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spk07: Good afternoon, and thank you for joining us for GoDaddy's fourth quarter and full year 2020 earnings call. I'm Mark Grant, Vice President of Investor Relations. With me on the call today are Aman Bhutani, Chief Executive Officer, and Ray Winborn, Chief Financial Officer. Following prepared remarks by Aman and Ray, we will open up the call for your questions. If you would like to ask a question on today's call, please use the raise hand feature in the webinar to be added to the queue. 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, normalized EBITDA, net debt, and gross merchandise volume. 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 investors.godaddy.net or on our Form 8K filed with the SEC with today's earnings release. The matters we'll discuss today include forward-looking statements, which include those related to our future financial results, new product introductions and innovations, partner integrations, our ability to integrate acquisitions and achieve desired synergies, changes to executive leadership, as well as the impact of the COVID-19 pandemic on our business, customers and employees. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. Actual results may differ materially from those contained in the forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, February 11, 2021, and we undertake no obligation to update these statements as a result of new information or future events unless required by law. With that, here's Iman.
spk09: Thanks, Mark, and thank you all for joining us today. GoDaddy exists to empower everyday entrepreneurs. Our mission is to make opportunity inclusive for all, and the shift to digital represents the greatest opportunity for our customers to share their gifts with the world. With a differentiated offering, including guidance and tools with an intuitive, seamless experience specifically designed and built for our customers, it is clear why customers continue to adopt our products and ask us for more. Everyday entrepreneurs are creative and resourceful, and they want to be able to focus their time on their business. From domain names to email and content creation to commerce, and soon to include payments and point of sale, customer focus for us is about building a seamlessly intuitive experience that saves them time and unlocks capabilities through ease of use. In 2020, our digital presence was key for our customers, and the increased demand led to accelerating bookings growth for the last three quarters for us. For 2020, GoDaddy neared $3.8 billion in bookings and topped $3.3 billion in revenue. We leaned into the surging demand with marketing spend, and while we kept it efficient, the result was our best year of net customer ads, except 2017, which included the HEG acquisition. We welcomed nearly 1.4 million net new customers in 2020. by providing valuable products and offering the best care, we have also been able to maintain stable renewal rates. And our churn metrics, well, those have always been low and they still found room to improve in 2020. Early last year, we spoke about our natural evolution into commerce. Everyday entrepreneurs are underserved and demand this from us, and our investments have been focused on the simplest and most relevant commerce experience. No doubt, commerce continues to be a giant opportunity for us. Internally, we are also evolving. We have made significant progress in implementing a broader experimentation program that allows us to more clearly measure the value we are creating for customers and deliver functionality faster. The discipline of measurement allows us to set more ambitious goals while also giving us the confidence to achieve them. We are moving faster, putting more products in the hands of more customers and winning the right to do more for them. Our leadership team is also evolving. 2020 was a year of milestones and career defining achievements for many GoDaddy leaders. After having truly accomplished herculean tasks both in 2020 and over their respective careers, our Chief Legal Officer Naima Kelly and our Chief Financial Officer Ray Winborn have each expressed a desire to retire at some point this year. They continue to be fully engaged with the company and will help with transition as we look to fill their incredibly big shoes. We have a strong leadership team with talented, tenured folks, and with continued leadership from Naima and Ray, we expect a seamless transition. We have strong internal candidates, and we will be looking for external candidates for both roles as well. With acceleration in the numbers and also in our internal operating rhythm, I want to share three priority areas where GoDaddy will be bringing innovative solutions to our customers in 2021. Our top priority is commerce and 2021 is the year we will bring to market a holistic solution for everyday entrepreneurs that powers every facet of their online and offline commerce experience. In 2020, we created strong customer value with our commerce tools and GMV for websites plus marketing and sell bright grew 75% year over year. In 2021, GoDaddy will extend our current offerings with a focus on delivering Omnicommerce solutions. Earlier this week, we closed on the point acquisition. And as you know, point extends our commerce offering with a set of products that span the full spectrum of commerce enablement. Point brings us payment capabilities as a payment facilitator and brings immense value to our customers through its innovative point of sale terminals, inventory management software, loyalty management tools, and more. Point and GoDaddy customers are already seeing great success. represented by the combined $23 billion in annualized GMV that already flows through our platforms. As we integrate and build the GoDaddy commerce platform, its scale will be backed by the 6,000 guides that are ready to provide guidance we know our customers need. To help drive focus and continued momentum in commerce, we have created a new commerce division within GoDaddy. Point CEO Osama Bedir has joined GoDaddy and will lead this new division reporting to me. The next priority I want to share is about our pro customers. We already have a large