GoDaddy Inc.

Good afternoon, and thank you for joining us for GoDaddy's third quarter 2021 earnings call. I'm Mark Grant, Vice President of Investor Relations. With me on the call today are Aman Bhutani, Chief Executive Officer, and Mark McCaffrey, Chief Financial Officer. Following prepared remarks, 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, annualized recurring revenue or ARR, gross merchandise volume or GMV, and net debt. 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 8-K filed with the SEC with today's earnings release. The matters we'll be discussing today include forward-looking statements, which include those related to our future financial results, our strategies or objectives with respect to future operations, new product introductions and innovations, partner integrations, our ability to integrate acquisitions and achieve desired synergies, and the impact of the COVID-19 pandemic on our business. 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, November 3, 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 Amon.

Thank you, Mark. And thank you all for joining us today. GoDaddy has made remarkable progress this quarter in our mission to make opportunity more inclusive for all. And we are incredibly excited about what the future holds for our company. We've continued accelerating our product innovation, maintained focus on gaining further customer traction. And in September, we celebrated what we consider to be the most significant product launch in our company's history godaddy products are designed to serve various types of customers We serve millions of independent entrepreneurs seeking to create and grow their business both online and offline. We serve the professional makers of the web who leverage our tools to build websites for their own clients. And we serve a growing body of domain investors who leverage the largest and most active domain aftermarket in the world. Today, I'd like to highlight a few of the most impactful initiatives for these customers and help this audience understand a little bit better why I have never been more excited to be leading this great company. looking first at the macro environment we track demand by monitoring a couple of key metrics including search query volume that is the number of potential customers searching online for products we sell as well as we look at gross customer ads in any given period we are pleased that some of the uneven demand signals seen over the summer did not prevent us from delivering strong results in q3 Relative to the demand signals we were seeing in July, we are starting to feel better as normal seasonality appears to be returning to the business. We are still hyper focused on delivering customer value, unlocking new TAM and increasing new revenue streams, all while generating strong, durable cash flow. We have exciting updates to the three priorities we laid out for you in 2021. First, driving success in commerce through presence. Second, winning with GoDaddy Pros. And third, innovating in domains. As you've heard me say consistently this year, driving success in commerce through presence is our top priority for 2021. And we took a giant leap forward in Q3. As many of you saw, we had a huge product launch in September. With the introduction of offline hardware solutions to complement our online solutions, we now have all tools in place for our Omnicommerce offering. We introduced our Omnicommerce offerings for websites plus marketing, giving our customers the tools they need to sell anything, anywhere. We have exciting plans for Omnicommerce beyond websites plus marketing and look forward to sharing those updates with you soon. We've said that 2021 would be about building the products and getting them out by the end of this year. And that 2022 would be about experimentation with pricing, go-to-market strategies, bundling, new SKUs, and promotions. One of the best things about getting the products launched three months early is that we get to start the experimentation earlier too. We have already begun exploring options for bundles, new SKUs, and go-to-market strategies to make Omnicommerce the easiest and simplest way for a merchant to set up an omnichannel commerce venture. Our Omnicommerce solutions give small businesses the ability to sell, track, and manage their sales in more places than any other comparable platform. In September, we launched state-of-the-art point-of-sale devices, Smart Terminal and Card Reader, that communicate across systems spanning online, offline, and third-party platforms. The point-of-sale launch rounds out the GoDaddy payments and commerce package comprised of e-commerce, virtual terminal, online pay links, and now offline transactions as well. Customers were thrilled to see GoDaddy's commitment to their success when we introduced industry-leading pricing in our terminals and payment transaction fees. We believe GoDaddy is the most merchant-friendly commerce solutions vendor in the industry right now. We wanted to make these stunning, innovative, and feature-rich point-of-sale devices accessible to the greatest number of potential merchants, and our pricing reflects that priority. These devices work with our websites plus marketing solutions as well as the WooCommerce and WordPress platform. Furthering our commitment to seamlessly intuitive experiences, GoDaddy customers can configure these devices online before they arrive, including adding product listings, logo, and custom receipts. So the device is ready for transactions as soon as it arrives two days later with free shipping. And we are allowing our customers to keep more of each dollar they earn. We introduced the lowest effective payments pricing available in the US. GoDaddy will charge an in-person transaction fee of 2.3% plus zero cents, while online transactions will be charged 2.3% plus 30 cents. On average, a customer would save over 20% with GoDaddy payments on transaction fees for online and in-person when compared to other leading providers' transaction fees. GoDaddy customers continue to grow their online and offline businesses. In Q3, annualized GMV across GoDaddy products increased nearly 30% year over year to approximately 25 billion. Point continues to account for the majority, roughly 20 