Q2 2023 GoDaddy Inc Earnings Call
[music].
Good afternoon, and thank you for joining us for Godaddy second quarter 2023 earnings call I'm, Chris you, Mr. Head of Investor Relations and with me today are among Giussani, Chief Executive Officer, and Mark Mccaffrey, Chief Financial Officer.
Following prepared remarks, we will open up the call for your questions if you'd like to ask a question on today's call. Please use the raise hand feature in the webinar to be added to the queue.
On today's call, we will be referencing both GAAP and non-GAAP financial measures and other operating and business matrix a discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted to our Investor Relations site at investors day.
Godaddy net or in today's earnings release on our form 8-K furnished with the SEC.
Growth rates presented represent year over year comparisons unless otherwise noted.
The matters, we will be discussing today include forward looking statements such as those related to future financial results and our strategies or objectives with respect to future operations.
These forward looking statements are subject to risks and uncertainties that are discussed in detail in our periodic SEC filings actual results may differ materially from those contained in forward looking statements any forward looking statement that we make on this call are based on assumptions as of today August three 2023, and except to the extent <unk>.
Required by law, we undertake no obligations to update these statements because of new information or future events with that I'm pleased to introduce them on.
Good afternoon, and thank you for joining us today.
Godaddy, our mission is to empower everyday entrepreneurs by make opportunity more inclusive for all <unk>.
In Q2, we continued to make good progress on our mission, providing a breadth of solutions to a growing number of customers globally.
Under my belt health of our business remains strong with new high quality customers robust redemption routes by an improved attach we continue to be on track for stronger growth and profitability in our business exiting the year at approximately 7% revenue growth and 28% normalized EBITDA margin.
For Q2, the amount of highly competitive obligations in Congress segment, while revenue of $352 million outperformed our guide with 11% growth.
We remain the leader in domains with 3% growth in primary registrations as domains under management grew in the quarter offset by underperformance in the domain aftermarket.
Hosting continues to stabilize from product improvements and the previously announced integration and divestitures of noncore hosting assets.
Gross ads remained strong on efficient marketing, while maintaining our customer attention for godaddy, Brian that 85%.
Customers are now bundling new solutions at a faster rate than we have ever seen before in.
Innovation, resulting in higher monetization through attached and pricing with strong retention underpins our confidence in the product of trajectory of our business and our ability to drive shareholder value for years to come.
Fat Godaddy, we are focused on creating value for customers through innovation strengthening product market fit and driving towards a one stop shop.
We moved quickly to understand and take advantage of the step function changes generative AI offers to our industry.
And just a few months, we have already launched multiple new generative AI based features that our customers are actively using to reduce their workload and there is more to come.
As you know our care organization has guided customers through success for over 25 years.
Now for the first time, we can bundle each godaddy domain purchase with an AI powered Godaddy digital guide.
The digital guide will automatically build a free personalized basic website, including a checkout path to take payments.
Proposes Brian colors creates a free logo and embedded in the basic website.
It also creates marketing messages with our customer's logo and posts to social media to generate traffic to their sites.
The digital guide built on years of our experience knows the journey of our customers from identity to presence to commerce and can automatically presents solutions in a unique way. So they can experience a new product in context. For example, the digital guide can configure an email or a new phone.
And bring messages from SMS and social sites to our conversations up giving our customers one simple inbox that aggregates their customers. These messages.
At the same time, the digital guide right proposed responses practically removing the effort and time taken to respond to inbound messages.
<unk> this with the domain purchase is different from anything else available across the industry and godaddy is in a unique position to pursue this disruptive approach at scale. These.
These new capabilities can improve loyalty and retention and bring differentiated offerings to our existing base of 21 million customers driving an increase in lifetime value. We are excited about bringing these new features to our customers and our teams have been energized to build new experiences powered by.
Generative AI in.
In November at our Investor dinner in Tempe, We look forward to showing you demos of these new capabilities.
As always I also wanted to briefly touch on our three priorities driving commerce through presence delivering for pros and innovating in domains.
On Commerce, we continue to drive strong growth in our omni commerce solution.
<unk> in our base continue to convert to godaddy payments at an impressive rate and attaching to our base was again the strongest component of our year over year G. PV growth, which is on pace to more than double our last year's exit rate.
We'll add to this momentum through our anticipated Q3 launch of Godaddy payments in Canada, as we deploy our successful U S playbook.
Websites plus marketing continues to perform well and we are driving greater engagement with customers with new product launches, we know that higher engagement is correlated with higher retention rates and we expect engagement to be a driver of website and commerce performance metrics.
On delivering for pros improvements in our managed Wordpress solution have reached an important milestone driving improvement in retention rates as customers begin to recognize and enhanced solution.
We now offer one of the industry's fastest most secure and easiest managed wordpress platforms.
