Q3 2020 GoDaddy Inc Earnings Call

Their business that with creative content that seamlessly intuitive experience has driven over 50% growth in posts. We've also extended the overlap across 12, new languages, giving more customers access to this powerful set of tools.

Additionally, go Daddy released a powerful social composer dashboard in website, plus marketing, giving customers a single place to rapidly create polished social content and view and schedule their social posts across connected social media platforms, what's more user.

Can track the performance metrics of each posed by platform. We also introduced a simple and intuitive one page ecommerce template in website, plus marketing, which has quickly become our most popular template and it has reduced time to publish for our customers by 40% country.

Turning on the team of Commerce, we launched our online store capabilities in Argentina, Peru, Colombia, and Chile positioning go Daddy to serve customers in these markets.

We also continue to innovate for our domains customers in Q3, we introduced revamped bulk search and file upload tools for domain investors and rolled out free global who is masking and a new paid security services with greater domain protections.

And we're super excited to welcome the Skyworks team with nearly 60 wouk almost extensions spanning payments email marketing and memberships Skyworks is a leading who commerce product developer. This.

This acquisition furthers our commitment in word press to help entrepreneurs and web professionals succeed online with high performing stores that our feature rich and quick to build.

Lastly in Q2, we talked about our plan to de lever monitoring for as long as we continue to see returns on our investments.

While the investment increase we also delivered another record quarter for both customer adds and total cohort size abhi.

Obviously, it's something we're quite pleased to see particularly as we coupled the strong marketing game alongside the great product enhancements, we've talked about today.

In closing our focus is to build simple and easy to use tools with a focus on helping everyday entrepreneur succeed.

Online commerce and marketing are areas, where this need has become significantly more pronounced in 2020.

We are seeing rapid adoption of these new tools, giving us the opportunity to help more customers succeed solid execution in an elevated demand environment powered a strong third quarter.

We are poised for sustainable profitable long term growth and we continue to be confident in our ability to hit our full one one target in 2022 with that here's rate.

Hey, Thanks month I'll touch on the financial results for what was a great quarter for generic and delivered on our outlook for Q4 Q.

Q3 report to the strong performance across the board with another record quarter of customer growth and acceleration of topline growth and margin expansion and new customer bookings continue to hit records, while small relative to total bookings, they're an important contributor to future growth.

We've also continued to experience low customer churn rates and resiliency in subscription renewal rates proof points to the durability of the business model.

Total revenue came in at 844 million growing 11% year over year, while currency impacts were negligible growth rates accelerated across all three product categories and re accelerated in our international business.

Business applications was our fastest growing product line.

Increasing 19% year over year on continued strength in branded email and productivity solutions.

We delivered 12% growth in domains across new registrations strong renewals in aftermarket sales and.

And finally hosting and presence grew 6% inside that Amman highlighted the tremendous growth in products comprising our website creation platforms in.

In contrast, it also reflects a headwind from a go Daddy social product due to the elimination of the outbound sales force in June total.

Total bookings grew to $945 million rising 11% year over year, while currency impacts were negligible strengthen bookings was broad based across products and geographies as our brand and product offerings positioned us well to capture demand as businesses continue their digital transformation.

For many small businesses, establishing an online presence was once seen as a competitive advantage. It's now table Stakes.

Gross margin came in at 66% in the quarter, a 40 basis point expansion year over year. We also delivered operating leverage as the June restructuring actions reduced costs in care, while gionee continue to benefit from both scale and lower discretionary expenses.

As we highlighted in the second quarter call, we stepped up our investment in marketing to capture market demand, resulting in a $36 million year over year increase in marketing expense.

We've been able to elevate our investment while remaining within our target months to breakeven and customer acquisition costs, even as we saw increased competition in performance advertising channels.

We will continue to invest in marketing as long as we're meeting our return metrics.

The net some resulted in normalized EBITDA of 199 million in Q3 were approximately two points of margin expansion over last year move.

Moving to cash flow on Unlevered free cash flow for the quarter was 224 million growing 17% year over year with margin expansion of over a point.

Trailing 12 month Unlevered free cash flow was over 800 million in margin top 25% illustrating both the size and scale of this business.

Now onto the balance sheet we.

