Q4 2023 GoDaddy Inc Earnings Call

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Christie Masoner: Good afternoon, and thank you for joining us for GoDaddy's fourth quarter and annual 2023 earnings call. I'm Christie Masoner, VP of Investor Relations, and with me today are Aman Bhutani, Chief Executive Officer, and Mark McCaffrey, Chief Financial Officer. Following the 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 your hand feature in the webinar to be added to the queue.

Good afternoon, and thank you for joining us for Godaddy is fourth quarter and annual 2023 earnings call I'm, Chris you may serve VP of Investor Relations and with me today are a mondo tiny 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'll be referencing both GAAP and non-GAAP financial measures and other operating and business metrics a discussion of why we use non-GAAP financial.

Christie Masoner: On today's call, we'll be referencing both GAAP and non-GAAP financial measures and other operating and business metrics. A discussion of why we use non-GAAP financial... 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.go.id.net or in today's earnings release on our Form 8K furnished at the SEC. Growth rates presented represent year-over-year comparisons unless otherwise noted. The matters we'll 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. However, actual results may differ materially from those contained in these forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, February 13, 2024, and, except to the extent required by law, we undertake no obligation to update these statements because of new information or future events. With that, I'm pleased to introduce Aman. Good afternoon, and thank you all for joining us today.

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 don't Godaddy that net or in today's earnings release on our form 8-K furnished at the SEC growth rate.

[noise] presented represent year over year comparisons unless otherwise noted the matters, we'll 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 statements that we make on this call are based on assumptions as of today February 13th 2024 and <unk>.

Speaker Change: To the extent required by law, we undertake no obligation 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 all for joining us today back Godaddy, our mission is to empower entrepreneurs and make opportunity more inclusive.

Aman Bhutani: At GoDaddy, our mission is to empower entrepreneurs and make opportunity more inclusive for all. Our strategy centers on creating customer value, driving profitable growth, resulting in compounding free cash flow per share and long-term shareholder value. Our focus remains on margin expansion and growth in our applications and commerce segment. 2023 was a pivotal year for us, and I am pleased with our financial and operational results. Innovation accelerated as we brought together our technology capabilities into a unified technology stack, enabling us to launch our compelling GoDaddy Aero experience. We also drove 2023 normalized EBITDA margin ahead of our guidance as we balanced investment in growth with cost structure management. Fully normalized EBITDA margin increased by approximately 200 basis points, resulting in a 12% increase in free cash flow and a 21% increase in free cash flow per share.

Speaker Change: For coal.

Speaker Change: Our strategy centers on creating customer value driving profitable growth, resulting in compounding free cash flow per share and long term shareholder value.

Speaker Change: Our focus remains on margin expansion and growth in our applications M. Commerce segment 2023 was a pivotal year for us, but I'm pleased with our financial and operational results innovation accelerated as we brought together our technology capabilities into a unified technology stack, enabling us to launch <unk>.

Speaker Change: Compelling godaddy early experience.

Speaker Change: We also drove 2023 normalized EBITDA margin ahead of our guidance as we balanced investment and growth.

Speaker Change: Cost structure management full year normalized EBITDA margins increased approximately 200 basis points, resulting in a 12% increase in free cash flow and a 21% increase in free cash flow per share in Q4, we drove 16% bookings growth in our higher margin applications and commerce segment.

Aman Bhutani: In Q4, we drove 16% bookings growth in our high-margin applications and commerce segment, and this momentum continued into January. Our focus on the combination of optimizing costs and driving growth in applications and commerce has positioned our business well to exit 2024 with a normalized EBITDA margin of approximately 31 percent. At the investor dinner in November, we showcased how GoDaddy Aero delivers a seamless experience for identity and presence, and our teams have launched even more capabilities since then. At our upcoming Investor Day on March 6th, we will showcase these new capabilities, as well as provide a sneak peek into what's coming soon. Aero enablement of commerce features will also be showcased, which now expands the Aero experience across the entire entrepreneur's wheel, fully unlocking the power of GoDaddy's software platform for our customers in a seamless and intuitive manner.

Speaker Change: And this momentum continued into January.

Speaker Change: Focus on the combination of optimizing cost and driving growth and obligations and Congress has positioned our business well to exit 2024, with a normalized EBITDA margin of approximately 31% at.

Speaker Change: At the Investor Day in November we showcased how good Audi Arrow delivers a seamless experience for identity and presence and our teams have launched even more capabilities. Since then.

Speaker Change: At our upcoming Investor day on March 6th we will showcase these new capabilities as well as provide a sneak peek into what's coming soon.

Speaker Change: Payroll enablement of Commerce features will also be showcased which now expands the ERO experience across the entire entrepreneurs wheel fully unlocking the power of Godaddy software platform for our customers in a seamless and intuitive manner.

Aman Bhutani: Over the last few quarters, we discussed our continued efforts to optimize our marketing spend and G&A expenses. We have had similar efforts in technology and development and care as well. In technology and development, the simplification and unification of our technology stack led to a material reduction in our server footprint and multiple areas of costs associated with it. We also expanded our access to talent globally, and together these items benefited both our capital and operating expenses. In care, we are harvesting the benefits of our investments in technology and global scale as customer preferences shift towards asynchronous chat and with continued room for leverage through the automation of tasks and the rollout of GoDaddy Aero for our care guide. Additionally, the power of data from our GoDaddy software platform bolsters our ability to drive faster decision making and is expected to benefit both our margin and revenue opportunities. We are excited to share more about our continued leverage opportunities driven by innovation in technology and care at our Investor Day in Tempe. As always, I would like to cover our high-priority initiatives, but I will keep my comments here brief since we plan to share an expanded set of demos in March.

Speaker Change: Over the last few quarters, we covered our continued efforts to optimize our marketing spend and G&A expenses. We have had similar efforts in technology and development and care as well.

Speaker Change: Technology and development, the simplification and unification of our technology stack led to a material reduction in our server footprint and multiple areas of costs associated with it.

Speaker Change: We also expanded our access to talent globally and together these items benefitted both our capital and operating expenses in care. We are harvesting the benefits of our investments in technology and global scale as customer preferences shifted towards pacing from us Chad and with continued room.

Speaker Change: For leverage through the automation of tasks and the rollout of Godaddy arrow for our care guides.

Speaker Change: Additionally, the power of data from our Godaddy software platform bolsters, our ability to drive faster decision, making and is expected to benefit both our margin and revenue opportunities. We are excited to share more about our continued leverage opportunities driven by innovation and technology and care at our Investor day in Tampa.

Speaker Change: <unk>.

Speaker Change: As always I would like to cover our high priority initiatives, but I will keep my comments here brief since we plan to share an expanded set of demos in March to start bundling has been a key focus for us as part of our innovation in domains and productivity to drive attach this initiative primarily benefits are higher margin.

Aman Bhutani: To start, bundling has been a key focus for us as part of our innovation in domains and productivity to drive ATT&CK. This initiative primarily benefits our high-margin application and commerce segment, and we expect our Aero experience to drive this higher over time. Aero has also created new engagement surfaces, allowing us to deliver automated customer experiences that we will continue to improve over time. For GoDaddy Aero, I have an update on its performance since launch.

Speaker Change: Application and Commerce segment, and we expect our aerospace Williams to drive this higher over time Pedro has also created new engagement surfaces, allowing us to deliver automated customer experiences that we will continue to improve overtime.

Speaker Change: And Godaddy Arrow I have an update on its performance since launch I am happy to share that in a controlled experiment customers that were part of the first test cohort for the Aero experience monetize at rates higher than those customers in the control group that we're not exposed to the Aero experience.

Aman Bhutani: I'm happy to share that in a controlled experiment, customers that were part of the first test cohort for the Aero experience monetized at rates higher than those customers in the control group that were not exposed to the Aero experience. The increased monetization was due to attaching and shifting the mix towards higher price and higher margin products. This is particularly encouraging because significant customer experience changes like AERO typically take many months of iterative improvement to outperform the control group. With this initial promising result, we have rolled out GoDaddy AERO to more customers in the US.

Speaker Change: The increase in monetization was due to attach and shifting the mix towards higher priced and higher margin products.

Speaker Change: This is particularly encouraging because significant customer experience changes like arrow typically take many months of it sort of improvement to outperform the control group with this initial promising results, we have rolled out godaddy hero to more customers in the U S. We have also launched tests in international markets.

Aman Bhutani: We have also launched tests in international markets a few days ago. Our goal for Aero is to help more customers discover more products and engage them at higher rates, leading to even greater monetization opportunities. As a result, we are closely monitoring cohorts' performance across discovery, engagement, and monetization. Components of the GoDaddy Aero experience are also currently being tested in our managed WordPress and Hub experiences, creating opportunities to save our designers and developers time and effort.

Speaker Change: Few days ago.

Speaker Change: Our goal for Arrow is to help more customers discover more products and engage them at higher rates, leading to even greater monetization opportunities.

Speaker Change: As a result, we are closely monitoring cohort performance across discovery engagement and monetization.

Speaker Change: <unk> of the Godaddy experience are also currently being tested in our managed wordpress and hub experiences, creating opportunities to save our designers and developers time and effort.

Aman Bhutani: We are also testing the Aero experience in care so guides can support our customers better and faster. Our platform approach to GoDaddy Aero means that new capabilities are quickly coming to market. For example, we will test Aero commerce functionality in the first half of this year, and these capabilities will extend to our partnerships as well. In commerce, over the last year, we proved that we can sell our payment solution to our customer base. And it was the largest driver of GPV growth last year. In fact, annualized GPV growth for 2023 exceeded our expectations and grew 125% year over year.

Speaker Change: We're also testing the arrow experience in care, so guides can support our customers better and faster.

Speaker Change: Our platform approach to Godaddy arrow means that new capabilities are quickly coming to market. For example, we will test Aero commerce functionality in the first half of this year and these capabilities will extend to our partnerships as well.

Speaker Change: <unk> commerce over the last year, we proved that we can sell our payment solution into our customer base and it was the largest driver of <unk> growth last year in fact annualized <unk> for 2023 exceeded our expectations and grew a 125% year over year.

Aman Bhutani: As we enter 2024, we are looking forward to surfacing our commerce capability more seamlessly with our Aero experience and doubling down on selling the full Omnicommerce solution, driving higher-margin subscription revenue. This is the last of a series of proof points that set up the commerce business for the long term, which is aligned with our overall strategy of creating customer value that ultimately drives profitable growth. As commerce subscription revenue takes center stage and GPV growth takes a lower priority, we still expect to continue to scale our base of commerce customers by growing GPV at healthy double digits. In closing, as I look ahead at the rest of 2024, I am excited by our ability to drive margin improvement and growth in applications and commerce, which we expect together will result in impressive improvements in free cash flow per share.

Speaker Change: As we enter 2024, we are looking forward to surfacing, our commerce capability more seamlessly with our aero experience and doubling down on selling the full omni commerce solution driving higher margin subscription revenue.

Speaker Change: This is the last of a series of proof points that set up the commerce business for the long term, which is aligned with our overall strategy of creating customer value that ultimately drives profitable growth.

