This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk04: 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 from those contained in forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, May 4, 2022, and except to 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.
spk03: Thank you, Christy, and thank you all for joining us today. At GoDaddy, our mission is to empower entrepreneurs everywhere, making opportunity inclusive for all. With the secular trends of entrepreneurship coupled with accelerating online presence and commerce, we believe GoDaddy's role is to help our micro and small business customers take advantage of the largest opportunity in front of them. the combination of the internet and commerce. We do this by helping customers establish and maintain their digital identity. Our tools help customers extend their web presence to social media and marketplaces and into their in-store experience, giving them ubiquitous presence. And we are bringing them to the world of connected commerce by enabling every surface for them with commerce. This mission has never been more important, and GoDaddy's combination of assets makes us a unique and differentiated player in the market. Together, digital identity, ubiquitous presence, and connected commerce form the entrepreneur's wheel, representing our customers' needs and how we meet and exceed them. We shared this new framing for GoDaddy at our Investor Day in February. We also presented a three-year plan and we are off to a good start. In the first quarter of 2022, revenue grew 11% year-over-year and normalized EBITDA grew faster, up 18% year-over-year. While we all face a fluid macro environment, we are focused on what we can control and delivering on expectations for our customers and shareholders. We are keeping a close eye on the war in Ukraine. The financial impacts of the war on our business are limited, but we remain critically concerned for the safety of our contractors in the area. A prolonged war will likely mean a bigger disruption in the work and delays in some product releases and rollouts as we ramp resources in other areas. We are also closely monitoring the uneven demand patterns as a result of the ongoing COVID-19 pandemic and inflation, and the strength of the US dollar is leading to FX headwinds across industries. Our business model is durable and offers us opportunities to adapt and be nimble. Our leadership team is focused on our three-year plan and mitigating short-term headwinds. Over the last several years, we have strengthened the quality of our revenue by delivering on our strategy to attract customers with higher lifetime value. Through disciplined execution, we have improved our renewal experience, and as a result, we have continued to drive modest improvements in our already high retention rates. An important data point that I am happy to share is that the 15-month renewal rate from the 2020 cohort of customers continues to be strong. Our commitment to our strategy is clearly highlighted in the consistency of our priorities. Our three strategic priorities have been and continue to be, first, driving commerce through presence. Second, delivering for GoDaddy Pros. And third, innovating in domains. We covered our priorities in detail at Investor Day, so I will provide brief comments on each of these today. On our first priority, we have delivered many product launches in the last couple of months, but the one I want to highlight is the launch of a new higher tier Commerce Plus plan. The new offering includes increased customer value in the form of simplified taxes, unlimited product listings, and higher limits on many features. from marketplace orders to email campaigns. The data is early and encouraging. 80% of sales in this new tier are from new purchases. And looking across our commerce plans, 70% of customers are now choosing GoDaddy payments, up from the 60% we shared in February. Annualized GMV across the GoDaddy ecosystem grew 20% year over year to 24 billion, primarily driven by offline point of sale. For GoDaddy pros, our focus continues to be to create best in class presence and commerce offerings and tooling for managed WordPress. We continue to add more users to the hub and our teams are working hard to increase rates of engagement. Our integration of Pagely continues at a good pace, and we are excited about upcoming releases, which include a commerce offering and a new onboarding flow for managed WordPress. I am looking forward to sharing more about these new capabilities once they are launched. On innovation in domains, in February we shared that we are going to bring to market an innovative new product called Payable Domains. I am happy to share that we have started to test Payable Domains with a small percentage of customers in the US. It is too early to comment on how customers will receive and adopt this product, but we are eager to experiment with it as quickly as possible. In closing, I want to remind you that GoDaddy has built a durable business with a history of solid performance in all kinds of economic environments. By accelerating the rate of experimentation and innovation, we have continued to improve the quality of our products and enter new markets, improving attached and ARPU and driving shareholder value. Our strength comes from our large customer base, extraordinary customer and revenue retention, the power of our existing cohorts, the strong competitive advantages we have serving the micro and small business customer, a clear three-year plan, and a disciplined leadership team and workforce committed to our mission. With that, here's Mark.
