GoDaddy Inc.

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the GoDaddy Q1 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I will now turn the call over to Sam Kemp, VP of Investor Relations and Strategy. You may begin your conference.

Good afternoon, and thank you for joining us for GoDaddy's first quarter 2019 earnings call. With me today are Scott Wagner, Chief Executive Officer, and Ray Winborn, Chief Financial Officer. Scott and Ray will share some prepared remarks, and then we'll open up the call for questions. On today's call, we'll be referencing both GAAP and non-GAAP financial results and operating metrics, such as total bookings, unlevered free cash flow, net debt, and ARPU. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted to our Investor Relations website at investors.godaddy.net or on our Form 8K filed with the SEC with today's earnings release. Unless otherwise stated, when we refer to organic measures, we're referring to those measures excluding the impact of Main Street Hub. The matters we'll be discussing today include forward-looking statements, which include those related to our future financial results, product introductions and innovations, our share or purchase program, and our ability to integrate recent or potential future acquisitions and achieve desired synergies. Any forward-looking statements that we make on this call are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC, are based on assumptions as of today, May 2, 2019, and may differ materially from actual results. We undertake no obligations to update these statements as a result of new information or future events. With that, here's Scott.

Thanks, Sam, and thanks to everyone for joining us today to discuss our first quarter of 2019, which has started off at a solid pace. GoDaddy revenue is up over 12%, and our cash flow margins continue to expand, even with the investments we're making across the business. Companies that thrive over the long term consistently focus on finding new ways to add customer value. And here at GoDaddy, we're doing this through constant improvements in our entire experience across product, marketing, and care, as we build not just for 2019 and 2020, but for the years to come. Today, we'll spend time on three topics. First, I'll share our quarterly product progress, both organically and through our recent acquisitions. Second, an update on how we're driving growth in domestic and international markets. And finally, Ray will cover our first quarter financial performance and outlook for the remainder of 2019. I'll start with our products. GoDaddy empowers the everyday entrepreneur by designing applications and services that help our customers look good, be everywhere, and engage with their audiences. Our feature release pace continues to be rapid, and in just the first several months of the year, we've taken big steps forward in e-commerce, digital marketing, and the WordPress ecosystem. Let me touch on each briefly. First, on e-commerce, our functionality continues to build on what's now a multi-year effort behind both service and product commerce tools. In March, we launched support for digital downloads in online stores, enabling customers to sell music, e-books, videos, art, and other digital content. In April, we acquired Cellbrite, a world-class multi-channel commerce suite that has tens of millions of orders and billions of dollars of cumulative GMV in channels like Amazon, Etsy, eBay, and Walmart.com. We partnered with Sellbrite last year to power our first Go Central Marketplace offer and saw strong early customer traction. And by joining forces, we'll more deeply integrate Sellbrite's e-commerce channel capabilities, inventory management, and fulfillment tools into Go Central and eventually into our WordPress offerings. Second, we continue to expand the suite of marketing tools available in Go Central. At an enterprise or mid-market level, you'll hear the term CRM and marketing automation a lot. But for our customers, these functions and their digital presence are really all blurred together. And as we help our customers be everywhere, we at GoDaddy are at our best when we unite these tools into a simple and thoughtful experience. Today, we're tailoring marketing recommendations using data science in the Go Central dashboard. And in March, we launched a customer management tool called Connections, which helps entrepreneurs organize and stay close to their customers. We have deep insights into the ventures using GoDaddy and their audiences. And this tool is a foundation that we'll use to help simplify, personalize, and automate marketing for our customers. This is an important step as we expand what we do, enabling not only the creation of an online presence, but ensuring that it thrives. And finally, We continue to invest behind WordPress's ecosystem of third-party themes, which make websites beautiful, and plugins, which give them functionality. At the end of Q1, there were more