GoDaddy Inc.

Good afternoon, and thank you for joining us for GoDaddy's fourth quarter and full year 2021 earnings call. I'm Christy Mason, Senior Director of Investor Relations, and with me 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 raised 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 investors.godaddy.net or on our Form 8K 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, including our approach to capital allocation, new product introductions and innovations, and our ability to integrate acquisitions and achieve desired synergies. 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 10, 2022, and accept the extent required by law. We undertake no obligation to update these statements as a result of new information or future events. With that, here's Aman.

Thank you, Christy, and thank you all for joining us today. At GoDaddy, we remain laser-focused on helping micro and small business owners succeed and grow their businesses Our customers continued to show resilience and creativity through the pandemic, and our Q4 financial results were a strong end to a strong year. As we look back at 2021, I am excited by the unyielding acceleration in the pace of execution, best demonstrated by the integration of points and the launch of the Omnicommerce offerings. And we have a deep trust with our 21 million customers, evidenced by the 65-plus NPS we have in care, and that in Q4, more than 60% of customers in the commerce tier of websites plus marketing chose GoDaddy payments over other established providers. We delivered strong growth in bookings, revenue, and unlevered free cash flow in 2021. with Q4 being GoDaddy's first quarter of $1 billion in revenue. We ended the year with a significant outperformance in aftermarket, driven by sustained market demand. We continue to drive broad-based trends in our Create and Grow suite of products, with ARR for them growing 19% year-over-year. And today, we announced a $3 billion share buyback program that Mark will cover in his section. While we delivered strong financial results, Omicron impacted our customers and our employees. In the U.S., the impact started to show late in the quarter as customer demand softened a little bit and more and more employees were out sick due to the pandemic. As you might expect, the biggest operational impact of the higher absentee rates were in our care organization. As Omicron cases around the world have come down, we have seen better staffing in care and expect the impact of Omicron to be limited to Q1 2022. Early this year, we named Roger Chen as our Chief Operating Officer. Roger has been with GoDaddy for over six and a half years and led teams to strong financial results by focusing on operational excellence. He started with GoDaddy with the expansion of our international footprint and most recently has been leading our domain business. Roger is excited to meet you at our Investor Day tomorrow. With Roger's appointment, I am happy to share that we have a well-rounded and complete executive leadership team in place, and we are excited about the large opportunity in front of GoDaddy and confident in our ability to execute to it. As always, I will cover progress on our top three priorities today. Our top priority continues to be driving success in commerce through presence. A year into the point acquisition, we have made remarkable progress with the integration. Kudos to all the teams involved. We completed several product launches for Website Plus Marketing and Managed WordPress, launching GoDaddy Payments mid-year and the Omnicommerce product launch in September. We also recently launched a higher-end commerce queue, which is currently being tested with a percentage of U.S. customers. We doubled the size of our commerce team, and we intend to continue the rapid pace of product launches in 2022 as well. With the launch of our Omnicommerce offering in September, we took a giant step forward in our ability to serve our customers with a seamlessly intuitive experience. Our customers' need is to sell anything, anywhere. And we are all in the early stages of the merging of the offline and online commerce experience. And we call this connected commerce. We're pleased to share that right out of the gate, we're seeing some good early signs. Since the launch, we have sold over a thousand point of sale devices and have received tens of thousands of GoDaddy payments applications from customers. Most promising is that customers are choosing GoDaddy payments. In websites plus marketing commerce tier, more than 60% of customers are choosing GoDaddy payments. And in managed WordPress, where customers have over 140 choices, nearly a quarter of customers are already choosing GoDaddy payments. We're pleased to already be at this level of attach. We have also rapidly expanded our partnerships with Google, Facebook, and Instagram to increase our customers' reach and boost their online profile. These integrations are making a real difference for our customers. Most of our customers double their website traffic when running a Facebook or Instagram ad. Additionally, GoDaddy websites plus marketing customers who added their stores to social media placing orders. Our customers' commerce needs are increasingly interconnected to the various different ways they show up. Recognizing this customer need, we have expanded our focus from online presence to what we call ubiquitous presence, which we'll discuss in more detail tomorrow. We know how and where customers show up is important to the way they connect with their customers. And GoDaddy has the solutions customers need. A third of our customers link their websites to at least one social platform. And in Q4, we added the ability for customers to link their sites to three new social platforms, TikTok, Twitch, and Discord. Since then, these new platforms account for 11% of all platforms that customers link from their websites, with TikTok being the most popular. Another customer need is BioSites. BioSites have become an essential tool for our Social First customers, and we're excited to support them through the launch of Social Site, GoDaddy Studio's BioSite capability. Consistent with our goal of meeting customers where they are, this tool empowers social-first entrepreneurs to set up a fantastic social site with GoDaddy Studios with just a few clicks, helping them grow their business by