Q3 2022 GoDaddy Inc Earnings Call
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 three 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 a month.
Thank you Christie and thank you all for joining us today.
Godaddy our mission is the mix opportunity more inclusive for all championing micro and small business customers.
One of our customers' tire in Harper co owner of Harp vision was recently asked what happens if harp vision doesn't succeed.
His response was I've never thought about it.
Only talk about it succeeding.
Every day, we are inspired by our customers.
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 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 do uniquely positioned 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 head count 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 ARPA and extending commerce and payments attached 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.
<unk> 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 as RP.
On gross add the data over the last few months suggest 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 add 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 our pool 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 updated drove higher published rates, which is an important indicator of customer success and increased lifetime value.
<unk> heard we regularly talk about bringing commerce to every surface at godaddy keeping with that we have enabled payments in all websites plus marketing plans, including our free plan.
This shows up in the form of buy buttons, making it easier for our nascent businesses side hustles and alike 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.
These customers want a simple inexpensive way to start taking payments. This functionality allows for that while providing the lowest in the industry online transaction rate of two 3% plus 30.
Lastly, we recently celebrated the one year anniversary of our omni commerce solution and I wanted to spend a moment technology all that we've 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 singer.
A 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 e-commerce 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 Dot com and others. We have added pay buttons integrated shipping labels, Apple pay and our new Commerce plus plan for websites plus 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 E. Commerce. We have also expanded our payments and commerce experience into commerce for managed Wordpress, while also actively rolling out our managed <unk> commerce.
Tore solution, allowing us to serve larger customers, we started with larger customers doing up to $1 billion 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 80 X higher lifetime value. We have continued to see positive momentum in new customers attaching godaddy payments within websites plus marketing and managed Wordpress. These.
This is 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 flows this quarter, we launched free SSL on nearly all new web hosting plans in our major markets, including the U S UK, Canada, Australia and India.
Early data shows that this is driving increased term lengths and modest improvement 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 silver response time by rolling out infrastructure improvements across multiple hosting platform.
We have also continued to update godaddy pro hub, putting a more competitive offering in the marketplace.
Hosting business in Europe is also exposed to rising energy costs and to mitigate that we secured a fixed power contracts.
Our third priority is innovation in domains. The rollout of table domains is going well with half of our domain now technically enabled as payable and ready for activation by customers.
The first cohort of existing customers, we exposed payable there remains too were logged in domain plus email customers.
These customers were identified as likely to have high intent and they have engaged with favorable 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.
<unk> 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.
A fuse.
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 dot com 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 the 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.
Thanks, Bob and thank you everyone for joining us today.
Q3, Godaddy delivered solid results despite increase in currency and macroeconomic headwinds.
Revenue was 1.03 billion.
<unk>, 7% on a reported basis and 9% on a constant currency basis.
Within total revenue International revenue grew 4% on a reported basis and 9% on a constant currency basis.
Applications ecommerce revenue grew 13% within the guided range of 13% to 15% on the strength of our create and grow our commerce products as well as email attach.
The <unk> for applications ecommerce grew 10% to more than $1 $2 billion and within that the AAR are from our create and grow products grew 7% to nearly $430 million. Additionally, annualize GM the crust of godaddy ecosystem grew 10% to <unk>.
Proximately $29 billion.
Core platform revenue grew 5% within the target range of 4% to 6%.
Primarily due to growth in the aftermarket and increased pricing debate.
Offset by a modest decrease in our hosting business as a bond noted above the hosting business has concentrations and exposure to uneven demand in Europe as well as FX pressure.
For core platform grew 2% to $2 3 billion.
Q3 bookings totaled 1.09 billion growing 5% on a reported basis and 7% on a constant currency basis applications Commerce bookings grew 10% core platform bookings grew 3% on similar growth factors noted for revenue.
<unk> EBITDA grew 15% to $263 million.
Our margin rate of 25%, representing a 180 basis point expansion year over year.
Continued discipline in spending allowed us to increase our margins at a rate higher than our bookings.
Unlevered free cash flow for the quarter totaled $297 million growing 18% driven by strong profitability.