billion, and Sellbrite and Websites Plus Marketing both continue to grow year over year, even with 2020's tough comps. We're also pleased to share that across our create and grow products, Websites Plus Marketing, Manage WordPress, Sellbrite, and GoDaddy Studios, ARR surpassed 400 million, growing 17% year over year. To help our customers navigate and grow their business, we launched the Commerce Hub. The Commerce Hub is designed to help customers easily manage and track every sale online, offline, or both. Similar to our GoDaddy Pro Hub, the Commerce Hub includes an intuitive dashboard that provides bird's eye view metrics on business performance, including visualizations, mapping sales and orders, comparison tools, to help entrepreneurs see which channels are performing best, single sign-on capabilities and access to inventory tracking tools. We introduced all of this innovation at our virtual open 2021 event in September with our partner, Naomi Osaka, who launched her own brand of skincare products with GoDaddy as the official e-commerce partner. Open 2021 included breakout sessions for our customers to learn more about branding, marketing, and sales growth, and to help them network with other entrepreneurs. More than 20,000 people attended the virtual event, materially surpassing the turnout we saw last year, even in the midst of the pandemic-driven digitization of small business. As you can see, we have an ambitious view of what we can accomplish in commerce and presence, and we're just getting started. We're excited to show you more of what our products can do and share more of what we plan to accomplish with those products at our investor day in a few short months. Moving on to pros, we know that designers and developers prefer WordPress, and GoDaddy remains the global champion of WordPress, serving pros with both our legacy hosting and our managed WordPress solutions. Earlier this year, we shared details of the Pro Hub launch, and we set out an ambitious goal of bringing 300,000 new and current GoDaddy pros into the Pro Hub by the end of the year. We are on track to reach this goal. The powerful functionality of the Pro Hub simplifies pros' work and serves as another example of GoDaddy delivering on our commitment to increase value to our customers now. The first step, now well underway, is getting pros in and engaged with the Pro Hub so they can see firsthand how much easier it makes their professional life. The second step, which is yet to come, is to find ways to share economics and capture more wallet share among those pros in a way that makes them more successful as well. This quarter, we launched simple invoicing and payment solutions for pros available within the Pro Hub, eliminating the need for pros to track and manage yet another third party point solution. This was a major pain point for GoDaddy pros. Invoicing and payments functionality was the most requested feature in our pro ecosystem. We were happy to deliver and almost immediately we saw good adoption. Lastly, we continued facilitating and harnessing the exponential power of the GoDaddy community, hosting our first GoDaddy event in India, specifically for pros. As you recall, we held the GoDaddy Expand event in April for designers, developers and agency pros in the United States. In September, we expanded this event, hosting another country-specific GoDaddy Expand event in India. We were humbled to see thousands of pros register for the event, giving us a forum to help them. Customer feedback from the Expand event in India was very positive, summed up well by one customer who said, I was blown away by the professional selection of topics and presenters. Moving on to domains, this business has been fantastic for GoDaddy this past year, and it continues to outperform the industry by a large margin. As we have been sharing throughout the year, our teams continue to innovate in all areas, primary registrations, the domains aftermarket, and GoDaddy registry, driving fantastic revenue growth. Aftermarket continues to drive significant year-over-year growth as we still benefit from the list of sale tool introduced in Q4 of last year. On registry, we are continuing to prove our ability to acquire, integrate, and accelerate. A great example is the cohort performance within GoDaddy Registry. When we acquired NuSTAR's registry assets in Q3 last year, its new cohorts were shrinking with new unit registrations down 4% year over year. We are now one year into the acquisition and we're pleased to report that within that first year, we have been able to accelerate new business significantly. We are now seeing new unit registrations increase nearly 20% year-over-year, all organically. There is still significant room for innovation and improvement in both the registry and registrar sides of our domain business. And we have several exciting initiatives in the works. We're excited to share more about what we're cooking up in domains at our investor day. Before I finish up, I wanted to take a moment to talk about our upcoming investor day in February announced a few weeks ago. We wanted to give people a heads up that it was coming because we expect to share some really exciting things. We expect to discuss our long-term strategy, innovation initiatives, financial framework, capital allocation strategy, and go forward financial reporting structure. We look forward to engaging with you to get your thoughts and feedback as we prepare for this event. In closing, we're quite happy with the results this quarter and GoDaddy's ability to pursue enormous opportunities ahead. We are well positioned as a true global leader with increasing customer touchpoints and ability to provide essential technology solutions. GoDaddy at its core is a great business that has and will continue to generate predictable results with an attractive financial profile, profitable growth at scale, and durable cash flow. Importantly, we'll maintain a relentless focus on increasing shareholder value and have demonstrated the capability to invest capital prudently. We are committed to continuing our pace of innovation, bringing important new solutions to customers, driving progress across the entire industry, and continuing to drive the value creation flywheel. With that, here's Mark.

