Thank you, operator. Good morning, everyone, and thank you for joining Frontdoor's Third Quarter 2022 Earnings Conference Call. Joining me today are Frontdoor's Chairman and Chief Executive Officer, Bill Cobb, and Frontdoor's Chief Financial Officer, Brian Turcotte. The press release and slide presentation that will be used during today's call can be found on the Investor Relations section of Frontdoor's website, which is located at investors.frontdoorhome.com. As stated on Slide 3 of the presentation, I'd like to remind you, this call 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, November 3, and except as required by law, the company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. We will also reference certain non-GAAP financial measures throughout today's call. We have included definitions of these terms and reconciliations of these non-GAAP financial measures to their most comparable GAAP financial measures in our press release and the appendix to the presentation in order to better assist you in understanding our financial performance. I will now turn the call over to Bill Cobb for opening comments. Bill?

Thanks, Matt, and good morning, everyone. Since taking over the CEO role in June, my leadership team and I have taken quick and decisive action to tackle one of the most challenging macroeconomic environments in the company's history, and we are delivering on the initiatives outlined on our last earnings call. We are laser-focused on rebuilding the core Home Service Plan business. We are improving execution. We are taking aggressive action to fight inflation and we are reducing our SG&A expense footprint. While we are seeing signs of better days ahead, there is more work to be done as we continue to transform Frontdoor. Let's begin on Slide 4 and the actions we have taken over the last several months. First, we completed a comprehensive review of our SG&A expense footprint that resulted in a 7% workforce reduction, primarily outside of the revenue generating and service-related areas. These actions are working as we have reduced our 2022 SG&A by $45 million from our original outlook. Second, consistent with our second quarter comments, our pricing strategy continues to target a 12% to 13% price increase in 2022 compared to year-end 2021, one of the largest in the company's history. Third, we are improving execution within our core Home Service Plan business. Under new leadership, we are changing Frontdoor's culture to further optimize how we operate. And lastly, we are working to advance our business transformation initiatives. I have challenged our team to reimagine how Home Service Plans can work better for our customers and our contractors. For example, we recently completed an extensive consumer segmentation study. We have been analyzing the data and expect it will allow us to better meet the needs of different audiences. Let's now turn to Slide 5 and the direct-to-consumer or DTC channel, where we have seen a decline in demand generation for two primary reasons. First, rising marketing costs have resulted in fewer leads entering our sales funnel. Second, customers have become more price and discount sensitive, and we have seen the landscape shift as competitors have become more aggressive with price promotions. The leaders I brought in to fix these challenges have accomplished a lot over the last quarter. We have refreshed our marketing to drive more demand while also working to improve our conversion rate. Also, we upped our game with some very successful price promotions in September, and we are in the process of running more in the fourth quarter. Now turning to Slide 6 and a review of our real estate channel. We are starting to see the housing market moderate as we exit a historically strong seller's market that has existed over the last few years. According to the National Association of Realtors, September data showed existing home sales declined nearly 24% year-over-year and inventory increased to 3.2 months of supply from 2.4 months over the prior year period. We are also hearing commentary from our real estate brokerage partners that the market is starting to turn. In fact, many real estate companies are working to retrain their agents on best practices, such as utilizing inspections and Home Service Plans to improve the appeal of their listings. These trends should increase the Home Service Plan capture rate as a percentage of existing home sales. However, we are carefully monitoring the level of existing home sales as we head into 2023. We see a significant decline in existing home sales will shrink the potential pool for Home Service Plan purchases. As I've said before, regardless of market conditions, I believe we can do a much better job of executing the real estate. I am very excited about what the team is doing to build our sales culture, fix structural misalignments, upgrade our talent, and refocus on the most impactful partnerships. Now let's turn to Slide 7 and the renewal channel. To date, our renewal channel is performing well. In fact, I am pleased to share our blended renewal rate actually increased in the third quarter to approximately 72%. While our customers remain generally inelastic, we are closely monitoring how our higher price increases may affect our customer base over the next several quarters. I want to be very specific about our pricing strategy. Consistent with our second quarter comments, we are still on track to deliver a 12% to 13% price increase by the end of this year. The larger benefit will actually occur in next year, as our pricing actions have been weighted more to the second half of 2022. But to be clear, for 2022, we have an approximately 8% realized price increase versus the prior year. Longer term, we expect renewal rates will gradually rise as we zero in on creating a better customer experience. In conclusion, I am confident that our financial results will improve from the actions we are taking and as the macro challenges subside, and we are already seeing signs that things might be moving in our direction as we close out 2022. I will now turn the call over to Brian to review our financial results. Brian?