group of designers and developers that are GoDaddy customers, but we know the opportunity is much, much larger. last year our partners team whose sole focus is to create value for designers and developers went back to first principles deep research into the customer needs led to a new set of solutions organized in three pillars The first pillar is all about a seamless, intuitive experience in the toolset we offer. In January, we launched the Hub for GoDaddy Pros, where website designers and developers can perform their work in a simple, intuitive way that saves them time and money. The hub enables bulk updates across hundreds of sites for WordPress core, plugins, and themes, allowing pros to roll out updates for better security, new functionality, and better availability. What may have taken hours now takes seconds and even works on WordPress sites not hosted by GoDaddy. Pros can also use the Hub's built-in project management tools and make it easier than ever to deliver customized sites for their clients. The Hub lets Pros manage all of their clients in one place and built-in delegated access allows Pros to collaborate with their clients more effectively to drive the results their customers want to see. The second pillar is all about care. Pros have told us that they value the kind of guidance and care we offer, and they want us to do more. We have extended our care to support pros for all their WordPress sites, not just the ones they host with us. With additional care guides armed with a higher level of training to support these pros, we are ready for the unique needs of this customer population. The third pillar brings it all together through marketing. With millions of pros out there, we have planned a marketing launch to tell them about the added value and capabilities we are bringing forward. It all begins with the launch of the GoDaddy Pro program. Signing up to be a GoDaddy pro gets pros access to exclusive discounts for themselves and for their clients and direct access to the most advanced guides directly through the hub, speaking their language exactly the way they want it. GoDaddy Pro is live in the US with its first marketing campaign. And in April, we will be hosting our first virtual GoDaddy Pro conference. And we're just getting started. Look out for more benefits of being a GoDaddy Pro and its global launch. The three pillars together embrace the needs of our pro customers and enhance our relationship with them beyond a strong managed WordPress offering. Overall, our strategy is straightforward. WordPress is the largest CMS in the world with a market share of over 60% and growing. Pros know WordPress and prefer WordPress, and our vision is all about making it seamless and intuitive while retaining all its power and flexibility. We are not interested in forcing pros to use a different tool. That sounds like a job for Sisyphus. While it is exciting to talk about new offerings like Commerce and GoDaddy Pro, under these exciting new businesses is the solid foundation of our domains business. And that is the third priority I want to talk to you about. For years, we have outgrown the domains industry with innovative ideas and execution in both the primary and secondary market. That growth isn't going away anytime soon. Recently, we added GoDaddy corporate domains and GoDaddy registry, which promise to offer new and existing customers with innovative solutions. But that isn't all. Our fine team has really stepped up their experimentation velocity. These are the folks that run the search algorithm on godaddy.com. We are building an adaptive user experience which leverages multiple inputs, including the customer's profile, the query, its context, the available results, and also available add-ons to make sure customers see the options and bundles that will create the most value. Our aftermarket is also seeing tailwinds from the digital transformation of small business. More businesses coming online is resulting in more customers leveraging our domain broker service to help them secure the perfect name for their online presence, even if someone else already owns it. Our new list for sale tool has also seen an incredible first inning. This tool lets customers with unused domain names list them in our aftermarket. And in just three months, we've seen over 350,000 domains get listed. The outcome here is a continued acceleration in this business as more customers are matched with better offerings and are exposed to attach opportunities as well. Most of the financial impact of this accelerating innovation in domains is still to come, and we are confident that the outperformance we have seen in this category will continue well beyond 2021. At our scale, innovation like this not only drives growth, but also helps fund exciting new initiatives across the business. I look forward to sharing more on the three priorities I just went through as the year progresses. Before I wrap up, I know that many of you are eager to hear about the results of our Websites Plus Marketing premium offering. In less than a year, it has shown itself to be an area of real promise for GoDaddy. Beginning in the spring of 2020, we conducted a small-scale experiment presenting our premium offering to a limited number of visitors. Over the course of the year, we steadily increased the number of US-based visitors that would see this offering to approximately 50% and we are pleased with the results we've seen along the way. Millions of signups and solid conversion rates that we're happy to note are higher than what we have seen elsewhere in the industry. There is certainly more to be done and this is an exciting outcome as we work to make freemium a tailwind to our business for years to come. Looking at 2021, while there are many unknowns and many things we plan to accomplish, we continue to see evidence in our business that supports aggressive forward momentum. As Ray will share, through focused execution, GoDaddy delivered a strong result in 2020 in the face of many challenges. Our core strategy of creating value for customers and converting it to shareholder value over time is working. We are evolving as a company and are in a fantastic spot as we enter into 2021. With that, here's Ray.
