Q1 2021 GoDaddy Inc Earnings Call
And our growth and presence I focus on pros and our domains business with four consecutive quarters of accelerating bookings growth today I'm delighted to share that in the last few months, we have brought to market new capabilities in all three of our priorities.
Our top priority this year from a product perspective is commerce as more and more of our customers are coming online with the explicit intent to sell products and services. We are rapidly innovating to meet those needs. Following our acquisition of point in February we have hit the ground running we are alive and market with.
Payments functionality for Wordpress, and a beta launch of our seamless payments experience in websites plus marketing is coming in a few weeks and our teams are running in parallel and getting payments to market, while continuing to make significant progress towards our true and goal a holistic omni commerce solution.
It was built by godaddy for the everyday entrepreneur to be launched this year.
While we plan. These significant improvements are customers continue to succeed on our platform with G. N V for websites plus marketing and celebrate growing 100% year over year in Q1 websites plus marketing commerce subscriptions also continued to stand out increasing more than 70% year over year demonstrating the.
Preference of our customers for our seamless and intuitive experience.
We continue to see strong growth in websites plus marketing overall, our customers look to us for help attracting their customers to effectively market their products and services the plus marketing side of the suite is critical for our customers and I wanted to share for incredible new features to help our.
And do exactly that and do it in a simple way.
First we're excited to announce the launch of Facebook boosted posts empowering godaddy customers to create and manage simple advertising campaigns on Facebook from within websites plus marketing are seamless and intuitive experience eliminates duplicated effort for our customers and we take it further.
Them with one click our customers can turn their social media posts into E mail marketing campaigns.
Through direct API integration with Instagram godaddy customers can create edit post and engage on Instagram directly from their websites plus marketing dashboards customers love This capability and we saw a 63% increase in account connections and a 22% increase in <unk>.
<unk> social posts after we introduced this feature.
Third we have a lot of service based customers like personal trainers or accountants, and they have unique needs and we launched a new online appointments, social composer, which enables them to create posts to market their business and drive appointment booking on their web site through their social media channels.
The result customers, who use the social composer so on average order per site and an average <unk> per site increased by 20% last but not least our brand is built on guidance and we have been working hard to bring guidance online recently, we embedded guidance directly into the editor.
This personalized action plan Leverages data from millions of websites and provides our customers with their next best action about 20% of websites plus marketing customers have already engaged with this tool and we saw an 86% increase in publication rates among those that did.
Websites plus marketing has grown into a suite of products with capabilities that help customers succeed in all digital channels, we continue to get the product out to as many customers as possible with premium with marketing dollars and customers consistently tell us they want more.
Moving to our second priority pros and we're pleased to share that last week, we hosted expand 2021 our first ever conference for web designers and developers for Godaddy pros, we created expand to bring together the pro community and share best practices and tools that will help them scale their business.
Get work done more efficiently and keep clients happy we had thousands of closed sign up for the event and early feedback is they absolutely loved it.
Growth before the Wordpress platform and its success is clear from its market share gains godaddy is committed to our pros and to Wordpress, we have a lot to offer growth and I wanted to highlight a couple of recent releases. The first is a public beta launch from a new Wordpress editor optimized for ease of use.
And simplicity, making site building and wordpress easier than ever and we've been rolling out the new editor to new users quickly over the last couple of months about half of the new users globally are now starting with the new editor and early indication is that their level of satisfaction is nicely.
The higher than customers using the regular wordpress editor.
Second is the pro hub, we've talked about the launch of the hub last quarter and now thousands of growth are using it and using it frequently our target is to have over 300000 closed enroll and actively using the hub by the end of the year. This is unique functionality for growth avail.
Alible for free and every week the team launches new features and capabilities the opportunity with Bruce is huge and we're putting initiatives in place that will help us drive value for this important customer segment for many years and.
And we're equally excited about the value created for godaddy and its shareholders as we tap more meaningfully into this market.
Moving on to domains last quarter I shared with you and the acceleration of velocity, we are seeing and experimentation in our domains business and the innovation is driving for our customers. The acceleration is a function of focusing on the customer needs and when we provide customers with better products they reward us with high engagement.
<unk> without products and higher revenue.
It started showing up in our numbers meaningfully last quarter and accelerated in Q1. The result in domains and demonstrates the opportunities that exist for godaddy even in its most mature business. We are a two sided marketplace for domains independent customers on one side and domain investors on the other.
The high teens growth in domains is driven by innovation on connecting these customers and we will continue to innovate to drive these high levels of growth I wanted to share a couple of examples of this with you.