Thanks, Bill, and good morning, everyone. Please turn to Slide 8, and I'll review our third quarter 2022 financial results. Third quarter revenue increased 3% versus the prior year period to $484 million as a result of a 5% increase from price and changes in customer product mix, which more than offset a 3% decline in customer volume. Looking at our Home Service Plan channels, third quarter revenue derived from customer renewals increased 8% versus the prior year period due to improved price realization and growth in the number of renewed Home Service Plans. First-year real estate revenue decreased 30% versus the prior year period, reflecting a continued decline in the number of Home Service Plans in this channel due to the ongoing challenges presented by the seller's market driven in part by extremely low home inventory levels across the U.S. First-year DTC revenue increased 8% versus the prior year period with 11% growth driven by improved price realization and a mix shift to higher-priced products, partly offset by 3% lower volume. Third quarter revenue reported in our other channel increased $2 million over the prior year period driven primarily by growth in our ProConnect on-demand home services business. Gross profit declined 17% in the third quarter versus the prior year period to $210 million, and our gross profit margin was 43%. The gross profit decline was driven by a $58 million increase in contract claims costs, primarily reflecting inflationary cost pressures, which I'll speak to more in a moment. Net income decreased $48 million in the third quarter to $28 million, primarily driven by the gross profit decrease, a $14 million goodwill and intangibles impairment charge, and $5 million for restructuring. The $14 million goodwill and intangible assets impairment was driven by a shift in focus to further integrate Streem's technology into the core Home Service Plan business and less focus on selling this technology platform to third-party B2B customers as a SaaS platform. This resulted in significantly lower projected revenue per Streem. And based on a discounted cash flow analysis performed in connection with preparing our third quarter financial statements, we determined that the carrying amount of the Streem reporting unit exceeded its fair value. The third quarter restructuring charges of $5 million were primarily comprised of a $2 million impairment of certain internally developed software and $3 million of severance and other costs. $2 million of the severance costs were related to the workforce reduction as part of the strategic review of our SG&A expenses we completed in the third quarter. Adjusted net income decreased $32 million over the prior year period to $46 million, and adjusted EBITDA was $79 million in the third quarter or $42 million lower than the prior year period. Let's move to the table on Slide 9, and I'll provide more context for the year-over-year decline in third quarter adjusted EBITDA. Starting at the top, we had $14 million of favorable revenue conversion in the third quarter versus the prior year period. Contract claims costs increased $58 million in the third quarter versus the prior year period, primarily driven by inflationary cost pressures, including higher contractor-related expenses and parts and equipment costs. The rate of inflation on a cost per claim basis versus the prior year period was relatively flat with the second quarter at approximately 23%, and the primary cost drivers remain the same. Sales and marketing costs decreased $2 million in the third quarter versus the prior year period, primarily driven by reduced investment in our ProConnect on-demand home services business. Service costs also decreased $2 million in the third quarter versus the prior year period, primarily driven by lower labor costs. And finally, G&A costs increased $3 million in the third quarter, primarily due to higher personnel and insurance costs. While the macroeconomic environment remains challenging, we continue to look for opportunities to improve margins while still investing for growth. Beyond the benefits of taking additional price, our top priority to improve gross margin is to mitigate the impact of claims cost inflation, and we continue to work on the initiatives I reviewed last quarter. These include increasing the percent of total jobs assigned to our preferred contractors, expanding our recruiting efforts to increase our contractor count, reviewing all service cost estimates over a certain dollar limit from nonpreferred contractors, and continuing to maximize the benefits of our supply management efforts. As Bill mentioned, we conducted a comprehensive review of our SG&A footprint in the third quarter and reduced our workforce by 7%, which resulted in annual operating expense savings of over $10 million. I would also note, we found opportunities to reduce our capitalized spend to improve cash flow by approximately $5 million on an annualized