spk05: Hey, thanks, Aman. I'll touch on the fourth quarter financial results and our outlook for 2021. Despite the operational challenges caused by the pandemic, we delivered a strong performance in 2020. We added 1.4 million net new customers, nearly double the number added in 2019. This was complemented by a decrease in our already low customer churn rates and resiliency in subscription renewal rates as our products and services became even more valuable to our customers. Full-year revenue grew 11% year-over-year, while unlevered free cash flow was up 12%, even as we invested more in marketing to capture higher demand in the market. We also took advantage of the opportunities created by the uncertainty, deploying $1.8 billion in capital adding capabilities for customers, and creating value for shareholders. Turning to the fourth quarter results, we saw continued acceleration in top line. Bookings grew to $943 million, rising 13% year-over-year on a reported and constant currency basis, as FX had little impact on the quarter. Growth was broad-based with continued strength across product categories. Revenue came in at $874 million, outperforming expectations and growing 12% year-over-year. Business Applications was again our fastest growing product line, increasing 20% year-over-year on continued strength in branded email and productivity solutions. Domains accelerated to 14% growth as new registrations, renewals, and aftermarket sales remained strong, along with a modest contribution from GoDaddy Registry. And finally, hosting and presence grew over 5% in the fourth quarter. We continue to see terrific growth in our website creation platform products, though the strength was tempered somewhat by the headwinds from the GoDaddy social service due to the elimination of the outbound sales motion in June. The key metrics underlying our growth have remained consistently strong. ARPU rose to $166, up 5% year-over-year, while the customer base grew 7%. Unlevered free cash flow for the quarter was $181 million and $825 million for the full year. This reflected good operating leverage in the P&L as well as reduced capital expenditures for corporate real estate and infrastructure as we transition more workloads to the cloud. Gross margin remained in the mid-60s in the quarter, consistent with our expectations. We continue to ramp investment in marketing to capture increasing demand, resulting in a $40 million year-over-year increase in marketing expense. As we mentioned last quarter, we've been able to elevate investment while remaining within our targeted return metrics, even as we saw increased competition in performance advertising channels. On the balance sheet, we finished the year with $765 million in cash and total liquidity of nearly $1.4 billion. Net debt landed at $2.4 billion, putting net leverage at 2.6 times on a trailing 12-month basis, illustrating our ability to deleverage quickly. The strength and resilience of our recurring business model has fueled a strong balance sheet, enabling us to execute across our capital allocation priorities. During 2020, we completed four acquisitions, repurchased nearly 6% of our outstanding equity at average prices substantially below today's stock price, and settled the TRA at an attractive valuation, removing an overhang toning the stock. All proof points that we have the flexibility to take advantage of opportunity as it arises. Rest assured, we'll continue to be prudent allocators of capital in the pursuit of long-term growth and levered free cash flow per share. As we look to the future, continued growth in cash flow and a strong balance sheet will provide us with the flexibility to deploy roughly $5 billion in capital through 2023. Moving on to our outlook for 2021, we expect to deliver revenue of approximately $3.7 billion, representing growth of 12% versus 2020. From our product category perspective, we expect double-digit growth in domains, high single-digit growth in hosting and presence, and high teams growth in business applications. This guidance includes $20 million in revenue we expect from the recent acquisition of Point. As for Q1, we started the year off on pace and expect to deliver revenue of $885 million, representing 12% growth versus last year. We expect 2021 unlevered free cash flow of approximately $945 