Q4 2022 GoDaddy Inc Earnings Call
<unk> EBITDA driving a 25% margin.
Free cash flow increased 13%, leading to a 22% increase in free cash flow per share of $6 in 2000 and.
Higher than our 2022 targets.
Our strategy direction and priorities continue to be consistent with our three year plan as we work to empower new customers and our large base of existing customers with more of our product offerings, including enabling commerce on every surface.
I will go into a bit more detail in the commerce priority section, but just to touch on it now in about 18 months Godaddy has added incredible new products to our lineup.
Fluting omni commerce offerings with websites plus marketing and our newly launched SaaS solution manage will commerce stores on Wordpress payable domains failings pay button and much more.
Our previously announced commerce offerings are now fully in market and today, we're adding to that lineup with an exciting new partnership with FIS World pay to be their preferred provider of omni commerce solutions for a U S based small business customers and bank partners.
The teams are already working together and we are receiving positive feedback from customers.
We remain confident in our long term growth potential we outlined last year in our three year plan, but also recognize that these top line growth targets may be challenged in the short term.
As a result, we've taken some aggressive and disciplined action in our cost structure that will result in over $100 million in annualized cost savings preserving our ability to achieve profitability targets, even in a weak economic environment.
These actions include deeper integration of some of our acquired brands and overall reduction in vendor spend and an 8% reduction in our global workforce.
We will continue to make prudent and thoughtful investment in our top growth areas and priorities of driving commerce through presence delivering for web pros and innovating in domains as always I will share a bit about our key priorities on this call and focus more on commerce.
Time.
On driving Congress through presence at Investor Day, we shared our vision of connected commerce, which is about bringing commerce every surface. Our goal has been to launch products and capabilities to engage the commerce customer early in the lifecycle, which might be of paywall domain.
Button on our websites plus marketing freemium website.
We have made tremendous progress in this direction through the broad release of payments into our website builders domains tailings pay buttons and more in Q4, we furthered our reach by enabling godaddy payments by default in all new commerce websites in January we rolled out our payments by the <unk>.
Fall out to new domain purchases.
Most of our new offerings have been in market in the U S for less than a year and we are just starting to engage our base. So I'm happy to share that our customers transacted $760 million of gross payment volume in 2022 <unk>.
<unk> has been accelerating and we are looking forward to sharing this metric with you regularly.
We have also launched our new omni commerce SaaS offering on <unk> Commerce, and Wordpress called managed will commerce stores. This product is targeted at the larger end of our micro business customers, giving them the flexibility and ability to scale to their needs.
Merchants can sell on a highly performing website sell in person using godaddy terminals and via marketplace and social channels with shared payments and inventory. We are excited by the opportunity and potential this offering bring to customers who need a more robust solution.
<unk>.
We are also leveraging our managed <unk> commerce stores offering in our new partnership with FIS World PE FRE.
<unk> is a market leading merchant services provider and we will be their preferred provider of omni commerce solutions for U S based small business customers and bank partners.
<unk> provides payment strategies and technologies to over 1400 financial institutions, including more than 700 credit unions throughout the U S. Supporting over 33 million debit cards and processing more than $15 7 billion transactions each year, bringing together.
Fierce world pays reach and our commerce product will create a significant new offering in the marketplace.
And briefly on supporting Godaddy pros, we have continued to improve our product offerings and have started to integrate more deeply some of our acquired brands. While these projects are complex they will lead to a much better customer experience and lower costs.
One of our key brands media Temple, we inform all customers in December 2022, and will be sunsetting the brand over the next three months.
And while I already mentioned, our new omni commerce SaaS offering we are actively testing price points that best appeal to a web pros customers and audience.
Our third priority is innovating in domain and we continue to add value into our aftermarket platform. In Q4 are damned outcome integration reached a critical milestone six months ahead of schedule by launching damn listings on our afternoon <unk> platform all Dan users.
Currently opted in for the distribution network will now benefit from greater exposure as their inventory is automatically integrated into the after Nick domain listing service network. This milestone was accompanied by numerous other enhancements such as bid and offer history that further off.
<unk> the aftermarket experience.
Payable domains is at 100% enabled in the U S and we will be ramping up the marketing launch in a couple of weeks.
As you recall payable domain, our branded failings that create a secure checkout page shareable Wheeling that enable us based domain name customers to begin accepting payments shortly after they purchased a newly registered domain, even if they do not yet have a website or online.