Additionally year to date, we completed $115 billion of share buybacks repurchasing $14 8 million shares and reducing our fully diluted share count by approximately 9% since year end.
Free cash flow per share rose to $5 96.
On a trailing 12 month basis versus prior year cash flow per share of $4 94.
A 21% increase driven by strong cash flow and share repurchases.
On the balance sheet, we finished Q3 with $826 million in cash and total liquidity of $1 4 billion.
Net debt stands at $3 1 billion.
At the midpoint of our targeted leverage range of two to four times.
Additionally, in October we announced a new term loan facility of $1 8 billion.
The proceeds of which are to be used to pay down our existing term loans due in 2024.
Pending term loan facility contemplates a maturity date of 2029 and pricing based on sopra, plus 325 basis points.
We also announced our intent to increase the borrowing capacity under our existing $600 million.
Revolving credit facility to a $1 billion facility maturing in 2027.
These transactions, which are scheduled to close in Q4 are subject to customary closing conditions and would meaningfully increase our total liquidity.
Cash interest payments under these transactions would increase our interest payments are roughly $35 million for 2023.
<unk> is expected annual interest of approximately $165 million.
Moving onto our outlook, we are targeting Q4 total revenue in the range of $1.03 billion to $1.05 billion.
Any growth of 2% year over year at the midpoint.
As we previously discussed the macro environment and FX has shifted since our initial guide in February <unk>.
Additionally, we are facing a tough compare in our aftermarket business.
Adults and core platform revenue growth between 4% and 6% for the full year.
Normalized EBITDA for Q4 is expected to be in the range of $250 million to $260 million and remain within the targeted range of 24% to 25% for both the quarter and the year and above our initial range of 23% to 24% provided in February we expect our unlevered free cash flow.
For the year to be between 1.09, and $1 1 billion, putting our cash flow per share at $6 in line with the outlook shared in February .
Our capital allocation strategy is unchanged.
Continued our buyback program during Q3 and will continue to evaluate use of cash options for the remainder of the year.
In line with our disciplined capital allocation framework, our attractive model and robust free cash flow.
Provide us the flexibility to continue to invest in our business at a time when others may have to pull back more aggressively.
And to return cash to shareholders through our buyback program.
At the same time.
We remain disciplined on how and where we spend.
With our focus on controlling our costs optimizing our marketing spend.
Monitoring head count and investing in tech so that we can strike the right balance between capturing attractive opportunities with delivering profits to our shareholders.
Always with an eye towards balanced long term growth and profitability.
On our cost structure.
Last quarter, we shared that we are focused on acting in areas, we could control.
<unk> added to that goal, we executed a couple of important contracts to reduce or mitigate exposure to increased cost.
In Q4, we expanded our relationship with Amazon Web services to continue to migrate workloads and development to the cloud.
This contract will reduce our overall costs in the form of long term capital spend and energy expenses, while giving us the agility to launch new products at a faster pace.
On energy costs.
As a man mentioned earlier, we secured a contract in Europe at a guaranteed rate for the next year, giving us mid term stability of these costs impacting our European Datacenters.
Lastly, as noted earlier, we are currently refinancing our 2024 debt to extend our due dates through 2029 and limit our exposure to further interest rate increases.
Through this anticipated new debt, we continue to expect our leverage ratio to remain between 2% to four times. We are committed to remaining transparent and we will provide an update with our latest thoughts on key business trends when we share our 2023 guidance early next year like.
Like so many other companies we are operating in a fluid environment and are not immune to these challenges.
In closing.
While the short term revenue outlook is dynamic we have continued confidence in our ability to execute we believe our competitive position and strategic advantages our diverse product offerings, and our strong balance sheet and the consistent and predictable cash flow, we generate places godaddy is a law.
Leader amongst its peers.
While the range of outcomes is somewhat wider today than at points in the past.
We are creating a track record as a responsible management team that can and will lead in good times and in tougher times.
Growing our business to perform across economic cycles, our 21 million customers create the foundation for our resilience.
We will continue to focus on execution against our strategic priorities.
Tightly managing our business and building deeper customer relationships as we partner alongside entrepreneurs on their journey.