We created new experiences for domain investors that allowed them to quickly to bulk searches and orders that simplified the day to day experience boredom as domain investors engaged more they added domains into the aftermarket, which we then pulled into new search experiences for independence. So day.
Could have access to more inventory and find the right name for their venture.
We also did the reverse we give independent customers and easy way to list their domains in the aftermarket a way that was seamless and custom built for them.
Independent customers added over 200000 domain names that had otherwise been passive into the aftermarket sparing activity for domain investors, creating these types of loops and quickly accelerate and our team is reviewing every experience from basic parking to deep learning models and testing improve.
And once that add value to the customer and spur network effects, one such opportunity that we will bring to bear is with our godaddy registry business. A few weeks ago, we announced some small acquisitions with big aspirations were adding about 30, new TLD to godaddy registry, including Dark club.
That design and the amex portfolio the efficiencies of scale make obvious sense and the reason for us to scale Godaddy registry is to be able to innovate for our customers. Following the acquisitions that we've announced godaddy will be the third largest registry in the world and our platform allows us to add TLD at nears.
ERO incremental cost the high margin business gives us investment dollars, while keeping costs low this is key to us, creating new experiences for customers, while giving them a choice of the best Dld's, both from our partners and from Godaddy.
In closing as we have shared and the past our formula for success first and foremost is about creating value for our customers are operating velocity is about innovation driving a constant increase and customer value, allowing us to shift part of the value to shareholders Godaddy had a strong quarter.
Powered by good acceleration in bookings and yes, our strong business model showed up and yes, we flexed, our organic and inorganic muscles for growth and yes, we invested and product and marketing, while delivering healthy unlevered free cash flow, but the key to long term growth and value creation remain that way.
We are a customer led software company focused on innovation for our customers and our customers continue to want to do more with us.
With that let's hear from Ray now in what will be his last quarterly call for godaddy. Thank you Ray.
Thanks, Omar I'll touch on the financial results from what was a terrific quarter for Godaddy, then provide our outlook for Q2 and the rest of the year.
Q1 was another solid proof point validating the strategy, we laid out last year and our Investor day, we've now seen four consecutive quarters of accelerating bookings growth and the teams are pushing harder every day to increase velocity and innovation, giving us confidence, we're just beginning to tap the huge opportunity in front of us.
For the quarter total revenue came in at and entered 1 million growing 14% year over year, while currency impacts were negligible.
And international business grew 16% on a reported basis.
Fastest growth on over two years, as we see ever increasing demand for digital presence and markets around the world.
Business applications was our fastest growing product line, increasing 21% year over year with continued strength and branded email productivity solutions and day.
And this was not far behind growing 19% on the heels of experimentation efforts, Oman and talked about earlier.
We continue to see stellar growth and aftermarket domain sales with over 20 million domains listed Godaddy operates the largest and most active domain aftermarket and the world and it now contributes roughly 10% from total revenue.
We also continue to see strength and primary domain registrations and strong product renewal rates.
And finally hosting and presence grew a little over 4% and the quarter.
And this line continues to reflect headwinds from the godaddy social product due to the elimination of the outbound sales motion last June and.
Putting some context on that impact excluding jewelry, social from both periods growth and hosting and presence would've been high single digits this quarter.
We marked a major milestone from a scale perspective this quarter for the first time ever Godaddy has reported quarterly bookings of more than $1 billion bookings rose, 14% year over year with a point of currency tailwind shrink was broad based across products and geographies with domains seeing the most upside.
Gross margin came in at 64% and the quarter as was shared with you and the past there are many variables that can impact gross margin and any given quarter, but product mix is one of the most important our sales growth and domains impacted overall gross margins this quarter, but we remain within the mid sixties range, we've always pointed to.
More importantly, we're pleased with the growth and gross profit dollars generated by the top line outperformance this quarter, both G&A and tech and Dev expenses accelerated this quarter, primarily related to acquisition expenses pre and post consolidation.
Importantly, our acquisition of point and February required us to account for some of the acquisition price as GAAP operating expenses, which we call out on the reconciliation tables and the press release and slides.
Excluding these nonrecurring expenses check and Dev expense would've been lower by $29 million, but still up nearly 20% year over year as we press to accelerate product development.
We also continue to invest and marketing to capture strong demand and the market.
The net sum resulted in normalized EBITDA of 192 million and Q1 representing growth of 17%.
Moving to cash flow well over free cash flow for the quarter was $268 million growing 14%, partially from lighter capex spend this quarter and should even itself out over the remainder of the year.
Now onto the balance sheet. We finished Q1 with $1 3 billion of cash and total liquidity of nearly $1 9 billion.
