GoDaddy Inc.

Welcome to GoDaddy's Third Quarter 2025 Earnings Call. Thank you for joining us. I'm Kristi 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 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 will 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 8-K 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, October 30, 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 our customers, millions of micro business owners bringing ideas to life every day. They are resilient, creative, and determined, even as technology and the world around them rapidly change. Our mission is to make that journey simpler, supporting their growth and success with tools that cut through the complexity and make running their businesses easier, backed by human guidance. In the third quarter, we delivered strong financial results, achieving 10% growth in total revenue while also delivering ANC bookings growth acceleration to 14% on strengthening customer cohort dynamics. We also delivered normalized EBITDA margin of 32% and increased our AI investment and capabilities with new products ready for launch. Reflecting on our strong performance, we are raising our full-year 2025 revenue guidance to 8% growth, the top end of our three-year range of 6% to 8%. At GoDaddy, we are energized by the agentic open internet, our vision for an open, trusted, and accessible web with AI agents helping us with our tasks. For more than 30 years, the open internet has enabled entrepreneurs to bring their ideas to life, and GoDaddy has been a foundational partner in that journey. The next leap forward is the agentic open internet, where AI-powered agents collaborate and complete end-to-end tasks with speed and precision. These unlocks will help small businesses thrive in the years ahead. And as we meet the moment and build towards this next era, GoDaddy itself is transforming in three ways. First, our aero platform evolution from generative AI to agentic AI. Second, agents transforming how work gets done internally. And third, by building on the foundation of being the world's largest domain registrar and putting the infrastructure in place to make the agentic open internet safe and accessible for all. The first part of the GoDaddy transformation is the evolution of the Aero experience from a generative AI platform to an agentic AI platform. Over the last few days, we launched five new Aero agents that handle fundamental customer jobs to be done, like finding and buying domain names, building websites and applications, creating logos and compliance documents. This is just the beginning. Our pipeline includes many more agents ready for launch over the next few days and weeks. The interactive design of these agents reflects our unique ethos of guidance, a core differentiator for GoDaddy. Agents are learning to anticipate next steps across multiple jobs, proactively guiding a customer through each interaction with clarity and confidence. Live for both new and existing GoDaddy customers, they deliver tailored support by instantly understanding each customer's unique business context. These new capabilities are available through the beta launch of Aero.ai, a new website built on the GoDaddy software platform. We can test new agents on Aero.ai quickly and maintain a seamless path back to GoDaddy.com. Look out for new agents on Aero.ai every week over the next few weeks, and we will direct targeted traffic to it soon. With this release, AeroPlus will shift from a generative AI toolset to an agentic AI toolset. AeroPlus will serve as a direct monetization vehicle on Aero.ai and on GoDaddy.com. Staying true to the needs of our microbusiness customer and our culture of experimentation, Aero.ai includes two different vibe coding experiences. Both experiences use an agentic AI chat interface to build websites and both allow seamless publishing. The difference is that one lands the customer in the websites plus marketing editor, while the other introduces the editor in line with the chat interface. As customers use these experiences, we are excited to add more functionality to these tools. The second part of the AI transformation at GoDaddy is the impact agentic AI is having on how we operate. Teams across the company are reimagining their roles in an agentic world and identifying the shifts required to solidify gains in velocity and efficiency. From experimentation to care to engineering to corporate functions, we are evolving beyond the value of generative AI and shifting focus on measurable improvements driven by agents. Our evolution in software development provides a good example. In Q2, we set a company-wide goal to reach 70% of AI-generated code by year-end. We are making great progress towards this goal. This month, more than 45% of code written at GoDaddy was generated by AI, and for