Store for any domain purchased existing or new customers can already access the respective payable domain through their godaddy dashboard, combining the ability to accept payments with the credibility of a domain name enables small businesses to get up and running easily.
And quickly.
While this capability has been rolling out over a few months, we're thrilled and ready to be fully in market, giving godaddy domain customers, a truly differentiated domain with expanded payments capabilities.
In closing we are pleased with our quarterly and annual financial results, we delivered while operating in this difficult environment. More importantly, we are proud of our progress against the key initiatives that we outlined last year at our Investor day, we remain incredibly excited for the future.
We are building on our unique market, leading position with identified abundant long term opportunity, bringing together our customers' digital identity their presence and connecting commerce every surface being this one stop shop for our customers is at the center of our strategy we have.
We're committed to continuing our pace of innovation participating in our customers' success intensely focused on delivering strong financial results.
As always growing shareholder value with that here's mark.
Earnings per month, Hello, everyone and thank you all for joining us.
Last year, we hosted a comprehensive investor day, where we shared our financial goals coming three years around revenue growth normalized EBITDA free cash flow per share and share buybacks.
Go down and turned in a strong year against those financial goals delivering revenue of $4 1 billion.
Normalized EBITDA of $1 billion free cash flow per share of $6 20.
And executing one $3 billion in share buybacks meeting and exceeding our targets.
Revenue growth has moderated in the short term, we remain confident in our ability to deliver the profitability and cash flow, we outlined at Investor day.
And fills a strategic steps among described earlier, we will serve as tailwind for accelerating our pace of growth going forward.
We will also remain committed to completing our share buybacks authorized by the board last year.
Reviewing our annual financial results total revenue was $4 $1 billion in 2022 growing 7%.
Excluding a point and a half of FX headwinds total revenue for the year would have grown over 8% on a constant currency basis.
Applications in Commerce revenue for the year grew to $1 3 billion, representing 13% growth and core platform revenue for the year totaled $2 8 billion.
Representing 5% growth also in line with the targets, we set last year.
International revenue was $1 3 billion for the year, representing 5% growth.
Excluding the FX impact international growth would have been 8% on a constant currency basis.
Total bookings in 2022 was $4 4 billion growing 4% or 6% on a constant currency basis.
Full year Unlevered free cash flow grew to $1 1 billion.
Representing 14% growth.
In line with our guide issue last year.
Free cash flow grew 13% to $969 million free.
Free cash flow per share increased 22% to $6 20 per share ahead of our investor day target of $6.
Lastly, full year normalized EBITDA grew to 16% topping $1 billion.
Resulting in a 25% margin for the year, which is an expansion of two points over the prior year.
Moving on to our fourth quarter results.
Total revenue topped $1 billion.
From 2% or 4% on a constant currency basis.
International revenue grew 3% or 8% on a constant currency basis.
Applications in Commerce revenue grew 11% to $333 million in line with the guided range of 10% to 12% for the quarter.
Growth in applications and colors was fueled by continued adoption of our green growth products.
Male attach and increasingly the adoption of godaddy payments and related hardware sales.
<unk> for applications in Commerce grew 9% to $1 3 billion with that.
<unk> from our creating growth products grew 8% to four.
$445 million.
Additionally.
Annualized GM bleed across the godaddy ecosystem grew 10% to approximately $28 million.
Furthering our efforts to provide more visibility into key growth areas of the business, we will sharing new metrics, demonstrating our progress with godaddy payments.
Key PV represents the dollar amount of payments processed on the godaddy payments platform.
With Q4 is the first quarter with commerce fully launched on every surface in the U S. <unk> has already grown to an impressive $760 million.
Core platform revenue decreased 2% to $707 million in the fourth quarter.
Primarily due to the tough compare to the year ago quarter, when aftermarket benefited from some larger than average transactions.
<unk> previously.
As well as a modest decrease in our hosting business as.
As previously mentioned the hosting business has an outsized exposure to uneven demand in Europe as well as FX pressure.
<unk> for the core platform grew 1% to $2 3 billion.
Q4 bookings grew to $1 1 billion flat year over year and growing 2% on a constant currency basis.
Applications in Commerce bookings grew 7% on the strength of websites plus marketing E mail attached and hardware and software sales.
Core platform bookings decreased 3% year over year on aftermarket compares noted earlier and due to softness in the broader <unk> business.
Gross margin was down slightly for the quarter, primarily due to product mix.
Payments revenue will put some pressure on gross margins as the revenue stream gets larger in the future. However.