spk02: Thanks, Aman. And thank you, everyone, for joining us today. We are excited to share our strong Q1 results, which highlight our execution towards the targets we shared at our recent investor day. Our results demonstrate our focus on delivering a balanced combination of durable top-line growth, profitability at scale, and robust cash flow. And our performance shows GoDaddy's business resiliency. We are pleased that we were able to deliver a strong first quarter while we actively managed through the uncertain global micro environment. In Q1, total revenue grew to $1 billion, which represents 12% growth year over year on a constant currency basis and 11% year over year on a reported basis. Within total revenue, international revenue grew 10% year over year. on a constant currency basis. As shared earlier this year, we updated the lens by which we report the pillars of our revenue. This change transitioned our reporting from three revenue segments into two new segments, applications and commerce and core platform. This gives us the framework of how we will talk about our business and opportunities going forward. Applications and commerce revenue, which includes presence and application solutions, grew 16% year over year. Coming in at the high end of our guidance range from February, our presence products such as websites plus marketing contributed to this growth. And as Aman mentioned earlier, we drove great traction with the attach of our payment solution, which will show up in this line item as it becomes more meaningful. The ARR for applications and commerce grew 14% year over year to $1.2 billion. ARR from our Create and Grow group of products, which includes Website Plus Marketing, Manage WordPress, Sell Right, and GoDaddy Studio, grew 13% year-over-year to $410 million. Lastly, annualized GMV across the GoDaddy ecosystem was approximately $24 billion, growing 20% year-over-year. We achieved growth across all channels. by offline point of sale. Core platform revenue, which includes domains, hosting, and security products, grew 9% year over year, delivering above our February guide with 40% of the increase driven by aftermarket. ARR for core platform grew 5% year over year to $2.2 billion. As a reminder, aftermarket performance does not impact ARR. Q1 bookings were $1.16 billion, growing over 7% on a constant currency basis and 6% on a reported basis against tough comparisons from the strong year-ago quarter. Additionally, Q1 bookings grew 10% sequentially against our largest-ever Q4 quarter. Applications and commerce bookings grew 9% year-over-year, and core platform bookings grew 5% year-over-year. Normalized EBITDA grew 18% year-over-year to $226 million at a 23% margin, representing over a point of margin expansion compared to the same period last year. And bringing our normalized EBITDA margins within the 23% to 24% guide we outlined at Investor Day. Our technology and development expenses increased as a percent of revenue this quarter, as we focused on building our commerce and innovation strategies. Additionally, as we continued reopening offices in Q1, our G&A expenses also increased as a percentage of revenue, while remaining below historical levels. We drove leverage in our marketing spend based on continued execution of the formula outlined at Investor Day. Additionally, during Q1, we faced inflation pressures, primarily in the form of increasing energy and cloud infrastructure expenses. Currently, we have medium-term contracts and FX hedges to mitigate some of the foreseen impacts. We expect these inflation-related impacts to continue throughout 2022, and we will monitor and proactively address our exposure in these areas. Unlevered free cash flow for the quarter was $287 million, growing 7% year over year, driven by strong profitability. Additionally, during the quarter, we began executing against our announced $3 billion authorized share repurchase through an initial $750 million accelerated share repurchase, or ASR, expected to be completed in May. Through Q1, we repurchased an initial 6.5 million shares, reducing our total share count by 4% since year end, bringing our free cash flow per share on a trailing 12-month basis versus prior year cash flow per share of $4.51 for an increase of 16%. On the balance sheet, we finished Q1 with $743 million in cash and total liquidity of $1.3 billion. Net debt stands at $3.2 billion at the midpoint of our targeted range of two to four times. Moving on to our outlook. Given the solid start to our year and the predictability of our model, based on what we know now, we are comfortable with our full year 2022 outlook provided in February. Having said that, we are not immune to the current macroeconomic environment, which increases our short-term exposure to foreign currency and customer demand fluctuations. While the environment remains fluid, We believe our predictable model allows us the flexibility to moderate our investments and leverage our operating expenses to seek to offset exposure to revenue from these factors. We also remain committed to delivering the $6 plus free cash flow per share discussed in