GoDaddy Inc.

Q2 2024 Earnings Conference Call

8/1/2024

spk12: Welcome to GoDaddy's second quarter 2024 earnings call. Thank you for joining us. I'm Christy Masoner, VP of Investor Relations, and with me today are Aman Bhutani, Chief Executive Officer, and Mark McCaffrey, Chief Financial Officer. Following prepared remarks, we'll open up a call for your questions. If you'd 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 measures and other operating and business metrics. 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 site at investors.godotty.net or in today's earnings release on our form 8K furnished with the SEC. Growth rates represent year-over-year comparisons unless otherwise noted. The matters we'll be discussing today include forward-looking statements, such as those related to future financial results and our strategies or objectives with respect to future operations. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our periodic SEC filings. Actual results may differ materially from those contained in forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, August 1st, 2024, and except to the extent required by law, we undertake no obligation to update these statements because of new information or future events. With that, I'm pleased to introduce Aman.
spk09: Good afternoon, and thank you for joining us today. At GoDaddy, our mission is to empower everyday entrepreneurs and make opportunity more inclusive for all. Our customers are a constant source of inspiration. One customer who has been with us for over 10 years runs a recruiting services company, wrote to us recently and said, in today's business environment, having partners that add real value is easier said than done. I'm happy to have GoDaddy on my extended business team. That is our goal, to be the extended business team for millions of micro businesses. Our strategy is relentlessly focused on creating customer value and transforming it to shareholder value through better conversion, attach, and retention. Our profitable growth model drives our North Star to maximize free cash flow over the long term. The GoDaddy team is executing against this plan to drive innovation and operational efficiency, leading to our strong Q2 results. This includes meaningful expansion of free cash flow, delivering 35% growth. Additionally, applications and commerce bookings grew 24%, and normalized EBITDA margin expanded more than 400 basis points. Our key growth and margin initiatives are driven by the innovation powered by the GoDaddy software platform. Our aspiration is to deliver seamlessly intuitive experiences that start to be magical, and this is fueled by GoDaddy's unique scale and data. GoDaddy Aero, our AI-powered experience, is one of the results of this aspiration. I am excited about Arrow's ability to reinvent multiple interactions with our customers, from domain search to insights on how they can improve their websites to growing their businesses. Arrow is now rolled out to all new and existing customers across our English-speaking markets, and it is poised for further expansion into over 90 countries in the coming months. Arrow has already transformed the experience for our new customers. In Q2, we passed an exciting milestone. Over 1 million new customers have discovered Arrow and over half a million of them actively engaged with the experience. With strong traction on discovery and engagement with new customers, the focus has moved to monetization with them. One example is the rollout of a paywall for a full website immediately after Arrow has built a coming soon page. This rollout followed a limited controlled experiment in which websites plus marketing conversions improved 12%. Early data also shows that Arrow leads to better product retention, which we will begin to understand more fully as these cohorts enter their renewal periods in the coming quarters. In parallel, we are building the engine to connect Arrow with our existing base of 21 million customers. Our approach here is a different go-to-market motion, but the goal is the same. Discovery, then engagement, and then monetization. As we shared at our investor day, monetization of our base with Aero represents one of the larger future opportunities for GoDaddy. We are also investing more in Gabi, our internal AI-powered guide assist bot, which can now communicate in over 60 languages. Now rolled out globally, Gabi is helping our guides work and serve customers more efficiently. While our investments in Aero and Gabi are about the future, 2024 growth continues to be driven by our key initiatives, pricing and bundling, seamless experience, and commerce. Pricing and bundling continued to drive growth led by productivity and was a significant contributor to the growth in applications and commerce bookings. We have started to apply our platform data, machine learning, and experimentation capabilities to the next set of product bundles as we look at opportunities for next year and beyond. Our seamless experience initiative overperformed versus our expectations as we removed friction in both purchase and renewal paths across multiple products. At our scale, small improvements in conversion and renewal rates through better user experience and robust technology provide measurable financial results. In our continued effort to take weight away from our customers, we expanded the use of AI-generated content. For example, in Managed WordPress, we have optimized templates and enhanced models to generate content for multiple pages, making it easier for our customers to build and publish websites. On Commerce, we are delivering on our 2024 target of driving higher margin subscription revenue with the recent launch of two new SaaS plans, Point of Sale Plus and Invoicing Plus. These plans offer premium features and discounted transaction fees to merchants. They drive value for our customers by offering tools that simplify their operations, including real-time inventory management, online ordering, and customizable branded templates for invoices and emails. Annualized GPV also continued to grow at a fast pace, with the primary driver again being conversion within our existing base of customers. In closing, we continue to deliver on our key initiatives, unlocking new avenues of growth and value creation for the long term. The GoDaddy team shares an unwavering determination to fearlessly push boundaries and prioritize, continuously experiment, meticulously track results, and aim for improvement each day. I am thrilled with the speed of execution as we continue striving to exceed customer expectations, propel profitable growth, and create enduring shareholder value. With that, here's Mark.
