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    GoDaddy Inc (GDDY)

    Q4 2023 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$113.03Last close (Feb 13, 2024)
    Post-Earnings Price$112.21Open (Feb 14, 2024)
    Price Change
    $-0.82(-0.73%)

    What went well

    • GoDaddy's high-margin Applications & Commerce (A&C) segment is experiencing strong growth, with bookings up 16% in Q4, driven by customers moving to second and third products faster than ever before, which enhances retention and profitability.
    • GoDaddy Payments is in the early stages of penetrating its large customer base, expecting continued healthy double-digit growth in gross payment volume (GPV) in 2024 as they expand offerings and broaden their omni-commerce solution.
    • Operational efficiencies are leading to significant margin expansion, with plans to exit 2024 at a 31% normalized EBITDA margin, driven by reduced technology and development spend, automation, and growth in the A&C segment.

    What went wrong

    • Revenue growth is expected to face headwinds due to divestitures and migrations, with a projected 100 basis point impact in 2024, primarily in the first half of the year.
    • Net customer growth is being impacted by hosting divestitures and a focus on higher-intent customers, leading to lower overall customer growth compared to historical levels.
    • Margin expansion is back-end loaded, with heavier spending in Q1 for renewals and launch costs, which may affect profitability in the near term.

    Q&A Summary

    1. A&C Growth and Guidance
      Q: Why guide A&C bookings to low-mid teens after 16% growth?
      A: While A&C bookings grew 16% in Q4 , we're projecting low to mid-teens growth in fiscal '24 due to factors like transaction timing and hardware shipments affecting revenue recognition. Despite strong momentum, we account for these variables in our guidance. ,

    2. Margin Expansion Drivers
      Q: What's driving the 200 bps EBITDA margin expansion in '24?
      A: The 200 bps margin expansion is driven by reduced tech and development spend through leveraging AWS cloud, efficiencies in customer care via AI and global workforces, and growth in our higher-margin A&C segment due to increased bundling and attach rates. ,

    3. Hosting Divestitures Impact
      Q: How will hosting divestitures affect revenue growth?
      A: Hosting divestitures contribute about a 100 bps headwind to revenue growth in '24, primarily in the first half. We're assuming flat to down performance from non-strategic hosting assets as we continue to evaluate their long-term prospects. , ,

    4. Capital Allocation and Share Repurchases
      Q: What's the plan for share repurchases and capital allocation?
      A: We have $1.4 billion remaining on our share repurchase authorization and will continue returning capital to shareholders. We'll evaluate repurchases quarterly within our disciplined framework, aiming to drive free cash flow per share. ,

    5. Customer Growth vs. ARPU
      Q: How are you balancing customer growth and ARPU?
      A: We're focusing on attracting higher-intent customers who adopt multiple products, leading to better retention and higher ARPU. Gross customer adds were higher in '23 than '22, with stable demand. Divestitures have reduced net adds but involved low-intent, single-product users. ,

    6. Airo Product Rollout
      Q: What's the progress and impact of Airo rollout?
      A: Airo has seen encouraging early results, with rapid rollout to more customers, including international markets. It's driving bundling, with customers moving to second and third products faster, improving retention and ARPU. Hundreds of thousands of customers have already experienced Airo. , , ,

    7. Payments Business Growth
      Q: How is the payments business performing?
      A: Payments is still in early stages of penetrating our customer base. Growth is primarily driven by converting existing customers to our platform, focusing on micro-sellers. We plan to expand our omni-commerce solutions in 2024, expecting payments to remain a significant growth driver. , ,

    8. Pricing Actions and ARPU Growth
      Q: How are pricing actions contributing to growth?
      A: Pricing actions are included in our guidance, with opportunities to adjust as we deliver more value. ARPU growth is driven by bundling, with customers adopting multiple products faster than before, leading to higher retention and lifetime value. , ,

    9. Aftermarket and Domains Outlook
      Q: What's the outlook for aftermarket and domains?
      A: We're assuming the aftermarket will be flat to single-digit growth, contributing over $400 million in revenue. Domains showed 4% revenue growth with 7% bookings growth in Q4, indicating strong demand and momentum entering '24. ,

    10. Tax Valuation Allowance Release
      Q: What's the impact of the $1 billion tax valuation allowance release?
      A: Due to increased profitability and anticipated future earnings, we're releasing a $1 billion valuation allowance. This accounting change doesn't affect cash or normalized EBITDA but will provide tax benefits in the foreseeable future.

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