FTDR

Frontdoor is the leading US home-warranty and home-services provider (American Home Shield and related brands), a subscription business that collects recurring membership fees and manages a network of contractors to fulfill repair claims. The model is capital-light and cash-generative: FY2025 revenue grew 13.6% to $2.09B, gross profit rose 16.8% with a 55.3% gross margin, net income increased 8.5% to $255M, and EPS climbed 13.6% to $3.42. The multi-year trajectory is strong — net income has more than doubled from the $71M FY2022 trough as the company has improved retention, pricing and claims efficiency.

Cash generation is the highlight: operating cash flow surged 54.1% to $416M against just $26M of capex, reflecting the negative-working-capital, prepaid-subscription economics. The company is deploying that cash aggressively into buybacks — $283M (+75.8%), shrinking shares 5.5% — and cash on hand grew 34.4% to $566M. The eye-popping 105.4% ROE and 5.72x liabilities/equity are artifacts of equity having been shrunk by repurchases to just $242M, not signs of financial stress; long-term debt of $1.17B is modest against $416M of annual operating cash flow and actually declined 2.2%.