Speaker Change: As commerce subscription revenue takes center stage and GPC growth takes lower priority, we still expect to continue to scale our base of commerce customers by growing <unk> at healthy double digits.

In closing as I look ahead at the rest of 2024 I'm excited by our ability to drive margin improvement and growth in obligations in Congress, which we expect together will result in impressive improvements in free cash flow per share.

Aman Bhutani: Behind these improving metrics is a talented workforce that is committed to ongoing innovation. For example, every week, we launch new tests, methodically track results, and share results broadly across the organization, making us better every day. The operational discipline of compounding improvements and doubling down on proof points continues to crystallize our path forward and raise our confidence to achieve our targets. With that, here's Mark.

Speaker Change: Behind these improving metrics as a talented workforce that is committed to ongoing innovation. For example, every week, we launched new test methodically track results and share results broadly across the organization, making us better every day.

Speaker Change: The operational discipline of compounding improvements and doubling down on proof points continues to crystallize our path forward and raise our confidence to achieve our targets with that here's Mart.

Mark Mccaffrey: Thanks Aman, hello everyone, and thank you all for joining us. In 2023, we made significant strides in our ability to deliver a unified GoDaddy software platform for our customers. These efforts are reflected in our results that drove sustained double-digit growth for our applications and commerce revenue of 13% in the quarter, expansion of our Q4 normalized EBITDA margin above our target, delivering 29.5% margin, and free cash flow per share also above our target, delivering $7.50 for the full year. Beginning with Q4 results... Our high-margin applications and commerce revenue grew 13% to $377 million. And we delivered an expanded segment EBITDA margin of 44%, increasing 100 basis points since last quarter and 300 basis points since last year. ARR for applications in commerce grew 10% to $1.4 billion, and our create and grow ARR was up 8% to $481 million.

Thanks, <unk> Hello, everyone and thank you all for joining us in 2023, we made significant strides in our ability to deliver a unified go Daddy software platform for our customers.

Mart: These efforts are reflected in our results that drove sustained double digit growth for our applications in commerce revenue of 13% in the quarter.

Mart: Expansion of our Q4 normalized EBITDA margin above our target delivering 29.5% margin and free cash flow per share also above our target delivering $7 50 for the full year, beginning with Q4 results our high margin applications in commerce.

Mart: <unk> revenue grew 13% to $377 million and we delivered an expanded segment EBITDA margin of 44%, increasing 100 basis points since last quarter and 300 basis points since last year.

Mart: Our our for applications in Commerce grew 10% to $1 4 billion.

Mart: And are creating grow AUR was up 8% to $481 million and commerce, we drove significant growth in annualized G PV to one $7 billion.

Mark Mccaffrey: In commerce, we drove significant growth in annualized GPV to $1.7 billion, with a doubling of last year's performance as conversion of our existing customers to the GoDaddy software platform remains strong. Core platform revenue grew 2% to $723 million in the fourth quarter, and segment EBITDA margin grew to 32%, increasing 200 basis points since last quarter and 250 basis points since last year. ARR for the core platform was $2.3 billion, consistent with the prior year.

Mart: With a doubling last year's performance as conversion of our existing customers to the Godaddy software platform remains strong core platform revenue grew 2% to $723 million in the fourth quarter and segment EBITDA margin grew to 32% increasing 200.

Mart: Basis points since last quarter, and 250 basis points since last year.

Our or for core platform was $2 3 billion consistent with the prior year growth and core platform. During the fourth quarter was supported by demand growth of 4% a continued strong demand and price increases.

Mark Mccaffrey: Growth in core platform during the fourth quarter was supported by domain growth of 4%, a continued strong demand and price increase. Bookings growth in domains was 7%, providing a positive leading indicator for future domain revenue. In addition, aftermarket grew 14% to $118 million on increasing volume and easier cop.

Mart: Bookings growth in domains was 7%, providing a positive leading indicator for future domain revenue. In addition.

Mart: Aftermarket grew 14% to $118 million on increasing volume and easier comps as a reminder, while.

Mark Mccaffrey: As a reminder, the aftermarket is stable on an annual basis. However, it is more difficult to predict quarter-to-quarter compared to our other businesses due to its transactional nature and the fact that it relies on third-party sellers and buyers to determine a mutually acceptable valuation. Our gains and core platform will be partially offset by an 11% decrease in hosting as we continue our efforts to unify GoDaddy's software platform. Bifurcating the hosting business, the continuing GoDaddy hosting revenue remains a stable, strong cash generator with high retention. The remainder of the portfolio decreased over the past several years, and we have taken deliberate steps throughout 2023 to rationalize the business. We will continue to evaluate the components of this business, integrating platforms that are strategic and rationalizing platforms that are not a credo to our long-term financial model. Total revenue in Q4 topped $1.1 billion, growing 6% on a reported and constant currency basis. International revenue grew 4% on a reported and constant currency basis to $354 million.

Mart: Aftermarket is stable on an annual basis.

Mart: It is more difficult to predict quarter to quarter compare to our other businesses due to the woods transactional nature and the fact that it relies on third party sellers and buyers to determine a mutually acceptable valuation our gains in core platform, partially offset by an 11% decrease in hosting as we continue our effort.

To unified go Daddy software platform bifurcated, the hosting business the continuing godaddy hosting revenue remains a stable strong cash generator with high retention the.

Mart: The remainder of the portfolio decreased over the past several years and we have taken deliberate steps throughout 2023 to rationalize the business. We will continue to evaluate the components of this business integrating platforms that are strategic and rationalizing platforms that are not accretive to our long term financial model.

Mart: Total revenue in Q4 topped $1 1 billion growing 6% on a reported and constant currency basis International revenue grew 4% on a reported and constant currency basis to $354 million as a reminder, our migrations in our divestitures are primarily <unk>.

Mark Mccaffrey: As a reminder, our migrations and our divestitures are primarily impacting international regions. Q4 bookings grew to $1.1 billion, up 7% or 6% on a constant currency basis. Applications and commerce bookings grew 16% on the strong attach of productivity solutions and continued strength in our create and grow product. Core platform bookings increased 3% due to the strong 4th quarter performance in domains, offset by migration and divestiture headwinds in hosting. Subscription bookings grew over 200 basis points ahead of subscription revenue. Normalized EBITDA in Q4 grew 22% to $324 million, representing a 29.5% margin and an expansion of nearly 400 basis points compared to Q4 2022. The continued margin expansion was driven by the leverage gains we achieved in the second half of 2023 across all spend categories.

Mart: Impacting international regions.

Mart: Q4 bookings grew to $1 1 billion up.

Mart: Up 7% or 6% on a constant currency basis.

Mart: Applications in Commerce bookings grew 16% on a strong attach of productivity solutions and continued strength in our create and grow products.

Mart: Our platform bookings increased 3% due to the strong fourth quarter performance and domains offset by migration of <unk> headwinds and hosting subscription bookings grew over 200 basis points ahead of subscription revenue.

Mart: Normalized EBITDA in Q4 grew 22% to $324 million.

Mart: Representing a 29.5% margin and that expansion of nearly 400 basis points compared to Q4 2022.

Mart: <unk> margin expansion was driven by the leverage gains we achieved in the second half of 2023 across all spend categories. As we shared last quarter. We continue to expect Q4 2020 for normalized EBITDA margin of approximately 31% with continued margin expansion in the out years, while also.

Mark Mccaffrey: As we shared last quarter, we continue to expect Q4 2024 normalized EBITDA margin of approximately 31% with continued margin expansion in the coming years, while also driving innovation, like you saw with our GoDaddy Arrow experience. As we think about this seamless experience for our customers, Arrow is possible thanks to the work we have done to unify our technology stack into one software platform that includes ownership of the data from domain-permitted transactions.

Driving innovation like you saw with our Godaddy Aero experience.

Mart: As we think about this seamless experience for our customers Arrow is possible. Thanks to the work we have done to unify our technology stack into one software platform that include ownership of the data from domain Furuta transactions.

Mark Mccaffrey: And this serves as an accelerant to our model as we bundle and bring more products to the market faster on the platform. With that, during the fourth quarter, we reduced our combined technology and development and capital spending by 7% from our migrations, divestitures, and restructuring efforts throughout 2023, as well as from the reduced data center capital expenditures. We expect that our technology and development spend will continue to decline in absolute dollars in 2024 compared to 2023, as most of this work was completed in 2023. Moving on to cash generation. Unlevered free cash flow grew 46% to $347 million, while free cash flow grew 51% to $305 million, despite a 13% increase in cash interest expense year over year. Free cash flow per share increased 21% to $7.50 per share.

And this serves as an accelerant to our model as we bundle and bring more products to the market faster on the platform with that during the fourth quarter, we reduced our combined technology and development and capital spending by 7% from our migrations divestitures and restructuring efforts throughout 2023.

As well as from the reduced data center capital expenditures, we expect that our technology and development spend will continue to decline in absolute dollars in 2024 compared to 2023 as most of this work was completed in 2023 moving on to cash generation.

Mart: Unlevered free cash flow grew 46% to $347 million, while free cash flow grew 51% to $305 million. Despite.

Mart: Despite a 13% increase in cash interest expense year over year free cash flow per share increased 21% to $7 50 per share driven.

Mark Mccaffrey: It was driven by growth in applications and commerce, operating leverage improvements, and share purchases throughout 2023, which was partially offset by an increase in cash interest expense. Turning to the balance sheet, we exited the year with half a billion dollars in cash and short-term investments and total liquidity of 1.5 billion dollars. Net debt landed at $3.4 billion, below three times net leverage on a trailing 12-month basis and near the midpoint of our targeted range of two to four times.

Mart: Driven by growth in applications, and commerce operating leverage improvements and share repurchases throughout 2023, which is partially offset by an increase in cash interest expense.

Mart: Turning to the balance sheet.

Mart: We exited the year with $5 billion in cash and short term investments and total liquidity of one 5 billion.

Mart: Net debt landed at three 4 billion.

Mart: Three times net leverage on a trailing 12 month basis and near the midpoint of our targeted range of two to four times and.

Mark Mccaffrey: In January 2024, we repriced $1.8 billion of outstanding principal to secure a 50 basis point interest rate reduction. This strategic adjustment, along with the repricing completed in July 2023, is together expected to reduce annualized cash interest expense by approximately $22 million. Additionally, the cumulative shares repurchased under our current authorizations totaled $2.6 billion, representing 34.2 million shares retired.

Mart: In January 2024, we repriced $1 $8 billion of outstanding principle to secure a 50 basis point interest rate reduction.

Mart: Strategic adjustments along with the repricing completed in July 2023 are together expected to reduce annualized cash interest expense by approximately $22 million.

Mart: Italy.

Mart: Cumulative shares repurchased under our current authorization totaled $2 6 billion.

Mart: Representing 34 2 million shares retired this reduced our fully diluted shares outstanding since the inception of these authorizations by over 20% achieving our three year targeted reduction ahead of schedule our buybacks over the last two years have driven impressive ROI for this cat.

