Q4 2024 GoDaddy Inc Earnings Call
Speaker Change: Welcome to GoDaddy's fourth quarter and full year 2024 earnings call. Thank you for joining us.
Speaker Change: I'm Christy Masoner, VP of Investor Relations, and with me today are Aman Bhutani, Chief Executive Officer, and Mark McCaffrey, Chief Financial Officer.
Speaker Change: Following prepared remarks, we'll open up the call for your questions.
Speaker Change: 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.
Speaker Change: A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted to our Investor Relations site at investors.go.edu.net or in today's earnings release on our Form 8K, Furnished with the SEC.
Speaker Change: Growth rates 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.
Speaker Change: These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our periodic SEC filings.
Speaker Change: Actual results may differ materially from those contained in forward-looking statements.
Speaker Change: Any forward-looking statement that we make on this call are based on assumptions as of today, February 13, 2025, 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 am pleased to introduce Aman.
Good afternoon, and thank you all for joining us today.
Aman Bhutani: At GoDaddy, our mission is to empower everyday entrepreneurs and make opportunity more inclusive for all.
Speaker Change: Our strategy is relentlessly focused on creating customer value and transforming it to shareholder value through better conversion, attach, and retention.
Speaker Change: This is the driving force behind our profitable growth model, propelling us towards our North Star of maximizing free cash flow over the long term.
Speaker Change: Our team demonstrated strong execution in 2024 with annual results that are tracking ahead of our Investor Day targets.
Speaker Change: Our impressive 21% growth in applications and commerce bookings alongside our nearly 400 basis points margin improvement were strong contributors to a 25% increase in free cash flow for the year.
Speaker Change: Equally exciting, GoDaddy crossed a significant milestone this year, delivering our first five billion of annual bookings.
Speaker Change: On our key initiatives from Investor Day, we continue to make great progress in pricing and bundling, seamless experience, commerce, cost optimization, and strong traction in GoDaddy Aero. I am excited to share these updates with you today.
Speaker Change: Pricing and bundling delivered impactful results throughout 2024 that were higher than our expectations. This bolstered our 21% applications and commerce bookings growth from focused efforts in productivity.
Speaker Change: We have shared that this is a multi-year journey, and our confidence in this initiative continues to grow. In 2025, we are targeting a meaningful contribution to growth from this initiative.
Speaker Change: We will focus our 2025 efforts on our presence products and specific customer populations within our hosting business.
Speaker Change: This continues to spread this initiative across applications and commerce and core platforms. In parallel, we are working on the next evolution of this initiative for 2026 and beyond.
Speaker Change: Our Seamless Experience Initiative also exceeded expectations in 2024, improving conversion, renewal rates, and engagement across products.
Speaker Change: In Q4, we launched a redesign-managed WordPress platform with two times faster performance and enhanced security. Additionally, we started testing Aero Site Designer for WordPress, an AI-powered web design tool.
Speaker Change: This initiative will continue in 2025 with similar goals to reduce friction, enhance performance and improve customer experience.
Speaker Change: Our aim is to help customers save time and focus on what they love, running their businesses and engaging with their own customers.
Speaker Change: Our commerce initiative is performing well and annualized gross payment volume is growing at a fast pace.
Speaker Change: While our focus in 2024 was on profitable growth through the creation and merchandising of our commerce subscription products,
Speaker Change: We also drove growth in our transactional payments business with annualized gross payment volume increasing 55% to $2.6 billion.
Speaker Change: In addition, we launched new innovations such as GoDaddy Capital, a merchant cash advance program that helps our customers more easily access working capital, manage cash flow, and invest back in their business.
Speaker Change: As we look to 2025, our teams are focused on delivering more new and innovative capabilities for our commerce customers, such as expanded payments processing options, as well as same-day payouts, which give customers rapid access to their funds.
Speaker Change: On our cost optimization initiative, we drove measurable impact across the organization.
Speaker Change: from continued simplification of our integrated platform and global talent recruitment across multiple functions to better technology and tooling.
Speaker Change: Last but not least, GoDaddy Aero continues to transform the customer experience and reposition where our customers start with us.
Speaker Change: Aero is quickly gaining traction and we view it as a key driver of future growth and customer lifetime value.
Speaker Change: Throughout 2024, Aero has shown promising results with discovery and engagement. We have also made great progress in expanding Aero across more customer entry points and plans.
Speaker Change: Website building remains the biggest beneficiary of Aero engagement, and Aero continues its momentum in becoming the largest funnel for Websites Plus marketing, with 50% of paid subscriptions originating with the Aero experience.
Speaker Change: We are excited to enter the monetization phase for Aero, earlier than planned, across two pathways.
Aero and Aero Plus.
Speaker Change: Aero has resulted in a combination of increased customer spend and better product attach. And with the first Aero cohort reaching the 13-month mark, we are seeing green shoots in terms of improved renewal rates for both domains and websites plus marketing.
Speaker Change: AeroPlus takes the Aero experience to the next level with advanced logos, AI-powered marketing tools, and enhanced site-building capabilities. We began testing AeroPlus as an independent SKU in the fourth quarter.
Speaker Change: We also launched a front-of-site experience in connection with our Super Bowl ad that highlights Aero and all of its capabilities.
Our ad accomplished what we set out to do.
Speaker Change: bring broad awareness to the full breadth of Aero's capabilities to a massive audience.
Speaker Change: We want the world to know about Aero, and the Super Bowl is one of the largest stages. Our Aero landing page jumped dozens of spots to become a top six page on our website on Sunday, telling us that customers were looking for Aero.
Speaker Change: This also kicked off our 2025 marketing campaign, which will continue to highlight Aero's capabilities to take the guesswork out of building a successful online venture and showcase the unstoppable confidence Aero inspires in small businesses.