than 3 million installs of GoDaddy-owned plugins and themes in WordPress websites around the world. In April, we added to this ecosystem by acquiring Koblox, which streamlines the WordPress website creation process, and ThemeBeans, which is a library of elegant and modern website themes. As we expand the resources supporting our WordPress offer, we're bringing an increasingly differentiated experience to the world's largest open source CMS through simplicity, security, and elegant design. Stepping back on our products overall, the investments we're making across both Go Central and WordPress are increasingly being recognized in the market as we pursue strategies that lead to the success of our customers. Let me now turn to our go-to-market efforts, where we're supporting the product momentum I just discussed by driving consideration and usage for both prospective and existing GoDaddy customers. Our underlying bookings growth accelerated for the second quarter, reflecting strong tailwinds from our brand initiatives and tactical marketing performance. Over the last several years, we've grown our incremental marketing spend largely by investing outside the U.S., which has helped drive our global scale. In 2019, we're directing the bulk of our new marketing efforts and discretionary spend in the U.S., and we're happy with the results, including the great early performance of the brand strategy that we launched in February. Our lineup of influencers has resonated well, we're reaching a more diverse audience, and our marketing execution continues to acquire customers at Attractive Economics. Importantly, the metrics we monitor for brand health and how well everyday entrepreneurs identify with GoDaddy are all moving in the right direction. Conversational marketing also continues to ramp nicely with a broader base of campaigns being run against a broader range of customer needs. Since the beginning of 2018, we've taken conversational marketing from a concept to a scaling channel for reaching our base in a helpful, impactful way, all while exceeding our target thresholds for returns. Our international business has been a big success over the last several years and at a billion dollar run rate is now larger than all of GoDaddy in 2012, which is the year that we first began localizing international markets. As we look forward, we remain bullish on our international potential and have three core priorities to continue driving growth. First, International market growth starts with localizing our existing products, marketing, and care in a targeted geography. We've done this across well over 50 markets, and we continue to ramp into new and underpenetrated countries like Germany, South Africa, and the Philippines. As we do this, we benefit from both the tailwinds of continuing Internet adoption and developing markets and share gains from small and relatively fragmented local players, which builds a nice runway in countries across Asia, Europe, Latin America, and the Middle East. The second priority is launching products and experience tailored to a market's unique needs, which we've just started to do in a handful of regions. For example, in Asia, we're expanding support for care conversations in WeChat, and other relevant messaging platforms. In India, which is a do-it-for-you market, we have a vibrant pro community built around our WebPro offering and the GoDaddy brand. And in certain price-sensitive markets like Brazil, Mexico, and recently India, we've launched value-priced email through open exchange, which has doubled the run rate of email unit sales in these countries. And finally, in our largest and most mature markets, we look to drive deeper customer engagement, which ultimately shows up in ARPU. As you know, the U.S. is our oldest market, and we continue to grow at a double-digit pace, showing that strategies like conversational marketing can sustain healthy growth over the long term. A ramp of conversational marketing, along with a broader and richer product portfolio and experience, has been focused in the U.S. where we're driving significant innovation. And as we refine this new playbook, we expect to be able to export it to other maturing international markets as a core strategy to drive ongoing growth. The punchline is that we continue to see many vectors of growth in domestic and international markets supported by a diverse set of product and operational initiatives in each market. And for you, our shareholders, this creates a clear line of sight to continue double-digit top-line growth. Before I wrap, I want to emphasize our focus on building a business that's aimed at customer success and that can deliver for years to come. We're proud of the consistency of our execution and, more importantly, how we've evolved as a company. We've got a good business, a great customer and market to serve, and a fantastic team, all of which underpin what we deliver to our shareholders. And with that, here's Ray to cover the financials.

