to that we will control what we can control I think we've gotten a lot better around inflation.

Speaker Change: These.

Speaker Change: Heading into this year, we've been monitoring that very very closely I think we learned a lot of lessons in 2022, where we kind of pulled all the levers, which inflation didn't kind of show up the way that we expected to which has been driven a lot of the favorability in of ourselves over the past couple of years, but I think heading into this macroeconomic environment that we're in right now we.

Speaker Change: Tusa Radnet.

Speaker Change: I guess historically the margin profile of this business has very pretty significantly I think you've done a pretty good job of narrowing down that variability with some of the process improvements that you've made but as we look over the long term, where do you see that variability I think there are still things that you can't control like weather. So just.

Speaker Change: We are we are very clear on what the levers are to pull in when and how we pay attention to that so we can reduce the variability there. So I think heading into kind of the future in terms of variability. It's you know again, we can't predict the weather, but I do think we're in a very much stronger position in the business in terms of controlling what we can control. So that we can keep them around that long term target of 50%.

Speaker Change: Any thoughts on how that very believes may be narrowed and where you see that over the long term. Thanks. So Sergio when you say conversion are you talking about retention or customer conversion, so customers coming into the funnel and then turning orange potential customers coming have found interfering in SAP customers. Okay.

Speaker Change: And I think you pointed out Sergio work that Evan and his team have done on process improvements with the contractors with insurance operations with improving the user experience through some of the tech initiatives.

Speaker Change: Okay speaking to conversion one of the things that I mentioned in my presentation was kind of moving down funnel.

Speaker Change: Just cited a couple of those.

Speaker Change: I think that is enabling us to withstand some of the shocks to the system.

Speaker Change: Which we expect will improve our conversion we have seen there are certain levers we can pull such as the discounting.

Speaker Change: Great. Thank you.

Speaker Change: And then our next question is from Cory Carpenter with Jpmorgan.

Speaker Change: Conversion increased significantly some of our channels are stronger than others. So we believe that kind of going after those mid funnel channels will help boost that number.

Speaker Change: Yes.

Cory Carpenter: Hey, everyone. Thanks for having us and I wanted to ask a few questions on 210, Bill you kind of kicked it off seeing you are even more optimistic about 210 and you. Originally estimated why is that where you're seeing that makes you feel that way.

Speaker Change: Okay, and then just on margin I think it is you know I remember when we got here two years ago that was the number one question around because its del pointed out we were at 43%.

Speaker Change: And I think that at that point right, there's the investor community with much more accustomed to the 50%.

Speaker Change: In Jessica maybe for you just a little more color on where you expect those synergies to come from I think you said $10 million. This year 33 years.

Speaker Change: I do think that long term as I pointed out that is really the model that we're driving towards and I think the variability has historically been around inflation I mean, whether we can never control and then obviously there's also just in terms of number of Cerner Subclassify, we've been down over the past couple of years, which has also given us some favorability on the incident side, which has also been embraced.

Speaker Change: Where are you seeing those synergies and then how are you thinking that group from a revenue perspective as well for tuten. Thank you.

Speaker Change: So in terms of.

Speaker Change: Why I'm, even more optimistic.

Speaker Change: When you bring on a team you know you've done all the due diligence and Dennis and then you just don't completely now I've been blown away by the.

Speaker Change: Margin, but kind of back to that we will control what we can control I think we've gotten a lot better around inflation.

Speaker Change: By the way the team has been absorbed into our company I think culturally I think fitting into the organizations were going to run this as one home warranty business under Kathy.

Speaker Change: You know, we've especially heading into this year, we've been monitoring that very very closely I think we learned a lot of lessons in 2020, Sheila we kind of pulled all the levers, which inflation didn't kind of show up the way that we expected to which has been driven a lot of the favorability and about thoughts over the past couple of years, but I think heading into this napa and environment.

Speaker Change: That has worked out very well I think the talent the quality the level of talent that we were able to bring over has been quite.

Speaker Change: Quite impressive.

Speaker Change: So I think that and then I think as George pointed out the synergy work, we've done which I think we have great opportunities for that I mean, we talked about $30 million plus over the next couple of years next few years.

Speaker Change: Right now we are we are very clear on what the levers are to Paul and when and how we pay attention to that so we can reduce the variability there. So I think heading into kind of the future in terms of variability. It's you know again, we can't predict the weather, but I do think we're in a very much stronger position in the business in terms of controlling what we can control. So that we can keep it around that long.

Speaker Change: So I think all of those things have come together and it's really really feeling in two months like one company, which is a which is sometimes with the.

Speaker Change: Term target of 50% and I think you pointed out Sergio worked with Kevin and his team have done on process improvements or those with the contractors with insurance operations with improving the user experience through some of the tech initiatives.

Speaker Change: Integrations and acquisitions it takes a while but this one is really going well and so that's why I feel so good about they feel good about the people and feel good about the business and.

Speaker Change: And I think the synergy opportunity Israel.

Speaker Change: Yes.

Speaker Change: Yeah, and then just I guess, adding on that I mean, we acquired as Bill said, a great business, but I think the opportunity is really with our size and scale across the board you know we operate a very efficient company and I think bringing them on them and bringing them onto our processes. Our systems is going to be a huge synergy opportunity for us that we see and then as Georgia and said many.

Speaker Change: Second a couple of those.

Speaker Change: I think that is enabling us to withstand some of the shocks to the system.

Speaker Change: Great. Thank you.

Speaker Change: And then our next question is from Cory Carpenter with Jpmorgan.

Speaker Change: Yeah.