In February we issued 800 million of eight year senior unsecured notes with a fixed rate of three and 5% to fund acquisition activity.
We also took advantage of favorable market conditions repricing, the 2020 seven term loan lowering the rate by 50 basis points and generating nearly $4 million and annual cash savings net debt stands at $2 7 billion below three times net leverage on a trailing 12 month basis and near the midpoint of our targeted range from two to four times.
And we have no significant debt maturities until 2024 and.
Additionally, we repurchased three and a half million shares of our common stock true today for an aggregate purchase price of $276 million or an average price of just under $79 per share.
These repurchases represent a 2% reduction and fully diluted shares outstanding.
We also announced that our board of directors approved a new share repurchase authorization to acquire and incremental $775 million of our common stock, bringing the total repurchase capacity to $1 billion Godaddy has a highly resilient recurring revenue model and a strong balance sheet. This enables us to execute against a number of pre.
<unk> as you saw this quarter, including investing for organic growth acquisitions and share repurchases.
We remain confident that we have the liquidity and flexibility to pursue multiple capital allocation priorities. The pursuit of long term growth and free cash flow per share.
With that let's turn to our outlook.
Given the strong pacing of the business, we're raising our guidance for full year revenue to $3 75 billion or 13% growth. We're also raising the outlook for unlevered free cash flow to $955 million or 16% growth.
With respect to investment cadence, we're seeing good returns on marketing spend and plan to continue at similar levels of investment to drive growth.
We also expect continued check and that investment as we push on the velocity and scope of product development, including the launch of and Omni commerce offer.
These investments will be largely offset by the operating leverage we're seeing and customer care and G&A.
For Q2, we expect total revenue of approximately $920 million or 14% growth year over year with high teens growth and domains and business applications and high single digit growth and hosting and presence.
Note that this updated guidance reflects $20 million of revenue and $20 million of Unlevered free cash flow dilution from the point acquisition and does not incorporate the impact of any of the recently announced registry deals.
We continue to expect point to contribute more than $150 million in incremental bookings to our commerce solution in 2023.
In closing 2021, and it's been strong out of the gate exceeding our expectations and we're not done yet.
We're playing offense and a world where a digital presence is now table Stakes ecommerce continues to evolve quickly.
Godaddy will lead in this space by providing differentiated customer experiences growth opportunities for its employees and creating significant value for shareholders.
That well Christie Masoner from our IR team open up the call for questions.
Thanks Ray as a reminder, if you would like to ask a question. Please use the raise and feature at the bottom center of 11 asking to be added to the queue. Our first question comes from the line and Sterling Auty from J P. Morgan Sterling. Please go ahead.
Alright, Greg can you hear me okay.
Can I.
Ray Congratulations on finishing up your tenure at Godaddy on such a high note.
But I am wondering how happy Mark is with you raising guidance before you step out the door.
Thanks Sterling I appreciate it it was a fantastic quarter.
Happy with where the business is the trajectory of it so.
And so maybe you can help us on and a couple of fronts I think maybe the one day.
All drilling and you mentioned, the headwinds and hosting and presence when do those headwinds abate and where logically should the growth on that business go.
And as it kind of gets back to a more normalized run rate.
Yeah. Thanks for that question Sterling, It's one we get pretty.
Pretty commonly thank you know as I mentioned in the prepared remarks ex social and the hosting approach. This line grew and the high single digits and the first quarter and the guide for US on a forward basis as continued growth from that range and rest of the year, obviously implies an acceleration as you move through cash free been Super happy with what we're seeing.
And those subscription software products that we've talked about and we really didn't start to see continued strong growth there I'm on highlighted on the progress we're seeing from a commerce perspective. So there is upside from here.
Fact from age the true.
Traditional hosting and security products still make up a large percentage of that line item.
I think the thing is and Investor we should look at it and remember is that these products are critical to this to the success of our partner audience Ray who serve entrepreneurs and while there are a little slower growing they are super stable businesses are cash generative and they support the investments we're making.
And those software centric offerings like websites plus marketing on managed Wordpress oversell bright and now with the introduction of Omni Commerce. Later this year all those investments are being funded by the <unk>.
Create and grow phase of the customer journey, we've highlighted this and you'll see it on the Investor day, that's $175 billion Tam a huge opportunity for us as these offerings continue to scale and capabilities, we do expect that to be a tailwind to the hosting and presence Inc.
As we move forward.
That makes sense and and maybe one follow up on the domain side with the new mix with the registry operations and Theyre no longer does this look like a segment that's going to grow in line with customer growth the way that it's been articulated in the past how should we think about the sustainability of what type of growth rate and domains is moved.
