Q1 2023 Financial Results May 4, 2023 Henry Ho Joyful Garden JOYFUL.BOSTON © 2023 GoDaddy Inc. Forward–looking statements and non-GAAP financial measures ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 001-36904 GoDaddy Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of ...

Customer Retention and Revenue Growth - GoDaddy's customer retention rate exceeded 85% for the five years ending December 31, 2022, with a 93% retention rate for customers over three years in 2022[17] - In 2022, GoDaddy generated $4,091 million in revenue, a 7.2% increase from $3,816 million in 2021, and total bookings reached $4,414 million, up 4.3% from $4,232 million in 2021[17] - Approximately 1.5 million customers spent over $500 annually on GoDaddy's products in 2022[17] - The company has 20.9 million paying customers with a customer retention rate of over 85% and operates in 54 global markets, with 47% of its customer base and a third of its revenue coming from international markets[52] - The company's revenue growth historically relies on sustained customer growth rates and strong subscription renewals[103] - The company focuses on the small business market, which is underserved, and aims to grow revenues by adding new small business customers and selling additional solutions to existing ones[106] - The company's future success depends on maintaining strong subscription renewals, as renewal costs are substantially lower than acquiring new customers[103] Customer Segments and Market Presence - GoDaddy's customer base includes 20.9 million everyday entrepreneurs, with 47% located in international markets such as the UK, Canada, Germany, India, and Australia[14][25] - GoDaddy's largest customer segment, Independents, consists of micro-businesses and noncommercial endeavors, most with fewer than five employees[20] - WebPros, the second-largest customer segment, account for an estimated 50% of global website builds through third-party services[21] - Domain Registrars and Investors, the third-largest customer segment, leverage GoDaddy's domain registration and management platform for strategic relationships and liquidity[22] - The company serves a significant market with over 32.5 million small businesses in the U.S., representing approximately 43.5% of total U.S. GDP in 2014[48] - Approximately 32% of total bookings were derived from international sales in 2022, with localized products and customer care available in 54 markets[77] - The company has made significant investments in international operations, including expanding offerings in India, Europe, Latin America, the Middle East, and Asia[128] Domain Management and Services - GoDaddy manages nearly 84 million domains as of December 31, 2022, holding 24% of the approximately 350 million domain names registered worldwide as of September 30, 2022[38] - Approximately 92% of GoDaddy's customers had purchased a domain from the company as of December 31, 2022[38] - GoDaddy manages over 200 top-level domains (TLDs) for corporate domain portfolio owners and other registry operators[23] - GoDaddy offers 424 generic TLDs and 58 country code TLDs as of December 31, 2022[39] - GoDaddy's aftermarket platform includes a portfolio of over 1.2 million previously registered domains[41] - The company operates back-end registry management for over 215 TLDs and continues to invest in domain search, discovery, and recommendation tools[70] - In July 2022, the company acquired Dan.com, expanding its domain marketplace with lease-to-own options and automation technology[72] Revenue Segments and Product Offerings - The company's revenue is divided into two segments: Applications and Commerce (A&C) and Core Platform (Core), focusing on proprietary software, commerce products, and domain-related services[25] - GoDaddy derived 31%, 30%, and 28% of its total revenue from Applications and Commerce (A&C) products in 2022, 2021, and 2020, respectively[35] - GoDaddy derived 69%, 70%, and 72% of its total revenue from Core Platform products in 2022, 2021, and 2020, respectively[47] - GoDaddy Payments enables customers to accept major payment methods with the lowest fees in the industry compared to leading providers[34] - GoDaddy's Managed WordPress hosting includes enhanced security, automatic daily backups, and integrated SSL[28] - GoDaddy's Websites + Marketing product includes Payable Domains, a default payments system for frictionless transactions[27] - GoDaddy's Smart Terminal POS system integrates with Websites + Marketing and Managed WooCommerce Stores for unified in-person and online sales[32] - The company launched Managed WooCommerce Stores, a fully managed platform for WordPress e-commerce, integrating GoDaddy Payments and POS devices[73] - The company expanded its commerce offerings in 2022 by enabling payments in all Websites + Marketing through 'Buy Buttons' and introduced on-the-go solutions like GoDaddy Mobile, Pay Links, and Virtual Terminal capabilities[107] Technology and Infrastructure - Technology and development expenses were $794 million in 2022, with a total investment of $2,987 million over the past five years to enhance customer experiences[61] - The company has 2,378 employees in technology and development, 353 issued patents, and 9 pending patent applications in the U.S. as of December 31, 2022[62] - The company employs 6,910 employees worldwide, including 3,124 in care and services (GoDaddy Guides) and 2,378 