Cory Carpenter: Hey, everyone. Thanks for having us.

Speaker Change: Times, right with Air Springs, and cross selling opportunities, it's a new distribution channel.

Speaker Change: To ask a few questions on 210 billion kind of kicked it off seeing you are even more optimistic about 210, new originally estimated why is that where you're seeing that makes you feel that way and then Jessica maybe for you just a little more color on where you expect those synergies to come from I think you said $10 million. This year 33 years.

Speaker Change: There's a lot of the million dollars additional million homeowners that we're gonna have access to the 19000 homebuilders that will have access to I, just think bring thing real flywheel of opportunity for synergies for us.

Where are you seeing those synergies and then how are you seeing that growth from a revenue perspective as well for <unk>. Thank you.

Speaker Change: Okay I know Jason has a couple of questions Jason one ask one.

Speaker Change: Yeah.

Speaker Change: I could probably.

So in terms of.

Speaker Change: Linked to that comment one of the questions was how many structural warrant with the customer counts earlier home warranty only or are there additional structural warranty.

Speaker Change: Why I'm, even more optimistic.

Speaker Change: When you bring on a team you've done all this due diligence and Dennis and then you just don't completely now I've been blown away by the by.

Speaker Change: It's related to the acquisition and how do we think about that mix going to take time, we've got why don't I take that one.

Speaker Change: By the way the team has been absorbed into our company I think culturally I think fitting into the organization, we're going to run this as one home warranty business under Kathy.

Speaker Change: When we talk about the structural warranties are all used to terms one sales within a particular here and then in the present prepared materials, you've probably heard me reference a million members. So sales within a particular year. We saw about 120 to 125000, new sales the <unk>.

That has worked out very well I think the talent the quality the level of talent that we were able to bring over has been quite.

Speaker Change: Quite impressive.

Speaker Change: Structural warranty is a 10 year product so those homeowners and homes are under warranty for a 10 year period. So when you hear me referenced vermilion that as the warranties that were sold from 2015 through 2025, and every 10 years Theres another.

Speaker Change: So I think all of those things have come together and it's really really feeling in two months like one company, which is which is sometimes.

Speaker Change: Rolls off each year, so theres always a million plus assuming a consistent level of sales volume each year.

Speaker Change: Integrations and acquisitions it takes a while but this one is really going well and so that's why I feel so good about I feel good about the people and feel good about the business and you know what I.

Speaker Change: And one of the opportunities that back to Corey. Your question you asked earlier about being optimistic we think we have a real opportunity with these 19000 builders in this.

Speaker Change: I think the synergy opportunity Israel.

Bill Cobb: Yeah, and then just I guess, adding on that I mean, we acquired as Bill said, a great business, but I think the opportunity is really with our size and scale across the board you know we operate a very efficient company, and I think bringing them on and and and bringing them on to our processes. Our systems, it's going to be a huge synergy opportunity for us that we see and then as George says.

People, who have access to 210, a structural home warranty to see how we how we can connect with those groups, especially in the one non warranty area, but potentially with some warranty area. So we think that the synergy opportunity there.

Speaker Change: It could be quite could be quiet.

Speaker Change: Exceptional.

Bill Cobb: <unk> said, many times I had with their sprint and cross selling opportunities. It's a new distribution channel and I think there's a lot of a million dollars additional million homeowners that we're gonna have access to the 19000 homebuilders that will have access to I, just think bring thing we a flywheel of opportunity for synergies for us.

Speaker Change: I know Ericsson the audience I don't need me to call you up and do you have a question from Goldman Sachs.

Speaker Change: [laughter].

I wanted to talk a little bit about long term mix of the business. So you laid out sort of the warranty case and the non warranty case for the market opportunity.

Speaker Change: I know you are positioning for growth in both sides, but how do you think the broader landscape evolves over the long term as to what homeowners actually would prefer and how that might inform strategic investments against mix. Thanks.

Speaker Change: Okay I know Jason has a couple of questions Jason one ask one.

Bill Cobb: Yeah.

Speaker Change: I could probably.

Speaker Change: Linked to that comment one of the questions was how many structural warrant was the customer counts earlier home warranty only or are there additional structural warranty.

Speaker Change: You know one thing and then Jessica if you wanted to.

Speaker Change: One thing that.

Speaker Change: Again, we every time a bad piece of real estate news comes out which there has been no good news.

Speaker Change: <unk> related to the acquisition and how do we think about that mix. Thanks, Darren why don't I take that one.

Speaker Change: We kind of get hit.

Real estate is about six or 7% of our revenue so in turn and that has gone down as Kathy pointed out.

Speaker Change: But it is yes.

Speaker Change: Part of that's a real part of our business, but it's becoming such a smaller part with all the advances we've made with non warranty with the acquisition here. So I think from a mix perspective.

Speaker Change: We will see a mix that again will be driving through against the whole.

Home warranty business as we're going to run it as one unit, but this business really is on the back of renewals non warranty and non warranty and other in other businesses and really guaranteed us continuing to grow data fee and Tom and I and I think what you heard here is we are very bullish on home warranty and I think that continues to be on growth that engine.

Speaker Change: Rolls off each year, so theres always a million plus assuming a consistent level of sales volume each year.

Speaker Change: One of the opportunities that back to Corey. Your question you asked earlier about being optimistic we think we have a real opportunity with these 19000 builders in this these millions of people who have access to 210, a structural home warranty to see how we how we can connect with those groups, especially in the one non warranty area, but potentially with some warrants.

