GoDaddy Inc.

Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the GoDaddy Q2 2019 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, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Sam Kemp. Vice President of Investor Relations and Strategy, you may begin your conference.

Good afternoon, and welcome to GoDaddy's second quarter 2019 earnings conference call. With me today are Scott Wagner, Chief Executive Officer, Ray Winborn, Chief Financial Officer, and Aman Bhutani, who's joining GoDaddy as our next Chief Executive Officer. Scott, Aman, and Ray will share some prepared remarks, and then we'll open up the call for questions. Given that Aman will not be starting as CEO until September 4th, Scott and Ray will be answering all questions related to strategy, operations, and financials. 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 the day'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 four looking statements, which include those related to our future financial results, product introductions and innovations, and our ability to execute our leadership transition announced earlier today. Any forward-looking statements that we make on this call are subject to risks and uncertainties that are discussed in detail in our second quarter 10Q are based on assumptions as of today, August 1st, 2019, and may differ materially from actual results. We undertake no obligation to update these statements as a result of new information or future events. With that, here's Scott.

Thanks, Sam. Thanks to everyone for joining us today. As we announced this afternoon, I've been facing health challenges that after talking with my family and GoDaddy's board of directors, require me to make a change in pace and to focus on my health. This was a really, really tough decision for me, but unfortunately I know I can't maintain the same 110% level of energy, drive, commitment that's had GoDaddy first for me for the past seven plus years, and most importantly, what GoDaddy's customers, employees, and shareholders deserve going forward. The board and I have worked methodically to identify a tremendous successor and to lay the groundwork for a smooth transition. I'm honored to introduce everyone to GoDaddy's next CEO, Aman Bhutani. Aman brings a wealth of experience to GoDaddy, an extraordinary track record in growing a scale business, deep expertise in product and engineering, and consistently strong delivery at scale across both go-to-market and customer conversion. Aman is an exceptional leader. and has created strong followings in every organization he's led. Aman's going to fit in great with GoDaddy's culture and our values and bring skills, mindset, and experience to lead the company into the future. For the past four years, Aman's been president of Brand Expedia Group, leading the Expedia, Orbitz, Travelocity, eBookers, and Wotiv brands. He's built up Expedia's advertising and insurance business's and has led multiple product and technology teams that serve the entire company. He's highly successful in many areas that are analogous to what we're focused on here at GoDaddy, and he's highly complimentary to our existing senior leadership team. So with that, here's Aman to say hello to everyone.

Aman. Thanks, Scott, and hello to everyone on the call. I look forward to meeting many of you in person soon. I am excited to be here and to have the opportunity to serve GoDaddy's mission, our customers, and our employees. GoDaddy stands for the empowerment of the everyday entrepreneur. This is so much more than a brand moniker. It is the philosophical thread that runs throughout the organization from the dynamic progress our product teams have made on applications and services to the power of every one of our 6,000 GoDaddy guides. I love the spirit of bringing humanity to technology for businesses, nonprofits, and all the ideas around the world. GoDaddy has a really compelling business with a ton of opportunity. It's a great combination between product, go-to-market, and a deep care for our customers. Leading GoDaddy into the future is an honor and a privilege. So, I'd like to say thank you to our customers, Scott and the GoDaddy leadership team, the 9,000-plus GoDaddy employees around the world, the board of directors, and our shareholders for their trust as I take the helm. Now, I'll hand it back to Scott and Ray to review our second quarter.