In a recent third party performance benchmarking study sites close date on Godaddy Wordpress loaded unimpressive, two X faster, which results in improved search engine rankings for our customers and domain customers are not the only ones with a digital guide we have launched similar capabilities in the pro hub and our measuring that.
<unk> saved for pros, including generating site content and client communications.
On innovation and domains, while bundling that Godaddy digital guide and it's enhanced offerings is the most exciting change we are bringing to domains I wanted to quickly share an update on payable domains as well payables domains made a meaningful contribution to <unk> growth this quarter with healthy double digit month over month growth.
This is a unique product that only godaddy offers and with Godaddy as digital guide, we expect to continue to make it simpler for customers to understand and adopt it.
In closing we feel good about our continued progress this quarter and how our organization is positioned to take us into the next phase of our growth with strong applications and Congress momentum. We have also continued to be efficient with our marketing spend especially with the improvements. We have made in search engine marketing and we are eager to duplicate those <unk>.
In other channels, we expect growth to accelerate as we exit the year and remain committed to our growth algorithm with increasing margins and expanding free cash flow per share and we remain eager to continue to deliver value for all godaddy stakeholders with that here's mark Thanks Oman.
In just the last few years godaddy successfully build a growing competitive and robust set of tools and services, including our websites plus marketing product and omni commerce solution at all one stop shop.
Powering entrepreneurs to build and manage their ventures and accept payments with a dedicated partner by their side.
Product innovation and targeted investment over this period has led to a better suite of products and with our soon to be launched Godaddy Digital guide, we will provide an even further differentiated experience for our customers propelling long term growth for godaddy through faster product.
Attachment and stronger retention as we consider the many headwinds we faced in the first half of the year. We are thrilled with the continued momentum of our applications in commerce revenue and the acceleration in our create and grow solutions. Our durable model continues to generate free cash flow and we.
We expect to Reaccelerate, our growth and improve our profitability as we exit the year, while delivering on our cash flow targets.
Moving to our financial results.
Our applications in Commerce revenue grew to $352 million up 11.
7%, surpassing our guide of 8% to 10% and delivering a segment EBITDA margin of 41%.
The strength in our applications and Commerce segment is fueled by our Cretan Gro solutions, which accelerated to $465 billion in a R are up 11%.
Additionally, we drove rapid growth in G. P V comparable to last quarter and we're on pace to more than double the 2022 exit rate by the end of the year as we continue to attract and convert customers within our 21 million base to godaddy payments.
A R. R for applications in Commerce grew 10% to more than $1.3 billion with a 20% growth in annualized G. M V to over $33 billion.
Core platform revenue totaled $696 million.
Flat year over year with a segment EBITDA margin of 27%.
Our armed for a poor platform segment was $2.3 billion.
Core platform revenue was supported by 3% growth in domains on stronger customer additions from higher demand and price increases. This was primarily offset by greater than expected declines in our aftermarket.
On aftermarket.
Revenue decreased 5% to $101 million on a tough compare from last year over the last five years, we built upwards of a 400 billion dollar revenue two sided marketplace. As a reminder, this business allows a buyer and seller to transact on our platform at their agreed upon valley.
<unk> this business rapidly grew as we scaled the operations participants and partnerships. What we see now is a post COVID-19 normalization of this business as valuations on larger transactions have decreased and volume growth has slowed with that we expect steady.
<unk> to mid single digits.
Top line growth for the business on a go forward basis.
On our core platform restructuring initiative, we completed the migration of media Temple and main street hub customers to the Godaddy technology stack.
And the one to three rig migration is planned to be completed by the end of the year as.
As expected.
These migrations produce a slightly elevated churn on these brands this quarter, but will deliver further cost efficiencies in the future the retention rate of customers for the godaddy branded products remains above 85%.
Total revenue grew to $1.05 billion up 3% on a reported basis and 4% excluding aftermarket constant currency revenue increased 4% within total revenue International revenue grew 3% on a reported basis and 6%.
On a constant currency basis.
<unk> grew 3% to $199 from $193 last year, and we added 100000 net new high quality customers. Despite the headwinds from our migration efforts.
Normalized EBITDA grew 2% to $265 million, while delivering a margin of 25% bookings totaled $1 $1 billion growing 2% on a reported basis and 4% excluding aftermarket and the impact of the integration of non.
Core assets.
Bookings grew 3% on a constant currency basis.
Excluding the impact of aftermarket the drivers of growth and bookings were strong customer additions and price increases in domains as well as strong attach and applications and commerce.
We expect these factors to contribute to accelerated revenue growth next year.
Unlevered free cash flow for the quarter totaled $284 million growing 3%, while free cash flow was relatively flat at $240 million despite increased interest related payments.
Free cash flow per share rose to $6.44 on a trailing 12 month basis versus the prior year's cash flow per share of $5.67.
