Ladies and gentlemen, please take your seats. The program will be about to begin. Ladies and gentlemen, please take your seats. The program is about to begin.

Thank you for joining Frontdoor, Inc. It's 2025 Investor Day. My name is Matt Davis, and I'm the Vice President of Investor Relations and Treasurer for Frontdoor. We are about to get started. But before we begin, I want to cover off on a few items. First, Frontdoor's fourth quarter and full year 2024 earnings press release as well as our 10-K was released this morning before market opening. Additionally, the Investor Day slides that will be used during today's presentation can be found on the Investor Relations section of Frontdoor's website, which is located at investors.frontdoorhome.com. As stated in the presentation and on the screens behind me, I'd like to remind you this investor day presentation and webcast may contain forward-looking statements. 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 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've 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 Frontdoor 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. The best way to do that is through our email, ir@frontdoorhome.com. You can also call us at 901-701-5199. Thank you again for joining us today. For those of you on the webcast, we will begin starting in approximately two minutes.

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 thirty-three months ago. Back then, the company was at an inflection point. We're in one of the most challenging macroeconomic environments in the company's history. High 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 forty-three percent. We had not yet fully implemented our pricing actions, and most importantly, we needed to implement process improvement and business transfer 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 and marketing. This work positioned AHS for growth. And the rebrand and marketing campaign we launched last year is doing exactly what we wanted. We're seeing positive momentum in our new member account, and Kathy Collins will talk about this later. We enhanced our margins In 2022, our gross margins were at an all-time low of forty-three percent. But now through a lot of hard work, and our process improvement and business transformation initiatives, we finished 2024 with a gross margin of fifty-four percent. An all-time high.…

Thank you, Bill, and good morning, everyone. I'm Ray Tong, Vice President of Pricing and Analytics. Invest in what you know. Invest in what you understand. That's why we want you to know the fundamentals of our home warranty business model. A home warranty is? And how it works. Home warranty is a high engagement product with homeowners. It's a subscription-based model and that model has critical non-intuitive implications on our financials. We optimize this model to create value for our shareholders. We protect homeowners from unexpected breakdowns, for up to twenty-nine systems and appliances through a contract. We will repair or replace these covered items when breakdowns happen due to normal wear and tear. By systems, I'm referring to electrical. Plumbing, heating and cooling, or HVAC. Appliances include refrigerator, washer, dryer, built-in microwave, garbage disposal, and more. Home warranty starts with the homeowner choosing the coverage that best fits their needs and then paying their fee monthly or annually. Needs differ by homeowner, so our coverage is not one size fits all. After we welcome and onboard the member, the next most significant interaction is when a covered item At that point, the member will request service. Through automated channels such as our mobile app. Or online portal or by talking to an agent. At the same time, they will also pay us a trade service fee or trip fee. We will assign a contractor who will go to the home to diagnose, resolve the issue. After the service request is completed, we will pay for cost covered by the warranty. So key difference between our category and insurance or other types of warranties is the likelihood that a homeowner uses our product. Whether you're talking about title insurance, term life insurance, warranty on your car, car insurance, or…

Thank you, Ray. Good morning, everyone. I'm George Guastello, Vice President of Strategy and Integration. I lead all strategic planning for the company. I'm also responsible for the integration of our 210 acquisition. 2024 was a record-setting year for Frontdoor. We're gonna build on that momentum. And it starts with the home services industry, which is large and attractive. Frontdoor 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 210 acquisition, it will turbocharge our progress. Now home services, it is a massive and growing five hundred billion dollar industry. It includes both warranty and non-warranty services. Frontdoor aggressively competes in both categories. There's a vast total addressable market of more than a hundred and thirty 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. Frontdoor is uniquely positioned to win in this space and continue to create value for homeowners and investors. Now within the home services, the home warranty category presents a big opportunity for growth. It's currently valued at about four billion dollars, and covers five million homes. That is only six percent of owner-occupied homes, which is woefully underpenetrated. Frontdoor is the clear leader in this category. We deliver forty-six percent category revenue share. We have more than two million members. Our network of seventeen thousand independent contractors manage about four million service requests annually. And our scaled subscription-based model delivers consistent, predictable recurring revenue. We will accelerate our leadership position in this category. Now the non-warranty category. This is large and fast-growing. Repairs, maintenance, replacements alone is valued at about two hundred and fifty billion dollars And…