Sure.
Hey, Sterling. This is them on maybe I'll start and Ray can jump in you know the story here and of course the growth from the primary market, we're seeing sort of new demand customers coming in.
On the outsize growth and the aftermarket as well and there's good demand there, but the real story here is about innovation and we want to increase the pace of innovation at the company, we've put that energy and to the domain side and Youre seeing the results of that.
As we continue to improve the product we've seen more inventory basically more domains going to the aftermarket and on both sides and independents and domain investors sort of taking taking advantage of that RV.
Our view is that we'll continue to innovate to look for opportunities sort of on every rock to improve the customer experience.
And the innovation will continue to drive growth for the company.
In terms of sustainability and and we like to think that we are making changes that make the growth durable but of course and what we've said before that we started to see some goodness and Q4 of last year. So we're going to have to continue to innovate to sort of continue to drive growth.
Ill turn it to ray to add a bit more color, yeah, just adding a little bit to that sterling.
And think of the driver of that five points of sequential acceleration on the domains line item is being a lot of the aftermarket right. So Oman, Mitch and we feel good about the systemic changes, we're making and the product and the flows. So we do expect the dollars to continue to drive meaningful growth as we move forward.
That said, we do anticipate the domains growth rates to moderate to the low double digits right by the end of the year.
Understood. Thank you you bet.
Sure.
Our next question comes from the line of Jan <unk> from Evercore ISI Jan. Please go ahead.
Great. Thank you guys and congrats on a quarter I started and Jan for Mark Mahaney.
Yes, maybe and one more question on our sales and marketing if you could put some color around just the overall, whether marketing growth compared to prior quarters and <unk>.
The revenue base for the Apple plus and continues to grow and also like what's the cadence of that freemium Rollouts and where are we in terms of like the U S. You brought out and if you could put some color on the conversion.
Yeah, Let me take the last part of that first this is them on John.
In terms of the freemium rollout and we continue to be Super happy with the rollout of majority of customers and the U S are now seeing the freemium product. We are still gathering the last bits of data on it but we're satisfied from a conversion standpoint that it is doing better than free trial, and it's going to be the way forward for us.
Our path there the next steps there will be about taking premium into other English speaking markets and then our other international markets. So that that's sort of the roadmap for freemium moving forward and in terms of the comparison year over years alternate Ray Yeah, EOG and the.
The rates on those products the growth rates are consistent with what we've been talking about and recent quarters continue to be really happy with both attach and we're seeing there as well as the skus that folks are are choosing.
And if I may add one more question on just the claims going out a couple of years I know you talked about 150 million by 2023, what kind of assumptions are you using in terms of just the <unk> capture how much of that <unk> and do you expect to be flowing through a point at that time.
Those are conservative and want to get into the details yet because we're still a good ways out from actually launching that iterating on the go to market, whether it's new versus existing so just give me a lot of factors to consider as we roll that product out but 150 is the minimum we're looking at we think there's a lot more opportunity.
On that.
Great. Thank you that.
Our next question comes from the line of Nick Chang from <unk> next please go ahead.
Great. Thanks for.
Taking the taking the questions I guess.
I guess first can you just maybe give an update on accordingly trends as kind of COVID-19 concerns and uncertainty persists.
And then the second question and maybe.
Bigger picture as you roll out new features for social API integrations, with Instagram and things like that.
And what is the level of the kind of the current sub base awareness of these rollouts that are.
Pretty frequent and then how does it come into play.
With winning new sub tour and market to choose a platform and maybe in particular the E Commerce solutions that godaddy. Thanks.
Hey, Nicole let me take the first one and our monarch and hit on the products.
Far as trajectory.
We continue to see really strong year over year growth and new customer cohorts as both on the number of customers and and the absolute dollar value of the cohort. If you look at the first quarter curve cohort, it's comparable towards the sizes. We received in Q2 Q3 last year when the COVID-19 demand surge.
We are seeing differences and demand around the world just like we have for the last years, but the numbers are still really strong as you can see on the results and and the guy in there.
This is consistent with what you see and a lot of the other external data points with respect to small businesses, including <unk>.
Still a real robust new business formation, and the U S and particular, the Q2 guide that we put out there as well as the full year is what we see with respect to current trajectory.
And then in terms of the feature set.
Nick It's all about.
Very very quickly bringing features to market that create value for customers that increases and engagement that increases their customer success rate that drives away and that that success for them drive sort of the awareness of the product not just with them, but with other people and the beautiful word of mouth that continues there but internally what it does.