Speaker Change: It's a consistent revenue model. It is the bread and butter, that's generating cash and then non warranty is really the plus right like that is that I don't know Paul the Cherry on top but that is where is the additional growth opportunities or we can get more share of wallet like there's really a lot there, but we are very very bullish on home warranty and that is going to continue to be our core and that's why you all.

Speaker Change: Area. So we think thats the synergy opportunity there.

Speaker Change: Asked us about this but the second half performance in DTC.

Speaker Change: Could be quite could be quite <unk>.

Speaker Change: Continuing that momentum is going to be key to us.

Speaker Change: Exceptional.

Speaker Change: Yes.

Speaker Change: I know Ericsson the audience I don't even call you up and do you have a question from Goldman Sachs.

Speaker Change: Okay back over to Jason Yeah. Two questions related is do you have a target for per cent to preferred.

Speaker Change: [laughter].

Speaker Change: I wanted to talk a little bit about long term mix of the business. So you laid out through the warranty case and the non warranty case for the market opportunity.

Speaker Change: And can you give us a service request from 'twenty 'twenty, four and an outlook for 'twenty five.

Even Iverson: Evan you want to take that.

Speaker Change: I know you are positioning for growth in both sides, but how do you think the broader landscape evolves over the long term, it's toward homeowners actually would prefer and how that might inform strategic investments against mix. Thanks.

Even Iverson: For sure so from a target to percent preferred we're very proud of the 85% that was in the presentation and I think targeting within the mid eighties is where we're likely to be that is driven by two factors. One I want to make sure we're always bringing in new contractors to test develop keep some.

Jessica Ross: One thing and then Jessica if you wanted to.

Speaker Change: One thing that and again.

Speaker Change: Every time, a bad piece of real estate news comes out which there has been no good news.

Even Iverson: And within the ranks very simple and then the other key piece as I've mentioned, our model is built on aggregation so simply adding more contractors does dilute a bit of my ability to aggregate volume and benefit from our scale and so we've found that that.

Speaker Change: We kind of get hit.

Real estate is about six or 7% of our revenue so in turn and that has gone down as Kathy pointed out.

Speaker Change: But it is.

Even Iverson: That balance point, if you will of how do we keep enough in and keep enough volume that were material to our best contractors. So I would say it's it is an area of continual focus with the mid eighties being where we think where we're best served.

Speaker Change: Home warranty business as we're going to run it as one unit, but this business really is on the back of renewals non warranty and non warranty and other another.

Even Iverson: And then just on service a class for 'twenty 'twenty four we were at $3 6 million and targeting cluster for Plano Malian for 2025, which is where we were in 'twenty three.

Speaker Change: And really guaranteed us continuing to grow GSE and and I think what you heard here. We are very bullish on home warranty and I think that continues to be our growth engine is our consistent revenue model. It is the bread and butter, that's generating cash and then non warranty is really the plants right that that is that's I'll now call the cherry on top but that is where I E.

Speaker Change: I know Sergio is another question, but we're going to go to Jason first.

Speaker Change: Can you give us your outlook for full year interest expense.

Speaker Change: So total debt service is about 110 million in interest expenses 8 million again, we're very pleased with our new debt deal.

Speaker Change: And then the remainder is just normal amortization.

Speaker Change: Additional growth opportunities or we can get more share of wallet like there's really a lot there, but we are very very bullish on home warranty and that is going to continue to be our core and that's why.

Speaker Change: I guess just going back to the my favorite slide.

Speaker Change: You all have asked us about this but the second half performance from DTC.

Speaker Change: For the revenue outlook, what kind of macro environment does that assume is that stable from here or is that getting better.

Speaker Change: Continuing that momentum is going to be key to us.

Speaker Change: Okay back over to Jason Yeah, two questions related.

Speaker Change: And then.

Maybe on the Inelasticity I think you guys had a slide on that with our renewals customers being the most in elastic does that change at all as the customer I guess is longer tenured.

Jason Bally: Is do you have a target for per cent to preferred.

Jason Bally: And can you give us a service request from 2024 and an outlook for 'twenty five.

Speaker Change: So why don't you take.

Jason Bally: And you want to take the percentages.

Ray: And then Ray <unk> sounds good, but I think it is absolutely anticipates, a return to real estate and in a more normal inflation etcetera. I mean, it's it is it's it's anticipating and growth in our margin and growth in non warranty, but yes overall macro environment. It does I mean, the big one there is that it anticipates a return to real estate.

Speaker Change: Yeah for sure so from a target to percent preferred we're very proud of the 85% was in the presentation and I think targeting within the mid eighties is where we're likely to be that is driven by two factors. One I want to make sure we're always bringing in new contractors to test develop keep some comps.

Jessica Ross: But in terms of is that coming through you know the real estate channel traditionally or indeed, a fee. That's the work we're doing to make sure we're capturing all of that when they come back as we rebuild the renewal book, that's certainly a lift also which is why Jessica I called it a transition year this year.

Speaker Change: <unk> within the ranks very simple and then the other key piece as I've mentioned, our model is built on aggregation so simply adding more contractors does dilute a bit of my ability to aggregate volume and benefit from our scale and so we've found that that balance point. If you will of how do we keep enough in.

Jessica Ross: Great. Thanks, Mike on the Inelasticity question, Yes.

Speaker Change: And keep enough volume that were material to our best contractors. So I would say it's it is an area of continual focus with the mid eighties being where we think we're we're best served.

Jessica Ross: Yes, and so what I mean by that is does customer tenure matter when it comes to an elasticity. It does just because the longer somebody who's been with US is a demonstration that they value the home warranty and at the same time when I had mentioned it's about how much value are we creating for the member which is really more of a prediction of their usage and therefore.

