Revenue Increased 3% to $540 Million;
Gross Profit Margin Increased 550 Basis Points to 57%;
Net Income Increased 40% to $100 Million;
Adjusted EBITDA(1) Increased 29% to $165 Million;
Repurchased $119 Million of Shares Through
August 2024;
Launched New American Home Shield App in
October;
2-10 Acquisition Remains on Track to Close
in the Fourth Quarter of 2024
Frontdoor, Inc. (NASDAQ: FTDR), the nation’s leading provider of
home warranties, today announced its third-quarter 2024
results.
Financial Results
Three Months Ended
September 30,
(In millions except as noted)
2024
2023
Change
Revenue
$
540
$
524
3
%
Gross Profit
306
268
14
%
Net Income
100
71
40
%
Diluted Earnings per Share
1.30
0.89
47
%
Adjusted Net Income(1)
106
76
40
%
Adjusted Diluted Earnings per Share(1)
1.38
0.94
46
%
Adjusted EBITDA(1)
165
128
29
%
Home Warranties (number in millions)
1.95
2.04
(4
)%
Third-Quarter 2024 Summary
- Revenue increased 3% to $540 million and was comprised of a
4% increase from price that was partly offset by a 1% decline from
lower volume
- The number of first year Direct-to-Consumer home warranties
grew 3% over Q2 2024 to 271k
- Gross profit margin increased 550 basis points to 57%
primarily as a result of higher realized price, a lower number of
service requests per customer, a transition to higher service fees
and continued process improvement initiatives
- Net Income and Diluted Earnings Per Share increased 40% to
$100 million and 47% to $1.30, respectively
- Adjusted EBITDA(1) increased 29% to $165 million
- Frontdoor completed its prior $400 million share repurchase
authorization, which included $119 million of share repurchases
year-to-date through August
- Established new 3-year, $650 million share repurchase
authorization on September 4, 2024
Updated Full-Year 2024 Outlook
- Increasing revenue outlook from a midpoint of $1.825 to
approximately $1.830 billion
- Increasing gross profit margin outlook from slightly above
51% to approximately 53%
- Increasing Adjusted EBITDA(2) outlook from a midpoint of
$390 to approximately $430 million
“We have dramatically improved our operations over the last two
years and are on pace for a record year of financial performance,"
said Chairman and Chief Executive Officer Bill Cobb. “Our top
priority is to accelerate our long-term growth trajectory. We are
driving this objective by taking aggressive actions to increase new
home warranty sales and remain on track to complete the 2-10
acquisition in the fourth quarter. Additionally, I am super excited
that we have just launched the new AHS app to enhance our member
user experience."
"Frontdoor’s financial position has never been stronger," said
Chief Financial Officer Jessica Ross. “We delivered another
exceptional Net Income and Adjusted EBITDA beat, increased our
full-year outlook, generated a record amount of cash and remain
focused on share repurchases. We are making the right investments
in the business to drive future growth and we look forward to
sharing more details at our investor day on February 27, 2025."
Third-Quarter 2024 Results
Revenue by Customer
Channel
Three Months Ended
September 30,
(In millions)
2024
2023
Change
Renewals
$
422
$
406
4
%
Real estate (First-Year)
36
40
(10
)%
Direct-to-consumer (First-Year)
49
54
(10
)%
Other
34
24
41
%
Total
$
540
$
524
3
%
Third-quarter 2024 revenue increased 3% to $540 million, which
was comprised of a 4% increase from price that was partially offset
by a 1% decline from lower volume.
- Renewal revenue increased 4% due to improved price realization
that was partially offset by lower volume;
- Real estate revenue and direct-to-consumer revenue both
decreased 10%, primarily due to a cyclical decline in home warranty
sales as a result of the challenging real estate market and the
impact of inflation on consumer sentiment;
- Other revenue increased 41% due to higher on-demand home
services, primarily new HVAC sales.
Third-quarter 2024 net income increased 40% to $100 million, and
diluted earnings per share increased 47% to $1.30.