basis. Please now turn to Slide 10 for a review of our cash flow and cash position. Net cash provided from operating activities was $80 million for the 9 months ended September 30, 2022, which comprised $121 million in earnings adjusted for non-cash charges, offset in part by $41 million of cash used for working capital. Cash used for working capital was primarily driven by seasonality and the impacts on deferred revenue of a decline in the number of first-year real estate home service plans. Net cash used for investing activities was $25 million for the 9 months ended September 30, 2022, and primarily comprised capital expenditures related to investments in technology. Net cash used for financing activities was $74 million for the 9 months ended September 30, 2022, primarily driven by $59 million of share repurchases in the first half of the year. While we didn't repurchase shares in the third quarter, we continue to prioritize share repurchases in our capital allocation strategy and remain committed to returning cash to our valued shareholders. However, like many other U.S. public companies, the amount of additional share repurchases, if any, will depend on the macroeconomic environment and how our business performs throughout the rest of this year and into 2023. Free cash flow calculated as net cash provided from operating activities minus property additions was $50 million for the 9 months ended September 30, 2022, and we're projecting approximately $85 million of free cash flow for the year ended December 31, 2022. We ended the third quarter with $244 million in cash with restricted net assets totaling $157 million and unrestricted cash totaling $87 million. I'll now conclude my prepared remarks with our current thoughts regarding the financial outlook for the fourth quarter and full year 2022, provided on Slide 11. We expect our fourth quarter revenue to be within a range of $326 million to $336 million, which reflects a mid-single-digit increase in renewal channel revenue versus the prior year period that has more than offset an approximately 30% decline in real estate channel revenue, a low single-digit revenue decline in the DTC channel, and lower revenue from both ProConnect and Streem. Fourth quarter adjusted EBITDA is expected to range between $4 million and $14 million, a decline from the prior year period as a result of the inflationary cost pressures and the impact of lower real estate channel revenue. Turning to full year. We raised our revenue outlook from last quarter and it is projected to be within a range of $1.65 billion to $1.66 billion. The full year revenue growth assumptions include upper single-digit revenue growth in both the DTC and renewal channels and a nearly 30% decrease in the real estate channel driven by the historically challenging sellers' market and extremely low levels of home inventory. On a consolidated basis, our core Home Service Plan business revenue growth is now expected to be in the low single digits, mostly driven by 6% growth from higher price and product mix, which more than offsets 3% lower volume. Our overall customer count is expected to decline by approximately 5% in 2022 as a 1% increase in renewal customers will be more than offset by a 30% decrease in real estate customers and a 5% decline in DTC customers. In regard to customer counts, please note that in an effort to assist you in better understanding our business and trends, we have provided historical customer counts by channel in the appendix of the webcast deck and will update quarterly going forward. Additionally, reductions in ProConnect marketing investments starting in the back half of the year will lower the on-demand full year revenue target to approximately $35 million. Our full year gross profit margin is projected to be approximately 41% driven primarily by the continuation of high-cost inflation, partly offset by higher pricing and process improvement efforts. This projection assumes that inflation will average approximately 20% on a cost per service request basis and the actual number of member service requests will be down approximately 4% in 2022 versus prior year. We're now targeting full year SG&A to range between $515 million and $520 million, including a stock compensation expense target of approximately $23 million. As Bill mentioned earlier, the $45 million decrease from our original full year SG&A guidance was primarily driven by the successful execution of our expense reduction initiatives. Based on these updated inputs, we raised our full year adjusted EBITDA range to be between $185 million and $195 million. And finally, we're projecting our full year capital expenditures to range between $40 million and $45 million and the annual effective tax rate to be approximately 27%. The 300 basis point increase in our annual effective tax rate from the previous estimate in August is primarily driven by the nondeductible goodwill impairment and share-based awards.