million, or 15% growth versus 2020. This guidance reflects continued investment in marketing and product, plus $20 million in net dilution from point as we build out our capabilities in commerce this year. Finally, I'd like to provide some additional modeling points for the full year 2021. We expect bookings to grow at a rate similar to revenue and normalized EBITDA margin to be roughly flat as compared to 2020. We expect capital expenditures of approximately $65 million, income tax payments of $25 million, and cash interest payments of $100 million, based on current debt outstanding and today's forward rate expectations. We announced my retirement today, and I want to thank all of you who've been along for the ride. I've had an incredibly rewarding career and feel blessed to have been able to top it off here at GoDaddy. It's been my privilege to serve with this amazing group of people dedicated to such a noble mission. We navigated a lot of change as GoDaddy has evolved into a truly customer-centric company, obsessed with creating value for customers, employees, and shareholders. This last year was challenging for a lot of people, but also very rewarding, as I've been able to witness our leadership team taking bold, decisive, and strategically sound actions that helped our customers and employees through an incredibly turbulent year. As for what's next, I plan to be deeply engaged in the search for a successor, and I'll stay on to ensure a smooth transition. I look forward to speaking with all of you again next quarter. With that, we'll have Christy Misner from IR team open up the call for questions.
spk08: Thanks, Ray. As a reminder, if you'd like to ask a question, please use the raise hand feature at the bottom of your webinar screen to be added to the queue and unmute your line. Our first question comes from the line of Ron Josie from JMP Securities. Ron, please go ahead.
spk01: Great. Thanks, Christine. Ray, congrats on the decision. We'll miss you, though. We have a few quarters, it seems. And Happy New Year, Aman. I wanted to ask two questions, maybe, Aman, on commerce. That was the first pillar that you mentioned as a focus area. And with PointNow, websites and marketing adoption in the millions, I think, new EC templates. I think I heard $23 billion in GMV, $7 billion of which through websites and marketing. Can you talk to us a little bit more how you view e-commerce unfolding across GoDaddy going forward? The tools appear to be in place. You got the scale, so what's next? And then, Ray, just real quick on the guidance with EBITDA flat year-over-year, and I'm assuming that's just continued investments in marketing and product. Is that a way to think about it? Thank you.
spk09: Ron, thanks for the question. And yes, commerce continues to be our number one priority. And you're right. You laid it out really well, you know, with websites plus marketing in place. Celebrite also growing quickly, which you didn't mention. Also a huge opportunity for us in the WooCommerce space. You know, we haven't talked about that much, but you know about the Skyverge acquisition that is helping us bring a program that we call a new Woo. that we'll talk about in the future as well. So yeah, all those things coming together, point adding those core capabilities as a payment facilitator, invoicing point of sale. And the idea is to bring all those pieces together and continue the pace of acceleration. If you just look at GMV for websites plus marketing and Sellbrite, the annualized number we gave you last quarter was much lower than the one you're seeing today. And that itself represents sort of quarter over quarter acceleration.
spk05: Hey, Ron, it's Ray. Appreciate the kind words first. But our normalized EBITDA margin, we're holding that flat year over year, which we're pretty pleased with given the investment we're going to put in place, both in product. Point will be a big piece of that. I mentioned in the call comments that we've got net dilution of about $20 million around commerce, and we'll continue to invest more in marketing this year as well. So those are the two big drivers on normalized EBITDA margin. That's great. Thanks, guys.
spk01: Appreciate it.
spk08: Our next question comes from the line of Egal Aronian from Wedbush. Egal, please go ahead. Egal, please unmute yourself.