spk04: Thanks, Mahan. we are pleased to announce our strong Q2 results, which demonstrate our commitment to execution and continued progress towards our North Star of maximizing free cash flow over the long term. Our North Star continues to be bolstered by two key pillars, sustained double-digit revenue growth in our applications and commerce segment, increasing 15% in the second quarter, and further expansion of our normalized EBITDA margin to 29%. We continued to build on our strong track record here, delivering free cash flow of $323 million in the quarter. We also continued to implement our disciplined capital allocation strategy, focusing on share buybacks and reducing our fully diluted shares outstanding at the end of the quarter to $145 million. We remain laser-focused on providing value for our customers by delivering seamless experiences that are easy to use, driving better attached conversion and retention. At the same time, we continue to refine our operations to deliver profitable growth while investing in exciting initiatives such as Arrow, which will provide benefits for years to come. Moving to our financial results for the quarter, total revenue grew to $1.1 billion, up 7% on a reported and constant currency basis, exceeding the high end of our guided range for the quarter. ARPU grew 6% to $210 on a trailing 12-month basis. Our customer count declined slightly to $20.9 million. reflecting the expected headwinds from our proactive divestiture and migration efforts that also impacted revenue by approximately 100 basis points. Meanwhile, our customer retention rate is an impressive 85%, and over 50% of GoDaddy's customers have two or more products with us. For our high margin applications and commerce segment, we drove 24% growth in bookings and 15% growth in revenue to $406 million, delivering at the high end of our guided range. Growth in revenue and bookings was largely due to the continued strong performance of our growth initiatives across all major applications and commerce product offerings, particularly our productivity solutions. The segment EBITDA margin improved to 44%. In addition, ARR for applications and commerce grew 14% to $1.5 billion. Our core platform segment delivered bookings growth of 4% and revenue growth of 3% to $719 million. In line with our guided range, core platforms performance this quarter reflected continued strength in both primary domains up 7% and aftermarket up 10%, partially offset by hosting divestitures. Segment EBITDA margin for core platform grew to 31%. Lastly, ARR for our core platform segment was $2.3 billion, up 2%. One quick update on domains under management. This quarter, in connection with the work related to our brand migration efforts, we determined that domains under management were overstated at the end of Q4 2023 by approximately 1.4 million domains, primarily related to European TLDs. Following correction of this disclosure, coupled with the impact from the divestiture completed at the end of Q1, domains under management as of June 30th were approximately 82.1 million domains. While we understand this metric may be closely followed, this is not a key operating or financial metric, and it does not impact our forecast or progress towards our North Star. profitability, normalized EBITDA grew 25% to $332 million and delivered an expanded margin of 29%, up over 400 basis points and exceeding our guide. On bookings, we delivered 11% growth in the second quarter on a reported and constant currency basis, achieving $1.3 billion. As a reminder, bookings primarily represent the cash collected during the period. Subscription bookings grew over three points ahead of subscription revenue. Unlevered free cash flow for the quarter grew 30% to $369 million, and free cash flow grew 35% to $323 million. Capital expenditures were down 52% from data center divestitures. Through July 30th, we repurchased 4.1 million shares year-to-date, totaling $521 million. Cumulative shares repurchased under our current authorizations totaled $3.1 billion and 38.3 million shares. We have $915 million remaining under our current authorization. We have reduced gross shares outstanding since January 2022 by 23%, ahead of our three-year targeted reduction of 20%. we had 145 million fully diluted shares outstanding at the end of the quarter. As we have shared previously, we plan to be in the market every quarter, subject to market conditions and other factors with a minimum offset to share-based compensation dilution. On our balance sheet, we finished Q2 with $445 million in cash. and total liquidity of $1.4 billion. Net debt was $3.4 billion, representing net leverage of 2.4 times on a trailing 12-month basis. Shifting to our outlook, given our strong performance in the first half of the year, we are raising our full-year revenue guidance. We now expect the full year's revenue to be between $4.525 and $4.565 billion. representing growth of approximately 7% at the midpoint. We are targeting Q3 total revenue in the range of $1.13 to $1.15 billion. also representing growth of approximately 7% at the midpoint of our range. We are also raising our expectations for application and commerce to deliver mid-teens growth for Q3 and the full year. In our core platform segment, we expect revenue to deliver low single-digit growth in the third quarter and full year. With our