new applications, this number is significantly higher. With that momentum, we are now shifting our focus from measuring code generation to measuring reduction in product cycle time. The expected net result is faster velocity, which allows us to build more capabilities without incremental investment. the impact is already visible a small team used ai to build the aero app builder and launched it in short order on aero.ai the pace of iteration on this product is high and it positions us to move fast on emerging shifts like agentic browsers another example comes from our aftermarket team which used ai tools to build a new portal for ultra premium domain names In the past, this type of work was hard to prioritize. Now a small team experimented, built, and delivered it end-to-end within weeks. For both the Aero app builder and the ultra-premium marketplace, our internal measurement tools show that nearly 90% of the code was AI-generated. The third part of GoDaddy's AI transformation builds on our foundation as the world's largest domain registrar. Our vision for an agentic open internet imagines today's open web enhanced by agents that can operate independently, collaborate across systems, and automate customer journeys. These agents can discover one another, validate identity, and establish trust across domains, creating an open space for agents to collaborate. Working back from that vision, we launched GoDaddy's Agent Name Service, or ANS. Built on DNS infrastructure and proposed as an open standard, GoDaddy's ANS provides verifiable identities for AI agents. By registering agents with ANS, value is immediately created for publishers by providing their agents with a verifiable identity. Value is also created for consumers of ANS since they can securely discover and validate agents across the open web. While many companies are beginning to explore this idea, we are excited to be leading the way. GoDaddy is launching ENS with its own agents to showcase registration, discovery, and validation, and we are now inviting partners to join this open ecosystem. We have a bold vision for the agentic open internet for our customers, and we look forward to showcasing this vision at our investor dinner in December. Before I pass it to Mark, as always, I'd like to share some updates on our 2025 strategic growth initiatives. The first is pricing and bundling, which continues to deliver strong results across both segments of our business. This work remains centered on giving customers greater value and choice through tailored bundles that simplify their decision-making and deepen engagement across our platform. Execution remains on track for 2025, and we are focused on launching the 2026 bundles, further extending our reach and impact. Our next initiative, Seamless Experience, creates frictionless journeys that support our customers from their first search to purchase and renewal. This large-scale experimentation engine continues to deliver improvements in conversion, attach, and renewal rates. In Q3, we expanded our optimization work to include more end-to-end flows across the customer journey, using AI to personalize recommendations and refine design in real time. This initiative is meaningfully contributing to Booking's growth with continued momentum into next year. Turning to commerce, growth in our payment solution remains solid, driven by continued conversion within our existing customer base. We also drove solid adoption of our high-margin subscriptions, including GoDaddy Capital, Rate Saver, and Faster Payouts, all of which are helping entrepreneurs simplify their operations and improve cash flow. These capabilities strengthen our commerce ecosystem, deepening relationships with merchants and positioning us to capture more of their business as they scale. And last but not least, GoDaddy Aero continues to be our primary customer engagement engine and key catalyst for our strategic growth initiatives, driving value as it powers better attached, higher average order size and improved retention. Our history shows that customers who adopt more products stay longer with us, generating higher lifetime value. The success metrics we track make it clear that Aero is creating a more valuable and durable customer cohort than our strongest historical benchmarks. In closing, I am proud of the progress our teams achieved this quarter, advancing our AI vision with Aero.AI, pioneering trust and security in the agentic open internet through ANS, and our experimentation culture that is accelerating innovation across the company. GoDaddy is evolving rapidly with the moment. And as AI reshapes what is possible, we are leading with the solutions we develop and helping entrepreneurs everywhere take the next leap forward with confidence, simplicity, and world-class care. With that, here's Mark.