Speaker Change: In 2024, Aero demonstrated the power of our integrative platform, the value of automation and the abilities generative AI can bring to our customers.
Speaker Change: As we look forward into 2025, Aero will take more leaps forward with personalized inputs for each customer that drives a new level of AI-driven personalization.
Speaker Change: The first test using this technology on aero domain search beat the most recent generative AI based winning model opening a new vein of improvement that our teams can pursue.
Speaker Change: We will also see the introduction of agentic AI across our platform and within the Aero experience, creating simplification for our customers and new engagement services that lead to monetization.
Speaker Change: With these and many other improvements on our roadmap, I'm excited by the innovation at the company and the focus on creating value for customers.
Speaker Change: In closing, I want to highlight that 2024 was a year of exceptional execution by the GoDaddy team.
Speaker Change: A year ago, we shared clear goals and strategic priorities at our Investor Day, and I am proud to say that our team has driven great performance across the board, growing bookings over 9%, revenue at 8%, almost 400 basis points of normalized EBITDA margin expansion to 31%, and $1.4 billion in free cash flow.
Speaker Change: Our strategy is steadfastly focused on the entrepreneur's wheel across identity, presence, and commerce, and it is working.
Speaker Change: The relentless focus of our operations continues to be to accelerate the pace of execution to create customer value and successfully transform it to long-term shareholder value. With that, here's Mark.
Mark Mccaffrey: Thanks Aman. Throughout the last few years we focused on creating significant value for our customers by integrating our platform to deliver seamless technology and provide one-stop-shop solutions that drive conversion, attach and retention.
Mark: Beginning with Q4 results, total revenue grew on a reported and constant currency basis to 1.2 billion dollars.
Mark: exceeding the high end of our guided range. Consolidated annual recurring revenue grew 8% to $4 billion.
Mark: For a high-margin applications and commerce segment, we drove 17% growth in revenue to $441 million on continued strong performance from our key growth initiatives.
Mark: A&C Bookings grew 17% on the strength across all products within this segment including our proprietary websites list marketing, managed WordPress, and commerce, as well as our productivity solutions.
Mark: Segment EBITDA margin also improved to 47%. Our core platform segment delivered revenue growth of 4% to 751 million dollars.
Mark: Driven by strength in domains from pricing and units, this growth was slightly tempered by our proactive strategic initiatives around platform integration that included divestitures, migrations, and product end-of-life efforts in our hosting business.
Mark: Core platform bookings grew 4% and segment EBITDA margin expanded to 34%.
Mark: We grew Normalized EBITDA ahead of expectations, increasing 19% in the fourth quarter to $385 million and delivered an expanded margin of 32%, up nearly 300 basis points.
Mark: Favorable product mix and continued operational discipline were the main drivers of expansion, while we simultaneously increased marketing expense in support of the broader launch of our Innovative Arrow experience.
Mark: On cash, unlevered free cash flow for the quarter grew 9% to $379 million, and free cash flow grew 12% to $342 million.
Mark: This is supported by the 1.2 billion of bookings in the fourth quarter, representing 9% growth on both a reported and constant currency basis.
Mark: ANC revenue grew 16% to $1.7 billion and core platform revenue grew 3% to $2.9 billion.
Bookings rose 9% with a slight currency headwind.
Mark: Full-year normalized EBITDA grew 23% to 1.4 billion dollars representing a 31% margin, up almost 400 basis points over the prior year.
Mark: Since 2020, we have driven cumulative expansion and normalized EBITDA margin of nearly 900 basis points, an impressive feat that we plan to continue building on.
Mark: We also continue to demonstrate normalized EBITDA to cash conversion of approximately 1 to 1.
Mark: Unlevered free cash flow for the year grew 20% to $1.5 billion, exceeding our guide for the year. And free cash flow grew an impressive 25% to $1.4 billion, also exceeding our guide.
Mark: Over the last few years, we have pivoted our go-to-market efforts to attract high-valued customers and build profitable cohorts through seamless technology and enhanced experiences.
Mark: By year end, nearly all customers are now on our integrated platform, which boasts an impressive 85% plus retention rate, despite our overall company retention rate dipping slightly to 84%.
Mark: This focus on quality over quantity has increased our model's resilience, profitability, and cash flow. By eliminating deep discounts, completing targeted divestitures, and migrating certain offerings, our customer base declined to 20.5 million.
Mark: That said, these efforts are working. Our newer cohorts are delivering exactly as intended with higher attach and conversion.
Mark: Additionally, the percentage of customers purchasing 2 Plus products has trended upwards.
Mark: and over 50% of our total customers subscribe to multiple products with us. This highlights successful efforts to boost cross-selling and bundling on our integrated platform, reinforcing our strong profitability and cash flow generation opportunities for years to come.
Mark: Moving forward, we remain confident in our trajectory and anticipate a return to customer growth in 2025, underpinned by our enhanced value proposition and strategic focus on high lifetime value customers.
Mark: Turning to the balance sheet, we exited the year with $1.1 billion in cash and total liquidity of $2.1 billion. Net debt was $2.8 billion, representing a net leverage of 1.7 times on a trailing 12-month basis.
Mark: Last year we bought back 5.2 million shares totaling 668 million dollars.
Mark: and an average purchase price per share of about $129. Overall, we drove a 23% reduction in gross shares outstanding since January, 2022.
Mark: three points ahead of our three-year targeted reduction of 20% and at the quarter end 145 million fully diluted shares remained outstanding
Mark: Shifting to our outlook for Q1 2025, we are targeting total revenue of $1.175 to $1.195 billion, representing 7% growth at the midpoint of the range.