Thanks, Aman. I want to take a moment to discuss our financial results for the third quarter and then move to our financial outlook for the rest of 2021. Q3 was a strong quarter, which showed up in the financial results. Total revenue came in at $964 million, growing over 14% year over year, which includes 70 basis points of currency tailwind. Our international business grew at 13% on a reported basis with approximately two points of currency tailwind. Friends in the top of the funnel signals continue to be below the elevated demand we saw last year, but in line with 2019. Hosting and presence grew 7% year-over-year, delivering at the high end of our expectations for mid-single-digit growth. We continue to see nice growth in our presence products like websites plus marketing, tempered by slower growth in our legacy hosting and security business. And while it's still too early to provide any details, we are really pleased with what we are seeing so far from our Omnicommerce launch in September, as well as the uptake we're seeing from the GoDaddy payments more broadly. Within hosting and presence, we're pleased to share an update to the previously disclosed ARR metric from our Create and Grow group of products, which includes Websites Plus Marketing, Managed WordPress, Sellbrite, and GoDaddy Studios. The suite of products passed $400 million in ARR in Q3. Within that suite, ARR from Websites Plus Marketing grew more than 20% year-over-year in Q3, and more specifically, Websites Plus Marketing Commerce ARR grew more than 30% year-over-year in Q3. Lastly, annualized GMV across the GoDaddy ecosystem was approximately $25 billion, growing nearly 30% year over year. We saw growth across all channels, primarily driven by offline point of sale as we lapped online tailwinds from COVID. Domains grew 17% year over year. The innovation the teams put in place late last year is driving performance in the aftermarket, which was a large contributor to the growth we saw in the third quarter. We also continue to see consistent renewals on primary registrations. And finally, business applications was our fastest growing product line, increasing 20% year over year. We continue to see new customer attach, strong renewals, and existing customers adding additional seats of email and productivity solutions. Bookings came in at $1.04 billion, rising 10% year over year with 80 basis points of currency tailwind. Strength in bookings in the quarter reflects similar drivers to what we called out for revenues. Gross margin came in at 64% in the quarter, in line with what we saw both last quarter and the mid-60 range we've guided to. Product mix continues to drive the company's overall gross margin. Given the payments launch and the pricing we announced in September, we expect payments revenue to have two different margin impacts as it scales. Payments revenue will put some pressure on gross margins as the revenue stream gets larger in the coming quarters and years. However, there are relatively low incremental operating costs once those customers are acquired and set up on GoDaddy payments, so we expect payments to be highly accretive to normalize EBITDA over time. Investment in tech and dev was consistent with last quarter as we continue to accelerate our pace of innovation while maintaining fiscal discipline. We continue to get leverage in G&A as travel and other office expenses remain below historical levels. Consistent with last quarter, our marketing and advertising investment remains strong in Q3. though the year-over-year growth decelerated as we started to lap the elevated investment we made to capture the extraordinary demand we saw last year. Our growth and investment in the second quarter resulted in normalized EBITDA of $228 million, representing growth of 15% year-over-year. Unlevered free cash flow for the quarter was $252 million, growing 12% year-over-year, driven by strong profitability, continued positive impacts from working capital, and disciplined CapEx investment as we continue shifting workloads to the cloud. We note, however, due to the global supply chain issues impacting technology hardware like servers, some of our planned CapEx spending shifted into Q4. We expect to continue our CapEx investment in Q4, bringing unlevered free cash flow in line with our full-year guide. Now on to the balance sheet and capital allocation. We finished Q2 with $1.1 billion in cash and total liquidity of $1.7 billion. Net debt stands at $2.8 billion, below three times net leverage on a trailing 12-month basis and near the midpoint of our