GoDaddy Inc.

Welcome to GoDaddy's first quarter 2025 earnings call. Thank you for joining us. I'm Christy Maisner, VP of Investor Relations, and with me today are Arman 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 on our investor relations site at investors.covid.net or in today's earnings release on our form 8K furnished at 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, May 1st, 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 happy to introduce him on.

Good afternoon and thank you all for joining us today. At GoDaddy, our mission is to empower entrepreneurs and make opportunity more inclusive for all. In an environment marked by global economic uncertainty with small businesses navigating more complexity, We continue to improve and expand the critical tools necessary for them to run their businesses, backed by care that helps make them successful. The inherent value of our products, discipline, innovation, and execution of our strategy is the backbone of our business and our strong Q1 results. In Q1, we drove 8% bookings growth and we expanded normalized EBITDA margin to 31%, propelling free cash flow to 26% growth, supporting our North Star of maximizing free cash flow over the long term. These results and the durability of our model reinforce our confidence in our full year guide and investor day targets. Our strategy is steadfastly focused on attracting high intent customers, creating customer value and transforming that value into long term shareholder value. The energy within the company is palpable with the continued acceleration and velocity of execution as we drive towards these goals. As always, I will touch on our key initiatives, starting with pricing and bundling. Focused on our present solutions and going across segments, this 2025 initiative delivered ahead of our expectations in Q1. Pricing and bundling is a multi-year initiative, and we continue to do further testing with customer cohorts that span across our ANC and core platform segments, and we are encouraged by the results so far. Our enhanced platform capabilities quickly integrate third-party products into our bundles, resulting in expanded test options for this initiative. As we had shared, we have continued to shift from the product lens to the customer cohort lens for pricing and bundling, maintaining the dual goal of growing bookings and minimizing churn. Our seamless experience initiative continued to deliver improved customer conversion product engagement, and renewals. This initiative is powered by our most sophisticated experimentation pipeline and is focused on removing friction and creating an intuitive experience, saving customers time better spent on growing their businesses. The results of our efforts across many experiences and products are found in the increase in average order size and improvement in renewal rate, driving customer retention and lifetime value on the GoDaddy platform. Commerce growth remained strong this quarter, and annualized gross payments volume increased at a healthy pace, with the primary driver continuing to be conversion within our existing base of customers. Our recently launched high-margin offerings, such as GoDaddy Capital, our merchant cash advance program, and same-day payouts, while still small, are gaining traction. These valuable additions, priced competitively, are important to our customers and strengthen our one-stop shop commerce offering. last but certainly not least godaddy aero continues to permeate across our products and customer experiences and aero's demonstrated results are showing up as better attached term length and renewals data from the 13-month aero customer cohorts shows that we are driving changes in customer behavior with aero resulting in more customers purchasing second and third products websites plus marketing continues to be the biggest beneficiary and aero customers are getting better results from their websites too leading to a fantastic win-win while the aero experience is driving financial results and aero plus our directly monetized experience is progressing with new improvements our focus continues to be to engage customers across the broader set of capabilities that aero provides This builds on the success we are already seeing with Aero and represents a large long-term opportunity for our customers and for GoDaddy. And we are still at an early stage. Aero has already shown its powers to automate and use generative AI to provide magical experiences for customers. And with agentic AI, we expect to take this even further. Agents powered by our personalized AI platform will take recommendations to our customers to the next level, doing the work for them across multiple jobs to be done. In closing, I want to underscore that GoDaddy has built a durable business, one that has consistently performed across economic cycles and technological shifts. We are driving results and remain focused on what we can control, accelerating the pace of innovation in a disciplined manner. The result of our model is profitable growth, and the maturity of our operations allows us to deliver results in the current period as we set up the next, positioning the business for long-term success. With that, here's Mark.

