GoDaddy Inc.

Welcome to GoDaddy's fourth quarter and full year 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 the 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.go.edu.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 statement that we make on this call are based on assumptions as of today, February 13, 2025, 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.

Good afternoon and thank you all for joining us today. At GoDaddy, our mission is to empower everyday entrepreneurs and make opportunity more inclusive for all. Our strategy is relentlessly focused on creating customer value and transforming it to shareholder value through better conversion, attach, and retention. This is the driving force behind our profitable growth model, propelling us towards our North Star of maximizing free cash flow over the long term. Our team demonstrated strong execution in 2024, with annual results that are tracking ahead of our investor day targets. We drove top-line bookings growth of over 9% and expanded our bottom-line normalized EBITDA margin to 31% for the full year. Our impressive 21% growth in applications and commerce bookings, alongside our nearly 400 basis points margin improvement, were strong contributors to a 25% increase in free cash flow for the year. Equally exciting, GoDaddy crossed a significant milestone this year, delivering our first $5 billion of annual bookings. On our key initiatives from Investor Day, we continue to make great progress in pricing and bundling, seamless experience, commerce, cost optimization, and strong traction in GoDaddy Aero. I am excited to share these updates with you today. Pricing and bundling delivered impactful results throughout 2024 that were higher than our expectations. This bolstered our 21% applications and commerce bookings growth from focused efforts in productivity. We have shared that this is a multi-year journey and our confidence in this initiative continues to grow. In 2025, we are targeting a meaningful contribution to growth from this initiative. We will focus our 2025 efforts on our presence products and specific customer populations within our hosting business. This continues to spread this initiative across applications and commerce and core platform. In parallel, we are working on the next evolution of this initiative for 2026 and beyond. Our seamless experience initiative also exceeded expectations in 2024, improving conversion, renewal rates, and engagement across products. In Q4, we launched a redesigned managed WordPress platform with two times faster performance and enhanced security. Additionally, we started testing Aero Site Designer for WordPress, an AI-powered web design tool. This initiative will continue in 2025 with similar goals to reduce friction, enhance performance, and improve customer experience. Our aim is to help customers save time and focus on what they love, running their businesses and engaging with their own customers. Our commerce initiative is performing well and annualized gross payment volume is growing at a fast pace. While our focus in 2024 was on profitable growth through the creation and merchandising of our commerce subscription products, we also drove growth in our transactional payments business with annualized gross payment volume increasing 55% to $2.6 billion. In addition, we launched new innovations such as GoDaddy Capital, a merchant cash advance program that helps our customers more easily access working capital, manage cash flow, and invest back in their business. As we look to 2025, our teams are focused on delivering more new and innovative capabilities for our commerce customers. such as expanded payments processing options, as well as same day payouts, which give customers rapid access to their funds. On our cost optimization initiative, we drove measurable impact across the organization from continued simplification of our integrated platform and global talent recruitment across multiple functions to better technology and tooling. In 2025, we plan to maintain our disciplined approach across our cost structure and drive opportunities with technology and AI to provide better experience and service to our customers at lower costs. Last but not least, GoDaddy Aero continues to transform the customer experience and reposition where our customers start with us. Aero is quickly gaining traction and we view it as a key driver of future growth and customer lifetime value. Throughout 2024, Aero has shown promising results with discovery and engagement. We have also made great progress in expanding Aero across more customer entry points and plans. Website building remains the biggest beneficiary of Aero engagement, and Aero continues its momentum in becoming the largest funnel for websites plus marketing, with 50% of paid subscriptions originating with the Aero experience. We are excited to enter the monetization phase for Aero earlier than planned across two pathways, Aero and Aero+. Aero has resulted in a combination of increased customer spend and better product attach, and with the first Aero cohort reaching the 13-month mark, we are seeing green shoots in terms of improved renewal rates for both domains and websites plus marketing. AeroPlus takes the Aero experience to the next level with advanced logos, AI-powered marketing tools, and enhanced site building capabilities. We began testing AeroPlus as an independent SKU in