targeted range of two to four times. GoDaddy has a strong liquidity position, access to both debt and equity capital markets, and resilient cash-generating operations. During the third quarter, we executed an accelerated share repurchase buying 3.4 million shares for an aggregate purchase price of $250 million. We also allocated nearly $200 million to acquisitions in the registry space. As we think about capital priorities, we will continue to balance M&A and share repurchases to make sure capital is deployed in the way that we believe will generate the best long-term returns for shareholders. After the completion of the ASR mentioned above, we have approximately $750 million remaining on our repurchase authorization. Moving on to our outlook, GoDaddy is on track to outperform the initial revenue and unlevered free cash flow targets we laid out at the beginning of the year. Looking at Q4, we expect total revenue of approximately $970 million or 11% growth year-over-year. Based on our outperformance in Q3 and our expectations for Q4, we're raising our full-year revenue guidance to approximately $3.765 billion or 14% growth year-over-year. As I noted earlier, some of our CapEx spending has shifted from Q3 to Q4. Based on our continued plan for approximately $60 million in CapEx spending for the full year and the strong performance we've seen year-to-date, we're raising the unlevered free cash flow guidance to $960 million or 16% growth year-over-year. As we mentioned last quarter, we still expect bookings growth to be a couple points below revenue growth in the final quarter of the year as FX tailwinds continue to abate and we face the tough compares from Q4 of last year. In Q4, we expect domains revenue to grow low double digits as we lap the tougher compares in the aftermarket from the impact of the list for sale tool and the other improvements introduced in Q4 last year that we talked about last quarter. The aftermarket, as you know, is a non-subscription business, therefore does not impact our deferred revenue at the end of the period. We expect hosting and presence revenue to deliver mid-single-digit growth for the full year. We continue to see low single-digit growth in our legacy hosting business. We're also lapping very difficult comps in our higher-growth products like websites plus marketing, and the top of the funnel softness we saw over the summer will take some time to rebuild, even with the improvements seen in September and October. We've got a strong track record of driving growth, and with an impressive slate of new offerings coming to market, we remain optimistic that we will be able to accelerate the growth of hosting and presence next year. We continue to expect high teams growth in business applications for the full year, driven by customer-attached, seek growth among existing customers, and upgrades to higher price tiers of productivity solutions. With respect to investments and expenses, we'll continue investing in the tech and dev as we work to maintain the product momentum we've seen year-to-date. Based on the current demand environment, we're expecting our absolute marketing spend to be relatively flat sequentially in Q4. We continue to expect investments to be largely offset by continued leverage in customer care and G&A. We are still comfortable with the 411 targets we set out early last year and will provide more specific formal guidance in February. Some of the revenue streams that we expect to become more impactful over time, like payments and aftermarket, are recognized immediately, so we would expect bookings growth and revenue growth to converge over time. GoDaddy has an incredibly bright road ahead and is well-equipped with both the innovation and the financial resources needed to pursue and capture the immense opportunity before us. Our consistent cash generation gives us multiple levers to generate significant returns for our shareholders, and we're committed to doing just that. As we prepare for our investor day in February, I'm excited about the direction of the company, our strategic vision, and the plans we are putting in place to enhance investor communication and outreach. GoDaddy is committed to providing investors with the information they need each quarter to model the business confidently, value the business effectively, and hold us accountable for executing against our stated objective. It's going to be an exciting day, and we look forward to being with all of you then. With that, we'll have Christy Masoner from our investor relations team open up the call for questions.

