Christie Masoner:

Welcome to GoDaddy's Second Quarter 2024 Earnings Call. Thank you for joining us. I'm Christie 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'll open up the call for your questions. [Operator Instructions] 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 investors.godaddy.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 August 1, 2024. 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 pleased to introduce Aman.

Mark McCaffrey:

Thanks, Aman. We are pleased to announce our strong Q2 results, which demonstrate our commitment to execution and continued progress towards our North Star of maximizing free cash flow over the long term. Our North Star continues to be bolstered by two key pillars

Josh Beck:

Thank you so much for taking the question. I wanted to start with A&C bookings rising from the low to mid-20s this quarter. Maybe help us think through and unpack the major drivers. You obviously cited bundling and productivity and how those could maybe change as we look ahead? And then related anything that we need to be cognizant of when we think about comps for A&C bookings in the second half and into 2025 as well?

Aman Bhutani:

It's one of those I want to take. Hey, Josh thanks for the question. Super excited about the momentum in A&C bookings 24% growth. And we're bringing to the table the full power the GoDaddy scale and data as part of a GoDaddy software platform. So whether it's pricing and bundling or our seamless experience improvements or commerce obviously they are all helping A&C growth. And we're bringing these capabilities to a broader set of our product suite. So as we look into the future, we continue to be very excited about being able to implement these capabilities across our entire products in both sort of scenarios with new customers and with existing customers as well. And I'll let Mark take some of the financial pieces.

Josh Beck:

Super helpful. And maybe just a quick follow-up on Airo, really helpful metrics. I think you mentioned one million discovered 0.5 million engaged. If we maybe double-click on that engaged group maybe what are some of the early standouts from adoption point of view? And when you think about the curve in the quarters ahead obviously, it hadn't been out that long. Is this the right cadence to think about in terms of number of customers ramping with that suite?

Josh Beck:

Great to hear. Thank you, Aman and Mark.

Mark McCaffrey:

Thanks, Josh.

Trevor Young:

Great. Thanks. First one just on aftermarket solid double-digit growth there with -- it looks like about 20 points coming from ATV. Is the strength there becoming a bit more durable or broad-based in your view maybe extending to the larger piece of that business where it's like sub-$10000 domains? Or is it more about just a narrow few high-priced transaction skewing the trend upwards? And then what's baked in to guide for the back half of the year for aftermarket?

Trevor Young:

That's helpful. And just as a follow-up, on the free cash flow guide, it looks like raising the unlevered free cash flow for the full year $150 million and regular free cash flow about $200 million. Can you distill the drivers of that change or rank order them? Is it the stronger flow-through of the top line or maybe stronger bookings or any onetime items to be mindful of?

Trevor Young:

Great. Thank you, Mark.

Jian Li:

Great. Thanks for taking the question, and congrats on a really nice quarter here. I want to circle back on the A&C bookings. Can you kind of -- is that booking strength primarily coming from the productivity pricing? Or is Airo conversion or Airo-driven conversion improvement a big part of that acceleration as well? And if you can talk a little bit about just the top of funnel that you're seeing going into A&C just given the current macro backdrop?

Mark McCaffrey:

Yeah. And I think that's right. We are entering the monetization, but it's really early stage. It didn't have a meaningful impact on Q2. Don't have enough data points to really build in anything related to our guide or forecast related to it. But the early signs are very positive and we are starting to cross into seeing data around monetization today.

Jian Li:

Got it. And if I may ask a follow-up on the margins. So the EBITDA margin beat this quarter, but you're maintaining the full year guide. Is there some sort of timing in terms of expenses like shifting to the back half? Or if you continue to see upside in margins, would you expect to flow that through to the bottom line? Or any reinvestment that you're thinking as well?

Christie Masoner:

Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.

Aman Bhutani:

Yeah. Thanks Elizabeth. Our core ethos around whether it's GABI or all of our capabilities in Care is that we always want to provide a superior experience at the same or lower cost, right? And in GABI we're super focused on making the guide slowly into a super guide. And whether it's the service side or support side or the sales side GABI is able to partner with the guide and allow them to explore things with the customer that otherwise it may be difficult because GABI has access to a lot more data given our scale. Of course on the sales side, Care continues to drive 9% of our bookings. We get a lot of calls and we've got 14 million contacts, 6,200 guides and GABI has access to all of that information to just make the guide better and better. So you'll see both. You'll see improved customer experience and you'll see more leverage on the cost.

Aman Bhutani:

Yeah. As we talked a little bit about in the Investor Day, Elizabeth we see the pricing and bundling initiative as a multiyear initiative for us. So while productivity is leading the way this year and other products and bundles are a little bit behind it, we expect that over the next few years we'll be able to apply the same tools and capabilities across the GoDaddy suite. It's really about capturing all the data, all the customer insight into the GoDaddy software platform being able to drive and bring the customer the unique offering that works for them. And as we do that more and more we actually think it's going to become stronger over time. So yes we're looking forward to pricing in bundle and seamless experience trying to working together over multiple years.

Aman Bhutani:

Yeah. And I think the comps will play a little bit. We're coming into some other comps in the second half of the year. But overall the way we look at the return from these tools is they're continuing to set the pace for the company where overall bookings are pacing ahead by a point or two of revenue. And that sets us up very clearly for the next year in the future as well.

Aman Bhutani:

Thanks, Elizabeth.

Vikram Kesavabhotla:

Hey, can you hear me?

Vikram Kesavabhotla:

Okay. Great. Thanks. I just wanted to ask first on capital allocation. Mark, going back to the Investor Day you talked about kind of three main priorities in terms of the use of cash across repurchases, debt paydowns and acquisitions. I just wanted to clarify where do repurchases currently rank within those uses of capital today? And how do you do that in terms of priority or most attractive uses of cash flow right now? And then my second question, I wanted to put a finer point on the A&C bookings growth comments. That number has accelerated now a few quarters in a row. I realize you don't guide to a specific number on that. But as we look at the third quarter directionally, I mean should that continue to accelerate from the second quarter levels? Or should we expect it to moderate? And if you could talk through some of the puts and takes there that would be great. Thanks.

Vikram Kesavabhotla:

Okay. Great. Thank you.

Christie Masoner:

Our next question comes from the line of Arjun Bhatia from William Blair. Arjun, please go ahead.

Aman Bhutani:

Thanks Willow. As you'll probably remember, we have the best value for money in terms of payments pricing out there given the offering we bring to market. What these new SaaS plans do is they start to engage our customers into a deeper set of capabilities. So for example, with an Invoicing Plus plan customers are able to build a more custom invoice and put a logo on it or be able to e-mail that out in a very easy way. And that's us just expanding what the sort of tool set that our customers can use with GoDaddy in a very, very easy way. And on the pricing piece, we've had pricing being an advantage for us since we came out with commerce and payments. And we continue to use that advantage and we actually look at multiple avenues as we grow this business to continue to maintain that differentiator and create the value for the customer while also creating value for the company and the shareholder.

Aman Bhutani:

Thank you.

Clarke Jeffries:

Hello. Thank you for taking the question. First a clarifying one. Aman, you said improved conversion by 12%. I wanted to put that into context. Is that 12% improved conversion as a measure of 100% of users in the funnel? Or is that an improvement of 12% higher dollar value? If you could just clarify that point first?

Clarke Jeffries :

Understood. And then just one follow-up. You mentioned the rollout to non-English speaking countries. What is the percent of the base that is English-speaking today? I mean we have that international versus domestic breakout, but I'd imagine there is a sizable contribution there from English-speaking countries.

Clarke Jeffries :

Thank you.

Christie Masoner :

Our next question comes from the line of Ygal Arounian from Citi. Ygal, please go ahead.

Mark McCaffrey :

I'll take that first half, Ygal. Just a reminder, we have transaction revenue in subscription. And then within A&C, we have a mixture of both. And we saw a good performance today this quarter in commerce, which is a transactional revenue, but we're also seeing good performance in the other areas, which are subscription. So the timing of the revenue related to the bookings acceleration can be anywhere from immediately within the quarter to over a period of time and will start to contribute to revenue as we go out through further quarters. So we saw some contribution this quarter. We'll continue to see that as we get to the rest of this year. And obviously, in 2025, we'll have momentum going in there. But remember, it's a combination of both right? So we can hit in different periods depending on the nature of the bundle the transaction or the combination of the products they buy.

Ygal Arounian :

Okay. And then on the bundling. So, understanding productivity is the focus now and then there's more after is coming in the future. Maybe just a hit on what's next in the pipeline if you can? I guess, that's going to come over time. But we hear mostly about e-mail and security. Any more details around some of the key bundles that you expect to roll out I think would be really helpful. Thank you.

Mark McCaffrey:

Yes. The advantage we have now with the consolidated technology stack is we have the ability to see what bundles really are attractive to our customers and we're starting to analyze that data and that starts to give us a path forward. Airo only helps that even further as we look at the behaviors and the engagement and allows us to start to position those bundles as to what value we can give to the customers.

Ygal Arounian:

Great. Thank you.

Chris Kuntarich:

Hi, you got Chris on the line. Just maybe going back to the attach comments in a couple of quarters now that you've said that over 50% of customers have two-plus products. Just curious if you could put a finer point on existing customers versus new customers? Are the new customers -- do they have a higher propensity to go to two, four, four plus type of attach versus the existing base?

Mark McCaffrey:

And this has been something that's building over time. I think the metric we gave out at the end of the year was a customer new customer attach at rate 25% faster than they were three, four years ago. And that trend continues, right? Our customers are coming in with intent. They're engaging at different levels. And just to hit on the finer point that Aman said, we count that two-plus product when they pay, not when they engage. And that means it can come into a renewal it can come after a free trial. So, it takes time but they are definitely engaging at a higher level rate than we saw in the past.

Mark McCaffrey:

There's nothing to call out on a one-off basis. This is just the three things we had talked about that would drive our profitability going forward. A&C growing which is our higher-margin business and being more of the pie over time will create a tailwind to our overall normalized EBITDA margin. As we start to tap into global talent pool, we'll use GABI more of that will create leverage within our P&L up and down. And then we continue our journey on operational simplification. We're trying to make sure we're fit for purpose going forward that we're agile and we continue to have that ability to not only invest in the business and invest in new technology, but have an efficient back-office operations. So, those three pillars still remain intact. And what we're seeing now is the A&C bookings and growth really becoming that tailwind that we had talked about coming into the year.

Christie Masoner:

Our next question comes from the line of Naved Khan from B. Riley. Naved, please go ahead. Hey Naved, you're muted.

Christie Masoner:

We can.

Mark McCaffrey:

Yes. I think we're happy on -- with our margin expansion through the year. We continue to look at opportunities and look at product mix and how the momentum is moving. We overperformed in Q2 on our margin. We believe that will continue into Q3 at the same levels. And obviously, we talked about our Q4 exit rate will remain at the 31% keeping us at 29% for the year. Because our bookings are doing well and obviously, we talked about our raise in our guidance related to revenue, a lot of that percentage falls to the bottom line on an absolute dollar and allows us to feel good about raising our free cash flow and unlevered free cash flow guidance as well.

Aman Bhutani:

Now they're picking on a really interesting thing where as we introduce more, we've got to be very careful to keep the experience simple for our customers. So actually there are a number of experiments that continue to evolve what the cards look like to get higher engagement with the customers. There's all sorts of different things from cards disappearing to changing the order to growing out to saying it's done. The teams are trying lots and lots of different combinations. And frankly there is more we want to include in Airo. And only when we make this simpler can we add the new things. So yes, that's a constant area of focus for us, but it's also the beauty of our scale, right? We have a breadth of products that we can bring to our customers. That's a lot of value we can pack in with a humble domain name. And if we can get the discovery and the engagement we can get the monetization. And at our scale we're doing lots and lots of experiments. We have teams that are well trained in understanding how to do this work well. And we're pretty excited about it. That's one of the reasons as Mark likes to say that Airo might be small today and it's not in our guide, but we are very excited about what it represents in the future for us.

Aman Bhutani:

We are in an early inning, Naved.

Naved Khan:

Excellent. Thank you, guys.

Christie Masoner:

Welcome to GoDaddy's First Quarter 2024 Earnings Call. Thank you for joining us. I'm Christie Masoner, Vice President 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. [Operator Instructions]

Mark McCaffrey:

Thanks, Aman. We are pleased to announce our strong Q1 results and continued track record of durable growth. We've demonstrated attractive progress toward our North Star, delivering strong free cash flow of $327 million, alongside continued execution of our capital allocation strategy, which reduced our fully diluted shares outstanding at the end of the quarter to 146 million.

Christie Masoner:

Thanks, Mark. [Operator Instructions] Our first question comes from the line of Ygal Arounian from Citi.

Mark McCaffrey:

Ygal, thanks for the question. We couldn't be more excited about the bookings growth in A&C and the momentum we have coming out of Q1 and the impact on the rest of the year, no doubt about it. As we get into the bundling, just a reminder, revenue is recognized from the bookings and it can be on different periods of time. So that momentum will continue. But given the size of our business, obviously, it takes a while to show up into the revenue growth numbers as we go on, couldn't be more excited about it, though.

Amanpal Bhutani:

Thanks, Ygal. Super excited about Airo. It's the best vehicle we have built to carry products to our customers. We know it's doing very well with new customers. And as I've shared, we've started to roll it out to our base as well. Airo just does a fantastic job of getting our customers engaged. And the metrics that we shared around it, they continue to be about discovery, which means our customers finding that GoDaddy has all these products about engagement, where they start using those products or you can say, attach them and then monetization where they start to pay for those products.

Mark Zgutowicz:

Maybe just a follow-up on that impressive A&C bookings number. Curious how much you'd attribute to product attach versus pricing in terms of that acceleration? And on the pricing side, just curious how pervasive your AI or value-based pricing initiative is across your A&C base. Does it touch all A&C customers at this point? That's the first question.

Mark Zgutowicz:

Okay. Got it. And then I think you had mentioned that Airo is leading to some increasing website attach rate for your domain customers. I was just hoping you might be able to expand on that a bit, maybe just some KPIs that you're seeing, maybe conversion rate, but that seems to be maybe awakening a sleeping giant there for some time. Just kind of trying to get a sense of how significant that could be.

Kenneth Wong:

Great. I wanted to maybe kind of pick your brain in terms of the rationale behind kind of changing payment pricing structure and then how you think about how that could impact the near-term dynamics and if you're sensing any kind of customer pushback there.

Mark McCaffrey:

Yes. And I'll take it up a level, too. When we think about the bookings to revenue, we have multiple different products, multiple different terms, the revenue can be -- come out in many different ways. The way we look at it is we think bookings is going to be 1 to 2 points ahead of revenue for 2024. And that'll give us a lot of momentum as we continue to see the results of the bundling and pricing initiative as well as the momentum we're seeing in things like aftermarket.

Christie Masoner:

Our next question comes from the line of Josh Beck from Raymond James.

Amanpal Bhutani:

Yes. The biggest sort of encouragement for our customers, the best vehicle we've put in place for pay link attach is being in Airo, right? And the way it happens is that when the customer buys the domain name, all these cards, all these capabilities get set up automatically.

Amanpal Bhutani:

Yes. There are some customer events -- customer-side events, for example, like you said, a customer coming up on a renewal. That may create an opportunity. But what we really lead with is that we have a relationship with these customers, right? GoDaddy has 65-plus transactions in NPS and in Care. Our customers are used to having a great relationship with us. So when we engage them, number one, they're open to the idea of GoDaddy offering them GoDaddy Payments.

Vikram Kesavabhotla:

Hey, can you hear me?

Vikram Kesavabhotla:

My first question is for Aman. I think you mentioned in your prepared remarks that GABI has now been rolled out to the entire care team. Just curious what the early data points have been there in terms of the impact that's having on efficiency. I know at the Investor Day, you talked about the potential for that to reduce time and interactions for the team. Just curious what you're seeing so far there and what the early reception has been from the care team.

Amanpal Bhutani:

Vikram, a quick word on GABI. I'm super excited for what Gabby offers us over the long term, right? Being able to bring the massive amount of data that only GoDaddy has, working with 21 million paying customers and many more over the years, using AI to bring it together and putting it on the fingertips of every guide in the company, that's a powerful combination, right? And where we are is the tool is rolled out. The guys are starting to use it. There is, of course, always a little bit of time for adoption and training for people learning how to use even a new tool that's GenAI powered.

Mark McCaffrey:

And Vik, on the normalized EBITDA margin, I would say, quarter-to-quarter, you may see some fluctuations depending on the timing of spend. Overall, if you look at Q1, we've always said accelerated A&C will be a tailwind to our ability to expand our margins over time. And with the pacing you saw in Q1, we saw some of the benefit of that. For the year, we're on track for the 31% to exit, and we feel good about that, and we're on track for the 29% for the entire year. And obviously, we've talked about our ability to expand that going out. And all those -- all that framework remains in place, and we continue to see the benefit of the ANC tailwind related to that.

Aaron Kessler:

Maybe just first on any update just on macro, just what trends are you seeing there? And I know customers are flat kind of year-over-year. I assume there was maybe some disposition impact on that? If you can just talk on that? And then also the -- if you may, to that point, trends in gross adds that you're seeing along with that?

Jian Li:

So I want to kind of go back to Airo. First, maybe just to -- it sounds like Airo's still in the early days of monetization. Are you baking in any kind of contribution to revenue and/or any contribution to bookings for this quarter for that matter? So if you can kind of talk about the contribution here. And also, I think in the Investor Day, you sort of alluded to Airo being applicable broadly across DIY and Pro users. So I'm just wondering if there is any product features for Airo that you're building specifically for the pros or agency community?

Amanpal Bhutani:

Yes. And I think the way you might think about it, a lot of value is being created for customers with Airo because they're getting a bundling -- bundled experience that's seamless, that's connected. And some of that monetization opportunity we have talked about like Airo Premium and pay walls, but there's also a monetization opportunity that would happen at renewals, but that would be a year out from the time the customer bought the domain. So just, Jian, keep that in mind as well.

Jian Li:

Great. Wonderful. And then just a quick follow-up on the GPV strengths that you're seeing. If you can parse it out a little bit, is that more customer attached growing? Is it more just the growing GPV per customer? And it's coming from WordPress marketing? Or more on the managed WordPress side? If you can just talk about also the growth of these 2 segments separately as well.