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 are our high-level framework for the warranty and non-warranty sides of the business, Starting on the warranty side, we'll kick off with American Home Shield, our leading brand, then AHS's 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. So to kick us off, I wanna share a very simple construct that helps organize our strategic priorities. At the highest level, we run two businesses. Warranty, our core recurring revenue business, and non-warranty, which is more transactional in nature. This nonwarranty business primarily exists to grow share of wallet among our two million plus warranty members. I won't get to the warranty side in just a few minutes, but let's start with warranty. 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 OneGuard, Landmark, HSA, and our newest brand, 210 Home Buyers Warranty. 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. 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 twenty-one percent meaning a customer can name us without being prompted. That awareness is twice as high as our nearest competitor. And due to the success of our marketing campaign, is at an all-time high.…

Thank you, Kathy, and good morning, everyone. I'm Evan Iverson, the Chief Operating Officer of Frontdoor. My job is focused on how our contractor network service operations, and technology come together to better serve our members and grow our business. Operations plays a major role in our strategic focus, and we are operating better than ever. 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. But before I detail our strategy, let's reset to when I spoke to you in 2023. CPI was at eight percent. The highest in forty years, which was a especially pronounced in home services with appliance up twelve percent and HVAC up twenty-two percent. And net, this was a sixteen percent increase in our cost per service request. 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. Coverage optimization, supply management, geographic optimization, and cost control and planning improvements. When I spoke to you in 2023, I told you how we were working through coverage Specifically, how we were managing our exposure across our marketing strategy pricing, and products. A great example is what Ray explained to you earlier on how we think about trade services fees and what we price in the cost of product It helped us fight inflation and remains a key focus today. 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 and aggregating volume across both suppliers and contractors. To ensure we get the greatest value possible. From our scale. This helped us escape the inflation trap…

Thank you, Evan, and good morning, everyone. Last year was an exceptional year for our company. We acquired 210 to drive growth, and we completed our new one point four seven billion dollar credit facility. Creating a solid financial foundation for years to come. With that, let's jump into our record fourth quarter results which demonstrated a continuation of our outstanding financial performance. Q4 revenue increased five percent to three hundred and eighty-three million dollars primarily driven by the addition of 210, as well as better than expected revenue from non-warranty services. Net income was flat at nine million dollars which is a great outcome considering it includes transaction costs, associated with the 210 acquisition our related debt financing in December. Adjusted EBITDA increased ten percent to forty-nine million dollars We also beat our fourth quarter guidance by approximately thirteen million dollars which was driven by better than expected revenue conversion, and gross profit partially offset by about seven million dollars of intentional marketing investments. Now turning to gross profit. Which increased five percent to a hundred and eighty-six million dollars and gross profit margin improved to a fourth quarter record of forty-nine percent. As you can see, we delivered another quarter of strong financial performance, and we could not be more proud Now moving to our 2024 full-year financial results. Full-year 2024 revenue increased four percent. To one point eight four billion dollars Net income increased thirty-seven percent to two hundred and thirty-five million dollars and adjusted EBITDA increased twenty-eight percent to an all-time high of four hundred and forty-three million dollars This was undeniably an exceptional year for Frontdoor. Full-year gross profit increased twelve percent to nine hundred ninety-one million dollars and gross profit margin improved four hundred and ten basis points to a record fifty-four percent. This…

Thanks, Jessica. Okay. We're near the end of the formal presentation. But before we open it up for your questions, I do wanna close with a few final thoughts. First, I am 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 to attributable or whatever that word is, to their excellence. So let me review the highlights from today's presentation. You've heard a lot about process improvements, about how we improved execution, And today, Frontdoor is operating better and more efficiently than ever before. As a result, we delivered record financial results last year. Going forward this year, we are entirely focused on growing our home warranty member account and maximizing the value of 210 as we fully integrate that business. These efforts and more have positioned the company for long-term growth through the warranty and non-warranty sides of our business. And it is great to see that all of our effort is paying off. Frontdoor's stock price has more than doubled since the middle of 2022 when I became CEO. We went from about twenty-four dollars a share to yesterday's ending price of fifty-seven seventeen per share. That's a one hundred and thirty-seven percent increase over that time frame. And trust me, it feels very good to stand here in front of you today and show just how much we have grown shareholder value since our last investor day. And yet, Frontdoor stock still remains undervalued from a historic perspective. We are only trading at about eleven times adjusted EBITDA. Our goal is to not only grow our earnings, but also get back to mid-teens multiple. So to reiterate and bring home all that you've heard this morning, we have a…