spk00: Hey, guys. Thanks for the questions and echo the sentiment on Ray. Congrats. We'll certainly miss you in big shoes to fill. I guess a couple of questions. So on a first, if we could just, you know, I'm on you, you gave some good commentary around pro hub. Maybe we could talk about the go to market strategy. You know, I guess marketing around that, how the, how the sale sales and customer service team will kind of, you know, help, help drive that, that initiative. And can you also talk about how many, pros versus, you know, DIYers are, you know, using your services today. So kind of maybe a little bit more just big picture around how that evolves. And then, you know, domains, I think outperformed and you talked a little bit about some of what's driving that. So today, just how is the new star acquisition, the synergies you're seeing there, how much is that contributing? Can you talk about some of the things that you put in place specifically from that acquisition and how that can add to growth in the coming years.
spk09: Yeah, thanks, Igor. Happy to take that. On pros, let's start with the numbers because I think that was sort of in the middle of your questions. We have about 1.5 million pros as part of our 21 million customers. So we already have a lot of pros that engage with us on a daily basis. But we know that the opportunity is much, much larger. and what the pro hub is about is it was about going to the pro saying what do you guys need in terms of the interface and then building that in a manner that works best for them and the go to market strategy around it you know there's a godaddy pro program that is all about pro signing up and getting benefits benefits that over time you know grow and there's a marketing campaign now in place in the us that is getting word out to say hey here's all these new things it's the new experience where you can do a whole lot you've got project management tools you got care with a click through messaging. There are guides in the background who have, there are more guides in number. They have higher level of training and they can execute on more asks from the pros than ever before because we've sort of opened up the aperture of what they can do. So it's the combination of all of those things that we're really excited about. And then in terms of sales and marketing, no doubt, you know, care will continue to play a role there. But this is not an outbound motion. You know, what we're really seeing is that pros want to engage with us on the web. They want to engage with care through messaging. They want to move things quickly. They don't even want to wait two minutes for a page to load. They don't want to spend hours updating their sites. They want it done in one click. And those are the type of capabilities we're opening up here. And then on domains, you know, Ray will take the sort of contribution for New Star. But just to remind you, you know, it's still super early for us with New Star. The innovation that we plan to bring to the table is all about having the full stack, being able to innovate on the registry side and the registrar side and bring new offerings. And I've talked about that a little bit in the past. So I'll turn it to Ray to just talk about synergies and contribution, as you asked.
spk05: Yeah, mine hit it on the head. This was more about the strategy and verticalization on domains. This is a future benefit to us as we get more control over the domain cost, which is one of our largest costs from P&L. If you think about contribution to the top line, Egal, the purchase accounting impacts for NuStar absolutely muted the impacts on the top line. If you're looking year over year, 21 contribution inorganic contribution from New Star is going to be, you know, roughly half a point on the top line.
spk00: Great. Thanks. Appreciate it.
spk08: Our next question comes from the line of Jason Helfstein from Oppenheimer Company. Jason, please go ahead.
spk13: Thanks. I kind of want to ask about acquisitions and then leverage. So first, you know, points was obviously very strategic acquisition, but not particularly expensive. You know, if we think relative to the amount of free cash flow you guys generate a year, you know, if we think about kind of your acquisition pipeline, would you say more of the acquisitions look like point in size or are you potentially looking at some things that might be bigger? And then if not bigger, you know, again, given the amount of free cash flow you generate and how, you know, the company is just very well positioned, you're seeing very good customer retention. Why not leverage up particularly in this environment? It's probably the number one question we get investors. Why not run this business at, you know, three and a half to four times leverage and just accelerate kind of the free cash flow per share return to shareholders? Thanks.