driving traffic to their top content. Our customers' customers are reaching them through many channels, chat on website, SMS, Facebook Messenger, and much more. Having to check and respond to these various different channels is cumbersome and time-consuming. With the acquisition of Reamaze, we quickly enabled a unified messaging inbox called Conversations in Websites Plus Marketing. It pulls in messages from a customer's website, Facebook Messenger, Instagram inbox, and voice lines all into one convenient inbox. customers can easily access, organize and respond to messages from multiple platforms all in one place and never miss a sales opportunity. This feature is also available via mobile app for convenient access to messages on the go. This saves small business customers time, and they can quickly help their customers or enable automated chatbots that can help answer questions about order updates, shipping, and more. And customers are already showing that they love it. Usage for the conversations feature jumped immediately, and we expect more and more websites plus marketing customers to use this feature over the next few months. Our present solutions continue to be priced competitively, giving us short-term pricing opportunity and with higher customer engagement with features like conversations, we continue to build greater consumer surplus, which we expect will offer pricing opportunities in the future as well. The increased pace of execution here is also showing in our results. Across our Create and Grow products, Websites Plus Marketing, Manage WordPress, Sellbrite, and GoDaddy Studios, ARR grew to 410 million in 2021, an increase of approximately 19% year-over-year. We measure and share this metric as we believe it is indicative of future success in GoDaddy's high-growth areas and where we are funding innovation and capturing higher-value customers. Moving on to our second priority, GoDaddy Pros. As you are aware, we have a large number of pros, over 1.5 million, in our customer base, a majority of them in our hosting business. Pros widely prefer WordPress, and we are committed to supporting them and supporting WordPress. More deeply engaging our pro customer base continues to be one of the large opportunities in front of us, and we are working on exactly that. While we set and achieved an aggressive goal to register 300,000 pros in our pro hub, we quickly shifted our focus to a steady set of feature launches driving monthly active users, or MAL. In Q4, we launched priority care ticketing, commission-based incentives, percent-based pricing for new reseller customers, client reports, and more in the hub. While it's early days on these new launches, all of these features demonstrate our commitment to provide a differentiated experience to our pro customers, increasing the value we create for them. Our pros customers use both managed WordPress and hosting products with us. As pros show greater preference for managed WordPress, delivering the best experience across both is key to our relationship with them. In 2021, we started to upgrade the hosting platform to a new optimized configuration, which has started to show significant performance improvements. Notably, a 37% average improvement in server response times, improved NPS, and a resulting 6% increase in renewal rates over a couple of quarters. And with our continued efforts to integrate Paisley, we will provide them with the best managed WordPress offerings for their customers as well. Our third priority is innovating in domains. Our aftermarket business posted another remarkable quarter, led by significant market demand as we exited the year, driving increases in both the volume and size of transactions. While primary domain registration growth remained solid, GoDaddy Registry successfully launched a reputation protection solution, contributing to strong growth in the registry business. We also extended our registry offering by winning the bid to be the exclusive issuer of .tv TLDs. The domains business continues to be one of our most valued assets as it often serves as our first introduction to our customers while providing a significant launching point to attach other products. We will share more on this at our investor day tomorrow. Lastly, I wanted to highlight some key wins on the marketing front as a preview for some of the content in tomorrow's Investor Day. One of the areas of investment for us over the last year was the GoDaddy website. The team had set its sights on conversion improvement as the goal, and by building and following a world-class experimentation-based software development approach, they realized meaningful incremental growth. We know that once a customer gets to our site, that's only the beginning, and our teams continue to work on continuing improvement in engagement and conversion. We've also been working hard at spending marketing dollars more efficiently. Over the last few months, with new leadership in place, we embarked on a journey to add advanced testing and measurement capabilities to make faster decisions on our marketing stance. Strengthening our talent and execution in areas like data science has been key for us to be able to better discover opportunities for marketing efficiency and do the tests needed to understand incrementality, even if it means turning off the channel for a couple of weeks. Farah will cover this area tomorrow at our investor day, and I continue to be excited to leverage our marketing spend more effectively. I also wanted to take a moment to welcome you to our investor day tomorrow. We will discuss our long-term strategy, innovation initiative, refreshed capital allocation strategy, go-forward revenue presentation, and three-year guide. We are eager to spend additional time with all of you tomorrow. In closing, we're pleased with the results this quarter and with GoDaddy's progress against our key initiatives. We're delighted that the momentum in our biggest product release yet, and even more delighted that our customers are demonstrating an appetite for it through the early signals of adoption. We are committed to continuing our pace of innovation, bringing important innovative solutions to customers, driving progress across the entire industry and delivering durable top line, profitable growth, robust cash flow with a focus on disciplined capital allocation. With that, here's Mark.