Great. Thanks, guys, for the presentation. Very helpful today. I guess, first question I had was on Conversion. It was great to see, I guess, the American Home Shield marketing camp looks like you're seeing a lot of success there with the 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 where's the investments needed for 2025 to improve conversion, get that customer count up. Would be number one. Then the second question would be on the long-term outlook. Jessica, that's my favorite slide too, so thanks for providing that. I guess, historically, the margin profile of this business has varied pretty significantly. I think you've done a pretty good job 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's still things that you can't control, like weather, So just any thoughts on how that variability is maybe narrowed in where you see that over the long term. Thanks. So, Sergio, when you say conversion, are you talking about retention what I'm not quite sure. Customer conversion. So customers coming into the funnel and then turning or interpreting them instead of customers. Okay. Yeah. You want me to take that first? Okay. Speaking to conversion, one of the things that I mentioned in my presentation was kinda 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 have seen conversion increase significantly. Some of our channels are stronger than others. So we believe that kinda going after thoseKathy Collins: mid-funnel channels will help boost that number.

Okay. And then just on margin, I think it is you know, I remember when we were here two years ago, it was the number one question in the room because as Bill pointed out, we were at forty-three percent. And I think that at that point, right, the investor community was much more accustomed to the fifty percent. So I do think that long term, as I pointed out, that is really the model that we are driving towards, and I think the variability historically been around inflation, mean, whether we can never control, and then, obviously, there's also just in terms of number of service requests. Right? 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 a boost to margin. But kind of back to the, we will control what we can control. I think we've gotten a lot better around inflation. You know, we've especially heading into this year, we've been monitoring that very, very closely. 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 results elsewhere the past couple of years. But I think heading into, you know, this macro environment that we're in right now, we are very clear on what the levers are to pull 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 them on that long-term target of fifty percent.

I think you pointed out, Sergio, the work that Evan and his team have done on process improvements, whether that's with the contractors, with their service operations, with improving the user experience through some of the tech initiatives. He just cited a couple of those. I think that is enabling us to withstand some of the shocks to the system.

Great. Thank you.

And then our next question is from Corey Carpenter with JPMorgan.

Hey, everyone. Thanks for having the event. I wanted to ask a few questions on 210. Bill, you kind of kicked it off saying you're even more optimistic about 210. You originally estimated. Why is that? Were you 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 ten million this year, thirty million, three years. Are you seeing those synergies? And then how are you thinking about growth a revenue perspective as well for 210? Thank you. So in terms of why I'm even more optimistic, you know, when you bring on a team you know, you've done all this due diligence and done as and then you you just don't completely know. I've been blown away by the by the way the team has been absorbed into our company. I think culturally, I think fitting into the organizations, we're gonna run this as one home warranty business under Kathy That has worked out very well. I think the talent the quality the level of talent that we were able to to bring over has been quite impressive. So I think that and then I think, as George pointed out, the synergy work we've done which I think we have, you know, great opportunities for that. I mean, we talked about thirty million plus over the next couple next few years. 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, you know, sometimes with integrations and acquisitions, it takes a while, but This one is really going well, and so that's why I feel so good about it. I feel good about the people. I feel good about the business. And and I think the synergy opportunity is real.

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 is gonna be a huge synergy opportunity for us that we see. And then as George has said many times, right, there's springs and cross-selling the million additional million homeowners that we're gonna have access to, the nineteen thousand home builders that we'll have access to, I just think brings a real flywheel of opportunity for synergies for us.

Okay. I know Jason has a couple of questions. Jason, you wanna ask one?

Yeah. And I'm I could probably link to that comment. One of the questions was, how many structural warrant with the customer accounts earlier home warranty only or are there additional structural Warranty counts related to the acquisition, and how do we think about that mix?