proven track record of margin expansion, we are committed to maintaining our operational discipline to drive further leverage in our model. We expect normalized EBITDA margin for Q3 to be approximately 29%. Additionally, we remain on track to deliver a 31% normalized EBITDA margin in Q4 and approximately 29% for the full year. Given our nearly one-to-one normalized EBITDA to free cash flow conversion ratio, we are also raising our unlevered free cash flow target to $1.45 billion plus. and free cash flow target to $1.3 billion plus. We remain committed to our disciplined capital allocation approach, and we will continue to evaluate all opportunities for shareholder return according to our rigorous return-based framework. We have made impressive progress driving profitable growth in line with our North Star in the first half of 2024, and we remain dedicated to the path we laid out at our investor deck. executing on our strategy with a combination of durable top-line growth and expanded profitability. Our substantial cash generation, strong balance sheet, and disciplined capital allocation framework are important pillars of our investment thesis that create enduring value for our shareholders. With that, we will have Christy Masoner from our investor relations team open up the call for questions.
spk12: Thanks, Mark. As a reminder, if you'd 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 Josh Beck from Raymond James. Josh, please go ahead.
spk07: Thank you so much for taking the question. I wanted to start with ANC bookings rising from the low to mid-20s this quarter. Maybe help us think through and unpack the major drivers. You obviously cited bundling and productivity and how those can maybe change as we look ahead and then related to Anything that we need to be cognizant of when we think about comps for ANC bookings, you know, in the second half and into 25 as well? Go ahead, Mark.
spk09: I guess both of us want to take it. Hey, Josh, thanks for the question. Super excited about the momentum in ANC bookings, 24% growth. And we're bringing to the table the full power of the GoDaddy scale and data as part of a GoDaddy software platform. So whether it's pricing and bundling or our seamless experience improvements or commerce, obviously they're all helping ANC growth, and we're bringing these capabilities to a broader set of our product suites. So, you know, as we look into the future, you know, we continue to be very excited about being able to implement these capabilities across our entire product suite in both sort of scenarios with new customers and with existing customers as well. And I'll let Mark take some of the financial pieces.
spk04: Yeah, and then, hi, Josh. You know, just we continue to see momentum across all the product groups within ANC, and for the first half of the year, Q2 followed Q1 with, you know, double-digit growth in every area for bookings. You know, when you asked about comps, keep in mind Q2 compared to last year was an easier comp for us, so it did give us some benefit going forward as reported this quarter, but it doesn't change the overall momentum of the bundling that's going on.
spk07: Super helpful. And maybe just a quick follow-up on Arrow, really helpful metrics. I think you mentioned a million discovered, half a million engaged. If we maybe double-click on that engaged group, maybe what are some of the the early standouts from, you know, adoption point of view? And when you think about the curve and the quarters ahead, obviously it hasn't been out that long. You know, is this the right cadence to think about in terms of number of customers ramping with that suite?
spk09: Yeah, you know, the new customers engaging with Arrow is happening at a tremendously fast pace. I couldn't be more excited about it, I think. you know, crossing the million milestone, but more importantly, the engagement with the product, right? We've talked about the three-step process of discovery, engagement, then monetization. And for new customers, we're really seeing goodness there. As I talked about in the prepared remarks, we're starting to add paywalls and monetizing a little bit on the new customers. But we're going to learn a lot more about that when those customers come up for renewal, right? And you asked about the areas where we see the most engagement. You know, one of the areas where we're seeing the most engagement is actually with website. You know, a lot more domain customers sort of discovering the fact that GoDaddy has not just website capability but automated AI capabilities to just build a one-page website for them, which now they can actually customize a little bit too. So, you know, customers are really, I think, enjoying this. And our view is that that engagement is going to sort of lead to more monetization opportunities. options in the future. And then, you know, of course, we have the very large base of existing customers to bring you over to, and that's a slightly different go-to-market motion, but ultimately it's the same discovery engagement and then monetization. And sort of our energy is going to be more and more focused on the existing as the new does better and better. In terms of overall timeline, it actually mirrors very well, you know, if you go back and look at our commerce rollout first with new and then with existing. So we feel pretty good about it.
