Q3 2024 GoDaddy Inc Earnings Call

[inaudible]

Welcome to GoDaddy's third quarter, 2024 earnings call. Thank you for joining us. 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 Preparever Marks, we'll 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 cue.

On today's call we'll be referencing both Gap and NonGap Financial Measures and other operating and business metrics.

A discussion of why we use non-gap financial measures and reconciliation of our non-gap financial measures to their gap of covenants may be found in the presentation posted to our investor relations site at investors.go.edu.net or in today's earnings release on our form A.K. for an extra at the SEC.

Grocery's represent year over your comparisons, unless otherwise noted.

The matters will be discussing today include forward-looking statements such as those related to future financial results and our strategies are objectives with respects 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, October 30, 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. I'm GoDaddy, our mission is to empower every day entrepreneurs and make opportunity more inclusive for all.

Our strategy is relentlessly focused on creating customer value and transforming it to shareholder value through better conversion, attach and retention.

This is the driving force behind our Prophicle Growth Model, propelling us towards our North Star of maximizing free cash flow over the long term.

are strong Q3 results demonstrate our effective execution of this strategy delivering both innovation and operational efficiency.

We drove meaningful growth in free cash flow, increasing 29% year over year, and application and commerce bookings were up 20% and normalized EBITDA margin expanded by over 400 basis points.

We are excited to share updates on our growth in margin initiatives, driving success in 2024.

and Converting and Vaneling, seamless experience, commerce and cost optimization are all ahead of schedule, driving the strong results mentioned.

The enthusiasm for GoDaddy Aero continues to vibrate within our teams and along with an update today, we are looking forward to more life demos at our investor dinner in early December.

Fricing and bundling continues to deliver solid results with productivity focused efforts remaining a key contributor to the 20% application and commerce booking growth this quarter.

As we have said before, we view the pricing and bundling initiative as a multi-year journey that leverages our software platforms, fast data and machine learning capabilities, allowing us to bundle solutions in a way that offers greater value to customers.

with pricing aligned to the value delivered. While efforts this year have been concentrated on productivity solutions, we will expand the initiative across more of our products we, extending this initiative beyond the application and commerce segment.

Putting a finer point on this, this means the financial impact of pricing and bundling can favorably drive growth in both ANC and core platform segments starting in Q4.

Our seamless experience initiative exceeded expectations as we continue to remove friction in the customer experience and improve purchase onboarding and renewal paths.

Given R scale, even modest improvements in conversion and renewal can yield meaningful results.

In managed WordPress, we added security enhancements to all new domains attached to the platform, as well as expanded AI powered features, making it easier for customers to build and manage their websites.

Additionally, with the recent launch of the GoDaddy Digital Marketing Suite, we are giving customers an intuitive all-in-one product to help grow and market their businesses regardless of where their website is hosted.

features like these empower our customers to better acquire, engage and expand their own customer base.

For our Commerce Initiative, we continue to enhance our offering by introducing new AI-powered features that simplify operations for merchants.

The two new SaaS plans we launched last quarter, point of sale plus an invoicing plus, have had positive adoption trends since being fully rolled out.

We have set aggressive attached targets and the team is making progress against them. Finally, within our cost optimization initiative, we augmented care interactions in 20 international markets with our new Gen. AI-powered conversational bot.

Providing our customers with better instant self-service access to solutions for common issues.

We found that use of this technology let the double digit improvement in containment rates, representing a savings of over 16 million incremental contact minutes without sacrificing customer satisfaction.

We are excited with the progress on the conversational bot and along with Gabby, we expect these to continue to drive leverage in care while delivering a better experience globally.

and Aero is starting to provide a magical experience to customers that we aspire to provide across every interaction.

It is a compelling proof point to our multiple year journey to successfully leverage our software platform and unleash the combined power of our infrastructure, large-scale data, experimentation, AI and machine learning capabilities.

With the capabilities of Aero, we evolve the domain to represent so much more. It is now a gateway to a true business in a box experience, allowing our customers to go from idea to online in minutes.

Artes are moving at a fast pace, even before celebrating the one year anniversary of the initial customer testing for Aero, it was available in over 180 countries globally.

Nearly 3 million customers have discovered arrows with over half of them engaging with the experience. We are pleased with the momentum in discovery and engagement and just as exciting are the proof points we are driving in a romanticization.

With many months of data, we can clearly see that the largest engagement winner is website building. Over half of engage users, published a coming soon page, which is a customizable one page website.

Customer is engaged with Aero, are quickly becoming the largest funnel for web sites plus marketing. With over 40% of websites plus marketing paid subscriptions in Q3, originating with the Aero experience.

Our goals with Aero are about discovery, engagement and monetization. And with these large discovery and engagement numbers and multiple paths to monetization, Aero is off to a great start.

and there is so much more we can do. Given the positive fraction we are eager to expand the era experience across all on-ramp at GoDaddy and we plan to increase investment in marketing initiatives to support this broader launch.

So far, the customer exposed to arrow starts with a domain purchase and in the next few weeks we will start rolling out arrow to customers that start with a website purchase.