However, there are relatively low incremental operating cost once those customers are acquired.
And setup on godaddy payments, so we expect payments to be highly accretive to normalized EBITDA as we scale.
Normalized EBITDA in Q4 grew 5% to $266 million.
Renting a 26% margin and an expansion of 70 basis points in the quarter.
Continued discipline in spending allowed us to increase our margins at a rate higher than our bookings.
Godaddy has high brand awareness and the effectiveness of our in house bidding algorithm allowed us to drive efficiencies in marketing spend.
We also continued to drive leverage and customer care.
Unlevered free cash flow grew 17% to $238 million, while free cash flow grew 16% to $202 million delivering a $1 2090, <unk> free cash flow per share in the quarter, a 25% increase over last year's Q4 free cash flow per share.
Turning to the balance sheet.
We exited knee.
The year was $774 million in cash and total liquidity of $1 8 billion net.
Net debt landed at $3 1 billion.
Three times net leverage on a trailing 12 month basis.
Okay.
Yes.
Our share repurchase.
Before I turn the call.
Thanks.
Yes.
Sure.
Okay.
Thank you.
Yes.
Yeah.
Okay.
43, we repurchased 17 2 million shares which has reduced our fully diluted share count by approximately 10% since the beginning of 2022.
On target for the 15% to 20% net reduction for the three year period.
On customers.
Over recent years.
We generated revenue has evolved through our extend offerings to our customers resellers and partners.
We will continue to use metrics like <unk>.
Our GMB and GPC to show the health of our business and the progress towards our strategic goals as discussed at Investor Day as a result of the way our relationship with customers is evolving we have updated the way we measure and report our total customers in.
In addition to paid subscriptions at the end of the period. We will now include accounts.
Transactions in the trailing 12 months and exclude accounts that have converted to free versions of our software.
These changes do not meaningfully affect the historical customer growth retention trends previously disclosed.
We believe the updated definition more accurately reflects the dynamic customer lifecycle.
And provides more detail around the overall strength of our historical cohorts with a continued focus on our long term customers with a higher propensity to spend.
Under the new definition in 2022.
<unk> increased to $197 compared to $187 and $170 in 2021 and 2020, respectively.
Retention rates remained consistent at 85% and customer count increased to $20 9 million in 2022, compared to 27% and $20 1 million in 2021 and 2020, respectively.
Moving on to our outlook for Q1 and for the full year 2023.
Start by covering several notable events in.
In January we signed a partnership with FIS World.
To be a strategic reseller of our omni commerce solution for the U S based small business customers and bank partners.
This arrangement is expected to drive growth in the second half of the year and will contribute to our commerce strategy into increased reach of our omni commerce offerings and website attachment.
We are excited about the launch of this partnership in 2023.
Our momentum this gives our application and commerce segment going into 2024 and beyond.
On restructuring.
We took certain actions necessary to align our structure with the current economic environment.
And position ourselves for future growth.
This will result in annualized savings of approximately $100 million.
Through a combination of a reduction in workforce reduced spending and integration of certain European brands and businesses within our core platform segment.
This will also result in a modest headwind to core platform revenue.
100 basis points in 2023 as.
As we sunset in certain brands.
We expect estimated restructuring and other related exit charges of $55 million to $65 million.
With most of the charges to be recognized in the first half of 2023.
In Q1 2023, we are targeting total revenue of.
$103 billion to $105 billion.
This represents 4% growth at the midpoint of the range.
And includes approximately two points of FX headwind from prior year bookings.
Excluding this the midpoint of our guidance would imply approximately six points of growth.
We expect normalized EBITDA margin during Q1 to be in a range of 24% to 25%.
For the full year.
We expect total revenue to be within a range of four to 5432 1 billion.
Representing growth of 5% at the midpoint of the range.
Outlook is inclusive of approximately two points of headwind from FX from prior year bookings and the anticipated brand integration as mentioned above.
And applications and Commerce segment, we are projecting revenue growth of 8% to 10%.
And core platform, we are projecting revenue growth in the range of 2% to 4%.
Normalized EBITDA during the year is expected to continue to grow with a targeted margin of approximately 26%.
As a reminder, as we scale our commerce offerings gross margin will be pressured and is expected to be in the low to mid <unk> range.
As we gain operational efficiency and commerce. This is expected to drive incremental normalized EBITDA margins.
As we have shared previously we have multiple levers within our control to drive our margins, while we continue to invest in the business.