Take that one? Yeah. Why don't I take that one? When we talk about the structural warranties, I'll I'll use two terms. One, you know, sales within a particular year and then in the present prepared materials, you're probably heard me reference a million members. So sales within a particular year we we saw about a hundred and twenty to a hundred and twenty-five thousand new sales. The structural warranty is a ten-year product. So those homeowners and homes are under warranty for a ten-year period. So when you hear me reference a million, that is the warranties that were sold from 2015 through 2025. And every ten years, there's another you know, it rolls off each year. So there's always a million plus, assuming a consistent level of sales volume each year.

And one of the opportunities that back to Corey or question you asked earlier about being optimistic. We think we have a real opportunity with these nineteen thousand builders and these these million people who have access to 210 structural home warranty to see how we how we can connect with those groups as especially in the non-warranty area, but potentially with some warranty areas. So we we think that's that the the synergy opportunity there could be quite could be quite exceptional.

I know Eric's in the audience. I don't even call you up, but did you have a question from Goldman

I I wanna talk a little bit about long-term mix in the business.

So you laid out sort of the warranty case and the non-warranty case for the market opportunity. I know you're 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.

You know, one thing, and then, Jessica, if you wanna approach it. You know, one thing that and, again, we every time a bad piece of real estate news comes out, which there has been no good news, you know, we kinda get hit. Real estate's about six or seven percent of our revenue. So in turn and that has gone down, as Kathy pointed out. It is Yeah. It's it's part of that's a real part of the 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 as a from a mix perspective, I think we'll see a mix that again, we'll be driving to against the whole home warranty business as as we're gonna run it as one unit. But, you know, this business really is on the back of renewals, non-warranty, and non-warranty and other and other business. And really guarantee to continuing to grow D2C. Right. And and I and I think what you heard here is we are very bullish on home warranty. And I think that continues to be our growth engine. It's our consistent revenue model. It is bread and butter that's generating cash. And then non-warranty is really the plus. Right? Like that is that's I don't know. Call the cherry on top. But that is where the additional growth opportunities are. 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 gonna continue to be our core.

And that's why, you know, you all have asked us about this. But that the second half performance in DTC and you know, continuing that momentum is gonna be key to us.

Okay. Back over to Jason. Yeah. Two two questions related.

Is, do you have a target for percent to preferred And can you give us a service request from 2024 and an outlook for 2025.

You wanna take the percentage first? Sure.

So from a target to percent preferred, we're very proud of the eighty-five percent 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, wanna make sure we're always bringing in new contractors to test, develop, keep some competition 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 contract does dilute a bit of my ability to aggregate volume and benefit from our scale. So we found that that balance point, if you will, of how do we keep enough in and keep enough volume that we're 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.

And then just on service requests, for 2024, we're at three point six million and targeting close to four point o million for 2025. Which is where we were in twenty-three.

I know Sergio has another question, but we're gonna go to Jason first.

Can you give us your outlook for full-year interest expense?

So total debt service is about a hundred and ten million and interest expenses eighty million. Again, we're very pleased with our new debt deal. And and then the remainder is just normal amortization.

I guess, Jessica, going back to the my favorite slide, For the revenue outlook, what kind of macro environment does that assume? Is that stable from here, or is that getting better? And then Maybe on the inelasticity. I think you guys had a slide on that. With the renewals customers being the most inelastic. Does that change at all as the customer I guess, his longer tenured

So, Minh. So why don't you take the first part, and then Ray, you take the second part. Sounds good. So I think it it absolutely anticipates a return to real estate. And, you know, more normal inflation, etcetera. I mean, it it is it's it's anticipating And growth and non-warranty. And growth and non-warranty. But, yes, overall macro environment, it does. I mean, the big one there is that it it anticipates a return to estate. But in terms of is that coming through, you know, the real estate channel traditionally or in D2C, that's the work we're doing. To make sure we're capturing all of that when it comes to Mac. As we read rebuild the renewal book, that's certainly a lift also. Which is why Jessica called it a transition year this year. Trey, you wanna take the second part? On the inelasticity question, yes.

And. So what I mean by that is, does customer tenure matter when it comes to inelasticity It does. Just because the longer somebody's been with us is a demonstration that they value the home warranty. And at the same time, what I'd mentioned, it's about how much value are we creating for the member, which is really more of a prediction of usage and therefore how much, it's gonna cost us and therefore value we deliver to the member, it also that also matters a lot. So I wouldn't say it's just tenure. Although, yes, that's a factor. This usually is a sign that they do value their home more a lot. I 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 a 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.