Just as websites have become the highest attached product for domains on aero, we expect to drive a touch with other products when every website customer starts with an aero experience.

This underscores our commitment to rapidly scaling products enabled by Aero as it continues to transform the customer experience and drive due avenues of growth.

We look forward to showing you more during our upcoming investor dinner event on December 3rd.

We plan to showcase paid tiers for aero with premium offerings like advanced logos and imagery as well as AI powered marketing tools to help our customers grow their businesses.

Equally exciting, we will highlight our conversational experience to building and maintaining WordPress sites, which reimagines harnessing the power of WordPress through a simplified intuitive interface.

We will also demo our site optimizer tool which can inspect any website and provide actionable recommendations to improve performance with just a click.

While these products themselves will be brand new, they represent our continued focus on leveraging AI and machine learning and our unique scale and data to deliver magical seamless experiences for our customers.

We are thrilled to give you a first look at these innovations that will drive our growth and success in the future.

In closing, we remain steadfastly focused on executing our key growth initiatives. I am delighted with the speed of execution and our relentless commitment to help our customers thrive.

The GoDaddy team remains dedicated to propel, profitable growth and create in your shareholder value. With that, here's Mark.

Mark: Thanks for Man!

We delivered strong Q3 results.

Mark: Demonstrating our disciplined execution of the strategy we shared at our recent investor day.

Our focus on building increasing customer lifetime value through developing and delivering seamless technology that drives conversion, attach, and retention is demonstrated in our financial results.

In the third quarter, we drove sustained double-digit ANC revenue growth, increasing 16% as well as impressive normalized EBDOM margin expansion to 32%. We made progress toward our North Star.

Growing 3 cash flow 29% to $363 million.

In addition, we continued to execute our disciplined capital allocation strategy, which focused on share by-backs, reducing our fully diluted shares outstanding to 144 million. Total revenue grew to 1.15 billion dollars.

Up 7% on a reported and constant currency basis.

Mark: For our high margin ANC segment, we drove 20% growth in bookings and 16% growth in revenue to $423 million.

Inline with our guided range, I'm strong performance of the growth initiatives, Aman spoke about earlier. The segment Ibadam Arjun for A and the improved 46% on the strength of our high-growth margin proprietary solutions.

Partially Offset by the Strong Performance and Lower Gross Mergin Profiles of our Commerce offerings and third party solutions.

ANC segment EBDI was also boosted by significant leverage gains across all operating expenses. Our proactive efforts to simplify our infrastructure and recruit global talent with a main driving factor behind this strike.

In addition, AR for application the commerce grew 15% to $1.6 billion.

We delivered $725 million in revenue for our core platform segment, representing growth in revenue and bookings of 3% in line with our guided range. Performance this quarter reflected the strength in primary domains.

Mark: partially offset by hosting divestitures and end-of-life migrations. Segment EBITDA margin for the core platform grew to 33% and ARR for our core platform segment grew 4% to $2.4 billion.

Mark: R.Poo grew 8% to $250 on a trailing 12 month basis, while our customer count declined slightly to $2.7 million.

With the previously mentioned divestiture and migration efforts behind us, we expect to return to customer growth in 2025.

Currently, our consolidated customer retention rate remains at 85%. And over 50% of our customers have two or more paid products with us.

Mark: Moving to profitability.

We drove expansion in normalized evada in the third quarter growing 24%.

to $367 million, and delivering an expanded margin of 32% up over 400 basis points.

This was driven by the gross margin tail when noted above, coupled with operational discipline that drove leveraging our P&L.

Mark: The Front-loaded Benefits of our 2023 Restructuring, Infrastructure, Simplification, and Global Talent Recruitment are evident in where we are pleased with these accomplishments.

As we look forward, we remain on track to deliver our investor-day targets of approximately 33% by 2026.

Additionally, as we look to the upcoming quarters, we expect to increase investment in marketing to support our broader launch of our arrow-enabled solutions to showcase our top rated AI website builder and capture customer demand.

On Bookings, we delivered $1.2 billion in the third quarter, representing 9% growth on both a reported and a cost-in-currency basis.

as a reminder, bookings primarily represent the cash collected during the period.

Subscription Bookings, group 2 points ahead of subscription revenue. Unleered free cash flow for the quarter-group 25% to $399 million, and free cash flow through $29% to $363 million.

Capital expenditures were down approximately 46% because of data centered by Bustchers.

Through October 28th, we repurchased 5.2 million shares a year to date, totaling $668 million.

We repurchased $39.4 million for $3.2 billion under our current authorizations and we have $757 million remaining. We drove a 23% reduction in gross shares outstanding since January 2022.

Mark: 3.1% of our 3-year targeted reduction of 20%. At the Quaterand, 144 million fully diluted shares remain outstanding.

On our balance sheet, we finished Q3 with $767 million in cash and total liquidity of $1.8 billion. Net debt was $3.1 billion representing a net leverage of two times on a trailing 12 month basis.

Pivoting to our outlook.

We are raising the full year revenue guide to $4.545-$4.565 billion. Representing growth of approximately 7% at the midpoint of our range. For the fourth quarter, we are targeting revenue between $1.165 and $1.185 billion.