Speaker Change: And then just on service a class for 'twenty 'twenty four we're at $3 6 million and targeting positive for Plano Mail and for 2025, which is where we were in 'twenty three.

Jessica Ross: Or how much it's going to cost us and therefore value we deliver to the member and also that also matters a lot. So I wouldn't say it's just.

Speaker Change: I know Sergio is another question, but we're going to go to Jason <unk>.

Speaker Change: Can you give us your outlook for full year interest expense.

Speaker Change: Tenure, although yes, that's a factor that's usually is a sign that they do value of their home warranty a lot I would be remiss, if I didn't take an opportunity to brag on my team a bit at the core of what Ray spoke of the more member experiences our product the more likely they are to stay the more they interact the longer they're with us the happier they are.

Speaker Change: And so total debt services about 110 million in interest expenses 80 million again, we're very pleased with our new debt deal and and and then the remainder is just normal amortization.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: That speaks to the heart of our model.

Speaker Change: I guess, Jessica is going back to the my favorite slide.

Speaker Change: For the revenue outlook, what kind of macro environment does that assume is that stable from here or is that getting better.

Speaker Change: Okay quarters up next.

Speaker Change: Yes.

Speaker Change: Alright, just one more for me I wanted to ask about tariffs. Jessica you mentioned that there is some anticipated tariff potential tariff impact in your guide, which I think called for.

Speaker Change: And then.

Speaker Change: Maybe on the Inelasticity I think you guys had a slide on that with our renewals customers being the most in elastic does that change at all as the customer I guess is longer tenured.

Speaker Change: Cost per claims inflation is going from zero percent this year or last year to.

Speaker Change: To mid single digits this year, but bigger picture on tariffs could you just remind us where do you have what are you most institute new headlines everyday what matters for you guys on the tariff side.

Speaker Change: So why don't you take.

Ray Tang: And then Ray <unk> sounds good, but I think it absolutely anticipates, a return to real estate and in a more normal inflation etcetera. I mean, it's it is it's it's anticipating and growth in a more on demand growth of non warranty paper, yes, overall macro environment I mean, the big one there is that it anticipates a return to real estate.

Speaker Change: Just how we should think about that more broadly certainly so it is reflected in our current estimate of mid single digits, but if you think of the things we buy parts and equipment parts printed circuit boards any number of miscellaneous parts that may come from overseas and so tariffs that target specific economies, China can be problematic.

Speaker Change: But in terms of is that coming through you know the real estate channel traditionally or in D. C. That's the work we're doing to make sure we're capturing all of that when they come back as we rebuild the renewal book, that's certainly a lift also which is why Jessica called it a transition year this year.

Speaker Change: And then across our three largest trades appliance plumbing HVA C.

Speaker Change: Hot water heaters are made of steel cases of air conditioners are made of aluminum. So when we call out raw material tariffs. Those are those are very real costs in our world.

Ray Tang: Maybe one quick sorry.

Speaker Change: Inelastic to the question.

Speaker Change: Yes, and so what I mean by that is does customer tenure matter when it comes to an elasticity. It does just because the longer somebody who's been with US is a demonstration that they value the home warranty.

Speaker Change: Long term we have no.

Speaker Change: I'd say magic weapon against tariffs ultimately the costs will flow through our system.

Speaker Change: Our approach, though is to ensure that our sourcing agreements give us enough time to manage and mitigate the cost of the tariffs and then within my teams, we manage not to the line item. If you will but the overall claim cost and so ultimately I suspect for all of you and for me if our costs are over by a dollar per claim I really don't care if that.

And at the same time, what I mentioned, it's about how much value are we creating for the member which is really more of a prediction of their usage and therefore, how much it's going to cost us and therefore value we deliver to the member and also that also matters a lot. So I wouldn't say it's just.

Speaker Change: Tenure, although yes, it's a factor that's usually a sign that they do value of their home warranty.

Speaker Change: It came from labor or materials, I want to figure out how to get that back down and anywhere I can drive efficiency in our systems offset it.

Speaker Change: I would be remiss, if I didn't take an opportunity to brag on my team a bit at the core of what Ray spoke of the more member experiences our product the more likely they are to stay the more they interact the longer they're with us the happier they are and that that speaks to the heart of our model.

Cory Carpenter: I think Cory the other piece is building on what have been said.

Speaker Change: <unk> has.

Speaker Change: The big impact that is part of the tariff situation fuel and the like we're too which will impact our contractors and their labor rates et cetera, Radian team really closely monitor all of these inputs.

Speaker Change: Okay core is up next.

[laughter].

Speaker Change: Because for US the biggest macros are interest rates affecting the real estate business inflation, which affects all of our business, especially DTC and then tariffs. So there are real macro.

Speaker Change: Cost per claims inflation is going from zero percent. This year last year to mid single digits. This year.

Speaker Change: Conditions, there and that's why I think you know Jessica and I have talked about this at length.

Speaker Change: Bigger picture on tariffs could you just remind us where do you have what are you most institute new headlines everyday what matters to you guys on the tariff side.

Speaker Change: And that's why we have built this and to have what might be a more conservative guide, but I think its appropriate given that you know I mean today. We just learn tariffs are moving up to March 4th in China is going to get another 10%. So I think it was prudent for us to put together the numbers that we did put together bill I might add just one other comment to that beyond the core.

Speaker Change: Just how we should think about that.

Certainly so it is reflected in our current estimate of mid single digits, but if you think of the things we buy parts and equipment parts printed circuit boards any number of miscellaneous parts that may come from overseas. So tariffs that target specific economies, China can be problematic and then across our three.