Thanks, Mark. As a reminder, if you would like to ask a question, please use the raised hand feature at the bottom of the webinar screen to be added to the queue. Our first question comes from the line of Egal Arounian from Wedbush. Egal, please go ahead.

Hey, good afternoon, guys. I guess I'll start at the highest level and just trying to understand, you had some good, solid outperformance across the board in 3Q. You talked about customer softness at last earnings. It was kind of like the peak of the summer and vacations and the shift to travel and entertainment and all that. Talk about how the customer trends have evolved since then and why the outperformance in light of those headwinds that feel like they were the strongest over the summer aren't translating into your guidance in 4Q. Start there.

Thanks, Igor. I can take that. Obviously, we're very happy that our strong execution enabled us to deliver strong results in Q3, even though, as we shared with you, there was sort of the uneven demand signals that we were seeing over the summer. To answer your question and give you a little bit of sort of chronological view on it, you know, we saw the drop most in July. There was a stabilization in August and then improved a bit in September and October as working out in line with September. So we're still continuing to monitor, but we're cautiously optimistic about normal seasonality returning to the business. And that's what you're seeing in the guidance. We'd like to share with you exactly what we see, which we did last time, and we're looking to do that again this time.

Okay, thanks. I'll ask about the new star, and the cohort growth there. Can you just maybe give a little bit more color on what exactly is happening there that is turning the business around from pre-M&A to post-M&A?

Yeah, super excited and proud of the team. The GoDaddy registry team has come into GoDaddy. They've had to go through the integration. We're growing scale for them, as you know, and we have new businesses to integrate with them. But all through it, they've maintained really strong execution. You know, so it's really about good, strong execution, the team coming together. It's a small team, but they've done a fantastic job. And of course, you know, as much as we can, we have the ability of, you know, that team working with GoDaddy leaders and looking for opportunities and looking for plans. And as I've shared in the past, we'll continue to share with you specific innovations that come forward. But this one is just raw execution.

Thanks so much.

Our next question comes from the line of Clark Jeffries from Piper Sandler. Clark, please go ahead.

Hello. Great to see another quarter of strong results ahead of guidance. I wanted to understand what the expectations are for durable growth in the create and grow products. I know as we are exiting tough compares and some of that top of funnel softness you called out, I just want to understand what kind of growth rate you would orient us to looking beyond 2021. And maybe even if not talking about beyond 2021, could you help us maybe understand some historical context to what that segment was growing sort of pre-pandemic?

Yeah, thanks, Clark. And I'll take the first part of it and then maybe hand it to Iman for the historical part. You know, we're seeing positive signs in our career growth and we are really happy with the ARR around websites with marketing with 20 percent and websites with marketing commerce at 30 percent. acknowledging the softness and looking at Q4, you know, that funnel slowdown. We'll take a little bit of time to rebuild, like we said in our comments, but we're really optimistic on the positive signs. You know, as we also said, we're comfortable with the 411 moving forward, and we are really looking forward to catching up with everybody on Investor Day and kind of putting it all together so we can communicate to you.

Great. And then, you know, now with the Omnicommerce solution out in market, I just wanted to understand – what allowed you to release industry-leading pricing on POS transactions, 2.3 plus 30? What gives you the flexibility to grant this kind of pricing compared to peers?

Yeah, I'm happy to start there. know the real build here is to look at it from the ground up and say what do our customers need to make these products accessible for them and we broke down the pricing structure and it's about technology and innovation and as you know we have a fantastic team from point and our goal is to not lose any money in payments or or in hardware our goal is to build it up from the bottom innovate pass on the value to the customer. And, you know, I'm excited about the idea that customers look at this pricing and they adopt and that we see a lot of demand for our products.