Christie Masoner:

Our next question comes from the line of Elizabeth Porter from Morgan Stanley.

Amanpal Bhutani:

Yes. On Airo changing the top of the funnel, we're excited about being able to market the GoDaddy brand as a provider of not just this expansive set of products and capabilities, but the provider that can bring you those capabilities in a seamless, intuitive almost magical manner. So Airo is not just an experience for our customers, not just a platform that GoDaddy has, it's something we're taking into our marketing and looking at ways to really dive into customer perception.

Elizabeth Elliott:

Great. That makes a lot of sense. And then a follow-up on the margin side of the equation. There's the kind of mix shift to ANC, also leverage as revenue growth reaccelerates and you guys are taking also some specific kind of cost actions to manage expenses. So just wondering if there's any way to, like, stack rank some of these drivers as it relates to the margin expansion that you guys have in the outlook.

Trevor Young:

On aftermarket, second consecutive quarter here of double-digit growth, but meanwhile, it looks like your full year expectations there are still kind of in low single-digit territory. What's driving that outsized growth right now? It looks like ATVs are up almost 20% on the year plus the benefit of easier compares. Just trying to understand if something has structurally changed in demand for that business. What's causing that resurgence? And relatedly, what would cause it to slow from here?

Mark McCaffrey:

Yes. I think the best way to say that, we previously contemplated that when we were talking about our guide for this year. We hadn't closed it and announced it, but we're far enough along we built it into the model.

Mark McCaffrey:

We look at it as overall. The divestitures are about 100 basis points for the year with that peaking in the second quarter and abating through the rest of the year.

Sang-Jin Byun:

John Byun for Brent Thill. You pushed through the price increases on productivity and now on payments. I'm just wondering how much pricing power is left, especially given it seems a lot of SMBs is still somewhat struggling. And then on that last point, I know there was a question earlier on macro, but anything you could share on the health of the SMBs? Anything different this Q1 versus last quarter? I don't know if there's any change, whether better or worse in terms of the SMB health and sentiment.

Christie Masoner:

Our next question comes from the line of Chris Kuntarich from UBS.

Amanpal Bhutani:

Yes. Let me start by talking about the Airo pay wall. The type of thing we're talking about is you buy a domain name and suddenly, you've got a logo, you've got a coming soon website created. You've got 8 versions of websites created that you can choose one from. You've got an e-mail address that's been created for you. You've got a pay link that's ready to go. You can take payments on it, 60 seconds later, right? You've got a marketing campaigns that are set up for you already.

Mark McCaffrey:

Yes, and this applies to marketing and all investments, really, at the end of the day. We like to use the data in order to understand what's going to get us the best return. And when we feel we understand that, we're willing to invest in. Marketing is the same thing for us, right? We want to get to the point where we understand the monetization formula and then we can start to optimize for that. So we feel good about our ability to make those decisions across the board and to leverage across all of our P&L. And obviously, our ability to continue to expand the margins, especially as we see the uptick in AMC and the tailwind that, that gives us go on to the future.

Naved Khan:

So just a quick question on the booking growth for AMC. It's pretty impressive. And in your commentary, you kind of attributed that to pricing and bundling. I just want to develop, like, on that. Is it more bundling versus pricing that's kind of driving this? How should we understand it from the outside looking in?

Amanpal Bhutani:

Yes, Naved, thanks for that question. So the approach we've taken with value-based pricing is that the pricing and bundling initiatives sort of works together on it, if you will. They go hand in hand. Because it's really looking at what the engagement is for that customer, what value that customer has, what bundles and services that we can create for them and then how should we price that.

Naved Khan:

No, that's what I wanted to kind of get a better handle on. It seems like you're leveraging both kind of ultimately get the sale done or renewal happen. Maybe just a quick follow-up on CapEx. It wasn't discussed. Should I just assume it stays where you guided to it at the beginning of the year? Or maybe has it changed?

Christie Masoner:

Our next question comes from the line of Alexei Gogolev from JPMorgan.

Mark McCaffrey:

Yes. Without getting into the specifics of growth rate around ARR, Alexei, just remember, it is our lagging of our lagging indicators. So generally, we'll trail revenue, not only in the bookings to revenue formula, but it also trails the revenue to -- in the trailing 12 months that impacts it. So while we expect to see a healthy growth in ARPU, that we -- again, it's going to lag throughout the year, but it will continue to increase over time.

Alexei Gogolev:

Okay. And then the second question was about WorldPay partnership. Could you provide an update on how it's faring and also, that significant improvement in total GPV or annualized GPV, has there been any tailwind coming from that WorldPay partnership?

Christie Masoner:

And our last question comes from the line of Ygal Arounian from Citi again.

Christie Masoner:

We have now finished the Q&A. I'll turn it back over to Aman.

Christie Masoner:

Good afternoon, and thank you for joining us for GoDaddy's Fourth Quarter and Annual 2023 Earnings Call. I'm Christie 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. [Operator Instructions] 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 investors.goddady.net or in today's earnings release on our Form 8-K furnished at the SEC. Growth rates presented 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, February 13, 2024. 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 pleased to introduce Aman.

Mark McCaffrey:

Thanks Aman. Hello everyone and thank you all for joining us. In 2023, we made significant strides in our ability to deliver a unified GoDaddy software platform for our customers. These efforts are reflected in our results that drove sustained double-digit growth of our Applications and Commerce revenue of 13% in the quarter, expansion of our Q4 normalized EBITDA margin above our target, delivering 29.5% and free cash flow per share above our target delivering $7.50 for the full year. Beginning with Q4 results, our high margin Applications and Commerce revenue grew 13% to $377 million and we delivered an expanded segment EBITDA margin of 44%, increasing 100 basis points since last quarter and 300 basis points since last year. ARR for Applications and Commerce grew 10% to $1.4 billion and our Create + Grow ARR was up 8% to $481 million. In Commerce, we drove significant growth in annualized GPV to $1.7 billion, more than doubling last year’s performance as conversion of our existing customers to the GoDaddy software platform remains strong. Core Platform revenue grew 2% to $723 million in the fourth quarter and segment EBITDA margin grew to 32%, increasing 200 basis points since last quarter and 250 basis points since last year. ARR for Core Platform was $2.3 billion consistent with prior year. Growth in Core Platform during the fourth quarter was supported by domain's growth of 4%, a continued strong demand and price increases. Bookings growth in domains was 7%, providing a positive leading indicator for future domain revenue. In addition, aftermarket grew 14% to $118 million on increasing volume and easier comps. As a reminder, while aftermarket is stable on an annual basis, it is more difficult to predict quarter-to-quarter compared to our other businesses due to its transactional nature and that it relies on third-party sellers and buyers to determine a mutually acceptable price. Our gains in Core Platform were partially offset by an 11% decrease in hosting, as we continue our efforts to integrate GoDaddy’s software platform. Bifurcating the hosting business, the continuing GoDaddy hosting revenue remains a stable, strong cash generator with high retention. The remainder of the portfolio decreased over the past several years and we have taken deliberate steps throughout 2023 to rationalize the business. We will continue to evaluate the components of this business, integrating platforms that are strategic and rationalizing platforms that are not accretive to our long-term financial model. Total revenue in Q4 topped $1.1 billion, growing 6% on a reported and constant currency basis. International revenue grew 4% on a reported and constant currency basis to $354 million. As a reminder, our migrations and our divestitures are primarily impacting international regions. Q4 bookings grew to $1.1 billion, up 7% or 6% on a constant currency basis. Applications and Commerce bookings grew 16% on strong attach of productivity solutions and continued strength in our Create + Grow products. Core Platform bookings increased 3% due to the strong fourth quarter performance in domains, offset by migration and divestiture headwinds in hosting. Subscription bookings grew 200 basis points ahead of subscription revenue. Normalized EBITDA in Q4 grew 22% to $324 million, representing a 29.5% margin, and an expansion of nearly 400 basis points compared to Q4, 2022. The continued margin expansion was driven by the leverage gains we achieved in the second half of 2023 across all spend categories. As we shared last quarter, we continue to expect Q4, 2024 normalized EBITDA margin of approximately 31% with continued margin expansion in the out years, while also driving innovation, like you saw with our GoDaddy Airo experience. As we think about this seamless experience for customers, Airo is possible, thanks to the work we have done to unify our technology stack into one software platform that include ownership of the data from domain through to transactions. And this serves as an accelerant to our model as we bundle and bring more products to market faster on the platform. With that, during the fourth quarter, we reduced our combined technology and development and capital spending by 7% from our migrations, divestitures and restructuring efforts throughout 2023, as well as from reduced data center capital expenditures. We expect that our technology and development spend will continue to decline in absolute dollars in 2024 compared to 2023, as most of this work was completed in 2023. Moving onto cash generation. Unlevered free cash flow grew 46% to $347 million, while free cash flow grew 51% to $305 million, despite a 13% increase in cash interest expense year-over-year. Free cash flow per share increased 21% to $7.50 per share, driven by growth in Applications and Commerce, operating leverage improvements and share repurchases throughout 2023, which is partially offset by an increase in cash interest expense. Turning to the balance sheet. We exited the year with $0.5 billion in cash and short-term investments and total liquidity of $1.5 billion. Net debt landed at $3.4 billion, below three times net leverage on a trailing 12-month basis, and near the midpoint of our targeted range of 2 to 4 times. In January 2024, we refinanced $1.8 billion of outstanding principal to secure a 50 basis point interest rate reduction. This strategic adjustment along with the repricing completed in July 2023 are together expected to reduce annualized cash interest expense by approximately $22 million. Additionally, the cumulative shares repurchased under our current authorizations totaled $2.6 billion, representing 34.2 million shares retired. This reduced our fully diluted shares outstanding since the inception of these authorizations by over 20%, achieving our three-year targeted reduction ahead of schedule. Our buybacks over the last two years have driven impressive ROI for this capital outlay, demonstrating our disciplined capital allocation framework and dedication to driving long-term shareholder value. Moving onto our annual financial results. Total revenue grew 4% or 5% on a constant currency basis to $4.3 billion. ARPU grew 3% to $203 as we added 100,000 net new customers, despite the elevated churn from our ongoing platform migrations and divestitures. Customer retention remains 85% as we drove improvements in 2+ product attach, with greater than 50% of our customers paying for at least two products. These high-quality customers are stickier and give us greater pricing flexibility. Applications and Commerce revenue grew 12% to $1.4 billion and Core Platform revenue was flat, totaling $2.8 billion. International revenue grew 4% to $1.4 billion. Total bookings grew 4% or 5% on a constant currency basis to $4.6 billion. Full year normalized EBITDA grew 12% to $1.1 billion, representing a 27% margin for the year, an expansion of nearly 200 basis points over the prior year. Lastly, full year unlevered free cash flow grew 14% to $1.3 billion and free cash flow grew 12% to $1.1 billion, both exceeding our guide for the year and showing impressive normalized EBITDA to cash conversion of nearly one to one. Moving onto our outlook. For the full year, we expect total revenue to be within a range of $4.48 billion to $4.56 billion, representing growth of over 6% at the midpoint of the range. When excluding the approximate 100 basis point impact of divestitures and migrations, that we will lap in the year, our growth would be 7% at the midpoint of the range. In Application and Commerce, we are projecting revenue growth of low to mid-teens for Q1 and the full year. In Core Platform, we are projecting revenue growth of low single-digits for Q1 and the full year. As we have shared previously, the entire GoDaddy team is committed to maintaining operational discipline and deploying opportunities to gain further leverage within our model. We delivered on this commitment in 2023 and expect to continue this trend in 2024, resulting in an expected normalized EBITDA margin of approximately 29% for the full year. We are targeting unlevered free cash flow of at least $1.4 billion, free cash flow of at least $1.2 billion, and free cash flow per share of approximately $9, representing a growth rate of 20% for the full year of 2024. In 2024, we expect capital expenditures of $35 million and cash interest payments of $155 million, representing reduced spend of 11% over 2023. In addition, we expect income tax payments of approximately $30 million. On share repurchases, we expect to buy back shares under our remaining $1.4 billion authorization using our disciplined capital allocation framework that we've applied in past quarters. Capital return has been and will continue to be a priority for GoDaddy, along with prudently managing our balance sheet, as we look to drive compounding returns for our shareholders. For Q1 2024, we are targeting total revenue of $1.085 billion to $1.105 billion, representing nearly 6% growth at the midpoint of the range. As a reminder, because of the timing of certain marketing spend, such as the spend that support our heavy renewal cycle in Q1 and the spend related to our launch of GoDaddy Airo, our normalized EBITDA margin will build over the course of 2024. As a result, we expect Q1 normalized EBITDA to be 27%, representing a nearly 300 basis point expansion over Q1, 2023. Over the course of the year, normalized EBITDA margin is expected to increase to approximately 31% as we exit the year, which averages to approximately 29% for the full year. We are proud of our record of accomplishment of increasing margins on an absolute basis and compared to our own initial guidance over the last three years. Investors should continue to see this discipline moving forward. In summary, we remain dedicated to actively managing our business through a combination of durable top line growth and improving profitability. We are focused on balancing the two to drive our strong free cash flow, which, when coupled with our disciplined capital allocation framework, creates significant value for our shareholders. We see an exciting path and have strong confidence in our ability to execute against our strategic priorities. At our Investor Day on March 6th, we will demo the expanded capabilities of GoDaddy Airo and Commerce. We will also discuss long-term growth and profitability expectations and levers we will provide a clear view of our opportunities. We will share our capital allocation framework and the shareholder value it will create. We are committed to providing the information you need to understand our long-term strategy and initiatives, model the business confidently, value the business effectively, and hold us accountable for executing against our stated objectives. We'll end the day with Q&A, hosted by our management team. With that, I'll hand the call over to Christie Masoner, VP of Investor Relations, to open the call for Q&A.

Naved Khan:

Yeah. Hi. Can you hear me?

Aman Bhutani:

We can.

Aman Bhutani:

Thanks Naved. Why don't I kick that off with a quick comment on the macro and I'll turn it to Mark for sort of the range and the valuation allowance. On the big picture, our customers continue to be the micro businesses and they're resilient crew and definitely we see strong demand continuing to come in through the front door. Of course, we continue to optimize our spend, marketing spend and be very, very judicious about finding new customers and bringing them to the site. But gross ads continue to be strong. And generally, I would say, our customers feel a little bit better about their prospects. Mark, I'll turn it to you.

Naved Khan:

It does. Thanks guys.

Zach Morrissey:

Great. Thank you. I guess just starting with Airo, obviously, it seems -- early results are pretty encouraging, expanding the rollout. I guess, how do we think about like what are the gating factors to a more broad rollout, at least in the U.S., just based on the early results that you're seeing today. And kind of how is this embedded in the kind of 2024 outlook in terms of any kind of growth on the Application/Commerce side of things? And then on the legacy hosting, obviously, that came in a little bit weaker just based on some of the strategic decisions you guys are making. How do we think about the trajectory kind of embedded in the 2024 growth outlook for core platforms? I think comps get easier as we kind of progress through the year, but any kind of color and context would be helpful there.

Mark McCaffrey:

Yeah. As Aman mentioned, you can hear the excitement. We're very encouraged about the momentum and the engagement metrics, but it is still early days. When we consolidated the core software platform for GoDaddy, we saw bundling and customers move into 2+ products a lot faster. And obviously Airo, we look at as an enabler of that down the road and we think it'll allow for greater bundling, greater catch, better retention. But right now it's early days and we're calling everything we see in front of us based on the momentum we see coming into the year. On the -- move on to the legacy hosting, a couple of things there, right? We have about 100 basis points of headwind coming into the year related to our divestitures and migrations that we've done. So that's built into the guide that we've given. In addition, we've seen aftermarket. We think it's going to be a flat to single digit grower, it's a $400 million plus business. We're really encouraged by the volume that's coming through the platform and the fact that it allows people to get names and in a secondary market, they couldn't get in the primary market. But we think it's going to be -- it's -- how do you say, moderated in its growth and it's leveled out. So, we've built that into the forecast. And we've talked about domains openly. We saw 4% revenue growth coming out of the quarter, but 7% bookings growth. So, we think there's a lot of momentum in the domains. And a lot of that has to do with the core GoDaddy platform now that we've launched and getting people the demand in, getting them to attach quicker, getting them to those retention rates we talk about in our model.

Christie Masoner:

Our next question comes from a line of Vikram Kesavabhotla from Baird. Vik, please go ahead.

Christie Masoner:

Yes, we can.

Vikram Kesavabhotla:

Yeah. I just wanted to follow-up first on the Applications and Commerce segment. Appreciate the color, Mark, you just provided on Airo. But I guess outside of that, curious if you could talk about what the primary drivers of growth in that segment are going to be to support the low to mid-teens range in fiscal '24. And then separately, I also wanted to ask about the share repurchases. You mentioned the plan around the remaining $1.4 billion. I guess any color you could offer in terms of the cadence of repurchases going forward. And maybe if you could also just remind us of your broader capital allocation priorities and framework going forward and leave it there. Thanks.

Aman Bhutani:

And then maybe, Vik, just looking at it from a different lens, you asked about A&C. If you look at it as the components of the products that we sell in A&C, every part of A&C, or every significant part of A&C, is growing booking double-digits right now. Right? So that's really propelling that business and getting to that 16% bookings growth we talked about.

Aman Bhutani:

Thank you.

Matthew Pfau:

Hey, great. Thanks. Wanted to start off asking on payments, and perhaps you could just give us an idea about where you are at in terms of penetrating your existing customer base, or at least the addressable customer base. As we go into 2024, do you expect converting existing customers to be the biggest driver of growth again?

Matthew Pfau:

Great. And just to follow-up on the guidance for A&C, the bookings growth of 16% in Q4 and then guiding for low to mid-teens in Q1, what's the discrepancy there? Is there payments or something else that drives that difference?

Aman Bhutani:

Yeah. Just to make sure, what we talked about is 16% is bookings, right? Revenue is always going to lag a little bit, like Mark said, and you'll see it show up, of course.

Christie Masoner:

Our next question comes from the line of Mark Mahaney from Evercore ISI. Mark, please go ahead.