Speaker Change: Warranty. We're also looking at the implications around the new home construction lumber steel et cetera, and the impacts of that in my macro may have on the new builds.

Speaker Change: Largest trades appliance plumbing HVA C.

Speaker Change: Hot water heaters are made of steel cases of air conditioners are made of aluminum. So when we call out raw material tariffs. Those are those are very real costs in our world long term we have no.

Speaker Change: A follow up in terms of your own sourcing versus getting getting the parkman in appliances from service pros any rough split on how much you guys are sourcing yourselves versus worse getting certainly varies by trade. So for example, within appliances, we buy 100% of the appliances, we replace we estimate within.

Speaker Change: I would say magic weapon against tariffs ultimately the costs will flow through our system. Our approach so as to ensure that our sourcing agreements give us enough time to manage and mitigate the cost of the tariffs and then within my teams, we manage not to the line item. If you will but the overall claim cost and so ultimately I suspect for all of you.

Speaker Change: In HVAC and plumbing would be somewhere between 50, and 65% again, depending on the trade in part of of things we produce.

Speaker Change: I think I'll remind you back to our approach of partnership though.

Speaker Change: And for me if.

Speaker Change: I'm, most concerned with our contractors hit their total cost and total quality targets and if they can do that supplying their own parts.

Speaker Change: If our costs are over by one dollar per claim I really don't care, if that came from labor or materials I want to figure out how to get that back down and anywhere I can drive efficiency in our systems offset it.

Speaker Change: Im ecstatic.

Speaker Change: We'll certainly offer our parts programs available to them, but they have to deliver and if we start to struggle with delivery then that team of field managers offers our parts programs or suggest them say here's a way we can get you back in line, which is required to keep you competitive.

Speaker Change: I think corner the other piece is building on what <unk> said.

Speaker Change: <unk> has.

Speaker Change: The big impact that is.

Ray Tang: Part of the tariff situation fuel and the life, which is which will impact our contractors and their labor rates et cetera, Ray and team really closely monitor all of these inputs.

Speaker Change: P J.

Speaker Change: Thank you I actually use the program and love it.

Ray Tang: Because for US the biggest macros are interest rates affecting the real estate business inflation, which affects all of our business, especially DTC and then tariffs. So there are real macro.

Speaker Change: Sure. So on the you know.

Speaker Change: Continuing the discussion on the appliances side do you have any.

Ray Tang: Conditions, there and that's why I think Jessica and I have talked about this at length.

Speaker Change: Relationships with the suppliers so vendors because the HVAC is generally have replacement program right now things like that do you have any of that to mitigate.

Ray Tang: And that's why we have built this and to have what might be a more conservative guide, but I think its appropriate given that I.

Ray Tang: I mean today, we just learn tariffs are moving up to March 4th in China is going to get another 10%. So.

Speaker Change: That's again the benefit of our scale, we've got very very strong relationship with all of the major suppliers.

Ray Tang: It was prudent for us to put together the numbers that we did put together bill I might add just one other comment to beyond the core warranty. We're also looking at the implications around the new home construction lumber steel et cetera, and the impacts that macro may have on the.

Speaker Change: Which is how we're able to pass those costs onto our members onto a contractor and as even as we talk about centers and 15 10, there's a lot of opportunity there within a screenshot of the App that was in Cathy's materials is no accident showed the HVAC page, but if you swipe wants to the left the next thing that comes up is the appliance purchase program my wife and I are.

Ray Tang: New builds.

Speaker Change: Just a follow up in terms of your own sourcing versus getting getting the parts and in appliances from service pro So any rough split on how much you guys are sourcing yourselves versus getting.

Speaker Change: Currently, replacing a washer and dryer through that with them. So you can leverage our scale to replace your washer and dryer or any other appliance for that matter.

Speaker Change: Certainly it varies by trade. So for example, within appliances, we buy 100% of the appliances, we replace we estimate within HVAC and plumbing would be somewhere between 50, and 65% again, depending on the trade in parts of things, we produce I think I'll remind you back to our approach of <unk>.

I think one one question on the like the DTC kind of how you.

Speaker Change: Initially moved away from real estate heavy to DTC and within DTC do you have with the changing kind of.

Speaker Change: The rental market and everything going on in the real estate do you have any strategy on that side going to property managers and things like that.

Speaker Change: <unk>, though.

Speaker Change: I am most concerned with our contractors hit their total cost and total quality targets and if they can do that supplying their own parts.

I'm ecstatic.

Speaker Change: Yeah, I can take that one so property management is something that we are actively looking at we have in the past as well right.

Speaker Change: Right now, we kind of think about it as the real estate market is down here. So we're focusing greatly on the DTC market knowing that we are ready when it comes back. So that's where we are implementing a number of new strategies looking for new channels. So property management is one title company, we're always looking for new ideas and ways to partner and.

Speaker Change: Yes.

P J: P J.

Speaker Change: Okay.

Speaker Change: Thank you I actually use the <unk>.

Speaker Change: Program and love it.

Speaker Change: It is so on the.

Speaker Change: Those new streams of revenue and new channels so absolutely.

Continuing the discussion on the appliances side do you have any.

Jason Bally: Okay back over to Jason Yeah.

Jason Bally: This one says you mentioned 5 million home warranties, where where do you think that can grow to.

Speaker Change: Yeah.

Speaker Change: Relationships with the suppliers or vendors because the HVAC is generally have replacement program right now.

Speaker Change: Good morning.