A 14% increase driven by execution operating leverage and share repurchases.
Through July 31, we repurchased 10 2 million shares year to date totaling $746 million of which $632 million was repurchased since the end of Q1.
This brings the cumulative share repurchase under the current authorization to $2 billion and $27 1 million shares reducing shares outstanding since the inception of this authorization by 16% we remain on target for our commitment to reduce our fully diluted shares outstanding by 15 to 20.
Person over that three year period. Additionally, today, we announced an incremental $1 billion share buyback authorization to bring the total authorization to $4 billion and extending the program out to 2025.
On the balance sheet, we finished Q2 with $583 million in cash and total liquidity of $1.6 billion.
Net debt stands at $3.3 billion with a 2.9 times net leverage within our targeted range of two to four times Lastly, we secured a 75 basis point interest rate reduction on one $8 billion of the outstanding principal toward refinance issued at par.
This refinance is expected to save $13 million annually in interest payments for each of the next seven years.
Moving on to our outlook.
We are targeting Q3 total revenue in the range of 1.055 to 1.075 billion representing growth of 3% at the midpoint with the current momentum.
We expect to exit the year at approximately 7% top line growth with a normalized EBITDA of 28% an increase of 300 basis points from our 2021 exit rate of 25%, we are increasing our growth expectations for applications in commerce to be between nine and 11% for Q.
Three and the full year in our core platform segment, we expect revenue to be flat in Q3, and reaccelerate in the fourth quarter to deliver 1% growth for the full year Q3 normalized EBITDA margin is expected to improve to approximately 26% with continued acceleration over the fourth quarter.
<unk>, resulting in a full year normalized EBITDA margin of approximately 26%. This is a 300 basis point increase from our 2021 rate of 23% on better operating leverage from improved marketing performance restructuring efforts.
Benefits from our continued move of workloads to the cloud and the incorporation of AI into our operating model.
On the growth bridge, we spoke about last quarter we.
We remain confident in the path to accelerated revenue growth, while expanding margins and improving cash flows.
As a reminder, this year's revenue growth rate includes approximately two points of FX pressure from last year's bookings.
Difficult compares in our aftermarket business and the migration and divestiture of certain non core assets, we expect momentum in bookings in the second half of the year to drive the Reacceleration of revenue growth as we exit the year, while we remain committed to delivering our margin expansion and free cash flow.
<unk> targets.
We will be hosting our annual investor dinner with product demonstrations in November and are planning, an investor day in Q1, 'twenty 'twenty four.
We considered both a great opportunity to share more about our exciting initiatives in AI and our outlook for the next three years.
In closing, we remain confident in our ability to execute in the areas of our business within our control and deliver the full year targets.
As always we remain focused on executing against our strategic priorities committed to being responsible stewards of capital and strive every day to provide a one stop shop to micro businesses along their entrepreneurial journey with an eye towards balanced long term growth and profitability with that.
We'll have Christie masoner from our Investor Relations team open the call for questions.
Thanks, Mark as a reminder, if you'd like to ask a question. Please use the raise has feature at the bottom center of the webinar scheduled to be added to the queue.
Our first question comes from the line.
Not fall from <unk>.
Please go ahead.
Hey, great. Thanks for taking my questions.
Two of them first wanted to ask on the acceleration of the core business in the fourth quarter. It implies a healthy sequential increase maybe you can just discuss what are the factors that are driving that increase.
Yes, Thanks, Matt.
Look at Q2 in bookings and kind of trade off in the second half of the year a couple of things to consider one.
We have FX that'll be abating, we have pricing increases that we did towards the end of the quarter.
It should help both our bookings and somewhat revenue into this year, obviously, the aftermarket compares get better going into Q4 and now that we've completed some of our migrations to the core.
The stack, we should see it start to some of those start to abate as we get through the half of the year. So that gives us the confidence that we will have that accelerated growth rate as we get through the remainder of this year.
That coupled with some of the demand we're seeing in front of the funnel with customers coming in attaching new products faster.
Our retention rates remaining strong and the momentum we have in application commerce, we feel good about the momentum coming out of Q4 and going into 2024.
Great.
It will guide maybe you can just help us understand what that rollout is going to look like is it just going to be for new customers or do you plan to roll that out to carry sustaining basis as well. Thanks, Matt Yes, we plan to roll it out to the existing base is all.
The digital guide is about.
Literally a guy that works for our customers, even when the customer sleeping.
Even with the base.
We will be able to offer or create new offerings for them. So.
It'll start with Neil just like a lot of other products too, but youll see us quickly take it to the base as well.
Great. Thanks for taking my questions.
Sure.
Our next question comes along.
Vikram <unk> from Baird. Please go ahead.
Vikram.
Are you there.
