Frontdoor : Second-Quarter 2020 Earnings Webcast

Second-Quarter 2020 Earnings Webcast

August 5, 2020

Today's Speakers

Rex Tibbens	Brian Turcotte	Matt Davis
President &	Senior Vice President &	Vice President
Chief Executive Officer	Chief Financial Officer	Investor Relations & Treasurer
		2

Forward Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, projected future performance and any statements about Frontdoor's plans, strategies, prospects, and the impact of COVID-19 on Frontdoor's business. Forward-looking statements can be identified by the use of forward-looking terms such as "believe," "expect," "estimate," "could," "should," "intend," "may," "plan," "seek," "anticipate," "project," "will," "shall," "would," "aim," or other comparable terms. These forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Such risks and uncertainties include, but are not limited to: the impact of the global COVID-19 pandemic; weather conditions and seasonality; weakening general economic conditions; lawsuits, enforcement actions and other claims by third parties or governmental authorities; the effects of our substantial indebtedness; the success of our business strategies; and failure to achieve some or all of the expected benefits of our separation from ServiceMaster Global Holdings, Inc. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of new markets or market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this news release. For a discussion of other important factors that could cause Frontdoor's results to differ materially from those expressed in, or implied by, the forward-looking statements included in this document, you should refer to the risks and uncertainties detailed from time to time in Frontdoor's periodic reports filed with the SEC, including the disclosure contained in Item 1A. Risk Factors in our 2019 Annual Report on Form 10-K filed and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, as such factors may be further updated from time to time in Frontdoor's periodic filings with the SEC. Except as required by law, Frontdoor does not undertake any obligation to update or revise these forward-looking statements to reflect new information or events or circumstances that occur after the date of this news release or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review Frontdoor's filings with the Securities and Exchange Commission, which are available from the SEC's EDGAR database at sec.gov, and via Frontdoor's website at frontdoorhome.com.

Non-GAAP Financial Measures

To supplement Frontdoor's results presented in accordance with accounting principles generally accepted in the United States ("GAAP"), Frontdoor has disclosed the non-GAAP financial measures of Adjusted EBITDA, Free Cash Flow, and Unrestricted Cash.

We define "Adjusted EBITDA" as net income before: provision for income taxes; interest expense; depreciation and amortization expense; non-cashstock-based compensation expense; restructuring charges; Spin-off charges; secondary offering costs; and other non-operating expenses. We believe Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives, Spin-off charges and equity-based,long-term incentive plans.

We define "Free Cash Flow" as net cash provided from operating activities less property additions. Free Cash Flow is not a measurement of our financial performance or liquidity under GAAP and does not purport to be an alternative to net cash provided from operating activities or any other performance or liquidity measures derived in accordance with GAAP. Free Cash Flow is useful as a supplemental measure of our liquidity. Management uses Free Cash Flow to facilitate company-to-company cash flow comparisons, which may vary from company to company for reasons unrelated to operating performance.

We define "Unrestricted Cash" as cash not subject to third-party restrictions. For additional information related to our third-party restrictions, see "Liquidity and Capital Resources - Liquidity" under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Annual Report on Form 10-K filed with the SEC.

See the schedules attached hereto for additional information and reconciliations of such non-GAAP financial measures. Management believes these non-GAAP financial measures provide useful supplemental information for its and investors' evaluation of Frontdoor's business performance and are useful for period-over-period comparisons of the performance of Frontdoor's business. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly entitled measures reported by other companies.

3

Current Business Focus

• Opportunistically investing in resilient business model
• • Direct-to-Consumerchannel
  • Improving customer retention
  • Building emerging businesses
• Improving customer experience
• Responding to evolving business conditions

4

Second-Quarter 2020 Summary

• Delivered solid financial results
• Managed challenging environment
• Invested in direct-to-consumer marketing
• Maintained customer retention at 75%
• Expanded Candu on-demand platform

5

Q2 2020 Financial Summary

$ millions

Net Adjusted Revenue Income EBITDA(1)

$417 $49 $100

1. See the Appendix accompanying this presentation for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to the nearest GAAP measure. See "Reconciliations of Non-GAAP Financial Measures" included in this presentation for a description of the calculation for this measure.

6

Q2 2020 Adjusted

EBITDA(1) Bridge

$ millions
Three Months Ended June 30, 2019	$105
Impact of change in revenue(2)	25
Contract claims costs	(13)
Sales and marketing costs	(14)
Customer service costs	(2)
General and administrative costs	(1)
Other	(1)
Three Months Ended June 30, 2020	$100

Note: Revenue and expense items are year-over-year increases/(decreases); amounts presented in table may not sum due to rounding.

(1)	See the Appendix accompanying this presentation for a reconciliation of Adjusted EBITDA, a non-
GAAP measure, to the nearest GAAP measure. See "Reconciliations of Non-GAAP Financial Measures"
included in this presentation for a description of the calculation for this measure.
(2)	Revenue conversion is calculated using the estimated gross margin impact of new home service plan	7
revenue along with the impact of price changes.