That can that customer success leads to us being able to build an ecosystem of upsell and be able to build an ecosystem, where they're able to adopt new and new capability and we're able to offer them more and then we're able to bring that success to sort of earlier in the sales path, where we can use that messaging in terms of confidence to say.
X percentage of customers are using this you should try to you can get it with the starter package of websites plus marketing hopefully that answered a little bit of I think the question that you were asking and there's just a ton of opportunity for us to drive awareness about our product.
And.
Looking at a lot of research where customers are just surprised to see how simple and intuitive and.
And a powerful websites plus marketing is for their needs, but they just didn't know that it existed or that it did xyz and us continuing to launch those features just makes it very very big and then quick mention on the pro side. You know this is why we did the expand program we have a new editor and play forward, perhaps we've launched the hub and we've.
Got to get word out there that godaddy is bringing to the table new feature set functionality.
And a huge amount of it for free that can really make life easier for the pros and.
And so far they're liking what they're seeing.
Great. Thank you.
The next question comes from the line of <unk> Yang from Barclays. Please go ahead.
Hi, Thanks for taking my questions can you comment on how you think you can monetize the boosted posts for Facebook as well as the Instagram API and do you have any preliminary stats on customer adoption and then them on you had noted targeting I think 300000, pros and rolled and pro hub by year end and that's <unk>.
About 20% penetration, where do we stand today, knowing that it's still very early days and.
And just what's going to drive that.
Adoption. Thanks.
Yeah, It's Super early days and you know I've mentioned, a couple of metrics force some of the features.
Where we have a little bit more data and no doubt for things like boosted posts and others. We will see I think really really good engagement from our customers on those in terms of engagement with the hub. The 300000 number comes from looking at our base of customers. As you know we have $1 5 million pros on our platform, which is which was just a massive number.
But to engage them at a much deeper level or what we did and we segmented those customers and we said look here are the types of.
Sub segments within those that could really benefit from a tool like the hub and those of the customer and we're targeting youre going to see us sort of reach out to them with sort of innovative marketing solutions and.
That bring them to the hub that allow them to try tools and then sort of add value to it every week literally every week every other week, we put something out there. So that if you go to the hub today for example, and one of the things we have out there is more data for them for their websites that we're capturing and youll see some data set and then you'll see right.
In front of it coming soon on the next thing so that day, they feel that velocity of change that they feel that okay. I'm seeing this today and I'm going to have something.
We got to and I need to come back together. So that's the type of loop, we're trying to create to bring 300000 folks into the hub Inc.
Trevor and when you think about monetization on those websites plus marketing capabilities, we're focused on delivering that customer value first and then we'll get to monetization once we've gotten closer to scale.
Great. Thank you both and congrats ray on leaving on a strong mark we appreciate it.
The next question comes from the line of Ron Josey at JMP Securities. Ron. Please go ahead.
Okay, great. Thanks for taking the question always good to talk to you. So I wanted to ask maybe two on them on on payments and Commerce solution, you talked about getting both rate and market I guess, Jim and trade and market and the angle of the omni commerce solution launching here.
Websites and marketing Commerce, I think subscriptions are subs rose, 70% year over year, and so can you talk to us maybe how godaddy looks once these solutions are fully launched and and really what we can expect around building awareness given your commentary on new products and services are being launched but awareness is still something thats being worked on and then maybe.
Another question more just on the organization.
Things reopening now are the guide stack and the office and just wondering how the organization if folks are back and the office, how that's coming along.
From an efficiency perspective, thank you.
Yeah happy to take that on the payments piece, we have.
A wordpress solution out there that's a small start because we're trying to see how things work and push through things through the pipe, but the big launches you said is about websites plus marketing and having a completely seamless experience the way.
Wanted to visualize that is going on.
Customer come to us based on where the website or domain ultimately to have an online store online and as they are picking their payments provider. They have a clean default choice that says you know start with godaddy payments and it just works seamlessly every interface. They go into looks the same feels the same works. The same way is connected and the background. So they are not copy pasting.
And anything every.
Thing related to their sort of selling capability, whether it's there and it's on their side or with partners like Amazon and Etsy or others is handled seamlessly and just taken care of and of course, the omni commerce solution, which we're committed to launching this year is about bringing the capability of in store and to that same ecosystem.
Well in on.
Outside of that we're also targeting managed Wordpress, which is our instance of Wordpress and a godaddy payment solution from managed Wordpress, which we will also be launching in a few weeks.
We've put those pieces together.
The point about awareness of course continues to become bigger and bigger but once we have a full solution. We can actually go to market and a different way, we can actually go to market and talk to customers about having the full capability and then.