Okay. Corey's up next.

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 calls for cost per claims inflation is going from zero percent this year or last year mid-single digits this year. But bigger picture on tariffs, could you just remind us where do you have what are you most sensitive to? There's new headlines every day. What matters for you guys? On the tariff side? And and how just how we should think about that more broadly.

Certainly. And 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, you know, any number of miscellaneous parts that may come from overseas. And so tariffs that target specific economies, China, can be problematic. And then across our three largest trades, appliance, plumbing, HVAC, 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 I would say, magic weapon against tariffs. Ultimately, the cost will flow through our system. System. 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 came from labor or materials. I wanna figure out how to get that back down and anywhere I can drive efficiency in the system to offset it.

I think, Corey, the other piece is building on what Evan said. You know, inflation has a has a big impact, you know, that is part of the tariff situation, fuel, the like, which which, you know, will impact our contractors and their labor rates, etcetera. Ray and team really closely monitor all of these inputs because for us, the 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 conditions that and that's why I think you know, Jessica and I have talked about this at length. And that's why we have built this in to have what might be a more conservative guide I think it's appropriate given that, you know, I mean, today, we're just learned tariffs are moving up to March fourth, and China's gonna get another ten percent. So I think it was prudent for us to 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, etcetera, and the impacts that my macro may have on new builds.

And just to follow-up, in terms of your own sourcing versus getting getting the parts in appliances from Service Pros. Any rough split on how much you guys are sourcing yourselves versus versus getting externally?

It varies by trade. So for example, within appliances, we buy one hundred percent of the appliances we replace. We estimate within HVAC and plumbing would be somewhere between fifty and sixty-five percent, again, depending on the trade and part of of things we produce. I think I'll remind you back to our approach of partnership though, I'm most concerned that our contractors hit their total cost and total quality target. And if they can do that, supplying their own parts, I'm ecstatic. 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.

PJ?

Thank you. I actually use the program and and love it, AHS. So on the, you know, continuing the discussion on on the appliances side, Do you have any relationships with the suppliers or vendors because the HVAC is generally, you know, have a replacement program right now. Things like that. Do you have any of that, you know, to mitigate No. We have I mean, that's, again, the benefit of our scale. We've got very, very strong relationships with all of the major suppliers. Which is is how we're able to pass those costs on to our members, to contractors, and as even as we talk about synergies with 210, there's a lot of opportunity there.

Within the screenshot of the app that was in Kathy's materials at no accident showed the HVAC page, but if you swipe once 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 within AHS. So you can leverage our scale to replace your washer and dryer. Or any other appliance for that matter.

Think one one question. On the, like, the DTC, kind of how you initially moved away from real estate you know, heavy to DTC. And within DTC, do you have with the changing kind of 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.

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 yeah. The real estate market is down here. So we're focusing greatly on the D2C market, knowing that we are ready when it 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 of ways to partner. And find those new streams of revenue and new channels. So absolutely.

Okay. Back over to Jason.

Yeah. This one says, you mentioned five million home warranties Where where do you think that can grow? To? Or do you think that one or is want me to take that one? Yeah. Sure. Take that.

Far as size of the home services in this home warranty business. So when we're talking five 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 fifteen and twenty million additional homes in the near term. Ultimately, we see that full eighty-seven million owner-occupied home as our addressable market. But over the horizon, we're operating right now fifteen to twenty additional homes what we're targeting to get.

I'm glad we only threw two numbers at you also. Beneficial.

Jason, another one from online.

Yeah. Kind of a related question. What is the runway for D2C look like?

So I think there's a huge runway exactly to what George just spoke to. We've only got five million out of eighty-seven million homes. It is on us to figure out how to explain the home warranty value's been benefits to the homeowners because that I think has been an area of confusion for years. You know, people are very confused between homeowners insurance and a home warranty. So like I said, that's we're taking that on as the leaders in the category to say, we need to educate people 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 D2C channel in Q4. We're gonna see that continue, and I think, like, said, there's a very long runway. And to George's point, our goal is to see that expand from five million to fifteen to twenty million. And I also think that the work you've done targeting, you talked about millennials and Hispanic millennials, The research you've done, it's about peace of mind, protection Right. And expense savings. Yep. Especially for that younger home buyer. I think that's gonna pay off for us as we as we focus our message. I think I think that's part of your funnel discussion. Exactly.