Mark Mccaffrey: This has reduced our fully diluted shares outstanding since the inception of these authorizations by over 20 percent, achieving our three-year targeted reduction ahead of schedule. Our buybacks over the last two years have driven impressive ROI for this capital outlay, demonstrating our disciplined capital allocation framework and dedication to driving long-term shareholder value. Total revenue grew 4% or 5% on a constant currency basis to $4.3 billion, and ARPU grew 3% to $203 as we added 100,000 net new customers, despite the elevated share from our ongoing platform migrations and divestitures. Customer retention remains 85% as we drove improvements in 2-plus product attach, with greater than 50% of our customers paying for at least two products. These high-quality customers are stickier and give us greater pricing flexibility. Applications and commerce revenue grew 12 percent to 1.4 billion dollars, and core platform revenue was flat, totaling 2.8 billion dollars. International revenue grew 4% to $1.4 billion, and total bookings grew 4% or 5% on a constant currency basis

Mart: <unk> outlet, demonstrating our disciplined capital allocation framework and dedication to driving long term shareholder value.

Mart: Moving on to our annual financial results.

Mart: Total revenue grew 4% or 5% on a constant currency basis to $4 3 billion.

Mart: <unk> grew 3% to $203 as we added 100000 net new customers. Despite the elevated churn from our ongoing platform migrations and divestitures.

Mart: Customer retention remains 85% as we drove improvements in two plus product attach with greater than 50% of our customers paying for at least two products. These high quality customers are stickier and give us greater pricing flexibility.

Mart: Applications in Commerce revenue grew 12% to $1 4 billion and core platform revenue was flat totaling $2 8 billion.

Mart: International revenue grew 4% to $1 4 billion.

Mart: Total bookings grew 4% or 5% on a constant currency basis to $4 6 billion.

Mark Mccaffrey: Full-year normalized EBITDA grew 12% to $1.1 billion, representing a 27% margin for the year, an expansion of nearly 200 basis points over the prior year. Lastly, full-year unlevered free cash flow grew 14% to $1.3 billion, and free cash flow grew 12% to $1.1 billion, both exceeding our guide for the year and showing an impressive normalized EBITDA to cash conversion of nearly one to one.

Mart: Full year normalized EBITDA grew 12% to $1 1 billion, representing a 27% margin for the year and expansion of nearly 200 basis points over the prior year Lastly, full year Unlevered free cash flow grew 14% to $1 3 billion.

Mart: And free cash flow grew 12% to $1 1 billion, both exceeding our guide for the year and showing impressive normalized EBITDA to cash conversion of nearly one to one.

Mark Mccaffrey: Moving on to our, For the full year, we expect total revenue to be within the range of $4.48 to $4.56 billion, representing growth of over 6% at the midpoint of the range. When excluding the approximately 100 basis point impact of divestitures and migrations that we will complete during the year, our growth would be 7% at the midpoint of the range. In applications and commerce, we are projecting revenue growth of low to mid-teens for Q1 and the full year. In core platform, we are projecting revenue growth of low single digits for Q1 and the full year. As we have shared previously, the entire GoDaddy team is committed to maintaining operational discipline and deploying opportunities to gain further leverage within our model.

Mart: Moving onto our outlook for the full year, we expect total revenue to be within the range of four four to 456 billion.

Mart: Representing growth of over 6% at the midpoint of the range when excluding the approximate 100 basis point impact of divestitures and migrations that we will lap in the year our growth would be 7% at the midpoint of the range in applications and commerce, we are projecting.

Revenue growth of low to mid teens for Q1 and the full year.

And core platform, we are projecting revenue growth of low single digits for Q1, and the full year as.

Mark Mccaffrey: We delivered on this commitment in 2023 and expect to continue this trend in 2024, resulting in an expected normalized EBITDA margin of approximately 29% for the full year. We are targeting unlevered free cash flow of at least $1.4 billion, free cash flow of at least $1.2 billion, and free cash flow per share of approximately $9, representing a growth rate of 20% for the full year of 2024. In 2024, we expect capital expenditures of $35 million and cash interest payments of $155 million, representing a reduced spend of 11% over 2023. In addition, we expect income tax payments of approximately $30 million.

Mart: As we have shared previously.

The entire godaddy team is committed to maintaining operational discipline and deploying opportunities to gain further leverage within our model. We delivered on this commitment in 2023 and expect to continue this trend in 2024, resulting in an expected normalized EBITDA margin of approximately 29% for the full year.

Mart: We are targeting Unlevered free cash flow of at least one 4 billion.

Mart: Free cash flow of at least $1 2 billion.

Mart: And free cash flow per share of approximately $9, representing a growth rate of 20% for the full year of 2024, and 2024, we expect capital expenditures of $35 million and cash interest payments of $155 million, representing reduced spend of 11% over 2020.

Mark Mccaffrey: On share repurchases, we expect to buy back shares under our remaining $1.4 billion authorization using our disciplined capital allocation framework that we've applied in past quarters. Capital return has been and will continue to be a priority for GoDaddy, along with prudently managing our balance sheet as we look to drive compounding returns for our shareholders. For Q1 2024, we are targeting total revenue of $1.085 to $1.105 billion, representing nearly 6% growth at the midpoint of the range. As a reminder, because of the timing of certain marketing spend, such as the spend that supports our heavy renewal cycle in Q1, and the spend related to our launch of GoDaddy Arrow, our normalized EBITDA margin will build over the course of 2024. As a result, we expect Q1 normalized EBITDA to be 27%, representing a nearly 300 basis point expansion over Q1 2023. Over the course of the year, normalized EBITDA margin is expected to increase to approximately 31% as we exit the year, which averages to approximately 29% for the full year.

Mart: In addition, we expect income tax payments of approximately $30 million on share repurchases, we expect to buy back shares under our remaining $1 4 billion dollar authorization using our disciplined capital allocation framework that we've applied in past quarters.

Mart: Capital return has been and will continue to be a priority for godaddy along with prudently managing our balance sheet as we look to drive compounding returns for our shareholders for Q1 2024.

Mart: Targeting total revenue of 1.0, 85 to 110 5 billion representing.

Mart: Representing nearly 6% growth at the midpoint of the range as a reminder, because of the timing of certain marketing spend such as to the spend that supports our heavy renewal cycle in Q1, and the spend related to our launch of Godaddy Arrow, our normalized EBITDA margin will build over the course of 2024.

Mark Mccaffrey: We are proud of our record of accomplishment of increasing margins on an absolute basis and compared to our own initial guidance over the last three years. Investors should continue to see this discipline moving forward. In summary, we remain dedicated to actively managing our business through a combination of durable top-line growth and improving profitability. We are focused on balancing the two to drive our strong free cash flow, which, when coupled with our disciplined capital allocation framework, creates significant value for our shareholders. We see an exciting path and have strong confidence in our ability to execute against our strategic priorities. At our Investor Day on March 6, we will demo the expanded capabilities of the GoDaddy Aero Experience and Commerce.

Mart: As a result, we expect Q1 normalized EBITDA to be 27%.

Mart: Representing a nearly 300 basis point expansion over Q1 2023 over the course of the year normalized EBITDA margin is expected to increase to approximately 31% as we exit the year, which averages to approximately 29% for the full year. We are proud of our record of <unk>.

Mart: Complishments of increasing margins on an absolute basis and compare it to our own initial guidance over the last three years investors should continue to see this discipline moving forward.

Mart: In summary.

Mart: We remain dedicated to actively managing our business through a combination of durable top line growth and improving profitability. We are focused on balancing the two to drive our strong free cash flow, which when coupled with our disciplined capital allocation framework creates significant value for our shareholders.

Christie Masoner: We will also discuss long-term growth and profitability expectations and levers, and we will provide a clear view of our opportunities. We will share our capital allocation framework and the shareholder value it will create. We are committed to providing the information you need to understand our long-term strategy and initiatives, model the business confidently, value the business effectively, and hold us accountable for executing against our stated objectives. We'll end the day with Q&A hosted by our management team. With that, I'll hand the call over to Christie Masoner, VP of Investor Relations, to open the call for Q&A. Thanks, Mark. As a reminder, if you'd like to ask a question, please use the raise hand feature at the bottom of the webinar screen to be added to the queue. Our first question comes from Naved Khan from VU Raleigh. Naved, please go ahead. Yeah, hi, can you hear me?

Mart: We see an exciting path and have strong confidence in our ability to execute against our strategic priorities.

Mart: At our Investor Day on March six we will demo the expanded capabilities of the godaddy Aero experience and commerce.

Mart: We'll also discuss long term growth and profitability expectations and levers and we will provide a clear view of our opportunities we will share our capital allocation framework and the shareholder value. It will create we are committed to providing the information you need to understand our long term strategy and initiatives.

Mart: <unk> modeled the business confidently value the business effectively and hold us accountable for executing against our stated objectives.

Aman Bhutani: We can. We will. Great. So, uh... Two questions from me, one maybe just on the big picture macro environment. Oh, just your views on where we are currently in terms of demand. And then, in relation to that, where do you see, or what could cause you to come in at the high end of the range that you just gave? GoDaddy Inc. GoDaddy Inc., Encapsulate that for us. And then the other question I had is around the... Billion Dollar Valuation Allowance. You already have a tax shield, which I think..., protects you from being diagnosed.

Mart: We will end the day with Q&A hosted by our management team.

Mart: With that I'll hand, the call over to Christie Masoner VP of Investor Relations.

Christie Masoner: To open the call for Q&A.

Christie Masoner: Thanks, Matt as a reminder, if you'd like.

Christie Masoner: Question for Raytheon feature as a part of the leather seats, we added.

Christie Masoner: Our first question comes from the line a lot of the time.

Christie Masoner: Please go ahead.

Christie Masoner: Yes.

Speaker Change: Yes, Hi can you hear me.

Mark Mccaffrey: Thank you. So we've talked about a significant amount of revenue we've seen coming in or a meaningful amount of taxes until 2030 or 31. Is this in addition to that?

Okay, great. So.

Speaker Change: <unk>.

Speaker Change: Two questions for me one maybe just on the big picture macro environment.

Speaker Change: Uh huh.

Speaker Change: Just your views on where we are currently in terms of demand.

Aman Bhutani: How should I think about the release? Thanks, Naved. Why don't I kick that off with a quick comment on the macro, and I'll turn it to Mark for a sort of range of the evaluation amounts.

Speaker Change: And then in relation to that where do you see what could cause you to come in at the high end of the range that you just gave.

Aman Bhutani: On the big picture, you know, our customers continue to be micro businesses and their resilient crews, and definitely, we see strong demand continuing to come in through the front door. Of course, we continue to optimize our marketing spend and be very, very judicious about finding new customers and bringing them on board. But growth has continued to be strong, and generally, I would say, you know, our customers feel a little bit better about their prospects. Mark, I'll turn it to you. Yeah, absolutely. And thanks, Naved.

We're still at the low end.

Speaker Change: So just kind of.