Period-over-Period Adjusted EBITDA(1)
Bridge
(In millions)
Three Months Ended September 30, 2023
$
128
Impact of change in revenue
17
Contract claims costs
21
Sales and marketing costs
1
General and administrative costs
(3
)
Interest and net investment income
1
Other
1
Three Months Ended September 30, 2024
$
165
Third-quarter 2024 Adjusted EBITDA(1) of $165 million increased
29% versus the prior year period, and includes:
- $17 million from higher revenue conversion(3), as price
increases were partly offset by lower volume;
- $21 million of lower contract claims costs(4), excluding the
impact of claims costs related to the change in revenue. The
decrease in contract claims costs primarily reflects:
- A lower number of customer service requests per customer
primarily driven by $14 million of favorable weather;
- A transition to higher service fees;
- Continued process improvement initiatives;
- Favorable claims cost development of $3 million, compared to a
$9 million favorable claims cost development in the third quarter
of 2023; partially offset by
- Normal inflation across our contractor network, replacement
parts and equipment.
- $3 million of higher G&A costs primarily due to increased
professional fees and personnel costs.
Cash Flow
Nine Months Ended
September 30,
(In millions)
2024
2023
Net cash provided from (used for):
Operating activities
$
212
$
139
Investing activities
(31
)
(23
)
Financing activities
(131
)
(88
)
Cash increase during the period
$
50
$
28
Net cash provided from operating activities was a record $212
million for the nine months ended September 30, 2024 and was
primarily comprised of $281 million in earnings adjusted for
non-cash charges decreased by $66 million of cash used for working
capital.
Net cash used for investing activities was $31 million for the
nine months ended September 30, 2024 and was primarily comprised of
capital expenditures related to technology projects.
Net cash used for financing activities was $131 million for the
nine months ended September 30, 2024 and was primarily comprised of
$119 million of share repurchases (excluding taxes and fees) and
$13 million of scheduled debt payments.
Free Cash Flow(1) increased 56% to a record of $181 million for
the nine months ended September 30, 2024.
Cash as of September 30, 2024 was $375 million and was comprised
of $161 million of restricted net assets and $214 million of
Unrestricted Cash.
Capital Allocation Update
- In August, the company completed its previous 3-year, $400
million share repurchase authorization. This included $119 million
to repurchase 3.2 million shares year-to-date through August.
- Frontdoor is now operating under a new 3-year, $650 million
share repurchase authorization that began September 4, 2024, a 63%
increase over the prior authorization.
Fourth-Quarter 2024 Outlook
- Revenue of approximately $367 million.
- Adjusted EBITDA(2) of approximately $36 million.
Updated Full-Year 2024 Outlook
- Increasing revenue from a midpoint of $1.825 to approximately
$1.830 billion. Key assumptions:
- A mid-single digit increase in renewals channel revenue.
- An approximately 15% decline in both direct-to-consumer and
real estate channel revenue.
- An approximately 40% increase in other revenue, which is
primarily driven by the new HVAC program.
- The number of home warranties is expected to decline
approximately 4%.
- Increasing gross profit margin from slightly above 51% to
approximately 53%.
- Decreasing SG&A to approximately $605 million. This
includes an estimated $15 million of acquisition-related costs
related to closing the 2-10 acquisition, which is excluded from
Adjusted EBITDA.
- Increasing Adjusted EBITDA(2) from a midpoint of $390 to
approximately $430 million.
- Capital expenditures of approximately $40 million.
- Annual effective tax rate of approximately 25%.
Third-Quarter 2024 Earnings Conference Call
Frontdoor has scheduled a conference call today, November 4,
2024, at 7:30 a.m. Central time (8:30 a.m. Eastern time). During
the call, Bill Cobb, Chairman and Chief Executive Officer, and
Jessica Ross, Chief Financial Officer, will discuss the company’s
operational performance and financial results for third-quarter
2024 and respond to questions from the investment community.
Participants can register for the conference call by clicking
https://www.webcaster4.com/Webcast/Page/3067/51429. Once completed,
each participant will receive access details via email.
Additionally, the conference call will be available via webcast
which will include a slide presentation highlighting the company’s
results. To participate via webcast and view the presentation,
visit https://investors.frontdoorhome.com.
The call will be available for replay for approximately 60 days.
To access the replay of this call, please call 877-481-4010 and
enter conference passcode 51429 (international participants:
919-882-2331, conference passcode 51429). To view a replay of the
webcast, visit the company’s
https://investors.frontdoorhome.com.
About Frontdoor, Inc.