Any more questions in the room? I don't wanna keep Jason busy. Yes. Go ahead.

Yeah. In your last investor day, there was a slide on home home warranty attach rates. You know, I think historically, in the in the category, there are one in three. And now that bottom out coaster one and four. I wanna understand, you know, in that glide path, your long-term targets You know, the current home environment where you have, you know, 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, you know, organic CAGR and and how much have you embedded this abnormally difficult environment where you may have some upside drivers of things like attach rates or volumes start to pick up again.

You're talking about real estate attach rates? Yes. Yeah. So RE one, real estate one, attach rates historically were close to thirty percent. They are now we're our best guess is about fifteen percent. So they have dropped dramatically. I as I said in my presentation, the best news we've held our share, and 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 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 were really getting at, at, that's where we're focusing more on the D2C, 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. But we think that there is supplemental volume to be had by marketing directly to new home buyers and through retargeting, finding people who are starting to look for new homes. So we can get to them early in their process. And I think kind of just getting back to another question that's relates to the question you had, Sergio, and just how does this relate to our overall outlook and our guide. And so when I say a return 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 it did five years ago. And I think that the work Kathy's doing to be more focused on getting directly to the home buyer for through D2C is where our assumptions around the real estate where the real estate market will contribute when it comes back in terms of our long-term outlook and guide.

Anything else from the room? Jason?

Yeah. Does your one twelve pricing model leave you vulnerable to immediate inflation. Probably for Ray. I could take that. Yeah. You take it. Yeah. 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. That said, as Bill mentioned, we take a much more proactive posture, learning, all that we can from 2022. So that way, we understand the signpost, whether those are headlines, whether those are core categories within PCE, PPI, and then having our battery of tactics, initiatives ready to go we understand which levers to pull and when as soon as possible. Yeah. And I mean, I think from Ray's presentation, you'll you saw that predictable and recurring is a good thing, but cost hit us today and we get to offset it with one twelfth 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 We don't wanna be caught behind. Right. This year, which is why we're gonna have to be especially with everything moving so quickly, What what steps we choose to take. This year or last year, we chose to take a mid-single-digit price increase because we felt like wanted to get into a more normalized range. That may have you know, we'll see where that Yeah. Whether that carries forward. And we have both pricing as a lever, we have trade service fees as a lever, and then got again the internal initiatives that we've got to manage costs in terms of supply chain. So think like everyone else, we are very eyes wide open on what's ahead. We've built you know, the risk into our plan, but we've also got a series of tactics that we are ready to fire off and deploy we as we think that

Yep. Okay. Our last question from online will be read from Jason.

How are you thinking about additional partnerships beyond Moen?

Okay. Yeah. So Moen, we love we love our Moen partnership. 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 Moen partnership, we just started in June in the state of California, and what we've seen has been pretty remarkable. You saw the state expansion. We will continue to expand but, you know, we have to then deal with all of the insurance agents they're working with, and, of course, all of our plumbing contractors and all the state regulators. So it does take time. So we know that there's still a long runway just with Moen. But we are actively looking for other partners can be just as valuable. And I think one of the things that are and it reports into Cathy this partnership team with people seeing you know, us being able to explain what we've done with HVAC. And now we have a real partner in Mo, and they see the value that the backbone some extent of this company is what Evan laid out, which is the contractors. And so our ability I mean, we got the Moen deal because we have a national network of plumbers, that can go in. It's great for our plumbers because the product's drop shipped and then they go to the house You know, put the valve on and, you know, they're done. And they 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 in potentially other categories is why we're so bullish on this area.

Bill, we have no more questions, so we're gonna close the Q&A session. If you wanted to say any final words.

Yeah. I mean, you know, the stocks getting hammered today. We on the investor day, you know, it's never a good look. But, you know, the macro situation is such that, you know, we we all have to deal with it. We're not the only company affected by that. 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 I think we feel good about how Q1's gonna net out that Jessica laid out for you. And, you know, this is gonna be a year where know, we gotta 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, you know, we feel very good about the state of the company. And and where we're going. So anyway, got a buying opportunity for a lot of you. So thanks very much. Thanks for coming. Thanks for the webcast, folks.

Thank you. Thank you very much. Thank you.