Hey, sorry about that can you hear me now yes, okay, great Hey, I wanted to ask about the applications and Commerce segment. It looks like you raised the expectation there for fiscal 'twenty three maybe if you could talk some more about the primary drivers behind that revision and then separately I also wanted to ask about the EBITDA margins. It looks like you posted about 25% in the second quarter guidance.
6% and <unk> and exiting the year at 28 could you just talk to you. Some of the main drivers of the expansion that throughout the balance of the year.
I'll start with the application Congress Thanks Victor.
Sorry, we continue to see.
Strong momentum momentum in the front of the total and customers bundling payments <unk> payments are coming through with websites <unk> marketing, so really happy and excited about that attach and the bundling that's happening at the front of the funnel, while again I alluded to we have really strong net customer gross customer adds coming in and they are getting to that bundled product quicker.
With that that gives us to higher retention rates.
Coupled with some pricing increases were doing at the back half of Q2, where we did at the back half of Q2 should start to show up in applications and Commerce. As we go also seeing great momentum on the conversion will talk about it previously, but our existing customers converting over to.
To the godaddy payments that motions as well and work and we're seeing that grow as we go out throughout the year.
On the margin expansion.
We had about 25% we're forecasting to get up to 28%. We have a couple of things going on there, we're seeing greater marketing efficiency, which is helping us.
We are really starting to see the benefits of moving into the cloud.
We're seeing the cost efficiencies that are coming with more workloads and that was a really starting to take hold as we hit certain milestones throughout the year.
We also had the restructuring in Q2 and some of that will gain steam as we go into the back half of the year and growing momentum as we go through there. So we have a lot of I would say moving parts that are all pointing in the same direction that would make us feel good about expanding our margins as well.
Expanding our growth rate as well through applications in college.
Great. Thank you.
Yeah.
Our next question comes from the line of Trevor yellow.
With Barclays. Please go ahead.
Great. Thanks.
First on core platform now expecting around 1% growth for the full year within the main lines their aftermarket domains ex aftermarket in security and hosting which aligner lines are kind of underperforming relative to your prior expectations.
And then second one on that AI powered digital guide do you view that as kind of complementary to the higher touch customer care organization or do you see that functionality eventually kind of helping alleviate some of the cost or head count within within the care organization.
Thanks, Trevor I'll start with the aftermarket and the core platform.
Really saw the aftermarket.
Underperformed this quarter, we've grown our $400 million business there over a number of years, we saw a lot of growth back half of 'twenty. One 'twenty two so no doubt we have compares but as we've talked previously the larger transactions and evaluations on Atlas have abated.
We're seeing the volumes.
Slowing growth as well coming out of Q2 and put it in perspective, we're seeing great demand.
Gross ads within our funnel, but it seems the valuations on the aftermarket stillwater connecting with the buyers. So we're seeing a lean towards the demand growth.
We think this is a normalization for now I think we've taken it out of our back half of the year expectations and we think this is going to be a low to mid single digit growth business going forward. So it's really point to the aftermarket on this as being part.
And Trevor on the digital side, we couldnt be more excited about adding our guide with everyday land purchase and letting that digital's I'd guide the customer just like we're doing care, we've done a phenomenal job in care over the last few years by sort of creating leverage on the <unk> line item is revenue Julie kept costs pretty flat and it's a little early to we talked about.
So overall, we do see leading to.
Efficiencies in our business overall, and frankly, we've already showed that in marketing with by implementing machine learning, we're able to make our spend more and more efficient and you've been seeing the results of that over the last year already.
Great. Thank you both.
Our next question comes from the line.
<unk> from B Riley. Please go ahead.
Yes, hi, thanks.
Yes.
Question on the on the outlook so 48%.
EBITDA margin.
Q4, if I have to think about.
Next year 2024, and you know I know youre not guiding to that but.
Is there any reason why.
The 8% shouldnt be the base.
To start with.
Cost savings will still be layering in because this is not a full year for cost savings right. So am I thinking about it the right way just any any comment there would be helpful. And then I have a follow up.
Yes.
Thanks.
We're excited on our Investor day coming up in the first quarter and will get more into the details of what will look like we're really excited about our margin expansion going into Q4 with 28%.
If we look back to the Q4 and 2021, we've increased our margins by 300 basis points year over year, we get to the same 300 basis points. So it's something we continue to work on and we continue to find efficiencies in our operation and we will continue to push margin.
Margin growth going into 2024 at the same time, we are accelerating revenue and hitting our cash flow objectives as well. So I don't want to give you too much of a leading what 2024 is going to look like but we're really excited about our progress. The work we've done in the first half of the year and how that's going to benefit us in the back half of the year and then ultimately into 2024.
Got it and then.
Thank you Anna.
Alluded to the bridge to sort of resumption of growth.
<unk> growth so.