the fourth quarter. We also launched a front of site experience in connection with our Super Bowl ad that highlights Aero and all of its capabilities. Our ad accomplished what we set out to do, bring broad awareness to the full breadth of Aero's capabilities to a massive audience. We want the world to know about Aero and the Super Bowl is one of the largest stages. Our Aero landing page jumped dozens of spots to become a top six page on our website on Sunday, telling us that customers were looking for Aero. This also kicked off our 2025 marketing campaign, which will continue to highlight Aero's capabilities to take the guesswork out of building a successful online venture and showcase the unstoppable confidence Aero inspires in small businesses. In 2024, Aero demonstrated the power of our integrative platform, the value of automation, and the abilities generative AI can bring to our customers. As we look forward into 2025, Aero will take more leaps forward with personalized inputs for each customer that drives a new level of AI-driven personalization. The first test using this technology on aero domain search beat the most recent generative AI-based winning model, opening a new vein of improvement that our teams can pursue. We will also see the introduction of agentic AI across our platform and within the Aero experience, creating simplification for our customers and new engagement services that lead to monetization. With these and many other improvements on our roadmap, I'm excited by the innovation at the company and the focus on creating value for customers. In closing, I want to highlight that 2024 was a year of exceptional execution by the GoDaddy team. A year ago, we shared clear goals and strategic priorities at our investor day. And I'm proud to say that our team has driven great performance across the board, growing bookings over 9%, revenue at 8%, almost 400 basis points of normalized EBITDA margin expansion to 31%, and $1.4 billion in free cash flow. Our strategy is steadfastly focused on the entrepreneur's wheel across identity, presence, and commerce, and it is working. The relentless focus of our operations continues to be to accelerate the pace of execution to create customer value and successfully transform it to long-term shareholder value. With that, here's Mark.

Thanks, Aman. Throughout the last few years, we've focused on creating significant value for our customers by integrating our platform to deliver seamless technology and provide one-stop shop solutions that drive conversion, attach, and retention. Our strong financial results are a testament to the continued disciplined execution of our strategy as we drive towards our North Star. In the fourth quarter, we supported this goal through our delivery of 8% revenue growth and normalized EBITDA margin expansion to 32%. Beginning with Q4 results, total revenue grew on a reported and constant currency basis to $1.2 billion, exceeding the high end of our guided range. Consolidated annual recurring revenue grew 8% to $4 billion. For our high-margin applications and commerce segment, we drove 17% growth in revenue to $441 million on continued strong performance from our key growth initiatives. ANC bookings grew 17% on the strength across all products within this segment, including our proprietary websites with marketing, managed WordPress, and commerce, as well as our productivity solutions. Segment EBITDA margin also improved to 47%. Our core platform segment delivered revenue growth of 4% to $751 million. Driven by strength in domains from pricing and units, this growth was slightly tempered by our proactive strategic initiatives around platform integration that included divestitures, migrations, and product end-of-life efforts in our hosting business. Core platform bookings grew 4% and segment EBITDA margin expanded to 34%. We grew normalized EBITDA ahead of expectations, increasing 19% in the fourth quarter to $385 million and delivered an expanded margin of 32%, up nearly 300 basis points. Favorable product mix and continued operational discipline were the main drivers of expansion, while we simultaneously increased marketing expense in support of the broader launch of our innovative Arrow experience. On cash, unlevered free cash flow for the quarter grew 9% to $379 million, and free cash flow grew 12% to $342 million. This is supported by the 1.2 billion of bookings in the fourth quarter, representing 9% growth on both a reported and constant currency basis. Moving on to our annual financial results, we delivered $4.6 billion in revenue, representing growth of 8% on a reported and constant currency basis. ANC revenue grew 16% to $1.7 billion, and core platform revenue grew 3% to $2.9 billion. Bookings rose 9% with a slight currency headwind. Full-year normalized EBITDA grew 23% to $1.4 billion, representing a 31% margin, up almost 400 basis points over the prior year. Since 2020, we have driven cumulative expansion in normalized EBITDA margin of nearly 900 basis points, an impressive feat that we plan to continue building on. We also continue to demonstrate normalized EBITDA to cash conversion of approximately 1 to 1. Unlevered free cash flow for the year grew 20% to $1.5 billion, exceeding our guide for the year. And free cash flow grew an impressive 25% to $1.4 billion, also exceeding our guide. Over the last few years, we have pivoted our go-to-market efforts to