Perfect. Thank you very much. Thank you.

Our next question comes from the line of Nick Jones from Citi. Nick, please go ahead.

Great. Thanks for taking the questions. I guess just on the domains business, are you seeing any success kind of tilting domain shoppers towards the TLDs that you own as opposed to maybe .com, which I think is generally more popular. And then the second question is, can you remind us how the VeriSign kind of .com price increases will trickle through? I think it's likely to be kind of a bigger impact next year as it flows through .coms. And I think people are expecting to take another price increase sometime next year. So those are the two questions. Thanks.

Thank you, Nick. On the giving preferential treatment to certain TLDs that we may own, we don't do that. All TLDs work on our registrar side in terms of their merit. It's about value to the customer, whatever works best, irrespective of whether we own the registry side or not. That's what we'll sell in front of the customer. To your question on VeriSign price increases, as you well know, I think Our pricing is quite nuanced. We have pricing that's different by customer populations. We have pricing that's different by geography. We have pricing that differs when we bundle, as an example. So we're always experimenting with pricing. We're always looking to optimize. And we realize that as GoDaddy, we have an opportunity to truly look at our options. And if it makes sense, and as you know, over time, registrars have passed registry price increases to the customer. We have the option to do that, but we also have the option to not pass the price and look for opportunity to really optimize for profit dollars. And I'll turn it to Mark and maybe Mark, if you have something to add on that.

Yeah, thanks, Aman. One, just to enforce, pricing wasn't an impact on Q3 for us, just as an FYI. When we do look at pricing, we are solving for gross profit. But if it comes to market share versus gross profit, we will go with market share. And we do not use any type of broad brush approach to pricing increases. We really look at it on a market-by-market basis.

Got it. And maybe if I could just follow up on the first question and maybe say it a different way. I think you're given a statistic that like 50% of people searching for a domain don't kind of find the handle they're looking for right away. So they, you know, they may be tilted more towards the.com or are you able to kind of present more options with the handle they want that maybe ends up yielding more purchases and TLDs that you own, I guess. I don't know if that kind of helps clarify where I was going with it. Thanks.

Yeah. Nick, just to quickly respond to that. You know what? You're right. You know, a lot of customers don't get the dot com they're looking for because it's already taken. Right. Joe's pizza dot com. Somebody's already got it. You know, what we do is we're improving our search results more and more with. You know, we use machine learning and AI to give the customer options and those options include TLDs. And it's actually very specific to the search. So it's really not about what TLDs we might own. It's really about what the search is and then providing the customer as high up on search as it makes sense with those options, with different TLDs and letting the customer make the choice.

Great, thank you. Yeah, and I'll just add to that. Aftermarkets does help us present to them names that they might not be able to get otherwise, so it is driving some of our aftermarket growth as well. Great, thanks.

Our next question comes from the line of Brent Bill from Jefferies. Brent, please go ahead.

Great. Thanks. As it just relates to the seasonality, I'm curious if it seems like the you mentioned there's a rebound. I'm curious kind of when you think about the trajectory of of this rebound. Can you maybe put it in context to historic and what what you're what you're hearing from that side? And then I had a quick follow up.

Brent, you know, the couple of data points here is we're looking at overall demand, you know, sort of Google search traffic as an example. And we're looking at how that's changing and evolving. And obviously, I know you have access to that data, too. But we parse it and we say, OK, is there a shift in the overall universe? And then we're looking at folks coming to our site, you know, the gross customer ad and saying, OK, what percentage of that population is actually becoming customers for GoDaddy or approaching GoDaddy? So what you see in the guide, the assumptions in it, are around what we see over the last four or five months. And we see signals match up in the broader macro with our data. In terms of answering your question on how does it compare to the past, obviously 2020 was a very large demand cycle. It was big cohorts and so on. So what we're really comparing against is 2019, and these demand signals are more in line with 2019 than 2020.