Also representing growth of approximately 7% at the midpoint.

In applications and commerce, we expect mid-teens revenue growth for Q4 and the full year. In core platform, we expect low, single-digit revenue growth in the fourth quarter and the full year. As our track record demonstrates, we are committed to maintaining our operational discipline.

Driving further operational leverage in our model and expanding margins. Including the additional marketing investment we expect to make in the fourth quarter, we remain on course to deliver a 31% normalized EBITDA margin.

Given our year-to-date performance, we are also raising our full year, normalized eBidot expectation to 30%.

Mark: Keeping in mind our nearly one-to-one normalized EBDA to free cash flow conversion ratio. We are also raising our Unleered Free Cash low target to 1.475 billion plus.

and Free Cashflow to 1.325 billion plus for the full year. Our disciplined capital allocation approach remained unchanged, and we will evaluate all opportunities for shareholder return according to our rigorous and returned-based framework.

We are committed to the path we outlined at our investor day.

Mark: Executing our strategy to deliver both durable, top-line growth and expanded profitability as we drive toward our North Star. Our robust cash generation.

Strong Balance sheet and Capital Allocation Framework underpin our investment thesis and power our ability to create enduring value for our shareholders. We are pleased with our progress towards our investor data target of $4.5 billion plus in cumulative free cash flow generation.

supported by 68% annual revenue growth and expansion of our normalized EBITDA margin to 33% by 2026. Lastly, we look forward to welcoming you to our annual investor dinner on December 3rd in our new MP Arizona headquarters.

Speaker Change: I will now turn the call over to our Vice President and Head of Investor Relations, Christie Masoner, to open the call for your questions.

Thanks, Mark. As a reminder, if you'd like to ask a question, please use the right-hand feature at the bottom of the webinar screen to be added to the queue.

Our first question comes in line out the Chrome case of a vote law from Bears. Please go ahead.

Hey, thanks for coming here.

Speaker Change: Again, baby.

Hey, great. Thanks. Hey, I want to ask two questions about the applications and commerce segment. The first one is on booking scroll. Yeah, I really don't guide to that metric, but just wondering if you could give us any thoughts on how that could track in the fourth quarter of this year and some of the puts and takes we should be considering for booking scroll as we go through the rest of the year.

And the second, you know, this is your third straight order now with applications and commerce, booking scrolls 20% or higher. And so I'm wondering if you could remind us of the relationship between that metric and forward revenue growth for that segment. And some of the puts and takes that influence the conversion there. And specifically, if I go back to the investor day, you talked about the segment being a load in the teen type of revenue grower. But just given the booking's momentum that you've seen here today, should we be thinking about a higher level of growth in the near term for that segment? We would be great to get any thoughts on post topics and I'll leave it there. Thanks.

Speaker Change: Hey, thanks for coming in a couple things, right?

Speaker Change: Yes, bookings, acceleration can be a talent for us in revenue. So that is a factual statement.

Thanks to consider when we're really looking at the difference between the two is the timing.

Speaker Change: especially with our ANC. We have multiple different timing depending on the products mixed within that group. For example, you know, transactional on commerce. We have monthly terms. We have annual terms. We have multi-year terms.

Speaker Change: So you really have to look at that on the Borlitz spectrum of what products are being sold with the mix is and yes, it will help our be a tailland for us on revenue in general. You know, we're really excited about the momentum. You know, we'll have obviously talk a little bit more when we get to the Q4, earnings total about 2025.

But you know we're comfortable with the six to eight percent growth we talked about it over the three years. We do think for the year overall bookings will help pace revenue by about two points. And that is obviously being pushed a lot by the ANC.

Okay, great, thank you.

Thanks for watching.

Speaker Change: Our next question comes in the line of Trevor Young from Barclays, Trevor Police Go ahead.

Trevor Young: Great, thanks. First just on the pricing and the bundle and going forward, I think you made comments that it's an opportunity near term in core platform. Can you expand upon that a little bit? Should we assume that that's going to happen in some of the bigger line items such as domains?

and then second question, after Mark McCaffrey wrote a quote a bit in three cue kind of flat issue around year versus double digits earlier in the year.

was that consistent with your expectations and was there anything kind of one time there? I know it's very transactional and nature so tough to predict, but just any color on what's going on in after market would be helpful.

Speaker Change: Thanks Trevor, I can take the pricing in one link approach. You know as we've talked about pricing in one link is a bow.

Finding the right cohorts of customers where we can provide the right value to customers and then price along with that value.

and the way we do this is that we experiment at different price points to find the price elasticity curve. And then what that curve helps us do is find the right course where we can...

Speaker Change: sort of balance the tritian or for customers, right, or let's say retention of customers with the pricing opportunity in front of us. And that's a great balance, right, at the company you want to drive as much growth as we can, while maintaining our high cost, more attention rates.

So for pricing and bundling, that approach of using machine learning, using experimentation, using the scale of our data and our competitive advantages there, we can direct that way of working.

Speaker Change: from Cross on Product Freed. And...