Thanks, Scott. We started 2019 on a strong foot with an acceleration in underlying bookings trends, continued strength in customer NARPU growth, and ongoing margin expansion that balances growing cash flow with the right rate of reinvestment for the long term. Q1 bookings grew to $871 million, rising 13.5% on a constant currency basis, or about 100 basis points faster than fourth quarter growth. Reported bookings growth of 11% reflects about 230 basis points of currency headwinds, and at today's exchange rates, we expect this to continue into Q2 and be awash in the second half. Revenue came in at $710 million, growing 13.5% on a constant currency basis and 12% on a reported basis, reflecting 150 basis points of exchange rate headwinds. Like-for-like revenue growth decelerated a couple of hundred basis points from Q4, which reflects tough comps from a year ago, most notably in our aftermarket business. Our key metrics remain strong, reflecting goodness in both ARPU and customer growth. ARPU rose to $150, up 9% year-over-year, and normalizing for acquisitions in currency remained steady in the mid-single-digit range. Our customer base grew more than 6%, to 18.8 million, adding over 1 million net new customers in the past year, as we see continued strength in new ads and modest reductions in churn. Unlevered free cash flow for the quarter grew 22% year-over-year to 199 million. Our trailing 12-month unlevered free cash flow margin expanded to 24%, up over 100 basis points versus a year ago. On the balance sheet, we finished Q1 with $1.1 billion in cash and short-term investments. Net debt landed at $1.3 billion, or about 1.9 times net leverage. As Scott touched on earlier, we made a couple of smaller acquisitions after the quarter ended, which are immaterial in both cash outlay and their contribution to the P&L. With that, I'll turn to our outlook for the rest of 2019. We continue to expect mid-single-digit growth in customers in ARPU will produce full-year revenue of $2.97 to $3 billion, implying full-year growth of 12% to 13%. For the second quarter, we expect revenue of $730 to $740 million, representing 12% to 14% growth versus the second quarter of 2018. For full-year end lever-free cash flow, we expect to generate $730 to $745 million, representing a point and a half of margin expansion versus 2018. With our recent credit rating upgrade, we now expect net cash payments for interest in 2019 to be 80 to 85 million, yielding slightly faster growth in leverage-free cash flow in 2019. Stepping back, we continue to deliver consistent results while executing against our key priorities in customer experience, product, and marketing. laying the foundation for sustainable growth in the future. Thanks, everyone, for joining us today. And with that, operator, let's open up the call for questions.

At this time, I'd like to remind everyone, in order to ask a question, press star 1 on your telephone keypad. To withdraw your question, press the pound key. We will pause for a moment to compile the Q&A roster. Your first question comes from Brent Thill from Jefferies.

Good afternoon. When you talk about the bookings growth acceleration to 13.5 and 12.5 in Q4, can you just talk through maybe what you saw in Q1 that led you to that? And then secondarily, some of us are customers of yours, and we noticed some small price changes in our bill. Well, we haven't seen that in the last couple of years. Is there a broader price increase going through the system, or is this just selective in some areas? be helpful. Many others have obviously raised prices across tech in the last year, and I think there's a lot of questions from investors around your approach on pricing. Thank you.

Hey, Vern, it's Ray. I'll take the first of those, and then I'll pass it to Scott on pricing. As far as the acceleration in bookings quarter to quarter, it was broad-based across a number of areas where we're driving change in product as well as go-to-market and merchandising, and you can see that show up in both the customer growth as well as the ARPU growth.

Yeah. Hey, Brent. And on your price question, overall, our strategy is having an incredibly valuable product at a valuable price. And over time, we're constantly looking at how we wrap our products together, what the list price is, and tweaking that so that, again, there's overall value. And again, our combination of ARPU is around adoption of products. It's around value add and then select pricing. And I think your wrapper comment was, is what you saw selective? And the answer is, yeah, it's selective. It fits with the philosophy and strategy we've had for a long time around value product at a value price.

Thank you.

Your next question comes from Jason Helfstein from Oppenheimer.

Thanks. Two questions. One, can you just talk about the current impact on business applications? I think you did mention that it was tougher comps, and I'm just wondering, you know, kind of current impact there. Question two, when we think about e-commerce, how do you expect to monetize that? Is that a function of getting customers to adopt higher ARPU, or another way that still kind of monetize that. And then just lastly, housekeeping. From here, do you think kind of expenses should be more linear just because of the moving parts? I think the street and ourselves have kind of struggled with modeling expenses. And kind of from here, do you think it gets more smoother? Thanks.