This allows us to strike a balance and continued growing revenue, while achieving operating leverage down the income statement to drive sustainable shareholder value over the cycle.
You have seen our recent record of accomplishment of delivering against our margin targets.
And we are confident in executing on our profitability goals. This year, regardless of where we land within our revenue guidance range.
For the full year of 2023.
We are targeting free cash flow greater than $1 billion.
And unlevered free cash flow of greater than $1 2 billion.
We remain on target to deliver free cash flow per share of more than $7 and are committed to returning capital to the shareholders under the remaining buyback authorized by the board in 2022.
As stated in the past our capital allocation strategy remains unchanged and we will continue to evaluate our use of cash options on a quarterly basis.
We expect capital expenditures of approximately $50 million.
Income tax payments of approximately $30 million in cash interest payments of approximately $170 million.
Moving forward, we will share our <unk>, <unk>, and <unk> and customer count quarterly.
We will share Gpus and retention rate annually.
Taken together these metrics provide a more comprehensive view of godaddy is expansive business over time and provide a view into the revenue growth and profitability as we continue to expand customer lifetime value.
These metrics may fluctuate based on acquisitions integrations divestitures and seasonality.
That said, we are in an advantaged position.
Given our ability to provide an ever growing suite of solutions to a large embedded customer base.
In summary, we are proud of our strong and resilient business model, where we are mission critical to our customers. We are confident in our ability to deliver the profitability and cash flow, we outlined at Investor day until the strategic steps taken this quarter will serve as a tailwind for accelerating our pace of revenue.
Growth.
Forward into 2024 and beyond.
Our predictable model provides us the visibility to make prudent business decisions and allows us to remain resolute and operating our business to grow long term value for our shareholders.
With that I will.
Chemical over to Christie Masoner Hulu dealing in Q&A.
Thanks, Mark sorry about the technical difficulties.
On the call our prepared remarks.
Thats just not good anymore.
As a reminder, if you'd like to ask the question David is the Raytheon Fitzgerald Novato Center webinar since we added our.
Our first question comes from the line of Aaron Kessler from Raymond James Aaron. Please go ahead.
Great.
Yes, Sir thank you and congrats on the on the year, maybe just first on the revenue growth can you provide a little bit more details. How are you thinking about 2023 revenue growth maybe at between customer growth on pricing and does guidance include any price increases or just your general thoughts on ability to raise prices in the future as well.
Okay.
Thanks Aaron.
Thanks for the question when we look at 2023, we're looking at a few things that are.
Within our growth rate.
One we're going to have some headwinds related to the FX in our bookings in 2022 lower through the first part of the year and therefore impacting our overall growth.
Second to that.
<unk>.
Integrations, we're taking into effect.
We put some headwinds related to those into our numbers I think when you look at US overall it will take into account those area. You are looking at around a 6% annualized growth rate before that.
And it comes to pricing.
Nuance for US we have a broad set of products across our customer base. We continue to look at opportunities to price within the market, where we can take we can take price and we'll continue to look for opportunities to take market share where we can.
And.
Obviously, theres a lot of things going on coming into 2023, we've assumed some level of macroeconomic environment that we've seen in the second.
Second half of 'twenty to persist throughout the year.
And we think we'll have some acceleration related to some things that we've talked about it.
Before or commerce.
And of course, we're excited about the new World pay a partnership that we sold recently, that's right and maybe I'll just add that all of those factors are included in the guidance micro normal.
And when we take those actions specialty pricing into account when we give the guidance.
Great. Thank you. Thank you.
Our next question from Matt Pfau from William Blair. Please go ahead.
Hey, great. Thanks for taking my question wanted to just expand on those macro comments a little bit. So if we look at the <unk>.
Commentary it seems like retention rates have held steady so on the macro side is it just more in terms of you're seeing lower demand and why might that be and then when we look at those customer addition, number you gave how should we think about the net additions for 2022.
In terms of rolling that forward and what should be a reasonable net customer attrition expectation.
Yes, Matt I can start with that and maybe Mark can cover a couple of the items fiscal stepped through all those items overall.
Overall, when we look at the 2022 retention rates continued to be strong we talked about 85% plus retention rates for our customers and we're very happy with those while we have talked about through the year was that our customers did see some headwinds. So we did see a little bit of pressure on that number we also talked a little bit about.
The gross add things.
Slightly weaker on the.
I think in the last call. So it's a combination of those factors that really impact the net adds for 2022.