February. For Q2, we are targeting total revenue in the range of $1.01 billion to $1.02 billion. which would represent year-over-year growth of 9% at the midpoint. Within that, we expect applications and commerce revenue to grow between 14% and 16%, and core platform revenue to grow between 5% and 7%. For Q2 and full-year bookings, we expect growth to be approximately two points below revenue, primarily driven by FX pressure. We will continue investing in technology and development to drive our robust product launch momentum, while balancing our goal for margin expansion through efficiencies in customer care and marketing. Normalized EBITDA for Q2 is expected to be in the range of $232 to $237 million, which would represent year-over-year growth of 18% at the midpoint. Our capital allocation strategy also remains unchanged. During the second and third quarter, we intend to fulfill our $1 billion buyback target for 2022 through an additional $250 million of share repurchases. Additionally, we will evaluate the impact of rising interest rates and explore refinancing our term loan and revolver with the intention of maintaining our leverage ratio of two to four times. Before I close, I want to reiterate that we remain laser focused on execution. And we have a track record of consistency in difficult times. We are marching towards delivering the 10% top-line CAGR, 15% normalized EBITDA CAGR, and 20% or better free cash flow per share CAGR while buying back $3 billion of our stock over the next three years that we described in detail in our investor deck. We are balancing our near-term and long-term goals. emphasizing delivering strong results while at the same time investing in areas for future growth. GoDaddy leads in providing small business solutions, a position that we built by understanding the needs of our more than 21 million customers. While the current macro events present challenges, GoDaddy's resiliency comes from our long history of strong customer retention, the power of our existing cohorts, and the competitive advantages we built as the champion for small businesses. With that, we'll have Christy Masner from our investor relations team open up the call for questions.
spk05: Thanks, Mark. As a reminder, if you would 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.
spk10: great thanks two if i may um just first one any color on how customer growth has trended thus far in 22 relative to the three percent growth last year aman i think you made some comments about on a 15-month basis the 2020 cohort is retaining it at pretty healthy levels just trying to get a sense on kind of like in period demand from new customers have you seen any improvement in that cadence And then on international REVs declining a tad queue on queue, were there any specific regions or countries where you saw weakness in the quarter? And did you see weakness specifically in Europe following the onset of the Russia-Ukraine conflict? Thanks.
spk03: Thanks, Trevor. This is Aman. On the 15-month retention rates, you know, one of the reasons I wanted to share that metric is 2020 was a huge cohort for the company. And I think analysts have been asking us, investors have been asking us about retention rates on it. And we're very excited to see that we've continued to attract a customer with a high LTV, a customer that wants to stay with us. So those strong retention rates are obviously very, very important for us. And in terms of the customer growth, you know, we don't guide to customer growth, but definitely at the end of the year, you know, it'll be something we'll be happy to talk about more and share with you. In terms of international, you know, I'm sure Mark may mention a thing or two, but generally, I would say, you know, we see the same sort of macro environment others see in Europe, as an example. And Russia, we did shut down our Russia website and remove support for the ruble. And that had an impact. And maybe, Mark, you want to comment on it? You know, I wouldn't call it any sort of material impact, but perhaps, Mark, you want to comment on it?
spk02: Yeah, thanks, Aman and Trevor. I think that's exactly right, Aman. I think you stole the byline. We did shut down. It didn't have a significant impact on us. I would say it's more the macroeconomic trends that are impacting us throughout Europe. And there isn't a particular exposure to any region or
spk05: or country at this at this point to call out great thank you both our next question comes from the line of clark jeffries from piper sandler clark please go ahead
spk06: Hello. Thank you for taking the question. You know, maybe addressing the previous question in a different way on a product level. Just wanted some qualitative thoughts on the macro impacts to domain demand and if there was any characterization you could offer between North America demand and international demand for domains. And then I think as a follow-up to that, With a 40% increase driven by aftermarket, was that in line with your expectations or above? And as we settle into kind of cleaner compares, where do you think the growth contribution from aftermarket goes?