spk07: Great to hear. Thank you, Mark. Thank you. Thanks, Josh.
spk12: Our next question comes from the line of Trevor Young from Barclays. Trevor, please go ahead.
spk02: Great. Thanks. First one just on aftermarket solid double-digit growth there with it looks like about 20 points coming from ATV. Is the strength there becoming a bit more durable or broad-based in your view, maybe extending to the larger piece of that business where it's like some $10,000 domains? Or is it more about just a narrow few, you know, high-priced transactions skewing the trends upwards? And then what's baked into Guy for the back half of the year for aftermarket?
spk04: Yeah, thanks, Trevor. You know, we're seeing strength, I would say, overall in the volume related to aftermarket, and we've talked about that coming into the year, and obviously it's continued through Q2. We are seeing the return of larger transactions in the first half of the year. Hard to predict. You know, we do believe that macro, you know, impacted related to those larger transactions, but they were definitely stronger in the first half of this year versus what we saw last year. As far as the guide going forward, you know, we continue to call what we can see in front of us. You know, it's hard to predict those large transactions, so we don't plan on them being there in any way, shape, or form. And, you know, they come in kind of hard and fast and close pretty quickly when they do come in. So, again, we try to be prudent and just call based on the volume we're seeing at the lower end, and we continue to think that overall this platform will be a lower single-digit grow over time, although we may see volatility from quarter to quarter based on some of these larger transactions.
spk02: That's helpful. And just as a follow-up, on the free cash flow guide, it looks like raising the unlevered free cash flow for the full year, $150 million, and regular free cash flow, about $200 million. Can you distill the drivers of that change or rank order them? Is it the stronger flow through a top line or maybe stronger bookings or any one-time items to be mindful of? Yeah, I wouldn't say there's any one thing to call out.
spk04: It is continued strong bookings, continued normalized EBITDA, and interest as well, you know, because we repriced some of our debt. So that's on the free cash flow part of it. But it's a combination of just, you know, better momentum across the board and translating into our free cash flow and unlevered free cash flow. Great. Thank you, Mark.
spk12: Our next question comes from the line of Jan Lee from Evercore. Jan, please go ahead.
spk10: Great. Thanks a ton for taking the question, and congrats on a really nice quarter here. I want to circle back on the ANC bookings. Is that booking strength primarily coming from the productivity pricing, or is aero-driven conversion improvement a big part of that acceleration as well? And if you can talk a little bit about just the top of funnel that you're seeing going into ANC, just given the current macro backdrop.
spk09: Yeah, maybe we'll take a bit of that. Jen, thanks for the question. On ANC, you know, all the components of ANC, as Mark said, contributing to the growth. Of course, it's being led by productivity, as we stated in our remarks. But GPV continues to grow very well. Our website business continues to grow very well as well. With respect to Aero, Aero, even though we love the engagement and, you know, and the discovery for new customers, it's still very small in terms of a contributor component. on the monetization side. So you're not really seeing much of an error. And maybe I'll ask Mark to touch on that a bit more and come back to the last part of your question.
spk04: Yeah, and I think that's right. You know, we are entering the monetization, but it's really early stage. Didn't have a meaningful impact on Q2. Don't have enough data points to really build in anything related to our guide or forecast related to it. But, you know, the early signs are very positive, and we are starting to cross into seeing data around monetization today.
spk09: And just on the macro, Q2 continued to be pretty steady in terms of demand coming in the door. And obviously, we have the global footprint, so it's a little bit different by region. But broadly, we would say it was a steady quarter in terms of macro.
spk10: Got it. And if I may ask a follow-up on the margins. So, not that our margin beat this quarter, but you're maintaining the four-year guide. Is there some sort of timing in terms of expenses? um, like shifting to the back half or, um, you know, if, if you continue to see upside in margins, would you expect to kind of throw that through to the bottom line or any sort of reinvestment that's, um, that you're thinking as well?