Speaker Change: Encapsulate that for US and then the other question I had is now.

Speaker Change: Is that on the.

Speaker Change: The billion dollars in valuation allowance.

Speaker Change: Ed.

Speaker Change: Sort of a release in the valuation allowance.

Speaker Change: You already have a tax deal.

Speaker Change: Richard.

Kind of protect you from bank.

Speaker Change: Yes.

Speaker Change: Our meaningful amount of taxes until 2030 or 31 is this in addition to that how should we think about that.

Mark Mccaffrey: On the high end of the range, I mean, you're really looking at the market around, you know, after market. We have looked at it as a flat business to slightly growing single digits, but it's always subject to, you know, larger transactions, you know, easier comps in Q4 of this year. But, you know, it seems to be a flat business, but can vary in the range. Also, we have to look at the bundling efforts we're making. Arrow is an early stage.

Richard: Thanks, Laura why don't I kick.

Speaker Change: Got off with a quick comment on the macro and I'll turn it to Mark.

Speaker Change: Randy.

Speaker Change: There are some allowance.

Speaker Change: Hum.

Mark Mahaney: Archival tumors continue to be the micro business isn't there a resilient group.

Mark: And definitely we see strong demand continuing to come in through.

Through the front door.

Mark: Of course, we are continuing to optimize our marketing spend and be very very judicious about finding new customers, bringing them to the side, but gross adds continue to be strong and generally I would say in all of our customers feel a little bit better about their prospects Mark alternative yes, absolutely and thanks David.

Mark Mccaffrey: You know, we're seeing customers come in the funnel. Amant said that talked about the demand, but they're coming in and attaching that second plus product, seeing a lot of momentum there. Obviously, continued momentum wouldn't be helpful. Commerce, we're seeing continued, you know, conversion of our existing customer base to our payment platform. You know, there's always a side for pricing as we get into more value delivery there. So there are many different things that can put us at the high end of the range. We like the momentum.

Speaker Change: On the high end of the range I mean, you're really looking at the market around app.

Speaker Change: Market.

Mark: We have we've looked at it as a flat business.

Mark: The growing single digits, but it's always subject to larger transactions.

Mark: Easier comps in Q4 of this year.

Mark: It seems to be a flat business.

Mark: We're in the range.

Mark: So we have to look at the bundling efforts, we're making arrow is early stage.

Mark Mccaffrey: Obviously, we call things as we see them today, and we feel real good about where we are and how that momentum is carrying forward on the price, sorry, on the tax. On the tax, as a reminder, we paid a one-time $850 million fee in 2020 to buy the tax savings from our shareholders back at that time. That was the NOLs and the credits that had built up over a period of time.

We're seeing customers come into the funnel a lot said that talked about the demand and but they are coming in on attaching that second plus product. We're seeing a lot of them anthem. There. Obviously continued momentum wouldn't be helpful. Commerce, We're seeing continued conversion of our existing customer base to our payments platform.

Mark: There's always upside for pricing as we get into more value delivering in there. So.

Mark: There's many.

Mark: Things that can put us to the high end of the range, we like the momentum obviously, we call things as we see them today and we feel real good about where we are and how that momentum is carrying forward.

Mark Mccaffrey: For accounting reasons, that was reserved on our books and what you're seeing now because of our increased profitability and our ability to utilize that asset over what I would say a foreseeable period of time coming forward. Accounting rules require you to release that when it's more likely than not you're going to get the benefit. You saw that in there. It's not cash.

Mark: On the price on that sorry on the tax.

Mark: On the tax.

Mark: As a reminder, we paid a onetime $850 million fee in 2020.

Mark: Bye bye the tax savings.

From our shareholders back in that time.

Mark: That was the Nols and credits that had built up over a period of time.

Mark Mccaffrey: It doesn't affect cash. It doesn't affect normal life's DBDI or anything along those lines, but it is a benefit that the company will receive from taxes gone in the foreseeable future. Hopefully, that answers your question. Thanks, guys. Our next question comes from the line of Zach Morrissey at Holtz Research. Zach, please go ahead.

Mark: For accounting reasons that was reserved on our books and what Youre seeing now because of our increased profitability.

Mark: And our ability to utilize that asset.

Mark: What I would say foreseeable period of time coming forward accounting rules require you released that when it's more likely than not you're going to get the benefit. So you saw that in there it's not cash.

Aman Bhutani: Great, thank you. I guess just starting with Arrow, obviously, that, you know, it seems early results are pretty encouraging for expanding the rollout. I guess, how do we think about, what are the gating factors to a more broad rollout, at least in the US, just based on the early results that you're seeing today? And kind of how is this embedded in the kind of 2024 outlook in terms of any kind of growth on the application of commerce side of things? And then on legacy hosting, obviously, that came in a little bit weaker. Just based on some of the strategic decisions you guys are making, how do we think about the trajectory kind of embedded in the 2024 growth outlook for core platforms? I think, you know, I think comps get easier as we kind of, you know, progress through the year, but any kind of color and context would be helpful there. Thanks, Zach.

Mark: It doesn't affect cash.

Mark: Normalized EBITDA or anything along those lines, but it is a benefit that the company will receive from from taxes.

Seeable future, so hopefully that answered your question.

Mark: Question there.

Speaker Change: It does thanks guys.

Speaker Change: Yes.

Speaker Change: Our next question comes from the line of back Marci.

Jeff. Please go ahead.

Jeff: Great. Thank you I guess, just starting off with arrow.

Jeff: Early results are pretty encouraging youre seeing the rollout I guess, how do we think about like what are the gating factors to a more broad rollout at least in the U S.

Jeff: Based on the early results that you're seeing today.

Jeff: And kind of how is this embedded in the kind of political more elegant towards about economic growth.

Jeff: e-commerce side of things.

Jeff: And then on the legacy wholesale obviously that came a little bit here just based on some of the strategic decisions you guys are making.

Aman Bhutani: On Aero, you know, we're super excited about the Aero launch. It's not often you launch a completely new experience, and customers, you know, who are used to a certain experience, adopt it, and it actually does better in the first test. It's a really encouraging result.

How do we think about the trajectory kind of embedded in the 2012, our growth outlook for core platforms, I think comps get easier as we kind of progress through the year, but any kind of color and context would be helpful. There.

Speaker Change: Thanks, Nick on Arrow, we're Super excited about the Aveva launch, it's not often you launch a completely new experience and customers who are used to a certain experience and updated and it actually does better in the first half that's super encouraging results. We are actually rolling out Aero very very quickly to more and more core customer that starts with new customers.

Aman Bhutani: We are actually rolling out Aero very, very quickly to more and more cohorts of customers. That starts with new customers. For example, you know, when we first started in November, we were doing it for customers that bought a domain. Very quickly after that, we enabled it for customers that bought a domain and a website. And so, you know, more and more Aero capabilities are showing up for more customers. We launched it in international markets, too.

Speaker Change: For example, when we first started in November we were doing it for customers that bought or domain very quickly after that.

Speaker Change: Enabling it for customers that bought a domain on the website until you know more and more capabilities are showing up to more customers. We launched it in international to of course, the full swing it giving it to all of our new customers across the globe and then starting to penetrate the base as well, which we have a ton of opportunity lies for us to be able to go to our base of customers and offer them the skipping.

Aman Bhutani: Of course, the full swing is getting it to all of our new customers across the globe and then starting to penetrate the base as well, which is where a ton of opportunity lies for us to be able to go to our basic customers and offer them these capabilities. So, you know, I would say every week, Our customers are seeing that we're actually moving as quickly as we can. I'm super happy with the team's progress. And in terms of guidance, I'll turn it to Mark. Yeah, you know, as Aman mentioned, you can hear the excitement. We're very encouraged about the momentum and the engagement metrics. But it is still early days.

Speaker Change: <unk>.

Speaker Change: I would say every week.

Speaker Change: One customer one of the things we are actually moving as quickly as we can I'm Super happy with the team's progress and in terms of the guidance I'll turn it to Mark yes.

Mark: John mentioned, we can hear the excitement we're very encouraged about the momentum.

Mark: Metrics, but it is still early days.

Mark Mccaffrey: You know, when we consolidated the core software platform for GoDaddy, you know, we saw bundling and customers move into two plus products a lot faster. And obviously, Arrow, we look at it as an enabler of that down the road. And we think it'll allow for greater bundling, greater catch, and greater retention. But right now, it's the early days.

Mark: We consolidated the core software platform for Godaddy.

Mark: We swapped bundling customers move into two plus products a lot faster than obviously the arrow, we look it as an enabler of that down the road.

Mark: And we think it will allow for greater bundling greater attach better retention, but right now it's early days we're call. It everything we see in front of US based on the momentum we see coming into the year.

Mark Mccaffrey: And we're calling everything we see in front of us based on the momentum we see coming into the year. On the move on to the legacy hosting, you know, a couple of things there, right. We have about 100 basis points of headwind coming into the year related to our divestitures and the migrations that we've done. So that's built into the guide that we've given. In addition, you know, we've seen the aftermarket, and we think it's going to be a flat to single-digit grower, you know, the 400 million dollar plus business. We were really encouraged by the volume that's coming through the platform and the fact that it allows people to get names in a secondary market that they couldn't get in the primary market. But, you know, we think we think it's going to be, you know, it's, how do you say, moderated, and it's growth, and it's leveled out. So we built that into the forecast. And We've talked about the mains issues openly.

Mark: On the I'll move onto the legacy hosting.

A couple of things there right, we have about 100 basis points of headwind coming into the year related to our divestitures and migrations that we've done so thats built into the guide that we've given.

Mark: In addition, we've seen aftermarket.

Mark: It's going to be a flat to single digit grower with a $400 million plus business. We were really encouraged by the volume that's coming through the platform and the fact that allows people to get names and in the secondary market that couldn't get in the primary market.

Mark: We think we think it's going to be.

Mark: How do you say moderated in its growth and its leveled out so we've built that into the forecast and we've talked about the mains opened later, we saw a 4% revenue growth coming into the quarter, but 7% bookings growth, we think theres a lot of momentum in the domains and a lot of that has to do with the core godaddy platform now that we've launched and getting people the demand in getting them to attach.

Mark Mccaffrey: We saw four percent revenue growth coming out of the quarter, but seven percent bookings growth. We think there's a lot of momentum in the domains. And a lot of that has to do with the core GoDaddy platform now that we've launched and getting people the demand and getting them to attach quicker, getting them to those retention rates we talk about in our model. Thank you. Our next question comes from the line of Vikram Kesavavotla, from Baird. Vik, please go ahead.

Mark: Getting them to two those retention rates, we talked about in our model.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Vikram <unk> from Baird. Please go ahead.

Mark Mccaffrey: I just wanted to follow up first on the applications and commerce segment. I appreciate the color mark that you just provided on Aero, but I guess outside of that, curious if you could talk about what the primary drivers of growth in that segment are going to be to support the low to mid-teens range in fiscal 24. And then separately, I also wanted to ask about the share repurchases.

Vikram: Hey can you hear me, yes, yes, yes.