The one that you shared last call was I think getting you back into the double digits. So if I had to think about when you start to see like the photo affects.
The effects of foot anniversarying and kind of getting to that.
How should I think about timing is it is it Q1 is it early next year at what point would be kind of this.
It would be in our rearview mirror for Ya.
Thanks.
Try not to pay a specific timetable here as we're getting into the back half of the year, we'll talk more about it later, but when we look at the full year guide this year and we kind of look at the impact of FX.
Difficult Mark aftermarket compares and migrations and divestitures were doing they were.
They will start to abate into the fourth quarter and continuing to abate and turn into a tailwind as we go into 2020 for not trying to pick a quarter on anything right now we'll talk more about that later in the year, but the momentum accelerating.
Accelerating revenue as we go throughout the periods.
And if I could just add long term, we're excited about the path to accelerating growth because it's based on a simple idea that create products that can meet the customer with the entrepreneurs wheel, which you'll remember is about leading them to identity to presence to Congress really create a flywheel for the company and our technology.
Jay has improved in a very significant way that leads to greater attach not just for new customers for our base as well that involves identifying a customer that was connecting and reaching out and engaging the customer and then closing the customer of course, you've seen us do it successfully with E mail over the last three or four years, where that business with our two businesses.
<unk> performed very well for us and now you're seeing us do it with the omni commerce solution as well, where <unk> has grown nicely and we can we can clearly see that we have a ton of customers in our base I would love that.
From us so at the core of our path to long term path to accelerating growth is about innovation in the product, it's about creating value for the customer that leads to monetization opportunities like attach like pricing and strong retention that come together.
Give us the confidence we're sharing with you about the positive momentum in our business and Thats, what we believe will drive long term shareholder value for years and years to come and then if I could just add to that and to clarify.
While we look out to 'twenty four we are reaffirming our guidance for 2023 and the range for revenue and just FYI.
Yes.
Thank you guys.
Okay.
Our next question comes from the line of Brent Thill from Jefferies.
Please go ahead.
Hi.
This is John dental dental.
First question.
<unk> had pretty good growth and accelerate 20% year over year and also up 18% sequentially. Just wondering what might have been some drivers I mean are you seeing.
And so the improvement.
<unk>.
The poorer customer or is it just better attach.
That's what it would be great.
<unk> growing as a function of sort of the macro to start with we are seeing more of our existing customers transact more.
With the solutions they have to remind you and a lot of our GMB is a function of the relationship we have had through the bank. So it's a different financial model for us, but it gives us a great barometer to get our product out there we get to see sort of what's happening in the world. So we're very happy with the growth and it basically signifies.
More and more people using the godaddy solutions for their businesses, both offline and in store.
Great. Thank you maybe is there any update on the partnership.
Yes.
Partnership is doing great. We have launched the product with them. We have a set of customers that are using our new solution Solvay early since we're only about a month and I think from the launch so it's still pretty early but very happy with the progress.
I'd say that our partners are pretty excited about the progress too and I think they can't wait to get out there and sell it more and we can't wait to see those customers.
We've always said the impact on 2024.
Sorry, 2023 is going to be minimal and we would start to see the momentum of that going into 2024, which again adds to our excitement about that momentum.
Yes.
Our next question comes from the line of Mark <unk> from benchmark, Let's please go ahead.
Hi, guys. This is Alex on for Mark Thanks for taking the question.
Just a question on table domains. So last quarter you characterized contribution is modest and it sounds like there was meaningful performance into Q from payable domains.
Just curious if you could perhaps.
Discuss what was the most meaningful driver.
For that.
For the outperformance.
Applications in commerce, whether or not payroll demands was a material driver of that.
Maybe led my fault Oddsson Congress sort of.
Payroll domains I'd, probably say, it's still very early.
And absent commerce is pretty big but let me sort of step back and answer your question around what's driving the growth of payables demand obviously.
We have 21 million customers, we have 84 million domains under management, we have a ton of opportunity that taxes, new and unique product. That's why you hear the excitement from me on it on a continuous basis and of course, the math adds up very quickly the more customers. We can get on it the biggest drivers over the last quarter were favorable demand as we started to read.
With stable demand in the journey and engagement that customers have with us because it's still a new concept for people our customers don't automatically understand that they've got the demand and with a couple of clicks. They can stop taking payments. So we've found better ways to guide the customer through that path get them live with with the.
Ability and what we find is once we get them live with that capability sure enough they start to transact.
And you know our overall map in terms of the retention rate. We have if we have one product with a customer they tend to retain at sort of mid 80, if we have to it jumps. If we have three products with a customer we pretty much have a customer for life and the LTV also goes to 80 83 X when once they have commerce with us so all of that math.
Is working but it is dependent on us getting more people to adopt this product and Thats why you started to see in Q2 when more people saw the product.