in technology and development[58] - The company’s Managed WordPress solution simplifies CMS management with integrated security tools (WAF, CDN, SSL), design tools, and automatic updates[53] - The company’s Websites + Marketing platform unites marketing, content, commerce, and customer management tools into a single, intuitive experience[53] - The company leverages data and insights to personalize customer experiences and tailor solutions, aiming to improve website, marketing programs, and customer care[54] - The company’s physical infrastructure includes investments in peering architecture, automation, and migration to AWS to enhance speed, reliability, and scalability[63] - The company has developed and begun implementing a new e-commerce platform to enhance customer value proposition, offering comprehensive, flexible, and integrated solutions[65] - The data platform provides accurate and meaningful insights, enabling personalized customer experiences and driving innovation through instrumentation and experimentation[66] - The company's content and marketing platforms leverage advanced technology to deliver customer-centric digital experiences, focusing on content creation speed, localization, and self-service[67] - Product development investments have grown significantly, with key initiatives including Websites + Marketing, GoDaddy Studio, and tools for customer acquisition and retention[68] Competition and Market Risks - The company faces competition from providers of domain registration, web hosting, website creation, commerce capabilities, and cloud infrastructure services[79] - The company faces significant competition from providers like Google, Amazon, Microsoft, Meta, TikTok, and Shopify, which could impact market share and growth prospects[120] - Increased reliance on social media applications and mobile devices may reduce the prominence and value of domain names, potentially affecting the company's business[116] - The company's competitive position depends on its ability to develop technology and introduce new products, but there is no assurance that these investments will result in successful products[108] - The company's business could be adversely affected if it fails to attract and retain customers or increase sales to new and existing customers[102] - The company's new products or enhancements may fail to achieve customer acceptance due to factors like market demand misprediction, product defects, or negative publicity[109] International Operations and Risks - The company's international presence subjects it to additional risks, and its future growth depends partly on international bookings[99] - International bookings outside the U.S. represented approximately 32% of total bookings for 2022, 2021, and 2020[123] - The company is exposed to risks in higher-risk regions such as China, India, Russia, and Ukraine, which could impact growth prospects[126] - The company may incur additional costs or face delays in product launches due to geopolitical changes or conflicts, such as the Russia-Ukraine conflict[126] Acquisitions and Integration Challenges - The company has acquired businesses such as Dan.com, GoDaddy Studio, and Uniregistry's registrar and brokerage business to complement its offerings[133] - The company may face challenges in integrating acquired products and technologies, which could adversely affect operating results[133] - Challenges in integrating acquired companies, including potential issues with intellectual property, data protection, and security infrastructure, which could increase vulnerability to network attacks[135] - Difficulties in assimilating acquired companies' personnel, technologies, and operations, particularly if key personnel are geographically dispersed or choose not to work for the company[136] - Potential delays in integrating acquired companies onto the company's systems, leading to prolonged reliance on legacy systems or transition services agreements[137] - Entry into new lines of business, such as GoDaddy Payments and Dan.com, which may expose the company to additional risks, including regulatory burdens and customer acceptance challenges[138] Cybersecurity and Data Protection - Dependence on third-party cloud computing and hosting providers, particularly AWS, for critical infrastructure, with potential risks of service interruptions, delays, and outages[147][148] - Increased reliance on AWS for cloud infrastructure, with potential adverse effects on business operations if AWS services are disrupted or terminated[150] - Exposure to system failures and capacity constraints, which could negatively impact customer experience and financial results[143][144] - Vulnerability to network attacks, security breaches, and data security incidents, including sophisticated threats like advanced persistent threats and distributed denial-of-service (DDoS) attacks[152] - Risks associated with social engineering attacks targeting personnel or third-party vendors, potentially leading to unauthorized access to systems or customer data[153] - Inability to guarantee the effectiveness of current or future security measures, including backup systems, network protection mechanisms, and cybersecurity training, to prevent data breaches or system failures[155] - Cybersecurity incidents impacted approximately 28,000 hosting customers in March 2020 and up to 1.2 million Managed WordPress customers in November 