spk09: Thanks, Jason. Maybe I'll start and Ray can come at the end of that. One, I love the idea that you agree that point is a strategically important acquisition and it wasn't very expensive. Those are great acquisitions. I love them. But to answer your question, we are looking at the whole spectrum, Jason. We absolutely agree that M&A is a core part of our strategy. It's in my DNA. It's in the company's DNA. We're good at it. We've done it before. But, you know, as we're out there looking at the assets, it's as you know, it's a competitive or sort of difficult time in the marketplace. And we're trying to make sure that the assets we look at truly form part of the advantage we want to create, because at the end of the day, what we're looking to have is that simple, intuitive experience. Right. There isn't a million things I talk about. Right. I'm talking about ease of use. I'm talking about saving people time. I'm talking about products, interfaces that truly are magical that lead to high NPS. And all the acquisitions we're doing or looking at big or small have to fit into that fold. So, you know, I wouldn't have anyone think that we're not interested in large acquisitions. We absolutely are. We're just we've got a formula. We're working it. And, you know, should the opportunities appear, you'll find us at the table.
spk05: andrey i'll turn it to you for levering up and such yeah jason when i think about leverage right we've um we've had a targeted two to four times leverage since we've been public and we've been at the very top of that range when the opportunity uh presented itself and you know we've been more about balancing our capital allocation priorities uh you saw every flavor of it in 2020 right we leaned into marketing put a lot of money into organic growth because the opportunity presented itself We closed on four acquisitions last year. We bought back stock, and we also settled the TRA. So we're really using that cash flow, that incredibly strong and consistent cash flow that you talked about, to drive significant returns for the company. And if we do see the opportunity, to Amon's point, we are certainly not hesitant to take up leverage the four times.
spk13: Thank you. And Ray, we'll miss you. It's been fun. But it sounds like you've got at least one more quarter with you.
spk05: Thanks, Jason. I appreciate it, man.
spk08: Our next question comes from the line of Drew Glaser from JP Morgan. Drew, please go ahead.
spk06: Hey, this is Drew on First Starline. Thanks for taking my question. I was wondering if you could provide some more color on how much of the 2021 revenue growth is coming from acquisitions?
spk05: Hey, Drew, it's Ray. When you look at the inorganic contribution on an incremental basis in 21, it's about a point, right? 20 million or so that's coming from point. I just mentioned on, I think it was Agal's question earlier, that New Star is about another half a point there. So those are the two biggies that are contributing and it's around that one point contribution.
spk06: Got it. Thank you.
spk05: You bet.
spk08: Our next question comes from the line of Nick Jones from Citi. Nick, please go ahead.
spk03: Great. Thanks for taking the questions. There's one on, you know, premium. As you roll it out to more, you know, visitors to the site and people are converting to the premium offering, is there, are you losing any potential subs who, you know, enter the premium and then eventually convert? And then I guess what is kind of the timing to conversion um for freemium like once they kind of set up a site to when they convert to a tank so thanks
spk09: Yeah, Nick, the question wasn't totally clear, but I think I caught most of it. On freemium, what we're seeing is that customers do come in and the metrics we're looking at include seven-day conversion and 90-day conversion, right? There isn't necessarily a fixed number of where everyone kind of makes a decision or not. You continue to see sort of the tale of people converting over time. both the seven-day and 90-day, especially as we got into later in the year on the 90-day conversion, we started to have a few cohorts that were reasonable size. And we continued to sort of see, you know, stable conversion in that 90-day realm, which is what we talked about. In terms of, and I didn't fully catch this part of your question, but I think the objective of freemium for us is to open up the aperture to allow our customers without friction to try our products, right? We fundamentally believe that whether you look at websites plus marketing or sell bright, which we also turned freemium last year. The value that customers get compared to the prices we charge, really, there's a tremendous amount of value. And we want to remove any hesitation customers have of trying to use those products. You know, these products are built from the ground up to the exact needs of our customers. And if we feel we open up the aperture, get more customers to try it, that over time, it's just going to build a greater and greater battery that, you know, leads to better financial outcomes over time.
spk03: Great, great. And one follow up on M&A, you know, you laid out dream, create, grow, manage, you know, as we look at 2021, you know, where, you know, where do you feel kind of the strongest pipeline is, or where's kind of the focus in terms of potential M&A across the TAMs you laid out at the investor day? Thanks.