Looking into 2023, I don't know, Mike if you want to touch on just we don't guide to net adds particularly but we are generally assuming the same demand patterns going from 22 to 'twenty three.
We're continuing to expect the same strong retention rates for the company because we're showing up every day in delivering the great products and great service.
We continue to expect those to continue.
We continue.
To focus on customers with a greater propensity to spend with us and that will be our focus and as we noted in our stated remarks, our definition of a customer is changing and we're dealing more with resellers, we signed a partnership with world pay that we announced.
In certain cases now through those agreements will have access to their customers, but they will be our customers. So the ongoing definition and nature of net adds will change and become more broad for us going forward.
We're going to continue to focus on ARPA to continue to focus on being a one stop shop, but we're going to continue to focus on making sure that we can provide all the benefits to our customers going forward that will drive our growth.
Great. Thanks for taking my question I appreciate it.
Our next question comes from the line of Trevor Young from Barclays. Please go ahead.
Great. Thanks on the.
Decline in core platform Rev. In the quarter can you just talk about what areas, where maybe stronger or weaker versus your own expectations was it greater declines in hosting and security.
Aftermarket swelling and converging with core domains or is it just the overall softer customer growth I. Appreciate the comments on the gross add cadence and that sort of thing and then any color on how fast the aftermarket is actually growing or how large it is as a percent of revenue just any update there would be appreciated.
Yes, perfect maybe I'll start with the drivers within our core platform and consistent with what we've talked about coming out of Q3, we were saying we are continuing to see pressure on the aftermarket overall, it's still contributing about 6% growth to our revenue today coming out of the year and.
It's about 10% of our overall revenue.
So we're still seeing progress there just not at the pace that we saw in 2021 and also we've talked about in Q3, posting we're seeing impacts around the European market for our hosting specially when you take it outside of the core Godaddy core platform post hosting platform and we continue to see.
Uneven demand of a pressure on our retention rates in that business.
Overall those are the things that I think I've been consistent what we saw Q3 looking at Q4, we see that going into Q1 of 2023.
And I think.
I'm going to I'm going to pause there because I forgot the second half of the question.
Yes.
Really addressed it with the aftermarket piece just how large it is but just to dovetail on what your answer there Mark.
Brand Thats being sunset is that specifically I will stick products. So we should expect that trend to kind of continue or.
Perhaps you can worsen.
Yes.
Brian We're talking about is media temple and it is a big hosting Brian .
Godaddy.
Great. Thank you.
Our next question comes from the line of Kirk Jefferies Corporate Sandler. Please go ahead.
Hello, Thank you for taking the question.
Firstly on the World pay partnership it encouraging to hear that that arrangement is expected to drive growth. The second half of this year I was wondering if you can give a little bit more of the specifics of the partnership what is that reseller arrangements look like will the economics be different for those partnership customers and then.
We think <unk> opportunity for those customers it would seem like those.
Hey, Katherine might skew a lot higher.
The size of customer compared to your existing base.
Yes of course, it's too early to talk about <unk> opportunity or it's sort of the specifics.
How's the relationship with evolve, but we're super excited about the partnership given the reach of World and Youre, absolutely right, the small and medium sized business.
The customer loyalty.
Sort of on the bigger end of our micro business customers, but we are ready with the product and putting our products mix oil plays.
Going to create an exciting new opportunity in the market.
We're looking at is a long term partnership between the two companies. Our teams are excited to work together, but we're starting to see some customers in the pilot and we're pretty excited about where this can go.
And also the launch for 2023 is in the U S. Only.
There is a lot more opportunity down the road in the.
Very very excited about it.
We have to hit certain milestones in the first half of the year, leading into the second half, but when you look at our overall commerce.
Platform and how revenue comes out of our Commerce platform Commerce platform, we have hardware and software sales we have reseller, we have godaddy payments in EMEA.
Related to websites <unk> marketing and managed Wordpress.
And the World Cup partnership will hit several of those and I will start with hardware and software.
Yes, the reseller impact and it will also allow us to attach directly to their customers websites. This marketing metrics Wordpress.
Thank the ability to drive not only our pool as we go into 'twenty four but our growth rates around commerce are going to be fantastic.
The nature of this relationship.
Perfect and if I could just ask one follow up.
Create and grow our slight improvement in year over year trends, if I look at it from what you disclosed maybe an improvement in sequential trends.