I'll now turn the call back over to Bill for closing comments before Matt opens the question-and-answer session. Thanks, Brian. I truly believe that this is an industry that is ripe for innovation. In addition to the work we are doing with the core business, the team has been doing some really innovative work that I'm excited to share with you at our Investor Day on 3/2/23 in Midtown Manhattan. We are currently in the testing phase, and some of our plans will evolve over the next several months. So we aren't going to get into specifics today. But as you can see from Slide 12, we have a great venue lined up, and I encourage all of you to try to attend in person. With that, I will now hand it over to Matt to open the Q&A session.

Thanks, Bill. Operator, let's open the line for questions.

And our first question today comes from the line of Ian Zaffino of Oppenheimer.

This is Isaac Sellhausen on for Ian. I guess starting just on the pricing side, you guys called out the higher pricing in the quarter and the full year guidance assumes, so I guess, higher price and product mix. I guess you had talked about targeting a 12% to 13% price increase this year. I guess how much do we sort of expect that to benefit this year and then into next year?

Yes. Isaac, I had mentioned, and I know it gets a little confusing because of the way we have to recognize revenue. For 2022, the realized price increase will be 8%.

Okay. Great. And then just on the contract claims costs, I guess, could you give us a little bit of color on sort of the cost and the inflation side between just contractor expenses and types of parts and equipment? I guess is there anything decelerating? Or what have you seen accelerate from the last quarter?

Yes, thank you for the question. We believe that the inflation from our contractors is stabilizing. As I noted in my prepared remarks, the inflation rate on a service request basis was about the same as it was in the second quarter year-over-year, which indicates stabilization. I can't definitively say it's moderating yet, but that possibility exists. This quarter benefited from a decrease in service requests, which is encouraging. Additionally, our overall EBITDA exceeded expectations, and we experienced favorable SG&A as well. Overall, it was a positive quarter in that regard. Does that help?

Isaac, I'll add that our contractor relations team has put in significant effort to navigate the unprecedented inflation we've experienced over the last two decades. We remain cautious and are closely collaborating with them. Observing the recent shifts in the economy, including changes in interest rates, reinforces our caution. However, we feel we have a good grasp on the situation. While I agree with Brian that we can't say things have fully moderated or stabilized, we have gained a better understanding and are more closely monitoring it. As Brian has mentioned before, the primary costs are related to labor, including labor rates and shortages, along with fuel costs. There's also been an increase in parts and equipment. I think it's fair to say that we are witnessing a greater sense of stability in these areas.

Yes, I agree.

Okay. Great. That's helpful. And then just last one, if I could squeeze it in. I know you guys provided the Home Service Plans account by channel, which is helpful to break it out. I know, obviously, you gave the guidance for the full year on the customer growth. Maybe if you could just provide some details on how you're thinking about 2023 in terms of renewals and the DTC channel obviously, you gave some color on the real estate side, but that would be helpful just to parse through the three different channels.

Yes. We're not ready yet to talk about 2023, but we obviously have a lot to share with you when we get together in March.

Maybe can you just talk about, Bill, your thoughts on the on-demand offering going forward? How are you thinking about that? Maybe two, on the SG&A kind of reductions, kind of what areas specifically? And third, just on the ad environment. I think you said it still remains tough, although some of that data sounds like it's getting a little bit easier as well as, so any commentary there would be helpful.

Yes. Let me address your points one by one. Aaron, regarding demand, we more than doubled ProConnect revenue this year compared to last year. As I mentioned in the second quarter, we see potential in the on-demand business and are figuring out the best go-to-market strategy. We aim for it to become a larger part of our business. Raj Midha and his team have done commendable work in developing that service. We are optimistic about it and will provide more updates in March. In 2022, we are pleased with our efforts, particularly in connecting with contractors, which will definitely be part of our future plans. Concerning SG&A, I discussed the workforce reduction, which is never an easy decision, but we felt it was necessary to optimize our workforce. We also reduced some marketing expenses and other areas within SG&A. I focused on leading service operations to ensure we continue to support our customers, especially during the busy season in Q3. It was a comprehensive effort, and I was proud of the executive team for coming together on this. We rigorously evaluated headcount and made careful decisions. We reviewed all aspects of the cost structure, and we successfully reduced expenses by $45 million from what we initially projected in 2022. Regarding ad spending, you raised a good point. It appears that some major platforms are facing challenges, which might work to our advantage. The past environment has been tough, and while it remains competitive, I wouldn't say we've seen a significant ease in marketing costs. However, it seems to be trending positively, and we hope this will help us generate more leads. Brian, would you like to add anything?

No. That's spot on.