Thanks Iman and hello. I am looking forward to connecting with everyone over the next few days. Today, I'll first touch on 2021 full year and fourth quarter financial results, as well as an outlook for 2022. Tomorrow, at our investor day, I'll provide additional long-term guidance and introduce our new revenue disclosures and metrics. With that, let's move to our 2021 results. Total revenue for 2021 grew 15% year-over-year to $3.8 billion, exceeding our initial guidance on broad-based strength in new and renewal revenue attached and outperformance in our aftermarket. ARPU increased 10% to 182, and we added 600,000 net new customers in 2021 with continued strong retention and renewal rates. Moving on to our quarterly results, GoDaddy achieved a new quarterly revenue milestone of $1 billion, up 17% year-over-year, exceeding our guidance. International revenue grew 13% on a reported basis with approximately one point of currency tailwind. Q4 domains revenue increased 24% year over year to $497 million. Aftermarket was the primary driver of the strength in domains, contributing nearly two-thirds of the growth in this line. with the remainder attributable to acceleration and GoDaddy registry, and continued strong new registrations and renewals. Hosting and presence revenue grew 7% year-over-year to $330 million in the fourth quarter. We continued to drive growth in our Create and Grow products, with legacy hosting and security growing low single digits. Q4 hosting and presence. Create and Grow ARR surpassed $410 million growing 19% year-over-year. Within that suite, Q4 websites plus marketing ARR grew 20% year-over-year. And more specifically, websites plus marketing commerce ARR grew 24%, demonstrating our commerce opportunity in websites plus marketing. As commerce becomes more pronounced in our products, we'll continue to evolve this disclosure, as we have multiple paths of growth for commerce in more products in our suite. Lastly, annualized GMV across the GoDaddy ecosystem was approximately $26 billion in 2021, growing 21% year-over-year. Business applications revenue increased 18% year-over-year, to $192 million on continued strength in branded email and productivity solutions as customers continue to attach, add feeds, and up-level their solutions. Bookings grew to $1.1 billion, improving 11% year-over-year on a reported and constant currency basis. Growth was broad-based with continued strength across product categories, including strength in aftermarket. Gross margin was down slightly in the low end of the mid-60s for the quarter. Product mix, particularly strength in aftermarket, continues to drive the company's overall gross margin. 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. One item to note is that during Q4, we continued the consolidation of our Arizona offices, resulting in a closure of one office and a $15 million one-time charge in our restructuring and other line. This offset the $15 million gain recognized last quarter from the sale of another Arizona office as we continue to simplify our physical footprint. As Aman noted earlier, we drove efficiency in our marketing spend, although our investment remained strong in Q4 and consistent with Q3. Year over year saw a deceleration in our spend as we lapped the elevated investment we made in 2020 to capture the extraordinary demand. As we continue to refine our marketing return engine, we remain focused adjusting our marketing spend as macro environments fluctuate. our growth and investment in the fourth quarter resulted in normalized EBITDA of $254 million, representing growth of 29% year-over-year from continued profitability, disciplined hiring, and leveraging OPEX as we continue to benefit from work at home and decreased travel. Unlevered free cash flow for the quarter was $203 million, growing 12% year-over-year. Full-year unlevered free cash flow grew 16% year-over-year to $960 million in line with our guidance. Positive working capital impacts, as well as reduced capital expenditures for corporate real estate and infrastructure, was offset by the lower margin profile of our top-line outperformance. On the balance sheet, we exited the year with $1.3 billion in cash and total liquidity of nearly $1.9 billion. Net debt landed at $2.7 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. The strength and resilience of our recurring business models have fueled a strong balance sheet, enabling us to address our capital allocation priorities. In 2021, we completed six acquisitions and repurchased nearly 4% of our outstanding equity. In addition today, we announced our intent to buy back $3 billion of shares through 2024. This represents utilization of approximately 80% of our projected free cash flow over the next three years and is expected to drive a material reduction in our share count. We also announced we expect to launch a $750 million ASR this quarter, which shows our commitment to aggressive use of the new $3 billion repurchase authorization. We are committed to increasing the value we create for shareholders by growing our free cash flow and reducing our share count over time. Now, I'd like to provide our outlook for 2022. We expect total annual revenue to be within a range of $4.14 to $4.16 billion, which represents year-over-year growth of 9% at the midpoint of the range. In Q1 2022, we are targeting total revenue of $985 to $990 million. This represents 10% growth at the midpoint of the range. We expect 2022 unlevered free cash flow of approximately $1.1 billion or 15% growth versus 2021. We expect capital expenditures of approximately $65 million, income tax payments of approximately $20 million, and cash interest payments of approximately $120 million. The global pandemic has affected a lot of businesses and SMBs. timeline of which has varied by market geography and customer type. Because of this variability, forward-looking guidance based on compare years that were impacted or benefited by COVID can be challenging. As such, it's important to call out that guidance we're providing today shows continued business momentum, yet comes off a strong year of outperformance in 2021, which makes for tough comps in the near term. Tomorrow at investor day, We will discuss multi-year growth targets and levers which provide a better picture of the potential we see and the shareholder value they will create. We are committed to providing the information you need to model the business confidently, value the business effectively, and hold us accountable for executing against our stated objectives. In addition to incremental disclosures and metrics, we will spend our time with you tomorrow discussing the company's long-term strategies. key innovation initiatives, an updated capital allocation strategy, and as I mentioned, a multi-year outlook. We'll end the day with Q&A hosted by our management team. Given we have Investor Day tomorrow, we ask that you limit questions today to our 2021 results and the information we've provided in our prepared remarks. We have ample information to share with you tomorrow, and we will have time to go into more details then. With that, I'll hand the call over to Christy Masner, who will be leading the Q&A.