spk03: Yeah, thanks, Clark. I can take the first, and Mark, perhaps you can take the second. In terms of domain demand, you know, Clark, I would point you to the sort of core domain business for us, which is now much more than, you know, selling just specific TLDs. We sell a large sort of set of TLDs across the world. We've also added to that capability the secondary market. We then combined the primary market and the secondary market. We connected those really well. You'll remember products like this for sale from a year, about a year and a half ago. And then we've also added a corporate business in domains, and we've added more recently a registry business as well. So we continue to be very happy with our overall domains business, but it's really the collection of sort of diverse products that we have that are performing really well for us. And then on the aftermarket, maybe Mark, I can turn to you.
spk02: Yeah, absolutely. Thanks, Clark. Hey, listen, we couldn't be more happier than the momentum we have in the aftermarket. And I think we talked about it coming out of Q4. And we continue to see strong volume growth and average prices going up. And that's what we really track when we look at the momentum around there. It's hard to predict the larger transactions, but we still see them coming in. And we still see the momentum, you know, obviously quarter over quarter that created within that market. Nothing to call out, you know, domestic versus or sorry, North America versus international. It seems to be just broad based momentum in that market and continue to be pleased with the amount of transactions and the volume that is going through there right now.
spk06: First, Lieutenant, if I could squeeze one more in about just how the investment plan changes given the macro environment. Just trying to get a sense of whether you see it as a net benefit to profitability or whether there'll be some offsetting costs. You do have to rotate some of that kind of contractor headcount around. You know, is it kind of a net benefit or a net headwind to profitability as you look through the year?
spk03: Yeah, I think if you're specifically talking about sort of my comments around contractors in the Ukraine region, you know, it is an important but a small group of people for us. So given our sort of large base of engineers across the world and our ability to hire globally and work with vendors around the world. We think overall it's not a huge shift. It is an important group of people. Their safety is of paramount importance to us, but I wouldn't over-focus on it because the size of the group is small.
spk02: Yeah. Clark, I'll just add on to that. The cost, we don't look at it as a headwind. All right. Perfect.
spk06: Thank you very much.
spk05: Our next question comes to the line of Egal Arounian from Wedbush. Egal, please go ahead.
spk11: Hey, good afternoon, guys. I'll take the macro one again. It may be like a kind of two-sided. So one of the things you're seeing around is just a lot of pressure on e-commerce. It sounded like from your comments, in-store POS has been a big driver, strength in GMV. Talk about the puts and takes on offline and online commerce that you're seeing. And then, you know, when we have... when we start to talk about recession um ultimately the impact to smbs um who are usually you know typically more exposed comes up a lot so um anything you're you're hearing from your smb customers um you know i know you're seeing things like um improvements and renewals and things look pretty good but just the the tone from your customers anything you're hearing there
spk03: Thanks, Igor. Look, bringing online and offline commerce together, what we call connected commerce is more important for our customers than ever before, right? They need to be able to quickly pivot to selling online or be able to bring those same capabilities in store very, very quickly. Given our portfolio, you know, And given that we are still very early in the connected commerce space and the exposure we have to sort of GMV is generally small in our overall business, you know, we're still growing in that area. We have lots of opportunity where I feel very, very early in that field. And in terms of, you know, different economic impacts, I would point you to a data point I think we shared a couple of years ago. When we looked at the data or the cohort for 2008, you might remember we talked about the recession, the great recession cohort. Well, that cohort a couple of years ago had delivered $1.5 billion in revenue with GoDaddy, and today it is up to $1.9 billion. in terms of what that cohort has delivered in terms of revenue. So, you know, we look at that cohort and we see it perform very similar to other cohorts. So we look at our business and we say, look, we deliver a set of products at a price that deliver great value to our customers. This is essential to their future, to their growth. And yes, in the short terms, you know, things might move up and down a bit, but those cohorts over time continue to perform very, very well. And Mark, maybe I'll turn it to you to add a couple more bits to that.
spk02: Yeah, and it's great. I think in these times, what we're hearing is that being a one-stop shop for our customer base, which is entrepreneurs and very small businesses, becomes an opportunity. They're focusing on their business and their ability to really count on us to help make their go-to-market easier seems to be something that is resonating with them. And a reminder, we generate about 85% of our revenue coming from our existing 21 million customers. So our ability to give them relevant products in the market is just a huge upside for us. And we look at it as very much of a positive going forward.