I didn't notice was that let me add let me start using it and Thats what.
<unk> created two quick.
If it will double digit month over month growth in the GPP.
Hopefully that makes sense.
Yes.
I'll add on applications Commerce in general we're really excited as strong gross customer adds are coming into the funnel is stronger than we've seen in a long time.
Not only are they are coming into the funnel they are getting to that second product quicker.
And whether it's payable domains whether it's.
Payments, whether it's commerce, whether its what flex marketing, they're bundling those together at the initial stages. We think the digital guys will also accelerate that as that starts to engage at a faster rate.
But when that happens.
Like <unk> said, when we get to that second product the third product, we get to a third product attach generally we find we have a customer for life and that really drives the LTV.
All of this because the decisions around that are being made.
On the top of the funnel helped us get there faster and drive that LTV equation, obviously, it helps too with our cash flow and it helps us.
To be more efficient because we are getting greater revenue prices are getting getting better revenue at a better efficient operating margins as well. So we feel really good about all that happening in the applications and commerce, it's really driving a lot of momentum.
That on top of the hardware sales that we're seeing that are driving that momentum as well.
A lot of positivity coming there right and it all starts with the domain and innovating in the demand.
Got it. Thank you guys I appreciate it.
Our next question comes from the line of Paul <unk> from Citi. Please go ahead.
Hey, good afternoon guys.
Alright.
Re asking this but I wanted to start on domains.
Yes.
Can you kind of see.
Let's say challenging growth from verified data on Dot Com Dot net I know you guys are involved in.
In other <unk>, two which if there's interesting things to point out about that.
Here, but.
<unk>.
Maybe just some of what youre seeing around that.
Expectations for when that could start to normalize how thats impacting the aftermarket.
And then is it fair time it made a really interesting comments about about channel partners, who are pushing more on <unk>.
They were on <unk>.
Your users.
I don't know if theres, some theres a comment around that.
If you think that's having an impact.
Hello.
Began in both sides, so but love to hear your view on that.
Yes.
Happy to give a bit of color on domains.
I think you've probably already that remains under management for Godaddy rule.
So definitely we're doing well on units as well and just sort of explain a little bit as Mark said, we are seeing better traffic and demand coming to our site as I mentioned in my prepared remarks, some of that is because of our focus in search engine marketing and a.
<unk> improving our abilities to.
Spend money in search and convert those customers.
Very happy with that as well.
One other maybe dimension Jim mentioned to you is that we.
We've continued to grow well internationally.
As Mark shared.
We grew 6% internationally.
On a reported basis, 3% constant currency, 6% and the product we lead with internationally as domains right. The lens is the number one thing we sell in in small markets around the world.
We have customers in over 100 markets. So.
It's the combination of those things that I would say that are leading to the best results for us and our domains business is broader than any other.
One particular registry business, you've mentioned that yourself and that's absolutely true we're the market leader.
A diverse set of assets within the domains business. We've continued to innovate in many of those areas and the key pieces, where we see good returns.
Being very efficient in marketing and search grow the donald's grow the customers can get customers to the site convert them well.
<unk> products to them, which obviously isn't what you were asking about attach rate products to them and do it around the world really well.
Hopefully that's a bit helpful. Yes, thanks, that's really helpful and so maybe.
Sorry go ahead.
Similar I don't know a.
A lot of the answer might actually be an overlap.
If there's anything incremental to add so just on the.
On the gross top of funnel growth ads commentary, which which feels really strong.
I know you have some noise in your new customer number I believe is still ongoing with some of the sunsetting of the brand is there any way to parse out.
That and then.
What is it.
Point, we talked about with the SCM work that Youre doing.
<unk> that strengthen the top of funnel.
With domains.
Even if your domains under management grew with domains kind of like let's say collectively still soft your commentary around the really strong top of funnel I think standout so wanted to maybe understand that a little bit better. Thank you.
Yes, so gross adds.
Strong for us and it was on efficient marketing spend and I did highlight in the prepared remarks and I think.
You repeated that which is that search was a strong contributor to that and what I added to that is that it's not just search in the U S. It's surged globally that did really good job sort of delivering for us, but it's not search alone we have been focused on improving our marketing the targeting of our <unk>.
Marketing the measurement of our marketing over the last couple of years I think we've talked about mulch.
Multiple different times as being an important priority for us and what we're seeing as a result of more people show up to the website more.
More people going through the funnel battery I think one of the things I've talked about.
If this is what you are asking about but.
One of the things in the past I've talked about is that we have.
Shifted as a company and we are very much an experimentation based culture now.
Teams go out and they try different things and then measure closely whether there is a conversion improvement or not and that of course helps as well, but anyway. When we land better traffic and conversion is all on the site that delivers better for us, whereas in the past maybe years ago. We may have relied on a combination of assai.