Speaker Change: Co-hosts within that product suite. So what we're really what I'm really talking about here is you know that we have identified other co-hosts of customers that we will be applying this approach to and some of those are going to have products that sit in the core platform which is now going to take sort of the benefit of pricing and bundling across both the segments.

and a Chevron aftermarket, just a reminder of the ball to business. We think it over time will be a low single digit failure.

and we always talk about there can be volatility from quarter to quarter. This quarter, it was down slightly, nothing to call out in it of itself. We saw some pressure on valuations at the lower level of the demand seem to continue. And again, we don't control the pricing on the aftermarket. It's a buyer and a seller agreeing to a pricing.

So again, these are still halls we believe it'll be a low single digit grow over time and we'll see a little bit of variability to quarter quarter, we'll just call it out.

Speaker Change: Great, thank you both.

Speaker Change: Thanks for having me. Thanks.

Speaker Change: Our next question comes to mind of Ken Long from Papin Highland.

Hansley Cohen

Can you guys hear me okay?

Thank you. Okay, perfect. I just wanted to just touch on an earlier statement that you made in terms of...

Speaker Change: You're resuming customer acquisition in 2025. It was just generally meant as sort of an anniversary to dive out. The truth is, or should we assume a heavier piece of investment than 25 to kind of pursue a more attractive growth opportunity?

Speaker Change: Yeah, so the first part of it is yes, it was just to call out that we are laughing the researchers, the integrations and the end of the life we talked about previously and as we start to laugh them throughout this year, you know, net customer ads will have that head when we will go away.

Speaker Change: and I want to comment on the more things we'll talk about.

Yeah, you know, look what's super excited, Ken about the product, what's all you're we having clear right now.

brought together by Arrow, you know, just an almost magical experience for our customers. We've got the product load out. You know, we've always had sort of very good God Reels for our marketing spend. But given the product offering that we have, there's an opportunity for us to spend up in marketing and we do expect to get more customers or the result to that.

and Mike Mark said that it is a normalization of the deadest, jurors and some of the actions we've taken. It also includes some actions that we took with fire officers that we have out there. That was going to last on that too.

and then maybe I'll follow up on a similar question to Vikram. ANC ARR accelerated on a tougher calm. Is that something we could continue to see, considering the pace of ANC bookings at that 20% level?

So just high level, obviously as we go into Q4 and then to 2025, the strength of the ANC will get harder to compare to. So on a percentage basis, you know, we like the momentum overall, that will continue, but obviously the percentage constant a little harder as we go on into next year.

Speaker Change: and just confirm that I think you have the sort of ANC comparison from last year for Q3 and Q4 and you can see the sort of step up in Q4 comms that happens.

Perfect, thank you guys.

Speaker Change: Thank you.

Our next question comes from line of Evaloranias from city Evalphus Guahed.

Hey guys, it's afternoon. I think I'll see. Great to see some of the early starting points with Arrow and Monty Poldout. You know some of these things around.

of around the English, and that we're seeing last quarter.

Speaker Change: You talked about...

started to put it in some pay-a-wall testing around that. I want to see how that's progressing and then maybe kind of connecting the dots with the engagement.

The expectations around moving in until the starting point at the website use versus the the the the main piece and are you starting to see real kind of financial results presumably if what was the 40% of

Speaker Change: was that so smart and inscriptions are originated in with arrow. That means he asked, but maybe just tell us to understand that a little bit better.

Speaker Change: Thank you all.

So, you know, the progress with the error was on a timeline of discovering engagement and monetization.

and Discovery is about getting an ear in front of as many customers as possible and getting them to discover the good-a-reheat of breadth of products.

Welcome to the next episode.

The engagement piece is about getting them to engage in some of those products and you'll remember that we call those aerocards getting customers to click on them and engage with them, set something off, and we're seeing a really good traction on discovery and engagement

and what we did over the last quarter or two is that we started to put up paywalls with along with that engagement. If for example, the customer got a coming soon page and wanted and were able to customize it a little bit if they wanted to do more.

Speaker Change: Up there, all over the peer and say, you need to buy subscription of websites plus marketing. Now, it is possible that that customer would have bought it anyway, two months, three months down the line, and we would have gotten that attached.

But what Aero offers is the ability for us to pay all right there, get the customer to make that decision. And that, they always actually connected to the 40% that I talked about today.

Speaker Change: and what that is about is that Aero is becoming a bigger and bigger on-ramp.

Speaker Change: for our website products. And today, you know, we have two in-earle, we have a coming survey that's doing really well. And we have our website for smartening subscription. And add aero becomes a bigger honour. Yes, of course, we're happy to see that monetization happens. But what that opens up in the future is they will in opportunity to sell other products. Because we do see in the customer behavior that customers have a need for the other offerings that we have. It's just that today they don't discover those offerings, they don't engage with those offerings, and they definitely don't see a monetization for it. But the aero is going to let us do that, which has followed the customer, they have those subsequent needs for the paywalls in front of them.

This website paywell story is a very good story. It's a new, it's of course an only story and it's the first big one for aero but we have similar work in logos. We have similar working images. These are things we're going to demo at the investor dinner. We have some work happening with with failing that come with aero and a couple of the others as well.

Speaker Change: Okay, great. And maybe one more on the, on the, on the Budlink initiative.