Thanks, Aman. I want to take a moment to acknowledge that the broader macroeconomic environment, including tariffs, is top of mind. To be clear, for GoDaddy, our direct exposure to tariffs is not material. For our customers, their grit and determination alongside our integrated one-stop shop solutions delivering unmatched value remains mission critical to their needs, especially as they navigate a complex landscape. Our tools empower them to compete efficiently and effectively. Our durable model and our customers' resilience gives us confidence in our full-year 2025 guidance and our Investor Day targets, including our North Star. In Q1, we delivered ANC revenue growth of 17%, expanded normalized EBITDA margins over 200 basis points, and grew free cash flow to $411 million. We also have fully utilized the remaining portion of our 2022 $4 billion authorization to retire over 25% of our fully diluted shares outstanding since inception of the program. Total revenue was at the top end of our guided range, growing 8% on a reported and constant currency basis to $1.2 billion. Annual recurring revenue grew 7% to $4.1 billion. International revenue grew 10%. surpassing our prior expectations on strong aftermarket sales in international regions. For our high-margin ANC segment, we drove 17% growth in revenue to $446 million and 14% growth in bookings on the ongoing strong adoption of our subscription solutions. Segment EBITDA margin expanded nearly 200 basis points to 44%. Our core platform segment delivered revenue growth of 3% to $748 million. Core platforms performance this quarter reflected strength in primary domains, up on pricing and units, as well as strength in aftermarket. Core platform bookings grew 5% and segment EBITDA margin expanded by over 150 basis points to 31%. Moving to profitability, normalized EBITDA grew 16% to $364 million, delivering an expanded margin of 31%, up over 200 basis points and exceeding our guide for the quarter. The expansion was driven by favorable product mix and sustained operational discipline from infrastructure simplification and global talent recruitment. alongside increased marketing for our innovative Arrow experience. On bookings, we delivered $1.4 billion, representing 8% growth on a reported basis and 9% growth on a constant currency basis. As a reminder, bookings primarily represents the cash collected during the period. Free cash flow grew an impressive 26% to $411 million. Our efforts are delivering the results we set out to achieve. bringing in higher lifetime value customers who will drive stronger, more profitable growth over time. Our stronger, more resilient cohorts are already translating into improvements with retention above 85% for customers on our GoDaddy platform. we are driving a higher average order size, and our ARPU grew 9% to $225 on a trailing 12-month basis, demonstrating the sustainability of our ongoing efforts. Since year-end, our customer count has remained stable at 20.5 million as we lapped the impact of the last divestiture, and looking ahead, we anticipate returning to customer growth later this year. We remain confident that our strategic focus here, centered on growing higher lifetime value customers, will drive compounding growth in free cash flow over the long term. Turning to the balance sheet, we exited the quarter with $719 million in cash and total liquidity of $1.7 billion as we utilized the remaining $767 million under the 2022 share repurchase authorization. Net debt was $3.1 billion, representing a net leverage of 1.9 times on a trailing 12-month basis. Our goal over the coming quarters is to continue to strengthen our already strong balance sheet, and we are reducing our target net leverage ratio from the previous guidance of 2 to 4 times to under 3 times moving forward, aligned to how we've been operating. In April, we completed our $4 billion 2022 repurchase authorization program. repurchasing a cumulative 43.7 million shares at an average price of $91, representing a gross share reduction of over 25% in our fully diluted shares outstanding since the inception of the program. Our commitment to a disciplined capital allocation framework is unchanged, and share buybacks remain a key mechanism to return value to our shareholders. With that, I am pleased to announce that our board has approved the 2025 repurchase authorization of up to $3 billion through 2027. This new authorization reflects our enduring confidence in the strength of our underlying business, the durability of our cash flows, and our belief that investing in our shares currently represents an attractive return opportunity for our capital. Shifting to our outlook, given the strong start to our year and the durability of our model, we are reaffirming our full-year 2025 outlook provided in February and 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. For Q2, we are targeting total revenue of $1.195 to $1.215 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. For Q2, we are projecting a normalized EBITDA margin of about 31%, and we are reaffirming our full-year normalized EBITDA margin expansion target of 100 basis points. We expect normalized EBITDA to maintain an approximate one-to-one conversion to free cash flow. We are also reaffirming our full-year free cash flow target of at least $1.5 billion, representing growth of over 11%. our disciplined capital allocation approach remains unchanged, and we plan to evaluate all opportunities according to our rigorous and returns-based framework. I am pleased with our Q1 accomplishments and strong financial results, a great start to a year that has already underscored the importance of GoDaddy's durable model. The strength of GoDaddy's foundation is evident in our long history of strong customer retention and the growing quality and stability of our customer cohorts, and the competitive advantages we've developed over time as a partner and champion for micro-businesses. We are executing with discipline and purpose as we drive towards our North Star, maximizing free cash flow over the long term. we are making steady progress towards our investor day targets of achieving $4.5 billion plus in cumulative free cash flow generation, underpinned by 6% to 8% annual revenue growth and expansion of our normalized EBITDA margin to 33% by 2026. With that, I will hand the call over to GoDaddy's Vice President and Head of IOR, Christy Masoner.