With that I'll turn the call back over to Omar.
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 macroeconomic 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.
With the momentum we are driving in Congress, we're excited about what's to come in 2023 and beyond.
With that we will have Christie masoner from our Investor Relations team open the call for questions.
Thanks, and as a reminder, if you'd like to ask a question. Please use the raise hand feature at the bottom center as a webinar screen to be added to the queue. Our first question comes from the line of Elizabeth quarter from Morgan Stanley . Melissa. Please go ahead.
Okay.
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 thus far into Q4 and last quarter, you did speak about Europe as being in that particular area of weakness and how that trend extended more broadly to the U S than any other.
Thank you.
Thanks, Elizabeth and.
Im happy to take that question.
When we talk about the unevenness in demand or the broader macro.
If we take a step back it's been kind of uneven or two plus here as you know Mike mentioned sort of some of the September October data as well, but when I look back I see us navigating the last two years really well you know our cohorts of continuing to be consistent at about 85% retention or higher.
We are without sort of.
Came into 2022 with uncertainty and it has been there has been quite a lot of uncertainty, but within the 9% constant currency revenue growth and expanding margins with.
We're taking all of that momentum with us into 2023.
The reasons.
Unevenness by geography, like you said or.
By month or by customer segment, yes, that's absolutely that and just to touch on Europe , a bit as we did last quarter is broadly similar as we talked about last quarter U K and Germany are big markets for US there. So clearly we feel a bigger impact there.
We're watching the U S very very carefully and we're watching our cohorts very very quick carefully, but we're taking all of this momentum into 2023 and more exciting we've got a lot of new product on the table on new capabilities and commerce and payments.
Improvements payroll domains registry like there's so much for us to look forward to.
But I think we're just going to watch the numbers very carefully and make good decisions and I'll turn it to Mark I don't know, Mike if you'd like to add something no I think that.
Good response Armada.
And kind of bringing it home.
I think it's more pronounced in Europe , no doubt in the UK and Germany like come on 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 are quick to closing 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 we think that when you talk about demand overall, that's something you have to call out.
Got it that's helpful. And then this is a follow up you guys have always focused on attracting customers that can attach more products didn't have that higher LTV and just in the current environment, what sort of changes are you, saying in their willingness to attach additional products provide bundled solutions.
Well you have budgets might be tighter, but any in our hand, there is an opportunity just to do more with a single platform versus any forex smaller point solutions you might have looked at in the past. Thanks.
Yes, Im happy to quickly touch on that first.
Overall, our core performing consistently ARPA.
Is rising and continues to do well, obviously, we'll talk about it more.
The end of the year, but our focus is to attract the customers with the right intent that wanted to use activate the products that we have so that we continue to maintain maintain that high customer retention rate.
As long as those.
CT form and customer lottery team, we know that you know in any.
It's 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.
In a short term up and down is okay, but overall I think all the ARPA numbers are showing that we're attracting the right customer.
And at all at.
One stop shop, and now theory has really come into play and I know, we've talked about commerce and the attach or staying at the front of the funnel.
But we're also seeing the competitive pricing in our existing customer base start to take hold and I think it's going to your to your question. It really shows that in this market are dealing with a one stop shop as a competitive advantage and we're seeing customers really.
Really be attracted to that not only new customers, but existing customers as well.
Great. Thank you so much.
Our next question comes from the line of Trevor Young from Barclays. Please go ahead.
Great. Thanks, first just more of a housekeeping one to start since investors have been asking where.
Where did we finished the quarter in terms of domains under management relative to the $83 8 million reported last quarter and then second one on after market 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.
The size, where we're at with that business.
Yes for the Dumbs Trevor it'll be in our Q tomorrow, So youll see it in reference.
Debate in my prepared remarks about some of the pull forward and what we're seeing with gross adds so there'll be some change in terms of the arc of where you'll see the details in the Q tomorrow and monarch alternative for the second part of the question.
Yeah. When you are 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.
Hopefully that allows you decided that a bit.
Okay, Great and then a bigger picture one.
Just on like the manage.