I think if I understand correctly, still majority focused on the product in these weeks, you call that a few sort of products in the past quarters and if you could.

I'll say it on where you are with the productivity and I'm glad to see that come out with commerce in the coming quarter to thank you guys.

You know, I'm pricing and bundling and it's the folks working on it really have the ability to test across various customer cohorts and what they're looking for.

are the cohorts where we can generate the best results.

Speaker Change: and the best result here means creating that customer value and then being able to monetize that value as well. So, you know, when I look across our products, you know, we have other products to go that are much larger in terms of the base of customer. So, we think that those likely are going to offer some of the better opportunities. But we'll keep you informed just like we did with productivity. You know, I think you'll remember last year we did apply this thinking to multiple products. And then we said, you know, what do you're going to see stronger or a large chunk of the return comes from productivity because we're going to zone in on that. But that's what we see the opportunity. Similarly, as we go over the next few quarters, we'll sort of guide you better on where we've seen that returns.

But our testing this year as we plan for next year is going well and one of the things that we have shared today is that we see ourselves going across customer course that now will be in the NC and in for. So you'll likely see all of it different behavior going into next year than you did this year.

God of thank you so much. Thank you. Our next question comes from line of Arjuna Bhatia from Williams Lair, Arjuna's

Hi everyone, I'm Willow on for Arjun Bhattya. I think we're taking your question. So just wanted to ask a macro question. Last year you called out your things to build in your base. Can you comment if you're seeing any changes here? And then also comment on any impact in that new as well, please.

Yeah, you know, overall on the macro, we track the metrics I think we've talked about before and sort of if I look at my dashboard, you know, generally we see some good but keeping a close eye on things especially election in the US coming off.

Speaker Change: But broadly speaking what I would say is when we think about our customer base and you know, Mark always likes to talk about our higher tensioner, and I'm sure he'll jump in.

With that, we were absolutely proud of that.

But when we look at traffic coming in the door, we continue to see good growth as a continued to see good traffic coming to the site. And in pockets and those pockets can be geographic, those pockets can be, you know, sort of different customer.

segments in pockets where we do see some sort of weakness that's more than made up by how we've improved conversion, how we've improved pricing, all the sort of mechanics.

that we're applying within our seamless experience initiative. So I feel, you know, if there are a few, those are more than overcome, but broadly speaking, we continue to get good traffic, continue to get good growth as in continuing to maintain our higher attention rate of full customers at 85%.

and just to add, you know, when you take out the the debesatures, when you take out, you know, the decisions we made around by-rolls and you look at the strong top of the funnel we saw our seeing is covered customers coming in with intent.

Speaker Change: and how we say it well our crews increasing, our crews being driven by a higher average of order sizes.

from our customers when they initiate with us at the beginning. We see our customers attaching overall a faster rate than they did years ago.

So when you really feel through the ends of the out to the customers, take out the disastrous turn off the virus, we're seeing very strong behavior with intent at the front of the funnel now. We are always subject.

and things like valuations and aftermarket and we've talked about that a lot, but the overall behavior of the funnel and the attachment is strong.

Speaker Change: Gotcha, that's helpful and one more follow-up by IMA.

Speaker Change: Can you comment on?

The bookings grow, so it looks like for ANC at the celebrated quarter-to-quarter. It seems like customer strength is...

Good, and pricing and stability in your language. The discipline takes the tolerations like that you understand the better.

So I heard the distelleration part there and I'll address that maybe if you had another part to let me know it was cut now.

So when the disseleration, it's a simple tougher cops. We went from Q2 comparison in 23 to Q3 comparison in 23. It was just a bit more difficult cops. The momentum in it of itself is the same.

Okay, that answers my questions. Thanks. All right, thank you.

Speaker Change: Next question comes in line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead. It was Elizabeth.

Elizabeth: Hi, thanks so much. I want to circle back on the pricing and bundling expanding into the core platform in Q4.

and we think about the ANC segment. You guys saw a big improvement with this strategy and we grew up there almost doubled.

So how should we think about the benefit unfolding for the core segment where the bookings have been a little bit more muted in the 3 to 4% range? Is there anything we should consider about the opportunity and core being larger or smaller than what you saw with productivity?

Yeah, there's a bit, it's a little too early to sort of be putting numbers on it, but we will definitely talk more about it in the next quarter's call and from that.

Generally speaking, our approach is the same. You know, we were using the data, the way we were recording customers, the way we were testing the price elasticity curve, the way we were creating it, the way we sort of decide where to go on it.

All of that methodology is similar, but it takes us really sort of getting into that customer cohort and a few weeks of executing that plan to really see what it's going to be. What we do see so far is that we are ready to start on it in Q4, but likely it'll take a quarter or more for us to get that one right going.

We can talk about it a little bit more data than we have today. Yeah, and Elizabeth, nothing to change what we've put out there's got in for Q4. We're talking about the initial steps of it, and then we'll talk about 20, 25 when we get to the fourth quarter or our next call.

I'm sure that's all thanks.