We finished Q3 with 622 million in cash and total liquidity of over 1.2 billion.

We were able to capitalize on favorable market conditions issuing a new 750 million seven year term loan with an all in yield of 2.7% a record for a double B rated company.

With this issuance net debt stands at 2.5 billion or about three times net leverage on a trailing 12 month basis.

That's the middle of our targeted range of two to four times.

And we have no significant debt maturities until 2024.

The view of our ability to de leverage this leaves more than ample liquidity to fund the business execute the strategy and pursue our stated capital allocation priorities.

Now I want to take a moment to reiterate that any potential increases to the corporate tax rate will not have an immediate impact on good at is cash flow.

As a reminder, given our net operating loss position, we don't expect to pay us cash taxes before 2027.

A higher corporate tax rate would however, enhance the value of the recent settlement of the Trs.

For example, a 28% rate increases the future tax savings associated with the TRP attributes by over $700 billion further enhancing the already strong returns on the settlement. This.

The strength and resilience of our recurring business model has fueled a strong balance sheet and has enabled us to execute across our capital allocation priorities in 2020.

Including completing four acquisitions repurchasing nearly 6% of our outstanding equity and settling the tiara.

We have the flexibility to take advantage of opportunities that arises in will continue to be prudent allocators of capital in pursuit of long term growth and leverage free cash flow per share.

With that let's turn to our Q4 outlook.

We expect total revenue of approximately 865 million or 11% growth year over year.

You should expect double digit growth in domains mid single digit growth in hosting and presence in high teens growth in business applications remember those products that relied on the outbound calling motion like go Daddy, social disproportionately impact the hosting and presence line.

On Unlevered free cash flow, we expect 2020 to land at approximately $820 million the midpoint of our previous guidance range.

As a reminder, Q4 has a highly anomalous 27th pay period this year without which our Unlevered free cash flow guide would have been approximately 18 million higher.

In closing digital migration is definitely an accelerating trend is here to stay business is well positioned to meet the needs of entrepreneurs around the globe is they bring their ideas to life on line.

Good idea has long been known as an industry leader with profitable growth at scale now with a set of subscription software tools, enabling websites content creation and commerce, that's approaching 350 million in annual recurring revenue, we're as confident as we've ever been that we can continue to grow take share in general.

Significant cash flow.

With that we'll have Christy mr. from our Investor Relations team open up the call for questions.

Thanks Ray as a reminder, if you would like to ask a question. Please use the Raytheon feature at the bottom of the weapon I seem to be out into the queue and I mean your lines. Our first question kind of from the line of Jason Helfstein Oppenheimer and company. Please go ahead.

And media. Thank you see you know has pointed out the net add in there are over 400000 net adds in the third quarter can you comment how the second quarter compared to this and then when we think about versus a year ago can you just comment.

On customer churn are you seeing.

Hi, Air or the same churn and then secondly, appreciate that the 350 million in air our gross bookings.

We have more than $350 million share are related to E. Commerce, if we divide that into gross bookings just about 9% is that a reasonable way to think about sizing the ecommerce business today relative to gross bookings banks.

Hey, Jason Thanks for that question. This is a month.

Yes, when we look at the third quarter equity presents record organic net sales growth for go Daddy, where we're really happy with the progress here and as we look at Q2 and I'm like we said in some of our prepared remarks October continued to be in line with September and did really well year over year as well.

Sounds of churn rates, they continue to be stable or slightly better just going back to the idea that our customers.

Only already everyday entrepreneurs and they hit road blocks, they create as they innovate and there's talk something else and get on with it.

And then I'll turn it to ray for maybe a little bit more color and to your second question on the 350.

Hey, Jason its ray.

As far as not apples to apples, obviously looking so its cash versus.

Revenue, but I'm really happy with what we're seeing there and those products are from a bookings perspective, while growing at relatively similar.

Levels.

Our next question comes from the line of next Gen from Citibank. Please go ahead.

Great. Thanks can you touch on some of the integration you talked about in the press release, all right and the Doc today, you know what kind of uses are you seeing or by subs with these integrations, whether it's over a Instagram Facebook and then I guess the follow up on that is.

As you integrate all these these great products or subs like many L. A.

Sciverse things like that how does that impact kind of the funnel for subscribers is it you know how I guess, how do you prevent them from getting confused by I guess, all the options you're introducing thanks.