2021[156] - The company has spent significant resources investigating and responding to cybersecurity incidents, including reporting to regulatory authorities and responding to FTC inquiries[156] - The company relies on third-party and public-cloud infrastructures, such as AWS, increasing dependency on third-party security measures[159] - The risk of security breaches is likely to increase as the company expands its cloud-based products and operates in more countries[162] - The company maintains cyber liability insurance, but coverage for nation-state-led cyber attacks remains uncertain[161] - Fraudulent activity, such as domain name hijacking and revenue share fraud, could result in service interruptions and substantial costs[165] Financial Performance and Risks - Net income in 2022 was $353 million, compared to $243 million in 2021 and a net loss of $494 million in 2020[196] - Customer demand growth rates have slowed in the past 12 months due to COVID-19, inflation, and foreign currency headwinds[196] - Revenue recognition is deferred over subscription terms, averaging one year but ranging from monthly to up to 10 years[200] - Future profitability depends on sustained revenue growth and effective cost management, with potential risks from macroeconomic conditions and competition[197] - The company may require additional equity, debt, or other financing for growth, acquisitions, or refinancing, which could dilute existing stockholders[198] - Debt financing may be impacted by market volatility, interest rate increases, and credit rating changes[199] - Tax liabilities could increase due to changes in tax laws, audits, or unfavorable outcomes from tax authority examinations[202] - The company relies on distributions from Desert Newco to cover expenses, taxes, and dividends, with potential risks if distributions are restricted[206] - Future effective tax rates may be volatile due to changes in deferred tax assets, liabilities, and intercompany restructurings[203] - The company’s ability to raise funds may be constrained by market conditions, operating performance, and investor interest[199] Marketing and Advertising - Advertising expenses were $412.3 million, $503.9 million, and $438.5 million for the years ended December 31, 2022, 2021, and 2020, respectively[168] - Marketing and advertising expenses totaled $1,992 million over five years, contributing to 20.9 million customers as of December 31, 2022[75] Customer Support and Employee Relations - The company employs approximately 6,200 GoDaddy Guides worldwide, providing 24/7/365 customer support[25] - The company's ability to increase sales is highly dependent on the quality of customer care provided by GoDaddy Guides[169] - Approximately 10%, 11%, and 12% of total bookings in 2022, 2021, and 2020, respectively, were generated from product subscriptions sold by GoDaddy Guides[169] - Competition for highly skilled personnel, particularly in U.S. tech hubs, is intense, and U.S. immigration laws may limit the ability to recruit global talent[174] Partnerships and Third-Party Integrations - The company partners with Microsoft, Open-Xchange, Yelp, Google, Amazon, WhatsApp, and Instagram to offer integrated products and payment options through providers like PayPal, Stripe, Block, and Mercado Libre[176] - The company relies on third-party integrations for services like email encryption, backup, migration, and archiving, which could impact demand if integrations fail or terms change[176] Operational Risks and Challenges - The company faces risks related to domain name registration, including system failures, inaccurate data, and potential negative publicity, which could harm its business[178] - The company depends on the reliability and security of its internally developed systems, and any disruptions could damage its brand and increase costs[179] - The company operates data centers in Arizona, Virginia, France, the Netherlands, India, and Singapore, with potential risks from cyberattacks, natural disasters, and facility vulnerabilities[182][183] - The company's revenue is heavily reliant on credit card payments, and any increase in chargebacks or fraud could lead to higher fees, penalties, or loss of payment processing capabilities[187][188] - The company faces risks related to data breaches and payment information security, which could result in liability, fines, or reputational damage[189] - The company's operating results may be impacted by factors such as customer acquisition, product introductions, renewal rates, and changes in small business growth rates[192] - The company is exposed to risks from macroeconomic conditions, including inflation, deflation, and global conflicts, which could affect its financial performance[193] - The company's ability to forecast and achieve financial results may be impacted by variability in key metrics, fixed operating expenses, and revenue shortfalls[194]

GoDaddy Inc. (NYSE:GDDY) Q4 2022 Earnings Conference Call February 14, 2023 5:00 PM ET Company Participants Christie Masoner - Senior Director, Investor Relations Aman Bhutani - Chief Executive Officer Mark McCaffrey - Chief Financial Officer Conference Call Participants Aaron Kessler - Raymond James Financial, Inc. Matthew Pfau - William Blair & Company Trevor Young - Barclays Clarke Jeffries - Piper Sandler & Co. Ygal Arounian - Citigroup Inc. Elizabeth Porter - Morgan Stanley Mark Mahaney - Evercore Inc. ...