And care more which we find now is that the site performs really well.
That's a great way for us to attract gross adds and we're pretty happy with that result.
To add to that.
What we really like about the gross adds coming in is they are customers that are having a higher propensity to want to do business and therefore are attaching a lot faster.
And on the churn on the other headwind we are losing.
Operation and in the marketing of some of those products, but they are generally.
For two is low calorie customers that werent growing the business for necessarily using the functionality.
And therefore, we're trading.
Good direction as we get those net adds.
Perfect.
I have a follow up but I don't want to.
Im going to ill jump.
I'll jump back in the queue and then we are at this time.
Okay go ahead.
Okay. So so then.
Super helpful.
Caller, you and your peers.
And of course, then platforms.
Seem to be all driving efficient marketing spend that's bringing more share.
We're up really across the board and then.
Going back in time that back into the.
Kind of let's just say flattish domains globally right.
It feels like then Youre space has taken a lot of the share.
What building ecosystem is that a fair characterization and where do you see the share coming from.
Let's talk about Wordpress in the past that maybe.
Maybe you could just help on that thanks guys.
And we'll provide more color on this at the Investor day for sure.
Talk about how website showed is shifting.
And overall I think there was if.
If we look at the last few quarter, there's more pressure on Wordpress at least from what we saw then if you go back many years, but taking a longer term view share is still coming from custom HTML sites that is what is reducing and there is sort of growing demand and obviously the new demand.
It was more towards the newer tools that exist radio fine that's easier and easier for customers to build sites themselves and get started.
Our tool West, Texas marketing does a fantastic job of that.
And godaddy with the digital guys, taking the next step where we're telling you today and we will show it to you live with testing with customers. It will show you live in November .
In Tempe.
When a customer buys a domain how they behave differently instead of just the demand you'll give them a website and get them started because the friction for our customer to make another decision and then create create.
Create content and then do another thing it's pretty difficult with of course technology has made it easier and easier over time and now generative AI allows our industry to take the next step in terms of reducing the effort that customers have to do to get started so I think youre going to continue to see some.
The momentum of course, there are secular trends underneath of entrepreneurship population.
People are coming to the internet, but what how quickly they're able to adopt the tools on the internet and get get a presence up in running I think you'll continue to see good momentum in that because technology in generative AI now are going to make a real difference.
Thank you so much that's really helpful.
Our next question comes from Chris <unk> from Morgan Stanley Chris. Please go ahead.
Hey, Chris.
Hi, This is Chris <unk> on for.
The quarter I wanted to ask around the macro and kind of how it's changed Q2 versus Q1, and then second question would be around the digital guide or are these capabilities kind of like table Stakes for the industry or how do you think about your ability to drive your differentiation and AI can sure.
We're building competitors. Thank you God I can't believe you set table Stakes for digital guide, but let me take your first question first to surprise me with that.
Let's start with the macro there are few items that sort of we look at on our dashboard are the leaders in our organization look at that when we look at macro and I'll try to touch on a couple of them to give you a bit of color one of them that we look at is sort of non brand demand that's coming to Google.
As a representation of demand and our people going out and searching for things and they're not searching for a particular company that just searching for our website, they're just searching for dominion and how is that trending and what we saw.
In that data is that there are a few markets in the world and actually the English speaking markets, where we are strong.
Being one of them we've seen good lift in non brand demand for the terms that we track and Thats a positive sign for those markets that means we expect better demand, we expect to spend more money there and generally the customer.
The entrepreneur is feeling better and wants to engage and stock via domain startup business or build their business.
So on.
The second group of geographically I would talk about is the.
The markets that are not big English speaking market, but what we call the rest of the world and there what we see as sort of a war simulator a flattish behavior in terms of non brand searches.
As you can see the international market does really well for us.
That's been phenomenon Godaddy has done a lot to take share globally on those but in terms of the amount of macro what we see is much much more timid.
And in the U S is somewhere a little bit in the middle.
I won't comment on sort of broad macro in the U S. I think.
If you understand it.
Better than me, probably but if I talk about demand on the terms that we track to.
There is some goodness, but not as good as some a couple of the other markets and the second data point to look at is customer or consumer confidence and we track that for all of our main markets and what we see there again is solar.
And expectation for menu that confidence would go down and it was probably trending down in some of those markets, but over the last two three months a little bit of a reversal. So maybe instead of going downwards, we cede more flat, but in some markets and again ill mention the U K, we actually see it.
Coming up which I think you didn't expect.
Sure just sort of a macro question and there are other markets that are sort of showing different behavior as well, but hopefully that gives you a little bit of color on a couple of the core metrics that we look at.
A couple of sort of.
A little bit of a geographic lens on it in terms of the digital guide, which I think.
Second question.
Just wanted to reiterate the digital guide is.