Aman Bhutani:

Yeah. On the international markets, our typical rollout plan is always English, large English markets first. So those are the markets we're testing now. But our absolute view is that Airo is a capability that should go across to all our markets. And there's a long tail of great tickets for us to approach there. So super excited about that. In terms of product attach and other monetization means, of course, product attach is the first level we're looking for. But as we'll share a little bit at our Investor Day, we're also looking for new monetization methods. And I'll just give you an example. One of the things that we want to test is a premium offering for logo building. Where -- as you see in Airo, you buy a domain and Airo builds you a logo and it builds you or gives you the ability to be able to edit that logo. But there are more services that we can offer around it. And we're going to test a new paywall for it and a new monetization method that GoDaddy has never done before. So that's one example of one of the types of things our teams are testing. And then I think in terms of the second part, I'll turn it to Mark.

Christie Masoner:

Our next question comes to the line of Clarke Jeffries at Piper Sandler. Clarke, please go ahead.

Mark McCaffrey:

Yeah. Clarke, I would say it will be primarily the first half with some in the second half, but primarily in the first half.

Mark McCaffrey:

Yeah. Thanks Clarke. And the way I look at it is if you take where we're exiting at Q4 of 2023 and where we're going for Q4 of 2024, the things that you have to look at are, reduced T&D spend, right? We're leveraging more of the AWS cloud. We're reducing dependency on data centers. There'll be a natural leverage we'll get in our P&L related to that. We're getting leverage in our care organization through the use of AI and automation, also access to global workforces that'll help us as we go forward. And then some of it is just the natural growing A&C picture, right? It's a more profitable segment. It's software based. Therefore, as that grows and becomes a bigger part of the picture, it helps expand our margins just naturally again, that leverage we get from the 2+ products starts to kick in the bigger A&C gets all together. So those are kind of the levers I'm looking at. Hopefully that's helpful.

Christie Masoner:

Our next question comes to the line of Ygal Arounian from Citigroup. Ygal, please go ahead. Hey, Ygal.

Mark McCaffrey:

Yeah. So I'll give some color for you, Ygal. When we look at our customers, we've always said we are targeting customers with a higher intent to do something when they come into the funnel, add that second product, start that business, generate value for themselves, and therefore generate value for us. What we've seen coming out of '23 and continuing into 2024 at the gross ads level is that consistent, strong demand that we've talked about all year and that continuing. And to put it in perspective, '23 gross customer ads was higher than 2022, right? And so not only are we seeing an increase there, we're seeing it more consistent from quarter to quarter and more stable. With that, we're seeing that also that intentful customer come in with those gross ads, which is the momentum we're seeing in the bundling, the growth you see materialize in A&C. And we're seeing through the divestitures, we are losing customers, but they are generally customers that were low intent customers. So they were on a single product, maybe weren't doing things, hadn't done things for years. So that trade off is in there and continues to be something that we are working through on a net customer ad basis. Obviously, as we continue our divestitures and look at our portfolios, we've done a lot of that work in '23. So that will begin to abate for the work we've done in '23 and we'll continue to review our portfolio going forward. But it is bringing in the demand that has that higher intent customer and that stable demand we're seeing at the front of the funnel now.

Aman Bhutani:

Yes, Ygal. A lot of what we talk about is GMV is often through our partnerships that we have. They tend to sell in the big categories, in the big verticals that you know about. Nothing significant to call out there, right? It follows to some extent the macro and sort of how customers are doing. Our focus very much is to provide them with a very competitive product so that they've got a system that works really well for them and it shows up in the results.

Ygal Arounian:

Thanks, guys.

Christie Masoner:

Our next question comes from the line of Ken Wong from Oppenheimer. Ken, please go ahead.

Mark McCaffrey:

Yeah. So, giving you color around, I'll say how we expect it to rollout. We talked about 27 in Q1 because of the spending related to our renewals and certain other timing and expenses. And then, 31 is our exit strategy with 29 being the average. So we do think -- we do, like we saw last year, believe it'll ladder up. We haven't gotten to the exact numbers yet. We'll provide more color around that as we get further into the year. But I think you can put a trajectory around there. Now, there might be some timing of marketing expenses that we'll talk you through if that were to happen. But other than that, I would expect it to be similar to what we saw this year in laddering up through the year.

Aman Bhutani:

Yeah. When we think about optimization and guiding to it, everything we have line of sight to is in the guidance already. But the fact is we're constantly evaluating new opportunities. Our teams have a very disciplined approach to looking at those opportunities and they bring forward proof points and what they need to do to be able to achieve those targets. And every quarter we're evaluating them and moving forward with new ideas. And if anything were to evolve, we would absolutely tell you more. We have a great track record of doing that over the last couple of years. And our goal is to just continue that momentum, continue that discipline. And it just compounds and that's a great thing.

Christie Masoner:

Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.

Mark McCaffrey:

Yeah. Thanks Elizabeth. Just a little further color, we're seeing the momentum in A&C and we've talked about the bookings. We've talked about the headwinds related to some of the divestiture activity. There are other things we built in there for the acquired or non-strategic hosting assets that still exist that haven't been integrated. We're assuming they're flat to down for the year as we continue to evaluate their long-term prospects. Things like aftermarket, we're assuming will be flat for the year, maybe slightly up, but again, no momentum being grown there -- coming there from continued growth in that market. That could change. There's some volatility in that market quarter to quarter, but we think on a long-term basis, that'll be the way to measure it. Still good growth in domains. It's still something that we're big in growing at percentage point wise is always difficult on a big base, but we think it'll be a steady increase as we see that demand coming in. So, when you put that all up and you put the headwinds into there at the first part of the year, we think 6% is a good point for the middle of the range. We know there's opportunities for the high-end of the range and we'll continue to monitor those.

Aman Bhutani:

I think it's hard to project sort of multiple scenarios there, Elizabeth. It also kind of depends on the product mix in terms of which products exceed targets, but generally we're looking to, on a regular basis, balance growth and profitability. Again, our teams have a pretty disciplined process of bringing proof points in on where we invest and how we double down. On investments, something changes, our goal is to be very transparent with you guys on the call as well, so you'll be able to be on that journey with us.

Elizabeth Porter:

Great. Thank you very much.

John Byun:

Hi, thank you. I just had two questions. One, going back to Airo. I wonder if there's a way for you to quantify how broadly it might be rolled out in the U.S. I mean, is it 5% of your users using it? Or if there's any way to quantify in what you might think it might be by the end of the year or in sort of phase? And then the second question, kind of going back to the guidance and some of the headwinds, I think you had about 100 basis points in '23, guiding for about 124 with, I guess, abating in the second half. But wondering, will it be pretty much done at this point? Or do you still have maybe, I guess, more to reorganize, given some of the -- I guess, some of the still legacy hosting grantees who have left? Thank you.

Mark McCaffrey:

Yeah. So, we did a lot of work in 2023, and that caused 100 basis points headwinds, both in '23 and '24. We're still continuing to evaluate our portfolio and we'll take any actions that we need to related to things that may not be strategic or things that aren't going to be accretive long-term to our model. So I wouldn't say we're done. I would say we'll continue to optimize, evaluate and make the decisions for the long-term business best we can.

Christie Masoner:

Our next question comes from the line of Chris Kuntarich from UBS. Chris, please go ahead.

Aman Bhutani:

Yeah. What you saw us launch in November was Airo capabilities, mostly on our identity and presence products. And if you look at the entrepreneur's wheel, right, we lay out identity, presence and commerce and the customer needs that surround them. What we're going to show you at Investor Day is a sneak peek into all of the commerce capability layered with Airo, which includes not just payments capability, but core commerce functionality like inventory management and catalogs and how Airo will work on hardware, for example, versus on the web where today when we talk about identity and presence, you're seeing Airo capabilities mostly on the web. But how does that translate to a piece of hardware that a customer is holding and taking a transaction on?

Mark McCaffrey:

Yeah. I haven't quantified it out to the exact numbers, but keep in mind it benefits us in two areas. One, obviously it helps on normalized EBITDA on a go forward basis, but also reduces our CapEx spend because a lot of these divestitures related to also data centers that we no longer need and will go with the acquiring entity. So, there are two benefits we see. Both triangulate around helping our free cash flow and generating our free cash flow growth going forward.

Christie Masoner:

Our next question comes to the line of Ella Smith on for Alexei Gogolev at JP Morgan. Ella, please go ahead.

Ella Smith:

Hi, team. Thank you for taking my question. It seems like price had the most to do with the margin expansion in the A&C segment. Is the spread of margin profiles of A&C products wide? If so, can you remind us what are the highest margin A&C products that drove the expansion?

Aman Bhutani:

Yeah. And maybe to add some of the data we have shared, our website products, so Websites + Marketing, Managed WordPress are our highest margin products and they're growing double-digits. So obviously that's driving goodness in the A&C segment.

Aman Bhutani:

The customer profile for GoDaddy Payments very much sort of squarely within the overall GoDaddy customer. We started with the micro seller, people selling $50,000, $100,000 a year, and we built up the million dollars, a customer who sells million dollars a year are now over a million dollars. That's the target market. That's what the product is targeted towards. So, we're very happy with the products we're growing. We're adding more capabilities in 2024. We're just going to keep broadening the omni commerce solution and tuning our go-to market. And that's what we're most excited about is just selling that broader view to our customers, like Mark said, getting to that really that third product that locks in retention for the long-term.

Aman Bhutani:

Thank you.

Christie Masoner:

Good afternoon, and thank you for joining us for GoDaddy's Third Quarter 2023 Earnings Call. I'm Christie 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. [Operator Instructions]. 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 investors.goddady.net or in today's earnings release on our Form 8-K furnished at the SEC. Growth rates presented 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, November 2, 2023. 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 pleased to introduce Aman.

Mark McCaffrey:

Thanks, Aman. The product enhancements over the last few years have put GoDaddy at the forefront of one of our most exciting eras yet. And we are poised to deliver a complete integrated software solution to our customers spanning every facet of their needs. We have seen the positive traction from these efforts in terms of faster product attach, stable retention rates as well as the strong sustained double-digit growth of our applications and commerce revenue, which has also contributed to us expanding our normalized EBITDA margin ahead of schedule. Moving to our financial results for the quarter. Applications and commerce grew 11% to $363 million, delivering at the high end of our guided range. Additionally, we delivered an expanded segment EBITDA margin of 42% from 41% last quarter. The related ARR for applications and commerce grew 11% to more than $1.4 billion. Create and grow ARR grew 9% to $478 million as bookings trended ahead of revenue growth. Like last quarter, GPV continues to grow at an impressive rate as our customers within our 21 million base convert to GoDaddy Payments. Core platform revenue totaled $706 million, flat year-over-year and in line with our guide. The segment's EBITDA margin accelerated to 30% from 27% last quarter. ARR for our core platform segment was $2.3 billion, flat year-over-year. Core platform revenue was supported by 4% growth in domains on stronger customer additions from higher demand and price increases. Additionally, domains bookings growth accelerated to 8%, showing a strong recovery for future revenue growth. This was partially offset by aftermarket, down slightly 2% to $107 million as it begins to reverse prior quarter trends, and the 150 basis points of headwind from migration and divestitures of certain assets previously mentioned. Total revenue grew to $1.07 billion, up 4% on a reported and constant currency basis and above the midpoint of our guide. Within total revenue, international revenue grew to $346 million, up 4% on a reported basis and 5% on a constant currency basis. ARPU grew 2% to $200 on a trailing 12-month basis, and we added 100,000 net new high-quality customers despite the headwinds from our migration efforts. We are happy to share that the number of customers with two or more products now sits above 50%, and retention rates for the GoDaddy products remained at approximately 85%. Bookings totaled $1.1 billion, growing 5% on a reported basis and 4% on a constant currency basis. Excluding the impact of aftermarket, the drivers of growth in bookings were strong customer additions and price increases in domains as well as strong attachment applications in commerce. We expect these factors to contribute to accelerated revenue and normalized EBITDA growth next year. Normalized EBITDA grew 13% to $296 million while delivering an expanded margin of 28%. These margin gains were driven in part by the two points of leverage achieved this quarter from a reduction in normalized tech and dev spend, decreasing 140 basis points sequentially as a percent of revenue. With that, we want to shed some further light on the components of tech and dev to give you an appreciation of the nature of the spend categories. There are two distinct categories of spending, one that drives product innovation and the other that supports our operations. First, we invest in driving innovation that enables our customers' success by providing competitive tools and interactions to enhance customer lifetime value through improved attach, retention and pricing. In the second category, we invest in our infrastructure to support our operations by maintaining, unifying and securing our technology platform, delivering a seamless experience for our 21 million customer. In addition, these investments facilitate a better cash profile by reducing data center-related capital expenditures, which improves our overall free cash flow and free cash flow per share. We also benefit from technologies we build in-house that are driving efficiencies in care and marketing spend. As a percentage of revenue, product innovation represents 7% to 8%, and infrastructure to run a secured company of our size represents 8% to 9%. Overall, during the third quarter, we reduced our tech and dev and capital spending by 5% from our restructuring efforts, the migration of noncore hosting assets and reduced data center capital expenditures. And to be clear, we know there is room to do more. We believe the strength of our product portfolio today has brought us to an inflection point, and we expect reduced tech and dev spending to meaningfully contribute to our EBITDA margin trajectory going forward without sacrificing GoDaddy's ability to innovate and compete. Moving on to our cash generation. Unlevered free cash flow for the quarter grew 8% to $320 million, and free cash flow grew to 6% to $280 million despite increased interest expense and the timing of working capital spend, which is expected to flip in Q4 of this year. Although our net debt has remained the same at $3.6 billion, our net cash interest expense for the quarter increased by 28% to $40 million, primarily from the refinance of our Term B loan. We finished Q3 with $329 million in cash, total liquidity of $1.3 billion, and we remain at the midpoint of our targeted leverage range of 2x to 4x. Free cash flow per share rose to $6.82 on a trailing 12-month basis versus the prior year's cash flow per share of $5.96, a 14% increase driven by improved operating leverage and share repurchases. Through October 31, we repurchased 17.3 million shares year-to-date, totaling $1.3 billion, of which $118 million was repurchased since the end of Q3. This brings the cumulative shares repurchased under our current authorization to $2.6 billion and 34.2 million shares, achieving 20% reduced fully diluted shares outstanding since the inception of these authorizations. Moving on to our outlook. We are targeting Q4 total revenue in the range of $1.095 billion to $1.115 billion, representing growth of 6% at the midpoint of our range. We expect our high-margin applications in commerce segment to deliver approximately 13% growth for Q4. In core platform segment, we expect revenue to deliver in the range of 2% to 3% growth in the fourth quarter. Bookings growth is expected to outperform revenue growth by approximately 200 basis points in Q4. As Aman mentioned, all of us on the GoDaddy team have the same determination and resolve around the opportunities we see ahead. And we are poised to drive additional normalized EBITDA margin leverage through the end of this year and beyond. As a result, we are increasing our targets for Q4 normalized EBITDA margin to approximately 29%. Additionally, the full year normalized EBITDA margin is expected to improve, delivering slightly above the 26% previously noted. As a reminder, from 2022, we delivered approximately three points of normalized EBITDA margin expansion. As evidenced by the incremental restructuring charge recognized this quarter, we remain committed to seeking out additional opportunities to drive efficiency throughout our operating model to achieve higher margins. We also remain on track to deliver our unlevered free cash flow, free cash flow and free cash flow per share target of $1.2 billion plus, $1 billion plus and $7.25 plus, respectively. In addition to our typical fourth quarter guidance, given the degree of focus on our ability to deliver margin expansion as we reaccelerate growth, we think it is important to update investors on our margin expectations for 2024. In 2024, we expect our tech and dev expenses to fall in absolute dollars and as a percentage of revenue year-over-year. We also expect to continue to drive improvements through the next year, resulting in a normalized EBITDA margin in Q4 of 2024 of approximately 31%. Based on our confidence in GoDaddy's ability to accelerate the pace of margin expansion in 2024, we also plan to enhance profitability further in 2025 and 2026 as we continue the path above 31% normalized EBITDA margins that we have laid out today. We will provide more detail about our expectations for this at our Investor Day in the first quarter of next year. As always, we remain focused on executing on what is within our control. So while we continue to be excited about our product portfolio, our ability to drive durable revenue growth and our levers to drive margin expansion, we realized that we are still in a dynamic macro environment, and we want to be responsive to the feedback from investors. I want to be clear that as we've been doing for the last several years, we are committed to actively managing the business with the goal of delivering a strong combination of revenue growth plus profitability. We take a dynamic approach to managing the business, and we will be proactive in driving margin expansion over time and compounding free cash flow per share. Please note that we plan to provide complete 2024 financial guidance when we report our fourth quarter results in keeping with our normal practice. We believe enhancing profitability and durable top line growth will drive even stronger free cash flow generation. We will continue to deploy cash in line with our capital allocation framework, creating significant value for our shareholders. We are excited about our path ahead, and we are acting with urgency to drive results every day. With that, we will have Christie Masoner from our Investor Relations team, open the call for questions.

Vikram Kesavabhotla:

Can you hear me okay?

Aman Bhutani:

Hey, Vikram.

Mark McCaffrey:

Yes. Thanks, Vikram. I'll start with, as we've done in prior quarters, we use a range, and that range takes into account the unpredictability of our aftermarket business. And we try to build that into our thought process as we go quarter-to-quarter. 7% is still part of the guided range. It allows for the upside or downside to our transactional business. When we're talking about the difference between these numbers, we are talking about a few million dollars either direction. And overall, on a $4 billion business, we feel good about the momentum it is driving. So hopefully, that gives a little bit of help on the first part of that question. On the second part of the question, we love our momentum going into 2024. If you look at our bookings growth and applications and commerce outpacing our revenue within the quarter. If you look at domains, 8% bookings growth versus 4% revenue coming out of the quarter and going into Q4. You look at the pricing actions, we take the overall growth of applications and commerce just as a bigger part of the picture. It really shows a lot of that momentum going forward. We have a lot of confidence in that, I would say, momentum going into 2024 and our ability to grow upon that. But we're feeling good about where we're headed.

Christie Masoner:

Our next question comes from the line of Trevor Young from Barclays. Trevor, please go ahead.

Mark McCaffrey:

All right. Thanks, Robert. And I'll start with the domains. And I would say both, right? We took pricing actions in Q3 that started to show up, especially in our bookings, but is accelerating our revenue, but we are seeing strong demand within domain. Now the strong demand also has a compounding effect because we're seeing them attached to that second product faster than we ever did, and that is showing up in our growth in bookings and applications and commerce right now. So I'd say it's a combination of all those working in the same direction, giving that momentum and giving us that confidence going into 2024.

