GoDaddy Inc.

Welcome to GoDaddy's second quarter 2025 earnings call. Thank you for joining us. I'm Christy Masoner, VP of Investor Relations, and with me today are Iman Bhutani, Chief Executive Officer, and Mark McCaffrey, Chief Financial Officer. Following prepared remarks, we will 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 .ed.net or in today's earnings release on our Form 8K furnished with the SEC. Growth rates represents -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 7, 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 Aman.

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. We draw inspiration from the ingenuity of our customers, who are the people building businesses, chasing dreams, and positively impacting their communities. As our Small Business Survey consistently shows, they are a resilient group and remain optimistic about their own businesses, even when navigating increased complexity. That's why we are committed to delivering the critical technology they need, combined with the human guidance that is empathetic, accessible, and grounded in their success. It is this combination that helps our customers thrive and grow with confidence. In the second quarter, our discipline execution delivered strong results, reflecting the power of our strategy of attracting and retaining high-intent customers who generate high lifetime value for GoDaddy. ANC bookings grew 12% against the toughest comparison for the year, and normalized EBITDA margin expanded nearly 200 basis points, reflecting the operating leverage in our model. We made strong progress towards GoDaddy's financial North Star of maximizing free cash flow with growth of 21%. Reflecting that momentum, we are raising our full year 2025 free cash flow guidance to approximately $1.6 billion. As a leader in bringing AI to micro businesses, we are energized by the transformative potential that agentic AI is unlocking for Aero and our customers. This is more than an evolution. It is a leap forward. This quarter, we began testing a new conversational experience that lays the foundation for something truly groundbreaking. An agent that can intelligently complete complex multi-step tasks for our customers, freeing them to focus on what matters most, building their dreams. Imagine a world where entrepreneurs can ask Aero anything across the full spectrum of our offering and receive instant contextual support seamlessly connected to our expert guides when they need a human touch. Brought to the customer experience as Ask Aero, its goal is to be a fully guided and proactive digital experience powered by agentic AI and elevated by empathetic care. The short video you saw at the start of this call offers just a glimpse into the future we are building for our customers. Behind the scenes, our operations are undergoing a fundamental shift powered by AI. Across the company, employees are embracing AI and agentic tools to accelerate velocity of execution. In one recent example, two interns leverage our internal agentic platform to build an agent that autonomously diagnoses anomalies in experiments, reducing a process that once took days to just minutes. From engineering to accounting, AI and agentic AI is reshaping how work gets done by transforming roles, unlocking efficiency, and enabling our teams to focus on higher impact outcomes. We can't wait to bring all of this to life for you as well. We look forward to sharing a deeper look at Aero's agentic capabilities at our investor dinner later this year. What we are building is exciting and we are off to a great start. As always, I also want to share a bit more about our growth initiatives, starting with pricing and bundling. With half the year behind us, we feel confident that this initiative is on track and delivering across both ANC and core platform for 2025. At the same time, we are actively executing against our 2026 roadmap, testing and scaling new offerings that represent the next phase of this multi-year journey. These new bundles are based on new partnership capabilities and the early results have been promising. Pricing and bundling is starting to benefit from our increased code writing velocity using AI. As an example, we recently concluded a test integrating a new partner product into GoDaddy's technology stack over a matter of weeks rather than months. Remarkably, nearly 100% of the code was generated by AI and guided by a senior engineer. This was work that would typically have required a small team for a few months. While the exploration of AI driven coding is ongoing across many use cases, this example demonstrates the transformative potential of AI driven coding in pricing and bundling. Scaling this type of result across our teams would create a step function change in velocity, enabling us to test new bundles at a pace many times faster than today. Our next major initiative is Seamless Experience, an ongoing large scale experimentation machine