Yeah, that's a let's take the specific examples you know from you know from previous quarters, and then I'll briefly touch on Sky version, how we look at the funnel Argo, bringing in all we're bringing in the experience for Muni registry was that we wanted to bring to the go Daddy family companies teams that were building on.

Using experiences for customers sort of best in class experiences and then we want to take those experiences and bring them into our mainstream products like website plus marketing. So when we talk about over the integration. It's you know it's it's all very new right now so it's less about what subscriptions, it's driving and it's more about what level of it.

Gauge when we're getting from the functionality, we're putting out there for example, with with the over integration. There was a 50% increase in post sort of content creation and people posting that content on social media, which shows immediate customer value and that's that's our core formula right. We want to introduce these pieces and its Vince.

Youre others into the core experience at the right place, it's not it's not only in the funnel. It's as these customers are using this these products. It shows up in a simple way at the right place and it's just intuitive for the customer to use it and as we continue to create customer value over time, we can turn it into shareholder value.

You you know by sort of moving people through the tiers by taking pricing action and such but was the first step is really creating customer value and in terms of skiver generally its the same Oklahoma Skywards team is fantastic in the commerce space and that's 60 plug ins. They just are completely focused on building domestics.

Revenue for customers and it's Super New right now, but well you can expect the same same thing foremost from us that it will become part of our managed Wordpress experience and it will just be simple for customers in terms of their commerce experience, yeah with will comment as well.

To touch on the funnel is just slightly you know keep in mind that as we add these kids.

Capabilities, they are coming at the right place where the customers using the product did these things don't yeah sort of in a sense clutter the buying experience or the premium experience in anyway. In fact, if anything as we layer on more and more capability and provided as part of the freemium package. If we feel it encourages people.

Not to use the product because they've got more functionality that they can use as part of the product.

Great. Thank you.

Our next question comes from the line of Ron Josey from JMP Securities. Please go ahead.

Great we'll take them on you Didnt completely hear me great quarter guys into mine. Thank you for the additional details on on the business metrics I wanted to talk about commerce, specifically in the four and a half billion in GMB and and also integration to Facebook and it's kind of what you just talked about but can you just talk about what tools. You think are still needed to fully take advantage.

So this you know commerce opportunity that you're seeing with the 80% growth in GMT or or do you have now.

Do you think you have a fully integrated approach now to fully take advantage and then as a follow up to that can you talk about sort of you know were two quarters into the freemium approach with works, what's actually marketing a quarter end with celebrate just talk out how freemium has maybe changed that come collection of of these new subs are these record yourself that are growing to the current on the platform.

Thank you.

Yeah happy to do that Ron Thanks for the question you know on the on the first piece about you know the 350 and just any color you know we're super excited about that part of the business and how quickly it's growing.

I think I'm blanking on the exact word you said, but just on the second part of your question.

When I look at the subs growth what I'm really focused on is are we providing the customers the product that they can try out and as an example, you mentioned celebrate sovereigns doing really really well raise the GMB growth that we're seeing you know it's fantastic, but it's because we're getting the product in the hands of customers in more and more as merchants are quickly user.

Thanks outbreaks by the way, we're seeing the same in West, Texas marketing premium means that more customers are using it and yes, what a couple of quarters in and what that's done is it's given us enough confidence that we are rolling the freemium piece out sort of 10% to 20% at a time, it's not a 100% in the U.S. yet as we get into every part of our web site.

In our sales path, that's the place where going in.

In Iran, as well, it's really I want to clarify one point on that within our customer count number does not include freemium. Those are paid only subscriptions so that record organic growth Mr paid subscriptions not premium yeah.

Yeah, and I'll also clarify the numbers that we gave for subscription or the 2.2 million doesn't include subscriptions for over four celebrate those are core website was marketing and managed Wordpress and what we say what we believe is that over and celebrate sort of you know customers use that as part of our core platform.

And then you asked a question Ive Quicksight back me around gaps in our offering.

The commerce offering is driving a ton of that growth in those suite of products right. So that's really fantastic and we serve the needs of a certain set of customers really well already the way I think about it is that as we grow to sort of offer cover more and more customers. We are going to have to add feature set but that's sort of an order of operations there once.