Speaker Change: Let me take that can take that so yeah, we throw a few numbers out to you today as far as size of the home services industry size of the home warranty business. So when we're talking 5 million. That's how many homes owner occupied homes have a home warranty today, when we look at the consumer understanding and awareness.

Speaker Change: Do you have any of that qunar to mitigate.

Speaker Change: That's again the benefit of our scale. It got very very strong relationship with all of the major suppliers.

Speaker Change: Which is how we're able to pass those costs onto our members onto contractors and it even if they talk about synergy 15, 10, there's a lot of opportunity.

Speaker Change: Within the screenshot of the App that was in Cathy's materials is no accident showed the HVAC page, but if you swipe wants to the left the next thing that comes up is the appliance purchase program My wife, and I are currently, replacing our washer and dryer through that.

Speaker Change: And as of the the war home warranties, and where that stands we're sizing it really between 15 and 20 million additional homes in the near term ultimately, we see that full 87 million owner occupied home as our addressable market, but over the horizon, We're operating right now.

Speaker Change: So you can leverage our scale to replace your washer and dryer or any other applies for that matter.

Speaker Change: 15 to 20 additional homes is what we're targeting to get.

Speaker Change: One one question on the like the BDC kind of how you.

Speaker Change: I'm glad we only through two numbers that you all soon.

Speaker Change: Beneficial.

Speaker Change: Initially moved away from real estate.

Speaker Change: Jason another one from online yeah kind of a related question what is the runway for <unk> look like.

Speaker Change: Heavy to DTC and within BDC do you have with the changing kind of.

Speaker Change: So I think there's a huge runway exactly to what George just spoke to when you've only got 5 million out of 87 million homes. It is on us to figure out how to explain the home warranty values benefits to the homeowners because that I think has been an area of confusion for years.

Speaker Change: The rental market and everything going on in the real estate do you have any strategy on that side going to property managers and things like that.

Speaker Change: Yeah, I can take that one so property management is something that we are actively looking at we have in the past as well yeah right now we kind of think about it as the real estate market is down here. So we're focusing greatly on the D. C market knowing that we are ready when it comes back. So that's where we are implementing a number of new strategies.

Speaker Change: You know people are very confused between homeowners insurance at a home warranty. So like I said that we're taking that on as the leaders in the category to say, we need to educate people on on what a home warranty is what the benefits are and we're starting to see I mean, we were very excited obviously that we saw some growth in the D to C channel in Q4.

Speaker Change: Looking for new channels. So property management is one title company, we're always looking for new ideas and ways to partner and find those new streams of revenue and new channels. So absolutely.

Speaker Change: We're going to see that continue and I think like I said, there's a very long runway and to George's point. Our goal is to see that expand from 5 million to $15 million to $20 million and I also think that the work you've done targeting you talked about millennials and Hispanics millennials. The research you've done and it's about peace of mind protection revenue and expense savings, especially for them.

Speaker Change: Thank you.

Jason Bally: Okay back over to Jason Yeah.

Jason Bally: One says you mentioned 5 million home warranties, where where do you think that can grow to.

Jason Bally: Or does it go ahead.

Speaker Change: Younger.

Jason Bally: I wonder if it takes us so we throw a few numbers at you today as far as size of the home services industry size of the home warranty business.

Speaker Change: Hum homebuyer.

Speaker Change: I think that's going to pay off for us as we as we focus our message.

Speaker Change: Part of your funnel break ocean exactly any.

Jason Bally: So when we're talking 5 million, that's how many homes owner occupied homes have a home warranty today, when we look at the consumer understanding and awareness of the home warranties and where that stands we're sizing it really between 15 and 20 million additional homes in the near term.

Speaker Change: Any more questions in the room I don't Wanna keep Jason busy Yes go ahead.

Speaker Change: Yeah and.

Speaker Change: In your last Investor Day, there was a slide on home home warranty attach rates I think historically in the category, one and three and now the bottom now closer to one in four I want to understand in that glide path of your long term targets.

Jason Bally: Ultimately, we see that full 87 million owner occupied homes as our addressable market, but over the horizon. We're operating right now 15 to 20 additional homes is what we're targeting again.

Speaker Change: The current home environment, where you have your all time low transaction volumes as well as all time low attachment rates can you within that context talk about the mid to high single digit organic CAGR in how much have you embedded this abnormally difficult environment, where you may have some upside dry.

Jason Bally: I'm glad we only through two numbers that you also.

Jason Bally: Beneficial.

Jason Bally: Jason another one from online.

Jason Bally: Kind of a related question what is the runway for <unk> look like.

Speaker Change: Or is it things like attach rates or volumes start to pick up again.

Speaker Change: So I think there's a huge runway exactly to what George just spoke to when you've only got 5 million out of 87 million homes. It is on us to figure out how to explain the hallmark values benefits to the homeowners because that I think has been an area of confusion for years.

Speaker Change: You're talking about real estate attach rate, yes, yes, so our a one real estate one attach rates historically were close to 30%.

Speaker Change: They are now were our best guess is about 15%.

Speaker Change: So they have dropped dramatically I as I said in my presentation. The best we've held our share.

Speaker Change: People are very confused between homeowners insurance had a home warranty. So like I said that we're taking that on as the leaders in the category to say, we need to educate people on on what a home warranty is what the benefits are and we're starting to see I mean, we were very excited obviously that we saw some growth in the D to C channel in Q4.

Speaker Change: We're still the leader in that category, but but it is obviously not top of mind for the real estate agents today, we've seen a lot of turnover in the agents too so it's a process.

Speaker Change: Of Reeducating every real estate agent on the benefits and hoping that the market will come back into balance. So they will again start to attach in the meantime, which I think is what you're really getting at that.