Hey, thanks, Aman. It's great to have you here, and I'm excited about the future of GoDaddy under your leadership. Ray and I are going to use the rest of our call for our regular quarterly update. with three core topics. First, I'll share some of our product and ecosystem highlights. Second, I'll cover some recent partnerships of notes. And finally, Ray will cover our financials. I'll start with product highlights where we've done some fantastic things this quarter and are seeing ongoing strength with Go Central and Manage WordPress continuing to drive unit growth above 40% on a substantial base as we gain share across the spectrum of site creators. Let me touch on a couple of our most exciting developments. First, we introduced a new Go Central template interface that delivers unparalleled flexibility during the website building process. With this new interface, creators are able to visualize and re-render content in dozens of different layouts simultaneously. The reason this matters is that builders can experiment and adjust their site at any point in time during the create process, even after they're done. This is a breakthrough feature that solves a major point for website creators around the world. GoDaddy is the only website builder on the market with this capability, and the market's response has been extremely positive. Second, Go Central continues its evolution as a full-fledged marketing and publishing engine that helps customers thrive in a social and digital world. Following integrations with Facebook, Yelp, and Google My Business, We've integrated with Instagram so customers can view activity and engagement and go to Central's marketing dashboards. Our strategy of empowering customers to unify and optimize their online presence is mirrored in our online store, featuring integrations with Amazon, eBay, Etsy, and Walmart.com, enabling customers to sell products and manage orders, inventory, and fulfillment, all from one location. Looking beyond Go Central, we often get asked about the optionality that exists in partnerships. There's opportunity in both extending our own products into third-party ecosystems and bringing the best to GoDaddy customers through tightly integrated partnerships. We did both in the second quarter. First, we deployed several GoDaddy products into various Amazon solutions, which include our Pro Tools, which are now available to higher-end WordPress developers using Amazon LightSail on AWS. Go Central and SmartLine, which are now available as free trials for Amazon's Business Prime members, and our domain platform, which is in the process of being integrated into AWS and will power AWS's new domain registration. Incidentally, this will make GoDaddy the domain technology provider for all of the major public cloud vendors. Our second new partnership is with Cabbage, a leading online provider of real-time small business financing. Together, we'll be working to help our customers get access to financing solutions as they face cash flow needs throughout their lifecycle. And third, we're expanding our partnership with PayPal customers who can not only use PayPal as a checkout option, but can also use the PayPal Commerce platform for back-end processing of other funding sources, such as credit cards. These are individually great, but what they're showing is that we're accelerating the development of our products into the broader ecosystem at large, and are integrating other highly regarded companies' products that have big value propositions back into the GoDaddy experience. All up, our product lineup is growing in both breadth and depth. And if you haven't poked around in our websites and marketing suite in the last six months, or even the last two weeks, you're missing out on all that we can do for our customers. As we've doubled down on our product strength, invested behind our brand, honed our experience, and scaled up our conversational marketing efforts into our base, we're becoming increasingly sharp on how we acquire customers, and more importantly, how we can do more with them to drive both better success and lifetime value. We're particularly enthusiastic about the 40% plus growth in Go Central and Manage WordPress, as we know that customers who are more engaged with us spend more over time and stay customers for longer. As I think about Aman coming in and his strengths, I'm excited about his future contribution to evolving our product portfolio, extending websites into marketing and content creation, creating elegant and commercially successful attachment and conversion flows across the GoDaddy experience, and putting a scaled global technology platform to work across brands. With that, here's Ray to cover the financials.

Ray. Hey, thanks, Scott. We closed out the first half with strong execution on many fronts. delivering currency neutral revenue growth of 15% and good trajectory on profitability. We're continuing to balance investments in a number of categories against the natural expansion in our business model with a focus on running a business that delivers sustainable top line growth and margin accretion. Bookings grew to 846 million, rising 14% on a constant currency basis, another acceleration versus first quarter growth. Reported bookings growth was 12%, reflecting about 170 basis points of currency headwinds driven by the strengthening US dollar. At today's exchange rates, we expect a marginal bookings headwind in the second half of 2019. Revenue came in at $737 million, growing nearly 15% on a constant currency basis and over 13% on a reported basis. Like-for-like revenue growth accelerated 100 basis points from Q1. which reflects strength across the board and in particular in presence applications and services. Our key metrics remain strong, reflecting goodness in both ARPU and customer growth. ARPU rose to $153, up 8% year over year, and our customer base grew more than 5% to 19 million, adding 1 million net new customers in the past year. Let me touch briefly on the optics of our customer metrics. We deliberately change our price and merchandising tactics to optimize for lifetime value. At times, these tactics can move customer return events from period to period and even from year to year. This is happening in 2019, such that even with strong renewal rates, net ads are going to be in the 700 to 800,000 range for the full year. As is evident in our top line trajectory in Q2, and our revenue growth expectations for the second half, this is a matter of optics and not fundamental performance, as our core strategy to maximize LTV is showing up in strong revenue and ARPU growth. Moving to cash flow, unlevered free cash flow for the quarter grew 8% to $168 million, with year-to-date growth of 16%. And our trailing 12-month unlevered free cash flow margin expanded to 24%, a point higher versus a year ago. Looking into the second half of 2019, we'll continue investing behind our marketing and product efforts, but we'll see year-over-year OPEX growth rates moderate across the board. On the balance sheet, we finished Q2 with $1.2 billion in cash and short-term investments. During the quarter, we issued $600 million of unsecured senior notes, maturing in 2027 at a fixed rate of 5.25%. which we used to prepay a portion of our existing term loans. And we increased our revolver capacity to 600 million, both to bring us more in line with similarly situated companies. Net-net, the impact of these transactions have a negligible impact on net interest expense, but diversify funding sources and extends the maturity profile of our debt. With that, I'll turn to the outlook for the rest of 2019. We continue to expect full-year revenue of $2.97 to $3 billion, implying full-year growth of 12% to 13%. For the third quarter, we expect revenue of $755 to $765 million, representing 11% to 13% growth versus the third quarter of 2018. For full-year unlevered free cash flow, we expect to generate $730 to $745 million, representing a point to a point and a half of margin expansion versus 2018. And based on today's interest rates, we expect 80 to 85 million of cash interest expense in 2019, yielding slightly faster growth in levered free cash flow. Before we turn it over to Q&A, I'd like to reflect on the incredible evolution of GoDaddy over the past seven years, including the quality and consistency of our business today and how we drive success for our customers. These positive outcomes are a direct result of Scott's strategic direction good judgment, operating execution, and just as importantly as leadership. On behalf of all of GoDaddy, we thank you and wish the best for both you and your family. And a quick welcome to Oman. We're all excited for you to take the reins for the next leg of our journey. With that, operator, let's open up the call for questions.