spk09: Yeah, our priorities on M&A are aligned with our broader priorities as a company. And those priorities simply are, you know, we are the leader in dream and we absolutely have some amount of attention there. We're making great progress in creating. That's fantastic. But we're putting disproportionate amount of time and energy resources into growth. And that's what our M&A team, that's how our M&A team is prioritizing as well. Because actually create and grow are more and more working together. And that's a massive opportunity. You know, when we talk about $180 billion TAM, you know, a huge percentage of that is within the growth phase. So that's where the majority of our energy is.
spk03: Thank you.
spk08: Our next question comes from the line of Aaron Kessler from Raymond James.
spk04: Aaron, please go ahead. Maybe on Q4 net sub growth, I think I saw the 1.4 million or so for the year. Any color on Q4 net subs and maybe the linearity of the quarter? And then also just maybe for Ray, and congrats on just taking some time off here. And then the cloud transition, maybe any updates on that? how maybe just incremental costs with kind of a dual sourcing right now as well, if you can lay that out. Thank you.
spk05: Hey, Aaron, I'll take both of those and Monica come over if I don't hit something. When you look at Q4 customer growth, still seeing record type levels. The momentum's been good and momentum's carried on into January. So nothing different in the trajectory that we've seen at this point. With cloud, you saw some of the impact of cloud in 2020, showing up or manifesting itself in lower capital expenditures, because we have continued to move workloads into the cloud. That is putting pressure on the tech and dev line. That's one of the investments we're making there. But if you recall back when we signed our contract with AWS, We were going to manage this thing to a cash basis, you know, and that's what we're continuing to do. And that's one of the reasons we use unlover-free cash flows, our key metric there, is the balance from normalized EBITDA down there obviously includes the CapEx versus the OpEx up in the P&L.
spk04: Got it. Great. Thank you.
spk08: Our next question comes from the line of Mark Zagutowicz from Rosenblatt Securities. Mark, please go ahead.
spk02: Thank you. Just a follow-up on your premium content or comment. Is it safe to say that the 90-day conversion you hope to improve upon? And if so, what potentially are the missing pieces there? And a point can help. And then appreciated the commentary in your presentation highlighting returns on your marketing spend last year. Just curious how those compared to the prior year And as you look into 21, sort of what considerations you're making in terms of absolute or relative spend and how point, you know, perhaps fits into that picture. Thanks.
spk09: Yeah, let me take freemium and a little bit on the marketing spend, and perhaps Ray wants to come in on that as well. On freemium, I'll actually go back to the comments, Mark, in the prepared comments. You know, what we're seeing in terms of conversion is a rate that's higher than what we see in the industry. So, you know, of course it's still early in the journey for us, but that's really good. That's really comforting. You know, it sort of – puts to bed a certain set of concerns that people may have had. But when I look at being able to improve conversion over time, absolutely, we have people dedicated to doing that. But for me, the biggest thing is I want to get it out broader and broader and broader. Right. I'd like to have it at 100 percent in the US soon. I'd like to go global with it. And that's where I'm really pushing the team, because we know that at the end of the day, it's about attracting more people to our products and getting them to use our products. Because once they use our products, people see that we have something differentiated to offer, that it works in a manner that they didn't fully understand that GoDaddy would have that offering. And then in terms of marketing, Ray can talk a little bit about the numbers and the unit economics and how we've continued to sort of maintain our benchmarks in months to break even. But I'd like to give you a little context of how I think about the marketing span. And the approach there is one of that you want to spend up in marketing. And as you spend up, you have to continually improve your measurement, your ability to bid, your ability to sort of get into more and more channels. And as you do that and you improve your internal capabilities to market better, you can then spend even more in marketing. And I've talked about sort of this idea of improvement and growth and improvement and spend in the past. And it's something that I've experienced with and I'm pretty pleased with what I'm seeing in terms of GoDaddy in 2020 and what we have forecasted for 2021.