Thanks, Mark. As a reminder, if you'd like to ask a question, please use the raise hand feature at the bottom of the webinar screen to be added to the queue. Our first question comes from the line of Trevor Young from Barclays. Trevor, please go ahead.

Great. Thanks. First on domains in 4.2, obviously sizable outperformance relative to the commentary last quarter, which I think was pointing to low double-digit growth. What drove the strength in the aftermarket, as I think the expectation was that there were some tailwinds that started in 4.2 of 20 from new inventory unlock that were sort of expected to abate? And then specifically within core and domains, was there better retention or an uptick in new registrations, or was most of the incremental growth there from the reputation protection solution service that you launched?

Thank you.

Thanks, Trevor. Good to hear from you. Just real quick, on the outperformance in looking at aftermarkets, you couldn't be more excited at the momentum we're seeing in the marketplace today around our aftermarket. As we exited the year, you know, we saw an uptick in both volume and average deal size, and we exited with deals that, you know, were pacing at a great momentum. Just a reminder, it's a transactional business, so the sales cycle is short on those, so our visibility out in any period can be limited. But we're going to talk about it a little bit more tomorrow, but we couldn't be more excited at the momentum as we continue to see great demand in the market related to the platform. On domains, we saw strength across the board. Customer retention rates remained strong. We also had added benefit from the registry items that we noted. So, you know, when I look at it across the quarter, it's broad-based, clearly driven by aftermarket was the big pickup, but we saw strength across the board.

That's really helpful. And just a quick follow-up, if I may, on the 3% customer growth throughout the year,

Can you just talk about how that trended in 4-2 versus earlier in the year? I think Aman noted some maybe softness later in the quarter related to Omicron. And then have you seen that improvement in customer demand, you know, kind of uptick?

Yeah, I'm happy to jump in on that, Trevor. Yes, as I noted in the prepared remarks, Omicron did have a slight demand impact, and it has continued going into January as well. But as I said, you know, we expect that to sort of be limited to Q1 of 2022 in terms of impact. Just reflecting on the full year of 2021, As you might expect, sort of the growth was based for the reflection of the sort of outperformance in 2020, given just the huge forward we had of 1.4 million new customers in 2020.

Great. Thank you both.

Thank you.

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

Hi, thank you for taking the question. The first one is just maybe a reflection on what's resonating most with fixed customers that are adopting GoDaddy payments. A little surprised to see nearly 25% of managed WordPress customers convert. Just wondering if you had any kind of insights on what was the reason for them choosing GoDaddy and what method was the sort of outreach or communication with those customers that kind of prompt the conversion?