Trevor Young:

Great. Thank you both.

Unidentified Analyst:

Hi, there. This is actually Jian [ph] for Mark. Thanks for taking the question. So a couple of ones. First, on the margin guidance again for '24. You mentioned kind of kind of greater leverage from tech and dev. How should we -- I guess -- maybe first, like where is the additional leverage coming from? Like what are you cutting? And how should we think about maybe a steady-state tech and dev level? And then the second question is on -- I think you mentioned very quickly on accelerating revenue in '24 as well. If you kind of talk through the puts and takes on that. What should we think about -- like how much of that is from easy comps versus your confidence in organic growth? [Indiscernible].

Aman Bhutani:

And then I think the second part of the question was around growth in 2024. And of course, there are some comps at play here, Jian. But the key piece that we're highlighting today is the growth in applications and commerce. And a couple of the data points, and I know our investors are interested in our path to growth in A&C. So we shared a couple of data points today in terms of the 12% bookings growth in Application & Commerce in Q3 and actually shared the data point for October as well with applications and commerce to mid-teens. And all of the components of applications and commerce -- and as you're probably aware, we have three core components, productivity, presence and commerce, and all of those are growing at healthy rates, which is what is pushing us into the teens there. And we expect that to continue into next year as well. Hello?

Matthew Pfau:

Hey, great. Thanks. Just wanted to follow-up on the acceleration that you're seeing in your applications and commerce bookings. Maybe just some more details on what exactly is driving that because there are other businesses that serve SMBs that are seeing pressure with SMB spending, but it seems like you're seeing improvements. So trying to figure out what the disconnect is there? Thanks.

Mark McCaffrey:

And I'll just add, the strong demand we're seeing really has been at a higher level than we've seen and consistent level. We've talked about it in prior quarters. We're continuing to see that same demand. And the customers are coming in with higher intent. So they're getting to that second product to get into their third product a lot quicker. So from a micro business perspective, we're seeing a lot of demand and attachment that is really pushing our model that we've talked about in the past.

Mark McCaffrey:

No problem, thanks Matt.

Christopher Kuntarich:

Hi, thanks for taking my questions. Maybe two, if I can. Just going back to that comment on 50% of customers now have two-plus products. I guess how should we be thinking about that versus last year and maybe versus kind of pre-COVID and really kind of how we should be thinking about where that goes in '24 and '25. Should we be thinking about more like that number jumping to 75%? Or is it more the idea that 50% of customers are going to three products? Just curious on kind of how that attach scales over time.

Aman Bhutani:

Yes, a couple of things I'd love to mention quickly is the first the bundling capabilities I talked about today. They're really going to help move the two-plus products number. And I think we've shared this number with you, and I think you're going to see it grow nicely. But the second thing, that's not the only thing we have in play. One of the great opportunities for GoDaddy is that we have a lot of customers coming through the domains funnel. And a lot of them aren't fully aware of the full suite of products that GoDaddy has. And that's where we're launching GoDaddy Airo, which is when a customer buys a domain name, they get a basic website created for them using gen AI and automation. They get a set of social posts that they can use right away. They get an AI-generated logo that they can use right away and actually a few other things that just come to them with the domain name. And one of the things we're most excited about launching this capability is that it will explore our domain customers to the full suite of offering that we have for them, and it will really propel two-plus products, which then leads to the numbers Mark is talking about, the higher LTV that comes with it. And that's obviously a path that we're pressing on pretty hard.

Aman Bhutani:

Yes. The GMV number continues to grow and is about 36 billion right now. So I think it will be in our 10-K. It should be there.

Christie Masoner:

Our next question comes from the line of Brent Thill from Jefferies. Brent, please go ahead.

Aman Bhutani:

Yes, John, let me take the first part. Mark can take the second. Based on our surveys, what we see for the micro businesses -- and I can give you two data points, one for the U.S. and one for the U.K. So you can get some idea of how it's different in different parts of the world. Generally, the question of how positive are they about growing their own business is this year a little bit up to flattish, right? They feel optimistic -- I think part of it is they have to feel optimistic. They have to show up every day and make it happen. So they have that positivity about themselves and their businesses. But if we look year-over-year on how they feel about the broader economy, that has gone down. So just to summarize in the U.S., positive on the overall economy, but almost equally positive, if not a bit higher on their own business. And it's a little bit different in the U.K. where the overall number for positivity is a bit lower. And even though they continue to be positive about their business, their view of the economy has declined much faster. So there's some consistency across the markets, but the numbers are different with the U.S. micro business owners feeling generally more positive about their business than the U.K., for example. Hopefully, that make it a bit of color, John and it's helpful. And I'll turn it to Mark.

Unidentified Analyst:

Thank you.

Naved Khan:

Hi, thanks. Can you hear me okay?

Naved Khan:

So just on your last answer, Mark, on the sort of the 9% growth in create and grow. I'm wondering how fast website plus marketing is growing in terms of ARR. Any color or commentary there? And then, Aman, maybe you can give us some color on payable domains, how that grew in the quarter and your thoughts there?

Aman Bhutani:

Yes. And on payable domain, we continued to perform and contribute to the GPV growth that we're seeing, but in line sort of with what we've seen in the past. Q3 overall was a stronger quarter for GPV. And as we look forward to Q4, we're excited to see what's to come.

Aman Bhutani:

Thank you, Naved.

Ella Smith:

Hi, team. Thanks for taking my question. Aman and Mark, could you please update us on the hosting business? If domains were up 4% in the quarter, does that imply that hosting was down high single digits in the quarter?

Ella Smith:

Got it. Makes sense. And for my follow-up, I think Aman just said that GMV was 38 billion in the quarter. What about GPV? And I was hoping you can remind us around your strategy to refer customers to GoDaddy Payments.

Ella Smith:

Great. Thank you so much.

Mark McCaffrey:

Thanks, Ella.

Ygal Arounian:

Hey, good afternoon guys. First question, so you've had an activist investor get a little bit more active and vocal about their views and just want to maybe get -- give you an opportunity to respond or make any comments on that or anything you'd like to share. And then second, you mentioned strength in domains, including pricing. So is that on the pricing front? Is it raising the annual price for domain registrations? And with the strength you're seeing in domains, relative to what we're seeing in terms of dot-com and dot-net growth, which has been challenged and kind of flat, what are you seeing? What are the differences? Is it growth in different TLDs? Is it more -- especially the ones that you hold at your registry business, too? Maybe just a little bit of insight on what you're seeing in the domain world.

Mark McCaffrey:

I think that covered a lot of it, Aman. I would say we're seeing strength in the demand end of it. We're seeing -- we took pricing action. No doubt that's contributing to the overall 8% bookings growth that we're seeing in domains coming out of the quarter. So a lot of strength there. We're a little different than some of the other players. So we have a little bit more breadth of what we offer, and we're seeing strength in some TLDs. And probably our geographic regions, as others have pointed out, there are weaknesses in certain areas that we're just not as exposed to.

Christie Masoner:

Our next question comes from the line of Ken Wong from Oppenheimer. Ken, please go ahead.

Christie Masoner:

We can.

Ken Wong:

Great. Thanks for taking my question. Just wanted to maybe check in if you guys can give an update on what you're seeing in the aftermarket. What are the dynamics that played out in the quarter? And how we're thinking about that trend in Q4?

Ken Wong:

Got it. And then maybe just a quick follow-up on the kind of spend management, I think definitely positive development, see some focus there. I guess what's the -- what areas are you looking to potentially peel back on from R&D? Any concerns that, that might potentially hurt product innovation?

Ken Wong:

Got it. Appreciate the insights. Thank you very much.

Deepak Mathivanan:

Hey guys. Thanks for taking the questions. Just wanted to ask about the headwinds from the hosting business, from all the divestitures and some of the other moving pieces. When should we expect some of this to normalize? And what do you generally think kind of the long-term growth outlook for these businesses? And then sort of I wanted to follow-up on the answer for the question below. How much is the margin expansion targets for potentially '24 and then '25 and '26 and beyond? Sort of dependent on the top line growth. Are there any specific ranges that you can kind of give us to expect on the top line side to achieve this margin targets? Thanks so much.

Aman Bhutani:

Yes. And just very quickly, I did mention in my prepared remarks some of the areas where we have initiatives to continue to drive more efficiency in the line items, and I want to repeat them again, but we did share some items there. And ultimately, it drives a better combination of growth and profitability.

Aman Bhutani:

Thank you, Christie, and thank you for joining us. As always, just a quick mention to all the GoDaddy employees who have been working super hard and a great quarter for us. And I'm excited looking forward into Q4 and 2024. Thank you.

Christie Masoner:

Good afternoon, and thank you for joining us for GoDaddy's Second Quarter 2023 Earnings Call. I'm Christie Masone, Head 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 in-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.godaddy.net or in today's earnings release on our Form 8-K furnished with the SEC. Growth rates presented represent year-over-year comparisons unless otherwise noted. The matters we will 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 statement that we make on this call are based on assumptions as of today, August 3, 2023. And except to the extent required by law, we undertake no obligations to update these statements because of new information or future events. With that, I'm pleased to introduce Aman.

Mark McCaffrey :

Thanks, Aman. In just the last few years, GoDaddy, successfully built a growing competitive and robust set of tools and services, including our websites plus marketing product and OmniCommerce solution at a one-stop shop, empowering entrepreneurs to build and manage their ventures and accept payments with a dedicated partner by their side. The product innovation and targeted investment over this period has led to a better suite of products. And with our soon-to-be launched GoDaddy digital guide, we will provide an even further differentiated experience for our customers. propelling long-term growth for GoDaddy through faster product attachment and stronger retention. As we consider the many headwinds we faced in the first half of the year, we are thrilled with the continued momentum of our applications in commerce revenue and the acceleration in our Create & Grow solutions. Our durable model continues to generate free cash flow, and we expect to reaccelerate our growth and improve our profitability as we exit the year while delivering on our cash flow targets. Moving to our financial results. Our applications and commerce revenue grew to $352 million, up 11%, surpassing our guide of 8% to 10% and delivering a segment EBITDA margin of 41%. The strength in our Applications & Commerce segment is fueled by our create gross solutions, which accelerated to $465 billion in ARR, up 11%. Additionally, we drove rapid growth in GPV comparable to last quarter, and we are on pace to more than double the 2022 exit rate by the end of the year. as we continue to attract and convert customers within our 21 million base to GoDaddy payments. ARR for applications and commerce grew 10% to more than $1.3 billion. with a 20% growth in annualized GMV to over $33 billion. Core platform revenue totaled $696 million, flat year-over-year with a segment EBITDA margin of 27%. ARR for our core platform segment was $2.3 billion. Core platform revenue was supported by 3% growth in domains on stronger customer additions from higher demand and price increases. This was primarily offset by greater-than-expected declines in our aftermarket on aftermarket. Revenue decreased 5% to $101 million on a tough compare from last year. Over the last five years, we've built upwards of a $400 million revenue two-sided marketplace. As a reminder, this business allows a buyer and seller to transact on our platform at their agreed upon valuation. This business rapidly grew as we scaled the operations, participants, and partnerships. What we see now is a post-COVID normalization of this business as valuation of larger transactions have decreased and volume growth has slowed. With that, we expect steady low to mid-single-digit top-line growth for the business on a go-forward basis. On our core platform restructuring initiative, we completed the migration of Media Temple and Main Street Hub customers to the GoDaddy technology stack. And the 123 Reg migration is planned to be completed by the end of the year. As expected, these migrations produce a slightly elevated churn on these brands this quarter, but will deliver further cost efficiencies in the future. The retention rate of customers for the GoDaddy branded products remains above 85%. Total revenue grew to $1.05 billion up 3% on a reported basis and 4% excluding aftermarket. Constant currency revenue increased 4%. Within total revenue, international revenue grew 3% on a reported basis. and 6% on a constant currency basis. Our ARPU grew 3% to $199 from $193 last year, and we added 100,000 net new high-quality customers despite the headwinds from our migration efforts. Normalized EBITDA grew 2% set to $265 million, while delivering a margin of 25%. Bookings totaled $1.1 billion, growing 2% on a reported basis. and 4%, excluding aftermarket and the impact of the integration of non-core assets. Bookings grew 3% on a constant currency basis. Excluding the impact of aftermarket, the drivers of growth in bookings were strong customer additions and price increases in domains as well as strong attach in applications and commerce. We expect these factors to contribute to accelerated revenue growth next year. Unlevered free cash flow for the quarter totaled $284 million, growing 3%. While free cash flow was relatively flat at $240 million despite increased interest-related payments. Free cash flow per share rose to $6.44 on a trailing 12-month basis. versus the prior year's cash flow per share of $5.67, a 14% increase driven by execution, operating leverage, and share repurchases. Through July 31, we repurchased 10.2 million shares year-to-date, totaling $746 million, of which $632 million was repurchased since the end of Q1. This brings the cumulative share repurchase under the current authorization to $2 billion and 27.1 million shares, reducing shares outstanding since the inception of this authorization by 16% and we remain on part for our commitment to reduce our fully diluted shares outstanding by 15% to 20% over the three-year period. Additionally, today, we announced an incremental $1 billion share buyback authorization to bring the total authorization to $4 billion and extending the program out to 2025. On the balance sheet, we finished Q2 with $583 million in cash and total liquidity of $1.6 billion. Net debt stands at $3.3 billion with a 2.9 times net leverage within our targeted range of 2 times to 4 times. Lastly, we secured a 75-basis point interest rate reduction on $1.8 billion of outstanding principal through a refinance issued at par. This refinance is expected to save $13 million annually in interest payments for each of the next seven years. Moving on to our outlook. We are targeting Q3 total revenue in the range of $1.055 billion to $1.075 billion, representing growth of 3% at the midpoint. With the current momentum, we expect to exit the year at approximately 7% top-line growth with a normalized EBITDA of 28%, an increase of 300 basis points from our 2021 exit rate of 25%. We are increasing our growth expectations for applications and commerce to be between 9% and 11% for Q3 and the full year. In our core platform segment, we expect revenue to be flat in Q3 and reaccelerate in the fourth quarter to deliver 1% growth for the full year. Q3 Normalized EBITDA margin is expected to improve to approximately 26% with continued acceleration over the fourth quarter, resulting in a full-year normalized EBITDA margin of approximately 26%. This is a 300-basis point increase from our 2021 rate of 23% on better operating leverage from improved marketing performance, restructuring efforts benefits from our continued move of loads to cloud and the incorporation of AI into our operating model. On the growth bridge we spoke about last quarter, we remain confident in the path to accelerated revenue growth. While expanding margins and improving cash flows. As a reminder, this year's revenue growth rate includes approximately two points of FX pressure from last year's bookings. Difficult compares in our aftermarket business and the migration and divested certain non-core assets. We expect momentum in bookings in the second half of the year to drive the reacceleration of revenue growth as we exit the year while we remain committed to delivering our margin expansion and free cash flow targets. We will be posting our annual investor dinner with product demonstrations in November at our Planning and Investor Day in Q1 '2024, we consider both a great opportunity to share more about our exciting initiatives in AI and our outlook for the next three years. In closing, we remain confident in our ability to execute in the areas of our business within our control and deliver the full-year targets. As always, we remain focused on executing against our strategic priorities, committed to being responsible stewards of capital, and strive every day to provide a one-stop shop to micro businesses, along their entrepreneurial journey with an eye towards balanced long-term growth and profitability. With that, we will have Christie Masoner from our Investor Relations team to open the call all for questions.

Matt Pfau:

Great. Thanks, for taking my questions. Two of them. First, I wanted to ask on the acceleration of the core business in the fourth quarter in Pleasant healthy sequential increase. Maybe you can just discuss what are the factors that are driving that increase.

Matt Pfau:

Great. And on the digital guide, maybe you can just help us understand what that rollout is going to look like? Is it just going to be for new customers? Or do you plan to roll that out to your existing base as well?

Matt Pfau:

Great. Thanks, for taking my questions.

Vikram Kesavabhotla :

I wanted to ask about the applications and commerce segment. It looks like you raised the expectation there for fiscal '23. Maybe if you could talk some more about the primary drivers behind that revision. And then separately, I also wanted to ask about the EBITDA margins. It looks like you posted about 25% in the second quarter. You're guiding to 26% in 3Q and exiting the year at 28%. Could you just talk through some of the main drivers of the expansion there throughout the balance of the year? Thanks.

Vikram Kesavabhotla :

Great. Thank you.

Trevor Young:

Great. First, on core platform now expecting around 1% growth for the full year within the main lines there, aftermarket domains ex aftermarket and security and hosting, which linear line are kind of underperforming relative to your prior expectations. And then second one on that AI-powered digital guide, do you view that as kind of complementary to the higher-touch customer care organization? Or do you see that functionality eventually kind of helping alleviate some of the cost or headcount within the care organization?

Aman Bhutani:

And Trevor, on the digital guide, we couldn't be more excited about bearing a guide with every domain purchase and letting that digital guide the customer just like we do in care. We've done a phenomenal job in care over the last few years by sort of creating leverage on the Care line item as revenue grew, we get costs pretty flat. And it's a little early to be talking about the impacts of AI. But overall, we do see leading to efficiencies in our business overall. And frankly, we've already showed that in Marketing, where by implementing machine learning, we're able to make our spend more and more efficient. And we've been seeing the results of that over the last year already.

Christie Masoner :

Our next question comes from the line of Naved Khan from B. Riley. Naved please go ahead.

Mark McCaffrey:

Yes. Naved, thanks. We're excited on our Investor Day coming up in the first quarter, and we'll get more into the details of what we'll look like. We're really excited about our margin expansion going into Q4, the 28%, if we look back to the Q4 in 2021, we've increased our margins by 300 basis points. Even year-over-year, we get to the same 300 basis points. So, it's something we continue to work on. We continue to find efficiencies in our operation, and we'll continue to push margin growth going into 2024. At the same time, we're accelerating revenue and hitting our cash flow objectives well. So, I don't want to give you too much of a leading what 2024 is going to look like, but we're really excited about our progress, the work we've done in the first half of the year and how that's going to benefit us in the back half of the year and then ultimately into 2024.