Hey, Jason, it's Ray. I'll take the first one and the last one. I'll pass the other one on to Scott. When you're looking at biz apps, I wouldn't point as much to currency. Within there, there's about 150 basis points of currency headwind in the revenue this quarter. And a disproportionate amount of that headwind is actually in the hosting and presence line. With BizApps, it landed exactly where we expected in the quarter. If you'll recall from the last fourth quarter call, I talked about us lapping a number of initiatives and merchandising changes from last year. It's just creating a little tougher comp this year. It is still by far our fastest growing product category. We're on a trajectory now for this to be a half-billion dollar business this year. And if you look at the quantum of growth on a dollar basis, it's been pretty darn steady if you look past the four or five quarters. We continue to see line of sight there. To hit that three to four times customer growth algorithm, we've been talking to you guys about it on a longer term. Hey, Jason, it's Scott.

And on e-commerce... Right now, both We as GoDaddy plus Sellbrite both monetize through subscription. And as of right now, our focus is going to be around driving unit adoption. So Sellbrite combined with GoDaddy to have an incredibly valuable capability, not just to have an online site in the open web, but also connect that cart to everywhere it needs to be online and to have that for a monthly subscription fee. Now, we will obviously think about and look at ways to think about transaction flow over time, but as of right now, our focus is going to be around driving units and driving adoption.

Yeah, and your last question around expense growth. You know, we talked to you guys through the back half of last year where we were investing back in the business given the tailwind we had on revenue. You will see that combined with the cash burn from Main Street impacting our expenses through the second half of this year, then you should start to see those growth rates level out in the back half.

Thank you. Your next question comes from Zachary Schwartzman from RBC Capital Markets.

Thanks for taking my question. Scott, in your opening comments, you spoke about your bullishness on the international opportunity, including India, and how does it do it for your market. And you also called out the launch of your open exchange power business email there. Can you remind us how many current customers you have in India and talk a little more about the geographic opportunity and the ability to expand your go-to-market capabilities there? Thank you.

Hey, Zach. In India, we've said we've got over a million paying customers in the market, which is great. Obviously, India is still in pretty early stages of open Internet adoption, and our own growth there will be continuing to ride that adoption curve and, as I mentioned, particularly have a couple of tailored products to the pros who build online presences for others. And so we think that India has continued trajectory, and I'd say what we're also seeing through open exchange and other things is really nice growth in other emerging markets like Brazil and Mexico.

And a quick follow-up on Brent's question earlier on some of the selective or just the normal industry pricing changes from some of your peers. Are you seeing any, I guess, read-throughs from the amount that were from the selective price increases, or do you feel that there's a further opportunity for your most engaged customers, whether that's through additional product expansion or pricing levers? Thanks. Thanks.

I would, nothing that's, I think, particular to call out to everybody. Again, the strategy around value product at a value price points grade, I will say there are others in our industry that are very explicitly trying to drive significant price increases in a couple of categories. I think that puts us in a nice relative position. Our biggest focus is around quality right now of the experience around adoption and units and being able to do more with our existing customers. So, you know, in terms of the premise of your question, I don't think there's anything that I or we should call out specifically. And, again, our focus will be around doing more with our existing customers, driving value and adoption, and that will show up well over time. Thank you.

Your next question comes from Sterling Otte from J.P. Morgan.

Hi, this is Matt Pronon for Sterling Audi. Thanks for taking the question. So I know you mentioned there was some FX headwinds in the hosting and presence segment. I was wondering if you could touch a bit on the contribution from Main Street Hub and Go Central in the quarter and what the performance was for those.

Yeah, I mentioned with Jason's question around the FX exposure there. From a Main Street perspective, You know, we had, uh, disclosed to you guys a $40 million run rates at $10 million a quarter, uh, for main street in that existing business. And that's, um, you know, good, good placeholder for you to continue to push in there. Uh, as far as go central and manage WordPress, the two applications to show up in that line, um, we're not disclosing that every quarter Scott talked about it last quarter with the 40% growth. We're continuing to see good growth in those applications.