Yeah, thanks, Clark. Just to clarify, you know, when we talk about managed WordPress customers and 25%, it's the customers sort of signing up for commerce tier and 25% of them are choosing GoDaddy payments over the 140 options they have. in Managed WordPress. And we're super excited about it. And in terms of what's driving that, you know, we continue to have a team that is focused on sort of surfing GoDaddy payments, making sure customers see it, they understand what we're offering. And, of course, you know, we have really competitive pricing in the market. We think we're at a price point that is attractive for our customers, that allows us to reach customers in a manner that sort of breaks through the other players. And that's been helpful for us.

Great. And then maybe one follow-up, you know, certainly encouraging to see the appetite to invest in the commerce effort both on the product side and the people side. I was particularly interested in the testing of a higher-end SKU for the commerce tier. I was wondering if you could help frame the sleeve of the market that you see as opportunity for that higher-end solution, maybe bracket, you know, where you would like to go with that SKU.

Yeah, we'll actually cover it in quite a lot of detail tomorrow, so I won't sort of cover it all today. But just as we talked about it a little bit, you know, we're bringing a lot more value to the table with the integration of blind. You know, a customer with GoDaddy now can not only sell sort of in the online store, sell on the major platforms or on social media and in their physical store. We have a number of things like the Commerce Hub that bring it all together and make it very, very simple. So what we're doing is packaging up the best of that into a higher end SKU. It's actually now available in the U.S. If you go to the website, you may not see it, but if you try a few times, you will because it's sort of being A-B tested right now to see what sort of adoption we get for that higher end SKU. But I will touch on more sort of related to commerce, you know, and why we're so excited about connected commerce tomorrow.

Thanks.

Our next question comes from the line of Dan Lee from Evercore ISI. Dan, please go ahead.

Great. Thank you, guys. I guess follow up on the kind of the Q1 outlook where you said that you expect the Omicron impact to be limited to Q1. Can you talk a little bit more about what gives you confidence about that projection? Is there anything that you're seeing that kind of is pointing in the right direction? And if there's any color around the segment growth assumptions, if you can share, and where we could see upside to that for your guide. Thank you.

Yeah, thanks, Jim. Let me take the first part now. I'll turn second over to Mark. On Omicron, the data we're looking at is both sort of across the world, the number of cases, and you know those charts as well as we do. And a little bit of our experience over the last two years, if you remember a couple of years ago as COVID started for a couple of quarters, we had talked about the COVID arc, where as we saw cases increase, we saw a sort of shift in customer behavior and demand. And we think we're seeing something similar here where you know, the rise of Omicron, we see it in our own employee base too, especially with care employees. And as cases have come down, our expectation is that things will sort of get back to normal, if you will. And Mark, I'll turn the second part over to you.

Yeah, thanks, Mark. I'll ask that, you know, we're going to talk a lot about segments tomorrow and some of our repositioning of our product pillars. So hang on tight with that question, if that's okay. I don't want to give away the lead story tomorrow. Having said that on the upside, right, we could have been more thrilled with the upside we saw in the market around the aftermarket. And, you know, as I mentioned previously, it is a transactional business with a short sales cycle, and we're seeing great momentum in both volume and average deal size. Because it's transactional, it can provide some upside going forward. Now, we don't have line of sight to that, and that's generally how we guide. But in answer to your question, we're excited about the upside there.

Great. If I may, just a quick follow-up on just the marketing. It looks like there's a little bit of marketing leverage this quarter. I know you guys talked about and probably will talk more about the marketing efficiency efforts. Is that mostly what's driving the leverage this quarter? Or if you can talk through the marketing spend environment, the CAC trend for Q4 and maybe Q1?

Yeah, let me touch on sort of the approach to marketing overall, Jan, and then maybe perhaps Mark can just touch on the leverage sort of across the other line items. Our approach to marketing over the last couple of years has been that when the demand was high, we wanted to make sure we lean into that demand. We wanted to make sure that we maintained our share of voice and customers knew that GoDaddy had entered into commerce. And we'll actually share more on that topic with you tomorrow as well. But as demand came down, we wanted to sort of, you know, bring the spend down with it, but not too fast. We didn't want to drag demand down for GoDaddy. So you saw us sort of bring the spend down as the demand came down. And in terms of leverage on the line items, I don't know, Mark, if you could just talk about that for a moment.