Mark McCaffrey:

Yes. Thanks. And try not to peg a specific timetable here as we're getting into the back half of the year. We'll talk more about it later. But when we look at the full-year guide this year and we kind of look at the impact of FX, the difficult aftermarket compares and migrations and divestitures we're doing -- they will start to abate into the fourth quarter and continue to abate and turn into tailwinds as we go through 2024. Not trying to pick a quarter on anything right now. We'll talk more about that later in the year. But the momentum has us accelerating revenue as we go through units.

Mark McCaffrey:

And if I could just add to that and to clarify, we -- while we look out in '24, we are reaffirming our guidance for 2023 in the range for revenue just FYI [ph].

Christie Masoner :

Our next question comes from the line of Brent Thill from Jefferies. Brent please go ahead.

Aman Bhutani:

Yes. GMV growing as a function of sort of the macro to start with. We are seeing more of our existing customers transact more with the solutions they have. To remind you, a lot of our GMV is a function of the relationship we have through the bank. So, it's a different financial model for us, but it gives us a great barometer. It gets our product out there. We get to see sort of what's happening in the world. So, we are very happy with the growth and it basically signifies more and more people using the GoDaddy solutions for their businesses, both off-line and in store

Aman Bhutani:

Partnership is doing great. We have launched the product with them. We have a set of customers that are using our new solutions, still very early since we're only about a month in, I think, from the launch. So, it's still pretty early, but very happy with the progress. I dare say that our partners are pretty excited about the progress too. And I think they can't wait to get out there and sell it more and we can't wait to see those customers.

Unidentified Analyst:

Thank you.

Unidentified Analyst:

Hi, guys. This is Alex on for Mark. Just a question on payable domains. So last quarter, you characterized contribution is modest, and it sounds like there was meaningful performance in 2Q from payable domains. Just curious if you could perhaps discuss what was the most meaningful driver for that -- for the outperformance in applications in commerce or whether or not payable domains as a material driver of that.

Mark McCaffrey:

Yes. And I'll add on applications comments in general, where we're really excited is strong gross customer adds are coming in and coming stronger than we've seen in a long time. Not only are they coming into the funnel, they are getting to that second product -- and whether it's payable domains, whether it's payments, whether it's commerce, whether it's wet like marketing, they're bundling those together at the initial stages. We think the digital guide will also accelerate that as that starts to at faster rate. But when that happens, when like man said, when we get to that second product, that third product, we get to a third product attached, generally, we find we have a customer for life, and that really drives the all this because the decisions around it are being made faster on the top of the funnel, help us get there faster and drive that LTV equation. Obviously, it helps to -- with our cash flow, and it helps us be more efficient because we're getting greater revenue prices or getting better revenue and a better efficient operating margin as well. So, we feel really good about all that happening in the applications and commerce. It's really driving a lot of momentum. We have that on top of the hardware sales that we are seeing that are driving that momentum as well, a lot of positivity coming right? And it all starts with the domain and innovating in the demand.

Christie Masoner :

Our next question comes from the line of Ygal Arounian from Citi. Ygal please go ahead.

Aman Bhutani:

Yes. Happy to give a bit of color on domains. Obviously, I think you probably saw already domains under management for GoDaddy grew. So definitely, we're doing well on units as well. And to sort of explain a little bit where -- as Mark said, we're seeing better traffic and demand coming to our site. As I mentioned in my prepared remarks, some of that is because of our focus in search engine marketing and us significantly improving our abilities to spend money and search and convert those customers. So, we're very happy with that as well. And one other maybe mentions to mention to you is that we've continued to grow well internationally. As Mark shared, we grew 6% internationally on a reported basis, 3% constant currency, 6%. And the product we lead with internationally is domains, right? Domains is the number one thing we sell in small markets around the world, we have customers in over 100 markets. So, it's the combination of those things that I would say that are leading to the best results for us. And our Domains business is broader than any other one particular registry business. You mentioned that yourself, and that's absolutely true. We're the market leader. We have a diverse set of assets within the domains business. We've continued to innovate in many of those areas. And the key pieces where we see good returns this we'll be very efficient in marketing and search, grow the dumps, grow the customers, get customers to the stick, can work them while attach products to them, which obviously isn't what you're asking about, but attach rate products to them and do it around the world really well. Hopefully, that's a bit helpful.

Aman Bhutani :

Yes. Yes. So, gross ads were strong for us, and it was on efficient marketing spend. And I did highlight in the prepared remarks, and I think you repeated that which is that search was a strong contributor to that. And what I added to that is that it's not just search in the U.S., it's search globally. That did a really good job sort of delivering for us. But it's not a search alone. We have been focused on improving our marketing, the targeting of our migraine, and the measurement of our marketing over the last couple of years. I think we've talked about it multiple different times has been an important priority for us. And what we're seeing as a result is more people show up to the website, right? More people going through the funnel better. I think one of the things I've talked about, and I don't know if this is what you're asking about. But One of the things in the past that I've talked about is that we have shifted as a company, and we are very much an experimentation-based culture now. teams go out and they try different things and then measure closely whether there's a conversion improvement or not. And that, of course, helps as well, right, where when we land better traffic and conversion is up on the site, that delivers better for us. Whereas in the past, maybe years ago, we may have relied on a combination of the site and care more, what we find now is that the site performs really well. And that's a great way for us to attract gross ads, and we're pretty happy with that result.

Ygal Arounian :

Right. I have a follow-up, but I don't want to I'll jump back in the queue and then...

Ygal Arounian :

Yes. Okay. So, then this is all super helpful. I love this color. So, you and your peers on the kind of closed-end platforms seem to be all driving efficient marketing spend that's bringing more share were really across the board. And then going back and tying that back into the kind of, let's just say, flattish domains globally, right? It feels like your space is taking a lot of the share of the web-building ecosystem. Is that a fair characterization? And where do you see the share coming from? I think we talked about World Press in the past and maybe you could just help on that. Thanks.

Ygal Arounian :

Thank you so much.

Unidentified Analyst:

This is Christian Kentaro on for the listed quarter. I wanted to ask around the macro and kind of how it's changed Q2 versus Q1. And then the second question would be around the digital guide. Are these capabilities kind of like table six for the industry? Or how do you think about your ability to drive your differentiation in AI against your web-building competitors? Thank you.

Mark McCaffrey:

I'll add one of the distinctions we have is from identity to presence, to commerce, we have the entire technology set. So, when we use generative AI, we could take it across their entire journey, and we start with the domain, and that makes that journey faster gets us the bundling faster, gets us to customers for life for us, and driving LTV into our financials. So, we're really excited about it. But one of the great distinctions is we have the entire technology stack around it to use they are around.

Aman Bhutani :

And the temperature is much cooler in November.

Navid Khan :

Okay good. Yes, a quick follow-up. So, one is we saw a transaction, Google domains being sold to Square space. And I wanted to get your thoughts on what it means for the other participants such as yourself in terms of competition. And then the other question I had was on the price increase on the A&C segment. What was the magnitude of the increase?

Mark McCaffrey :

Yes. I don't think we've gotten into the magnitude of breaking down pricing by each of the different components of it. I'll give it a little color. I think last year, we focused mostly on pricing increases around renewals. This year, we're doing it on new as well as renewals. So, I would say than we did last year. Obviously, our priority is always retention rates in sticking with -- but we took those pricing increases at the end of Q2, and we should start to see them materialize as we go throughout the year.

Mark McCaffrey :

Thanks, Navid.

Aman Bhutani :

Thank you, Christie, and I'll just end by thanking all the GoDaddy employees for another good quarter. And just to remind all of our Anderson shareholders where -- we're super excited about the products we're bringing to market. We're super excited about attaching into our base that we've demonstrated with e-mail and are demonstrating with commerce now. We're super excited about the trajectory we have going into Q3 and Q4. Ending the year at accelerating growth and strong margin, setting up next year really well. I look forward to the next call. Thank you very much.

Christie Masoner:

Good afternoon, and thank you for joining us for GoDaddy's First Quarter 2023 Earnings Call. I'm Christie Masoner, Head 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. [Operator Instructions] On today’s call, we’ll be referencing both GAAP and non-GAAP financial results 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.godaddy.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, which include those related to future financial results, our strategies or objectives with respect to future operations including our approach to capital allocation, new product introductions and innovations and our ability to integrate acquisitions and achieve desired synergies. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. 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 4, 2023 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 pleased to introduce Aman.

Mark McCaffrey:

Thanks, Aman. Before getting into the detailed results, I wanted to summarize a few key points. First, we are making progress towards returning to double-digit growth while executing our three year plan to expand our operating margins and deliver on our free cash flow per share targets; second, we are delivering on our applications and Commerce segment growth through increases in new customers and the conversion of our existing customers to our payments platform in the US.; lastly, we are on target to complete our restructuring action in the second quarter, driving better operating leverage in our core platform segment and improving our overall operating margin in the second half of the year. With that, Applications & Commerce revenue grew to $338 million up 12%, exceeding our guide of 8% to 10%. Additionally, the normalized EBITDA margin for Applications & Commerce was 39%. Taken together, this highlights the impressive performance we are driving in this business which delivered ARR for Create and Grow of $450 million, up 10% and over $1 billion of GPV. This segment is our largest opportunity to drive growth through the attachment of our Create and Grow products, Commerce platform and productivity solutions for both new and existing customers. ARR for Applications & Commerce grew 9% to more than $1.3 billion. Annualized GMV, across the GoDaddy ecosystem grew 18% to approximately $28 billion. Our core platform segment which includes Domains, Hosting and Security continues to serve as an important on-ramp to our overall business. Core Platform revenue was $698 million with an ARR of $2.2 billion and a strong normalized EBITDA margin of 27%. Core Platform revenue was supported by a 5% growth in domains from a combination of new customer adds, attach and price increases on renewals. This was offset by tough compares for our aftermarket business as well as the continued uneven flow of large transactions. Additionally, there are modest impacts to our hosting revenue and customer count from migration of non-core hosting platforms being sunset. Total revenue, grew to $1.04 billion up 3% on a reported basis and 5% on a constant currency basis, reflecting a sequential lift from the Q4 growth rate. Within total revenue, international revenue grew 3% on a reported basis and 7% on a constant currency basis. Q1 bookings grew faster than revenue at a rate of 4% on a reported basis and 5% on a constant currency basis, totaling $1.2 billion. Bookings growth on our subscription products outpaced the related revenue growth by approximately 100 basis points. Our durable model continues to generate cash flow through our strong customer relationships and cohort performance, highlighted by our customer retention rate of 85%. We build on this strength through intentionally focusing our marketing on attracting high-intent customers that stay with GoDaddy and spend more. This quarter, we added 100,000 net new high-quality customers, despite headwinds from our migration efforts noted above. Our ARPU grew 4% to $197 from $190 last year. Normalized EBITDA grew 11% to $250 million with a margin of 24%, representing approximately 160 basis points expansion. We expect to continue to drive operating leverage through strong execution and our restructuring efforts. Unlevered free cash flow for the quarter totaled $304 million, growing 6% driven by strong profitability, while free cash flow remained flat at $259 million, despite an increase in our cash interest expense due to the refinancing of our term debt in Q4 2022. Free cash flow per share rose to $6.19 on a trailing 12-month basis versus the prior year's cash flow per share of $5.25, an 18% increase driven by execution, operating leverage and share repurchases. Additionally, in Q1 we completed $114 million of share buybacks, repurchasing 1.6 million shares. This brings the cumulative share repurchase under our $3 billion authorization to $1.4 billion and 18.4 million shares reducing shares outstanding since inception by 11%. We remain on target for our commitment to reduce our fully diluted shares outstanding by 15% to 20% over the three-year period. On the balance sheet we finished Q1 with $892 million in cash and total liquidity of $1.9 billion. Net debt stands at $3 billion with 2.7 times net leverage within our targeted range of two to four times. Lastly as noted above we signed an agreement to divest certain non-core hosting assets which is expected to close by Q3. Our restructuring charge of $50 million in the quarter included $21 million of a non-cash impairment charge for these assets. Moving on to our outlook. We are targeting Q2 total revenue in the range of $1.045 billion to $1.065 billion, representing growth of 4% at the midpoint. With the current momentum, we expect to exit the year at approximately 7% top line growth with a normalized EBITDA of 28%. We expect applications and Commerce segment growth to be between 8% and 10% for both Q2 and the full year. For core platform, we expect revenue growth 1% to 3% in Q2 and accelerate in the back half of the year to deliver between 2% and 4% for the full year. Q2 normalized EBITDA margin is expected to improve to approximately 25% with continued acceleration over the back half of the year to deliver full year normalized EBITDA margin of approximately 26%, showing improved operating leverage from the actions previously discussed. I would like to spend a moment bridging our expected 2023 revenue growth to what we believe our strategy and model can produce going forward. Our current guide for the full year is 5% revenue growth at the midpoint. As a reminder, this year's revenue growth rate includes approximately two points of FX pressure from last year's bookings and is also impacted by difficult compares in our aftermarket business and the divestiture of certain non-core revenue-generating assets. Looking ahead to next year and beyond, absent those negative impacts and with the momentum we are driving through the strategic initiatives Aman spoke about earlier including ARPU expansion, even with the continuation of the current macro environment there is a path to returning to double-digit top line growth, while remaining committed to delivering our margin expansion and free cash flow targets. We remain disciplined in how and where we spend with a focus on controlling our costs, optimize our marketing spend, monitoring headcount and investing in innovation so that we can strike the right balance between capturing attractive opportunities with delivering value to our shareholders always with an eye towards balanced long-term growth and profitability. In closing, we have strong confidence in our ability to execute and accelerate our growth. We believe our competitive position and strategic advantages, our diverse product offerings, our strong balance sheet and the consistent and predictable cash flow we generate will position GoDaddy as a leader amongst its peers. Our 21 million customers create the foundation for our resiliency. We remain focused on execution against our strategic priorities responsibly managing our business and building deeper customer relationships as we partner alongside entrepreneurs on their journey. With that we will have Christie Masoner from our Investor Relations team open up the call for questions.

Matt Pfau:

Great. Thanks for taking my questions. First wanted to understand the potential acceleration next year a little bit better. So if we look at the business absent those three headwinds that you cited do we need an acceleration in that business in order to get to double-digits, or is just a normalization of those three headwinds sort of enough to get us there?

Aman Bhutani:

Yes. And maybe I'll just add Mark, Matt that we see of course the headwinds away but we also have good momentum in the business. Mark already mentioned the growth in AMC, but also the domains business has done well and demand has been better and improving. So we're very sort of encouraged by the momentum and that's what we're really talking about.

Mark McCaffrey:

Yes. No doubt Matt that we've talked about that product mix will impact our gross margin. And we're focusing on operating margin as we run the business and expansion of that. But as we get into more of the transactional businesses we can continue to see pressure on the gross margin, but be in that 60 -- low 60s to mid-60s range. As it scales it becomes more accretive. Obviously we get the leverage on the operating margin and it'll help us deliver on our normalized EBITDA.

Mark McCaffrey:

Thanks, Matt.

Trevor Young:

Great. Thanks. Just first one Mark. On the 1Q segment results core platform a bit below guide and A&C a bit ahead, on either of these, could you maybe speak to which areas drove relative under or outperformance specific versus your expectations? And then, on repurchases in the quarter, a bit below run rate over the prior three quarters and a bit below what you'd expect given the $1 billion guide. Realized capital allocation strategy was reiterated here, but just wondering if there was something that gave you pause on those repurchases such as macro or just a conscious effort to kind of bolster cash on hand a bit? Any color there would be appreciated.

Trevor Young:

Great. Thanks, Mark.

Christie Masoner:

Our next question comes from the line of John Byun from Jefferies on for Brent Thill. John, please go ahead.

Christie Masoner:

Hi, John. You might be -- I think you’re still muted.

Aman Bhutani:

Yes, John thanks for that question. Mark has talked about the pillars of revenue for Commerce. And we actually saw goodness across all of them. But selling into our existing base of customers was the largest driver of this acceleration and growth and we continue to be very excited about it. In terms of how that sales cycle works, our customers have a fantastic relationship with GoDaddy. And we're bringing not just sort of the surprise and delight element of hey you have this relationship with GoDaddy and we have more to offer, we also have great pricing for them. So, when you put together the relationship all the basket of sort of one-stop shop and the pricing that leads to them switching over from other folks. And we -- this is -- of course, we're excited about payable domains and that did its part and resellers did its part. And everyone -- every piece helped, but the prime focus for us is selling into our base. We're seeing goodness there. We're going to keep attacking that. And from what we can see it seems to be a bit of a unique competitive advantage for GoDaddy because of the relationships we have. So, we absolutely are continuing on path on that.

Aman Bhutani:

Yes. GMV as a whole if you remember is the broader sort of set of customers we have also inherited from Poynt and it tends to follow seasonality of the business Q4 versus Q1 and nothing new to sort of report that.

Aman Bhutani:

Thanks John.

Clarke Jeffries:

Hello, thanks for taking the question. First one I think it's for Mark I was hoping you could maybe give us some color on that exit rate of 28% EBITDA margins. How we might be able to think about that between the two segments kind of footing the disclosures you gave on A&C core platform and overhead?

Aman Bhutani:

Yes. And maybe just very quickly Clarke if I can add. If you look at items like marketing spend, obviously, I've talked about it a lot over the last couple of years, but we continue to sort of make our ability to measure return on ad spend better and better globally. And what we're seeing is good gross ads good demand coming to the site and the lowest marketing spend sort of as a percentage of revenue that we've had in a while. So obviously, that continues to help us as well apart from sort of the actions that Mark talked about which are more on the people side.

Mark McCaffrey:

Yeah. You just called it. I think the primary driver was aftermarket and the continued absence of the large transactions. Just as a reminder, we don't set the prices in the aftermarket. That's a buyer and seller agreement and we kind of facilitate the transaction between two. So we're still seeing that disconnect in the market related to the buyer and seller agreeing which shows up in the larger transactions. So it's primarily the cause of the core platform missing the guide. There is a little bit on the hosting no doubt. I don't want to say it's 100% because there is some as we are migrating some of the noncore assets into the GoDaddy technology stack we have seen some pressure there. But I would say aftermarket was primary.

Christie Masoner:

Our next question comes from the line of Aaron Kessler from Raymond James. Aaron, please go ahead.