Financial Data and Key Metrics - Revenue grew 7% YoY to $1.03 billion, with 9% growth on a constant currency basis [17] - Normalized EBITDA grew 15% to $263 million, with a margin rate of 25%, representing a 180 basis point expansion YoY [19] - Unlevered Free Cash Flow for the quarter totaled $297 million, growing 18% driven by strong profitability [19] - ARR for Applications and Commerce grew 10% to more than $1.2 billion, with Create and Grow products ARR growing 7% to nearly $430 million [18] - Annualized GMV across the GoDaddy ecosystem grew 10% to approximately $29 billion [18] - Core Platform revenue grew 5%, within the target range of 4% to 6%, primarily due to growth in the Aftermarket and increased pricing in domains [18] Business Line Data and Key Metrics - Applications and Commerce revenue grew 13%, within the guided range of 13% to 15%, driven by Create + Grow and Commerce products as well as email attach [17] - Core Platform revenue grew 5%, with ARR for Core Platform growing 2% to $2.3 billion [18] - Hosting business faced challenges due to uneven demand in Europe and FX pressure, with a modest decrease in revenue [18] - GoDaddy Payments saw positive momentum in new customer attachments within Websites + Marketing and Managed WordPress [12] Market Data and Key Metrics - International revenue grew 4% on a reported basis and 9% on a constant currency basis [17] - Europe, particularly the UK and Germany, experienced significant FX pressure and uneven demand [32][34] - The US market is being closely monitored, with no significant shifts reported yet [32] Company Strategy and Industry Competition - Strategic priorities include driving commerce through presence, delivering for GoDaddy Pros, and innovating in domains [7] - The company is focusing on simplifying site creation, enabling payments in all Websites + Marketing plans, and expanding OmniCommerce solutions [8][10] - GoDaddy is targeting larger customers with Managed WooCommerce Stores, aiming to serve high single-digit million sellers [11] - The company is leveraging its one-stop-shop approach to attract and retain customers, particularly in the current economic environment [37] Management Commentary on Operating Environment and Future Outlook - The company is navigating an uneven macro environment, with strong customer retention rates of over 85% [5][31] - Management remains committed to controlling costs, optimizing marketing spend, and investing in growth initiatives [6][24] - The company expects Q4 revenue in the range of $1.03 billion to $1.05 billion, representing 2% YoY growth at the midpoint [21] - Normalized EBITDA for Q4 is expected to be in the range of $250 million to $260 million, with a margin rate of 24% to 25% [23] Other Important Information - The company completed $1.15 billion of share buybacks year-to-date, repurchasing 14.8 million shares and reducing the fully diluted share count by approximately 9% [19] - GoDaddy secured a fixed power contract in Europe to mitigate rising energy costs and expanded its relationship with Amazon Web Services to reduce long-term capital spend and energy expenses [25] - The company is refinancing its 2024 debt to extend the due date to 2029, with a new term loan facility of $1.8 billion and an increased revolving credit facility to $1 billion [20] Q&A Session Summary Question: How has the top of the funnel changed from Q2 to Q3, and has the weakness in Europe extended to the US? - The macro environment has been uneven for over two years, with Europe, particularly the UK and Germany, experiencing significant FX pressure and uneven demand [31][32] - The US market is being closely monitored, with no significant shifts reported yet [32] Question: What changes are being seen in the willingness to attach additional products or buy bundled solutions? - The company is attracting customers with the right intent, leading to consistent cohort performance and rising ARPU [36] - The one-stop-shop approach is proving to be a competitive advantage, with customers attracted to the simplicity and competitive pricing [37] Question: Where did the quarter finish in terms of domains under management, and what is the contribution of the Aftermarket business? - Domains under management data will be available in the Q3 report, with some changes expected due to pull-forward effects during COVID [40] - The Aftermarket business contributed about 2% of revenue in Q4 last year, with no similar strength expected this year [41] Question: How is GoDaddy growing relative to the market in the presence segment, and what is the impact of competitors' changes in spending? - The company is encouraged by the progress in its Create and Grow products, particularly Websites + Marketing, which fits the needs of micro businesses [47] - Competitors' changes in spending have not had a significant impact yet, with GoDaddy's prices remaining very competitive [47] Question: What are the KPIs for Payable Domains, and how does Apple Pay contribute to GMV? - The company is looking at the percentage of customers signing up for and activating Payable Domains, with early engagement rates being attractive [53][55] - It is too early to determine the impact of