Yeah, and, you know, the great thing about our model and our durable revenue and our ability to generate cash is we can do so with great attach, increasing ARPU, and get better leverage because our business is 50. And we continue to see that in marketing. We continue to see that in care. As our relationships grow, our ability to upsell and cross-sell just get easier, and we get better leverage out of it. On top of that, you know, we will continue to get leverage out of G&A. We look to simplify our footprint. We're investing a lot in moving to the cloud. So, again, the thing I love about our operating model is it's flexible, it's agile, and it creates a lot of leverage for us to both return cash to our shareholders as well as invest in durable growth.

Awesome. Thank you, guys.

Our next question comes from the line of Igal Aramian from Wisewish. Igal, please go ahead.

Hey, guys. I guess Aman, you mentioned getting back to normal after COVID.

So even after kind of the Omicron wave or outside of that, there's been investor concern just in this space broadly about demand, that demand has been pulled forward, that overall demand levels over not just this year but over the coming years might be different.

We've seen the new business application numbers come back down to normal. So whether it's framed within the outlook or just kind of overall, how do you see the normal? What is the new normal? What should we expect? I'm sure we'll touch on it tomorrow. It's kind of hard to parse out the long term from this, but maybe frame it within the guidance and then have one follow up.

Yeah, I'll let Mark touch on the guy in particular. You asked a very hard question. And as you framed it yourself, you know, no crystal ball to really be able to say, you know, how the demand was for how the pandemic continues to impact demand for small businesses. I think the way we're looking at it is that 2020 was just a unique year. It was very, very different. And For multiple quarters, seasonality disappeared from the business and every quarter was a bit different and very hard to look at. Now we tend to see more and more data points with what I'll call normal seasonality. is back in the business. And, of course, it's going to be very hard to sort of see demand at the 2020 levels, as a lot of companies saw. But when I say normal, what I mean is, you know, the normal seasonality pattern, you know, a bit more predictable demand that we are used to expecting in our business.

Okay. And then on the follow-up, I just want to make sure I understand the payments adoption process. correctly. So are you saying it's 50% of new commerce subs that are taking GoDaddy payments? How should we think about that on renewals and kind of what, you know, what the pace of overall adoption has been or what it can be?

Thanks. Yeah, we should absolutely see those as new customers coming to GoDaddy, going to websites for marketing or managed WordPress and the rate at which they're adopting GoDaddy payments, right? But it's too early to talk about our existing dates. We do think we have an amazing card with GoDaddy payments. We have great pricing, a great brand, and there's an opportunity with our existing customers, but it's too early to talk about renewal cycle or things like that. We're literally almost like six months into GoDaddy payments, so it's very, very early.

Okay. So we should think in another six months is the kind of first big renewal cycle where people might start picking up GoDaddy payments to previous customers.

When we do have more on it, we'll definitely share a little bit with you.

Got you. Thanks, guys. We'll look forward to hearing more tomorrow.

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

Hi. Thank you so much, and congrats on the strong quarter. I don't want to dig in on the monetization per user. We got the customer count for the first time in a year. Overall ARPU growth was pretty impressive. So I want to get some color on what type of uplift you're seeing in spend per customer and any trends to call on in the behavior of how new customers are landing versus the existing customer base expanding.

Yeah, I'm happy to jump in first on that, Elizabeth. When we think about overall customer just to take the last part of your question you know new customers we continue to see you know if you take the sort of two-year cycle instead of the one-year cycle I would say we see very consistent patterns with new customers and we're particularly happy with the ARPU growth it is a bit accelerated versus previous years, and we're very happy to see it. Our goal, of course, is to continue to maintain that type of ARPA growth. That's why we have the higher-priced products, the, you know, greater offering with commerce. And we will touch on this tomorrow as well to just show you, again, the lifetime value of the customer as we attach more products with them, especially as we get into commerce and how that opens up a bit more of the tan for GoDaddy.

Yeah, and I'll just add to that, Elizabeth. Good to talk to you again. Couldn't be more thrilled with the customer ad and the ARPU and the momentum. Really excited to just show them the durability of the model and the strength of it going forward and the predictability of the revenue and the cash flow that we'll have into the future to invest and return to shareholders.

Got it. Thanks so much. And then I just wanted a quick follow-up on Omicron that you highlighted. The headwinds are limited to more Q1. Any color on, you know, if you guys saw any effects of Omicron impact with the Q1 guidance or any other headwinds, tailwinds, like effects to call up to the growth in Q1?