Vikram: Yes, I just wanted to follow up first on the applications and Commerce segment.

Vikram: The color Marc that you just provided on Aero, but I guess outside that curious if you could talk about what the primary drivers of growth in that segment are going to be to support the low to mid teens range in fiscal 'twenty four and then separately I also wanted to ask about the share repurchases you mentioned the planned around the remaining one.

Mark Mccaffrey: You mentioned the plan around the remaining $1.4 billion. I guess any color you could offer in terms of the cadence of repurchases going forward, and maybe if you could also just remind us of your broader capital allocation priorities and framework going forward, I'll leave it there.

Speaker Change: $4 billion I guess any color you could offer in terms of the cadence of repurchases going forward and maybe if you could also just remind us of your broader capital allocation priorities and framework going forward and I'll leave it there. Thanks, yeah. Thanks, Vikram on AMC the growth drivers and we talk about this a lot is that we're seeing the demand move to that second product.

Mark Mccaffrey: Yeah, thanks, Vikram. On ANC, the growth drivers, and we talk about this a lot, are we're seeing demand move to that second product much faster than we've ever seen, and then now we're seeing it move to the third product much faster than we've ever seen. So that shows up in our ANC growth. That's our higher-profitability segment as well, so it's driving a lot of our increased profitability and leverage within our model. But those are the drivers.

Vikram: Much faster than we have ever seen.

Vikram: And then now we're seeing it to the third product much faster than we've ever seen so so that that shows up in our ANC growth.

Vikram: That's our higher profitability segment as well so it's driving a lot of our increased profitability and leverage within our model, but those are the drivers outside of Aero. It is the bundling, it's the customers' top stores coming in with the 10th customers move into that second product. We've talked about once we get to the second product our average retention is 85%, but it go.

Mark Mccaffrey: Outside of Aero, it's the bundling, it's the customers, customers coming in with intent, customers moving to that second product. We've talked about how once we get to the second product, our average retention is 85%, but it goes up from there. If we get customers to the third product, their lifetime value goes up significantly, and they're almost a customer for life. So those are the things that are driving the momentum in ANC right now, and we're seeing that compounding. So I would say, between price, demand, and supply, everything is driving that nice growth in there. On the share of purchases, there's been no change.

Vikram: Up from there if we get customers to a third product that goes up significantly it's almost a customer for life.

Vikram: Those are the things that are driving the momentum enhanced C. Right now and we're seeing that compounding so I would say between price demand the patch everything.

Vikram: As driving that nice growth in there on the share repurchases.

Mark Mccaffrey: We'll talk about it a little more on investor day, a little more broadly, but it's still a big part of our portfolio to return capital to our shareholders. We have $1.4 left on our authorization. We'll look at it in our discipline framework, quarter to quarter, based on what we see out there, and we'll make decisions as we go. We will talk about it a little bit more when we get to investor day in March. And then maybe they're just looking at it from a different lens. You asked about AMC. If you look at it as the components of the products that we sell in AMC, you know, every part of AMC or every significant part of AMC is growing double digits right now. So that's really propelling that business and getting into that 16% bookings we talked about. Okay, great. Thank you. Our next question comes from the line of Matt Pfau from William Blair. Matt, please go ahead.

Speaker Change: No change, we'll talk about all of our Investor day.

More broadly but.

Speaker Change: Still a big part of our our portfolio to return capital to our shareholders.

Speaker Change: We have $1 four left on our authorization, we'll look at it and our disciplined framework quarter to quarter based on what we see out there and we'll make decisions as we go we will talk about a little bit we will talk about it a little bit more when we get to the Investor day in March.

Speaker Change: And then maybe Rick I'll, just looking at it from a different lens you asked about AMC.

Rick: Look at it as the <unk>.

Speaker Change: So the products that we sell and Nancy every part of AMC will have a significant part of AMC is growing bookings double digits right now right. So.

Speaker Change: So thats really propelling that business and getting to that 16% bookings growth we talked about.

Speaker Change: Okay, great. Thank you. Thank you.

Speaker Change: Our next question comes from the line of Matt Pfau from William Blair. Please go ahead.

Aman Bhutani: Hey, great. Thanks. Wanted to start off asking for payments.

Matthew Pfau: Okay, great. Thanks.

Matthew Pfau: Wanted to start off asking on payments.

Aman Bhutani: And perhaps you could just give us an idea about where you are at in terms of penetrating your existing customer base, or at least the addressable customer base. As we go into 24, do you expect existing or converting existing customers to be the biggest driver of growth again? Yes, thanks, Matt.

Perhaps you could just give us an idea about where you are at in terms of penetrating your existing customer base or at least the addressable customer base as we go into 'twenty four do you expect.

Matthew Pfau: Existing car.

Matthew Pfau: Existing customers to be the biggest driver of growth again.

Aman Bhutani: We are still in the very, very early stages of penetrating our customer base, but we feel very comfortable that, you know, we have access to a lot of commerce intent customers within the base already. We do expect it to continue to be the largest driver of our growth in payments in 2024, as well. So, you know, we expect very healthy growth.

Speaker Change: Yes. Thanks, Matt we are still in very very early stages of penetrating our customer base, we feel very comfortable.

Matthew Pfau: We have access to a lot of e-commerce customers within the base already but we do expect it to continue to be the largest driver of our growth in payments in 2024 as well. So we expect very healthy growth and as I said in my.

Mark Mccaffrey: And as I said in my comments, we are going to expand what we're selling to these customers, we're going to go after more of the omni-commerce solution. We're ready, we've got some great products, some great offerings, you'll see much of that in March as well. We're going to go broader with our offering to these customers. But you know, the core payment functionality, we feel really good, that'll keep growing well. Great. And just to follow up on the guidance for A&C, the bookings growth of 16% in Q4 and then guiding for low to mid-teens in Q1, what's the discrepancy there? Are there payments or something else that drives that difference?

Matthew Pfau: Our prepared comments, we are going to expand what we're selling to these customers are going to go after more of the omni commerce solution. We are ready we've got some great products.

Matthew Pfau: Clearings youll see much of it in March as well, we're going to go broader with our offering to these customers.

Matthew Pfau: Our core payments functionality, we feel really good that will keep growing well.

Speaker Change: Great and just to follow up on the guidance for AMC that bookings growth of 16% in Q4, and then you're guiding for low to mid teens in Q1.

Speaker Change: The discrepancy there is or payments or something else that drives that difference.

Mark Mccaffrey: And thanks, thanks, Matt. You know, I would look at the overall business and the momentum we have going. Remember, it's not just a subscription business; we have transactional and we have hardware shipments as well. So we take that into account. And we take into account, you know, the timing of those orders and when we think they're going out.

Speaker Change: Yes.

Speaker Change: Thanks. Thanks.

Speaker Change: I would look at.

Speaker Change: Overall business and the momentum we have going and remember it's not just the subscription business, we have transactional and we have.

Speaker Change: We have hardware shipments as well so we take that into account and we take into account the timing of those orders and when we think theyre going out. So there will always be a little bit of a discrepancy between.

Aman Bhutani: So there'll always be a little bit of a discrepancy between, you know, bookings and revenue related to that. Yeah, you know, just to make sure that what we talked about at 16% is bookings, right? Revenue is always going to lag a little bit, but like Mark said, you'll see it show up. Perfect. Thank you. The next question comes from the line of Mark Mahaney from Evercore ISI. Mark, please go ahead. Thanks, this is Jannie from Mark Mahaney.

Speaker Change: Bookings and revenue related to that.

Speaker Change: Yes.

Speaker Change: Just to make sure.

Speaker Change: It's what we talked about a 16% as bookings rate revenue is always going to lag a little bit like Mark said.

You will see a chart a course.

Speaker Change: Perfect. Thank you.

Speaker Change: Our next question from line of.

Speaker Change: Mark will hold from Evercore ISI. Please go ahead.

Speaker Change: Thanks for <unk> scaffold for Mark Mahaney.

Aman Bhutani: Just a question on Aero again. Can you just give us more color? Which international markets are you testing right now? And maybe also, apart from driving product attach, what are the other potential monetization opportunities that you may be exploring for Aero? And then the second question is: you kind of mentioned that greater attach gives you greater pricing flexibility. So can you talk about our pool?

Mark Mahaney: First of all a question on Aero again.

Mark: Can you just give us more color, Washington, and Nashville markets are you testing right now.

Mark: And maybe also like our parts on driving product attached.

What are the other potential monetization opportunities that you might be exploring for arrow.

Mark: And then the second question is on your kind of mesh and greater attach gives me greater pricing flexibility. So can you talk about like <unk> or how should we think about hyper growth drivers. This year between just glenn attach versus potentially taking up pricing like as price action baked into your full year outlook.

Aman Bhutani: How should we think about our growth drivers this year between just growing attachement versus potentially taking up pricing? Like, is price action baked into your full year out? Thank you.

Mark Mccaffrey: Yeah, on the international markets, you know, our typical rollout plan is always English, large English markets first, so those are the markets we're testing now. But our absolute view is that Aero is a capability that should go across to all our markets. And you know, there's a long tail of great tickets for us to approach with that. So super excited about that.

Speaker Change: Thank you.

Speaker Change: Yeah on the international markets are typical rollout plan as always English large English markets first so that both of the markets. We're testing now, but our absolute news that arrow is a capability that should go across to all our markets.

Speaker Change: There's a long tail of great tickets for us to approach therefore super excited about that in terms of the product attach and other monetization with of course, the prototypes of the first lever, we're looking for but as I will share a little bit at our Investor Day. We're also looking for new monetization methods.

Aman Bhutani: In terms of product attach and other monetization means, of course, product attach is the first level we're looking for. But as we'll share a little bit at our investor day, we're also looking for new monetization methods. You know, and I'll just give you an example.

Mark Mccaffrey: One of the things that we want to test is a premium offering for logo building, you know, where, as you see in Aero, you buy a domain, and Aero builds you a logo, and it gives you, you know, or gives you the ability to be able to edit that logo. But there are more services that we can offer around it. And we're going to test a new paywall for it and a new monetization method that, you know, GoDaddy has never done before. So that's one example of one of the types of things our teams are testing. And then, in terms of the second part, I turn it to Mark.

Speaker Change: I'll just give you. An example, one of the things that we want to test as a premium offering for logo building.

Speaker Change: As you see in Aero buyer demand in Aero build your logo I think Bill's U.

What gives you the ability to be able to add at that level, but there are more services that we can offer around it and we're going to test a new payroll.

And new monetization method of Godaddy has never done before so that's one example, with one of the types of things. Our teams are testing and then I think in terms of the second part.

Mark Mccaffrey: Yeah. So anything we plan on doing price-wise, just so you know, is built into our guide as we sit here today. We're excited about, you know, the bundling and the attach that's happening within Aero, within our software platform altogether. And, you know, with 21 million customers, 14 million interactions with them, we get a lot of data about how they're getting value out of our products, which creates a lot of opportunity going forward around pricing bundles, elasticity around that, seeing the value they're driving. So we think there's a lot of opportunity out there as we go forward. But right now, we've built in pricing actions as we usually do within our guide for the rest of the year. And we'll continue to evaluate and update as we go forward. Our next question comes from the line of Clark Jeffries at Piper Sandler. Clark, please go ahead.

