Applications and commerce bookings accelerated to 22% growth.
Normalized EBITDA margin expanded by 400 basis points.
Total Q1 revenue reached $1.1 billion, a 7% increase year-over-year.
Applications & Commerce segment revenue grew 13%, with annualized GPV for GoDaddy payments surpassing $2 billion.
Core platform revenue grew 4%, driven by strong domain and aftermarket demand.
Consolidated normalized EBITDA grew 25% to $313 million, with a margin of 28%.
Q1 bookings grew 9%, reaching $1.3 billion.
Unlevered free cash flow for the quarter grew 18% to $359 million; free cash flow grew 26% to $327 million.
Shareholder Returns and Capital Allocation
Through April 30, repurchased 2.8 million shares, totaling $346 million.
$1.1 billion remains under the current share repurchase authorization.
Fully diluted shares outstanding at the end of the quarter were 146 million.
Strategy and Business Developments
Focused on pricing and bundling efforts, particularly in productivity solutions, contributing to the applications and commerce segment’s growth.
Continued emphasis on creating seamless customer experiences and leveraging AI for website creation.
Launched GoDaddy Smart Terminal Flex, enhancing the commerce offering.
Introduced a Pay Wall for websites built by GoDaddy Airo and began rolling out GoDaddy Airo to the base.
Gabi, the guide assist bot, is now fully deployed across customer care.
Outlook and Guidance
Raised the lower end of full-year revenue guidance to $4.5 billion to $4.56 billion, representing 6.5% growth at the midpoint.
Q2 revenue expected to be in the range of $1.1 million to $1.12 billion, with 6% growth at the midpoint.
Full-year normalized EBITDA margin expected to be approximately 29%; on track for 31% by Q4.
Full-year targets for unlevered free cash flow and free cash flow are $1.4 billion plus and $1.2 billion plus, respectively.
Management Commentary
GoDaddy is focused on empowering entrepreneurs and driving value through innovative customer experiences and strategic growth initiatives.
The company remains committed to its profitable growth model and strategic framework outlined during the Investor Day.
Question and Answer
Acceleration of Revenue Growth from A&C Bookings
Question
How does the strong bookings growth in the A&C segment, particularly in the first quarter, translate into revenue growth acceleration for the rest of the year?
Answer
The company is excited about the momentum and impact of the A&C bookings growth, driven by pricing and bundling initiatives.
While the momentum will continue, the size of the business means it will take time to fully reflect in revenue growth numbers.
The company is experiencing some headwinds from dispositions, which will peak in Q2 but are expected to abate throughout the year.
Despite the headwinds, the company is confident in its pricing and bundling initiatives and the positive impact they will have on bookings and revenue in the long term.
Airo International Rollout and Customer Adoption
Question
Can you provide more details on the rollout and customer adoption of Airo internationally, particularly in terms of incremental uplift in conversion, ARPU growth, and other metrics?
Answer
Airo is performing well with new customers, driving engagement and discovery of GoDaddy’s product offerings.
The company is seeing significant take rates for website attachments with new customers.
The rollout to the existing customer base is still in the early stages, and more time is needed to gather data and assess the impact.
Airo’s cards and capabilities are driving customer engagement and attachment, providing confidence in the potential for future monetization.
Drivers of A&C Bookings Growth and Pricing Initiatives
Question
How much of the impressive A&C bookings growth is attributed to product attachment versus pricing, and how pervasive are the AI-based value-based pricing initiatives across the A&C customer base?
Answer
The growth in A&C bookings is a combination of pricing and bundling initiatives, with a focus on productivity and website businesses.
The AI-based pricing and bundling initiatives have not yet been rolled out to all A&C customers but are starting to impact a significant portion of the segment.
The company plans to continue investing in these initiatives and expand them to reach all GoDaddy customers over time.
Airo’s Impact on Website Attachment Rates
Question
Can you elaborate on how Airo is leading to increasing website attachment rates for domain customers, and provide some key performance indicators (KPIs) or insight into the significance of this trend?
Answer
While it’s still early days, the company is seeing significant take rates for website attachments with new customers.
The company is applying a methodical approach to rolling out Airo to the existing customer base, and it will take some time to gather data and assess the impact.
The company is optimistic about the potential for Airo to drive significant growth and engagement in the base, similar to its impact on new customer engagement.
Rationale for Changing Payment Pricing Structure
Question
What is the rationale behind the changes in the payment pricing structure, and how might it impact near-term dynamics and customer sentiment?