Frontdoor is reimagining how homeowners maintain and repair
their most valuable asset – their home. As the parent company of
two leading brands, we bring over 50 years of experience in
providing our members with comprehensive options to protect their
homes from costly and unexpected breakdowns through our extensive
network of pre-qualified professional contractors. American Home
Shield, the category leader in home warranties with approximately
two million members, gives homeowners budget protection and
convenience, covering up to 23 essential home systems and
appliances. Frontdoor is a cutting edge, one-stop app for home
repair and maintenance. The app empowers homeowners by connecting
them in real time through video chat with pre-qualified experts to
diagnose and solve their problems. The Frontdoor app also offers
homeowners a range of other benefits including DIY tips, discounts
and more. For more information about American Home Shield and
Frontdoor, please visit frontdoorhome.com.
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 and prospects as
well as statements with respect to the proposed acquisition of 2-10
Home Buyers Warranty (the “Acquisition”), the Acquisition’s effect
on our business and timing of such effects, and the expected timing
of closing. 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: risks related to the proposed Acquisition, including risks that
we may not complete the Acquisition or that the Acquisition may not
achieve its intended results; changes in macroeconomic conditions,
including inflation and global supply chain challenges, especially
as they may affect existing home sales, interest rates, consumer
confidence or labor availability; the success of our business
strategies; the ability of our marketing efforts to be successful
or cost-effective; our dependence on our real estate and
direct-to-consumer customer acquisition channels and our renewal
channel; changes in the source and intensity of competition in our
market; our ability to attract, retain and maintain positive
relations with third-party contractors and vendors; increases in
parts, appliance and home system prices, and other operating costs;
our ability to attract and retain qualified key employees and labor
availability in our customer service operations; our dependence on
third-party vendors, including business process outsourcers, and
third-party component suppliers; cybersecurity breaches,
disruptions or failures in our technology systems; our ability to
protect the security of personal information about our customers;
lawsuits, enforcement actions and other claims by third parties or
governmental authorities; evolving corporate governance and
disclosure regulations and expectations related to environmental,
social and governance matters; physical effects of climate change,
including adverse weather conditions and Acts of God, along with
the increased focus on sustainability; increases in tariffs or
changes to import/export regulations; our ability to protect our
intellectual property and other material proprietary rights;
negative reputational and financial impacts resulting from
acquisitions or strategic transactions; requirement to recognize
impairment charges; third-party use of our trademarks as search
engine keywords to direct our potential customers to their own
websites; inappropriate use of social media by us or other parties
to harm our reputation; special risks applicable to operations
outside the United States by us or our business process outsource
providers; a return on investment in our common stock is dependent
on appreciation in the price; restrictions in our certificate of
incorporation related to an acquisition of us or to our lawsuits
against us or our directors or officers; the effects of our
significant indebtedness; increases in interest rates increasing
the cost of servicing our indebtedness; increased borrowing costs
due to lowering or withdrawal of the credit ratings, outlook or
watch assigned to us, our debt securities or our credit facilities;
and our ability to generate significant cash needed to fund our
operations and service our debt. 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, 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 2023 Annual Report on Form 10-K filed
with the SEC, as such factors may be updated from time to time in
Frontdoor’s periodic filings with the SEC, including Part II, Item
1A. Risk Factors in our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2024. Except as required by law,
Frontdoor does not undertake any obligation to update or revise the
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 SEC,
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
(“U.S. GAAP”), Frontdoor has disclosed the non-GAAP financial
measures of Adjusted EBITDA, Free Cash Flow, Adjusted Net Income,
Adjusted Diluted Earnings Per Share, and Unrestricted Cash.
We define "Adjusted EBITDA" as net income before depreciation
and amortization expense; goodwill and intangibles impairment;
restructuring charges; acquisition-related costs; provision for
income taxes; non-cash stock-based compensation expense; interest
expense; loss on extinguishment of debt; 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 and acquisition initiatives 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 U.S.
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 U.S. 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 “Adjusted Net Income” as net income before:
amortization expense; restructuring charges; loss on extinguishment
of debt; other non-operating expenses; and the tax impact of the
aforementioned adjustments. We believe Adjusted Net Income is
useful for investors, analysts and other interested parties as it
facilitates company-to-company operating performance comparisons by
excluding potential differences caused by items listed in this
definition.
We define “Adjusted Diluted Earnings per Share” as Adjusted Net
Income divided by the weighted-average diluted common shares
outstanding.
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 2023 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 U.S. GAAP. In
addition, these non-GAAP financial measures may not be the same as
similarly entitled measures reported by other companies.