Speaker Change: So yes.

We plan on doing pricing wise, just so you know what's built into our guide this week with sit here today.

Speaker Change: We're excited about the bundling and the attach that tackling within Aero within our software platform altogether and with 21 million customers.

Speaker Change: Millions of interactions with them when we get a lot of data about how theyre getting value out of our products, which creates a lot of opportunity going forward around pricing bundles elasticity around that value, they're driving so we think theres a lot of opportunity out there as we go forward, but right now we've built in pricing actions as we usually do within our within our guide for the.

Speaker Change: Rest of the year, and we'll continue to evaluate and update as we go forward.

Speaker Change: Our next question comes from the line of Seth.

Seth: Piper Sandler Barclays.

Seth: Please go ahead.

Mark Mccaffrey: Hello, thank you for taking the question. I have two questions for Mark. One is, you mentioned a 100 basis point revenue headwind from some of those divestitures. Based on the 7% or 8% domain bookings, it seems like there's strength there. I just wanted to ask clarification on when we'll see the revenue headwind sort of peak or trough during calendar 2024. It's 100 bps for the full year, but you're seeing more color on intra-quarter trends in the fall. Yeah, Clark, I would say it will be primarily in the first half, with some in the second half, but primarily in the first half. All right, perfect.

Seth: Hello, Thank you for taking the question.

Seth: Sure.

Seth: <unk> for Mark.

Speaker Change: One is you mentioned 100 basis point revenue headwind from some of those divestitures.

Speaker Change: Based off of the 7% or eight.

Speaker Change: On demand bookings it seems like the strength there I just wanted to ask a clarification on when we'll see the revenue headwind.

Speaker Change: Sort of peak or trough during calendar 2024.

Speaker Change: 100 bps for the full year, but just any more color on intra quarter trends for the follow up.

Speaker Change: Clark I would say it will be primarily the first half with some in the second half primarily in the first half.

Mark Mccaffrey: And then for that 200 bps of EBITDA margin expansion for next year, you know, reflecting on what happened in 2023, marketing and advertising dollars did fall, but we've had a good discussion around that, you know, the intent to reduce tech and dev spend. So, when you think about the driver of that 200 bps, any way you could frame the mix shift of ANC reduction in tech and dev and anything incremental around marketing, advertising, dollar growth, or percent of revenue for calendar 24 would be great. Thank you.

Speaker Change: Alright, perfect and then for that 200 bps of EBIT margin expansion for next year.

Speaker Change: Reflecting on what happened in 2023 marketing and advertising dollars did fall, but we've had a good discussion around that.

Speaker Change: Intent to reduce tech and Dev spend so.

Speaker Change: When you think about the driver of that 200 bps anyway.

Speaker Change: Rain.

Speaker Change: Mix shift.

Speaker Change: The reduction in Tech and Dev.

Speaker Change: Anything incremental around marketing advertising dollar growth or percent of revenue.

Mark Mccaffrey: Yeah, thanks, Clark. And the way I look at it is if you take where we're exiting at Q4 of 2023 and where we're going for Q4 of 2024, the things that you have to look at are, you know, reduced T&D spend, right? We're leveraging more of the AWS cloud, we're reducing dependency on data centers, and there will be a natural, you know, leverage we'll get in our P&L related to that. We're getting leverage in our care organization through the use of AI and automation, and also access to global workforces, that'll help us as we go forward. And then, and then some of it is just the natural growing ANC picture, right?

Speaker Change: For calendar 'twenty forward great. Thank you.

Speaker Change: Yes, Thanks Clarke.

Speaker Change: When I look at it is if you take where we're exiting Q4 of 2023 and where were going for Q4 of 2020 or the things that you have to look at our reduced TMT extent alright.

We're leveraging more of the AWS cloud, we're reducing dependency on datacenters there'll be a natural.

Speaker Change: Leverage will get in our P&L related to that.

Speaker Change: We're getting leverage in our care organization.

Speaker Change: Use of AI and automation and also access to global Workforces that'll help us as we go forward and then and then some of it is just the natural growing ANC picture right into more profitable segment.

Mark Mccaffrey: It's a more profitable segment. It's software-based, you know. Therefore, as that grows and becomes a bigger part of the picture, it helps expand our margins just naturally, again, that leverage we get from the two plus products starts to kick in the bigger ANC gets all together. So those are kind of the levers I'm looking at.

Speaker Change: Software based therefore.

Speaker Change: Therefore, as that grows and becomes a bigger part of the picture a picture it helps expand our margins just naturally again.

Speaker Change: The leverage we get from the two plus products starts to kick in the bigger AMC gift altogether. So those are kind of the levers on looking at.

Mark Mccaffrey: Hopefully, that's helpful. Absolutely, thank you. Our next question comes from the line of Ygal Arounian from Citigroup. Ygal, please go ahead.

Speaker Change: Hopefully that's helpful.

Speaker Change: Absolutely. Thank you.

Our next question comes from the line of all around Ian from Citigroup. Please go ahead.

Speaker Change: Yeah.

Aman Bhutani: Hey, good afternoon, guys. I want to focus, maybe, on customer growth for a second. Is there any way to help us understand the impact on customers from the hosting divestitures? And, you know, I guess even if we normalize for that, and we look at what customer growth has been historically versus what it's been over the past couple of years, you know, you talk about a continued strong top line and top of the funnel. Sorry, but the customer growth that around 1%, let's call it historically, it's been How are you guys thinking about customer growth right now? Are you focused on a smaller subset of customers that might convert more easily? And, you know, you're looking to ARPU to fill in the gaps you think can get back to, you know, that lower single-digit versus single-digit or flattish customer growth number in the next year or two. Yeah, so I'll give us some color.

Speaker Change: Hi.

Ed.

Hey, good afternoon.

Ian: I want to focus maybe on customer growth for a second.

Ian: Hello.

Ian: Understand.

Ian: Customers.

Ian: From the housing does divestitures.

Ian: I guess, even if we normalize for that.

And we look at what customer growth has been historically versus what it's been over the past couple of years.

Ian: You talked about a continued strong topline and top of the funnel.

Ian: <unk>.

Ian: Customer growth around 1%, let's call. It historically has been.

Ian: For us.

Ian: I was thinking about customer growth right now or are you focused on a smaller subset of customers that might convert more easily than when you are.

Ian: Looking to <unk> to fill in the gaps do you think can get back to us.

Ian: Yes.

Lower single digit versus single digit or flattish customer growth number over the next year or two.

Mark Mccaffrey: When we look at our customers, you know, we've always said we are targeting customers with a higher intent to do something when they come into the funnel at that second product. So that businesses generate generate value for themselves and, therefore, generate value for us. What we've seen coming out of 23 and continuing into 2024 at the gross ads level is that consistent, strong demand that we've talked about all year and that will continue. And to put it in perspective, 23 gross customer ads was higher than 2022, right?

Speaker Change: Yes, so so I will give us some color for you again.

Speaker Change: We will look at.

Custom burgers, we've always said, we're targeting customers with it a higher intent to do something when they come into the funnel AD that second products that business generate generate value for themselves and therefore generate value for us.

Speaker Change: What we've seen.

Speaker Change: Coming out of 'twenty, three and continuing into 2024.

Speaker Change: Gross add level is that consistent strong demand that we've talked about all year and that continuing and to put it perspective 23 gross customer adds was higher than 2022 right. So not only are we seeing an increase there we're seeing it more consistent quarter to quarter in a more stable with.

Mark Mccaffrey: And so not only are we seeing an increase there, but we're seeing it more consistent from quarter to quarter and more stable. With that, we're also seeing that intentful customer come in with those gross ads, which is the momentum we're seeing in the bundling, the growth you see materialized in AFC. And we're seeing through the divestitures that we are losing customers, but they are generally customers that were low intent customers. So they were on a single product, maybe weren't doing things, or haven't done things for years.

Speaker Change: That we're seeing that also that intent for customer come in with those gross adds which is the momentum we're seeing in the bundling the growth you've seen materialize on AFC.

Speaker Change: And we're seeing through the divestitures, we are losing customers, but they are generally customers that were low intent customers. So they were on a single product.

Mark Mccaffrey: So that trade-off is in there and continues to be something that we're working through on a net customer ad basis. Obviously, as we continue our divestitures and look at our portfolios, we've done a lot of that work in 23. So that will begin to abate for the work we've done in 23.

Speaker Change: Maybe working things Havent done things for years, so that trade off is in there.

Speaker Change: Continues to be something that we are working through on a net customer add basis.

Obviously, as we continue our divestitures and look at our portfolios.

Speaker Change: We've done a lot of that work in 'twenty three so that will we will begin to abate for the work we've done in 'twenty three and we will continue to review our portfolio going forward, but it is.

Mark Mccaffrey: And we'll continue to review our portfolio going forward. But it is, you know, bringing in the demand that has that higher intent customers and that stable demand we're seeing at the front of the funnel. Okay, great. That's really helpful.

Speaker Change: Bringing in the demand that has that was higher than 10 customer and thats stable demand, we're seeing at the front of the funnel now.

Aman Bhutani: And then, you know, understand the driver of GPB and, you know, bring more customers onto your paying platform. GMB is also, you know, continues to be really strong. Is there any way to quantify the growth drivers of GMB, whether it's by, I don't know, segment or business type or product, just to help give a little bit more color around that? Thanks.

Speaker Change: Yeah.

Speaker Change: Okay, Great that's really helpful and then.

Speaker Change: On.

Speaker Change: Understand the driver of PPV and framework <unk> results here Pam platform <unk> also.

Speaker Change: It continues to be really strong.

Speaker Change: Are there any way to qualify.

Speaker Change: The growth drivers of GNP, whether it's by I.

Speaker Change: I don't know if segment or business tied for products just help okay.

Aman Bhutani: Yes, they go, you know, a lot of what we talk about is GMB is often through our partnerships that we have, right, and they tend to sell in the big categories, in the big verticals that you know about, nothing significant to call out there, right? It follows, to some extent, the macro and sort of how customers are doing. Our focus very much is to provide them with a very competitive product so that, you know, they've got a system that works really well for them, and it shows up in the results. And I'll just add, you know, the GPB is what we focus on because that's what we monetize within our customer base, and that's what we're targeting to help grow. Thanks, guys. Thank you. Our next question comes from Ken Wong from Oppenheimer. Ken, please go ahead. But perfect.

Speaker Change: More color on that thanks.

Speaker Change: A lot of what we talk about is <unk> is offered through our partnerships that we have they tend to sell in the big category is a big vertical.

Well nothing significant to call out there it follows to some extent the macro and sort of how customers are doing.

Speaker Change: Our focus very much is to provide them with a very competitive products. So that they have got a system that works really well for them and it shows up in the results.

Speaker Change: I'll just add that.