At this point I'm wondering if I could get your view on where we are in the curve of the macro does it feel like we've leveled out in terms of the customer trends in e-commerce or any kind of comment there would be would be helpful.
Alright, thank you.
Got it okay.
Ill go first and then you can jump in as well.
None of us have a crystal ball its really hard to.
Sort of predict the macro I think when we continue to see sort of uncertainty around it.
We're doing our best to look at the data that we have and look at the indicators in the marketplace.
Everybody else looks at it as well.
We're trying to run the business and what we see and we're pretty happy with our results.
Focus on the execution and what we control.
I gave up trying to be an economist in this environment.
Yes, we have a broad business too so we see impacts different in different areas that we've talked about aftermarket we've seen the impact in this environment around our transactions there.
Commerce continues to make progress going into 2023, we're seeing a lot of taking you talked about the attach related to websites <unk> marketing where people are coming through the fall. We've continued to see the progress of our existing customer base of 21 million customers converting over to payments.
We're really excited for the first time that we have all the revenue streams in place and they're making progress towards our stated objective, especially as we look at 'twenty four and beyond.
But the one thing that we continue to evaluate as our business gets impacted in different ways based on different things happening.
It gives us protection overall, but something we need to continue to monitor.
Really appreciate it thank you Ross.
Our next question is from all Iranian from Citi. Please go ahead.
Hey, good afternoon guys.
So it sounds like Youre.
Eric You said committed.
<unk>.
EBITDA and then the free cash flow guidance Gabe can work.
Stepping off the commitment to the revenue growth given the.
The macro base, so first just thinking about it.
Can you help us think about that the right way.
Thank you.
I think through revenue growth, where we should be thinking what you guys are thinking.
And then on the <unk>.
Opex $100 million savings any more color you could share aware cleared that those those are coming from which were flat items.
Yeah, I'll start with ammonia could add.
Looking at our investable thesis going back to Investor Day, we talked about the revenue growth normalized EBITDA cash flow per share share buybacks, where our main components.
And looking at the profitability and the cash flow per share coming out of 'twenty two when we started the year.
Forecasting 23% to 24% for the year, we're exiting the year at 26%. So we're ahead of target on profitability.
We're delivering cash flow per share greater than the $6, we had targeted that $61 20.
So those two we are really happy with our progress.
Things like FX, and the macro environment hit our bookings and then bookings, especially in our subscription revenue. It takes time to rollout. So we're seeing headwinds leading into 2023 related to that revenue growth.
We also with some of the actions we're taking are building in some headwind on revenue for the integrated brands that we've been talking about so.
As time goes on we think we are well positioned to be a double digit revenue growth company going forward, but it will take time for our bookings relative to our revenue to get back to the tailwind versus the headwinds we're facing coming into 2023.
Really good about our ability to meet all of our other objectives around profitability and cash flow per share I will stay committed to our share buyback. So a lot of positive there, but we are controlling what we can control and we're monitoring what's going on in the macro environment.
Assuming that we will see a headwind turn into a tailwind as we go into 2024.
Thank you covered it all.
I think what I might add is that our success godaddy is aligned with sort of secular trends around people coming to the internet while people transacting on the internet people wanting to get their idea out there.
Be inspired and Vietnam, Intrapreneur and that opportunity is huge and we are super excited about it and pursuing over the medium to long term from my perspective, if the top line metrics. If those milestones are moving a bit it doesn't change our direction. It doesn't change our strategy. It actually allows us to focus the business and put ourselves in a <unk>.
<unk>, where we can grow faster.
The macro and improve being a very good position to take share.
Okay, Great and then on the.
Opex.
That's coming from specifically.
Savings.
So a couple of different areas one.
The actions were primarily around our core platform segment to give some color of the area and then.
Some of the areas of the line items.
HR recruiting marketing I think we are the ones that were targeted during this event.
And I think those are the primary things within our operating expense.
Okay and then.
Last question on <unk>.
The world and our partnership there is really interesting.
I think it was.
Major retailer partnership that's about it.
Is this a strategy to do more things like this.
<unk> com.
Part of the customer growth that kind of future growth.
Yes look.
Our passive.
Godaddy terminals in every store and to see godaddy software being used by millions and millions of micro and small businesses.
Partnership ownership like royalty it gives us access to be able to reach a pool of customers faster. So I would say, it's very much aligned to our core strategy.
Yes can I ask what opportunities present themselves.
Reach our goals or execute that strategy, we will look at other opportunities as well.
Okay, great. Thanks.