© 2024 Frontdoor, Inc. All rights reserved. The following terms,
which may be used in this press release, are trademarks of
Frontdoor, Inc. and its subsidiaries: Frontdoor®, American Home
Shield®, HSA™, OneGuard®, Landmark Home Warranty®, Streem®, the
Streem logo and the Frontdoor logo. All other trademarks used
herein are the property of their respective owners.
(1)
See “Reconciliations of Non-GAAP Financial
Measures” accompanying this release for a reconciliation of
Adjusted EBITDA, Free Cash Flow, Adjusted Net Income and Adjusted
Diluted Earnings per Share, each a non-GAAP measure, to the nearest
GAAP measure. See “Non-GAAP Financial Measures” included in this
release for descriptions of calculations of these measures. Amounts
presented in the reconciliations and other tables presented herein
may not sum due to rounding.
(2)
A reconciliation of the forward-looking
fourth-quarter and full-year 2024 Adjusted EBITDA outlook to net
income cannot be provided without unreasonable effort because of
the inherent difficulty of accurately forecasting the occurrence
and financial impact of the various adjusting items necessary for
such reconciliation that have not yet occurred, are out of our
control, or cannot be reasonably predicted. For the same reasons,
the company is unable to assess the probable significance of the
unavailable information, which could have a material impact on its
future GAAP financial results.
(3)
Revenue conversion includes the impact of
the change in the number of home warranties as well as the impact
of year-over-year price changes. The impact of the change in the
number of home warranties considers the associated revenue on those
plans less an estimate of contract claims costs based on margin
experience in the prior year period.
(4)
Contract claims costs includes the impact
of changes in service request incidence, inflation and other
drivers associated with the number of home warranties in the prior
year period. The impact on contract claims costs resulting from
year-over-year changes in the number of home warranties is included
in revenue conversion above.
Frontdoor, Inc.
Consolidated Statements of
Operations and Comprehensive Income (Unaudited)
(In millions, except per share
data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Revenue
$
540
$
524
$
1,461
$
1,414
Cost of services rendered
235
256
655
706
Gross Profit
306
268
806
708
Selling and administrative expenses
154
152
456
439
Depreciation and amortization expense
10
9
28
28
Restructuring charges
3
5
5
6
Interest expense
10
10
29
30
Interest and net investment income
(5
)
(4
)
(15
)
(12
)
Income before Income Taxes
134
96
303
217
Provision for income taxes
34
24
77
54
Net Income
$
100
$
71
$
226
$
163
Other Comprehensive (Loss) Income, Net
of Income Taxes:
Unrealized (loss) gain on derivative
instruments, net of income taxes
(4
)
—
(3
)
2
Total Other Comprehensive (Loss)
Income, Net of Income Taxes
(4
)
—
(3
)
2
Comprehensive Income
$
97
$
72
$
223
$
164
Earnings per Share:
Basic
$
1.32
$
0.89
$
2.92
$
2.01
Diluted
$
1.30
$
0.89
$
2.90
$
2.00
Weighted-average Common Shares
Outstanding:
Basic
76.2
80.1
77.4
81.0
Diluted
77.1
80.6
78.0
81.3
Frontdoor, Inc.
Condensed Consolidated
Statements of Financial Position (Unaudited)
(In millions, except share
data)
As of
September 30,
December 31,
2024
2023
Assets:
Current Assets:
Cash and cash equivalents
$
375
$
325
Receivables, less allowance of $5 and $5,
respectively
6
6
Prepaid expenses and other current
assets
28
32
Contract assets
75
—
Total Current Assets
484
363
Other Assets:
Property and equipment, net
68
60
Goodwill
503
503
Intangible assets, net
141
143
Operating lease right-of-use assets
8
3
Deferred customer acquisition costs
10
12
Other assets
3
5
Total Assets
$
1,217
$
1,089
Liabilities and Shareholders'
Equity:
Current Liabilities:
Accounts payable
$
91
$
76
Accrued liabilities:
Payroll and related expenses
29
38
Home warranty claims
73
76
Other
42
22
Deferred revenue
89
102
Current portion of long-term debt
17
17
Total Current Liabilities
341
331
Long-Term Debt
565
577
Other Long-Term Liabilities:
Deferred tax liabilities, net
24
25
Operating lease liabilities
21
16
Other long-term liabilities
6
5
Total Other Long-Term Liabilities
50
46
Commitments and Contingencies
Shareholders' Equity:
Common stock, $0.01 par value;
2,000,000,000 shares authorized; 87,193,682 shares issued and
75,782,534 shares outstanding as of September 30, 2024 and
86,553,387 shares issued and 78,378,511 shares outstanding as of
December 31, 2023
1
1
Additional paid-in capital
139
117
Retained earnings
522
296
Accumulated other comprehensive income
2
6
Less treasury stock, at cost; 11,411,148
shares as of September 30, 2024 and 8,174,876 shares as of December
31, 2023
(403
)
(283
)
Total Shareholders' Equity
261
136
Total Liabilities and Shareholders'
Equity
$
1,217
$
1,089
Frontdoor, Inc.