And nothing more to add on the Omicron piece, Elizabeth, versus what I just already shared in terms of, you know, what we see in the case and what we see in our employee base. You know, we have the benefit of having a very large care organization that gets a lot of calls from customers. So we get a little bit, if you will, color on how people are feeling or doing. So that's what our estimate is based on. And in terms of effects, maybe Mark, you could weigh in on that.

Yeah, absolutely, and I think we're comfortable with the guidance that we're giving out here. You know, we've seen the Omicron hit in January without care, like Aman mentioned. We think it's limited. Obviously, we can't predict any other variants or, you know, other things happening out there for the quarter, but I think we're very comfortable right now with where we're pecking Q1.

Got it. Thank you so much.

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

Thanks. Just on use of capital, you're coming to a fairly large buyback in the ASR. I guess when you think about just the overall, you know, ability to do tactical M&A, can you give us a sense of, Is the buyback the way, given how significant that commitment is, or are you leaving yourself in a wiggle room to do some talking M&A going forward?

Hey, Brent, perfect question, right? I would say we're going to get into the capital allocation strategy tomorrow. But one of the great things about our model just leading up to tomorrow is we have the ability to generate a lot of cash because of our predictability and durability. but also, you know, look at other items that can accelerate growth and grow our business over the long term. So I think I said in key three, very much an and versus an or for us, and looking forward to getting the details of how we're thinking about that moving forward tomorrow.

Great. And, Alon, when you think about some of the new product features you've given, you know, there's a lot of great innovation. I guess when you think about kind of the the one or two areas that you're most excited by. Please give us your sense. We understand you love all your products equally, but one or two standing out to you.

I'm particularly excited about our top priority, which is commerce and bringing commerce to every surface that we have, Brent. You will see that tomorrow I have picked, you know, At least one idea that I'm particularly excited about, so I go into a bit of detail. I won't showcase it now, but suffice to say that just bringing commerce to every surface of the company is what I'm most excited about.

Great. Thanks.

Thank you.

Our next question comes from the line of Sterling Audi from J.P. Morgan. Sterling, please go ahead.

Hi, this is Drew on for Sterling. Revisiting the Omnicommerce solution, I was wondering if you could speak to the trend you're seeing in customer behavior, more specifically in the split between shopping in-store versus online.

Thanks, Drew. It's a bit too early to be giving out numbers on the Omnicommerce solution. We did share that we shipped over 1,000 orders for point sale, so definitely customers are starting to realize that we that we have the solution and that they're excited to adopt it, but it's too early to be talking about in terms of what we're seeing. We need a few more quarters of data in before we should talk about that.

Okay, got it. Thank you.

Thank you.

Our next question comes from the line of Deepak Mahavanan from Wolf Research. Deepak, please go ahead.

Deepak, I think... Sorry, this is...

Oh, yeah. Can you hear me? We can. Right. Okay. Sorry about that. So, hey, just a couple of questions, and apologies if this was already addressed. On that $40 million outperformance, you know, on the aftermarket side in domains, was the contribution to fourth quarter bookings roughly the same? Because, I mean, if I exclude that, it seems like the bookings were up like 7%. Is that map accurate? Can you help with that? you know, what are the factors of deceleration, if that's accurate. And then also related to that on the first quarter guide, how should we think about this aftermarket, you know, contribution that you have factored into revenues and then also, you know, maybe some call-around bookings would be great.

Yeah, a couple things. Hi, Deepak. How are you doing? Just on the aftermarket part of it, and I'll try to bridge this for Q4 and Q1. It's a transactional business, so it impacts both bookings and revenue when it's recorded, but does not impact deferred revenue at the end of any given period. So it can provide upside in any given quarter, but does not have a, what I'd call, deferred revenue impact in future periods. So our visibility into any given quarter could provide variability. On the deferred revenue, I would say we're coming off of 2020 cohorts that were very large, and we're coming into 2021 cohorts that are a little smaller. So we're seeing the deferred revenue balances come down based on that trend. But that's generally what you're seeing out there.

Got it. If I can just follow up on that. So should we expect this trend to also continue in 2022?

Definitely. So, Deepak, I would say we're seeing great momentum in 2022 when it relates to continuing to grow our business and provide durable revenue. We are excited about the momentum of the aftermarket, but it's still early stage for us to see that momentum and the variability we'll have from quarter to quarter. We are extraordinarily excited at the volume of the transactions going up, the average deal size going up. So we expect some momentum, but like I said, it can vary from quarter to quarter.