Our next question comes from the line of Elizabeth quarter at Morgan Stanley Elizabeth. Please go ahead.
Great. Thank you so much.
Just wanted to hit on the restructuring a little bit more so can you help us understand just the restructuring announcement with the context for your outlook on revenue growth to start to improve from Q4 and Q1 guidance.
Is this more about allocation of resources versus an outlook on demand and then just related how should we think about reinvestment in the business.
Yes.
So I'll start with <unk>.
Tables, but I'll start with the Q4 leading into.
Into Q1, when we look at our our growth and the impact.
2022 out of our bookings for Q4.
We we needed to right size, our operating structure to reflect.
The bookings growth in the.
Impact it was going to have on revenue growth going into 2023, and that's how we looked at it controlling what we can control from an operating perspective.
And.
Monitoring and assuming that the macroeconomic environment. We're in today will persist throughout the year when it comes to investment in Tech and Dev.
We.
Primarily looked at core platform and some of the non strategic brands around hosting as we started to evaluate where we were going to look at the deductions versus invest and the flip side of it as applications ecommerce continues to be an area. We invest in commerce continues to be a growth driver for us moving into 2024, so when it comes.
As to investment in Tech and Dev side, we continue to push towards that I always use the commentary there's two things we need to have to wind in the tech industry going forward, you need innovation and you need to own the customer relationship.
We continue to focus on both of those continue to innovate commerce as again as one of the areas. We continue to look for innovation and growth and obviously, our customer care relationships have been something that has been a strength for us going forward. So those two areas continue to be the areas of investment for us.
Great and then just on <unk>.
Given the change in customer accounts and the context for how <unk> grew in 2021 versus the.
The 10% that you just reported for 2020 and how should we think about the level of sustainability any opportunity there is to actually accelerate our preliminary 2023, just as in Peru, and the attach of commerce and payments.
Yes, absolutely focused on growing our food.
Our strategy around bundling more products and it's something we've talked about over many quarters rate.
It's about new customers and existing customers and exporting them do more and more of our product range.
Absolutely looking at opportunities to increase operating just to touch on the call.
Over the years the trend is similar we've had sort of consistent <unk> growth over the years.
Investing in making the right decisions to continue to see that happen.
Continued focus on customers with a greater entity to spend.
Commerce, we think will be a big opportunity.
<unk>.
85% of our revenue comes from.
Our existing subscription base right now, but as we get more into the transactional nature of the businesses the one stop shop.
An opportunity for us to continue to increase our pool.
Thank you so much.
Our next question comes from the line of Mark Mahaney from Evercore ISI. Please go ahead.
The increased disclosure is a good thing.
Thanks for doing that and doing it.
Quarterly going forward. So you talked about marketing launch for payables domain in the U S. Do you provide any more color on that and then.
Any color on the timing for international payable domains enablement. Thank you.
Yes, Thanks, Mark the marketing launch starts in about two weeks with PR and Youll start to see payables domains really show up in a lot of our marketing collateral, including the site today, you can get to payroll to maintenance effect.
I've talked about it in the past, but just given our large demand sides of domains under management, we have to roll. This out so we could support all different kinds of domains.
With that in the U S. Now, we're just going to bring it to the side bring it into our marketing bring it into our merchandising and promotions. So that every customer new and existing is able to see it in.
You start to connect the dots for them so that they start to understand what a payable domain is in terms of international obviously, we feel this product is.
As a global.
Just like a domain name and favorable demand with.
With appealing because this should work everywhere in the world, but no specific timing on international rollout just yet.
Okay. Thank you Omar Thank you Juan.
Our next question comes from the line of John <unk> from Jefferies on behalf.
John Please go ahead.
Hey, John you're muted.
John sorry about that I guess.
Thanks.
Hey, guys on behalf of <unk>.
Thanks Al.
First question on the FY Aswell.
Is there a way to think about when that is scale.
Sort of impact that might have on gross margin operating margin.
Yes.
So we think it's going to start to have impact in 2023, as we hit certain milestones now it will be.
Relatively small within 'twenty, three but it will give us momentum going into 2024 that we expect it to be accretive to our margins overall, our operating margins again as we start to scale and the breadth of the relationship is just not about a transactional but it's hardware software leads to two other fees and then leads to <unk>.
Our ability to attach websites plus marketing and managed wordpress that should give us the ability to get operating leverage and improve our operating margins down the road. So very excited about this it's a very broad relationship that it's focused on the U S. Right now, but we think the opportunity to go global on it overall, it's going to be exciting moving forward.