Thank you. At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from the line of Jason Halfstein with Oppenheimer. Your line is open.

Thanks. Just one kind of model question and then a bigger picture question. And just before I do that, Scott, it's been a terrific run and just, you know, you've built a great company and leaving the company in a great place. So I want to echo those words. So first question, given your comments about net ads and some of the optics, Can you give us some comments, maybe what's happening in gross ads? And to the extent you are seeing higher churn on the pricing increases, is there something positive going on in gross ads? And, you know, not, not asking you to give that metric now, but maybe that's a metric that would be helpful as we're trying to measure marketing efficiency. And then the second, um, the constant question we get on the company is your plan for a capital allocation. I mean, you're on your way to effectively have no net leverage, uh, in the not too distant future. And so really, are you not seeing the right assets available for sale? Are valuations too high? And if either of the above, why not start buying back stock and just waiting for the right asset to come by? Thanks.

Yeah. Hey, Jason, it's Scott. First, thanks for the acknowledgement. I appreciate it. Hey, we're joined by Andrew Loeke, our COO. And so on the first part of your question on on the customer ads. I'm going to hand it off to Andrew, who will give you a color on it, and Ray will talk about capital allocation. Andrew? Yeah, sure thing. Hey, Jason.

We regularly adjust our different domain offers just to put a little color towards this. Sometimes we use a one-year offer. Sometimes we use a two-year offer. That has the effect of deferring customer return events sometimes. Last year, our net ads, for example, were up over 50% year over year because of this effect. Our core pacing remains really healthy. Gross ads, our Q2 cohort looks to be one of the best performing ever, and we really haven't seen any impact from price. As Ray mentioned, retention rates are looking really strong.

Hey, Jason, it's Ray. To comment on your question around capital allocation, you know, that has not changed for us. The priorities are the same, and they're in the order of organic, M&A, and if share repurchases last, we're going to be disciplined about M&A. we're looking for the right fit. It's not just about price. It's got to be a good operational strategy and cultural fit.

Okay, thank you.

Your next question comes from the line of Navid Khan with SunTrust. Your line is open.

Yeah, thanks a lot. A couple of questions. Maybe on the gross margin, It went down a little bit. Is there anything to read into that and maybe the components may be driving it down? And the other question I have is just around international growth. It seems to have slowed sequentially if I look at the year-on-year growth for Q2 versus Q1. Is that just a function of how you deploy your marketing dollars or is there more to it? Thanks.

Hey, Navid. It's Ray. I'll take the first and then I'll pass it to Andrew for international and Gross margin landed right within our expectations. While you're generally going to see natural accretion from the mix of products, there's variability from quarter to quarter based off of a variety of factors. We're managing our product and pricing strategy decisions to deliver incremental dollar growth and with good returns, irrespective of the margin percentage. As I've mentioned to you guys on past calls, that mid-60s percentage I think is what you should be plugging into the models going forward.