Mark: Within that, we expect ANC revenue growth of mid-teens and core platform growth of low single digits.
Mark: We anticipate elevated spending for marketing, focused on our broader Arrow launch, as well as typical seasonal expenses in the first quarter.
Mark: We project a normalized EBITDA margin of about 30%, an expansion of about 200 basis points over last year.
Mark: For the full year, we expect total revenue to be within a range of $4.86 to $4.94 billion, representing growth of 7% at the midpoint of the range. We expect revenue growth in the U.S. to outpace international growth by approximately 200 basis points.
Mark: primarily on currency headwinds that are expected to be more prominent in the first half of the year. In A&C, we expect revenue growth of mid-teens.
Aman Bhutani: and in core platform we expect revenue growth of low single digits. To be clear, as Aman said, we are excited about the Arrow experience.
Aman Bhutani: and the longer term accelerant it represents for our business. In the near term, including 2025, the financial benefits are expected to be more modest as monetization begins to take hold in the form of bookings before being recognized as revenue in later periods.
Aman Bhutani: Looking back on the incredible progress of our A&C business, we take immense pride in its rapid growth, rising from 30% of our overall revenue just three years ago to an expected nearly 40% by year's end. This achievement reflects our relentless focus on innovation, execution, and customer impact.
Aman Bhutani: As we move forward, we remain committed to driving meaningful, profitable growth. And we have an exciting road ahead, and we are just getting started.
Aman Bhutani: As our record of accomplishment demonstrates, we remain dedicated to maintaining our operational discipline and looking for opportunities to gain further leverage.
Aman Bhutani: Looking ahead, we expect to drive this leverage through continued infrastructure simplification and global talent recruitment.
Aman Bhutani: while also making long-term strategic investments in product innovation and marketing. In 2025, we expect normalized EBITDA margin expansion of approximately 100 basis points, and we remain on track to deliver our Investor Day target of 33% by 2026.
Aman Bhutani: For the full year of 2025, we are targeting free cash flow of at least 1.5 billion dollars, representing growth of over 11 percent.
Aman Bhutani: We expect capital expenditures of $30 million, cash interest payments of $150 million, and $30 million in cash taxes, primarily to foreign jurisdictions.
With that, our disciplined capital allocation approach remains unchanged.
Aman Bhutani: and we plan to evaluate all opportunities for shareholder return according to our rigorous and returns-based framework. On our buyback program, we are committed to, at a minimum, covering dilution from share-based compensation over the year.
Aman Bhutani: We are pleased with our strong 2024 performance and our progress towards our Investor Day target of 4.5 billion dollars plus in cumulative free cash flow generation.
Aman Bhutani: underpinned by six to eight percent annual revenue growth, an expansion of normalized EBITDA margin to 33 percent by 2026.
before we go to Q&A.
Aman Bhutani: I want to emphasize that our path ahead is clear, and we remain dedicated to executing our strategy to deliver durable, top-line growth alongside expanded profitability. Balancing the two drives us towards our North Star of maximizing free cash flow. With that, I'll hand it over to our Vice President and Head of Investor Relations, Christy Masoner, to open up the call for your questions.
Christy Masoner: 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 the line of Vikram Kesavavotla from Baird. Vik, please go ahead.
Thanks, can you hear me?
Hey Cam. Hey Vic.
Speaker Change: Okay, great. Hey, thanks for taking the questions. My first one is on pricing and bundling. You talked about focusing this year on presence products and specific customer populations within the hosting business. Just wondering if you could elaborate some more on the strategy there. Why are you choosing to focus on those areas and how impactful do you think that could be relative to your work last year and productivity? And I think you mentioned the next evolution in 2026. Just wondering if you could share any color on what those next steps could look like.
Speaker Change: And then my second question is on the customer account. Mark, you reiterated the confidence in returning to customer growth in 2025. Just what are the drivers that you think will help you get there? And what does the timeline look like in terms of returning to growth on a quarter over quarter basis and year over year? And maybe associated with that, just what are you seeing at the top of the funnel right now? And I'll leave it there. Thanks.
Speaker Change: Thanks, Vic. I'll start with pricing and bundling. Continued to be very excited about that program. It delivered ahead of our expectations in 2024, and we have a very material target for it in 2025 as well. I feel like, you know, we've put the breadcrumbs in place on the evolution of this program, so there isn't sort of a hard cut over in 2026 or anything.
Speaker Change: So what we're talking about here is that continued evolution, where, you know, we've, of course, we focused on productivity solutions in 2024. In 2025, you'll see us continue to focus on some of our presence products, and that was the more product-led mindset or approach.
to pricing in one week, but then the customer...
Speaker Change: cohort-based lens is starting in 2025 as well. And the first place we're going is a customer cohort in the hosting business. And what it's really based on is the continued experimentation with customers continuously looking at what bundles make the most sense, where is the significant customer surplus, and where can we sort of price up a little bit and shift some of that value.
Speaker Change: to the farm and shareholders. And I think for customer account, Mark, I'll turn it to you. Absolutely, and thanks for the question.
Mark: You know, just a reminder, our focus is on high quality customers, and we want customers that are coming in with intent.
Mark: So our goal is really looking at the metrics around, you know, what is the average order size that at the initiation with that customer, you know, how are they attaching? How is it ultimately impacting our retention rate?
Mark: You know, the drive to getting customers is more in line with getting the high value customers versus just getting any customer.
Having said that...
Mark: You know, we had some headwinds, and we've talked about them around our customer count. We had divestitures. We ended deep discounting at the top of our funnel. We had migrations. All of those created a drag on certain customers, certain brands that we had.
Mark: and we are now, you know, getting through the majority of that work and we're looking at that starting to abate from a comparison basis.