spk04: Nothing to call out at this, at this point, we're on a good pace. We're continuing to expand our margins. Uh, as we said, we would, uh, there's nothing in particular we have to call out right now. Um, everything's on track and, and, you know, uh, you know, we are on track for the 31% exit rate that we talked about at the beginning of the year.
spk10: Thanks.
spk12: Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.
spk01: Hi. Thank you so much. I did a quick follow-up on Gabby. And when I noticed that you talked about Gabby as highlighting that you can serve customers more efficiently. How should we think about Gabby? Is it more of a cost opportunity, or is there a chance to turn customer service actually more into a revenue center as guides can drive better upsell and cross-sell?
spk09: Yeah, thanks, Elizabeth. Our core ethos around whether it's Gabby or all of our capabilities in care is that we always want to provide a superior experience at the same or lower cost. And in Gabby, we're super focused on making the guide slowly into a super guide. And whether it's the service side or support side or the sales side, Gabby is able to partner with the guide and allow them to sort of explore things with the customer. Otherwise, it may be difficult because Gabby has access to a lot more data, you know, given our scale. Of course, on the sales side, you know, Care continues to drive 9% of our bookings. You know, we get a lot of calls in. We've got 14 million contacts, 6,200 guides, and Gabby has access to all of that information to just make the guide better and better. So you'll see both. You know, you'll see improved customer experience, and you'll see, you know, more leverage on the cost.
spk01: Great. And then follow up on the ANC bookings. It sounds like momentum there can be pretty durable with, you know, multiple factors driving the growth. I'm hoping that you could share any finer points on, more specifically, the pricing and bundling strategy about how broadly it's been rolled out, whether from the product portfolio side or the customer base side, just to understand the durability of this growth driver. Is this a dynamic that you should roll out, you know, over the course of the year, or it could actually be a multi-year tail end?
spk09: Yeah, as we talked a little bit about in the investor day, Elizabeth, we see the pricing and bundling initiative as a multi-year initiative. initiative for us. So while productivity is leading the way this year and other products and bundles are a little bit behind it, we expect that over the next few years we'll be able to apply the same tools and capabilities across the GoDaddy suite. It's really about capturing all the data, all the customer insight into the GoDaddy software platform, being able to drive and bring the customer the sort of unique offering that works for them And as we do that more and more, we actually think it's going to become stronger over time. So, yes, we're looking forward to pricing and bundling and seamless experience, frankly, working together over multiple years.
spk04: And, you know, just keep in mind, too, it's for new and renewals. So as renewals come up, you know, you have the ability to sell in to the existing customer base, and that becomes a compounding factor. So more bundles, hit more renewals, keep on going. That's why we think it's going to be a multi-year journey.
spk09: Yeah, and I think, you know, the comps will play a little bit. You know, we're coming into some harder comps in the second half of the year. But overall, the way we look at the return from these tools is, you know, they're continuing to set the pace for the company, but overall bookings are pacing ahead by a point or two of revenue. And that, you know, that sets us up very clearly for the next year and the future as well.
spk01: Great. Thank you so much, and congrats on a strong quarter.
spk09: Thanks, Elizabeth.
spk12: Our next question comes from the line of Vikram Kisavola from Baird. Vik, please go ahead.
spk06: Hey, can you hear me? Yes. Hey, Vic. Okay, great. Hey, thanks. I just wanted to ask first on capital allocation. You know, Mark, going back to the investor day, you talked about kind of three main priorities in terms of use of cash across repurchases, debt paydowns, and acquisitions. I just wanted to clarify kind of where do repurchases currently rank within those uses of capital today and kind of how do you do that in terms of priority or most attractive uses of cash flow right now? And my second question, I wanted to put a finer point on the ANC booking scroll comments. You know, that number is accelerated now a few quarters in a row. You know, I realize you don't guide to the specific number on that, but as we look at the third quarter, directionally, I mean, should that continue to accelerate from the second quarter levels, or should we expect it to moderate? And if you could talk through some of the puts and takes there, that would be great. Thanks.