Speaker Change: <unk> is what we focus on because that's what we monetize within our customer base.

Speaker Change: What we are targeting to help grow balanced.

Speaker Change: Thanks, guys.

Speaker Change: Thank you. Our next question comes from the line of Ken Wong from Oppenheimer. Please go ahead.

Mark Mccaffrey: I just want to maybe kind of circle up on that 31% exit margin you mentioned, you know, heavier spend in Q1 for renewals and launch costs. As we track to 31, would you expect that to be fairly linear or more back-end loaded, just given that there are some product investments up front? Yeah, so, giving you color around, you know, I'll say how we expect to roll out. We talked about 27 into one because of the spending related to our renewals and certain other timing and expenses. And then, you know, 31 is our exit strategy, with 29 being the average.

Speaker Change: Okay.

Speaker Change: Perfect.

Ken Wong: I just wanted to maybe kind of circle up on that 31% exit margin you mentioned heavier spend in Q1 for renewal than loss cost.

Ken Wong: As we track to 31 would you expect that to be fairly linear or more back end loaded just given that there are some product investments upfront.

Speaker Change: Yes, so so give me some color around.

I'll say, how do we expect to rollout.

Speaker Change: When we talked about 27% in Q1 because of the spending related to our renewals of certain other timing of expenses.

Speaker Change: And then 31 is our exit strategy with 29 being the average so we do think.

Mark Mccaffrey: So we do think, you know, we do, like we saw last year, believe it'll ladder up. We haven't gotten to the exact numbers yet. We'll provide more color around that as we get further into the year. But I think you can put a trajectory around there.

We do like we saw last year I believe it will ladder up.

Speaker Change: We haven't gotten to the exact numbers yet we'll provide more color around that as we get further into the year.

Mark Mccaffrey: Now, there might be some timing of marketing expenses that we'll talk you through if that were to happen. But, other than that, I would expect it to be similar to what we saw this year and to increase through the year. Got it.

Thank you can you can share sort of trajectory around there now there might be some timing of marketing expenses.

Speaker Change: I'll get through with that were to happen, but but other than that I would expect it to be similar to what we saw this year and flattering up through the year.

Mark Mccaffrey: And then just a quick follow-up on the optimization side. Obviously, those are efforts that you guys will continue to push forward on, and perhaps some new ones that you guys will talk about as of yesterday. As we look at the outlook, I guess, how much incremental optimization is already baked in there? Or are those plans yet to launch post-investor day?

Speaker Change: Got it and then just a quick follow up on the <unk>.

Speaker Change: On the optimization side, obviously that those are efforts that you guys will continue to push forward on perhaps some new ones that you guys will talk about at Investor day, as we look at the outlook.

Speaker Change: I guess how much is.

Speaker Change: Incremental optimization is already baked in there or are those plans yet to launch post post investor day.

Mark Mccaffrey: Yeah, when we think about optimization and guiding to it, you know, everything we have a line of sight to is in the guidance already, you know, but the fact is, we're constantly evaluating new opportunities. Our teams have a very disciplined approach to looking at those opportunities, and they bring forward proof points and what they need to do to be able to achieve those targets. And in every quarter, we're evaluating them and moving forward with new ideas. And if anything were to evolve, we would absolutely tell you more. We have a great track record of doing that over the last couple of years. And, you know, our goal is to just continue that momentum, continue that discipline, and it just compounds them. That's a great thing.

Speaker Change: Yes, when we think about optimization guiding to anything we have a line of sight to isn't within the guidance already.

Speaker Change: The fact that we are constantly evaluating new opportunities. Our teams have a very disciplined approach to looking at those opportunities and they bring forward.

Speaker Change: And what they need to do.

Speaker Change: To be able to achieve those targets in every quarter, we are evaluating them and moving forward and new ideas and if anything were to evolve we would absolutely tell.

Speaker Change: Are you more we have a great track record of doing that over the last couple of years and our goal is to just continue that momentum continue that discipline and it just compounds and that's a great thing.

Mark Mccaffrey: Okay, fantastic. Thanks, guys. Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.

Fantastic Thanks, guys.

Speaker Change: Our next question comes from the line of Elizabeth quarter from Morgan Stanley. Please go ahead.

Mark Mccaffrey: Hi, thanks for the question. I was hoping to get a little bit more clarity on just the walk rate for the fiscal 24.9 of 6% versus the exit rate in Q4. I appreciate the disclosure on about one point from divestitures and migrations, but I feel like there are a couple of benefits as well, whether it's the aftermarket easing or pricing. And so I'd love to just get a better sense of the view that you're taking on the underlying growth of the business and how that changes. Relative to Q4, just given some of the momentum in bookings momentum that we've seen in bookings exiting the year. Thanks. Yeah, thanks, Elizabeth. Just just a little, little more color.

Elizabeth Quarter: Alright. Thanks.

Elizabeth Quarter: Thanks for the question.

Elizabeth Quarter: I was hoping to get a little bit more clarity on just the work for this fiscal 'twenty four 6% versus.

Elizabeth Quarter: The first is the exit rate in Q4 around 6%.

Elizabeth Quarter: I appreciate the disclosure on about one point from divestitures and migration still think there's a couple of.

Elizabeth Quarter: Benefits as well, whether it's the aftermarket Zhang of pricing and so I'd love to just get a better sense on the view that you're taking on the underlying growth of the business and how that changes relative to Q4, just given some of the momentum bookings.

Tim that we've seen in bookings exiting the year. Thanks.

Tim: Thanks, Elizabeth just a little further color.

Mark Mccaffrey: You know, we're seeing the momentum in ANC, and we talked about the bookings. We talked about the headwinds related to some of the divestiture activity. There are other things we built in there, you know, for the acquired or non-strategic hosting assets that still exist that haven't been integrated.

Speaker Change: We're seeing the momentum in ANC and what about the bookings.

Speaker Change: Talked about the headwinds related to some of the divestiture activity. There are other things we built in there for the acquired or nonstrategic hosting assets still exist that haven't been integrated.

Mark Mccaffrey: We're assuming they're flat to down for the year as we continue to evaluate their long-term prospects. Things like aftermarket we're assuming will be flat for the year, maybe slightly up, but again, no momentum being generated there. Coming from continued growth in that market, you know, that could change. There's some volatility in that market quarter to quarter, but we think on a long-term basis, that'll be the way to measure it. You know, still good growth in domains.

Speaker Change: We're assuming they are flat to down for the year as we continue to evaluate the long term prospects.

Things like aftermarket, we're assuming will be flat for the year, maybe slightly up but again no momentum being grown there coming there from.

Speaker Change: Continued growth in that market.

Speaker Change: That could change there is some volatility in that market quarter to quarter, but we think on a long term basis that will be the way to measure it.

Mark Mccaffrey: It's still something that, you know, we're big in growing in percentage point wise is always difficult on a big base, but we think it'll be a steady increase as we see that demand coming in. So when you put that all up, you know, when you put put the headwinds into their the first part of the year, you know, we, you know, we think 6% is a good point for the middle of the range. And, you know, we know there's opportunities for the high end of the range and we'll continue to monitor that. Great.

Speaker Change: Still good growth in domains is still something that we're big and growing as a percentage point Y is as always difficult on a big base, but we think it'll be a steady increase as we see that demand coming in so.

Speaker Change: So when you put that all up.

Speaker Change: You put the headwinds into there at the first part of the year.

Speaker Change: We think 6% is a good point for the middle of the range and we know there is opportunities for the high end of the range and we will continue to monitor those.

Mark Mccaffrey: And then just as a follow-up, when we think more holistically, like about the business, when you tend to have, you know, revenue upside, is that more likely to flow through on the margin side, just given you guys have already made a lot of improvements on the margin thus far? Or would you look to take any of that upside and potentially invest kind of more aggressively into the business, just given the opportunities ahead? I think it's hard to project multiple scenarios.

Speaker Change: Great and then just.

Speaker Change: A follow up when we think more holistically about the.

Speaker Change: That's when you tend to have revenue upside it was that more likely to follow through on the margin side. Just given you guys have already made a lot of improvements on the margin, thus far or would you look to take any of that upside and potentially a grasp more aggressively into the business just given the opportunities ahead.

Speaker Change: I think it's hard to project.

Mark Mccaffrey: It also kind of depends on the product mix in terms of which products exceed targets. But generally, we're looking to, you know, on a regular basis, balance growth and profitability. Again, our teams have a pretty disciplined process of bringing proof points in on where we invest and how we double down on investments. You know, if something changes, our goal is to be very transparent with you guys on the call as well. So you'll be able to be on that journey with us.

Speaker Change: Both scenario there Elizabeth it also kind of depends on the product mix in terms of which products.

Speaker Change: Target, but generally we're looking to on a regular basis balance.

Speaker Change: Growth and profitability again, our teams have a pretty disciplined process of bringing proof points, and where we invest and how we double down on investments.

Speaker Change: If something changes our goal is to be very transparent with you guys on the call as well so you'll be able to be on that journey with us.

Mark Mccaffrey: And, you know, I think the mom put it perfectly: we balance growth and profitability. You know, our goal is to drive free cash flow, and ultimately free cash flow for share. We're constantly looking at ways to do that and ways to be creative in the long term model. And we'll constantly evaluate what creates that opportunity for us that we can go into. Great, thank you very much. Our next question comes from the line of John Bayoune on for Brent Thill at Jeffrey's. John, please go ahead.

Speaker Change: I think command put it perfect we balance the growth and the profitability.

Our goal is to drive free cash flow and ultimately free cash flow per share. We're constantly looking at the ways to do that and the ways to be accretive to the long term model and we will constantly evaluate what creates that opportunity for us that we can go go into the future.

Speaker Change: Great. Thank you very much.

Speaker Change: Our next question comes from the line of John <unk> on for Brent Thill at Jefferies. John. Please go ahead.

Aman Bhutani: Hi, thank you. I just had two questions. One, going back to Aero, I wonder if there's a way for you to quantify how broadly it might be rolled out in the U.S. I mean, is it, you know, 5% of your users using it, or not? If there's any way to quantify what you might think it might be by the end of the year, or some sort of phase. And then the second question, kind of going back to the guidance and some of the headwinds, I think you had about 100 business points in 23, guiding for about 124, with, I guess, abating in the second half, but wondering, will it be pretty much done at this point? Or do you still have maybe, I guess, more to reorganize given some of the, I guess, some of the still remaining legacy hosting grants you still have left? Thank you. Yeah, let me start with Aero, John.

John: Alright. Thank you I just had a quick question going back to Aero.

John: If there's a way for you to quantify how broadly might be rolled out in the U S amazing.

John: It's like 5% of your users using it or.

John: If there's any way to quantify what you might think you might be by the end of the year or instead of phase and then the second question kind of going back to the guidance and some of the headwinds I think you had about 100 basis points in 2000 to be guiding for about 124.

John: I guess abating in the second half, but wondering whether it would be pretty much done at this point or do you still have maybe I guess more to reorganize given some of the I guess I'm still a legacy Horton <unk> slide left thank you.