spk05: Yeah, I think if you look at what we've been spending on marketing, it's roughly 13% of revenue in 2020. But it's discipline, right? We're disciplined in the approach. We're disciplined in the execution and delivering the P&L and the P&L in totality. We've got a really good track record of investing in marketing over time with good returns. Aman mentioned the strong unit economics that we've got. And we're always challenging the team to stretch and look at that next marginal customer at an acceptable return because it is all about balance. But when we do see that, we extend the payback period. And, you know, that does create more risk or higher risk profile for us because it does hit the bottom line in the short term. But for the right paybacks, we're willing to do that. You might have noticed in the slides that we put out with the earnings, we put a new slide in for marketing with a different lens on how we see the returns. So go take a look at that. But, you know, in summary, we did roughly $0.85 in incremental bookings and $0.45 in incremental gross profit in 2020 for every dollar that we spend on marketing and advertising. So when you compare that against others in the industry, that's going to shape up pretty darn well.
spk02: Okay, thanks much.
spk08: Our next question comes from the line of Brent Phil from Jefferies. Brent, please go ahead. Brent, please unmute yourself.
spk11: Okay. It took a couple of clicks. This is John Bion on behalf of Brent Thill. Thank you. When you look at the newer products, websites plus marketing and managed WordPress, is there any way to think about what the relative size and growth rates are between the two of them?
spk05: Yeah, we gave you a kind of a view into those website creation products last quarter with an ARR of 350 million growing in the high 30s. And we have continued to see strong growth on both of those metrics.
spk11: That's helpful. Is there a way to differentiate between the two at all? I don't know if it's an indication between the pro and DIY at all.
spk05: Both are growing strongly. Obviously we've put a lot more shoulder into websites and marketing recently. If you heard Aman's comments earlier, one of the things with point that is gonna help us there is continuing to push on commerce, which will stretch into the managed WordPress and WooCommerce offering as well.
spk11: Great, thanks very much.
spk08: Our next question comes from the line of Navid Khan from Truist. Navid, please go ahead.
spk12: Yeah, thanks. A couple of questions, if I may. In terms of just your outlook, what are you baking in in terms of potential synergies from points integration, maybe later on? in the year into your e-commerce packages and then another question just guidance related as well how should we think about the the drag from the social and outbound for this year is it material if if it is then can you just call it out thanks yeah when you think about point synergies
spk05: We give you guys some guidance around the top line and the bottom line there. It's going to be an investment year for Point. As we integrate it into our offering, we'll be spending money on marketing, spending money on product, as well as experimenting across the front of the site with that. So that will be dilutive to the tune of $20 million in 2021. On social, think about that being a headwind through the first half and less so in the back post our decision to take out the outbound call in motion. So first quarter will be the highest headwind, and then it starts to diminish as we move through the back half.
spk12: Got it. And then maybe just a quick clarification on the synergy comment, Ray. So the curve you kind of, gave us at the time of acquisition, I think it's around 150 million in bookings by 2023. Should we expect any kind of revenue synergies to emerge this year at all or not?
spk05: Yeah, you'll see some. This year is going to be a lot more focused on getting it to market, right? Payments will be first, but it's certainly not going to be linear. Next year, 2022 will be more of the go-to-market strategy and starting to drive revenue. And then our expectation is we'll start to scale in year three. And that number that we put out there of 150 in 23 should be a conservative number based off of what we're looking at. That's true.
spk12: Thank you, Ray.
spk05: You bet.
spk08: Our next question comes from the line of Clark Jeffries from Piper Sandler. Clark, please go ahead.
spk10: Hi, this is Clark on for Brent. Thanks for taking the question. I wanted to circle back to domains growth, you know, 14%, another quarter of acceleration. I just wanted to dig in there. What is driving that growth? Is that all the primary market? And, you know, if so, you know, I see the .com and .net registrations came down in Q4, but still at elevated levels. I guess what has given you the confidence for that guidance of double-digit growth for domain in 2021. And will there be any contribution from the new products of corporate domains or anything like that that will be an offset?
spk05: Yeah, we've been really pleased with the performance in domains, closing out 2020 with really solid growth. And then obviously you saw the guide into 2021, continuing to see good strength. And it is broad-based. That's the beauty that business Aman mentioned earlier, we own the dream phase of the customer journey. So it's strength across primary registrations. Renewals have been strong. We've got aftermarket that is really doing well.
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