spk04: I'll start, I'm sure, a monolith on here. You know, capital allocation, the strategy remains the same. You know, we're going to look at it from quarter to quarter. you know, we've laid out our North Star and our North Star continues to be our ability to generate free cash flow and obviously look at that on a per share basis and continue to grow that at the CAGR we set out there. Now, everything we look at has to be set against that backdrop. You know, we still believe buying back our stock is a high ROI for us and we continue to look at that from quarter to quarter based on, you know, other factors that are going on in the market. So, So no change there, you know, active discussion quarter to quarter, looking at what's out there and looking at the different opportunities that can really drive that LTV we talked about at Investor Day. On the bookings and our pace there, now, just a couple factors. One, we expect for the year to bookings to outpace revenue by about one to two points, and And that's based on the momentum we're seeing in A&C and also some of the other areas. And we think that's going to set us up nicely for 2025. But, you know, we also will – get more difficult comps as we go up throughout the year. So I want to say the pace and the momentum are there. Whether the percentages move a little bit based on tougher comps, you know, we'll see as we go out throughout the year and into 2025. But the overall pacing is still strong, and we're really happy with our ability to continue to get to that second and third products within our customer base today. Okay, great. Thank you. Thanks, Rick.
spk12: Our next question comes to the line of Arjun Bhatia from William Blair. Arjun, please go ahead.
spk13: Hi, I'm Willow Miller. I'm for Arjun Bhatia. Thanks for taking our questions. So shifting gears a bit and focusing more on commerce, in your prepared remarks, you called out the new point of sales and invoicing plus SKUs offered discounted transaction fees to merchants. are you only offering discounted transaction fees here, or is there opportunity for volume-based advantage pricing in other areas to attract more and larger customers to GoDaddy payments?
spk09: Thanks, Willow. You know, as you'll probably remember, you know, we have the best value for money in terms of payments pricing out there, given the offering we're bringing to the market. What these new SaaS plans do is they start to engage our customers into a deeper market. set of capabilities. So, for example, with an invoicing plus plan, customers are able to build a more custom invoice and put a logo on it or, you know, be able to email that out in a very easy way. And that's us just expanding, you know, what this sort of tool set that our customers can use with GoDaddy in a very, very easy way. And on the pricing piece, you know, we've had pricing being an advantage for us since we came out with commerce and payments. And we continue to use that advantage, and we absolutely look at multiple avenues as we grow this business to continue to maintain that differentiator and create the value for the customer while also creating value for the company and the shareholder.
spk12: Great. Well, thanks for taking our questions.
spk09: Thank you.
spk12: Our next question comes from the line of Clark Jeffries from Piper Sandler. Clark, please go ahead.
spk05: Hello. Thank you for taking the question. First, a clarifying one. Aman, you said improved conversion by 12%. I wanted to put that into context. Is that 12% improved conversion as a measure of 100% of users in the funnel, or is that an improvement of 12% higher dollar value? If you could just clarify that point first.
spk09: Yeah, as I noted, Clark, that, you know, I wanted to provide a data point of a controlled experiment. So, you know, that was an experiment in the path where a customer that buys a domain gets a coming soon page, and we tried two or three different ways to provide a paywall to see which one engaged the customer more. And it was the conversion from that free coming soon page to a paid plan that increased by 12%. And that's typically on a unit basis. But the main point here is that, you know, by putting ourselves in the situation where customers are engaged with Arrow, we're opening up all these new possibilities where, you know, this was a website example, but as you're aware, Arrow today has nine cards that customers can engage with. And we're improving the way we engage customers across more and more of those capabilities that are just available to them when they buy a domain name. So as we get more of that engagement, you know, we're going to continue to share with you how we are sort of stepping into the monetization. And, you know, I wouldn't over-index on any one of those pieces. It's more how together all of those things lead to a completely different engaged customers, which we think, you know, in the long term is just very, very valuable to lifetime value.
spk05: Understood. And then just one follow-up. You mentioned the rollout to non-English-speaking countries. You know, What is the percent of the base that is English-speaking today? I mean, we have that international versus domestic breakout, but I'd imagine there is a sizable contribution there from English-speaking countries.
spk09: Yeah, I don't think we've disclosed, you know, English-speaking versus non, but, you know, our larger markets are English-speaking. We have, you know, businesses in over – we have customers in over 100 countries, so that is a sizable number of customers, and in many of those, countries, there's great opportunity because GoDaddy is still early and we're able to, you know, bring domains to customers there at our scale and with our capabilities. So, you know, we continue to be excited about what it is, what we're bringing to the market. In terms of our actual English markets, our biggest markets are UK, Canada, and Australia. So those are our bigger businesses. So, you know, maybe you can do a bit of math if that's what you're looking for.