Consolidated Statements of
Cash Flows (Unaudited)
(In millions)
Nine Months Ended
September 30,
2024
2023
Cash and Cash Equivalents at Beginning
of Period
$
325
$
292
Cash Flows from Operating
Activities:
Net Income
226
163
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization expense
28
28
Deferred income tax benefit
—
(12
)
Stock-based compensation expense
20
21
Restructuring charges
5
6
Payments for restructuring charges
(3
)
(3
)
Other
2
5
Changes in working capital:
Receivables
—
(1
)
Prepaid expenses and other current
assets
(74
)
(70
)
Accounts payable
14
7
Deferred revenue
(12
)
(22
)
Accrued liabilities
(11
)
(2
)
Current income taxes
18
22
Net Cash Provided from Operating
Activities
212
139
Cash Flows from Investing
Activities:
Purchases of property and equipment
(31
)
(23
)
Net Cash Used for Investing
Activities
(31
)
(23
)
Cash Flows from Financing
Activities:
Repayments of debt
(13
)
(13
)
Repurchase of common stock
(120
)
(76
)
Other financing activities
2
—
Net Cash Used for Financing
Activities
(131
)
(88
)
Cash Increase During the Period
50
28
Cash and Cash Equivalents at End of
Period
$
375
$
320
Reconciliations of Non-GAAP
Financial Measures
The following table presents
reconciliations of Net Income to Adjusted Net Income.
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In millions, except per share
amounts)
2024
2023
2024
2023
Net Income
$
100
$
71
$
226
$
163
Amortization expense
1
1
2
3
Acquisitions-related Costs
3
—
9
—
Restructuring Charges
3
5
5
6
Tax Impact of Adjustments
(1
)
(2
)
(2
)
(3
)
Adjusted Net Income
$
106
$
76
$
240
$
170
Adjusted Earnings per Share:
Basic
$
1.39
$
0.95
$
3.11
$
2.10
Diluted
$
1.38
$
0.94
$
3.08
$
2.09
Weighted-average Common Shares
outstanding:
Basic
76.2
80.1
77.4
81.0
Diluted
77.1
80.6
78.0
81.3
The following table presents reconciliations of net cash
provided from operating activities to Free Cash Flow.
Nine Months Ended
September 30,
(In millions)
2024
2023
Net cash provided from operating
activities
$
212
$
139
Property additions
(31
)
(23
)
Free Cash Flow
$
181
$
116
The following table presents reconciliations of net income to
Adjusted EBITDA.
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In millions)
2024
2023
2024
2023
Net Income
$
100
$
71
$
226
$
163
Depreciation and amortization expense
10
9
28
28
Restructuring charges
3
5
5
6
Acquisition-related costs
3
—
9
—
Provision for income taxes
34
24
77
54
Non-cash stock-based compensation
expense
6
8
20
21
Interest expense
10
10
29
30
Adjusted EBITDA
$
165
$
128
$
394
$
302
Key Business Metrics
As of September 30,
2024
2023
Number of home warranties (in
millions)
1.95
2.04
Renewals
1.50
1.55
First-Year Direct-To-Consumer
0.27
0.28
First-Year Real Estate
0.18
0.20
Reduction in number of home warranties
(4
)
%
(6
)
%
Customer retention rate(1)
77.7
%
76.2
%
(1)
Customer retention rate is presented on a
rolling 12-month basis in order to avoid seasonal anomalies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241104789637/en/
Investor Relations: Matt Davis 901.701.5199
ir@frontdoorhome.com
Media: Tom Collins 901.701.5198
mediacenter@frontdoorhome.com
Frontdoor (NASDAQ:FTDR)
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Von Dez 2024 bis Jan 2025
Frontdoor (NASDAQ:FTDR)
Historical Stock Chart
Von Jan 2024 bis Jan 2025