And then being able to do it in the manner that they like to do it with godaddy, where the solutions are simple the technology's intuitive and the human guidance is always always available to them. So that that's what you should expect from us in terms of reopening we are still evaluating reopening and unlike many other companies we have done some surveys of the employee.
We have put in some dates where we're going to incur will ask folks to come in on a volunteer basis and so far there is not a lot of folks taking us up on that I think force to continue to be concern I think folks in many places and it depends on country as you well know August.
You see the situation and India, very very difficult right now, but depending on country and are there are some locations where people are slightly more open to it but at this point, we think it's looking more like later in the summer that we will have a set of folks back into the office and maybe from a productivity perspective, we're now a year call. It three quarters and the guys working from home.
And maybe improvement there. Thank you.
Yes.
We're happy with the productivity that we've continued to add more on sort of tech. We've continued to add more capability for the guys to work remotely because we realize that this is sort of.
Normal for quite a bit so so far away and import we're pretty happy with the productivity, we start to lap some of that growth.
Going into April and May here and.
So so far we're pretty happy with it.
Got it thank you.
And thank you.
The next question comes from Brett <unk> from Piper Sandler and Kyle.
Please go ahead.
Hi, This is Clarke Jeffries on for Brent first question and certainly top of line is that 90% domains growth number highest and three years with a high Teen guide and Ray I appreciate the disclosure around percentage of the business from aftermarket could you maybe give us a sense of what percentage of the business aftermarket was a year ago or in the past and.
And maybe how much volumes versus asp's are a drag on the benefit today I have one follow up thanks, Yes Clark.
Disclosing for a while.
Single digit.
And now it's climbed up to double digit we've been really happy with all the work the teams and are putting employees and I'm on articulated a lot of the things we're doing and it's not just one thing.
And different purchase paths is different.
<unk> on it.
And it's more inventory and the pie.
No.
And the lift there has been really strong and you saw that five point difference on a sequential and teachers.
And just talked about from a unit versus ASP perspective. This is primarily unit right. These are more.
More inventory going through the pipe versus higher asp's.
And we do see our share of strong asp's.
Six digit plus numbers.
That's not what's driving the revenue growth.
Alright, perfect and then second question, obviously strong growth global demand seen with 16% growth and international.
I was wondering if you could get a little bit more detail about where you're seeing strength and the different regions any pockets of particular strength to call out and then.
Is there any takeaway for investors and with this being a third of the business and now growing faster than overall revenue.
Yeah Fantastic results out of the international team.
And really stepped up during the COVID-19 demand surge, particularly on the marketing side. If you look at some of the campaigns that we've put up and in different markets.
Really driving a lot of sign ups.
As far as.
Any areas of strength are developed markets are growing incredibly strong so Canada, Australia UK and.
India.
Those all sequentially stepped up and we.
We've been really happy with the results we're seeing there.
Alright, Thank you very much you bet.
Our next question comes from E. All around Ian from Wedbush. Please go ahead.
Hey, guys. Thanks for taking the questions.
So actually but one of the most important things you said on the call. So far today is just that the cohorts.
The <unk> is comparable to <unk> <unk> last year, and I think that's an incredibly positive signs and I wanted to dig into that a little bit maybe you could.
And if theres anything around core behavior.
Where where they are coming into the funnels and around domains.
Is it more on the website since marketing side is it.
Managed wordpress as is as the pro push helping push that and and some of those behaviors. So just some color around that and then on the hosting side and I know that the slower growth piece and not the fanciest part of the business, but it remains important.
Are there opportunities to grow that business.
And are you seeing pressure there from the larger cloud providers, taking share on the market or do you guys not really claims and ballpark.
Hey, guys. Thanks for the question you know on the cohorts as Ray said Q1 came in at a strong cohort and.
Definitely behaving similar to <unk>.
Q2, Q3 cohorts. So we thought that he talked about I think overall, that's great customer numbers, they're coming in through similar channels. As an example, you talked about growth.
The stuff we're talking about pro this still early so what you can expect as the channels are pretty similar and it's similar to what we saw through the pandemic last year. So there isn't a lot of sort of change in terms of the shape. It just <unk>.
Nice increase continue and nice increase and customer numbers and more going through the pipe and then on the second piece and I'll, let ray ticket yeah. So as far as competition right. There is some consolidation taking place and hosting.
But we are very sharply priced on our offerings and the pro hub is another way, we're enhancing the benefit for those folks that are coming in and using that product.
Great. Thanks for taking the question.
Okay.