attract high-valued customers and build profitable cohorts through seamless technology and enhanced experiences. By year end, nearly all customers are now on our integrated platform, which boasts an impressive 85% plus retention rate, despite our overall company retention rate dipping slightly to 84%. This focus on quality over quantity has increased our model's resilience, profitability, and cash flow. By eliminating deep discounts, completing targeted divestitures, and migrating certain offerings, our customer base declined to 20.5 million. That said, these efforts are working. Our newer cohorts are delivering exactly as intended with higher attach and conversion. Average order size, a leading indicator, is 16% higher, while ARPU is also up 8% to $220. Additionally, the percentage of customers purchasing 2-plus products has trended upwards. and over 50% of our total customers subscribe to multiple products with us. This highlights successful efforts to boost cross-selling and bundling on our integrated platform, reinforcing our strong profitability and cash flow generation opportunities for years to come. Moving forward, we remain confident in our trajectory and anticipate a return to customer growth in 2025, underpinned by our enhanced value proposition and strategic focus on high lifetime value customers. Turning to the balance sheet, we exited the year with $1.1 billion in cash and total liquidity of $2.1 billion. Net debt was $2.8 billion, representing a net leverage of 1.7 times on a trailing 12-month basis. Last year, we bought back 5.2 million shares totaling $668 million and an average purchase price per share of about $129. Overall, we drove a 23% reduction in gross shares outstanding since January 2022, three points ahead of our three-year targeted reduction of 20%. And at the quarter end, 145 million fully diluted shares remained outstanding. Shifting to our outlook for Q1 2025, we are targeting total revenue of $1.175 to $1.195 billion, representing 7% growth at the midpoint of the range. Within that, we expect ANC revenue growth of mid-teens and core platform growth of low single digits. We anticipate elevated spending for marketing, focused on our broader Arrow launch, as well as typical seasonal expenses in the first quarter. We project a normalized EBITDA margin of about 30%, an expansion of about 200 basis points over last year. For the full year, we expect total revenue to be within a range of $4.86 to $4.94 billion, representing growth of 7% at the midpoint of the range. We expect revenue growth in the U.S. to outpace international growth by approximately 200 basis points, primarily on currency headwinds that are expected to be more prominent in the first half of the year. In ANC, we expect revenue growth of mid-teens. And in core platform, we expect revenue growth of low single digits. To be clear, as Aman said, we are excited about the Arrow experience and the longer-term accelerant it represents for our business. In the near term, including 2025, the financial benefits are expected to be more modest as monetization begins to take hold in the form of bookings before being recognized as revenue in later periods. Looking back on the incredible progress of our ANC business, we take immense pride in its rapid growth, rising from 30% of our overall revenue just three years ago to an expected nearly 40% by year's end. This achievement reflects our relentless focus on innovation, execution, and customer impact. As we move forward, we remain committed to driving meaningful, profitable growth, and we have an exciting road ahead, and we are just getting started. As our record of accomplishment demonstrates, we remain dedicated to maintaining our operational discipline and looking for opportunities to gain further leverage. Looking ahead, we expect to drive this leverage through continued infrastructure simplification and global talent recruitment. while also making long-term strategic investments in product innovation and marketing. In 2025, we expect normalized EBITDA margin expansion of approximately 100 basis points, and we remain on track to deliver our investor day target of 33% by 2026. For the full year of 2025, we are targeting free cash flow of at least $1.5 billion, representing growth of over 11%. We expect capital expenditures of $30 million, cash interest payments of $150 million, and $30 million in cash taxes, primarily to foreign jurisdictions. With that, our disciplined capital allocation approach remains unchanged, and we plan to evaluate all opportunities for shareholder return according to our rigorous and returns-based framework. On our buyback program, we are committed to, at a minimum, covering dilution from share-based compensation over the year. We are pleased with our strong 2024 performance and our progress towards our investor day target of $4.5 billion plus in cumulative free cash flow generation, underpinned by 6% to 8% annual revenue growth, an expansion of normalized EBITDA margin to 33% by 2026. Before we go to Q&A, I want to emphasize that our path ahead is clear, and we remain dedicated to executing our strategy to deliver durable top-line growth alongside expanded profitability. Balancing the two drives us towards our North Star of maximizing free cash flow. With that, I'll hand it over to our Vice President and Head of Investor Relations, Christy Masoner, to open up the call for your questions.