Your next question comes from Matt Pfau from William Blair.

Hey, guys. Thanks for taking my question. Just have one on Sellbrite. So my understanding is that a lot of your e-commerce companies, or at least they're more weighted towards services business versus product business. So Is the plan with Sellbrite more to expand the product portfolio to bring new product-selling businesses into the mix, or is there a sizable base of product customers within your existing e-commerce space that you can take the Sellbrite tool to?

Well, I think it's about expanding the range of capabilities within commerce. So you're right around service commerce, and that's something that we've certainly ramped up over the last couple of years. And Sellbrite adds a capability, again, where somebody's card can now absolutely get syndicated, managed, and show up across the big marketplaces. And that's just a great capability around product commerce. And so we think that this will allow us to deliver incremental value, certainly to go central towards product commerce. And down the road, it's a great capability to add to WordPress. And so if you think about a lot of the footprint of e-commerce retail around. There's, frankly, a huge chunk of installed base within and around WordPress, and we're excited about the capability that Cellbrite offers and how to deploy it not only to go central but also to the WordPress community.

Great. Thanks, guys, for taking my question.

Your next question comes from Ron Josie from JMP.

Great. Thanks for taking the question. Scott, too, please. I think, Scott, you mentioned most new marketing efforts and discretionary spend would be directed here in the U.S. And so can you just talk a little bit more about your marketing strategy here in the States specifically and maybe the products you plan to highlight slash lead with? And then sort of as a secondary to that, you know, I'm pretty intrigued with the connections tool and bigger picture, just how you view connections with marketplaces and Go Central in terms of the marketing messaging and just, you know, basically the product together and sort of bigger picture where that could go. Thank you.

Great. Yeah, thanks, Ron. You know, in the U.S., the strategy has been to emphasize the GoDaddy brand and really standing for empowering everyday entrepreneurs. And you're seeing that whether it's in social media or different YouTube executions, but ways to show and link GoDaddy to the full lifecycle of things that we can do with our customers. because right now the richness of our product portfolio is still something that, frankly, we've got opportunity here in the U.S. to expose or almost reintroduce ourselves to both existing customers and prospects. And so that's been the strategy and focus of, frankly, incremental dollars through the year. And when we say both brand enhancement and conversational marketing, it's about those two things. So that's the first. And frankly, again, we're happy, I think, with the results, both in terms of the receptivity of the message and how it's showing up in dollars. To your second question around connections, think about that as a foundation. And it's a foundation in digital marketing that really brings together website, digital marketing, and social presence. which are a continuum now, and we're really poised to bring all three of those capabilities together in an easy, simple way for customers, both at a product level, and then obviously when you think about Main Street Hub, that's a bit of a hands-on execution that for certain people who need extra help or want somebody to take on those services for them, we're set up to do it. So appreciate the interest and connections, and I would think about that as a foundation in digital marketing that we're going to do a heck of a lot more with in the quarters to come. So stay tuned.

Great. Thank you. Your next question comes from Yagal Arunian from Wedbush Securities.

Hey, guys. Good afternoon. So maybe I'll start with – Clearly a lot of focus on hosting a presence, building out the products out there, accelerating the pace of the rollouts. I feel like we haven't heard as much about product rollouts in business applications. I just wanted to get your thoughts on kind of next steps of products that you could add to grow the value of that segment.

Yeah, thanks. Well, don't run away from OX and what we've just done with Open Exchange, which is to be able to enable world-class email productivity capabilities at a, frankly, really low price point. And so that's rolling out across emerging markets. And we've doubled unit sales in some of the emerging markets that that's just been recently introduced. And so that's been a really nice execution that we're ramping up around the world. And, you know, we're excited about that on what it can do. And then per Brent's question around, you know, both digital marketing, which really expands categories, again, there's going to be more to come there too.