Thanks, Iman. Good afternoon, everyone, and thank you for joining us. We are pleased with our strong execution, which led to favorable results and exceeded our top line guidance. As a result, we are raising our full year revenue guide to 8% at the midpoint to reflect the continued strength across the business. We delivered ANC revenue growth of 14% and grew free cash flow 21% to an impressive $440 million. We continue to demonstrate our commitment to shareholder returns, repurchasing 9 million shares for a total of $1.4 billion year-to-date. Taken together, we are on track to exceed our Investor Day North Star commitment of a 20% CAGR. How are we getting there? As Aman mentioned, our strategy that elevates GoDaddy Arrow is our primary customer engagement engine is hitting its stride. High intent customers are adopting more products, spending more, and generating higher lifetime value. Our $500 plus customer cohort now represents approximately 10% of our base, and this cohort has higher attach and near perfect retention, boosting our ARPU up 10% to $237. In the third quarter, total revenue grew 10% to $1.3 billion, surpassing the high end of our guided range. Growth was broad-based, driven by continued strength in both the primary and secondary domain markets as more ideas come online. and by the momentum in ANC, where rising attach rates are expanding customer lifetime value and deepening engagement across our ecosystem. Retention rates remained at 85% and our total customers grew sequentially to 20.4 million. underscoring the durability of our model and GoDaddy's central role in bringing entrepreneurs to the open internet. Additionally, international revenue grew 14%, primarily driven by the strength in the primary and secondary domain markets, as we continue to expand our reach globally. For our high-margin ANC segment, we drove 14% growth in revenue to $481 million on the ongoing solid adoption and attach of our subscription solutions. Our core platform segment delivered elevated revenue growth of 8% to $784 million on 28% growth in aftermarket and 7% growth in primary domains. Moving to profitability, normalized EBITDA grew 11% to $409 million, delivering a margin of 32%. This reflects leverage gains across the P&L from AI-driven efficiencies and continued operational discipline, partially offset by gross margin pressure from product mix and continued investment in our AI initiatives. Total bookings grew 9% to $1.4 billion. Within that, ANC bookings grew 14% and core platform bookings grew 6%. As a reminder, bookings primarily represent cash collected during the period. free cash flow grew an impressive 21% to $440 million on our bookings growth, powered by continued strengthening of our customer cohorts and the greater than one-to-one conversion of normalized EBITDA to free cash flow. On the balance sheet, we exited the quarter with $924 million in cash and total liquidity of $1.9 billion. Net debt was $2.9 billion, representing a net leverage of 1.7 times on a trailing 12-month basis. We maintained our disciplined approach to capital allocation, repurchasing 4.1 million shares during the quarter, totaling approximately $600 million. As of the end of the quarter, our fully diluted shares outstanding were $137 million. Pivoting to our outlook, for the full year, we are raising our 2025 revenue guide to a range of $4.93 to $4.95 billion, representing growth of approximately 8% at the midpoint. We expect total bookings growth, absent FX impacts, to be in line with total revenue growth and ANC bookings growth to continue its momentum. For the full year, we expect ANC revenue growth in the mid-teens and core platform growth in the mid-single digits. For the fourth quarter, we expect revenue to be in the range of $1.255 to $1.275 billion, representing 6% growth at the midpoint. This range reflects a more difficult ANC revenue comparison, the expected impact from the DOTCO registry contract expiration, and our consistent approach of excluding high-value aftermarket transactions from our guidance. for q4 we expect agency growth in the low to mid teens and core platform growth in the low single digits for the full year we expect a normalized ebitda margin of approximately 32 percent and for the fourth quarter we are projecting 33 percent normalized ebitda as we continue to balance operational efficiency with investments in AI innovation. We expect normalized EBITDA to maintain greater than a one-to-one conversion to free cash flow for the full year and reaffirm our free cash flow target of approximately $1.6 billion, representing growth of over 18%. On capital allocation, our approach remains unchanged, and we will continue to evaluate all opportunities to maximize long-term shareholder value. In closing, GoDaddy is delivering solid, profitable growth driven by durable revenue performance and continued operational discipline. Our strategy around Arrow is working. We are ahead of our target of our Investor Day North Star, reflecting consistent execution across the business. Our expanding AI-powered innovation and efficient operating model position us to drive long-term value creation for customers and shareholders. We look forward to hosting many of you at our Investor Dinner in Tempe on December 2nd, where we will showcase the innovation setting the pace for GoDaddy's sustained success. I will now turn the call over to our VP of Investor Relations, Christy Masoner, to open up the line for Q&A. Thank you.