Amanpal Bhutani:

Yeah. Thanks Aaron. Maybe I'll just take the top of the funnel and Mark if you want to touch on ARPU. So like I started to say earlier top of the funnel I think we see good demand year-over-year. We see good gross adds and we're pretty happy with what we're seeing and as we had talked about last quarter as well a bit the momentum seemed to improve through the quarter. So our customers by just nature tend to be resilient and tend to be a creative group. So and we serve them like I talked about as well all, but it does seem to be showing up in the numbers to a good extent as well. So we remain optimistic about the rest of the year. And of course we'll keep you updated on it with Mark on ARPU.

Aman Bhutani:

And we can – those two thoughts together with bookings growing faster than revenue both those pieces basically come together.

Christie Masoner:

Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.

Aman Bhutani:

I think from two views, one from our customer's view I think the challenges in the financial banking crisis have not had a significant impact for our customers. I would remind you that many of our customers are micro businesses and they don't even access to banking services or capital and they really are a very creative group. And for our business as a whole obviously, we're not dependent on SVB or sort of risks that come close to the regional banking places. I don't know Mark if – what you would add?

Unidentified Analyst:

Great. Thank you for the question.

Mark Zgutowicz:

Thank you. Good evening. Just a couple of quick ones. Your A&C revenue guide for this year ,it looks like potentially a modest sequential decline if you look on a two-year stack basis throughout the year. So I'm just curious with new products coming to – does the market an infancy there, what that might be attributed to? And related if you can maybe speak to the attachment rates you're seeing early on with your OmniCommerce rollout and whether there are any initial demand signals that you'd like to share? And then last on the 2Q and annual revenue growth guides, if there's any material contribution from payables – payable domains and then and also from Worldpay? Thank you.

Aman Bhutani:

Maybe, I'll just talk about attach more broadly real quick and then get into OmniCommerce as well. We talked about bundling a little bit. And as Mark said bundling is a great option for us to bring two-plus products to our customers and it helps obviously not just the average order size but it helps with the retention, because customers that engage with more than one product tend to retain at higher rate. And that's an area of focus for us and we're pretty excited about where we're going. On the OmniCommerce issue, we've had great success selling into our base but it's still very, very early days. Very similar to your question about payable domain. I'm super excited about payable domains. We have some early results that I indicated and there's more to do. But all of these things we're very early in the process. We're very excited about the opportunity in the future. And overall the attach of these products to our existing customers continues to be good. I think in terms of sharing specific numbers on that, we'd want to have it reach certain milestones so we can share more with you.

Mark Zgutowicz:

Great. Thanks guys. Appreciate it.

Aman Bhutani:

Thanks.

Ygal Arounian:

Hey, good afternoon, everyone. So I want to ask about AI. Apologies, if it has been asked. But I know you mentioned some of the generative AI, prompt library and some things you're doing on that front. But certainly recently but really over the past couple of months there's been a greater dialogue about generative AI disrupting the web builder business. And I want to get your thoughts on that, how you're approaching it and how you think about AI maybe not just in the near-term but over the long-term as well?

Ygal Arounian:

Okay. That's really helpful. I think some of the ways -- it's been depicted about how AI disrupts your business model. So, a little bit too simplistic. So it's good to hear that from you. I think you also mentioned taking share within the website builder space. And you guys give your overall customer count but not the specific customer count on Websites + Marketing and Managed WordPress. So I wanted to maybe see if you can elaborate on that point a little bit more and get a little bit more color. Thanks.

Ygal Arounian:

Okay. Great. Just to be clear, your -- when you're talking about taking share, are you including WordPress on that or not?

Ygal Arounian:

Great. Thank you.

Christie Masoner:

Our next question comes from the line of Ella Smith from Morningstar. Ella, please go ahead.

Aman Bhutani:

Yes. Super excited about the Tap to Pay opportunity. And obviously, I think all of you know well what the functionality offers. I think what GoDaddy has to bring that's a bit special is that we work with Apple directly to create a truly seamless experience. I would love to in a different setting showcase that for our analysts and customers on a bus tour or something. So you can actually, see how much easier it is when GoDaddy creates that what we call the seamless and intuitive experience. And our goal there really is to have a set of services or experiences for our customers that are also easy to use that the customer doesn't hesitate to use it. As you know, our customer is the micro business owner. And there is a cost for them to take on something new, right? Because they need to put energy into growing their business and not trying to learn new technology. So when we lower the friction bar when we make it easy for them the adoption is much faster. And that's the early signal with Tap to Pay as well that GoDaddy merchants are just very, very quickly adopting Tap to Pay. And there's actually much more we're going to give them with Tap to Pay. With Microsoft Teams, the idea there is that, we want to be able to serve our customers to any of the sort of services that they used to engage their customers. This is a new opportunity. It's something that we're exploring and are curious about, where as you well know Microsoft Teams has grown and sort of has very large user base. And what we're really offering is the payments capability within Teams. And it extends our existing sort of beautiful relationship with Microsoft through the productivity products already.

Aman Bhutani:

Actually, over the last couple of years, I've talked about it a little bit, but let me update some of my comments. At GoDaddy, we've been using AI to provide customers with better domain names and we've put more energy into that over the last two or three years. It was actually one of the things we had mentioned where when we had first seen the acceleration of the aftermarket that we were actually using machine learning models to find better names for customers that were available where they were available in the primary market or the secondary market., So there is an impact of AI into our core business. But that impact so far has been a positive one and one that creates tools that allows customers to find better things. And at least so far we have not found any reason for those technologies to be negative on a negative impact to us.

Aman Bhutani:

Thank you.

Aman Bhutani:

Thanks Christie. Just a quick shout out to all GoDaddy employees for another solid quarter. We are super excited about the execution of the company. We're clear in our strategy and it takes all of us to get it there. And we appreciate you taking the time today to join this call and ask us a few questions. Thank you.

Christie Masoner:

Good afternoon, and thank you for joining us for GoDaddy's Fourth Quarter and Full-Year 2022 Earnings Call. I'm Christie Masoner, Senior Director 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. [Operator Instructions] On today’s call, we’ll be referencing both GAAP and non-GAAP financial results and operating and business metrics such as total bookings, unlevered free cash flow, free cash flow, normalized EBITDA, annualized recurring revenue or ARR, gross merchandise volume or GMV, gross payments volume or GPV, and net debt. Growth rates presented represent year-over-year comparisons unless otherwise noted. 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 investors.godaddy.net or in today’s earnings release included in our Form 8-K filed with the SEC. The matters we’ll be discussing today include forward-looking statements, which include those related to our future financial results, our strategies or objectives with respect to future operations, including our approach to capital allocation, new product introductions and innovations, and our ability to integrate acquisitions and achieve desired synergies. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. 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 February 14, 2023 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, here’s Aman.

Mark McCaffrey:

Thanks Aman. Hello, everyone, and thank you all for joining us. Last year, we hosted a comprehensive Investor Day, where we shared our financial goals for the coming 3 years around revenue growth, Normalized EBITDA, free cash flow per share and share buybacks. GoDaddy turned in a strong year against those financial goals, delivering revenue of $4.1 billion; Normalized EBITDA of $1 billion; free cash flow per share of $6.20 and executing $1.3 billion in share buybacks, meeting and exceeding our targets. While revenue growth has moderated in the short-term, we remain confident in our ability to deliver the profitability and cash flow we outlined at Investor Day and feel the strategic steps Aman described earlier will serve as tailwinds for accelerating our pace of growth going forward. We also remain committed to completing our share buybacks authorized by the Board last year. Reviewing our annual financial results, total revenue was $4.1 billion in 2022, growing 7%. Excluding a point and a half of FX headwind, total revenue for the year would have grown over 8% on a constant currency basis. Applications and commerce revenue for the year grew to $1.3 billion, representing 13% growth, and Core platform revenue for the year totaled $2.8 billion, representing 5% growth, both in line with the targets we set last year. International revenue was $1.3 billion for the year, representing 5% growth. Excluding the FX impact, international growth would have been 8% on a constant currency basis. Total bookings in 2022 was $4.4 billion, growing 4%, or 6% on a constant currency basis. Full year unlevered free cash flow grew to $1.1 billion, representing 14% growth, in line with our guide issued last year. Free cash flow grew 13% to $969 million. Free cash flow per share increased 22% to $6.20 per share, ahead of our investor day target of $6. Lastly, full year Normalized EBITDA grew 16% topping $1 billion, resulting in a 25% margin for the year, which is an expansion of 2 points over the prior year. Moving on to our fourth quarter results, total revenue topped $1 billion, growing 2%, or 4% on a constant currency basis. International revenue grew 3%, or 8% on a constant currency basis. Applications and commerce revenue grew 11% to $333 million, in line with the guided range of 10% to 12% for the quarter. Growth in Applications and Commerce was fueled by continued adoption of our Create and Grow products, email attach, and increasingly the adoption of GoDaddy payments and the related hardware sales. The ARR for applications and commerce grew 9% to $1.3 billion. With that, the ARR from our create and grow products grew 8% to $445 million. Additionally, annualized GMV across the GoDaddy ecosystem grew 10% to approximately $28 billion. Furthering our efforts to provide more visibility into key growth areas of the business, we will share a new metric demonstrating our progress with GoDaddy Payments. GPV represents the dollar amount of payments processed on the GoDaddy payments platform. With Q4 as the first quarter with commerce fully launched on every surface in the U.S., GPV has already grown to an impressive $760 million. Core platform revenue decreased 2% to $707 million in the fourth quarter, primarily due to the tough compare to the year-ago quarter when aftermarket benefited from some larger than average transactions we have discussed previously as well as a modest decrease in our hosting business. As previously mentioned, the hosting business has out-sized exposure to uneven demand in Europe as well as FX pressure. ARR for core platform grew 1% to $2.3 billion. Q4 bookings grew to $1.1 billion, flat year-over-year and growing 2% on a constant currency basis. Applications and Commerce bookings grew 7% on strength of Websites + Marketing, email attach and hardware and software sales. Core Platform bookings decreased 3% year-over-year on tough aftermarket compares noted earlier and due to softness in the broader hosting business. Gross margin was down slightly for the quarter, primarily due to product mix. Payments revenue will put some pressure on gross margins as this revenue stream gets larger in the future. However, there are relatively low incremental operating costs once those customers are acquired and set up on GoDaddy Payments, so we expect payments to be highly accretive to Normalized EBITDA as we scale. Normalized EBITDA in Q4 grew 5% to $266 million, representing a 26% margin and an expansion of 70 basis points in the quarter. Continued discipline in spending allowed us to increase our margins at a rate higher than our bookings. GoDaddy’s high brand awareness and the effectiveness of our in-house bidding algorithm allowed us to drive efficiencies in marketing spend. We also continued to drive leverage in customer care. Unlevered free cash flow grew 17% to $238 million, while free cash flow grew 16% to $202 million delivering $1.29 free cash flow per share in the quarter, a 25% increase over last year’s Q4 free cash flow per share. Turning to the balance sheet, we exited the year with $774 million in cash and total liquidity of $1.8 billion. Net debt landed at $3.1 billion, below 3 times net leverage on a trailing 12-month basis, and near the midpoint of our targeted range of 2 to 4 times. On our share repurchase efforts, we’ve returned $1.3 billion of cash to shareholders under the current authorization. From January 1, 2022 through February 1, 2023, we repurchased 17.2 million shares, which has reduced our fully diluted share count by approximately 10% since the beginning of 2022, on target for the 15% to 20% net reduction for the 3-year period. On customers, over recent years, the way we generate revenue has evolved through our expanded offerings to our customers, resellers and partners. We will continue to use metrics like ARR, GMV and GPV to show the health of our business and the progress towards our strategic goals as discussed at Investor Day. As a result of the way our relationship with customers is evolving, we have updated the way we measure and report our total customers. In addition to paid subscriptions at the end of the period, we will now include accounts with paid transactions in the trailing 12 months and exclude accounts that have converted to free versions of our software. These changes do not meaningfully affect the historical customer growth or retention trends previously disclosed. We believe the updated definition more accurately reflects the dynamic customer lifecycle and provides more detail around the overall strength of our historical cohorts with a continued focus on long-term customers with a higher propensity to spend. Under the new definition, in 2022 ARPU increased to $197 compared to $187 and $170 in 2021 and 2020, respectively. Retention rates remained consistent at 85% and customer count increased to 20.9 million in 2022 compared to 20.7 and 20.1 million in 2021 and 2020, respectively. Moving on to our outlook for Q1 and for full year 2023, let us start by covering several notable events. In January, we signed a partnership agreement with FIS Worldpay to be a strategic reseller of our OmniCommerce solutions for U.S.-based small business customers and bank partners. This arrangement is expected to drive growth in the second half of the year and will contribute to our commerce strategy through increased reach of our OmniCommerce offerings and website attachment. We are excited about the launch of this partnership in 2023 and the momentum this gives our Application and Commerce segment going into 2024 and beyond. On restructuring, we took certain actions necessary to align our structure with the current economic environment and position ourselves for future growth. This will result in annualized savings of approximately $100 million through a combination of a reduction in workforce, reduced spending, and integration of certain European brands and businesses within our Core Platform segment. This will also result in a modest headwind to core platform revenue of 100 basis points in 2023 as we sunset certain brands. We expect estimated restructuring and other related exit charges of $55 million to $65 million with most of the charges to be recognized in the first half of 2023. In Q1 2023, we are targeting total revenue of $1.03 billion to $1.05 billion. This represents 4% growth at the midpoint of the range and includes approximately 2 points of FX headwind from prior year bookings. Excluding this, the midpoint of our guidance would imply approximately 6 points of growth. We expect Normalized EBITDA margin during Q1 to be in the range of 24% to 25%. For the full year, we expect total revenue to be within a range of $4.25 billion to $4.325 billion, representing growth of 5% at the midpoint of the range. This outlook is inclusive of approximately 2 points of headwind from FX from prior year bookings and the anticipated brand integrations mentioned above. In the Application and Commerce segment, we are projecting revenue growth of 8% to 10%. In Core Platform, we are projecting revenue growth in the range of 2% to 4%. Normalized EBITDA during the year is expected to continue to grow, with a targeted margin of approximately 26%. As a reminder, as we scale our commerce offerings, gross margin will be pressured and is expected to be in the low- to mid-60s range. As we gain operational efficiency in commerce, this is expected to drive incremental Normalized EBITDA margins. As we have shared previously, we have multiple levers within our control to drive margins, while we continue to invest in the business. This allows us to strike a balance and continue growing revenue, while achieving operating leverage down the income statement to drive sustainable shareholder value over the cycle. You have seen our recent record of accomplishment of delivering against our margin targets, and we are confident in executing on our profitability goals this year regardless of where we land within our revenue guidance range. For the full year of 2023, we are targeting free cash flow of greater than $1 billion and unlevered free cash flow of greater than $1.2 billion. We remain on target to deliver free cash flow per share of more than $7 and are committed to returning capital to the shareholders under the remaining buyback authorized by the Board in 2022. As stated in the past, our capital allocation strategy remains unchanged and we will continue to evaluate our use-of-cash options on a quarterly basis. We expect capital expenditures of approximately $50 million, income tax payments of approximately $30 million and cash interest payments of approximately $170 million. Moving forward, we will share ARR, GMV, ARPU and customer count quarterly. We will share GPV and retention rate annually. Taken together, these metrics provide a more comprehensive view of GoDaddy’s expansive business over time and provide a view into revenue growth and profitability as we continue to expand customer lifetime value. These metrics may fluctuate based on acquisitions, integrations, divestitures and seasonality. That said, we are in an advantaged position given our ability to provide an ever-growing suite of solutions to a large, embedded customer base. In summary, we are proud of our strong and resilient business model, where we are mission critical to our customers. We are confident in our ability to deliver the profitability and cash flow we outlined at Investor Day, and feel the strategic steps taken this quarter will serve as tailwinds for accelerating our pace of revenue growth going forward into 2024 and beyond. Our predictable model provides us the visibility to make prudent business decisions and allows us to remain resolute in operating the business to grow long-term value for our shareholders. With that, I’ll hand over to Christie Masoner, who will be leading the Q&A.

Aaron Kessler:

Thank you, and congrats on the year. Maybe just first on the revenue growth, can you just provide a little bit more details how are you thinking about 2023 revenue growth maybe between customer growth and pricing? And does guidance include any maybe price increases, or just your general thoughts on ability to raise pricing in the future as well?

Aman Bhutani:

That’s right. And maybe I’ll just add that all of those factors are included in the guide, as Mark would normally say. And we take those actions, especially pricing into account, when we do the guide.

Aman Bhutani:

Thank you.

Matthew Pfau:

Great. Thanks for taking my question. I wanted to just expand on those macro comments a little bit. So if we look at your commentary, it seems like retention rates have held steady. So on the macro side, is it just more in terms of you’re seeing lower demand, and why might that be? And then when we look at those customer addition numbers you gave, how should we think about the net additions for 2022 in terms of rolling that forward? And what should be a reasonable net customer attrition expectation?

Mark McCaffrey:

Yeah. We continue to focus on customers with a greater propensity to spend with us and that will be our focus. And as we noted in our stated remarks, our definition of a customer is changing and we’re dealing more with resellers. We signed a partnership with Worldpay that we announced. In certain cases now, through those agreements, we’ll have access to their customers, but they will be our customers. So the ongoing definition and nature of net adds will change and become more broad for us going forward. We’re going to continue to focus on ARPU, continue to focus on being a one-stop shop, and we’re going to continue to focus on making sure that we can provide all the benefits to our customers going forward that will drive our growth.

Christie Masoner:

Our next question comes from the line of Trevor Young from Barclays. Trevor, please go ahead.

Mark McCaffrey:

Yeah. Perfect. Maybe I’ll start with the drivers within our Core Platform. And consistent with what we talked about coming out of Q3, we are continuing to see pressure on the aftermarket. Overall, it’s still contributing about 6% growth to our revenue today coming out of the year, it is about 10% of our overall revenue. So we’re still seeing progress. They’re just not at the pace that we saw in 2021. And also we talked about in Q3 hosting; we’re seeing impacts around the European market for hosting, especially when you take it outside of the GoDaddy core platform hosting platform. And we continue to see uneven demand and pressure on retention rates in that business. Overall, those are the things that I think have been consistent when we saw Q3 looking at Q4, and we see that going into Q1 of 2023. And, I think, I’m going to have to pause there, because I forgot the second half of the question.

Aman Bhutani:

Yeah, the brand we’re talking about is Media Temple, and it is a big hosting brand for GoDaddy.