Okay, that's great. And just a quick follow-up on the financials. I mean, the delta between bookings and revenue, and I know there's a lot of factors, but it's never, I think, been this wide at 9% FX versus 13.5%. So what is the divergence? Why is it so large? And I know you mentioned they're going to converge, but why are we seeing that right now?

You know, I kind of look at it as a cycle. We saw a divergence and now we're seeing a convergence come back the other way. And we do, like you said, expect them to equal out over time. And we're starting to see that happen now. But we had large cohorts last year. You know, they went into our deferred revenue. They're being amortized out now. and as they're being replaced by smaller cohorts, you know, it's going to result in that divergence you're seeing right now. Great. Thank you.

Our next question comes from the line of Elizabeth Elliott from Morgan Stanley. Elizabeth, please go ahead.

Hi. Thank you so much for the question. I just wanted to dig in a little bit on payments and Super helpful color on about 20% savings on fees versus other providers. Any color you could share with us and kind of the mix of new eligible users, you know, how many of those are opting for GoDaddy payments?

Thanks, Elizabeth. It's really too early to talk about new versus existing users. You know, as you know, we did a big launch called Open 21 and attracted a lot of customers, you know, 20,000 folks plus got to see it. We had thousands of folks engaged in detailed sessions where we talked about how to do their marketing, how to sort of manage their offline and online portfolios and get into the big markets and platforms. But it's all very, very early. And unfortunately, it's too early to comment on any specific numbers.

Got it. Thank you.

Elizabeth, I'll just add what we're seeing, you know, really excited about it. And the great thing about launching a quarter early is we'll get to see data a quarter early. So we're really looking forward to adding some color and investor deck.

Great. And then just a quick follow-up for me on the pro hubs. So great to see kind of you're on track for that ambitious kind of 300,000 goal on pros. You know, I know that the hub itself is free. So any color you could provide on just the ability to grow the mix of pros and attach kind of more products to those users in order to monetize the opportunity?

Yeah. As you know, we have 1.5 million web pros on our platform, you know, given the businesses we're in, we have access to a lot of these pros, but we, but we built the hub so we could have engagement with them on a regular basis, give them ways to save them time, give them ways to be able to do their jobs better and focus on, on growing customers and their business. The pros focus on WordPress. That's what the hub is all about, optimizing their experience there. And ultimately, what we're looking for is to get a bigger share of wallet with GoDaddy for them. We know pros support lots and lots of sites. They have a percentage with us, and we know it's a very, very large opportunity for us to get a piece of the rest. Other places where you'll see some monetization experiments, You know, of course, we launched invoicing. So that's a good tool. You know, it creates lots of stickiness, but it also creates some economics. We're also experimenting with special offers within the hub. So where, you know, we can try to see what encourages pros to sort of buy something with GoDaddy or something else. And, you know, just it's... The idea there is let's try to share with them and say, hey, if you sell this product, we'll give you a piece of it. Those are the types of experiments you'll see. And those also create economics for us.

Great. Thank you very much for the color.

Thank you.

Next question comes from the line of Sterling Audi from JP Morgan. Sterling, please go ahead.

Yeah, thanks. Hi, guys. So I'm curious if you could give us some color. geographically on the trends that you talked about? So in other words, the sluggishness that's turning into improving signs back to 2019, how does that look in the U.S. versus Europe versus Brazil, et cetera?

Thanks, Sterling. It truly follows, you know, sort of the COVID arc that we've talked about in the past and likely you see as well. You know, the demand environment that I talked about actually covered U.S. and international, and we see a lot of similarities. Having said that, in certain geos, there is a bigger impact in COVID, and we see demand bounce around a little bit in those geos, but overall in the GoDaddy portfolio, that's small. So, you know, if I look at the overall portfolio, there isn't really one geo to specifically call out as having any significant impact, and broadly the trends are similar.

All right, great. And then one follow-up on the payment side, you'd mentioned getting the opportunity to experiment with pricing. So is that to mean that the lowest pricing that you just announced is something that's kind of a test bed and could fluctuate? Or what is it that you want to experiment with?