spk00: Thank you.
spk09: Yep.
spk12: Our next question comes from the line of Egal Arounian from Citi. Egal, please go ahead.
spk14: Good afternoon, guys. Back to ANC looking through acceleration. We got this a lot last quarter in the translations of the top line guide in particular. You know, at this point, we're nine points ahead on the ANC bookings acceleration or ANC bookings relative to the revenue. I understand we have some tougher costs, but, you know, I should be thinking about how that translates to maybe why aren't we seeing it more And on the comps, have you guys disclosed what the comps are pre-4Q of 23? I may have missed it. If you did, that could help kind of help people paint the picture to the revenue translation.
spk04: I'll take that first half of Gollum. You know, just a reminder, you know, we have transaction revenue and subscription revenue. And within ANC, we have a mixture of both. And we saw good performance today this quarter in commerce, which is a transactional revenue, but we're also seeing good performance in the other areas, which are subscriptions. So the timing of the revenue related to the bookings acceleration can be anywhere from immediately within the quarter to over a period of time. and we'll start to contribute to revenue as we go out through further quarters. So we saw some contribution this quarter. We'll continue to see that as we get to the rest of this year, and obviously in 2025 we'll have momentum going in there. But remember, it's a combination of both, right? So it can hit in different periods depending on the nature of the bundle, the transaction, or the combination of the products they buy.
spk09: And just, Igor, On the bookings numbers for AMC, I believe you should have Q3 and Q4, but you can always take it offline.
spk14: Okay. And then on the bundling, so understanding productivity is the focus now, then there's more opportunities coming in the future. Maybe just a hit on what's next in the pipeline, if you can. I get that it's going to come over time, but We heard mostly about email and security. Any more details around some of the key bundles that you expect to roll out, I think would be really helpful. Thank you.
spk09: Yeah, you know, ultimately we want to go across the board, right? Like the approach is really about the customer and not about the product, right? We're trying to create this value for the customer and their whole relationship with us. So all the products are going to sort of see something over the next year or two. You know, not making any promises on it, but some of the products in ANC that we're very excited about is, for example, the websites business. You know, just a couple of days, completely unrelated to us, TechRadarPro named Aero as the number one AI company. website builder for micro-businesses. So, you know, we're definitely getting some momentum in that business, and with Aero, we think there's some great opportunity there. But that's not the only one. You know, our other products, many of them are at significant scale, and, you know, we lend themselves well to bundling in different ways.
spk04: Yeah, I think the advantage we have now with the consolidated technology stack is we have the ability to see what bundles really are attractive to our customers, and we're starting to analyze that data and that starts to give us a path forward. Arrow only helps that even further as we look at, you know, the behaviors and the engagement. It allows us to start to position those bundles as to what value we can give to the customers.
spk09: Yeah, and there is a little bit of an order of operations, Egal, where, you know, we have to hit certain renewal cycles to be able to see the customer behavior, right? So, you know, it's not the thing that we can just everything happens on. in one quarter, one day. There is a progression of this program working over the next two, three years, getting to the real value for our customers. Right.
spk03: Okay.
spk14: Thank you. Thank you. Thanks, Colin.
spk12: Our next question comes from the line of Alex Luesringer from UBS. Alex, please go ahead.
spk03: Hi. You got Chris on the line. Just maybe going back to the attach comments, it's been a couple quarters now that you've said that over 50% of customers have two-plus products. Just curious if you could put a finer point on existing customers versus new customers. Are new customers coming in, do they have a higher propensity to go to two, three, four-plus type of attach versus the existing base?
spk09: Yeah, you know, Chris, we're very excited about your offering, right? We're engaging customers with a lot more products right away. But the metric that Mark talks about is that's paid products. So, you know, what we'll see happen is as we engage customers across these products, you know, when they come through those renewal cycles, we expect to see sort of that number continue to grow. But broadly, our new customers adding more products has been a good trend for us.