Christie Masoner:

Our next question comes from the line of Clarke Jeffries from Piper Sandler. Clarke, please go ahead.

Aman Bhutani:

Yeah, of course, it’s too early to talk about ARPU opportunity, or sort of the specifics of how the relationship would develop. But we’re super excited about the partnership given the reach of Worldpay. And you’re absolutely right, the small and medium sized business, that’s the customer Worldpay is sort of on the bigger end of our micro business customers. But we’re ready with the product and putting our products next to Worldpay reach is going to create an exciting new opportunity in the market. We’re looking, it’s a long-term partnership between the two companies, our teams are excited to work together, we’re starting to see some customers in the pilot, and we’re pretty excited about where this can go.

Clarke Jeffries:

Perfect. And if I could just ask one follow-up, Create and Grow ARR slight improvement in year-over-year trends and if I look at it from what you disclosed maybe an improvement in sequential trends. At this point, I’m wondering if I could get your view on where we are in the curve of the macro. Does it feel like we’ve leveled out in terms of the customer trends in e-commerce? Any kind of comment there would be helpful?

Mark McCaffrey:

No. Go ahead.

Mark McCaffrey:

Yeah, I gave up trying to be an economist in this environment, that’s the truth. We have a broad business, too. So we see impacts in different areas. And example, we’ve talked about aftermarket, we’ve seen the impact in this environment around our transactions there. But commerce continues to make progress going into 2023, we’re seeing a lot of taking – talk about the attach-related to Websites + Marketing, when people are coming through the funnel, we’ve continued to see the progress of our existing customer base or 21 million customers converting over to payments. We’re really excited for the first time that we have all the revenue streams in place, and they’re making progress towards our stated objectives, especially as we look at 2024 and beyond. So, the one thing that we continue to evaluate as our business gets impacted in different ways based on different things happening, which gives us protection overall, but something we need to continue to monitor.

Christie Masoner:

Our next question is from Ygal Arounian from Citi. Ygal, please go ahead.

Mark McCaffrey:

Yeah, I’ll start, and Aman you could add. So looking at our investment thesis going back to Investor Day, we talked about the revenue growth, Normalized EBITDA, cash flow per share, share buybacks, were our main components. And in looking at the profitability and the cash flow per share coming into 2022, we started the year in forecasting 23% to 24% for the year. We’re exiting the year 26%, so we’re ahead of target on profitability. We’re delivering cash flow per share greater than the $6, we had targeted at $61.20. So those two, we are really happy with our progress. Things like FX and the macro environment hit our bookings. In that booking, especially in our subscription revenue, takes time to roll out. So we’re seeing headwinds leading into 2023 related to that revenue growth. We also with some of the actions we’re taking or building in some headwind on revenue for the integrated brands that we’ve been talking about. So as time goes on, we think we are well positioned to be a double-digit revenue growth company going forward. But it will take time for our bookings to roll to our revenue to get back to the tailwinds versus the headwinds we’re facing coming into 2023. We feel really good about our ability to meet our other objectives around profitability around cash flow per share. And we stay committed to our share buybacks, so a lot of positive there. But we are controlling what we can control and we’re monitoring what what’s going on in the macro environment. Assuming that, we will see a headwind turn into a tailwind as we go into 2024.

Ygal Arounian:

Great. And then, on the OpEx kind of where that’s coming from specifically for savings?

Ygal Arounian:

Okay. And then last question on the Worldpay partnership there, it’s really interesting. I think it’s the first major retail partnership you guys have done? Is this a shift in strategy to do more things like this, and that become a bigger part of the customer growth and kind of future growth?

Ygal Arounian:

Okay, great. Thanks.

Elizabeth Porter:

Great. Thank you so much. I just wanted to hit on the restructuring a little bit more. So could you help us understand just the restructuring announcement with the context for your outlook on revenue growth to start to improve from Q4 and Q1 guidance? Is this more about allocation of resources versus an outlook on demand? And then just related, how should we think about reinvestment in the business?

Elizabeth Porter:

Great. And then just on the ARPU, given the change in customer count any context for how ARPU grew in 2021 versus the 10% that you just recorded for 2022. And, how should we think about the level of sustainability any opportunity there is to actually accelerate ARPU into 2023, just as you improve through the attach of commerce and payments?

Mark McCaffrey:

Yeah, continued focus on customers with a greater entity to spend in commerce, we think it will be a big opportunity. 85% of our revenue comes from our existing subscription base right now, but as we get more into the transactional nature of the businesses on the one-stop shop, that will create an opportunity for us to continue to increase ARPU.

Christie Masoner:

Our next question comes from the line of Mark Mahaney from Evercore ISI. Mark, please go ahead.

Aman Bhutani:

Yeah, thanks, Mark. The marketing launch starts in about 2 weeks with some PR, and you’ll start to see Payable Domains really show up in a lot of our marketing collateral, including the site today, you can get to Payable Domains in fact, I think I’ve talked about it in the past that just given our large size of domains under management, we had to roll this out. So we could support all different kinds of domains. We’re ready with that in the U.S. Now we’re just going to bring it to the site, bring it into our marketing bring it into our merchandising and promotions, so that every customer new and existing is able to see it, and in this start to connect the dots for them so that they start to understand what a Payable Domain is. In terms of international, obviously, we feel this product is very global, just like a domain name Payable Domain with appealing, because just should work everywhere in the world, but no specific timing on international rollout just yet.

Aman Bhutani:

Thank you, Mark.

Aman Bhutani:

John?

Mark McCaffrey:

Yes. So as we think it’s going to start to have impact in 2023, as we hit certain milestones, now it’ll be relatively small within 2023, but it’ll give us momentum going into 2024. We expect it to be accretive to our margins overall, our operating margins. Again, as we start to scale, and the breadth of the relationship is just not about a transactional, but it’s hardware/software leads to other fees, and then leads to our ability to attach Websites + Marketing and Managed WordPress, that should give us the ability to get operating leverage and improve our operating margins down the road. We’re very excited about this. It’s a very broad relationship. Again, it’s focused on the U.S. right now. But we think the opportunity to go global on it overall is going to be exciting moving forward.

Aman Bhutani:

Yeah, I think, the word that we’ve used in the past continues to work, which is – we continue to see sort of uncertainty around what’s going to happen. There is no large fluctuation. But even when we look at the geographies, when we look at certain products that we sell, we do see trends that are different from what we’ve seen in the long-term. And, right now, in any one geography, a trend can change very, very quickly. But, overall, I’d say over the last couple of quarters were – looking into Q1, we’re seeing some core stability, which is ultimately a good thing.

Unidentified Analyst:

Thank you.

Deepak Mathivanan:

Hey, guys, thanks for taking the questions. And I just want to ask about the pricing expectations for 2023. There’s a lot of pricing tweaks happening in the market currently given the sustained inflation. Can you talk about philosophy – your philosophy in 2023 whether you see potential to raise prices on any products either on the domain side or on other areas? And then, second question, are you seeing any market share shifts in your core products in domains, or in Websites + Marketing currently?

Deepak Mathivanan:

Got it. And then, if I can just ask one quick follow-up, and I apologize if this was asked already. Can you unpack the 2023 revenue guidance a little bit, maybe specifically in terms of how much you expect contribution from things like payments, and some of these other incremental growth areas?

Christie Masoner:

Great. Thank you. I’ll now hand the call over to Aman for some final remarks.

Aman Bhutani:

Thank you Christie, and thank you all for joining us today. At GoDaddy, our mission is to make opportunity more inclusive for all, championing micro and small business customers. One of our customers, Tyron Harper, co-owner of Harp Vision, was recently asked, what happens if Harp Vision doesn’t succeed? His response was I never thought about it. I only thought about it succeeding. Every day we are inspired by our customers. I know we make a difference in their lives and in uncertain times our mission becomes even more important. None of us have a crystal ball to perfectly predict the future, but I can tell you that our customers are creative and resilient. In a recent survey, while more of our customers expressed a negative near-term outlook they generally remained a positive group with two-thirds of them reporting optimism about their business. Today, we are pleased to announce our Q3 results with 7% revenue growth, 15% growth in normalized EBITDA, and continued strong customer retention of more than 85%. These achievements are noteworthy given the continued negative foreign currency impact, uneven demand patterns, and lower consumer confidence. Our core competitive advantages of high global brand awareness to attract customers, sage guidance through Care to help retain customers, and seamlessly intuitive experiences to deliver mission-critical products and services to our customers uniquely position GoDaddy to weather economic challenges from a position of strength. While we are not immune to economic turbulence, we are committed to action and attention on what we can control. As in previous quarters, we will be prudent with our cost structure. Day to day, that comes down to focusing on success-based marketing, monitoring headcount and directing investments on the most important growth initiatives, including simplification and automation. This formula helps us deliver a great service efficiently. Maintaining strong cohort retention, driving new customer adds, increasing ARPU and extending commerce and payments attach are all important to achieving our long-term goals. In Q3, we continued to drive strong retention that is in-line with our past cohort performance. This demonstrates that through the varying economic cycles over the past couple of years, we successfully attracted the customers that have the right intent, those customers that can grow and attach more with us over time thus benefiting GoDaddy’s ARPU. On gross adds, the data over the last few months suggests that there was a pull-forward during peak COVID times, though the magnitude of this is hard to calculate until normal seasonality returns to the business. As a result, gross adds and domains under management are not expected to follow the same historical arc as in recent years. Countering this, we are encouraged by our ability to maintain strong retention, increase ARPU, and continue the growth and momentum we are driving in our commerce and payments business within our existing customer base. Our strategic priorities remain consistent; first, driving commerce through presence; second, delivering for GoDaddy Pros; and third, innovating in domains. Beginning with presence, this quarter we added simplified site creation through improved guidance on template selection, making it easier for customers to start building an online presence. This update drove higher publish rates, which is an important indicator of customer success and increased lifetime value. You have heard me regularly talk about bringing Commerce to every surface at GoDaddy. Keeping with that, we have enabled payments in all Websites + Marketing plans, including our free plan. This shows up in the form of ‘Buy Buttons’ making it easier for nascent businesses, side-hustles, and the like to get started with our Commerce offering. Our goal here is to build the Commerce relationship with our customers as early as possible and then expand this relationship over time. These customers want a simple, inexpensive way to start taking payments. This functionality allows for that, while providing the lowest-in-industry online transaction rate of 2.3% +$0.30. Lastly, we recently celebrated the one-year anniversary of our OmniCommerce solution, and I wanted to spend a moment to acknowledge all that we have accomplished in this area since the release. We have been very ambitious in building out these capabilities because our customers tell us that they prefer a single one-stop shop solution. We believe our connected commerce solution is poised to win at a greater rate because it is adding value for our customers while saving them time and money. We made notable updates in user experience, eCommerce value and a disruptive payments experience. We added in-store, point-of-sale and Online Store inventory sync with omni-channel reporting for merchants across all channels. Our customers can clearly see their sales across their physical store, their online store, third party marketplaces and social media platforms including Amazon, Etsy, Walmart.com and others. We've added Pay Buttons, integrated shipping labels, Apple Pay and a new Commerce Plus plan for Websites + Marketing, for up and running businesses that need sales tax automation. And our customers can use Mobile app QR Code Payments and Apple Pay for eCommerce. We have also expanded our payments and commerce experience into Woo Commerce for Managed WordPress, while also actively rolling out our Managed Woo Commerce Stores solution allowing us to serve larger customers. We started with larger customers doing up to a million dollars in sales, and we are finding that we can effectively serve high single digit million sellers as well, and we already have these customers in our base. It is still early days but we have made good progress in identifying, converting and activating these larger sellers. Attaching to our existing base is key to our long-term ambition with GoDaddy Commerce and GoDaddy Payments. We are learning a lot about the sales and implementation cycle to serve these customers and we will provide more updates over time. We know that customers who engage in commerce and payments are generally stickier and have over 80x higher lifetime value. We have continued to see positive momentum in new customers attaching GoDaddy Payments within in Websites + Marketing and Managed WordPress. These serve as consistent proof points that our customers want this capability from us, and it can fuel our growth and customer retention for years to come. Moving on to GoDaddy Pros, this quarter we launched free SSL on nearly all new web hosting plans in our major markets including the US, UK, Canada, Australia and India. Early data shows that this is driving increased term lengths and modest improvements in new units and bookings in our hosting business. While the macro and FX challenges on our hosting business are meaningful, we are focused on what we can control, making the product better for our customers. Along with free SSL, we have continued to improve server response time by rolling out infrastructure improvements across multiple hosting platforms. We have also continued to update GoDaddy's Pro Hub, putting a more competitive offering in the marketplace. Our hosting business in Europe is also exposed to rising energy costs and to mitigate that we secured a fixed power contract. Our third priority is innovation in Domains. The rollout of Payable Domains is going well with half of our domains now technically enabled as payable and ready for activation by customers. The first cohort of existing customers we exposed Payable Domains to were logged in domain plus email customers. These customers were identified as likely to have high intent and they have engaged with Payable Domains at an attractive rate. It is still too early to calculate how much usage Payable Domains will have for non-website customers, but we are encouraged by this beginning and moving as quickly as we can to merchandise it to more customers. We also released a new Auctions user experience that improves the buying experience with new bulk bidding and Buy-It-Now options, improved uptime, and a simpler and consistent design. We also launched a Domain Portfolio Manager for all customers giving them modern domain management capabilities aimed at increasing their efficiency and ease of use. While we are learning more about how the macro environment impacts the Aftermarket, we continue to focus on what we control, which is to improve the experience for domain investor customers and integrate Dan.com’s capabilities into the broader GoDaddy secondary market. In closing, we look forward to finishing the year steadfast in our commitment of executing against our strategic priorities and working to achieve our long-term financial goals. As we think ahead to next year and beyond, we continue to be a leader in our space, with ample growth opportunities and the ability to participate in our customers’ success. History has shown that companies that continue to innovate and invest appropriately during an economic downturn can exit the other side in an even better position. We will stay close to our customers, we will understand their greatest needs and we will delight them with guided Care, constantly innovating towards a seamless experience making our solutions stickier leading to greater customer lifetime value. With that, here's Mark.

Aman Bhutani:

Thanks Mark. Taking a step back, we are incredibly proud of the work our teams are doing as we are making progress against our stated priorities. GoDaddy has a proven, focused strategy, executed by an experienced team that will act proactively and decisively through a fluid macro-economic environment to create long-term value for shareholders. Despite these headwinds and the tough compare in Q4, the full year is on track to deliver 7% growth or 9% on a constant currency basis. Coupled with the momentum we are driving in commerce, we are excited about what’s to come in 2023 and beyond. With that, we will have Christie Masoner from our Investor Relations team to open up the call for questions.

Elizabeth Porter:

Hi, thank you so much. Obviously, macro is definitely softening. But I was hoping you could provide some color on just how the top of the funnel has changed from Q2 to Q3, and this far into Q4. And last quarter, you did speak about Europe as being a particular area of weakness? And has that trend extended more broadly to the US and any other geographies? Thank you.

Mark McCaffrey:

No, I think that's a good response. Aman, and just kind of bringing it home. I think it's more pronounced in Europe, no doubt, in UK, and Germany, like Amman mentioned, but then overall, looking at Q4 and the outperformance of aftermarket last year versus this year, we're not seeing the same demand around the larger deals, we see a lot of supply and demand. But these things are short to come and quick to close. And we've taken that out of our guide for Q4, because we just don't see it in front of us right now. So, I think that when you talk about demand overall, that's something you have to call out.

Aman Bhutani:

Yes, I'm happy to quickly touch on that. First, overall, our cohorts are performing consistently, ARPU is rising and continues to do well obviously we'll talk about it more at the end of the year. But our focus is to attract the customers with the right intent that want to use activate the products that we have. So that we continue to maintain that high customer retention rate. And as long as those cohorts form and customers are retained, we know that in any short to mid-term cycles may push customer demand up or down a bit. But over the long-term customers need the products we have. We deliver critical products to them at amazing prices and we know these products are core to their needs. So, short-term up and down is okay. But overall, I think ARPU -- the ARPU, numbers are showing that we're attracting the right customer.

Elizabeth Porter:

Great. Thank you so much.

Trevor Young :

Great. Thanks. First, just more of a housekeeping one to start since investors have been asking. Just where did we finish the quarter in terms of domains under management relative to the $83.8 million reported last quarter. And then second one on aftermarket, Mark, maybe could you give us any sort of data points in terms of like percentage of total revenue or growth rate in the quarter or even contribution to overall core platform growth to just kind of help us size where we're at with that business?

Mark McCaffrey :

Yes. When you look at the Q4, it's about 2% of the aftermarket contribution that we had last year that we haven't built into this year. Trevor, hopefully, that allows you to size it a bit.

Aman Bhutani :

Yes. It's still very early, Trevor, in terms of us reaching into our base and attracting customers that sell multiple single-digit millions of dollars -- multiple single million dollars in sales. What I would say we're seeing a bit of everything right now, but the offering we're taking to them is the one-stop shop from their in-store capabilities to their online. They can go to one screen. They can see Amazon, Etsy, Walmart.com, their physical store and all the inventory things and they have it at an amazing price point for our GoDaddy payments just 2.3% plus $0.30 online. We're really got a great package to approach them with. And what we're seeing is interest and good conversion with our new capabilities. And we'll talk much more about our Managed WooCommerce stores product. That's really targeting these larger sellers. And again, it's still early, but you'll see it in general release very, very quickly, and the pilot continues to go well, sort of -- and we're encouraged by the green shoots there.

Aman Bhutani :

Thanks, Trevor. I think maybe we will ask Christie, I think the next question is from Matt. Matt, do you want to go ahead?

Aman Bhutani :

Yes. Overall, we look at our create and grow products and are quite encouraged with the continued progress there. As we've shared in the past, websites plus marketing, particularly has continued to grow well and really fits a need for our type of customer. The micro business that wants to get up and running faster and website so marketing just produces a really, really good, high performing website for them very, very quickly. So I think we're really encouraged by that. In terms of directional changes from competitors, I think it's still pretty early. We haven't seen a ton of change overall. But our prices for those products are very, very competitive. So we're definitely keeping an eye on it.