And then, Navad, on international growth, it's exactly what you cited, which is around where we're putting our marginal marketing spend. It's what we talked about last quarter. As we've built out the conversational marketing engine primarily focused in the U.S., we're seeing great return. We manage our spend globally, and so we're putting it against the highest return opportunities. We still continue to see a tremendous amount of opportunity across international, but frankly, we love the returns we're seeing in the U.S. right now.

Thank you.

Your next question comes from the line of Mark Grant with Goldman Sachs. Your line is open.

Thanks. I'm just hoping if you could give us a little bit of an update on what you're seeing around SmartLine and MainStreetHub. You know, the partnership with AWS obviously is encouraging and the free trials available there from SmartLine. But have you seen any changes in whether it's new customers coming in for new trials or any impact to the 31-day churn metric?

Hey, Mark. It's Scott. Thanks. So SmartLine, first of all, so on SmartLine, you know, we're still working through the value proposition on it, there's a huge need at the top of the funnel. And if you think about SmartLine, right now you have second line number and voice. And what we're really focusing on is actually building it out in terms of messaging. And we think that that is really the product need and the fulsome nature of what customers need is a second number that's actually tying into the broader way that our customers have to reach and talk to their customers. And so we're spending our time and energy thinking not about just SmartLine as a voice service, but particularly extending it into an integrated messaging platform. Boy, when you just spend time watching our customers interact, this is a big, big opportunity. And so we're throwing our shoulder against it. On Main Street Hub, it's in really nice shape. So at this point, We have one integrated team and business working through assisted, not only website creation, but maintenance and paid social media services. So it's all one operation between websites and marketing. And we're seeing, frankly, great results as we integrate operations and particularly as we bring kind of this integrated value proposition to the GoDaddy base. So punchline is we got top line growing nicely. We're starting to drive growth, and now we're really focused on scaling. It's in nice shape.

Great. Thank you very much. And, Scott, certainly all the best to you and your family going forward.

Yay. Thanks, Mark. I appreciate it.

Your next question comes from the line of Brent Thill with Jefferies. Your line is open.

Scott, you've got a lot of fans. Stay strong. I had a question for Amane. You have a very strong product background, and I'm just curious if you could just give us your vision of this migration from domains to applications and how you see this. And I know it's early, but it seems like there's a lot of questions we get around the application side. And I had a quick follow-up for Ray at the end.

Thanks, Brent. This is Aman. You know, it's not even day one for me yet. What I would tell you is when I look at the GoDaddy strategy of focusing on the conversion funnels, getting the marketing working well, increasing the product portfolio, and then being able to run multiple brands on a strong technology platform, Those link in really well to my background. So I'll be excited to share more with you and everyone else as I get on board and learn more about the business. But going in, it seems like a good match for the expertise I bring to the table.

Ray, cash flow missed the street by 10%. It's definitely a little more back-end loaded. Can you just talk through this and I'm getting a number of questions from your investors. You know, it's been three quarters. You got $500 million on the buyback. You haven't touched a share. The stocks have lagged, both the indexes and the peer group. You know, I guess the question is kind of what's the holding pattern for?

Hey, yeah, Brent, look at the top line, right? We've got good, solid metrics and growth this quarter on unlevered free cash flow. We're about 50% of the way towards our annual guide, so no concerns around cash flow. It's just timing in quarters against consensus, so I've got no concerns there. As I mentioned earlier, the capital allocation priorities have not changed. We're going to continue to grow this business organically. We are looking for M&A, but it's got to be the right fit, and share repurchases will come into the picture, but it's in that order.

Thanks. Your next question comes from the line of Sterling Odie with JP Morgan. Your line is open.

Yeah, thanks. Let me also start, Scott. I mean, held the job not only as CFO but CEO and really advancing the culture and the progress of the company. Congratulations. Thoughts and prayers for you and the family. Moving on to the business, you know, if I look at slightly slower growth in the customer additions, which was mentioned before, but the bookings coming in at a really nice level, You've mentioned a couple of elements, but I'd love for you to kind of rank order. Where do you think you're kind of punching above your weight class in terms of getting the extra bookings per new customer coming onto the platform?