Wordpress tool Commerce stores, you mentioned going after some of the larger customers may be a few million dollars of revs are.
High single digit Reds.
Hum.
Is that those conversions are they typically coming from a modern competitive solution or are they legacy godaddy customers that were maybe like domains and managed wordpress customer, but had their own payments, our commerce integration and now to your earlier remarks kind of bringing it all into one house one one stop shop.
Yes, it's still very early February 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 would be offering were taken to them is the one stop shop from their in store capabilities to their online. They can go to one screen that can see Amazon Etsy, Walmart dot com, the physical store and all the inventory thing and they have it at an amazing price point for our godaddy.
Payments, just two 3% to 30 cents online. So we're really we've really got a great package to approach them and what we're seeing is interest and good conversion with our new capabilities and we will talk much more about our managed will commerce stores product, that's really targeting these larger sellers and again, it's still early but.
Youll see it in general release, very very quickly and the pilot continues to go well and we're encouraged by the green shoots there.
Great. Thank you both.
Okay.
Thank you Vivek.
Okay.
Maybe we lost Christy I think the next question is from Matt.
Matt do you want to go ahead, great. Thanks. Thank you.
But wanted to ask on the on our presence.
Market, how do you think you're growing relative to the market are you seeing share up flat or down and then some of your competitors in that area have made some material changes to how they're thinking about spending has that had any impact on.
On your business.
Yes overall, we look at are created in growth 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 in websites <unk> marketing. This produces a really really good with 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 our prices for those products are very very competitive so we're definitely keeping an eye on it.
Okay.
And just on the Mark you called out some areas that you or some things you've done to drive some cost savings if the macro continues to worsen into next year. How do you think about making other cost adjustments and when where would those cost adjustments fee.
Yes. Thanks.
We don't have a crystal ball into next year and obviously we are we.
We don't know if FX is going to be a tailwind or headwind and did you 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 AR and our operating expenses I think we've talked about the poor 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 what we can do 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 to where we finished on a normalized EBITDA margin expansion. It's obviously something we are very focused on and continuing to manage as we go through this environment.
Perfect. Thanks for taking my questions.
Our next question comes from the line of Mark <unk> from benchmark Mark. Please go ahead.
Hey, Mark efficacy.
Yes.
And Mark LOE question on payables domains.
I'm curious.
Really early here, but I'm curious what sort of the kpis that you're looking at initially here.
And how long before you file.
We will know whether or not.
Theres, a payments activation or a potential payments activation to me made.
You've got obviously.
Lots of data that you look at in your your marketing is always very focused on.
High intent.
<unk> users, so I'm sort of curious or what but.
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.
Two G M b over time.
And maybe specifically if you 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.
Yeah happy to take that Mark.
Bring it up a level if you remember how we introduce godaddy payments into websites plus marketing.
The first set of metrics, we talked about is what percentage of customers, who are attaching godaddy payments to websites plus marketing, it's very similar for payroll domains or other surfaces, where we're bringing in payments where the first step. We're looking at is when we put this capability in front of new customers what percentage of those customers.
Sign up for it.
Ill take it on and then of course, we want to see what percentage of those customers activated and then what G. P V they'll transact what.
We're doing a little bit differently.
For payable domains is that at the same time, we've started to expose it to cohorts of customers that are already in our base. So that's one of the examples that I used in my prepared remarks, where you can imagine customers that have domain plus email with us. They don't have website with us they have domains less email and they come in and make whatever changes.
On the website or to their account and what we're doing is we're catching them at that moment, and we're saying hey, here's here's a new thing that's available to you would you like to try it out and we saw an attractive percentage of those customers sign up for that and say I'd like to use it. So in terms of exact timeline I can't tell you, how many weeks or months it might take to sort of get an idea.
But what we're looking for is those customers just like new customers and the existing base starting to activate the payroll capability used the billing and then see overtime, what J P V flowed through it but obviously you know we have a large base and we now have this available for 50% of our domains in the U S, which is where we have payments.
So it's quite a large opportunity we're going after and in terms of Apple <unk> I think it's just too early to talk about what changes we might see.