Our next question comes from the line of Deepak massive on it from Wolfe. Please go ahead.
Okay.
Deepak please on mute your line.
Okay.
We will move on to the next question.
And from the line of Brent Thill from Jefferies.
Please go ahead.
Yes.
Hey, Ray congrats on a on a great run.
Thanks, Brett.
When you think about the cash flow. It was about 11% ahead of the street.
And I'm, just curious nice to see the commitment to the buyback.
I'll also questions around you know you've done some some great tuck ins with point and others Youre commitment on that side too and how youre going to balance the buyback versus.
Overall, our tuck ins to solidify that the tech platform.
Yes.
Yeah.
You got a question there, Brian where are you make any comment.
I'm just curious when you think about the mix and how you're incorporating that and it's nice to see the commitment to the buyback, but I was just curious if you can comment as it relates to M&A and part of the strategy going forward.
And some nice tuck ins like point shall we continue and expect that going forward.
And by background and how you think about capital allocation gosh, it's the beauty of this business model right significant and predictable cash flow generation, we can execute across all of the capital allocation priorities right, whether that's organic M&A and share repurchases.
Your point, we've made a string of acquisitions over the last 18 months that have added significant product capability.
Incredible talent.
And some strategic Optionality, when you think about registry and that vertical ovation there since the last earnings call, 2% of our outstanding equity at really attractive prices, because we were able to take advantage of the market volatility.
And honestly when you look at capital allocation for us.
Pretty easy.
Our net leverage is near the midpoint leaves us a whole turn of EBITDA and capacity there, but those priorities and the orders don't change right, we're going to invest.
And prudently, but at a at on an accelerated rate and the organic business M&A and we've got a strong pipeline and and we'll continue to be opportunistic with that $1 billion of capacity gaps on repurchases.
Okay excellent. Thank you.
Scott.
Our next question comes from the line of Matt Pfau from William Blair. Please go ahead.
Okay.
Hey, Thanks, guys just wanted to ask another question on on the pro hub product.
Maybe my understand is incorrect, but I think that it's free for professionals to sign up for the product and that you can actually use it to manage.
Wordpress websites that that arent created on godaddy. So maybe just sort of be helpful. If you could dig into the monetization model and strategy with the pro hub.
Yes for sure Matt. So the approach here is very much aligned with our broader approach.
As a company the idea is to build tools and capabilities that add value to the customer drive engagement and drive value.
Over time take some of that value and to.
And to shareholders great absolutely. The pro hub is a fantastic tool it not only helps pros come in and manage Wordpress instances you know.
Both closer to godaddy and outside but it also gives them a place where they can do a bit of a project manager and or manage their clients and we are adding more and more capabilities to it. The idea is to create value for the product as an example, we already know that just the pros that are using it right now are saying that they can save about three hours per.
Site rate per month already with the with just what we have today. So as we save those pros time, we expect to have a bigger part of our business with godaddy and <unk>.
It forms a great starting point for us to be able to put in front of them.
New capabilities, new products, because they have a high engagement product that they come to all the time that that creates value for them and gives us the opportunities and now expose them to products that we monetize.
Got it and and just one follow up on that within your pro base are you seeing.
Similar uptake or interest and a lot.
Launching commerce sites that you are seeing and the websites plus marketing business.
I think we're very early in that space. We know that pros are super interested in commerce, we know that day that will commerce supports a huge percentage of the.
On online e-commerce sort of GMB today. So we know there's great demand. There. We know there is a strong community behind it but we're still pretty early and that process as you'll remember in Q4 of last year, we did and acquisition cost Skywards. So we now have a team that is dedicated to commerce, they're part of the overall Commerce Division, which as you know.
It was led by Osama barrier, who joined US from point, So we're actually bringing all the different pieces together at the company and saying Here's the Commerce division they are going to deliver a platform that works across websites plus marketing and managed wordpress.
Okay. Thanks, guys appreciate it thank you.
Our next question comes from the line of novel Heart from true now that please go ahead.
Yeah, Hi, thanks, Thanks for taking the question.
Just curious to know if the 70% growth and the website, especially on getting and celebrate.
It's comparable to what we have been saying and the last three quarters or is that or is that a pickup or about the same and.
And also maybe if you can give some color on the.
On the mix of E Commerce packages, and then that would be great.
Yeah, sorry, I can take that now with overall.
And the growth we talked about is was all commerce across.
Websites with marketing suite, so that grew 70%.
Year over year, and it's if I remember right about consistent with what we've talked about we've consistency consistently seen that.
SKU grow faster.