Great. Yeah, I guess I didn't mean to ignore OpenX. I was just thinking outside of email. But thanks for clarifying. Let me just ask one more on managed WordPress. And How you guys see the managed WordPress product? Again, obviously you're starting to build out the e-commerce side a lot more. It feels like more of that is starting on the Go Central side and understand that Sellbrite will eventually work its way up. But how do you see managed WordPress and the things you're doing there, how they fit in today's context? kind of more advanced website builder ecosystem, especially when it comes to e-commerce? Thanks.

Great question. So first on managed WordPress, again, for context for those listening that may not know WordPress as well, WordPress is far and away the largest online publishing CMS, but obviously built on open source software. And there's kind of four principal considerations here. and ways to add value around WordPress. One of which is site management. Plugin updates is the single biggest pain point that any user of WordPress faces. Second is security. And then third is sort of performance speed availability of sites themselves. And then the fourth is kind of ease of management, simplicity of design, right? Inherently as an open source system, you know, a simpler framework around design and management. And so our strategy around WordPress is side by side with what we're doing around Go Central and is really aimed at those four things that we just talked about. And just to highlight what we did with theme beans and code blocks, both of those bring nice capability around the design making WordPress sites easier to design and manage, so we're excited about it. Down the road and looking forward, we think there are nice opportunities to blend the capabilities between Go Central and WordPress, but we'll get to that a little bit in the future. But we see these two things as both critically important in addressing the major needs of not just websites, but really publishing site creation and bringing websites, social media, and digital marketing together.

Awesome. Thank you. That was really helpful. Your next question comes from Nived Khan from SunTrust.

Yeah, thanks a lot. I have a couple of questions. So maybe just on FX, did the FX headwinds intensify a bit versus when you got it back in 2019? in February, and then maybe a high-level question on marketplaces. Scott, you know, when you acquired MainStreetHub, you kind of spoke about the opportunity there. Maybe up to 2 million subscribers could be using it over time. Could you sort of give us a big-picture opportunity for marketplaces, maybe?

Hi, Navadish Ray. I'll take the first one on FX. Now, the headwinds were right in line with what we expected. I think I said... two to 250 basis points on the fourth quarter call, and it came in right in the middle there. As we look into the rest of the year, as I mentioned on my call comments, we would expect a similar pressure in the second quarter, and then that will balance out over the remainder of the year.

Thanks. And on Main Street Hub, we've been focused on doing two things with the capability of Main Street Hub, the first of which is – product, bringing the product of Main Street Hub, which is really social media reputation management and assisted reputation management through social and bringing it together with GoDaddy's website building and site creation capabilities. And we're pleased with the progress there. That's one team in our presence unit and is being set up really well. The second has been to rebrand the MainStreetHub social media services as GoDaddy and introduce it into GoDaddy's base. And as you mentioned, we had shared a 2 million-ish white space or customers that were either buying those services from others or had high interest in it. And as we've rebranded those services as GoDaddy and are starting to introduce it into our base, we're seeing really nice take rates. far above what Main Street Hub did on a standalone basis. And I would say that's on top of the acquisition thesis in case. And so we're tracking where we want to be.

And just to sort of extrapolate from that, if I look at marketplaces, launch, e-commerce product, what percent of your base do you think could be adopters of that over time?

Rather than share a specific number, our potential to grow product commerce from the base at which we were starting is quite high. Again, I would think about ways to frame it as think about the number of WordPress sites that actually sell a product. And we think, again, with Accelbrite, that's a really neat capability to add unique value to WordPress sites in particular. GoDaddy is the largest WordPress host. As Ray mentioned, we have over 3 million plugins and installs. Obviously, all of those are not product commerce, but there's a base of WordPress sites that are product commerce that we think have a – environment within the base for incremental cellbrite activity.

Great. Thank you. Your next question comes from Nick Jones from Citi.

Hi. Thank you for taking the question. I just want to touch on code blocks and theme beams. How big of an opportunity is there for you to consolidate third-party plug-ins and things like that? I know WordPress has a pretty deep offering there. Thanks.