Hey, Sterling, it's Scott. I think we're seeing a combination of things. One is slightly better attach right during the initial conversion flow and funnel. The second is back to this effort of conversational marketing into the base. I mean, we really do have now the science of, you know, what are each one of our customers doing, not only with GoDaddy's products, but others, and where are they in their life cycle? And it's really honing in on, boy, how do we put the right next thing in front of them at the right time? And again, I think if you're using the old baseball analogy, we're probably in the second inning of actually scaling out that capability, but As we make progress there, that shows up in ARPU, and it particularly shows up in some of the more advanced application products. Really, it's kind of those two things. And from a product category standpoint, it's showing up a little bit more in hosting and presence. And per the script comments, 40% unit growth and go central and manage WordPress. Obviously, those show up nicely and are probably the big areas of incremental growth.

Great. And then one follow-up question, you mentioned the partnership and AWS integration. You know, if we go back all the way to the time of the IPO, there was the first concern about Google domains and, you know, obviously you've had the great partnership with Microsoft, et cetera. I thought it was interesting. You said that this gives you all three major clouds integrated. Can you give us a sense of how much of the domain flow comes from the existing relationships that you had and might, what might we expect as you add AWS into that equation?

Yeah, thanks, Sterling. Scott again. So across all of those partners, it's a small, small contribution. I mean, the vast, vast majority of our domains are GoDaddy proper. We are the marketplace for naming. And frankly, that's not going to change for a long time. This is more about just strong relationships with the ecosystem. And so it's honestly a great nod to our domains team. with the breadth of names that are carried plus the speed and sophistication, frankly, of our APIs that, you know, the other cloud providers are using our domain technology to, you know, power some, if not all, of their domains in their own cloud offering. But it's tiny, you know, relative to the P&L, and honestly, it's not going to show up in our financials or our top line, but it's just a really important part of us being, you know, part of the broader ecosystem.

Great. Thank you.

Your next question comes from the line of Matt Powell with William Blair. Your line is open.

Hey, guys. Thanks for taking my questions, and best wishes to you and your family, Scott. So I wanted to ask on the website products, seeing some nice growth there on both the WordPress and the Go Central offerings, maybe you can just give us some more detail on what's the driver there. You made a lot of functionality enhancements, so I suspect that's part of it, but there's also been some changes from others in the market around pricing and other things, so just wondering what the biggest factors there are in the continued strong growth.

Yeah, thanks for the question. First and foremost, there's, I'd say, feature functionality product quality richness that really over the last year has really amplified. And in terms of how that translates into business, really the first, the first thing is more awareness, not only within the GoDaddy base, but in the broader market. And again, that's something that's going to be a multi-year effort, but just awareness of the capability that we have is a big thing. And honestly, the second is better attached, just working our flows that I'd say we're still in the early innings of and have a lot of upside. Relative to those two products, price isn't driving any of the uptick. It's all quality and attach.

Got it. Thanks, guys.

Your next question comes from the line of Deepak Madhavanan with Barclays. Your line is open.

Great, thanks. God, I want to echo all those comments. Great run. We and I'm sure your investors really appreciated your time at Good Addy. Two questions from us. First, is the payback period on this marketing spend any different than some of the other incremental spend that you've done before? Bookings growth is really strong, but curious if you're seeing anything different with marketing investments. Should we expect a period where this sort of normalizes over the next few quarters? And then second question is on Go Central. Can you provide some color on what geographies are kind of driving this growth? You've never quantified it, but perhaps can you give some color on how to think about the size of the Go Central business currently? Thank you.

Yeah, Deepak, Scott, Purse, thanks for the comment. I appreciate it. On the relative return of conversational marketing, we don't get into the specifics on individual components of our marketing channels. They really are complementary versus completely different lanes. But again, you can think about incremental spend going against the base, and we have return thresholds on it. Needless to say, everything we're doing is economically accretive and has really good return. We're looking for ways to keep spending money against these kinds of opportunities and against these areas. You know, investors, not only we as a business, but investors would actually want us continuing to spend more. This is about us just honing and scaling how we do this. Your second question on Go Central, you know, it is a part of the hosting and presence line. And obviously, if that's growing 40 percent, you can see the overall aggregate. Go Central from a revenue contribution is still a small but meaningful component of that line. And, you know, it really is the big reason for the ongoing strength in that segment. So when you're looking at the growth in that segment line, think about that as coming almost all from Go Central. And, you know, in terms of where, you know, kind of follow the developed world, U.S. is the strongest, and then core English markets are next. It's where we're putting our shoulder, and, you know, there's a lot of runway really in just those geographies. I think that covers everything.

Great. Super helpful. Thank you very much.

Your next question comes from the line of Ron Josie with JMP Securities. Your line is open.