Faster than the other skus and I think it matches the demand we have and in the market today right customers are coming online and they are looking for an online store. You also saw a shift I think I've talked about it and the previous call. Some of our merchandising where you come to the homepage of godaddy and unless we already know you and personalize it and what we've put right in front of you is the ability to build and online store with web site.
Marketing in terms of the percentages.
Going into the commerce SKU versus others broadly in line with what we've talked to you about it continues to be the product with customers are excited about it continues to be the product that we're putting a lot of them and it's not just about product commerce as I talk and in my prepared remarks, we're doing more and more for services commerce customers as well and their needs are.
Our unique and different what they're looking for is tools that help them do the online appointment and sort of things that go along with that so and overall I would say the similar trend, but hopefully that a little bit of color helps.
Well that's helpful and maybe a quick quick follow up.
On the Pemex shrunk and.
And what point do you think maybe you can touch on the share some.
And some numbers that.
And you think you can.
And every email and the back half on average.
True.
And also with respect to your own expectations, how are you tracking with that.
And the launch of <unk>.
Integrating point into the on line packages.
Yeah, we continue to be very happy with the point integration, we're moving very aggressively the products that we're building and testing right now and as I said you know, we've got something out there for Wordpress already and you'll see more from us and websites plus marketing within a few weeks from our from my perspective and look fantastic.
Exactly sort of seamless intuitive experience that our customer base and meet them. We're absolutely excited about providing that we're still on track to provide and omni commerce solution. This year. Our teams are working in parallel and burning the midnight oil on that we're all super excited about it and we think it's going to make a difference and the mark.
And.
And bringing sort of in store online and platform of Amazon and Etsy all of those sales together in one place bundled with Congress with payments and.
Honestly more opportunities coming right behind it the invoicing and others. We think it's just fantastic, but overall in terms of talking about numbers, but too early and.
And he said we have a number out there for 2023 and.
We think it's conservative because we really think the opportunity is very large.
Makes sense. Thank you. Thank you.
Our next question comes from the line of Frank <unk> from Wolfe Research Frank. Please go ahead.
Hi, Ron Frankel day here for day Park.
Congratulations on a great quarter, just wanted to ask about the registry business, obviously acquired more extensions on.
And before you spoke a lot of that innovation and being central to your strategy I'm. Just curious on if you could highlight kind of what which innovations you're most excited about as.
As well as how we should think that timing on the building out the building that business is larger.
Yeah, one of the things we realize this and have to innovate we needed a bit more scale and that business, we need more TLD and we need to be able to give the customer and more choice. So what you see is us, adding a bit of scale and of course, theres, some financial advantages to that too, but adding a bit of scale. So that we can really drive.
And more innovative experience for our customers believe me, where we're doing some small things there and as soon as we have something that we're super excited about you guys will hear about it.
Hey, Frank.
And <unk>, we picked up right those are either owned or perpetual contract <unk>, meaning zero incremental cost.
Got it.
And innovate.
Got it and then just as a follow up.
We should also struggle on to that websites and marketing as we you know coming out of the pandemic and things are starting to reopen have you guys see on any kind of impact on our customer acquisition cost or any kind of anything notable we should be thinking about in terms of your marketing channels.
Yeah, I think as.
And we talked about a little bit the Q1 cohort.
It was a strong cohort and you know.
And we'll continue to spend and marketing until we see the returns and as Ray guided right now.
We intend to continue to spend on marketing as best as we can see today, we see good returns for that marketing spend or at least well within our guidelines. So that's what we're expecting to do obviously, there's no crystal ball and I can.
And talk about what's going to happen, but overall, we still feel pretty good about it.
Yeah.
And so no impact yet is what I'm hearing.
No.
As I mentioned.
First quarter cohort looked a lot like the size of the Q2 to Q3 last year. So.
Alright, perfect. Thanks, everyone. Thanks, everyone and congratulations on a great quarter.
And I appreciate it.
Thank you for joining us today, and I'll turn the call over to him on for some closing remarks.
Christie.
I wanted to take just a moment to thank Naomi Kelly and wind-borne.
<unk> has been the backbone of this company for almost 20 years and the FERC contribution is immeasurable.
And I know this group doesn't get to see her with nine months all within the tack on with US on these calls and always helping out and has done so much for the company and Ray just.
Guys get to see them all the time total joy to work with such a professional and Ray I'm really glad you got to go out on a beat and raise and as Sterling joke, which certainly and you gave me a big laugh.
This is this is a good point and after Mark for sure. So thank you.
And <unk> and Ray and thank you all godaddy employees for a great quarter and thank you all for joining the call.
Yeah.