Great. Thank you and then.
We're about halfway through Q1 I am wondering in.
And all you're seeing in terms of the environment in terms of that.
Activity and demand trends I mean does it feel like it's similar to Q4 or are you starting to see.
Any recovery at all.
Within your customer base. Thank you.
Yes, I think the board that we've used in the past continues to.
Org, which is continuing to see sort of uncertainty around what's going to happen.
Yes.
There is no large fluctuation, but even when we look at the geographies. When we look at certain products that we sell we do see trends that are different from what we've seen in the long term and right now.
In any one geography or plan can change very very quickly, but overall I'd say over the last couple of quarters. We are looking.
Looking into Q1, we're seeing some cost stability.
Which is ultimately a good thing.
Yes.
We still think that the.
A large opportunity is out there for us to go gather.
Obviously, we're assembling the macro environment stays muted a bit as we go into 2023.
Again coming back to one of my previous answers different parts of our business are impacted differently in this environment and we continue to see that and monitor that.
We talked about aftermarket.
We continue to see not see larger transactions related to aftermarket. So that is something that has continued into 2023.
On the other hand, we see greater attach around commerce, and we're seeing that trend continue to grow throughout the year. So we're excited about things going in the rest of the year. However, we are acknowledging that some of these may take some time to develop as.
As we reset our bookings into revenue and our subscription business.
Thank you.
Our next question comes from the line of Deepak <unk> from Wolfe Wolfe Research feedback. Please go ahead.
Hey, guys. Thanks for taking the questions and I just wanted to ask about the pricing expectations for 2023, there's a lot of pricing tweaks happening in the market currently given the sustained inflation.
Can you talk about philosophy your philosophy in 2023, whether you see potential to raise prices on any products.
On the domain side or on other areas and then second question are you seeing any market share shifts in our core products and domains are and websites plus marketing currently.
Yeah on pricing the bulk we continue to have a nuanced approach I've talked about before we price our products based on the customer population, we serve based on the geography.
Specific bundling and channel dynamics priced.
Pricing as well we will also maintain that we provide services and products to our customers where the value we provide and much higher than the price that we have so we do continue to feel that this pricing opportunity, but we will continue to be nuanced about it because we are we have added a lot of capabilities over the last year for us to be.
<unk> on how we price and how we market and how we sort of move dollars around between Geos and channels.
To allow us to get the best return on AD spend so yes, youll see some pricing actions from us which are all in the guide.
Thanks, guys.
You'll also see some.
Sort of as a system increases you'll also see in some markets. Some decreases because our testing clearly shows that there is room to take share there and thats sort of our approach to market share overall as well we're constantly testing these things and when we see an opportunity we're going to lean in and take market share and we're able to move marketing.
Around quickly much faster I would say than when we were in the past. So we will lean in that and take market share and in other markets, where we see opportunity to take price we'll take price.
Got it and then if I can just ask one quick follow up and I apologize. If this was asked already can you. The fact that 2023 revenue guidance a little bit maybe specifically in terms of how much you expect contribution from things like payments and some of these other incremental growth areas.
Yes.
Haven't gotten into the breakdown of each of the contributing areas.
We're looking at.
And our revenue guidance right now is continued.
Growth in IRR around our subscription businesses again, a focus on applications with commerce.
It was obviously are higher growing areas right now versus our core platform, which we've talked about some of the pressures we've seen around hosting and aftermarket.
To be excited about commerce, we haven't broken down the dollars between all of that but we look at that as a contributor I remember.
We're looking at some of the in our subscription business.
What I would say a rollover effect of the FX that will be a headwind for our revenue in the first part of the year, but assuming macroeconomic conditions stabilize this should become a tailwind as we get to the back half of the year as well as looking out to 2024, so a lot of moving parts. There we havent gotten into the this product versus this product type of thing.
We're extremely excited about the progress of Commerce. That's the one thing we continue to call out.
We're excited about the contribution of world pay and the momentum that gives us kind of going into 2024 again those around our applications and conference business.
And we continue to see the our ability to be the one stop shop for our customers and be able to.
Long opportunity long term opportunity that we continue to pursue.
Okay.
Great. Thank you I'll now turn the call over to online for some final remarks. Thank.
Thank you Christie and thank you all for joining us.
I'd like to thank all godaddy employees for another good quarter and sort of the focused energy to continue to drive the business and grow the business. We will see you next quarter.