designed to enhance the entire customer journey from landing page and initial search all the way through to purchase and renewal. It is focused on improving discovery and reducing friction, saving our customers time and effort. Through this initiative, we boosted conversion rates, strengthened, attached, and drove better renewal performance, outcomes that our scale translate into meaningful financial impact now and in the future. The bookings generated from Seamless Experience have scaled in an impressive manner, and this initiative has an equally strong roadmap as pricing and bundling, and its impact and contribution is becoming increasingly comparable. Turning to our commerce initiative, we surpassed a significant milestone, reaching more than $3 billion in annualized gross payments volume on continued strong conversion of our existing base of customers, a clear signal that our strategy is resonating. Equally exciting, our focus on delivering powerful high value tools is gaining traction. Our newly launched Rate Saver, a credit card surcharging feature that can reduce effective rates from merchants by more than 50%, is demonstrating promising early momentum with attach rates climbing. Last but never least, Aero discovery and engagement continues to grow, and we expect it to increasingly shape and monetize our future customer cohorts, and our strongest cohorts are ahead of us. Notably, Aero cohorts consistently outperform non-Aero cohorts across key metrics, including average order size, multi-product attach rates, and renewals, serving as a catalyst for the growth in higher lifetime value customers. These gains are compounding, creating long-term leverage in our model. We are deeply focused on Aero's continued evolution into a true differentiator that accelerates customer success and drives sustained value across the entire GoDaddy ecosystem. In closing, we are proud of the progress we made in the second quarter as we push our strategy forward, making meaningful progress towards our three-year targets outlined at our Investor Day in 2024. Our results reflect the impact of disciplined execution and the growing traction behind our priorities of expanding high-intent customers, capturing more wallet share, and driving greater lifetime value. As we enter the second half, our teams are focused, our path forward is clear, and our business is well positioned to accelerate the pace of innovation that delivers long-term value to our customers and shareholders. With that, here's Mark.

Thanks, Eman. Good afternoon, everyone, and thank you for joining us. Q2 was another strong quarter for GoDaddy, underscoring the resilience of our customers and the mission-critical solutions that differentiate us in the market. We delivered ANC revenue growth of 14%, expanded normalized EBITDA margins to 31%, and we grew free cash flow to $392 million. Our consistent performance reinforces the strength of our strategy and the discipline of our execution as we progress toward our North Star of maximizing free cash flow over the long term. Total revenue grew 8% to $1.2 billion on both a reported and constant currency basis, surpassing the high end of our guided range. Annual recurring revenue grew 9% to $4.2 billion, and international revenue grew 11%. For our high margin ANC segment, we drove 14% growth in revenue to $464 million, in line with our guided range. ANC is now approaching an annualized run rate of approximately $2 billion, nearly doubling over the past four years on the ongoing adoption of our subscription solutions. ANC revenue now accounts for 38% of total revenue, which is an all-time high, up from 36% at the same time last year. Segment EBITDA margin expanded nearly 100 basis points to 44%. Our core platform segment delivered revenue growth of 5% to $754 million, exceeding our guide. These results were driven by growth in primary domains of 7% of both units and pricing and bundling initiatives, alongside continued momentum in aftermarket, which also grew 7%. Segment EBITDA margin expanded by over 200 basis points to 33%. Moving to profitability, normalized EBITDA grew 15% to $382 million, delivering an expanded margin of 31%, up nearly 200 basis points and in line with our guide for the quarter. The expansion was driven by sustained operational discipline, with leverage gains reflected across our P&L. Total bookings grew 7% on a reported and constant currency basis to $1.3 billion, against the toughest compare of the year. Within that, ANC bookings grew 12% and core platform bookings grew 3%. As a reminder, bookings primarily represents cash collected during the period. Importantly, free cash flow grew an impressive 21% to $392 million, reinforcing the strengthening of our customer cohorts and the increasing conversion of normalized EBITDA to free cash flow at a ratio that is now greater than -to-one. Our -to-market strategy is focused on attracting high-intent customers who adopt multiple