We're learning more about that relationship and executing towards it but it's too early to talk about that.
Okay. Thanks, Mike I appreciate it.
Our next question comes from the line of Mark Mahaney from Evercore ISI. Please go ahead.
Hey, guys. Thanks for the question. This is Joanne Lee from Mark Mahaney, maybe a couple of question. One is just to circle back on the macro environment.
Can you just kind of talk about the.
Demand trains in terms of like the larger users to pros versus the Smbs are the pro is holding up better.
Or is it kind of equal impact across the board and another question on operating expense, perhaps like on the flip side I'm, just kind of noticed a pretty impressive marketing leverage. So 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 is core business given your cash position. It almost seems that perhaps is an opportunity to lean into marketing of D.
If the pricing Cpm's are favorable so if you can talk about the marketing environment Youre seeing right now and kind of how do you think about the spend trajectory are you expecting to hold it at this level or or optimistic. Thank you.
Yeah.
I guess I'll start to handle some of that yes.
Hey, Mark I was already talking on mute.
Joe Go ahead go ahead.
I think I've got three three separate question then maybe Margaret you can grab a bit over the last one was just very quickly there. Thanks for the questions on proven smbs keep in mind.
A lot of the pros that work with godaddy tend to be in our hosting business and thats disproportionately sort of impacted by FX and an European exposure. So what we see there.
It's been significantly Mark talked about our international revenue.
4% or about five points of impact.
Of FX that would have been 9% constant currency. So we definitely see those shifts but overall.
The broader macro I would say it is impacting all kinds of customers in a similar way, but the most important thing for us is that the customers that we bring and continue to have the right intent because what we're really watching us every cohort of customers that we bring in every channel that they come from are we getting the right renewal rates for those customers.
That's what really creates lifetime value for the company is not the fast customer that we can just get for a low price that is going to turn 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 and into the sort of the success based thinking.
And it comes in many flavors it comes in incremental repeat testing it comes in sort of AB testing, even based on Geos. It comes in a b testing in terms of bidding in search, which I've talked about before and by being very focused on gathering the data.
Executing to what the test so 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 of that absolutely I always say I would love to spend more in marketing every time I just want it to.
Continuing 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 am not sure of what I had trouble yes.
No no I think you covered a lot of demand and I think you hit the high points, but I'll I'll add we continue to look at marketing.
A tool based on the ROI, we see in front of us and we're always balancing our decisions today and how we invest while keeping an eye on the long term.
And our stated objectives.
We're trying to be disciplined in our approach, but yet look for the ROI and the opportunity to take advantage of it when it comes.
Our next question comes from the line of Neely Das on behalf of Deepak <unk> from Wolfe Research. Please go ahead.
Yes.
Hi, Thanks for taking the question.
John if you could provide more color on fiscal year 'twenty. Three I know you guys are still in the planning process, but are there any key priorities, we should be thinking about into next year and can we expect any large investment initiative. Thank you.
Ed.
Okay.
Don.
So.
No.
We're looking forward to talking to everybody early next year about our 2023 outlook, but I'll give it to give it a step back here and talk about kind of 'twenty, two and where we're going and the momentum we have going into 2023.
When we talk about.
Our first meeting this year in Investor day.
We've 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, where we're looking at targeting 7% growth for the year, 9% on constant currency and we really like the momentum going into into 2023 as it stands right. Even in Q4, we always knew Q4 was going to be tough.
Terrible for us.
But you take the growth rate you had 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 and around our our products and some of the stuff has talked about.
So looking forward to talking a little bit more as we get into two.
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.
Great. Thank you so much.
No.
Our next question comes from the line of Alex Bolton on behalf of Aaron Kessler from Raymond James Alex. Please go ahead.
I think it actually isn't random [laughter] hi.
Hey, guys Hey, Eric.
Okay great.
Can you just talk about maybe the shape talk a little about the shift to cloud.
Kind of worth what's your progress in terms of that shifting to cloud services and the impact on Opex that we should be thinking about over the next year or so.
Yes, I'm happy to share 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 are they're 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 with just renegotiated a contract.
Our teams work very well together and more almost all of our teams are using the cloud in some way shape or form.