Mark: Now, funnel you asked about, we're still seeing at the top of funnel very solid traffic coming into our funnel. We're seeing customers attaching faster, all the positive signs, all the positive signs around Arrow that are part of our strategy. So at the end of the day, we feel our strategy is working.
Speaker Change: Okay, great. Thank you. Thanks. Thank you. Our next question comes from the line of Ken Wong from Oppenheimer. Ken, please go ahead.
Ken Wong: Can you guys hear me? Great. I just wanted to maybe kind of dive in a little bit on the revenue growth for next year. I think we were generally expecting some convergence between revenue and bookings, and we are seeing a little bit of that. Just wondering if there's any kind of one-off headwinds that we should be aware of, any quantification of how FX might have impacted that number.
Ken Wong: Thanks, Ken. We're still seeing great momentum in bookings, and obviously, depending on the terms, transactional versus subscription, that's going to impact revenue in different periods.
Ken Wong: But, you know, on an overall basis, Bookings is going to outpace revenue and continue to see that momentum going through 2025.
Ken Wong: FX, we did see, I would say, a small impact on FX in bookings towards the second half of the year, not much. Now, you know, it hits us in bookings first, then it rolls out into revenue, so it is very much in our model for 2025. But I would say at this juncture, it's relatively small overall.
Speaker Change: Okay, perfect. And then, you know, last year you guys, you know, more or less deliberately kind of fired customers at the base falling, you know, $20.5 million. You guys have been talking up investments in terms of customer acquisition for $25. Like, how should we think about the contribution to growth from that aspect of your focus?
Aman Bhutani: I'll start and then maybe Aman you could jump on so, you know, we're looking this year and we've talked about our Investment in marketing around arrow and bringing people into the arrow experience and you know with that We are starting to enter the monetization phase But you know the monetization phase takes a while to build
Aman Bhutani: and goes to bookings first and ultimately to revenue. So for this year, I would say modest impact of the Arrow launch and some of the efforts we're making around attracting customers into that experience.
Aman Bhutani: but as we go out obviously we expect that to to increase.
and the starting point of the company with the customer.
Thank you guys.
Thank you.
Yeah, thanks so much for the question team.
Aman Bhutani: of Arrow and Arrow Plus. It sounds like, you know, you're entering that phase maybe earlier than you had
Aman Bhutani: planned, say, six, twelve months ago. So just kind of curious what, what triggered that, that change and really what was behind that.
Aman Bhutani: Yeah, happy to talk about that. Definitely, we brought Aero to market in November, December for the first time with a small cohort of customers, and that's 2023. And then over the last year, we've expanded it. And in our original estimates, and I think I've talked about it many times, the idea very much was that the focus was on discovery and engagement and then monetization. And we really wanted to solidify discovery and engagement because we want to change the pace that...
People started with GoDaddy on.
Aman Bhutani: And what's happened in 2024 is that discovery and engagement have gone very well. You know, obviously, we've shared metrics of millions of customers discovering Aero and then half of them engaging with Aero. And now, you know, we've continued to share the metric of how Aero has become the path where people start at GoDaddy and then find their way to websites.
with the AeroPath sort of providing 50% of website starts.
Aman Bhutani: So, you know, that's very good discovery and engagement metrics. And what it's done is it's sort of bolstered our confidence and pulled forward some of the aero monetization, which, you know, of course, Mark talked about the positive of aero in terms of, you know, just some green shoots on retention rate, some product attach, you know, that all of that's fantastic, some conversion improvements, too. But what happens now is that a SKU appears, which is a monetization SKU, which is AeroPlus that we launched in Q4, and you're going to start to see us fold in a number of the new
Aman Bhutani: and other innovative products on the Aero platform as AeroPlus to the customer.
The comps are also very high with respect to growth.
I guess how much
Aman Bhutani: Penetration, do you see in the years ahead? Obviously, you've had tremendous success getting to this point. Is that something where there's still a lot of low-hanging fruit and gains to be had, or should we be thinking about growth maybe slowing there? Any guidance would be great.
Aman Bhutani: Yeah, you know, I continue to be very excited about GPV growth. And I think, you know, we want to continue it at a fast pace, but our model is a profitable growth model. So what we did in 2024 is not just grew GPV very fast. What we did is we we started to launch SAAS offerings as well, which has helped sort of the higher margin revenue getting out there. And in terms of penetration into the base, I would say, you know,
Aman Bhutani: still the largest contributor to our GPV growth is our base of customers and we're I'm afraid to even say we're getting started because it is you know We have penetrated such a small percentage of our base and I feel there's so much more to go in front of us So that that's what we're after And even adding to that as new customers have come into the funnel and started using payments over over the years They will grow and add to that GPV as well. So there there is plenty of runway on our GPV growth going forward
Great, thank you both. Thank you.
Speaker Change: Our next question is from the line of Aaron Kessler from Seaport Research. Aaron, please go ahead.
Aaron Kessler: Great. Let me unmute there. Perfect. A couple of questions. Maybe back to the arrow. I think you said 50% of...
Aaron Kessler: of bookings for web presence, which is pretty impressive. Any thoughts on maybe how much those are kind of incremental versus
Aaron Kessler: In terms of that uplift, do you have a sense for that? And then maybe talk about some of the internal efficiencies. I know it's kind of a longer-term process, but that you're gaining from AI, and then what would you expect from 2025 as well from some of the internal efficiencies you're getting? Thank you.
Yeah, you know, on the first part...