Mark McCaffrey :

Yes. Thanks. And we don't have a crystal ball into next year. And obviously, we don't know if FX is going to be a tailwind or a headwind and continue to watch the depth and the breadth of the recession, especially in Europe. So, a lot of moving parts there. We look quarter-to-quarter. We look at the leverage in our operating expenses. I think we've talked about that before about how we can obtain leverage. We feel really good about the actions we've taken or are taking in Q4 to manage some of that risk. For example, we talked about the energy contract, the AWS contract. But we continue to look at what's in front of us, what we can do, what's within our control. We can find leverage in G&A and care. Obviously, we continue to get more efficient with marketing. I think even in this year, when you take a step back and you look at where we started to where we finished on our normalized EBITDA margin expansion, it's obviously something we are very focused on and continuing to manage as we go through this environment.

Christie Masoner:

Our next question comes from the line of Mark Zgutowicz from Benchmark. Mark, please go ahead.

Mark Zgutowicz:

Hey, Christie, Aman and Mark, will question on payable domains. Curious -- I know it's really early here, but I'm curious what sort of are the KPIs that you're looking at initially here? And how long before you will know whether or not there's a payments activation or a potential payments activation to be made? You've got obviously lots of data that you look at in your marketing is always very focused on high-intent attached users. So I'm sort of curious on what data points you're looking for initially? And then just on Apple Pay, maybe very high level, but I'm just curious how you think about how that will contribute to GMV over time? And maybe specifically, if you look at Apple Pay itself as a driver of cart conversion. But just any high-level thoughts there would be helpful. Thank you.

Mark Zgutowicz:

Okay. Thanks, Mark. Appreciate it.

Jian Li :

Hey, guys. Thanks for question. This is Jian Li from Mark Mahaney. Maybe a couple of questions. One is just to circle back on the macro environment. Can you just kind of talk about the demand trends in terms of like the larger users the Pros versus the SMBs? Are the Pros holding up better or is it kind of equal impact across the board? And another question on operating perhaps like on the flip side, I've just kind of noticed a pretty impressive marketing leverage that you guys have had over the past few quarters. I think this is another record low. So if you can kind of talk about, just given the visibility of GoDaddy's core business, given your cash flow position, it almost seems that perhaps there's an opportunity to lean in to marketing if the pricing CPMs are favorable. So if you can talk about the marketing environment you're seeing right now? And kind of how do you think about the spend trajectory? Are you expecting to hold it at this level or be opportunistic?

Aman Bhutani :

Yes. Sorry, Mark, I was already talking on mute, but if I could jump in.

Aman Bhutani :

I think I've got three separate questions there, and maybe, Mark, you can grab a bit of the last one. But just very quickly, Jian, thanks for the questions. On Pros and SMBs, keep in mind, we -- a lot of the Pros that work with GoDaddy tend to be in our hosting business, and that's disproportionately sort of impacted by FX and European exposure. So what we see there has been significant. Mark talked about our international revenue growing 4% and the five points impact of FX there, would have been 9% constant currency. So we definitely see those shifts. But overall, the broader macro, I would say, it's is impacting all kinds of customers in a similar way. But the most important thing for us is that the customers that we bring in continue to have the right intent because what we're really watching is every quarter customer that would bring in, every channel that they come from, are we getting the right renewal rates for those customers because that's what really creates lifetime value for the company. It's not the fast customer that we can just get for a low price that is going to churn very, very quickly. And in terms of marketing leverage, we've talked about it a little bit in the past of how we have pushed all of our marketing channels into sort of the success-based thinking. And it comes in many flavors. It comes in incrementality testing. It comes in sort of AB testing even based on geos. It comes in AB testing in terms of bidding and search, which I've talked about before. And by being very focused on gathering the data, and executing to what the test show, we have been able to trim our marketing spend and focusing on areas that bring us the best returns with the best intent customers. And in terms of leaning into marketing and doing more there, absolutely, I always say I would love to spend more in marketing every time. I just want it to continue to deliver the returns that we're asking for. So as long as it's within our guidelines, we definitely look for new channels, new areas where we can spend up more and attract more customers. And Mark, I'll turn it to you. I'm not sure, if what I interrupt you.

Christie Masoner:

Our next question comes from the line of Mili Das on behalf of Deepak Mathivanan from Wolfe Research. Mili, please go ahead.

Mark McCaffrey:

So we're looking forward to talking to everybody early next year about our 2023 outlook, but I'll give it a step back here in talk about kind of 2022 and where we're going and the momentum we have going into 2023. When we talk about – our first meeting this year on Investor Day, we had a lot of momentum going into the year, but we couldn't predict the macroeconomic environment that was out there. As we sit here today, we're looking at, targeting 7% growth for the year, 9% on constant currency, and we really like the momentum going into 2023 as it stands. Even in Q4, we always knew Q4 was going to be a tough comparable for us but you take the growth rate, you added a couple of points for FX. You add a couple of points for the aftermarket over performance that we've taken out, and we really have a lot of momentum going in around our products and some of the stuff Aman has talked about. So, looking forward to talking a little bit more as we get into 2023, and what we're seeing out there. But right now, we are really happy with how we're performing in 2022 and the momentum we have. And just to add to that, being able to expand our normalized EBITDA margins during this period and at the same time hit our cash flow targets and cash flow per share targets, we like the long-term outlook out there.

Christie Masoner:

Our next question comes from the line of Alex Bolton on behalf of Aaron Kessler from Raymond James. Alex, please go ahead.

Mark McCaffrey:

Hey, Aaron.

Aman Bhutani:

Yes. I'm happy to share, Aaron that we've continued to shift more of our applications into the cloud. It gives us a much stronger ability to – and greater velocity to put more products out there much, much faster and manage scale much, much better. I'll let Mark talk about sort of some of the OpEx CapEx type sort of change there. But overall, we're very happy with the relationship we have. We've just renegotiated a contract. Our teams work very well together, and almost all of our teams are using the cloud in some way, shape or form. Mark, I'll turn to you for OpEx.

Aaron Kessler:

Yes, it does. Great. Thank you.

Naved Khan:

Can you hear me?

Naved Khan:

Great. Yes. So two questions. One, are any of the costs associated with your European business kind of based out of the US or in US dollars that might be hurting the margin somewhat. And the other question is just around the price testing you guys have been doing, any – are you seeing any stickiness in that any kind of pushback? Any color would be great? Thanks.

Aman Bhutani:

And then on price testing, Naved, we've continued to test price. And you'll continue to see us do it where we continue to be nuanced in our approach on pricing looking to balance both what's happening sort of macro-economically or within a geo versus also our ability to take share and push in versus take price. So we'll continue to make -- do that approach and we'll continue to guide to the plans that we have, for example, for 2023, you'll hear about them. They'll be within the – as we talk about 2023 in February.

Christie Masoner:

Our next question comes from the line of John Van [ph] on behalf of Brent Thill from Jefferies. John, please go ahead. Hi, John, I think you are un-mute.

Aman Bhutani:

Yes. Thanks, John. Maybe taking the second part first. On payable domains, it's super early. What I talked about in my prepared remarks is that in the US, we have now technically enabled half the domains under management as payable. We still have to put that in merchandise that to customers and activate them. But I give an example or 2 of how we're doing that both in the new path and in the existing customers, engaging them. So we're very excited about getting this capability to customer, very excited about some of the attach rates we're seeing. But in terms of customers actually starting to use it and GPV flowing, it will take a little bit of time for us to truly understand what that usage is going to look like. And to take a step back to talk about the overall macro, I think the word that describes it well is that it's been an uneven macro environment for two-plus years now, right? And I'm really proud of what the GoDaddy team has achieved and what we've been able to do. I feel we've navigated that environment very, very well. We've attracted great customers. We continue to have greater than 85% retention rates for customers. We're sitting – we came into 2022 with a lot of uncertainty as well. And we're sitting here with 9% constant currency revenue growth and lots of new products coming into the market in commerce and payments, we word press with websites plus marketing having plan down to even the free plan with payable domains with the registry business. So it's just a lot of good for us to look forward to. And we're taking all of that momentum with us into 2023. And we've highlighted the areas where we see some risks, and we always call it like we see it. right? But at the core, GoDaddy is a market leader. We have a durable business. Our customers are resilient, which leads to us having a resilient business. Our core competitive advantages around our unmatched scale Sage guidance we gave in customer care, that customer care is great for us to attach products, and we'll give you examples of that. And we're building technology that works for our customer for the micro and small business, which is seamless, which is intuitive which helps saves them time, help save them money. And we have pricing like example payments that -- or even in websites marketing, that is very, very competitive in the market. And ultimately, we put the customer at the center of what we're doing. We're staying close to the customer. We're pruning stewards of the P&L. We're investing in areas that are the biggest growth initiatives for us as a company. And we're running the business for long-term profitable and sustainable growth. That's sort of our view, and that's how we see it.

Aman Bhutani:

Thank you.

Aman Bhutani:

Thank you, Christie. Thank you all for your questions. Thank you to all GoDaddy employees for all the hard work for another good quarter, and I look forward to talking to you next time. Thank you.

Christie Masoner:

Good afternoon, and thank you for joining us for GoDaddy's Second Quarter 2022 Earnings Call. I'm Christie Masoner, Senior Director 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. [Operator Instructions] On today's webinar we'll be referencing both GAAP and non-GAAP financial results and operating metrics such as total bookings, unlevered free cash flow, normalized EBITDA, annualized recurring revenue or ARR, gross merchandise volume or GMV and net debt. Growth rates presented represent year-over-year comparisons unless otherwise noted. 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.godaddy.net or in today's earnings release on our Form 8-K furnished at the SEC with today's earnings release. The matters we'll be discussing today include forward-looking statements, which include those related to our future financial results our strategies or objectives with respect to future operations, including our approach to capital allocation, new product introductions and innovations and our ability to integrate acquisitions and achieve desired synergies. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. 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 3, 2022 and except to the extent required by law we undertake no obligation to update these statements as a result of new information or future events. With that here's Aman.

Mark McCaffrey:

Thanks, Aman and thank you, everyone for joining us today. GoDaddy's resiliency and durable top line growth, profitability at scale and robust cash flow are evident in our Q2 financial results and enable GoDaddy to continue to invest to deliver long-term value while returning excess capital to investors in the form of share buybacks. Revenue in Q2 was $1 billion, growing 9% on a reported basis and 10% on a constant currency basis. Excluding the currency impact, our reported revenue would have come in at the high end of our Q2 guidance. Within total revenue international revenue grew 4% on a reported basis and 7% on a constant currency basis. Applications and Commerce revenue grew 15% within the target range of 14% to 16%, driven by continued strength in our Create and Grow products and Email attach. The ARR for Applications and Commerce grew 12% to more than $1.2 billion. And within that the ARR from our Create and Grow products grew 10% to $420 million. Additionally annualized GMV across the GoDaddy ecosystem was approximately $28 billion, growing 12%. Core platform revenue grew 7% delivering at the high end of our 5% to 7% Q2 guidance, primarily due to strength in domain registration, aftermarket and security, offset by a slight decrease in our hosting business. ARR for our core platform grew 5% to $2.3 billion. Q2 bookings totaled $1.12 billion, growing 6% on a reported basis and 8% on a constant currency basis. Applications and Commerce bookings grew 10% and core platform bookings grew 4% on similar growth factors noted for revenue. Normalized EBITDA grew 30% to $258 million. Our 25% margin represented over four points of margin expansion primarily because of expanded gross margins on product mix and reduced marketing spend. The decreased marketing spend is the result of disciplined moderation of our investment as we zero in on success-based marketing and flex our spending to capture attractive returns. Our technology and development expenses increased as a percent of revenue this quarter as we advanced our commerce and innovation strategies. Lastly, we recognized a $10 million impairment charge related to IT licenses and facilities as we continue to simplify our infrastructure. Unlevered free cash flow for the quarter totaled $274 million. growing 16% driven by strong profitability. Additionally, year-to-date, we completed $1 billion of share buybacks, repurchasing 12.8 million shares and reducing our fully diluted share count by approximately 8% since year-end. Free cash flow per share rose to $5.67 on a trailing 12-month basis versus the prior year cash flow per share of $4.78, a 19% increase on strong cash flow and share repurchases. On the balance sheet, we finished Q2 with $770 million in cash and total liquidity of $1.4 billion. Net debt stands at $3.1 billion, at the midpoint of our targeted range of two to four times. Moving on to our outlook. We continue to be confident in our ability to execute in the second half of 2022, and are on target to meet our full year operational and strategic goals, including our targets around normalized EBITDA, unlevered free cash flow, and cash flow per share. With that said, we are not immune to the macro environment of the strengthening dollar and the impact that it has on our top line performance. Assuming a continuation of today's rates, over the rest of the year, we expect that the adverse FX impact for the full year to be approximately $35 million or approximately 1%, compared to our full year revenue guidance issued in February. As a result, we revised our 2022 full year revenue outlook to $4.1 billion to $4.13 billion. We remain focused on driving strong financial results, and are committed to delivering $1.1 billion, in unlevered free cash flow and $6 plus free cash flow per share, as laid out earlier this year. We are also increasing our margin expectations, for normalized EBITDA to 24% to 25% for the full year, based on strong execution and disciplined investments. For Q3, we are targeting total revenue in the range of $1.03 billion to $1.045 billion, representing growth of 8% at the midpoint. The adverse FX impact to the range assuming continuation of today's rates, would be approximately $10 million or 1% flowing through this impact, we expect Applications and Commerce revenue to grow between 13% and 15%, and core platform revenue to grow between 4% and 6%. For Q3, and full year bookings, we expect growth to be approximately two points below revenue primarily driven by FX pressure. We will continue investing in technology and development, to drive our robust product launch momentum, while balancing our goal for margin expansion through efficiencies in customer care and marketing. Normalized EBITDA for Q3, is expected to be in the range of $250 million to $260 million, which would represent growth of 12% at the midpoint. Our capital allocation strategy remains the same. We fulfilled our $1 billion buyback target for 2022, and we'll continue to evaluate use of cash options for the remainder of the year, in line with our disciplined capital allocation framework. Lastly, as we said last quarter, we will evaluate the impact of rising interest rates and explore refinancing our term loan and revolver with the intention of maintaining our leverage ratio of two to four times. Before I close, I want to remind folks that during economic times like now, our strong balance sheet consistent cash flow and strength of execution, enable us to improve upon our market-leading position, through prudent investments and market share gains growing the business long term while also delivering on our profit and cash flow goals. Our 21 million customers create the foundation for our resiliency. We enjoy exceptional retention, and we continue to execute on our strategic priorities, build deeper relationships and partner alongside entrepreneurs on their journey. We are laser focused on operational execution and we are dedicated to delivering 10% plus top line CAGR, 15% plus normalized EBITDA CAGR and 20% or better free cash flow per share CAGR through 2024. And with $1 billion of buybacks complete, halfway through the year, we remain committed to executing against the remaining $2 billion of shares, under our current authorization through 2024. With that, we will have Christie Masoner, from our Investor Relations team to open up the call for questions.

Trevor Young:

Great. Thanks. Two if I may. First, what drove the sequential uptick in gross margin? How much of an impact was FX on GM given that maybe a bit more of COGS there, such as like domain pass-through costs and infrastructure are incurred in dollars versus the revenue mix? And then second, on the price testing, Aman, I think you alluded to it. It looks like what we saw in our end both basic premium and Commerce plan saw increases mid-July ranging from like $1 to $3 a month, which translates to some pretty healthy increases on a percentage basis. Could you just clarify are these increases just for new customers versus existing subs? Is it domestic versus worldwide? And what do you expect the weighted average increase to be once this is fully rolled out?

Mark McCaffrey:

Yes, no problem. Hey, Trevor, how are you doing? So I would say, most of the gross margin mix was -- or change was based on product mix. The FX impact to that was pretty nominal.

Trevor Young:

That's really helpful. And just, Mark, just to clarify on the gross margin. If FX rates stay where they're at today, should we expect some impact on gross margin in the balance of the year from currency?

Trevor Young:

Great. Thank you.

Matt Pfau:

Great. Thanks, guts. Aman, you called out retention rates continue to remain strong. You did see some pressure from macro factors. Are there certain areas where you're seeing the macro impact your business more than others, maybe both on the product side as well as on geography?

Matt Pfau:

Got it. And then, just a question on the marketing spend. You adjusted debt for demand, should we expect if macro improves and demand ramps back up that then we could see that go back up as a percentage of revenue, or how do you think about that adjusting that dial going forward?

Mark McCaffrey:

And I'll add, we continue to expect to get leverage out of our marketing line, especially, as our business and our solutions are broader, as we get into more commerce as we get into more aftermarket. As once customers are into entrepreneur wheel, our efficiency and marketing gets better. So over time we expect to get leverage out of that marketing line and continue to be able to expand our normalized EBITDA margins based on that.

Christie Masoner:

Our next question comes from the line of Brent Thill from Jefferies. Brent, please go ahead.

Aman Bhutani:

Yeah. Sure Brian. So let's start with the customer, right? GoDaddy's average customer is the micro business. A-third of our micro business customers are solopreneurs. We add to that the fact that the products we sell create tremendous value for our customers and the price we charge leaves plenty of consumer surplus for our customers right? So even if they have to adapt to changing economic environment the products we typically sell to them tend to be the last products they walk away from. So that's why we see sort of the continued high retention rates for customers. But also keep in mind, the more we have focused in terms of attracting the customer, to whom we can attach more and more products and reach higher LTV that sort of limits some of the – should I say, discounting and other techniques that companies might use to attract a lot of customers that may not have sort of good retention rates. But obviously, our strategy is to attract the customers that have high LTV have good retention rates.

Brent Thill:

Okay. And real quick, I think the Street unlevered free cash flow number is a little bit. Your number was a little bit below what the Street wanted. Was there anything to read into the number this quarter? I know, you're reiterating the long term but anything to comment there relative to the Street?

Brent Thill:

Excellent. Thanks,.

Christie Masoner:

Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead,

Aman Bhutani:

Thanks, Elizabeth. So, as you know, the higher premium tier offerings are especially in the case of Website + Marketing with the new Commerce Plus offering is relatively new for us right? And we're just super excited and announcing the launch of our WooSaaS solution, which is also going to be a premium offering. But all of these businesses are very new for us right? We have a base of 21 million customers. We have great relationships in Care. So we're sort of early in the process and not of course we realize that customers feel the pinch of inflation but these businesses are small for us in our core products they just deliver tremendous amounts of value. And one of the things we sometimes say here is people don't give up their dream because of an economic downturn. So they're not going to give up the domain name.