Speaker Change: Youre going to see that continue and I think like I said theres, some very long runway and to George's point. Our goal is to see that expand from 5 million to 15 to 20 million and I also think that the work you've done targeting talked about millennials in experiment millennials. The research you've done and then it's about peace of mind protection and expense savings, yes, especially for that.

Speaker Change: That's where we're focusing more on the D to C. But we're also finding ways to get directly to new home buyers. So not just going through the real estate agent, we would like to continue doing that.

Speaker Change: Younger.

Speaker Change: But we think that there is supplemental volume to be had by marketing directly to new homebuyers and through re targeting finding people who are starting to look for new homes. So we can get to them early in their product and I think kind of just getting back to another question as it relates to the question you had Sergio and just how does this relate to our overall outlook on our guy.

Speaker Change: Oh homebuyer.

Speaker Change: I think that's going to pay off for us as we as we focus our message from bigger I think that's part of your funnel right Gotcha exactly.

Speaker Change: Any more questions in the room I don't want to keep Jason busy Yes go ahead.

Speaker Change: Yeah.

Speaker Change: Last Investor Day, there was a slide on home home warranty attach rates and I think historically in the category. There were one and three and now the bottom now closer to one in four I want to understand in that glide path of your long term targets.

Speaker Change: And so when I say a return to the real estate market. We are that the real estate channel may not look the way that it did you know when we launched into real estate. It may not look the way that just five years ago, and I think that the more Catholics doing till it to be more focused on getting directly to the home buyer for them.

Speaker Change: The current <unk> environment, where you have your all time low transaction volumes as well as all time low attachment rates can you within that context talk about the mid to high single digits organic CAGR in how much of your embedded this abnormally difficult environment, where you may have some upside drivers.

Speaker Change: Through D to C is where our assumptions around the real estate, where the real estate market will contribute when it comes back.

Speaker Change: In terms of our long term outlook and guy.

Anything else from the room.

Jason Bally: Okay Jason.

Speaker Change: Yeah, Doug.

Speaker Change: As your 112th pricing model Levi vulnerable to immediate.

Speaker Change: Things like attach rates or volumes start to pick up again.

Speaker Change: Immediate inflation.

Speaker Change: You're talking about real estate attach rate, yes, yes, so our a one real estate, while attach rates historically were close to 30%.

Speaker Change: That's right for array I can take that you take them.

Speaker Change: Yet if you look at what happened in 2022, it is possible for cost to rise faster than price can flow through into our earned revenue that is possible and it did happen.

Speaker Change: They are now were our best guess is about 15%.

Speaker Change: So they have dropped dramatically I as I said in my presentation that best is we've held our share.

Speaker Change: That said as Bill mentioned, we take a much more proactive posture learning all that we can from 2022, so that we understand the signposts whether those are headlines whether those are core categories within PCE PPI and then having our battery of tactics initiatives ready to go so we understand which levers to pull and win.

As soon as possible I mean anything from raised presentation, you saw that predictable and recurring is a good thing but costs hit us today, and we get to offset it with 112th of the revenue. So it is why I think it hurt us very much in the second half of 'twenty, one and into 'twenty two.

Speaker Change: Where we're focusing more on the D to C. But we're also finding ways to get directly to new home buyers. So not just going through the real estate agent, we would like to continue doing that.

Speaker Change: We don't want to be caught behind this year, which is why we're going to have some.

Speaker Change: Let's see with everything moving so quickly.

Speaker Change: But we think that there is supplemental volume to be had by marketing directly to new homebuyers.

Speaker Change: What what steps we choose to take this year or last year, we chose to take.

Speaker Change: And through re targeting finding people who are starting to look for new homes. So we can get to them early on there.

Mid.

Speaker Change: Mid single digit price increase because we felt like we wanted to get into a more normalized range that means we will see where that carries.

Speaker Change: Think kind of just getting back to another question as it relates to the question you had Sergio and just how does this relate to our overall outlook in our guide and so when I say a return to the real estate market. We are now that the real estate channel may not work the way that it did you know when we launched into real estate. It may not look the way that just five years ago, and I think that the more Catholics go into it to be.

Speaker Change: Carries forward demand both pricing as a lever we obtain service fees as a lever and then we thought again the internal initiatives that we've got to manage cost in terms of supply chain. So I think like everyone else. We are a very eyes wide open on what's ahead. We felt you know the risk into our plan, but we've also got a series of tactics that.

Speaker Change: More focused on getting directly to the home buyer for <unk>.

Speaker Change: <unk> C is where our assumptions around our real estate, where the real estate market will contribute when it comes back in terms of our long term outlook and died.

Speaker Change: We are ready to fire off into play as we ever been pet.

Speaker Change: Okay. Our last question from online will be read from Jason.

Jason Bally: How are you thinking about additional partnerships beyond knowing.

Speaker Change: Anything else from the room.

Jason Bally: Hey, Jason.

Jason Bally: Okay, Yeah, So MAU and we love, we love our MAU in partnership.

Jason Bally: Yeah does your 112th pricing model Levi vulnerable to.

Jason Bally: We still have yes, we have a ways to go there we are actively in conversations with other potential partners, but I think the thing that people need to realize as these things take time. So the mountain partnership. We just started in June and the state of California, and what we've seen has been pretty remarkable you saw the state expansion we will continue.

Jason Bally: Immediate inflation.

Ray Tang: It's probably for Ray I can take that.

Ray Tang: Yes, if you look at what happened in 2022, it is possible for cost to rise faster than price can flow through into our earned revenue that is possible and it did happen.