I believe you said the cost per claims were up around 22% unless I misheard that. Can we get a sense on how much labor was up versus parts and equipment? I mean, it sounds like labor is up more, but what's sort of the breakout there?

Yes. It was similar to Q2. And if we look at our overall claims cost, it's about half contract related, which would be labor, fuel, their overhead and the other half that parts and equipment, and that was pretty consistent this quarter versus last quarter.

I think the specific number was 23%, right?

Yes, 23%.

Okay. And then just thinking about pricing increases 12% to 13% sort of on, but I understand that takes time to earn through, but it seems like that could come up light. So I guess, where do you feel your pricing is in the industry kind of relative to competitors? Is there anything that may be holding you back from going higher there? Will you need to go higher there do you think to really repair margins?

Yes, we are considering that. I want to be clear that I'm not dodging the question. We will not implement any price increases this year. We are still developing our pricing strategy for next year and I'm not prepared to discuss that just yet. It's possible that we may adjust prices, but for now, we are still evaluating our options. We have made some adjustments in our marketing efforts due to previous price increases, aiming to steer customers more toward the gold product rather than the lower-priced platinum product, as their coverages differ. We are taking steps within our marketing strategy to encourage positive unit sales, and more information will be shared on that later, as it remains a significant topic within the company.

Just wanted to see if you had any sense on what's driving the lower service request volume in the quarter. I think you said that came in below your expectations? And then just how you're thinking about that going forward? And then maybe for Bill, could you just talk more about your discounting strategy in the direct-to-consumer channel? I think you said you started that in September and you claim on doing some more in Q4 and how that fits in with the broader price increases you're making?

Sure. Thanks, Cory. Yes, I think Q3, there was a lot of benefit from HVAC. I think the weather cooperated for us. So that was a lot of the benefit in the quarter. But also, what we're seeing since the start of this pandemic, and the pandemic trades have been plumbing and appliances, those have begun to trend down continually since the peak. So those are getting more favorable, too. So again, the Q3 was basically mostly HVAC favorability.

Yes. Regarding pricing and discounting, as competitors become more aggressive by comparing our top-tier product to their mid-tier option, we've observed some advantages in this dynamic, which is to be expected. We are integrating promotions into our overall pricing strategy to boost unit sales. This is partly driven by consumer sentiment surrounding inflation and recession, as we remain a discretionary purchase in the home warranty sector. We're incorporating this as an additional tool in our marketing efforts. We do not disclose the timing of promotions and manage them closely along with our marketing materials. This approach is an integral part of our pricing strategy designed to respond and stimulate unit sales. While most of the revenue benefits will manifest next year, we are managing this as a multi-year, 12-month business strategy. Thus, it is a component of our marketing mix aimed at encouraging unit sales.

Thanks for the incremental detail on the renewal rates by channel. Real estate seems stable and what you pointed out to versus what you pointed out historically, wondering if you could give us some context for how direct-to-consumer and renewal channels, how the renewal rates there are coming in and also anything on seasonality? That 72% blended rate is that normal given seasonality? And how should we view that in context of the 75% you reported on a trailing 12 months, should we expect that TTM figure to round down?

So, regarding renewal, are we discussing retention or renewal? It seems we're focused on renewal. I still struggle to distinguish between the two, but I discuss it with the team regularly. When we look at the renewal rate, which reflects our current customer base compared to the previous year, it has shown a slight positive trend overall. These numbers have remained quite stable, so any movement in the right direction is encouraging. As of now, we believe we are in a solid position. As mentioned in our script, the renewal rate has increased a bit, and we are generally satisfied with the level of stability we’ve maintained, especially during these unusual times. Brian, would you like to add anything about retention?

Yes. I know we probably confused you a little bit giving you both metrics, but they're different. And the renewal rate is really a ratio of customers you began a period with and end the period with. Retention is a little more complicated because it includes additional customers added during the period. So that's really the difference between the two. And actually, our retention rate is running fairly well at 75% this year.

It incorporates cancels, too, right? Yes, I'm learning along the way, Brian.

Yes, absolutely. And to Bill's point, our cancels are trending favorably. So that explains some of our benefit for retention rate at this point.