Q2 2020 Cash Flow

$ millions	Six Months Ended
	June 30,
Net cash provided from	2020	2019
(used for):
Operating Activities	$140	$140
Investing Activities	(19)	(12)
Financing Activities	(4)	(4)
Cash increase during	$118	$124
the period

$ millions

Free Cash	Available
Flow(1)	Liquidity(2)
$122	$622

(1} See the Appendix accompanying this presentation for a reconciliation of Free Cash Flow, a non-GAAP measure, to the nearest GAAP measure. See "Reconciliations of Non-GAAP Financial Measures" included in this presentation for a description of the calculation for this measure.

1. Consists of $372 million of Unrestricted Cash and an undrawn revolving credit facility of $250 million

8

Q&A

For more information please visit our website: frontdoorhome.com

9

APPENDIX

10

Q2 2020

Consolidated

Results

Note: See elsewhere in this Appendix for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to the nearest GAAP measure; amounts presented in table may not sum due to rounding.

$ millions, except per share amounts			Three Months Ended
					June 30,
		2020			2019			Better / (Worse)
Revenue	$	417	$	388		$	30
YoY Growth								8%
Gross Profit		218			205			13
% of revenue		52.1%			52.9%			(0.8) pts
Selling and administrative expenses		125			104			(21)
% of revenue		29.9%			26.9%			(3) pts
Depreciation and amortization expense		10			6			(4)
Restructuring charges		1			-		(1)
Interest expense		14			16			2
Interest and net investment loss (income)		3			(2)			(4)
Income before Income Taxes		65			81			(15)
Provision for income taxes		17			20			4
Net Income	$	49	$	60		$	(12)
Other Comprehensive Loss, Net of Income Taxes:
Net unrealized loss on derivative instruments		(1)			(7)			6
Total Comprehensive Income	$	48	$	53		$	(5)
Earnings per Share:
Basic	$	0.57	$	0.71		$	(0.14)
Diluted	$	0.57	$	0.71		$	(0.14)
Weighted-average Common Shares Outstanding:
Basic		85.2			84.6			0.6
Diluted		85.5			84.8			0.7
Adjusted EBITDA	$	100	$	105		$	(5)

11

YTD 2020

Consolidated

Results

Note: See elsewhere in this Appendix for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to the nearest GAAP measure; amounts presented in table may not sum due to rounding.

$ millions, except per share amounts				Six Months Ended
					June 30,
		2020			2019			Better / (Worse)
Revenue	$	711	$	658	$	53
YoY Growth								8%
Gross Profit		364			333			31
% of revenue		51.2%			50.6%			0.6 pts
Selling and administrative expenses		229			193			(36)
% of revenue		32.3%			29.3%			(3) pts
Depreciation and amortization expense		18			12			(6)
Restructuring charges		4			-			(4)
Spin-off charges		-			1			1
Interest expense		29			31			2
Interest and net investment loss (income)		1			(3)			(4)
Income before Income Taxes		83			98			(15)
Provision for income taxes		21			25			4
Net Income	$	62	$	73	$	(12)
Other Comprehensive Loss, Net of Income Taxes:
Net unrealized loss on derivative instruments		(16)			(12)			(4)
Total Comprehensive Income	$	45	$	61	$	(16)
Earnings per Share:
Basic	$	0.73	$	0.87	$	(0.14)
Diluted	$	0.72	$	0.87	$	(0.15)
Weighted-average Common Shares Outstanding:
Basic		85.2			84.6			0.6
Diluted		85.4			84.7			0.7
Adjusted EBITDA	$	147	$	149	$	(2)

12

Net Income to Adjusted EBITDA

Reconciliations

$ millions		Three Months Ended			Six Months Ended
		June 30,				June 30,
		2020			2019			2020			2019
Net Income	$	49	$	60	$	62	$	73
Depreciation and amortization expense		10			6			18			12
Restructuring charges		1			-			4			-
Spin-off charges		-			-			-			1
Provision for income taxes		17			20			21			25
Non-cashstock-based compensation expense		5			3			8			4
Interest expense		14			16			29			31
Secondary offering costs		-			-			-			2
Other non-operating expenses(1)		5			-			5			-
Adjusted EBITDA	$	100	$	105	$	147	$	149

Amounts presented in the above tables may not sum due to rounding.

1. Other non-operating expenses for the three and six months ended June 30, 2020 includes (a) a loss on investment of $3 million, (b) incremental direct costs related to COVID-19 of $1 million, which were temporary in nature and primarily related to incremental health and childcare benefits for our employees and hoteling costs related to our offshore business process outsourcers and (c) acquisition-related transaction costs of less than $1 million.

13

Net Cash Provided from Operating Activities to Free Cash Flow Reconciliations

$ millions	Three Months Ended				Six Months Ended
		June 30,				June 30,
		2020				2019				2020			2019
Net Cash Provided from Operating Activities	$	80			$	88			$	140		$	140
Property Additions		(11)				(6)				(18)			(10)
Free Cash Flow	$	70			$	82			$	122		$	130

Amounts presented in the above tables may not sum due to rounding.

14