Answer
The company takes a methodical approach to pricing changes, testing them and ensuring they offer multiple options for customers while maintaining the best value in the industry.
The changes are designed to create differentiated pricing and bundles, enabling a broader commerce solution with a range of options for customers.
Timing of Bookings Recognition and Convergence with Revenue
Question
Can you remind us of the lag between bookings and revenue recognition and provide insights into how this applies to the A&C segment?
Answer
The company expects bookings to be recognized as revenue with a lag of approximately 12 months.
For 2024, bookings are expected to be 1 to 2 points ahead of revenue, providing momentum for the bundling and pricing initiatives and aftermarket growth.
Success of Pay Links and Impact on Engagement
Question
Can you provide more context on the success of Pay Links, particularly in terms of its impact on discovery and engagement, and whether it performs better in certain channels?
Answer
Airo has been a significant driver of Pay Links attachment, with its seamless integration and automatic setup for customers.
Airo has led to higher engagement rates with Pay Links compared to previous methods of discovery and promotion.
The company has achieved a $2 billion annualized GPV milestone, with a significant portion coming from converting base customers to GoDaddy Payments.
Customer Conversion Strategies for GoDaddy Payments
Question
Can you discuss the strategies for converting existing customers to GoDaddy Payments, including potential incentives or customer-side events that create opportunities?
Answer
The company leverages its strong customer relationships, high transactional NPS, and one-stop-shop offerings to encourage customer adoption of GoDaddy Payments.
Customer-side events such as renewals can create conversion opportunities, but the focus is on providing value and convenience to customers through the one-stop-shop approach.
The company’s pricing, which is the best value in the market, serves as a third pillar of the conversion strategy, along with relationships and one-stop-shop offerings.
Impact of Gabi on Customer Care Efficiency
Question
What are the early data points and reception of Gabi, the AI tool, by the care team in terms of its impact on efficiency and interactions?
Answer
Gabi is being rolled out to the entire care team, and while it’s still early days, the company is excited about its potential to improve efficiency.
Gabi is already being used for tasks like summarizing and taking on certain responsibilities, reducing the time and interactions required from customer care representatives.
The company has a roadmap for Gabi with many use cases planned over the next couple of years.
Drivers of EBITDA Margin Outperformance
Question
Can you discuss the drivers of the EBITDA margin outperformance in the first quarter and whether these factors are specific to the quarter or will benefit the balance of the year?
Answer
The outperformance is attributed to the pacing of accelerated A&C, which is a tailwind for margin expansion.
The company is on track to achieve the 31% exit rate and 29% full-year EBITDA margins, with the framework for further expansion remaining in place.
Factors contributing to margin expansion include the tailwind from A&C growth, access to global talent pools, and infrastructure simplification.
Macro Trends and Customer Sentiment
Question
Can you provide an update on macro trends and any changes in SMB health or sentiment compared to previous quarters?
Answer
The company observes a steadiness in the macro environment, which is positive for its business and customers.
SMBs tend to be optimistic about their businesses, and a steady macro environment contributes to this optimism.
The company has a strong brand awareness, excellent products, and marketing efficiency, providing confidence in its ability to reach and attract more customers.
Airo Monetization and Features for Pro Users
Question
Is there any contribution to revenue or bookings from Airo expected in the current quarter, and are there specific features within Airo being developed for the pro or agency community?
Answer
The company is currently in the discovery and engagement phase with Airo and has not yet reached the monetization phase.
Monetization opportunities include Airo Premium, Pay Walls, and renewals, but these are expected to occur approximately a year after the initial purchase.
Airo Insights is a feature specifically designed for Pro users, providing actionable advice to improve existing websites.
The company plans to test various monetization methods for Airo Insights later this year.
Drivers of GPV Growth and WordPress Partnership
Question
Can you elaborate on the drivers of the strong GPV growth, particularly the contributions from customer attachment versus GPV per customer, and whether the WordPress partnership has played a role?
Answer
The primary driver of GPV growth is converting existing base customers through a broader omni-commerce solution, which includes both online and in-store offerings.
The company sees the conversion of existing customers as the biggest opportunity for commerce and the main driver of GPV growth.
While the WordPress partnership is valued and the company is excited about the product offering, it has not been a significant driver of GPV growth.
Airo’s Impact on Top-of-Funnel Demand and Customer Growth
Question
How is Airo changing top-of-funnel demand and improving customer growth, particularly after several quarters of muted growth?
Answer
Airo is enhancing the company’s marketing approach by highlighting GoDaddy as a provider of a seamless and intuitive platform with a wide range of capabilities.