spk11: Thanks. That's really helpful. Maybe we could just talk about Commerce Plus a little bit and expand on that. It seems like a really interesting product. Is that you guys going a little bit more upmarket or is that still a product that's focused on your kind of micro SMB core customer. And anything you could share about price points and any other details around that would be super helpful. Thank you.
spk03: Sure, Igor. In terms of the target customer, like we shared on Investor Day, you know, we have lots of customers in our base that sell up to a million dollars or do up to a million dollars of GMB a year. And as we had shared with you, we want to be able to serve their needs because they are our customers already, and we don't need to do that much more to serve them well. And we had talked about launching in Q1 a new higher-end SKU. That's what the Commerce Plus SKU is. Happy to send you details offline in terms of price points and how far it's launched. and stuff like that, but you can literally go to the US website and see it. You will see it 100% of the time. So it's absolutely there available to customers. And we're very excited about it. Like 80% of the sales that we've seen in that SKU have been new purchases, which means customers are willing to pay more for the greater value that we provided them. And it's definitely played a little bit of a part as well in the overall customers adopting GoDaddy payments, because now 70% of customers in our commerce SKUs are adopting GoDaddy payments, which is 60% in February that we shared with you.
spk11: Great. Thanks so much. I'll definitely check that out on the site.
spk03: Thank you.
spk05: Our next question comes to the line of Mark Zagudowitz from Benchmark. Mark, please go ahead. Mark, I believe you're muted.
spk09: I apologize for that. I just wanted to draft maybe on a couple of those last questions on the new customer side of Commerce Plus, which you highlighted. I was just curious if you could maybe refresh us again on your go to market and sort of where perhaps those new customers are coming from. And then as it relates to. your GMB growth, obviously, you know, mainly coming from POS, just trying to get a sense of sustainability of that 20% growth. If that sort of corresponds to the CAGR that you're sort of talking about for applications and commerce through your CAGR and sort of the high teens, if that would sort of, you know, parallel that growth. That's it for me. Thanks.
spk03: Thanks, Mark. On the new Commerce Plus plan in terms of go-to-market approach, it's a super new product. We just launched it this last quarter, and most of the customer base is coming in through the web. So that's where we've done the majority of the testing. No doubt we have a huge competitive advantage in the care organization and the ability of the care organization to be able to have a fantastic relationship with our customers and to be able to upsell customers. But that is, you know, that is part of this year's priority for us to be able to get, you know, our go-to-market motion really swinging in terms of commerce. But we're excited to have the product launch. We're excited to have customers like it. We're excited that they're picking GoDaddy payments. So that's been fantastic for us. In terms of GMV growth, you know, we just feel we're so early in the payment space, and we have such a large customer base with this need. You know, of course, it's hard to sort of have a crystal ball and talk about specifics, you know, in terms of numbers of the long term. But we feel we're very, very early, and there's just so much more for us to take. It's a massive time. We're positioned really well. We're putting out. great innovative products in the market in terms of what we're doing with websites plus marketing. In my prepared comments, I mentioned a new commerce queue coming for WordPress. We have payable domains out there now testing in the US. So we're really lighting up all our surfaces with commerce. So we feel we're just very early here.
spk09: Super. Well, thanks very much. I appreciate it.
spk05: Our next question comes from the line of Aaron Kessler from Raymond James. Aaron, please go ahead.
spk08: Great. Can you hear me? Yeah. Great. I know you've been working on the cloud transition for a couple of years now. Can you talk about where you are on that and then any impact you're seeing from overall labor costs? Obviously, a question coming up a lot of our conference calls. as well. And finally, just in terms of the lower year-over-year marketing spend, nice leverage there. I guess, how much of an impact is that having on kind of gross ads or customer ads from that lower marketing spend? Or have you been able to find more efficient sources? I think you mentioned that at the investor day as well. Thank you.