Aman Bhutani: You know, we don't have any sort of number to disclose today, but we are looking forward to talking about this at our Investor Day. It's one of the things we are going to share with you. But just to give you an order of magnitude, in the first six, eight weeks, hundreds of thousands of customers had already seen the Aero experience. So this was not a small rollout by any stretch of the imagination.

Speaker Change: Yes, let me start with Aero John.

Aero John: We don't have sort of number to disclose today, but we are looking forward to talking about this at our Investor day. It's one of the things we are going to share with you, but just to give you order of magnitude.

Speaker Change: In the first six eight weeks hundreds of thousands of customers that are already seeing the arrow experience. So this was not a small rollout by any stretch of imagination, and that's just new customers.

Aman Bhutani: And that's just new customers, purchasing customers that I'm talking about, you know, and you talked about sort of where we expect to get by the end of the year. Our timelines for Aero are much more aggressive than that. We expect a very large percentage of our new customers to be seeing Aero within the next few months. And by the end of the year, looking much more at how our existing customers are starting to engage with Aero, and how can we make a real difference there. And I'll turn it to Mark for the headwind of 100 bps. Yeah, so you know, we did a lot of work in 2023, and that caused 100 bps headwinds in 2023 and 2024.

Speaker Change: Choosing customer that I'm talking about.

Speaker Change: And you talked about sort of where do we expect to get by the end of the year, our timeline for aero are much more aggressive than that.

We expect a very large percentage of our new customers to be seeing here within the next few months and by the end of the year looking much more at how our existing customers are starting to engage with arrow and how can we make a real difference now I'll turn it to mark for the headwind 100 bps, yes. So we did a lot of work in 2023.

Speaker Change: Hi.

Mark: And that caused a 100 basis points headwind in 'twenty, three and 'twenty four.

Mark Mccaffrey: You know, we're still continuing to evaluate our portfolio, and we'll take any actions that, you know, we need to related to things that may not be strategic or things that aren't going to be accretive long term to our model. So, I wouldn't say we're done. I would say we'll continue to optimize, evaluate, and make decisions for the long term business as best we can. Thank you. The next question comes from the line of Chris Kuntarich from UBS. Chris, please go ahead.

Mark: We're still continuing to evaluate our portfolio and we will take any actions.

Mark: We need to related to things that may not be strategic or things that arent going to be accretive long term to our model. So I wouldn't say, we're done I would say, we will continue to optimize evaluate and make the decisions for the long term business best we can.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Chris Harris from UBS. Please go ahead.

Aman Bhutani: All right, great. Thanks for taking my question. Maybe the first one would just be a clarification.

Chris Harris: Alright, great. Thanks for taking my questions, maybe the first one.

Aman Bhutani: When you're talking about the current Aero flow versus the commerce Aero flow that we're going to be learning more about at the analyst day, can you just talk about maybe what products are not being included today? When we think about the existing flow? Is it really just payments?

Chris Harris: Just a clarification when you are talking about the current aero flow versus commerce arrow flow that we're gonna be learning more about at the analyst day can you just talk about maybe what products are not being included today.

Chris Harris: We're thinking about the existing flow is it really just payments or is there something else kind of key products that we should be thinking about existing flow versus aero commerce well.

Aman Bhutani: Or is there something else, kind of key products that we should be thinking about existing flow versus an Aero commerce flow? Yeah, what you saw us launch in November was Aero capabilities, mostly on our identity and presence products. And if you look at the entrepreneur's wheel, right, we lay out identity, presence, and commerce and the customer needs that surround them. What we're going to show you at investor day is a sneak peek into all of the commerce capability built with Aero, which includes not just payments capability but core commerce functionality like inventory management and catalogs and, you know, how Aero will work on hardware, for example, versus, you know, on the web. Where I got it.

Speaker Change: Yeah, what you saw US launch in November was a real capabilities.

Speaker Change: Mostly on our identity and presence products and if you look at the entrepreneurs.

Speaker Change: We lay out identity presence in Congress and the customer needs that surround them, what we're going to show you at Investor day, the sneak peaks peak into all of the commerce capability with layered with Arrow, which includes not just payments capability, but core commerce functionality like inventory management and catalogs.

Speaker Change: Now ill work on hardware for example versus on the web.

Today, when we talked about I didn't even in presence of seeing arrow capability is mostly on the web, but how does that translate to a piece of hardware that are customers holding and taking a transactional.

Aman Bhutani: Very helpful. And just one follow-up on the divestitures, any color to help us think about the margin benefit that they deliver from divestiture versus the full year guide? Yeah, I haven't quantified it out to the exact numbers.

Speaker Change: Got it very helpful and just wanted to follow up on the divestitures any any color to help us think about the margin benefit that they deliver from divestiture versus the full year guide.

Mark Mccaffrey: But keep in mind, it benefits us in two areas. One, you know, obviously, it helps normalize on a go forward basis, but it also reduces our CapEx spend because a lot of these divestitures relate to data centers that we no longer need, and we'll go with the acquiring entity. So there are two benefits we see, both triangulating around, you know, helping our free cash flow and generating our free cash flow growth going forward.

Speaker Change: We haven't quantified it out to the exact numbers, but keep in mind it benefits us in two areas. One obviously it helps on normalized EBITDA on a go forward basis, but also reduces our capex spend.

Speaker Change: Because a lot of these divestitures related to also data centers.

We no longer need and we will go with the acquiring entity. So there are two benefits we'll see.

Speaker Change: Triangulate around helping our free cash flow and generating are.

Aman Bhutani: Thanks, Mark. Thanks, Simone. Our next question comes from the line of Ella Smith on behalf of Alexi Gogolev at J.P. Morgan. Alexi, go ahead.

Speaker Change: Free cash flow growth going forward.

Speaker Change: Got it thanks, Mark Thanks, Mark.

Our next question comes from the line of Ella Smith on for Alexia.

Aman Bhutani: Hey Ella. Hi team, thank you for taking my question. It seems that price had the most to do with the margin expansion in the ANC segment. But is the spread of margin profiles of ANC products wide? If so, can you remind us what the highest-margin ANC products were that drove the expansion? Yeah, I don't know, Ella, if we've gotten into that detail before. So I'll give you some high level tips, and then hopefully, that'll be helpful for you.

Ella Smith: P. Morgan. Please go ahead.

Ella Smith: Hi team. Thank you for taking my question. It seems you price had the most to do with the margin expansion. The ANZ segment is the spread margin profiles of AMC products wide. If so can you remind us what has the highest margin.

Ella Smith: Are the highest margin ANC products that drove the expansion.

Speaker Change: Yes, I don't know.

Speaker Change: We've gotten into that detail before so I'll give you some high level and then.

Mark Mccaffrey: You know, ANC in and of itself is a higher-margin business for us. There are certain areas that are, from a gross margin perspective, a little lower, for example, payments, where we have the transaction fee, but they're coupled with software and subscriptions that drive it up. So when we look at it from a bundling perspective, you know, they are very accretive to the margin as well as the normalized EBITDA line. I would say, you know, when I look at what's driving the growth in ANC, you have to look at it from there is a pricing aspect of it, no doubt, as we increase prices across certain products, but there also is a demand element of it, which when we So I would say it's a good balance.

Speaker Change: Hopefully that's helpful for you.

Speaker Change: Sure.

Speaker Change: AMC ended up itself is a higher margin business for us there are certain.

Speaker Change: Areas that that are from a gross margin percent perspective, a little lower for example payments.

Where we have the transaction fee, but they are coupled with software and subscriptions that drive it up so when we look at it from a bundling perspective.

Speaker Change: They are very accretive to the margin as well as the normalized EBITDA line I would say when I look at what's driving the growth in AMC and you have to look at it from there is a pricing aspect of it no doubt as we increase prices across certain products, but there also is a demand element of it which will we see that customer go to that second product, we get we get.

Aman Bhutani: We haven't gotten into breaking down, you know, x times y, but, you know, all that's contributing to the growth in ANC right now. And maybe to add some of the data we have shared, our website products, websites with marketing managed WordPress are our highest margin products, and they're growing double digits. So I see that's driving goodness at the end.

Speaker Change: The increase on that as well so I would say, it's a good mix, we haven't gotten into breaking down.

Speaker Change: X times y but.

Speaker Change: All of Thats contributing to the growth in ANC right now, yes, maybe to add some of the data we have shared our website products.

Speaker Change: Websites plus marketing managed Wordpress are our highest margin products and they are growing double digits, obviously, that's driving.

Aman Bhutani: Great, thank you Aman and Mark. And for my second question, can you please speak about GoDaddy payments and your latest strategies there? Also, how would you describe the customer profile of those who are adopting GoDaddy payments? The customer profile for GoDaddy payments is very much sort of squarely within the GoDaddy, overall GoDaddy customer.

Speaker Change: Goodness in the ANZ segment.

Speaker Change: Great. Thank you I'm on and Mark.

Speaker Change: And for my second question can you. Please speak about godaddy payments in your latest strategy. Sir also how would you describe the customer profile of those who are adopting godaddy payments.

Our the customer profile for godaddy payments very much sort of squarely within that overall godaddy customer we started with the micro seller people selling 50000, $100000 a year and we've built up to $1 billion across more than $1 million a year now over $1 million.

Aman Bhutani: You know, we started with the micro sellers people selling $50,000, $100,000 a year, and we've built up to a million dollars. A customer who sells a million dollars a year is now over a million dollars. That's the target market. That's what the product is targeted towards.

Aman Bhutani: So we're very happy with the products we're doing; we're adding more capabilities in 2024. We're just going to keep broadening the Omnicommerce solution and tuning our go-to-market strategy. And, you know, that's what we're most excited about selling that broader view to our customers, like Mark said, getting to that really third product that locks in retention for the long term. Great, thank you so much. Thank you. And as a quick reminder, if you'd like to ask a question during the call, please use the raise hand function at the bottom of the screen. It doesn't look like we have any more questions or at the top of the hour. So I'm going to hand it back over to Aman. Thank you, Christie.

Speaker Change: That's the target market, that's what the product is targeted towards so we're very happy with the products. We are growing we are adding more capabilities. In 2024, we're just going to keep broadening the omni commerce solution and tuning our go to market and that's what we're most excited about is just selling that broader view to our customers like Mark said getting to that really that third product.

Speaker Change: That locks in retention for the long term.

Speaker Change: Great. Thank you so much.

Speaker Change: Thank you.

Speaker Change: And as a quick reminder, if you'd like to ask a question.

Speaker Change: On the call. Please see the Raytheon assumption at the bottom of the screen.

Speaker Change: It doesn't look like we have any more questions or at the top of the hour.

Aman Bhutani: And thank you all for joining us. We're looking forward to seeing you at our investor day. We're excited about it. We have a lot of cool stuff to show, and hopefully, you're able to make it. Thank you.

Omar: Back over to Omar.

Omar: Thank you Christie and thank you all for joining US we're looking forward to senior at our Investor Day, We're excited about and we have a lot of cool stuff to slow and hopefully we're able to make it. Thank you.