Q4, Opex alright, thanks in the iron ore are you doing.
It was an early on it will get more clarity as we talk to you in early 2023, but the way I would look at it right. Now is we have pressure around increased energy costs.
Especially coming out of Europe right now.
About the contract we signed two <unk> to secure cost for next year.
But the but the AWS contract really allows us to gain any future impacts around energy cost and I think from an operating expense point of view, we're looking at it to kind of cover us as we go into 2023, if that makes any sense.
Yes, it does.
Thank you.
Our next question comes from the line of novel <unk> from tourists.
Go ahead.
Yeah.
I know that I think you're on mute.
Can you hear me, we can hear you.
Okay, Yes, so two questions in one.
Any of the.
Costs associated with your European business and kind of.
Made it out of the U S.
In U S dollars that might be hurting the margin somewhat.
And the other question I had just around the price testing.
Guys have been doing.
Any.
Are you seeing any.
If they can have any kind of pushback in any color would be great. Thanks.
Nothing to really call out in the data centers and the.
The U S dollar observed or be a part of it.
A lot of our European customers.
Customers are based on European data centers, obviously, there is some FX impact, but nothing really to call out too significant on the margins.
And then on price testing now either we've continued to test pricing.
You'll continue to see us do it where we can continue to be nuanced in our approach on pricing looking to balance both what's happening sort of macroeconomically or within a geo versus also our ability to take share in Cushing versus take price. So we'll continue to do that approach.
We will continue to guide to it.
The plans that we have for example for 2023, you'll hear about them.
Or there'll be within the guide for Mike as we talked about 2023 in February .
Okay. Thank you.
Yeah.
Our next question comes from the line of Jon again on behalf of Brent Thill from Jefferies. Please go ahead.
Hi, John I think youre on mute.
Yes, we can.
Okay.
Couple of questions.
One more on the macro it does seem like to follow on.
And a little bit more cautious.
Okay.
How they progressed maybe over time in October .
What are you seeing some of the more incremental caution.
And the second question on the tabletop names although it's.
But.
Wondering how the behaviors.
The first turn it on.
Buying at all or is that like follow on music and it's still anecdotal.
Thank you.
Yes.
John maybe taking the second part first and on payable domain, it's super early but what I've talked about in my prepared remarks is that in the U S. We have now technically enabled half the domains.
Under management payroll, we still have to put that in merchandize that the customers and activate them. What I gave an example, or two 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 the customer excited about some of the attach rates, we're seeing but in terms of customers actually starting to use it in G. P V flying it'll take a 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 this.
Scribes it well is that it's been an uneven macro environment for two plus years now and I'm really proud of what they've godaddy team has achieved and what we've been able to do I feel we've navigated that environment very very well.
<unk> attracted great customers, we continue to have greater than 85% retention rates with customers now we're sitting we came into 2022 with a lot of uncertainty as well and we were sitting here with 9% constant currency revenue growth and lots of new product coming into the market in commerce and payments I mean, wordpress with west.
Plus marketing, having enormous planned down to even the free plan with payroll domains with the registry business. So it just a lot of good for us to look forward to them and we're taking all of that momentum with us into 2023, and we've highlighted the areas where we.
Where we see some risks and we always call it like we see it.
Great, but at the core godaddy the market leader, we have a durable business our customers are resilient with leads to us having a resilient business on our core competitive advantages around.
That's unmatched scale the sales guidance, we gave them customer care, you know that customer care has created for us attach products.
And we're giving examples of that and where we're building technology that works for our customer for the micro and small business, which is the seamless which is intuitive which helps save them time help save them money and we have pricing. Like example payments that we're even and websites plus marketing that is very very competitive.
In the market and ultimately you know we've put the customer at the central what we're doing we're staying close to the customer where prudent.
Tours 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 that's sort of our view and that's how we see it.
Great. Thank you a little color.
Thank you.
I will now turn the call over to Oman for any closing remarks.
Thank you Christine. Thank you all for your questions. Thank you to all go Daddy employees for all the hard work for another good quarter and I look forward to talking to a next time. Thank you.