Two, if I can. I'll look positive comments on the renewal rate. Could you talk about how measures of customer satisfaction are trending? I know there were some frustrations with contractor availability earlier in the year, trying to get requests resolved. So I'm curious if the combination of lower reflect this quarter, plus some operational improvements are driving faster turnaround times and better customer satisfaction? And I'll stop there and then follow up after that response.

I believe that currently, the situation mirrors the stability of the rates we are experiencing. Our service operations team has performed well this year, and we have successfully navigated through the peak season. There are always unique cases we haven't addressed, especially when HVAC systems fail in extremely hot conditions. Overall, our customer satisfaction has remained steady, and I feel we have improved significantly this year in many of our internal customer service metrics. At this point, I think we are in a solid position, always seeking improvement, but for now, things are stable along with other indicators.

Got it. And then for the follow-up, I was interested in your comments about sellers having to use Home Service Plans more to move inventory in this type of environment. You're starting to see higher attach rates of Home Service Plans. Any quantification of just what that delta looks like, the incremental uptick? When you step back and you look at the decades of data that Frontdoor has, how should we think about the potential uplift from both the shift to more of a buyer's market in play and then also just the extra partnership that you have with real estate channel to augment that?

Yes. Thanks, Justin. I don't think we're in a position yet to quantify. And frankly, I think, Jes Fields, our Chief of Sales is very close, very well known in the industry, and is very close to some of our major partners. I think they're trying to figure it out, too, because the shift has been so quick, so severe in terms of some of the numbers we saw from the NAR and then what we anticipate seeing in October. So I don't think we're to a point where we can look at. I'd love to be talking about uplift in real estate. That's for sure. And Jes is working hard and her team on that. But I think that this is almost in real time that a lot of the brokers and agents are realizing they're going to have to improve their listings, they improve the appeal of the listings for one to five years or so they could roll them all in the court and just say go play. Now it's back to a competitive market, it's where buyers have more choice. So we're still working through that because it has been so abrupt even in the time since I took over here, the real estate shift has been pretty abrupt. So it's in motion right now, and I think it's a fair question to ask, but I don't think we're in a position to have any quantification.

Maybe just one. If we could go back to sort of the revamped marketing strategy. Can you give us a little bit more color on what that might mean in terms of channels where you're getting optimistic in terms of engaging in with marketing dollars to possibly drive better outcomes as we move out of '22 into '23? Will that have an impact in terms of the type of channel mix or distribution you get for the product over the long term? And how should we be thinking about marketing ROI in general based on what you've learned ahead of revamping the marketing strategy?

Yes, I’ll provide a detailed response as we are focusing on various aspects of our operations. One key area we're addressing is the temptation to concentrate all marketing efforts on attracting new customers in the direct-to-consumer space. Our marketing team is dedicating significant attention to renewals and conversions. We are working to identify potential non-renewals earlier than before. Interestingly, individuals without claims are at risk of not renewing because they may question the necessity of our service. Therefore, we actually encourage these clients to reach out to us to foster a longer-term relationship. Additionally, we have other indicators that help us refine our targeting, such as monitoring complaint volumes and service times. We aim to enhance our approach while clients are in the middle of their contracts to improve conversion rates. In terms of real estate, we have observed improvements in renewal rates across different channels, with an increase in our numbers over the past year, which is a crucial area for us due to our established client base. Our marketing team is focused heavily on conversions and renewals. As for the direct-to-consumer strategy, we are testing new creative advertising and promotions, and collaborating directly with high-quality affiliate partners instead of going through an affiliate network, which has shown potential for success. We are also implementing new pricing and discounting strategies to enhance our product offerings. By defaulting leads to our gold product, we aim to engage customers with great options at competitive prices. We have also identified that we might be requesting too much information too early in the funnel. Therefore, we’re working on allowing potential customers to receive quotes sooner to ease their journey. Lastly, from a sales standpoint, we are fine-tuning our call scripts to improve our conversion rates when leads come in. Overall, our approach is quite comprehensive, moving beyond simply increasing spending on search engine marketing. While we discussed the rates earlier, our goal is to undertake targeted and specific initiatives within our broader marketing strategy.

And we have no further questions. So this concludes the Q&A session. Ladies and gentlemen, thank you again for joining Frontdoor's Third Quarter 2022 Earnings Call. Today's call has now concluded.