Got it. Okay. Thank you so much.

Our next question comes from the line of Matt Fowle from William Blair. Matt, please go ahead.

Hey, guys. Thanks for taking my questions. First, I wanted to ask, for 2022, if it would be possible if you could give us some direction on how you're thinking about the growth by your three different revenue line items.

Hey, Matt, I'm going to give you the classic, hey, can we wait until tomorrow? We're just building some new information on how we're going to be describing our revenue pillars going forward, and I think that will be able to answer your questions.

Okay, great. And then to follow up on some of the previous questions about ARPU and customer growth, If we look prior to the pandemic, your overall revenue growth was kind of split evenly between customer growth and ARPU, and then obviously the last two years have been non-normal. How are you thinking about the split between those two drivers as we move forward here?

Matt, the way I think about it, and Amon can add on to me, the way I think about it is we have great opportunities going forward coming out of the pandemic, both to attract new customers as well as upsell our existing customer base. And while we don't get into which one is going to provide more, we can both create an exceptional opportunity for us to continue to grow the business at a durable rate, which we've shown over time we can do.

Got it. Thanks a lot, guys. Appreciate it.

Our next question comes from the line of Navid Khan from Shura. Navid, please go ahead.

Yeah, hi. Can you hear me?

Yeah. Okay. Yeah, so I just wanted to touch on the inflationary environment there and how you are thinking about the inflationary pressures on your as well as your ability to pass it on to your customer base. And then secondarily, just on e-commerce, I think last year, Aman, I think you spoke about maybe a quarter of your new customers being e-commerce customers. Is that still the case? Is that mix holding up or has it kind of come back down to more normal drivers or maybe even more?

I'll take the first part of that and maybe Aman, you can take the second part of that. The inflationary comment. Obviously, we're living in interesting times with inflations and we saw a lot in the press today. The fallback I always look at is, hey, we have a very durable model that has been around for a while and we've seen the ups and the downs and we've been able to continue to generate growth, continue to move forward. So, you know, We'll see what the ultimate impact in the macro environment is around inflation, but we're confident that we can continue to meet our strategic objectives going forward. An example I always used to use or like to use, I think in 2008, our cohort had generated $1.9 billion over the period of time, which is fantastic when you think about that, looking back at what that type of macro environment was. So we believe our model remains durable.

And now that on the websites plus marketing, e-commerce customers, I think that's the data point you were referencing. We did share today that websites plus marketing had grown 20%, but the commerce queue had been growing 24%. So we continue to see more customers in, and that was AR numbers, so we continue to see more and more attention in the commerce queue. And as I shared earlier, earlier, we're actually launching a higher-end commerce view, and it's testing in the U.S. now. So in terms of that, in terms of the overall business, commerce is becoming a bigger part of our website, plus marketing business.

Thank you.

Our next question comes from the line of Sunil Rajpal from Barenburg Capital Markets. Sunil, please go ahead.

Hi. Sorry, can you hear me?

We can.

All right. Can you shed some light on what is impacting the gross margins this quarter? And secondly, what does the management think about the recent announcement from Apple turning their handsets into payment terminals? Thank you.

I'll take the first part of that, and Mom, maybe you take the second part of that. Again, good to talk to you. The gross margin in this quarter was impacted by aftermarket. It's a lower gross margin point than some of our other products, so the outperformance impacted our gross margin. We still feel very confident in our operating margin and our ability to grow normalized EBITDA, given the leverage that those models actually will provide for us. but that is in the aftermarket to provide some downward pressure on the gross market. Thank you.

And, Sunil, on the Apple announcements, Again, I'll touch on this tomorrow, but, you know, we have a firm belief that the commerce use cases are going to appear on every surface that exists and be tightly coupled to every product that's out there that way it makes sense. So I'll actually touch on it tomorrow a bit to share how at GoDaddy we believe that commerce use cases are just going to be omnipresent on everything we do. So no surprise that Apple is sort of bringing forward tickability that allows folks to sort of tap and pay just with the iPhone.

All right. Thank you.

All right. At this time, I'll turn the call back over to Aman. Aman, please share some closing remarks.

Thank you, Christy, and thank you all for joining us. We look forward to spending more time with you tomorrow at our investor day, and I'll just end by thanking all the GoDaddy employees all over the world for another great quarter and all the hard work they put in coming in every day with everything else going on. Thank you very much.