spk03: Yeah, thanks, Aaron. Let me take the cloud and marketing, and Mark, maybe you can comment on labor costs. In terms of our transition to cloud, you know, we continue to be very happy with our applications moving to the cloud. We're seeing higher productivity. We're seeing, you know, better responsiveness. We measure our applications with the Google tools and they perform very, very well, you know, both sort of in the U.S. and globally. So we're very excited about that. The transition is going to plan, you know, nothing significant to call out there. In terms of our marketing dollars, I think, you know, over the last year, we've been very open about sharing with you our philosophy around marketing, about making sure that we lean into the demand when we see it. And then as we see sort of changes in the pattern that we manage our marketing dollars, you know, we don't want to manage them too aggressively because we don't want to. pull demand down just for GoDaddy, but we do want to follow all of the demand patterns. And what we're doing is that we're coupling that with investments in data science and better data and better technology that's allowing us to measure that marketing spend better and better every year and be more efficient with it. And Mark, I'll turn it to you for the labor cost comment.
spk02: Yeah, thanks, Aaron. On labor costs, for talent here for a number of years. So we've been constantly looking at how do we attract talent, but yet have levers in place to moderate the cost buildup appropriately. And that hasn't changed. And we're not seeing anything that would cause us to think that that's going to be what we haven't built into our guide already. um and and you know we continue to look for opportunities to diversify the locations of our employees going forward to make sure we we can maintain that into our three-year outlook great thank you our next question comes from elizabeth porter from morgan stanley elizabeth please go ahead elizabeth i believe you're on mute
spk01: Oh, hi. Thank you so much. I had a question on the competitive landscape. So back in March, Google announced that they were going GA with their domains product after being in beta for multiple years. So just wanted to get your view on any changes in the competitive landscape. Thanks.
spk03: Thanks, Elizabeth. You know, specific to Google, we've been competing with Google on domains for I think seven years or more. And, you know, the removal of sort of the beta logo, if you will, it doesn't change sort of create any fundamental change in the industry from my view. You know, competing with the mega tech players is a fact of life for every tech business. So I feel we've been competing with them and sort of not much has changed with this little change from them.
spk01: Great. And then on the payment side, great to see that that adoption kind of ticked up to 70% from 60. And I believe that's just new customers that are going into commerce. So I wanted to see if there had been any change in legacy customers kind of moving over to GoDaddy payments from their prior provider, just given the competitive kind of pricing that you guys offer with that product.
spk03: Yeah, I think a majority of what we've talked about is new customers going through the site. In terms of our legacy customers, we continue to feel that is a big opportunity for GoDaddy. You know, anecdotally, we do see a set of customers that are attracted, so we know that our pricing makes sense. We know that, you know, this is something we can scale, but that's part of this year's priority for us to get the go-to-market motions at scale across the company so that we can go after not just the new but the legacy customers as well. But it's just that is still work in progress.
spk01: Thank you.
spk03: Yep. Thank you.
spk05: Our next question comes from the line of Brent Phil from Jefferies. Brent, please go ahead.
spk07: Thanks. Good afternoon. I guess a couple on financially, you know, the bookings growth trailed revenue this quarter, I guess. Was that more just the comp or was there anything on the internal execution that you call out that caused that?
spk02: I'll jump into that one. I'm on good ad color. You hit it right on the head there. We're comping to a tough quarter last year. We did talk about January at Investor Day and some of the impacts in the market, and we've seen positive momentum coming out of the quarter, which gives us a lot of comfort as we get into the rest of the year. We're excited about it. So there's nothing in particular call out that we haven't already mentioned. And we also are very happy that coming off a great Q4, you know, the bookings growth was pretty strong. So we like the momentum. We like the opportunities out there in the market right now. You know, obviously it's an interesting time, but we continue to manage through it. And, yeah, we feel good about where we think we're going to end up for the year and the quarter, Q2.
spk07: And maybe just a quick follow-up that obviously the elephant in the room everyone's watching is the interest rates and what that does to the small business segment. And I'm curious, you know, how you're thinking about this and what happens not maybe, you know, this quarter, next quarter, but over the next year, how you think you can kind of be more insulated or not. I'm curious how you think through this as that rolls through.