As Bill mentioned, we take a much more proactive posture learning all that we can from 2022, so that we understand the signposts whether those are headlines whether those are core categories within PCE PPI and then having our battery of tactics initiatives ready to go so we understand which levers to pull and win.

Jason Bally: To expand but you know we after them deal with all of the insurance agents, there working with them and of course, all of our plumbing contractors and all of the state regulators. So it does take time so.

Jason Bally: So we know that there's still a long runway just with Boeing but we are actively looking for other partners that can be just as valuable and I think one of the things that our.

Ray Tang: As soon as possible I mean missing from res presentation, you saw the predictable and recurring is a good thing, but cost service today, and we get to offset it was $1 12 for the revenue.

Jason Bally: It reports into Kathy this.

Speaker Change: Partnership team with people seeing.

Speaker Change: US being able to explain what we've done with HVAC and now we have a real partner.

Ray Tang: It is why I think it hurt us very much in the second half of 'twenty, one and into 'twenty two.

Speaker Change: And more and they see the value that the backbone to some extent of this company is whatever laid out which is the contractors and so our ability I mean, we got them all in deal because we have a national network of plumbers that can go and it's great for our plumbers and products drop shipped and then they go into the house.

Ray Tang: We don't want to be caught behind this year, which is why we're going to have especially.

Ray Tang: Especially with everything moving so quickly.

Ray Tang: What steps we choose to take this year or late last year, we chose to take.

Speaker Change: You know put the valve on and they're done.

Ray Tang: Mid single digit price increase because we felt like we wanted to get into a more normalized range that may have.

Speaker Change: Our plumbers love a business like that so I think our ability you know the fact that we can now showcase real real tangible businesses that and potentially other categories is why we're so bullish on this area.

See where that.

Ray Tang: Carries forward and we have about pricing as a lever we have paid services is Atlanta and then we've got again the internal initiatives that we've got to manage costs in terms of supply chain. So I think like everyone else. We are a very eyes wide open on what had we felt the rest into our plan, but we've also got a series of tactics that.

Speaker Change: Bill we have no more questions. So we're going to close the Q&A session. If you wanted to say any final words.

Speaker Change: The stocks getting hammered today.

Ray Tang: We are ready to fire off into play as he hasn't been set yet.

Speaker Change: On the Investor day.

Speaker Change: Never a good book, but you know.

Speaker Change: The macro situation is such that we all have to deal with it we're not the only company affected by that.

Jason Bally: Okay. Our last question from online will be read from Jason.

Jason Bally: How are you thinking about additional partnerships beyond knowing.

But we think we've got a terrific plan. We I think we've had a great track record of performance I think we've got the appropriate caveats in our plan.

Jason Bally: Okay, Yeah, So no and we love we love our MAU in partnership.

Jason Bally: We still have yes, we have a ways to go there we are actively in conversations with other potential partners, but I think the thing that people need to realize is these things take time. So the mountain partnership. We just started in June and the state of California, and what we've seen has been pretty remarkable you saw the state expansion we will continue.

Speaker Change: I think we feel good about how Q1 is going to net out that Jim.

Speaker Change: Just going to lay out for you.

Speaker Change: And this is going to be a year, where we got to stay on every every day and see what the latest going on from a macro situation, but I think we're well positioned I think we can deliver on our on our numbers and we feel very good about the state of the company and where we're going so.

Jason Bally: To expand but we have to then deal with all of the insurance agents, there working with them and of course, all of our plumbing contractors and all the state regulators. So it does take time.

Speaker Change: They got a buying opportunity for a lot of you.

Speaker Change: So thanks very much thanks for coming thanks for the webcast folks. Thank you. Thank you very much.

Jason Bally: So we know that there's still a long runway just with my line, but we are actively looking for other partners that can be just as valuable and I think one of the things that are.

Speaker Change: Hum.

Cathy Collins: Fortunately the Cathy this.

Jason Bally: Partnership team with people seeing.

Speaker Change:

Jason Bally: US being able to explain what we've done with HVAC and now we have a real partner.

Jason Bally: And more and they see the value that the backbone to some extent of this company has where they haven't laid out which is the contractors and so our ability I mean, we got the mowing deal because we have a national network of plumbers that can go in and it's great for our plumbers as our products dropped shipped and then they go to the house.

Speaker Change: [music].

Jason Bally: Hum.

Jason Bally: Put the valve on and they're done.

Speaker Change: Our plumbers love a business like that so I think our ability. The fact that we can now showcase real real tangible businesses that and potentially other categories is why we're so bullish on this area.

Speaker Change: Bill we have no more questions. So we're going to close the Q&A session. If you wanted to say any final words, yeah I mean.

Speaker Change: The stock is getting hammered today.

Speaker Change: On the Investor day.

Speaker Change: Never a good book, but you know the.

Speaker Change: Macro situation is such that we all have to deal with it we're not the only company affected by that.

Speaker Change: But we think we've got a terrific plan I think we've had a great track record of performance I think we've got the appropriate caveats in our plan.

Speaker Change: I think we feel good about how Q1 is going to net out.

Jessica Ross: Jessica laid out for you.

Jessica Ross: And this is going to be a year, where we got to stay on every every day and see what the latest going on from a macro situation, but I think we're well positioned I think we can deliver on our on our numbers and we feel very good about the state of the company.

Jessica Ross: And where we're going so.

Jessica Ross: Anyway kind of a buying opportunity for a lot of you.

Jessica Ross: So thanks very much thanks for coming thanks for the webcast folks. Thank you. Thank you very much.

Jessica Ross: [noise].

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