Aaron Kessler: Without breaking every piece of it down, overall ARO has demonstrated higher conversion, higher product attack, and just now starting to show better renewal, not just for domains, but for websites. And when we talk about
Aaron Kessler: AERO website. What we're really talking about is people starting with the AERO experience and then sort of launching into the website experience. And that's what's reached 50%. So AERO has become a very large funnel and obviously now is going to be the largest
Aaron Kessler: on all four websites. But Aero is helping across all these metrics. But, you know, even as I talk about them, I have to sort of mention that, you know, these are green shoots, right? Aero is...
Aaron Kessler: is an infant. It's about one year old and its first cohort just came up for renewal for the first time. So we have so much more to do here, but the real excitement for me here is that, you know, we are starting the customer with something different at GoDaddy and that different vehicle is Aero and it offers us lots and lots of opportunities.
Speaker Change: and Andy, Mark, if you want to... Yeah, no, you know, Aaron, on your incrementality.
Speaker Change: It's always hard to measure whether they would have gone to websites or they went to websites because of ARRA. Having said that, the metrics we're tracking are things like average order size when they're initiating. Those are indicators to us that they're coming in and doing more than they previously did, and those are all very positive in the early stages of what we're seeing.
Speaker Change: And then on the question on internal efficiencies, you know, where...
Speaker Change: Obviously, I'm super excited about AI and we continue to invest in
Speaker Change: AI, machine learning, generative AI, and now agentic AI as well. And we think there's great room for innovation for internal efficiencies there.
Speaker Change: sort of across the company. And, you know, our model in some of the places, for example, in care is a little bit different than than other companies. But we've continued to make progress. For example, we've talked about Gabby. We've also talked about our conversational bot. And those those tools continue to do better and better. And, you know, I dare say a year from now, we'll be talking about them a lot more.
Thank you.
Speaker Change: Our next question comes from the line of Trevor Young from Barclays. Trevor, please go ahead.
Trevor Young: Great, thanks. On the EBITDA margin guide, 1Q implying about two points expansion year-on-year, meanwhile only committing to 100 bps for the full year.
Speaker Change: If I heard you correctly, the marketing spend is also going to be concentrated in one queue.
Speaker Change: So just help us understand, is there some additional spend layering in later in the year that we should maybe be contemplating as we think about margin progression? And then similarly, is there any sort of FX headwinds, any nuances between where REVREC is and where costs lie that could be weighing on margin as well?
Speaker Change: Thanks, Trevor. On the margin, you know, as we say, every quarter is going to be a little bit different for us, and so, you know, looking at Q1 versus the entire year gets a little tricky, but we do have a seasonality related to it. Now, having said that, on the 100 basis points, it's just following the model that we've talked about, right? We're seeing the upfront benefit last year from things like infrastructure simplification, global talent recruitment.
Speaker Change: Those were very front-end loaded for us, and now it's generally the tailwind related to the continued growth in ANC at a higher segment EBITDA margin. There's nothing in particular that we haven't called out. We have talked about marketing. We have talked about product innovation.
Speaker Change: But generally, it's staying within the parameters that we've talked about within the model that we've talked about, and we're heading towards the 33% in 2025. Sorry, 2026.
Great. Thank you, Mark.
Speaker Change: Our next question comes from the line of Robert Colbreth from Evercore. Robert, please go ahead.
Bye.
Robert Colbreth: Great, thank you for taking our question. I wanted to ask a little bit more about the renewal rate improvement you're seeing on the on the very early ERO cohorts, particularly in relation to domains.
Speaker Change: I'm wondering if it's just because they're doing multi-product attach at a higher rate or maybe the improvement in relation to domains conveys that there's something more unique about the era of renewal motion. And then associated with that, are you seeing an opportunity for...
Speaker Change: higher expansion at renewal from customers who have received the Aero experience or engage with it. And does that potentially portend opportunity to put Aero in front of the broader installed customer base at renewal in the future? Thanks.
Speaker Change: Yeah, thank you. When we talk about the Aero Cohort for domains, these are customers that bought a domain and were immediately sort of
You know.
Speaker Change: sort of engaged with the Aero experience, right? They were surrounded by the soil, they chose to engage with it.
Speaker Change: And what we see there is that because Aero offers eight to nine, what we call cards, or areas for customers to engage where they can turn that domain into a pay link, they can do a little bit of social marketing, or they can create a logo, or they can get a one page website.
Speaker Change: that Aero just creates for them, right? This is before they go build a full website.
All of these other interactions happen for free.
for these customers that have just bought a domain.
Speaker Change: And, you know, our hypothesis is that because the customer now has greater value, that over time, that should lead to a little bit higher retention rate. Now, it's going to be different from our two-plus products and such, because there what we're talking about is two paid products. But what we have here is a customer using multiple products, and that should lead to better retention.
Speaker Change: better renewal rate. In terms of expansion of other opportunities for Aero customers, you know, that is what we're after. We want to start the customer with a set of products and we want to keep adding to that value over time so you'll keep seeing us add more and more capabilities to Aero. But then we, but as they start using it.
Speaker Change: expose them to a logo builder or an image creator that's much better than what came naturally with Aero or a marketing tool, a marketing consultant, you know, or the digital marketing tool we have, which do much, much, do a much better job and then the customer can opt in and sort of sell themselves into Aero Plus.
Speaker Change: And it may be the last piece, just the opportunity to, you know, perhaps at renewal, you know, put Aero in front of customers who haven't seen it before.
Yeah, we are new customers.
Speaker Change: Yeah, we continue to work on taking ARO into the broader base of customers. I think I've talked about it a little bit in the past too, you know, our learning from taking websites and then the productivity solutions and now commerce into the basis that that go-to-market motion tends to be a bit different than new customers. So it tends to come a few quarters after we've nailed a new customer.