products and generate high lifetime value. Over the past year, cohorts that spend over $500 annually grew meaningfully, and that momentum carried through into Q2. This group now represents nearly 9% of our total base, and Arrow is playing a pivotal role in its evolution by intelligently guiding their journey. These customers are expanding average order size and fueling GoDaddy's impressive total ARPU growth up 10% to $230. What's more, this cohort demonstrates near-perfect retention. The combination of rising ARPU and exceptional retention clearly illustrates the durable pathway we build toward a growing base of sticky, higher lifetime value customers. On total customers, we have largely moved beyond the impacts of eliminating deep discounts and divestitures. That said, we continue to see some residual pressure from migrations as they move through their initial renewal cycles. Excluding this remaining headwind, customer count has grown in each of the last two months. As these pressures subside and we benefit from strong conversion of higher-intent cohorts, we expect a return to customer growth later this year. This momentum underscores the effectiveness of our strategy and the long-term value creation embedded in our integrated platform. On the balance sheet, we exited the quarter with $1.1 billion in cash and total liquidity of $2.1 billion. Net debt was $2.8 billion, representing a net leverage of 1.6 times on a trailing 12-month basis. -to-date, through August 6th, we have repurchased approximately $900 million of our outstanding shares. Our commitment to a disciplined capital allocation framework is unchanged, and share buybacks remain a key mechanism to return value to our shareholders. As of the end of the quarter, our fully diluted shares outstanding was $142 million. Looking ahead, I am pleased to share that given the strength of our performance -to-date, our increasing profitability to cash flow conversion, and the proven durability of our business model, we are raising our full-year free cash flow target to approximately $1.6 billion, representing growth of over 18%. Additionally, we are raising our full-year 2025 revenue outlook that we provided in February. For the full year, we now expect total revenue to be in the range of $4.89 to $4.94 billion, representing growth of 7% at the midpoint. For the full year, we expect FX Neutral Bookings growth to be in line with revenue growth. For Q3 specifically, we are targeting total revenue of $1.22 to $1.24 billion, also representing 7% growth at the midpoint of the range. Within total revenue for both Q3 and the full year, we expect Applications & Commerce revenue growth in the mid-teens, and Core Platform growth in the low single digits. Regarding our outlook, I want to mention that beginning in the fourth quarter of this year, GoDaddy will no longer operate as the registry service provider for the .co top-level domain. As a result of this change, we anticipate an approximate 50 basis point headwind to bookings and revenue, primarily in the fourth quarter. Importantly, this transition does not affect our ability to execute our strategic initiatives or deliver on our 2025 and 2026 financial commitments. For the third quarter, we are projecting a normalized EBITDA margin of approximately 32%, and we are reaffirming our full-year margin expansion target of 100 basis points, with continued sequential expansion each quarter this year, exiting 2025 at 33%. We expect normalized EBITDA to maintain greater than a -to-one conversion to free cash flow for the full year. Our capital allocation approach remains unchanged, and we will continue to evaluate all opportunities, according to our rigorous returns-based framework, to maximize long-term shareholder value. In closing, we remain more confident than ever in the strength of our model and our ability to execute toward our targets. Our second quarter results reflect GoDaddy's solid foundation, powered by disciplined operations, consistent innovation, and the growing impact of our strategic initiatives. From enhancing and expanding AI-powered experiences and solutions like Arrow to attracting higher-value customers, we are driving sustainable and profitable growth across the business. With nearly 30 years of consistent growth through a variety of macroeconomic backdrops, GoDaddy is built for durability and long-term value creation. That strength is anchored by a high-quality recurring revenue base, disciplined cost management, robust free cash flow generation, and a strong balance sheet. Looking ahead, we are fully committed to delivering on our investor-date targets of $4.5 billion plus in cumulative free cash flow generation, 6% to 8% annual revenue growth, and expansion of our full-year normalized EBITDA margin to 33% by 2026. With our continued momentum, we remain excited about our path forward. With that, I'll hand it back to Christy to open up the line for questions. Thank you.