The next thing that we need to go after and Thats build out capability or why that capability put it in place and then offer to customers in asymptote away as possible.

Okay. Thank you.

Yeah.

Our next question comes from the line of EAC all around in from Wedbush Securities. Please go ahead.

You don't please on mute your line.

Okay.

Yeah, I mean now.

We can all right great. Thanks, So I want to ask a couple of big picture questions. One one related to to commerce, and where you're doing there and obviously you're doing a lot. Its feature that it was in your space is kind of growing.

Pretty competitive across the space.

You guys have always viewed yourselves is focused.

Focused on that micro businesses. So it does what you're doing here and when you think about divergent celebrate integration into Facebook Instagram and you guys see yourself playing in that market and not in the ecommerce specifically is it still kind of focused towards that.

Yeah micro SMB. It just does that change any of your your philosophy in terms of go to market and to your target customer is and then.

Related to that I think you know a lot of investors think of go Daddy still very exposed to Smbs, which which you are and I think that's something maybe some people have a hard time getting over in terms of the risk from from cold and businesses shutting down and overall health we saw in Threeq you.

New business applications for for SMB.

Smbs, but really businesses in general were up over 50%. So there's a lot happening in that space to is there anything you're seeing that gives you extra confidence you know I'm on you touched on entrepreneurs and shutting down and reopening or what are you seeing within businesses closing and opening and that overall environment that gives.

Ill, maybe more or less confidence.

Compartments. Thanks.

Thanks, Roland let me address some of the target customer micro SNB commerce part of the question and then take some of the.

This is on you know turn and what exposure we see in the SMB space and then you can touch on it too.

If we take a step back ago, we're what we're seeing in the numbers is that customers are customers people that have great relationships with the go Daddy are coming to us and saying I want to commerce offering from you we shared with you.

Quarter or two ago that 25% of customers signing up for web sites plus marketing are signing up for the commerce. Here. These are people buy themselves going there and saying I want. This this product should go down. So you know what what we're focused on is when we see those early signals and we see people starting to click somewhere like this isn't offering.

We have the right to serve.

Hi, This is a target segment of customers that have the best relationship with US, let's meet their needs and my view on the competitive space and such is that there is so much opportunity still in the micro businesses in the everyday entrepreneur space that we define that there is really a lot to do that and my view is that as we look at.

The future of the small difference between a micro business and an online micro business every micro businesses will be online right. That's just how people are going to find things. That's just how people are going to want to transact because it's going to be simpler for them and it can allow them to scale in a way that previously that could.

And in terms of the exploring and I'll just point again to the steady churn rates and go Daddy and just the creativity of the customer and so maybe for one click deeper are turning to rental revenue you want to talk a little bit more about that yeah go ahead.

I mentioned this maybe on the last call, but a lot of our confidence is coming from the recurring nature of the business model a couple of things that point out too.

To your very point, our core customers a solo but anyway, it's a wonderful odd employees and a lot of cases and when they get knocked down to get back up.

We are providing them all the tools they need for 2025 Bucks a month is an incredibly valuable service to them and it's one of the primary reasons, our customer retention rates been so strong for gosh 20 plus years now.

I think folks are consistently gotten their long about what is perceived to be is exposure to volatile small businesses. These are entrepreneurs not necessarily small businesses. So when one fails they pick up the next idea.

I'm on hit on the renewal rates have been very stable.

The natural flow renewal events is roughly evenly spread over the year for us. We're 10 months and 2027 to have gotten to the pandemic in renewal rates are holding so its instilling confidence in us despite the uncertainty in the market.

Great. Thanks, so much very helpful.

Our next question comes from the line as Brent fell from Jefferies Bank.

Go ahead.

Thanks.

Ray a 11% bookings I know you had a tougher 15% comp I guess with all the talk and.

E Com and business ops more attach I think maybe some thought you'd seen a little more acceleration then not I'm curious if you can just comment on the puts and takes in kind of what you're seeing I know, it's all not gonna flowing in one quarter bye.

Seems like Directionally or you're having the right right traction.

Yeah, Brent, Yes, obviously, you'll recall last year was a really tough comp there yeah. There was over a point of looking bookings related to credit card abuse. So I think what I would look at net bookings as a cleaner view of the growth, which is closer to 30% year over year.