Speaker Change: side. But, you know, we're continuing to work on that. We're very excited about full basic customers continuing to be a very exciting place. If you're on the side, you'll see Aero and Aero Plus over the next few months. Aero is already on many of the surfaces, but you'll actually see Aero Plus start popping up for existing customers too.
Okay, great. Thank you
Speaker Change: Our next question comes from the line of Chris Kintarek from UBS. Chris, please go ahead.
Chris Kintarek: Great, thanks for taking the question. I just want to go back to the comment, Mark, that you had made on the 16% average order growth. Could you give us a sense for what that was growing in 2023?
Chris Kintarek: You know, we don't haven't disclosed that back to 2023. So, you know, I would say it's a year over year comparison at 16%. Remember, we're we're we were in a different environment in 2023. So it's, you know, we're comparing it to
Chris Kintarek: post-arrow to pre-arrow. So again, we'll continue to update that as we go forward, but right now it's at 16%.
Speaker Change: Got it. Yeah, I think that was kind of really what I was trying to get at here was, was that accelerating, was that average order of growth accelerating in the order of magnitude of 5%?
Speaker Change: mid singles, high singles here, just as kind of a proxy for what what that performance improvement was coming from Aero. Yeah, Chris, we haven't gone out and given numbers like that back that far. So we can take it offline. But you know, we're making 16%.
Speaker Change: Got it. And just maybe on AeroPlus, curious how you're thinking about that product. You're obviously doing independent skew tests now at this point. Is this something we should be looking for is something that you're going to be putting marketing dollars behind this year?
Speaker Change: Yeah, we're going to test it first, Chris, and your customers are going to start to see it on the site and only once that testing is complete, you know, you'll see UI retested pricing and so on.
Speaker Change: As we get to confidence on its performance, then likely you'll see some marketing on it. As Mark has talked about, we are putting marketing dollars behind AERO. We think it's a fantastic experience and the world needs to know about it.
Got it. Thank you.
Thank you, Chris.
Speaker Change: Hey, good afternoon, guys. I think first, just going back to the full-year revenue guidance and that kind of point on convergence from 2024 bookings to 2025 revenue.
Speaker Change: You know, maybe you can just help kind of paint a little bit of what's embedded in in the range of the guidance
Speaker Change: What would it take to get to the lower end of your guidance, meaning 6% revenue growth coming off a year of 9% bookings growth? Just what's the right way to think about that?
Speaker Change: Yeah, Gal, thanks. And, you know, we continue to make great momentum. And the revenue growth comparison, you know, obviously trails the booking comparison, and we're comparing it against different years, different periods, different aspects. We feel really good about where we are in the range.
Speaker Change: But there are transactional ends of the business that we continue to monitor. There are, you know...
Speaker Change: impact not only our core platform, they can also impact our ANC. So we try to build that range to take into consideration that, you know, what is the volume? What are the units coming in? And what are the different ranges there? So I would say, if you really want to see the what can get us from one.
Speaker Change: poll to the other poll, you have to look at the transactional business because the booking takes a period of time to uh...
Speaker Change: to get revenue on subscriptions. And I think we could get a little color and say transactional businesses, you're talking about the aftermarket business being a big part of that. That is the biggest part of it. We did have the return to, you know, some larger transactions last year, making this year, you know, a tough compare in the aftermarket. As we always say, we don't anticipate those larger transactions, so that is always going to be a
Speaker Change: a bit of a swing for us depending on what we see out there.
Speaker Change: Okay, that's helpful. And another one for you, Mark, on capital allocation.
Speaker Change: So, it's been a couple quarters now with not a lot of buybacks or certainly less than what you've been buying at a run rate.
Speaker Change: previously. You build in cash, you're below your leverage targets here. Just give us an updated thought on buyback, capital allocation, is the M&A environment any different or your approach to M&A stuff? How do we think about that as your cash consumers grow here? Thanks.
Speaker Change: No change to our approach. We're ahead of where we had targeted coming out of 2024.
Speaker Change: We bought back through Q3, and like I said, never look at any particular quarter for a trend. We continue to evaluate on a quarter-by-quarter basis, and we continue to look at what the right rate of return is for all of our capital allocation.
Speaker Change: Overall, no change in how we approach it, no change in how we look at things, and we'll continue to apply that in a very disciplined approach going forward.
Alright, thank you. Thanks, Bill.
Speaker Change: Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.
Elizabeth Porter: Great, thank you so much. First, we generally think of websites as a pretty sticky market and with the opportunity to drive more website attach
Elizabeth Porter: Should we think about the opportunity as really skewed towards the new customer side, or do some of the products like site optimization allow you to actually dip back into that install base of customers, then maybe leveraging a different website builder and provide an opportunity to drive it attached to a good old daddy website? Thanks.
Speaker Change: Yeah, Elizabeth, you're right on the spot. Yes, you know, there's the opportunity within you, but Site Optimizer is built to help.
Speaker Change: reach existing customers that could renew their sites, that could do a better job. I think we've shared publicly that, you know, while Site Optimizer is still being tested with a smaller cohort of GoDaddy customers, as a technology, it's built to make any site better in the world.
Speaker Change: Great, and then just as a follow-up, the pricing and packaging in 2025 seems to be more focused on web presence and cohorts and hosting. How should we think about the relative benefit of this strategy to these areas in 2025 compared to the impact the strategy had on productivity in 2024?
Speaker Change: Productivity just in general seems to be a bigger contributor within ANC and we know hosting's gotten a little bit smaller with divestitures. So can you just help us understand how big of an opportunity these areas represent?
Speaker Change: Pricing and bundling continues to be a multi-year opportunity, and we feel very good about the transition.