Thanks for taking our questions. This is Andrew Benon for Ron. You guys have historically talked about 1 million net ads per year on average, understood the color on the contract issues, but is that the level that we should expect going forward that we get back to that once we get through this? And then secondly, just on your Amazon partnership, really interesting. Can you take a step back and talk about what you guys look for in third-party partners? Thank you.

Yeah. Hey, it's Scott. So on the first one on net ads, if you look at this on a two-year stack, a year ago, as Andrew was describing, there was a million-two. Ray talked about how things are going to layer throughout the year that kind of normalizes around that million number over that two-year period of time. I think the most important point is that the underlying renewal rate at a cohort basis and a customer basis not only hasn't changed, but, you know, it's tweaky getting better, meaning small amounts. So the fundamentals of cohort retention, frankly, haven't changed. And more importantly, the value of each cohorts are increasing and, you know, honestly are in really nice shape. I think your second question around partnerships, number one is that there is a value proposition from a product and a customer job that matches the needs of our customer base. The second is that we can execute a really tight integration with fantastic CX or customer experience. If you think about what we've done with Microsoft O365, I mean, boy, that's the gold standard of really tight integrations where you take a great product

Excuse me. You're experiencing technical difficulties. The conference will resume momentarily.

All right.

Hey, guys. This is Scott. Apparently, we had a little bit of a telecom issue through the central place, and we're back. I think we were talking about partnerships. Basically, this is a big value proposition and a tight CX and Microsoft O365 is honestly the gold standard of it. And what we're seeing in those other categories is the same kind of execution.

All right, thank you.

Yeah, thanks. I think we're set for next question.

Yeah, your next question comes from Lloyd Walmsley with Deutsche Bank. Your line is open.

Thanks for the question. This is Seth on for Lloyd, too, if I may. One, just touching on the Amazon partnership, maybe asking it a little bit differently, is there anything in the contract or in the partnership with them that prohibits them from competing with you down the road in any way? And then second question, apologies if I missed it, just wondering about marketing and advertising and also G&A looked a little bit elevated in the quarter compared to what we were modeling, and I was just curious if there's any one-time expenses to call out or maybe something with conversational marketing. And best wishes to you and your family, Scott.

Yeah, thanks. On the specifics, we're not going to get into the partnership details, but we feel good that if we have a great value proposition that, you know, those partnerships are going to continue for a long period of time. It'll be good. On the marketing, Ray's going to pick it up on marketing.

I don't know if you have any questions around this, but marketing, It's a soft comp for the prior year. It's the lowest point in the year. Don't forget the G&A line has a litigation settlement in it, so you need to pick that up.

Next question. Next question comes from the line of Zachary Schwartzman with RBC Capital Markets. Your line is open.

Thanks for taking my question first, Scott. Like others have already said on the call, best wishes for a full and healthy recovery. What on the net customer ads? Now it's $700,000 to $800,000 from the call it million net ads that had been previously discussed. Are some of the changes and additions that Ray referenced that are layered in the back half, are they going to be more margin accretive to the bottom line? Given that revenue guidance wasn't picked up here, but there's a lower... but there's lower net ads. It seems like ARPU should expand. Thanks.

Yeah, Zach, and, you know, again, these aren't quarter-to-quarter changes, right? The purpose is around just managing lifetime value. And, you know, that doesn't flow in a calendar year, right? That's on a, you know, if you think about that on a 12-month forward basis. And, yeah, as we particularly focus on some of the higher-value customers, ARPU, you know, lifts, and that's what you're seeing from not only our revenue performance, but the guide. But again, the margin accretion, that's not like a quarter-to-quarter thing, but the relationship between customers and ARPU should work in the way that you were describing.

Great. Thanks.

There are no further questions at this time. I turn the call over to Scott Wagner.

All right. Hey, everybody. Appreciate it. And in closing, I want to say thank you to everybody. In particular, thank you to the GoDaddy employees who are listening on the call and have been here with all of us for day in, day out for a long, long time. And particularly, thank you to the investment community, both on the sell and the buy sides. Our dialogue over the past four plus years has been consistently both thoughtful and respectful. Good companies are always evolving, as GoDaddy no doubt will. But our one constant will be transparency and a view towards building a well-rounded business that delivers for customers, shareholders, and employees. And thanks, everybody. Really appreciate it. And good luck going forward. I know it will be a huge success. Thanks, everybody.

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