Speaker Change: and then as a follow-up, I wanted to talk to you on the margin side. You referenced in the prepared remarks just increasing marketing initiatives to support the broader launch of arrow.

is that the main factor is riding some of the margin contraction to 31% and Q4 from 32% and Q3. It's going to be something else to call out.

Water some of the puts and take a lot more broadly as we think into next year, what are some of the key levers?

that can also include marketing spend around the RL. Yeah, thanks for spending just a couple of high-level college.

and Q3, we benefited from the favorable product mix. Generally we think that Rose Martin is going to be around 64% Kid or take 100 basis points.

Elizabeth: We saw a favorable mix within Q3. We saw a aftermarket for example, aftermarket was down about 1% and that's a lower margin business for us. You know, as we see our higher margin.

and the Pryotary software, where the other part of the mix are largely towards the high side. If we see transactional, you know, having strength, we'll see that, you know, towards the lower side.

Elizabeth: So again, there'll be products in there that will determine or impact on the gross margin.

We had themes from promoted benefits from some of the restructuring, some vacation efforts. We had global recruitment. We talked about hit into Q3. Those were front-end loaded and we'll continue to see those. And then the rest is what we alluded to was the timing. We just had timing of expenses like marketing. And we'll see you start to pick up a little more on Q4.

Still on target for the 31% we talked about but some of that was your shud timing and the expense of the powderheading.

God, thank you.

Speaker Change: Next question comes from line out Josh Vack from Raymond James. Josh please go ahead.

Speaker Change: i

Thank you so much for the question. Wouldn't it go back to some of the arrow comments realizing you kind of had this.

Discover and gauge monetized framework. So I think that discovery element of it was up maybe 3x, quarter over quarter to 3 million.

So is that when we think about the Mark and Spend that Elizabeth just asked about? Is that really...

The King metric that we should be

Thinking about in terms of it, you know, really ramping up in the year and is there some type of, you know, maybe not specific goal, but, you know, could it reach a pretty size of a little, could it, you know, be half of your base, just curious on how we should, you know, be considering that.

Thanks Josh, Discovery is definitely an important metric because without discovering my prey.

We can't feel confident that our customers are seeing

the Breath of our product, both new and existing products. But if you had this sort of...

Paul and on one metric and say, hey, which is the one that we really are focused on optimizing on. It's really the engagement metric that we want to keep very, very healthy and it is very, very healthy. Because as we spend in marketing and discovery, we'll definitely go up. But we don't want engagement as a percentage of drop down too much. We want customers engaged with this because, you know, we have data for 25 years and we know from our own data and the data of the companies that.

The Engage customers enter the monetization phase in a much more favorable manner than non-Engage customers.

Right, concentrates like attached convertors and do much, much better for engaged users than they do for non-engaged users. So that's, you know, if you will, that is the quality metric. That's the thing that makes sure that our efforts are valuable and are going to create more value in the future.

While I'm very happy about the multiple paths in the monetization for Error and we'll show you the people and teams are doing good stuff and the website be well doing well and even sort of monetization on coming soon and other being great opportunities for us.

I would say overall in our three year plan at the investor date for the other year we've

We purposely put air outside of the three-year planning because we wanted to build a very large mode of discovery and engagement because that very large mode of discovery and engagement will believe generate sort of recurrence for you as the company.

Super helpful. And then I also want to follow up on this stat around.

Double digit containment rate improvements that I think was a genuine boss.

which I assume is something similar to a deflection rate, you know, what to clarify that.

Could that be a much larger number of time and that at some point could you see benefits and with respect to the P&L, just curious how we can think about that.

Yes, containment read is like a deflection read. It really points to the sessions, the way to customer ask the question, and the conversation model is able to answer the customer's question in the satisfactory manner, and that being resolved in sort of a...

had been forwarded to human agent, so seeing that sort of double digit percentage increase in...

the Baud being able to resolve the customer quality or issues is a great, great first step. Look, of course, whether it's this or a guide, a system of which we call Gabby, you know, these are relatively new technologies. They're after a great start, but we see great momentum in those, you know, over the next two to three years. It's, it's our sort of aritos around this and, you know, I've talked about this often.

but in care we want to provide a better experience.

at a lower cost. Expectation is a care of the Lionaga, and will continue to leverage.

and we will continue to provide a better and better experience for our customers. And one of the ways that we're doing that is by having better technology and care. That makes our guides more successful. That makes our customers more successful. And while retaining some of the secrets of care that we have as a company.

Speaker Change: Thank you very much.

Our next question comes from line of Ellis Smith on for Olexi Gogovov at JP Morgan, LFH Squad. Fiova.

Speaker Change: Hi, I'm Mark, hi, Christie, I hope you're all doing well. So first I have yet another question on Aero for you. So, Aman, Aero is clearly a powerful open to all of ramp from your customers and it's clearly driving booking.

How are you balancing that with your ambitions to monetize the products and when might monetization begin?

You know, Ella thinks for the question, you know.

Speaker Change: My first goal is to make the largest board of discovery and engagement. We want to be able to spend against their and build a virtuous cycle of the firewood, if you will, where customers get...