Speaker Change: being a product-led lens to pricing and bundling, to moving to a customer cohort-based lens. And we think the opportunity is very large over multiple years. In terms of contribution, you know, that...
Speaker Change: I had wanted to share, which is why we included it, is that we have a very material contribution from pricing and bundling in 2025 as well. And I think that there's a bit of a
Speaker Change: There's a bit of confusion for people because there's too much focus on productivity rather than looking at GoDaddy's very large customer base and all sets of products that they have and also the products that we can bundle with those products to create these new value-based softwares. That's really the scope that we should be looking at versus looking at one specific product within our P&L, if you will.
Great, thank you so much. Thank you, Alyssa.
Speaker Change: Our next question comes from the line of Mark Zagutowicz from Benchmark. Mark, please go ahead.
Trevor Young: Thanks Christy, I appreciate it. Mark, just maybe a follow-on to Trevor's question on the margin guidance.
Mark Zagutowicz: for the year. I'm curious what your A&C and core platform AdjustCityBid.margin expectations are for 25. And the question stems from, I would just expect to see perhaps more leverage than 100 bps just given the makeshift to A&C, so
Mark Zagutowicz: That's where that question stems from. And then also notice that there was some de-leverage in corporate quarter over quarter and fourth quarter and wondered if any of that
Mark Zagutowicz: I guess what drove that and what if there's any of that lingering into year 25.
Margin Guidance. Thanks.
Mark Zagutowicz: and thanks Mark. Real quick on the margin guidance, you know, we were very front-end loaded when we went from 23 to 24 with some of the actions we had taken. We talked about the three buckets and each of them having a certain contribution and the first two were very front-end loaded. We feel really good about our pace towards the 33.
Mark Zagutowicz: And the 100 bits of improvement is based on the fact that we are now going to be seeing more of the tailwind related to the A&C growth. And that'll help in that segment, EBITDA margin, and that will help be that tailwind that helps us get there. Now, at the same time, you know, we are continuing to look at marketing investment around Arrow and product innovation. So we're investing in the long term.
Mark Zagutowicz: and we feel good about our path to get there. You know, I always say our North Star is free cash flow. So we are well on track on the free cash flow targets coming out of the year, and we continue to have that great momentum to get there.
Mark Zagutowicz: On the second question, and I'm going to say... De-leverage on... De-leverage on... Yeah, nothing to call out. We were finishing up some infrastructure projects towards the end of Q4, but there's nothing specific or nothing lingering into 2025 to call out. We're on a good track to continue to get operating leverage on our P&L.
Speaker Change: Okay, great. And then just one last question, you touched on it a little bit, but aftermarket...
Speaker Change: You had a nice acceleration in 4Q, and I'm just curious what drove that and what your assumptions are with aftermarket in 1Q and for 25. Thanks.
Speaker Change: Yeah, we continue to see it as a low single digit grower and we're seeing good volume at the, I would say, the base level of the smaller transactions. You know, like I said, we don't build in any of the larger transactions, which can create some volatility.
Speaker Change: and that pattern seems to be holding. Every quarter may be a little different, up or down, depending on some of that, but that's what we build into our model going forward.
Okay, got it. Thanks, guys. Appreciate it.
Speaker Change: Our next question comes from the line of Alexei Gogolov from J.P. Morgan. Alexei, please go ahead.
Speaker Change: Hi, this is Ella Smith on for Alexei. Thank you so much for taking our questions. Hey, Ella. So, hey, somebody first with Aero. How many of Aero users are existing GoDaddy customers versus how many are new customers? And how do you think about that distinction in customer groups moving forward?
Hi everyone.
Speaker Change: Currently more, the greater percentage of Aero customers are going to be in the new because all new customers are getting exposed to Aero and we take great engagement from them with new customers.
Speaker Change: on existing customers to go to market is a bit different, but that is an area of larger opportunity over time. Also, the new, you know, continues to sort of weave into the base.
Speaker Change: as well. So over time, you're going to see the base become larger and larger in terms of Aero customers. And we have a lot more to do on that and a lot of great ideas to bring to customers.
Speaker Change: Got it. Thank you, Aman. That makes a lot of sense. And for a quick follow-up, how did your GMV fare in 2024? And looking ahead, do you still expect GPV to outpace GMV growth?
Speaker Change: Ella, we've strayed away from GMV and just the disclosures around it only because it's not a clear indicator of how it translates directly into our revenue. GPV is the number we base it on, and obviously we talked about the growth in the GPV. So nothing to really call out in GMV related to GPV at this time.
Got it. Thank you, Mark. Appreciate it.
Speaker Change: Our next question comes from the line of Alex Rondolo from Wells Fargo. Alex, please go ahead.
Hey, thank you so much. Maybe two from me.
Speaker Change: on AeroPlus. I think all the AI products in the bundle right now were built by GoDaddy. How do you think about, you know, potentially adding third-party AI products to that subscription tier over time? And then maybe secondly, you know, if I had to characterize AeroPlus, there's the logo maker, there's the enhanced website building tool, and I think it's a marketing product.
Speaker Change: Do you think you found the killer feature or tentpole feature for the bundle at this point in time?
Speaker Change: On the third-party product for AeroPlus, just like we included a product within Aero that was third-party, you know, we're very curious about third-party products and we actually test
Speaker Change: When I think about sort of a 10-pole feature or something really good, what I would say is we have great...
Speaker Change: sort of starting point with Site Optimizer and the marketing suite, the digital marketing suite. We know from early testing that those two products products that attract customers so you know
Speaker Change: We really double down on those to get those to a very large group of customers. We don't necessarily need a fourth, fifth, or new one right now.
Thank you.
Thank you.
Speaker Change: Our next question comes from John Bayoune from Jeffries. John, please go ahead.
and we'll see you next time. Bye bye.