I'm not sure it's consolidation as much as, boy, bring capability to have world-class plugins within the GoDaddy environment. I mean, there is a lot of opportunity for us to add value for all the WordPress sites sitting in our base. And as you mentioned, both Koblox, ThemeBeans, what we're really able to do with those two is We're going to make the site design process easier, simpler. That's going to be great. And this is a step, and we're going to do more of these kinds of things around WordPress, both organically and in the right spot through M&A, too.

Great. And one follow-up on the kind of scanning subdomains. Do you know how prevalent that is? Is that something that you're going to invest in monitoring more closely, or how should we think about that?

Sorry, could I have the question again? I didn't catch the first part of it.

I was asking about the spam subdomain.

Oh, just regular part of our practice. Super tiny number of sites. And this is just part of our ongoing... legal site review process, but nothing special to call out there, and it was a tiny number of sites.

Thanks for taking my question.

Your next question comes from Lloyd Wamsley from Deutsche Bank.

Thanks for taking the question. This is Seth on for Lloyd. LiveScore, you talked about Mexico and Brazil being able to provide an email seat for $1.50, so we were just wondering how the uptake has been trending there. and if there are any levers in the future that you'd be able to pull in order to raise ARPU. And then just as a follow-up, it doesn't look like you bought back any stock this quarter, none last quarter. Just curious as to your updated thoughts on capital allocation and as well as what you're seeing in the M&A markets so far this year. Thank you.

Sure. On the first, we're seeing kind of 2x the level of unit sales in those markets. and we're in the process of rolling out open exchange around the world. Boy, it's great to drive unit adoption and usage, and, you know, that'll create a lot of value. So right now we're focused on driving OX adoption into emerging markets around the world. I'll let Ray comment on the second question.

Yeah, Seth, I mean, you know we can't get into the details around stock buybacks, but we're an economically-minded management team. As far as capital allocation priorities go, they haven't changed. It's organic growth, M&A, share repurchases, in that order.

Your next question comes from Mark Grant from Goldman Sachs.

Hey, thanks for taking the question. I just wanted to touch on the investments around technology and platform that you've been making. We've been talking about this for over a year now. And really building out that technology platform, it seems like those investments are making it easier to make some of these tuck-in technology acquisitions and just plug them in and have it work. So whether it's managed WordPress, Go Central, where do you think you are in terms of bringing in all the capabilities that you hope to offer? Are there any features or products that you think the platform is missing that you'd need to focus on?

Mark, I wouldn't talk about it as specific feature capabilities. I think there's a couple things that you're seeing us do if you look at not just feature releases, but what we're doing. The first is bringing site creation, which is really publishing into the open web, social media presence, and digital marketing together. I could pick off certain features and elements in each one of those categories, but we've got, I think, a whole different level of capability that's coming in the intersection of those three things. And what we're trying to do at a high level is have somebody's idea, whether it's business or venture, look great, be everywhere it needs to be, and allow somebody to engage with their own audience. And those are the customer things that we're driving today. and really it cuts across sites, social media, and digital marketing. And, and this is an important and, the elegant thing about GoDaddy is that we're creating DIY technical tools to allow people to do that in an elegant way and building a service capability where we can put hands-on work for the 50% plus of the world that actually wants somebody else to either build or manage their online presence. And that's the strategy, and we continue to build capability to fulfill, frankly, that value proposition.

Thanks. That's very helpful. Your next question comes from Brian Essex from Morgan Stanley.

Hi. This is actually Chris on for Brian. Thanks for taking the question. Just a quick one for me. Can you talk about some of the initiatives to increase attach rates as you're working with better data? better analytics, and is that something that's localized in your core geographies, or can we expect a rollout towards international markets soon as well?

Thanks. Yeah, great question. If you think about Attach, there's a lot underneath that. I would say we were, one, working at Waze within the GoDaddy site experience to present the relevant next thing to somebody. Obviously, the core name, site, email are different ways that those are presented. Again, through whether it's connections, what I just described, or a number of things within security, we're adding sophistication on kind of the next level of attach that really shows up through our site experience. That's one. Two, what we've termed conversational marketing to everybody is is our way of taking data insight and science across our 18.8 million customers and being able to profile what's the one next thing that we should at least introduce or talk to them about. And that's the muscle that we're really focusing on here in the U.S. We're seeing good traction. And in both of those two things that I described, we're kind of proving them out in the core U.S. region, and then we're going to expand them to markets around the world.