Sterling, the pricing that we announced, the 2.3% plus $0 in-store and 2.3% plus $0 online, That's the pricing for payments. But as you know, we have a lot of opportunity to build SKUs and bundles, including new value for these. So the experimentation that we'll be looking at is, you know, new SKUs that offer the full suite where customers get the full bang, if you will. You know, and how do we price those things when we bundle things differently? You know, the pricing for the hardware. Those are the areas that you'll see us experiment more. Excellent. Thank you. Thank you.

Our next question comes from the line of Trevor Young from Barclays. Trevor, please go ahead. Oh, I think we might have lost Trevor. So Navid, if you are available, Navid Khan from Truist, please go ahead.

Thank you. Can you hear me OK? We can. Great. So with 20 billion in GMV kind of flowing through point, maybe just touch on the opportunity to maybe – gradually maybe move over some of this on your own rails on GoDaddy payments versus the legacy and what are the things you can, what are the different levers you can pull to do that?

Thanks, Navid. As you know, Point built its customer base predominantly through channel partners. And those channel partners, you know, as banks want to use their rails for payments. But what that GMV does show is customer success. That customers at a very large scale are having a lot of success using this tool set. And obviously our thesis of having point be a part of GoDaddy is about us selling direct to customers, right? So I would look at that 20 billion as customer success and, you know, over time more and more GPV flowing directly as we sell directly to customers.

Got it. And then a quick follow-up, if I may, if I just look at marketing efficiency, it seems like it improved sequentially. Any changes that you might have made to a channel mix or how should we just kind of think about this going forward?

Yeah, you know, overall, we're happy with the good returns on our marketing spend. And what you're really seeing here is, you know, over the last year, as demand was very high, we wanted to maintain share of voice. We wanted to lean into that demand. And as the demand came down, we didn't want to pull back on marketing so hard that we actually pulled demand down for ourselves. So we let the demand pull the marketing spend down. You're seeing some of that in the efficiency. You're also seeing some optimizations across channels, but no specific comment on channels that we're doing more on or less on. Overall, our demand profile, especially in the way we get bookings, broadly remains the same.

I'll add, Navid, we expect it to be flat for Q4, just in case you were asking that question as well. No, that's helpful. Thank you.

Our next question comes from a line of Trevor Young from Barclays. Trevor, please go ahead.

Great, thanks. Just two, if I may, on payments. First, acknowledging that it's kind of early days, can you talk about the initial adoption on payments, feedback on the POS devices, what seems to be resonating well with merchants versus maybe what needs some refinement? And then Mark, Your comments were helpful on the margin profile. Sounds like maybe lower gross margin, but higher overall OM over time. But can you help us unpack the fees there, like in terms of interchange fees, fraud and security, other cost of revenue lines, and then OPEX and opportunities for savings there as it scales? Thank you.

Thanks, Trevor. On payments, the feedback on the products has been positive. You know, one thing I talked about previously, if you remember, we had introduced just GoDaddy payments. I'm not talking about Omnicommerce now. GoDaddy payments in the websites plus marketing flow. And we had shared that we've seen good adoption from customers on payments. We continue to see good adoption there. So we know that it's been holding over the last few months. And in terms of, you know, Other numbers related to Omnicommerce, you know, the devices are getting shipped all over the U.S. So you'll see them soon. But it's really too early to comment on specifics, except that the customer feedback is good.

And Trevor, I'll just add, we're not getting into the breakdown of some of that pricing, just a couple of data points. One, you know, we don't plan to lose money on the hardware and the payments. And, you know, our expectation, although we'll see a little bit of margin pressure at the gross level, it should be accretive to our normalized EBITDA going forward. Great. Thank you both.

Thank you.

Thank you for joining us today. I will turn it over to Aman for closing remarks.

Thank you, Christy. I'll just end with thanking you for joining. We appreciate your questions. Look forward to engaging with you over time and seeing you at our investor day in February. A quick thank you to all the GoDaddy teams. A lot goes on for us to be able to deliver these strong results in the quarter. And a big thank you to everyone at GoDaddy. Thank you very much.