Beyond that noise, I mean Amman hammered in the the opening comments, we are seeing historic growth in new customer adds but remember the new bookings are small relative to the base, it's roughly 10% so you're not going to see that inflection immediately but if there were super critical for fuel.

Your growth and there is strong demand for for our offerings in the market, we are investing to to maintain that while maintaining our threshold. So you saw us for on the marketing we're seeing the results of that and new is growing very very strong.

And you've been apparently colorful on past calls just looking at what's been happening inside the quarter and linearity was there any color just as it relates to was it fairly steady improvements throughout the corner or was it evenly based how how would you describe the linearity of the quarter into in store.

In this current quarter. Thanks again, yeah.

I think what I would say as we hit the peak or mid summer the growth rates are still spectacular I mean, these are record growth rates, but we're starting to see some seasonality some waning in demand in the market, but you know I would still tell you. These are our historic lace rates that were looking at right now.

Great. Thanks autumn on the guide.

Slide that we put out the flex what we see from a trajectory standpoint for Q4.

Our next question comes from the line is not far off from William Blair Knapp. Please go ahead.

Hey, Thanks for taking my question guys and great quarter, just wanted to ask on the guidance so full year revenue expectation.

A bit from your previous expectation and free cash flow expected to be in the sort of middle of the prior range. So is this related to you like in what you're seeing from the increased marketing spending and continuing to lean into that or is there something else going on and then on gross margins as web sites any commerce continue to be.

Faster growing component of your business, how do we think about that impact on the gross margins.

Yeah, Matt on the revenue growth glad you're noticing we're happy with what we're seeing there from an acceleration perspective, and what we've messaged in the past remains true any upside we've seen cash flow, we're putting back into the business. We invested a lot in marketing this quarter, we'll invest again in the fourth quarter, we're going to continue to lean in there as long as.

We're seeing the returns on gross margins.

Don't forget your Q2 was weighed down by the cold weather impacts on the top line with you know honestly no relief in cost as we maintain salaries across the board Q3 does include a benefit now consolidating go Daddy registry right, we talked about that acquisition and the benefits there of eliminating the domain cost we formally paid.

Now to an external party.

Oh my.

My final thought on gross margins, though right we've consistently message for for modeling.

Keep us both safe busting at mid Sixtys, Yes, you're right as we move more into these software centric offerings those are higher margin, but we're continuing to put more into that bundle.

And we want to maintain the flexibly flexibility on pricing. So they could still mid 60 is a good place for your models.

Great. Thanks, guys appreciate it.

Our next question comes from the line of Mark Mahaney from RBC capital markets Mark. Please go ahead.

Okay.

Two questions one any more color on the marketing that you're talking about.

And are there other channels that are working better view than those in the past I think in the middle of the year. There was probably some very good ROI out there to be had and those are.

Kind of a pullback in marketing from a lot of different verticals I assume that the ROI is become a little bit more.

Back to pre coping no norms. So just talk about what you're seeing in terms of ROI and then channels and then one other question related to marketing and that is the lax customers customers that were on the go Daddy platform in the past if you had much success. During this kind of time of.

What must be really elevated demand for digital presence solutions have you had success being able to go back to some of those last last customers and getting them to Reengage with go Daddy. Thank you.

Thank you Mark.

Regarding the first part of your question on the marketing cost and return. We're seeing you know we continue to see strength on the brand side as we have historically core metrics like aided or unaided brand awareness consideration you know something we measure which as you know for people like me, we continue to see sort of good performance.

Numbers heading in the right direction, our performance marketing <unk>.

Continues to show strength as well you're right. You know there were some differences in the quarter and you know cost per impression that has gone up a bit but we're still seeing good cost per impression for.

For the business as a whole and the overall results.

We mentioned it has been amazing we've you know we've had to have a super valuable cohort. It's the biggest scored in the company's history, which is the third quarter core and its not just because you know we're growing.

Every quarter every year. This this cohort is 30% sort of more valuable than all the cohorts, it's really really a big increase in what we're seeing in terms of the lapse customers you know as we talked about that.

A lot of our customers stay with us even after they have ventures ventures go away. So we some of that happens within our system already it's not new but I'm not I'm not aware of anything.