spk04: And this has been something that's building over time. You know, I think the metric we gave out at At the end of the year, new customers attach at a rate 25% faster than they were, you know, three, four years ago. And that trend continues, right? Our customers are coming in with intent. They're engaging at different levels. And just to hit on the finer point that Aman said, we count that two-plus product when they pay, not when they engage. And, you know, that means it can come in at a renewal, it can come after a free trial. So it takes time, but they are definitely engaging at a higher level than we saw in the past.
spk03: Got it. Very helpful. And maybe just one follow-up on ANC incremental margins. It's happened a couple quarters where you're over 60%. It really seems like you guys are sticking to a very cost-controlled approach here. Any reason why this may be one-off here and not the right way to be thinking about it over the medium term?
spk04: And there's nothing to call out on a one-off basis. This is just, you know, the three things we had talked about that would drive our profitability going forward, you know, ANC growing, which is our higher margin business and being more of the pie over time will create a tailwind to our overall normalized EBITDA margin. As we start to, you know, tap into global talent pools, use Gabby, more that will create leverage within our P&L up and down. And then, you know, we continue our journey on operational simplification. We're trying to make sure we're fit for purpose going forward, that we're agile, and we continue to have that ability to not only invest in the business and invest in new technology, but have an efficient back office operation. So those three pillars still remain intact. And, you know, what we're seeing now is the ANC bookings and growth really becoming that tailwind that we had talked about coming into the year. Thanks, Mark.
spk12: Our next question comes from the line of Navid Khan from V. Riley. Navid, please go ahead.
spk11: Hi, Navid. You're muted.
spk08: Yeah, thanks. Can you hear me now? We can. So apologies if somebody already asked this. I jumped on a little late. But a question I have is on your 3Q guidance. specifically, you know, the EBITDA guide, why are you guiding to compression in margins, quarter and quarter, and also given that ANC continues to be the bigger piece of the business, and that's the higher margin business, just kind of unpack that for me, and then I have a follow-up.
spk04: Yeah, I think we're happy with our margin expansion through the year. We continue to look at opportunities and look at product mix and how the momentum is moving. We overperformed in Q2 on our margin. We believe that will continue into Q3 at the same levels, and obviously we talked about our Q4 exit rate will remain at the 31%, keeping us at 29% for the year. because our bookings are doing well, and obviously we talked about our raise and our guidance related to revenue, a lot of that percentage falls to the bottom line on an absolute dollar and allows us to feel good about raising our free cash flow and unlevered free cash flow guidance as well.
spk08: Got it. And then – Aman, on your comments about, you know, now having like nine cards in Arrow, I think we started with maybe five or six, if I remember correctly. Have you seen an improvement in conversion every time you add a card and then optimize the experience around that? Just give us some color around these launches and what the effect is on conversions and attach rates.
spk09: Now they're picking on a really interesting thing where as we introduce more, we've got to be very careful to keep the experience simple for our customers. So actually there are a number of experiments that continue to evolve what the cars look like to get higher engagement with the customers. You know, there's all sorts of different things from cars disappearing to changing the order to graying out to saying it's done to, you know, like the teams are trying lots and lots of different combinations and, Frankly, there is more we want to include in Arrow, and only when we make this simpler can we add the new things. So, yes, that's a constant area of focus for us, but it's also the beauty of our scale, right? We have a breadth of products that we can bring to our customers. That's a lot of value we can pack in with a humble domain name, and if we can get the discovery and the engagement, we know we can get the monetization. And at our scale, we're doing lots and lots of experiments. We have teams that are well-trained in understanding how to do this work well. And, you know, we're pretty excited about it. That's one of the reasons, as Mark likes to say, that, you know, Aero might be small today and, you know, it's not in our guide, but we're very excited about what it represents in the future for us.
spk08: So maybe just to follow up on that, if I asked you where are you on that journey with Aero, you know, if it's a nine-inning game, How are you going to face yourself?
spk09: We are in an early inning.
spk04: I was going to say we're in the first pitch, right? So there's a lot to go and a lot of exciting things going on there. Excellent. Thank you, guys.
spk12: Thank you. That concludes our Q&A. I'll turn the call back to Aman for closing remarks.
spk09: Thank you, Christy. Thank you all for joining. And a quick shout-out to all GoDaddy employees for Aero being named the number one AIF website builder just recently. And I think it sets a great tone for us at the company. It's always good to see somebody recognize our work. So thank you very much. And we'll see you next quarter.
Disclaimer

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.

-

-