Got it. And just a quick follow-up. In terms of Flosso, are you able to provide any incremental color in that?

Only that we're integrating into the core Go Central experience. And as I described earlier, it's creating all sorts of digital commerce capabilities, downloads, books, music, art, et cetera, that is just adding richness to our Go Central experience. It's great. Like we're six months into the integration – into – into the integration, and it's ticking right along.

Perfect. Thank you. Your next question comes from Deepak Mathavanian from Barclays.

Hey, guys. I'm sorry if this question was asked. I was jumping around a couple calls. So first, I know you've been making domain pricing tweaks recently. Should we think of that largely as a pass-through for Versa and Hikes that's coming up over the next, you know, few months, or will there be another adjustment when that becomes effective? And then secondly, I know there were a couple questions on M&A, but what is the recent thought process on potentially consolidating the side of the market where you have pretty good cost structure advantages, like domains and hostings? Thank you.

Hey, Deepak. In terms of the former, no comment on future pricing. As you know, we're always testing – price but particularly new renewal from you know a value standpoint and particularly around combining individual products and so you know again that's sort of both strategy and and tactic and both of those are going to continue in terms of consolidating domain and hosting companies uh we're we have the capability you know certainly in naming where um We have complete, frankly, confidence in our ability to operationally tuck in and integrate anything we're doing. From a hosting standpoint, the focus has been to selectively think about our geographic scope through acquisition, and that's probably the way that everybody should think about any future action that we do in what you'd call the conventional domain in hosting companies, which, again, would be get a footprint in a market that we can increase our heft and scope and then roll out GoDaddy's product portfolio over time.

Use it as a way to accelerate the organic growth.

Great. Thank you so much.

As a reminder, to ask a question, press star 1 on your telephone keypad. The next question comes from Aaron Kessler from Raymond James.

Great. I just made a couple of things. I may have missed it, but can you speak to kind of the uptake of kind of shifting over to cloud with AWS? And then just on Go Central, kind of where do you feel you are in terms of kind of adding various services to the app in terms of where you want to be at kind of over the next year? Kind of which ending are you in there? Thank you.

Hey, Aaron. I'll take the first one on cloud, and Scott will take Go Central. Making great progress on transition to the cloud. As I've mentioned before on previous calls, this will be a multi-year transition. We're taking a lot of the workloads outside of our core hosting products and moving those to the cloud. That will occur over the next 18 months. We're moving a lot of the dev teams today. Some new product design will go there. Production is next. So all going according to plan, but you won't see any dramatic impacts either in operating expense or capital. over the next, you know, call it 12 to 18 months.

And in terms of Go Central, we've added a heck of a lot of capability into the core editor and site design of what we can do. and extending Go Central into both social media and marketplaces, whether it's Facebook, Yelp integration, or through Sellbrite, what we're doing around e-commerce. So it's extending a website into the social media ecosystem that, frankly, I think we put a heck of a lot of capability onto the field right now, and I'm excited about what's coming. And, again, then the third sort of pillar of digital marketing is, is funneling through and bringing capability into Go Central that helps our customers talk to their customers. Frankly, I think we've got a lot more richness into the product than, frankly, perhaps even users of existing product realize, and that's going to be a big effort of ours going forward. So I think the wrapper on the question would be we have a ton of capability within the product now that we're excited about and can deliver great outcomes for customers. And if I'm looking ahead over the next couple quarters, I'm excited about what I think we're going to deliver into the marketplace along those same areas.

Great. Thank you.

That was our last question at this time. I will turn the call back over to the presenters.

Hey, everybody. Thanks for joining us. Appreciate the questions, as always, and we'll talk to everybody next quarter. Take care.

This concludes today's conference call. You may now disconnect.