This is John Baird for Brent Seller.
Good job.
Speaker Change: Can you hear me okay? Yeah, we can hear you. Okay, Anderson Echo. First question is...
Speaker Change: You know, both of them are on AI, but for AeroPlus, it's been out a couple of months, but just curious what you're seeing in terms of acquiring paying subs. I mean, I know we're still testing it. And then second on agentic AI, just wondering how they might look. I don't know if there's any examples you could share.
of what they might be. Thanks.
Speaker Change: Yeah, John, super early for Aero Plus, but we'll definitely talk about it more in future earnings calls. And in a Gentic AI, you know, without giving away any competitive info, what I would just say that from last year, what you saw in Aero was the power of automation and generative AI.
Speaker Change: And if you look at some of the capabilities that it already automates.
Speaker Change: and does, you know, Agentic AI has the opportunity to really superpower even what Aero does. So that's, you know, in terms of the use cases, there are lots and lots of use cases, but if you look at the core use cases that our customers are already using, Agentic AI and Aero can do them a lot better.
Thank you very much. Thank you.
Speaker Change: Our next question comes from Navid Khan from B. Reilly. Navid, please go ahead.
Navid Khan: Great, thanks. I have a clarification before I ask my question. So, just on the guide, Mark, for the full year, are you making any kind of impact from FX in your guide?
And then I have some questions.
Navid Khan: Navid, we are seeing some, but it's small at this point. It's a little bit of a headwind we came out in our bookings that'll roll over into the first part of the year, but nothing really significant.
Okay, and then I have...
Navid Khan: Two part of the question. One is, you know, we are seeing the cost of using generative AI models, you know, kind of getting cheaper and cheaper.
with models like DeepSeq.
Navid Khan: How should we think about the P&L impact of this kind of development?
Speaker Change: And then the other question is just around customer growth. So now that, you know, the noise from the devices is gonna be behind us in 2025, do you expect to return to positive customer growth?
Navid Khan: Beyond the cost of generative AI, Navid, I just pointed to sort of our commentary over the last couple of years, you know, we've been very judicious.
Navid Khan: in terms of cost on generative AI. You know, I've been a huge proponent of generative AI. I do feel, you know, as the platforms get out there and we have more and more people that are going to build better models, models that are trained faster, that are trained cheaper. You know, but we already are very careful about that. And, you know, if it gets cheaper and better, that's only good for our customers and good for us.
So that's fantastic. And then the customers, you know, we're
Navid Khan: Just a reminder, we're focusing on high-valued customers, and we're making sure that we're getting those customers into the funnel. Having said that, we are starting to move past a lot of the efforts we've made around consolidating our technology stacks, and we're seeing strong top of the funnel. We do expect customer accounts to return to positive, and we'll continue our focus on our strategy because it's working.
Great, thank you.
Speaker Change: Next question comes in the line of Brad Erickson from RBC. Brad, please go ahead.
Brad Erickson: Thanks. Thanks for putting me on. I got the echo too, sounds like.
Speaker Change: And I guess start with, can you give your latest thinking around how you think about your marketing tools, comparing the tools on some of the big walled gardens out there?
Speaker Change: I know this isn't like a new topic, but just curious to get your latest thinking on that dynamic, given how quickly it's evolving.
And then maybe a follow-up from Naved's question on DeepSea.
Speaker Change: I'm just curious, like, in your management conversations across companies, etc., has, you know...
Speaker Change: Are you feeling like there could be infrastructure efficiencies over time? Clearly, that's where it points, but just pragmatically, what do those conversations sound like as you have them? Thanks.
Speaker Change: On the marketing tools, Brad, you know, we have very early stage products and marketing tools, but our tools are custom built.
Speaker Change: for our customer, which is the microbusiness, you know, part of them are solo openers.
Speaker Change: These are very, very small businesses. So our tools are really factored and built for that customer. You know, we think of ourselves as the base of the pyramid and only place for us to go is up. And that's fantastic. So we're just starting out on those. And in terms of AI and infrastructure costs,
and discussions internally on infrastructure.
You know, this is a...
Speaker Change: quickly evolving situation, like my view is AI is moving so quickly.
Speaker Change: Most people have no idea or we can't really guess how different things are going to be in three to six months. So while we want to stay on top of it.
Speaker Change: Our real focus is how do we take AI, create value for customers, and then transform that value to shareholder value in terms of bidder, attach, upsell, pricing, and so on.
Speaker Change: Our next question comes from the line of Deepak Mazhavanan from...
Cantor Fitzgerald, Deepak, please go ahead.
Deepak Mazhavanan: Hey guys, thanks for taking the question. I'll ask a couple of them.
Deepak Mazhavanan: First, can you just talk broadly about the macro trends in early 2025? How is the top of the funnel trends, particularly in the context of new business formation that's driving your business? And then the second question, obviously earlier in the year there was a lot of news flow around WordPress. Are you seeing any tailwinds to certain products or maybe to your customer growth or maybe migrations from WordPress to some of your sort of like a DIY products at this time? Any color you can share that would be helpful. Thank you.
Thank you so much.
Deepak Mazhavanan: Deepak, with a minute left, I'm going to be quick on this one. You know, on business formations, we've talked about how business formation data doesn't fully correlate to GoDaddy, but what I will say is that our customer continues to be resilient. You know, they got to put food on the table, and these people are showing the creativity under different economic conditions. And, you know, I'm happy to talk about that more, but I think we've talked about that quite a bunch. And on WordPress, super excited about WordPress, new version that we've launched, it's twice as fast.
Deepak Mazhavanan: fantastic product and I'm looking forward to sort of getting to market very broadly what we've just launched recently.