Here about a year old they come in, they discover the set of products we have and they engage in buy into this product. That has a really good.

and the fire was affected by a dry, average order size of the fire. It allows us to be more in marketing to bring more customers to our side. And that's a lovely fire will that can build.

Speaker Change: Billed on itself. So that's the first thing that we're trying to build in and for us, the way to build it well is to focus on discovery and engagement and then...

Monitoring the monitoration. Absolutely, super excited about it. Teams are...

In fact, I would say ahead of some of the monetaries, shin experiments.

vs. what we have originally designed.

Speaker Change: It's great to see you all becoming great on-ramp for websites for smarkling. We wanted to become great on-ramp for other products too.

But it has to follow the discovery and engagement cycle because I would love to be able to sit here and give you numbers on discovery and engagement that are much larger than where we are today. And these numbers are pretty large and fantastic as is what I think they can be much better.

Yeah, and I think when you stick that a robber will all frame work.

Speaker Change: and we're always trying to make sure we're heading towards on North Star that we talk about free catch-flow and that means balancing.

are investments with where we see the return and making sure we're doing it to drive LTV and shareholder value over the longer term without trying to push ourselves into a specific area too quickly that would basically jeopardize that over the long term.

That makes a lot of sense. Thank you very much. And as, and for my follow up, we feel a news day of the day that you launched a reseller program. Can you show us a light on the strategic thinking around that program and how the economics tool looks like?

Yeah, the resolar program is just about the maturity of our product cell. It's pretty simple. I would say natural progression of our product capabilities. You can imagine as our product for the degree example of websites marketing, plus marketing where we did do a press release around APIs being available. That's an example. You can think of websites as marketing, not only the fantastic website builders, sort of the number one in terms of producing the best.

Science, you know, if you build a successful smart getting it's going to build a very very

Speaker Change: It will have a lot of time for you that will be on very well in Google.

But how do you sort of expand beyond the folks that are coming to you? And the natural extension is to be able to put...

gives some of those capabilities into partner systems and the best way to do it is through API. So what we have as an advantage is the company is not only exposing those APIs towards such as marketing, but we able to leave in API that power other things that they're all can bring into the mix.

So just like we're going out to customers directly and we're exposing them to Arrow and looking at discovery and engagement. Let me tell a program or the API is our way of finding sort of work with partners and saving them. Let's see what we can do, given our expanded capabilities, given our expanded tools that we're...

Speaker Change: are product offering can show natively in our partner experiences.

That makes a lot of sense. Thank you so much.

Thank you.

Our next question comes to mind of Brent Phil from Jeffrey. Brent, say, go ahead.

Hi, thank you. This is John Bianch for playing tell. Two questions, one, you know, as you

Just want to ask you to talk about what's in other responses in different verses that say the initial launch within the US, any sort of change difference in behavior or attach. And then the second question is around the normal GBTOM, obviously that's been expanding faster than expected.

and you go all the 33% in 2006. It seems like it looks very likely to be overshoot that wondering if there are any factors of why that may not be, why we shouldn't be extrapolating from here. Thank you.

John O'Bee, I can take the first one in Mark, you take the second. So on the launch of Europe, John, the way we look at it is that we've got the US market, which is obviously where we started and our largest market, and we've shared some of the data with you and how well that is going.

The next stage is the English-speaking markets. These are our bigger markets around the world.

Just what you would expect them to be like Canada, UK, Australia.

and then we have sort of the help market and I will say emerging markets and it's too early to talk about sort of those emerging markets and how our era is going to perform that it's still relatively new as an offering, but in the broader English-speaking markets we're actually taking the learning from the US and looking to apply them in all the other English-speaking markets and of course, you know, we expected to perform maybe not exactly the same but at a similar level in those markets.

and then I'll just on the door-light, you but we've talked about the three buckets that are a tailwind to get us to the 33% in 2026. We've talked about the acceleration of ANC being a big part of the picture. We've talked about the infrastructure, simplification. We'll talk about the global talent pools. We're really happy on our accomplishments, especially around some of the front-loaded elements of this. If you remember, we took...

The structure and the last year that we're really showing up into our expansion of normal life EBITDA this year.

Speaker Change: You know, some of that was front and load it so we'll start to see continue benefit in those three buckets to get to the 30-3% we feel really comfortable with that. But you know, we did see some of that front loaded related to the restructure.

Speaker Change: Thank you very much.

Speaker Change: Next question comes to an align of Chris Vang from UDS. Chris, please go ahead.

Speaker Change: Chris?

Chris Vang: Ah, there's a button to click. Alright, thanks for taking our questions.

So how do we think about your investment needs in 2025 versus 2024 in addition to the marketing investments? Can you maybe just rank order a couple of areas you are focusing on next year and then I have a follow up?

Speaker Change: Well, we'll, we'll, we'll, Chris, we'll talk about 25 when we get to Q4 earnings. No doubt, Lee, we'll give some details or we think, you know, things, things like our investments you're going to be.

But you know, there are areas, we talked about on this call, Marketing is one of them we continue to see the ability to accelerate arrow, we see the customer engagement and the behaviors around it.

Speaker Change: and then we also think about, you know, I always say there are two important things within our growth, which is innovation and you know, own in the customer relationship and those are about what we spend to innovate meter customers needs and things like our care organization. We seek great leverage across those lines.