spk02: Yeah, Brent, I'll take it on two ends on that one. One, us internally, and then two, customer demand, and Amon may have some comments on the customer end of it. One, on our end, you know, we're, you know, I think it's in our prepared remarks or slide. We're at 13% variable interest rate right now. So we think the impact for us in the quarter and the year will be minimal. Obviously, we will, as we mentioned, we'll look to refinance our term loan and our revolver. If it makes sense, we'll do so. But we think those are things within our control. When it comes to a customer base, you know, it's hard to predict the overall impact of inflation, but we believe because our products help them do business and our ability to be a one-stop shop helps them ultimately be more efficient in the marketplace and focus on growing their business, that we are an additive tool for them versus something they will have to choose between. But, you know, it's hard to look at the overall impact in the three years. And, Aman, I don't know if you want to add to that at all.
spk03: Maybe just to say I appreciate the long-term view on the question. My view is that we have these secular trends around entrepreneurship, around the Internet, around commerce on the Internet. We're positioned really well. This is a critical need for micro and small businesses. So the time is large. GoDaddy's positioning is very, very good. It's mission critical to customers. They don't, you know, just in a difficult time, customers don't give up their website or they don't give up their domain name or lots of them don't do that. So from my perspective, if times are tough for our customers, that's actually opportunity for GoDaddy to do more for them. That's the opportunity GoDaddy has to help them understand how they can navigate those times better. And as I shared about sort of the 2008 cohort, you know, we can end up with fantastic customers in all kinds of economic environments.
spk00: thank you thank you our next question comes from the line of sunil rajkapal from barenberg sunil please go ahead hi can you please comment about the overhead expenses line seems to have gone up quite a bit this quarter and also my second question will be on the payments front Just want to understand a little bit more. I know you commented earlier about that you are still in the early phase of deployment in terms of the payment opportunity. But have you thought about what would be the potential opportunity from our payable domains and how that could potentially accelerate your revenue stream going forward? Thank you.
spk02: I'll hit the first part of that. And Matt, maybe you can handle the second. I assume you're talking about the G&A line and say overhead represents. We started reopening our offices in Q1, so we saw a small uptick as we got ready for that. It's still below historical levels and we expect it to be in one going forward and we're comfortable with where we are in our normalized EBITDA. margins that we put out there in the guide and also for our three-year plan. But the specific increase was related to opening the offices in Q1.
spk03: And Sunil on payable domains that I think my excitement about that product sort of leaked out during investor day. I'm sure you will notice how excited I get about it. You know, my view is that it's a fundamentally new idea. Nobody else is selling that product. We have tremendous scale to bring that to market. You know, but we have to work with customers to help them understand what the new product is. And that's what we're going through. That's what we're testing. We have great estimates on what we think it can be. That's definitely why we're talking about it and we're excited about it. And we'll keep you informed on how it progresses. You'll be able to see it on the side. You'll be able to see us doing more and more with it. Sure.
spk00: Thank you. And maybe if I could just follow up, you talked about inflationary pressures in terms of the cloud infrastructure costs going up. So how should we be thinking about those costs? And is there I mean, do you think it will incrementally pose pressure on margin and pushing margins towards the low end of the guidance?
spk02: So when we look at the infrastructure cloud cost, you know, we're still in the process of moving to the cloud. I think we've talked about that and our impact on our tech and deadline. And we still look at it as an opportunity to moderate our costs as well as reduce our capital expenditures going forward. Everything that we're looking at today, we've included in the guide, not only for the year, but for our three-year plan. and we feel comfortable with our normalized EBITDA margins where they are. Obviously, we want to put some takes, but we're comfortable where we are and built in what we can see today. Thank you very much.
spk05: As a reminder, if you'd like to ask a question, please use the raise hand feature at the bottom of the webinar screen. Our next question comes from the line of Navid Khan from Truist. Navid, please go ahead. Navid, I think you're on mute. I will turn the call back over to Aman. Aman, for closing remarks.
spk03: Thank you, Christy, and thank you all for joining us today. I'll end the call by just thanking all the GoDaddy team members who have been doing a tremendous job getting us these results and all the good work we do for our customers as well. And may the fork be with you.
Disclaimer