A technology built using AI that users generative AI to generate content with uses AI for lot of other purposes and.
Our goal is to couple that with every domain purchase so when you buy a domain of digital guide is automatically enabled for that customer and what it's trying to do is find that best experience and path for that particular customer and get them through that path, whether it's adding products whether its posting something.
Whether it's reminding them of something.
It's not trying to do it in a way that says it comes come buy this from me what.
What its doing.
I actually doing the work for the customer in advance and then say take a look if you.
Like this we can keep it.
So I don't think of that as table Stakes at all.
If I look at and I'm not.
Not even talking about our industry, if I look at sort of across the technology landscape of course there are.
Technologies out there and a lot of people want to do similar things, but I don't see anyone starting at the point with domain and we have AI or generative AI ready capabilities. We're already testing many of these things and I think in the past I've talked about them all.
Last quarter, I mentioned, one or two of them, but we have capabilities that are live today that are being tested with customers.
And there isn't anyone else that is going to bring it to millions of domain names and start people off the way we want to start the law right. So.
That's that's the big thing I guess of.
For folks that May have joined just a minute or two late there was a great little video that we started with today and I assume will posted on one and 2009.
As it will close to it.
That two minute video is a great way for you to understand what are what we want our customers to experience and how much effort. We are taking away from the customer that normally a customer would have to do and letting the digital guide to that and believe it or not that happens today and care to right now.
Customers call us and what they want is that they want.
US to give them confidence in they want us to encourage them and at the same time, they want us to solve their problems and give them access to more tools and we do all of that and we're trying to take the learnings that we have in care and enable every customer with it. So that we can scale to literally every customer that buys with us.
I'll add one of the distinctions we have is from identity to presence to commerce, we have the entire technology stack. So when we use generative AI. We can we can take it across their entire journey and we'll start with the domain and that makes that journey faster gives us to bundling faster.
It gets us to customers for life for us in driving LTV into into our financials. So we're really excited about it but.
But one of the great distinctions is we have the entire technology stack around it to use and to use AI around may.
Maybe one other quick thing I'll add is that I think we learned last year that having people see head.
And definitely working.
Functionality to them the customers can see is very powerful so I would invite all of you and I know many of you joined so I would invite all of you to <unk> in November . So you can do it yourself with us demoing it without showing.
What that experiences for our customer and then I think I think it will sort of illuminate the idea in a much better way and the temperature is much cooler temperatures.
Our next question comes from the line of novel <unk> from <unk>. Please go ahead welcome back David.
Yeah.
Hey, there.
Yes can you hear me.
Yes, we can hear.
Okay great.
Uh huh.
Okay.
Follow ups. So one is we saw some action Google.
Google domains being sold.
Just of course phase and wanted to get your thoughts on.
What it means for <unk>.
For the other participants such as yourself in terms of competition.
Sure.
And then the other question I had was on the price increase.
On the ANC.
Segment.
The magnitude of that.
Increase.
Yes, let me take the domain space first and then Mark if you want to touch on the pricing.
Some of that meeting.
On the Google domain space.
Well the way we look at it.
Anytime there's a transition language there is disruption in the customer experience of flow customers tend to put their head up and they will look at what other options might exist for them and given our brand awareness and leadership position in the world of domains given the care, we provide given our high transactional NPS.
Just sort of broad understanding from a very large number of people, but what godaddy brings to the table and the more we attached to that bundle with that domain I think we're positioned very well to see.
If some disruption happens that we're there and it's advantageous to us.
In terms of beyond that I think our goal is to just do a fantastic job delivering providing customers great products and we think we're doing a good job of tracking customers were going down.
I mean, maybe the way to say that we were the leader in domains when Google came into the business and we're leaving the lands when will those leaving the business. So we're okay with that.
And then on the AMC pricing I assume the question is to websites plus marketing pricing yes.
Yes.
I don't think we've gotten into the magnitude.
Breaking on pricing by each of the different components of it I'll give a little directional color I.
I think last year, we focused mostly on pricing increases is around renewals.
This year, we're doing it on new as well as renewals. So I would say, it's bigger than we did last year and obviously our priority is always retention rates.
Sticking with 85.
But we took those pricing increases at the end of the Q2 and we should start to see the materialized as we go throughout the year.
Thank you thanks.
Thanks Alan.
I will now turn the call over to online for some closing remarks well. Thank.
Thank you Christie and I will just end by thanking all the godaddy employees for another good quarter and just to remind all of our analysts and shareholders.
We're super excited about the products, we're bringing to market. We're super excited about attaching into our base that we've demonstrated with email and are demonstrating with commerce now we're super excited about the trajectory, we have going into Q3, and Q4 ending the year at accelerating growth and strong margin setting up next year really well.
Look forward to the next call. Thank you very much.