Special in terms of that changing during covered but I'll turn it to rare to see if there's something you want to mention about that yeah. Marc Let me put a little finer point on that the growth in new purchases from the existing base is up year over year relative to the trend before too, but not as high as we're seeing certainly in the new new customers.

But still solid growth year over year, so definitely the demand side as well in the existing base.

Okay. Thank you very much.

Our next question comes from the line of Mark The go direct from revenue like Securities Mark. Please go ahead.

Barclays on mute your line.

Sorry about that a couple of questions on W. costs and I got on the call just a little late so I apologize. If this question was also already asked but just on the freemium.

Side of things I'm, just curious what the read is initially on conversion and what are sort of the dynamics that you're seeing I know, it's been a I guess a couple quarters now I'm just sort of your thoughts on how that model is played out in the future and then the second one is just in terms of trajectory revenue trajectory of W.

Plus Sam over the next 12 months is there a greater pricing component in the I guess pricing unit next equation.

And is that sort of required as you think about your comps that you.

Actually we'll be heading up against the summer comps. If you will is up is there a necessarily a greater pricing.

Next necessary.

I appreciate that thanks.

Thanks, Mark on the freemium piece, yes, there are a couple of quarters and it's given us the confidence of the experiment has given us the confidence to continue to rollout freemium.

It's still early to talk about specific metrics on that on those cohorts, but.

But generally we're happy with the experiment. This is the path forward for us and we want more and more and more customers to be using our premium products, and we will get better and better and better at converting them over time, you know that the more.

Feature set the with including the freemium products sort of the more usage. We see you know, we'll be able to optimize a number of things overtime in terms of pricing and you know what I don't think we can come in much in terms of what pricing actions might be then the you know going into next year or what we need to do but I'll turn it to rate deceived.

There's some commentary that he wants to include here.

Yeah, Mark I think if you look at the disclosures we made this quarter around those products, there's a mix of both volume.

Unit growth as well as positive mix the percentage of customers coming in at the higher tiers has been favorable since killed with hit so that's helping as well, but yes, no comment specific comments around what that will look back in the next 12 months.

Okay, great. Thanks, guys.

Our next question comes from the line of Deepak Mathivanan from Barclays. Please go ahead.

Hey, guys can you hear me.

Yes.

Great question. So first on the E. Commerce side, you have obviously improves the product pretty nicely and a lot of feature set and also I've done a lot of integration when should we expect modernization initiatives, particularly in areas like Damon shipping potentially partnerships on fulfillment and also saying that a lot of other areas but.

Some of your peers, you know generate nice revenue.

And then the second question is off you know a little bit a little bit related to the customer cohorts given the big granular base. It's some are harder for us to parse out but can you provide some color on the quality of customers that you have seen over the last three four months in the more recent cohorts how much EBITDA, our book higher compared to your EBITDA.

Customer in the West Elm like and what are the additional products that they are buying thanks.

Yes, I'll take the first and then I can take the second on the ecommerce side you know websites. This marketing is growing amazingly well.

By itself and the commerce here is growing much faster than websites marketing overall, so yes.

Yes, we were improved we've improved the product we continue to invest in it and we're seeing good results. There good demand from customers. There in terms of monetization options deposit the focus for US right now is to get the scale, where we we have a great offering by by making it easier for customers to use by getting them premium tier.

By inserting more and more capabilities for them by increasing usage like mouth, increasing the use of certain features we are creating that surplus for the customer and definitely into the areas that you talked about continued to be future opportunities for us, but it's an order of operations first we want to get the scale and we share the GMB numbers with you and then we want to.

Look at the future options of monetization and then I'll turn it ready for the second question. Yeah, Obviously, we talked about the size of the cohorts that we've seen over the last couple of quarters of B historically largest suite C.

As far as performance you know still really early to be able to tell how we're going to perform over the longer period. We flashed up you know a cohort we picked up in the great recession. In 2008, you can see the long term performance on that turned out to be right in line with other cohorts said no reason for us.

These cohorts are going to perform any differently, but we'll see over time.

One thing I would point out is in these cohorts post code that we are seeing a heavier mix of attachment for website first marketing managed wordpress.

Right. Thanks, Thanks, a lot.