Apple Pay on GMV, but the company is learning more about the relationship and executing towards it [56] Question: How are demand trends impacting larger users (Pros) versus SMBs, and what is the marketing environment like? - The macro environment is impacting all customer segments similarly, with Pros in the hosting business disproportionately affected by FX and European exposure [59] - The company has achieved marketing leverage through success-based thinking, with a focus on ROI and efficiency [60][63] Question: What are the key priorities for fiscal year 2023, and are there any large investment initiatives expected? - The company is focused on executing its strategic priorities and maintaining momentum into 2023, with a strong outlook for growth and profitability [66][67] Question: What is the progress on the shift to cloud services, and what is the impact on OpEx? - The company has continued to shift more applications into the cloud, improving product velocity and scalability [69] - The AWS contract helps mitigate future energy cost impacts, providing stability for OpEx in 2023 [70] Question: Are there any costs associated with the European business based in the US, and what is the status of price testing? - There is no significant impact on margins from US-based costs for the European business [73] - The company continues to test pricing in a nuanced manner, balancing macroeconomic conditions with competitive positioning [74] Question: How has the tone on the macro environment progressed, and what is the behavior of customers using Payable Domains? - The macro environment remains uneven, with the company navigating it well and maintaining strong customer retention rates [77] - It is too early to determine the behavior of customers using Payable Domains, but early engagement rates are encouraging [77] Closing Remarks - The company is proud of its performance in a challenging environment and looks forward to continuing its strategic priorities and growth initiatives [81]

Financial Data and Key Metrics Changes - Revenue in Q2 was $1 billion, growing 9% on a reported basis and 10% on a constant currency basis [27] - Normalized EBITDA grew 30% to $258 million, with a margin of 25% representing over four points of margin expansion [30] - Unlevered free cash flow for the quarter totaled $274 million, growing 16% driven by strong profitability [31] - Free cash flow per share rose to $5.67 on a trailing 12-month basis, a 19% increase from the prior year [32] Business Line Data and Key Metrics Changes - Applications and Commerce revenue grew 15%, driven by strength in Create and Grow products and Email attach [27] - Annualized GMV across the GoDaddy ecosystem was approximately $28 billion, growing 12% [28] - Core platform revenue grew 7%, primarily due to strength in domain registration, aftermarket, and security [28] Market Data and Key Metrics Changes - International revenue grew 4% on a reported basis and 7% on a constant currency basis [27] - The company noted greater pressure for European customers due to macroeconomic factors [48] Company Strategy and Development Direction - The strategic priorities include driving Commerce through presence, delivering for GoDaddy Pros, and innovating in Domains [9] - The company is focused on attracting high-value customers, maintaining customer retention rates above 85% [7][15] - GoDaddy is committed to disciplined marketing spend aligned with demand signals to create balance across all business components [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing operational and strategic goals for the second half of 2022 despite macroeconomic challenges [33] - The adverse FX impact for the full year is expected to be approximately $35 million, leading to a revised revenue outlook of $4.1 billion to $4.13 billion [34] - Management remains focused on delivering strong financial results and maintaining a strong balance sheet [38] Other Important Information - The company completed $1 billion of share buybacks, reducing the fully diluted share count by approximately 8% since year-end [31] - GoDaddy's technology and development expenses increased as a percent of revenue to advance commerce and innovation strategies [30] Q&A Session Summary Question: What drove the sequential uptick in gross margin? - The change was primarily based on product mix, with FX impact being nominal [42] Question: Are the price increases just for new customers versus existing subscribers? - Price testing is nuanced based on geography and customer expectations, with increases potentially affecting both new and existing customers [43] Question: Are there certain areas where macro impacts are more pronounced? - Greater pressure is observed for European customers due to inflation and other macro factors [48] Question: How does the company view marketing spend in relation to demand? - Marketing spend is adjusted based on demand signals, with a focus on efficiency and optimization [50] Question: What characteristics define subscribers that are successfully upselling products? - The core funnel involves customers starting with domain purchases and attaching additional services, with a focus on intent-driven marketing [74]