The company is incorporating Airo into its marketing strategy to drive customer perception and expand the top of the funnel.
The company is optimistic about growing its customer base in the medium and long term, leveraging its brand awareness, product offerings, and marketing efficiency.
The company acknowledges the impact of divestitures and migrations on the customer base but is confident in its ability to attract higher-intent customers and engage them through bundling and Airo.
Margin Expansion Drivers and Ranking of Factors
Question
Can you discuss the key drivers of margin expansion and rank them in terms of their relative impact on the outlook?
Answer
The main drivers of margin expansion are the tailwind from accelerated A&C growth, access to global talent pools, and infrastructure simplification.
While all three factors contribute to margin expansion, the tailwind from A&C growth is expected to have the largest impact.
Aftermarket Growth Drivers and Outlook
Question
What is currently driving the outsized growth in the aftermarket segment, and what factors could potentially slow this growth in the future?
Answer
The growth in the aftermarket segment is driven by the return of larger transactions and an increase in average transaction value.
While the company does not build these short-term trends into its model, they are contributing to the current growth.
The company expects the aftermarket business to return to a steady-state of low single-digit growth, with continued expansion in the lower end of the market and good average transaction values.
Impact of eNom Divestiture on Hosting Revenues
Question
How much of a drag will the eNom divestiture be on hosting revenues, and was this previously contemplated in the 2024 guidance?
Answer
The impact of divestitures, including the eNom sale, is estimated to be approximately 100 basis points for the year, peaking in the second quarter and abating throughout the rest of the year.
The eNom divestiture was included in the company’s guidance, even though it had not yet been officially closed and announced.
Pricing Power and SMB Health
Question
How much pricing power remains, particularly considering the current challenges faced by many SMBs, and can you provide any insights into the health and sentiment of the SMB segment?
Answer
The company’s pricing and bundling initiatives are not focused on traditional price increases but rather on creating new and differentiated bundles with value-based pricing.
The company sees runway for its pricing and bundling strategies, leveraging its large customer base and machine learning capabilities.
The steadiness in the macro environment is a positive for SMBs, who tend to be optimistic about their businesses.
Pay Walls and Marketing Leverage
Question
Can you explain the concept of Pay Walls and how they are used in the context of Airo, and provide insights into the expected marketing leverage and efficiency for the remainder of the year?
Answer
Pay Walls are a technology that introduces friction in the customer journey at a certain point where value is created, encouraging customers to move to a paid plan.
The company is excited about the potential for Pay Walls within Airo, as the platform offers a wide range of products and capabilities to test different monetization methods.
The company maintains a disciplined approach to marketing spending, focusing on ROI and data-driven decisions.
The company is confident in its ability to make informed investment decisions and leverage its data across all aspects of the business, including marketing.
A&C Bookings Growth Drivers and Scope of Value-Based Pricing
Question
Can you elaborate on the drivers of the impressive A&C bookings growth, particularly the relative contributions of bundling and pricing, and discuss the current and future scope of value-based and dynamic pricing initiatives?
Answer
The approach to value-based pricing involves a combination of pricing and bundling initiatives, which are designed to work together based on customer engagement, value, and service bundles.
The company plans to expand these pricing and bundling initiatives across its entire portfolio, leveraging its large customer base and the three-year opportunity identified at the Investor Day.
CapEx Guidance and ARR Growth
Question
Can you confirm if the CapEx guidance remains unchanged and provide insights into how ARR growth is expected to perform throughout the year?
Answer
The full-year CapEx guidance remains unchanged, although it may fluctuate from quarter to quarter.
The company expects healthy growth in ARR, with subscription revenue continuing to outpace overall revenue growth.
Impact of WordPress Partnership on GPV Growth
Question
Has the WordPress partnership contributed to the GPV growth, and can you provide an update on the status and performance of that partnership?
Answer
The WordPress partnership has not been a significant driver of GPV growth, as the primary driver remains the conversion of existing base customers through a broader omni-commerce solution.
The company is excited about the WordPress partnership and the product offering, and it expects to see increased sales as the partnership matures.
VeriSign Marketing and Dotcom Trends
Question
What is your perspective on the potential impact of VeriSign’s increased marketing spend and one-on-one partnerships on the dotcom market, and how might this influence your marketing strategy and overall business?
Answer
The company has a diversified portfolio of domains, with the ability to sell over 400 different TLDs and a strong global brand awareness.
The company welcomes increased marketing efforts from partners like VeriSign and is open to collaborating to drive growth in the domain market.