Our next question comes from the line of Brent Bracelin from Hyper Sandler Brent. Please go ahead.

Good afternoon, and thanks for taking the question here I had two if you could certainly appreciate the the record customer growth you are saying, but if I look at international in particular, it's the highest growth rate we've seen in here too.

Two quarters of accelerating international growth could you just provide a little more color on as you think about this this they assess record really strong customer growth how much of it is coming from international and maybe what countries you're seeing adoption drive this acceleration.

Yes, Brad its broad based right we started increasing the spend on marketing when we saw demand spike back in May June timeframe.

And that was pretty pretty evenly split domestic and international so the incremental spend is going towards both of those and obviously seeing some nice improvement in trajectory there.

Nothing specific to any one geo its strong around the world.

Okay. That's super helpful. And then just one quick follow up as we think about kind of they are already just talked about that $300 million, where our business growing 40% year over year, how should we think about that growth profile on organic basis I assume there is some some acquisition kind of revenue in there. So as you just think about air our cat.

Organic growth potential how should we kind of think about that go forward guys vast majority of that will again make those acquisitions were both small on oney, our base is less than 5%.

Okay, great. So bring hurting thank you.

Our next question comes from the line of Novid Conference Correct. David. Please go ahead.

I think now that we're going to have to skippy for a second and our next question comes from the line of Chris Carriage. Chris. Please go ahead with your question Brent Ti.

She had greater bank holidays.

Hi can you hear me, yes, we can.

Great maybe just on one of your milestones you guys talked about ER business apps customers now over 3 million. So that's roughly give or take mid teens percentage of your total customers I think back in 2015, you had talked about roughly a 30 year customers are buying hosting said so maybe two questions around that.

First being it's a third of customers purchasing hosting from you guys still the right way to think about it and then second on business out how would you think about the opportunity to kind of close that penetration up your customers a ton more maybe in line with where Ah I always think penetration is with your customers. Thanks.

Yeah I think.

Chris You know, we continue to see great growth with business apps and you know that we were able to attach that product along with domains were able to have customers Richardson we're offering.

The best in class service for them offering for them both in terms of tusa and in terms of support it's hard for me to talk about how the percentage isn't they line up well over the next few years, but generally speaking we feel we have a great product. If we feel the customers are very appreciative to have it you see really good response.

In terms of NPS from customers on these products and so we our intention is to continue to invest into it and make it easier and easier for customers to use you know weve had couple of sort of innovative ways of being able to some more support customers. So that customers can get themselves set up with email you know really really simple way.

And then I don't know if there's anything else there some of the other comparisons I don't know Chris that you can sort of their kind of apples and oranges in my mind would agree I don't know what you'd add Chris all you might put on top of that is that you know.

Our focus both from a product perspective and go to market right. Now is on the software products right, let's I suppose marketing and managed Wordpress and then all of the marketing teams that go in with that marketing commerce tools. So less focused on hosting whereas you know we may have quoted that years ago.

We now have more prominent software products that were pushing on the go to market.

Got it appreciate the color.

You bet.

Our next question comes from the line have to bother from JP Morgan. Please go ahead.

Hey, this is drew on for Sterling I'm. So another question on the hosting area. So given the positive results in her team present, you think that you guys can hit the bottom in that segment and could we see increased growth in that segment going forward.

Yeah, Andrew it's Ray.

Obviously, we saw nice improvement a lot of that being driven off the back of the growth in our software products. There I'm still seeing headwinds in will until we lap the restructuring actions. We took in June but you know I think ER.

All clear as far as you know the pressure we're seeing there.

Okay got it and then secondly, so we're seeing a surge in new business applications. According to some government data are you guys seem that benefit your business at all or could that start benefiting that in coming quarters. Yeah. I think the fact that we had a record of organic net customer add this this quarter.

In the company's history. So youre. So we are seeing a demand.

Got it thank you.

Our next like our next question comes the line of Novid Curran from Kara.

Now that please go ahead.

I think we don't have audio from Novid. So apologies I'm everybody. Thank you so much for joining our call today and I'll turn it back over time.

Thank you Christie.

I'll just say a huge thank you to all go down employees all over the world for a strong quarter.

And we're looking forward to the next quarter. Thank you very much.

Yeah.

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