Speaker Change: and we'll continue to invest in what the future is to drive the long term value. Yeah, maybe just a...

and that is a quick short summary is that our investor-day framework is pulling tax, we're making great progress on it, we're working in maximum of pre-cash low, and the components of its state percent growth and 33 percent margin in 2016, those continued to sort of be the path.

Speaker Change: Alright, sounds great, the Prince of the Color.

and a guy as it relates to marketing investments specifically.

Maybe can you share with us what guardrails you're applying to determine the level of your spend or maybe just directly how that differs from among the various product offerings in your ANC portfolio.

Here you are on the Mark McCaffrey's spend we will play.

We've invested in sort of very good God rail, given by data and machine learning that gives us great telemetry on our marketing and spending return on it.

and I go all this to stay within. I don't think what we're really building is the opportunity to drive more discovery for aerodynamic, more engagement with the aeros and get some of those returns and then be able to greenen us them back in. So it's really about sort of kickstarting that flywheel with a great product suite we have in place now. Yeah, and our discipline approach hasn't changed around this. It's about measuring the ROI as making sure that we feel comfortable that where we invest, we will get that discipline ROI we always talk about.

Speaker Change: Right, thanks for your color and I look forward to seeing your team in Arizona.

You are. Yeah. You too. Next question comes from a line of Navit Khan from B. Riley Navit's Gohead.

Thank you, Lord. So I got a couple of questions. One is this 40% of paid, the developers have.

and Sub-Scribers coming originating through Arrow. That's pretty impressive. I'm just wondering how that share that come through Arrow has kind of trended over the last three or four quarters since this Arrow has been kind of live.

So that's one and the second question I have is just around the on-ramps. So now that you are extending your own to the sort of website first kind of on-ramp, I'm trying to just kind of think about the legislative size of the on-ramps for the business. Like, how should I, you know, what's the right way to think about?

Speaker Change: Domains vs.

Speaker Change: website.

And this is a share for you over the last few months, not quarters. You don't have quarters in a day that's month, right? Over the past few months, hasn't been included in the activity that we've already done.

and then we're going to take a couple of orders to see how this is a very old performance, where we're going to get that.

The number of young people in the 40s and the clear-cutting of the government's critical is this a hat and I'm not liking it. So that's all the video. You know, the size of the different on and on and on. Oh, many more work on the news is we bring all the on and on together with the arrow. We're trying to take these things that are today are different and make them pay the same to the more.

Speaker Change: and the people who are actively in the world.

So yeah, I meant actually meant just a quarter is not one. So thanks for thanks for correcting me. Where do you think this could land as you continue to kind of on the offering and improve it? You think it's not the 50% is?

Speaker Change: High level partners.

I think we're just starting tomorrow. We're not in the air and right here. We haven't downloaded it before. We're just in the air and we're just in the air. We just say, I think, you know.

Speaker Change: We have three data as we raise them for a year and just looking forward to how far we can go with it. Many people really believe for us it will be fading or we think that the standardization of the year will not happen.

Speaker Change: Great.

Thanks Aman.

and Mark McCaffrey.

Speaker Change: i

Hello, I'm really taking the question. So first I wanted to ask about specifically a call out in the prepare remarks about

is 46% of EBITDA margin A and C being driven by the strength of high gross monetary criteria solution. I just wanted to ask is that principally websites in marketing or is there any other kind of driver in that bucket of proprietary solutions?

Speaker Change: and then as a follow-up.

There is a pretty notable market event in the last quarter of the agreement between a managed work press vendor and a large contributor to work press. Aman, do you see that as largely irrelevant to the long-term progress of work press? Have you seen any kind of...

Speaker Change: Conversation in your customers or partners that have reacted to that out to that event. Any any cussops on that would be really appreciate it. Thank you.

Yeah, happy to take that. And I'm glad you're generally talking about it correctly in terms of the high margin. The appropriately system is the ones we build and those that have higher margin and have to be the subscription to the product.

and then the third party party that we still tend to be with lower margin rates versus the first step.

Speaker Change: Now, you know, if you sort of stack them together of course websites with marketing ranks, very, very high and most of all of that work is done internally and you know, we're able to sort of put that product forward in a very, very competitive manner.

In terms of the broader question about WordPress, you know, is your where WordPress is the largest content management system in the world, right? Over 40% of websites run on it.

I'd give tremendous credit to everyone that's part of that immense success story and we as GoDaddy you know where the

Third, top three or top five contributor to WordPress, depending on how you calculate contributions. You know there's a bunch of public data on it. So we're in a weird for the WordPress community, we are part of the WordPress community and we believe in the WordPress is here to stay.

Our focus really is to build magical experiences on top of WordPress and I'm actually excited to show you conversational WordPress at our investor dinner which takes the...

Speaker Change: Arnaces, the power and massive capability that WordPress has and allows our customers to do things with it without needing the technical expertise to do it. But those are the things that we're really interested in. It's a take this massively capable platform and bring it sort of in power our customers.

is sort of doing amazing things with it.

Speaker Change: Thank you very much.