Q1 2025 GoDaddy Inc Earnings Call
And it will be muted throughout the meeting.
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Speaker Change: Welcome to <unk> first quarter 2025 earnings call. Thank you for joining us I'm Christie Masoner VP of Investor Relations and with me today are chief.
Speaker Change: Executive Officer, and Mike Mccaffrey, Chief Financial Officer, following prepared remarks, we will open up the call for your questions.
Speaker Change: You'd like to ask a question on today's call. Please use the raise hand feature in a webinar to be added to the queue.
Speaker Change: On today's call, we'll be referencing both GAAP and non-GAAP financial measures and other operating and business metrics a discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted on our Investor Relations site at investors <unk> com.
Speaker Change: Or in today's earnings release on our form 8-K furnished with the SEC.
Speaker Change: Both 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. These forward looking statements are subject to risks and uncertainties that are discussed in detail in our periodic SEC.
Speaker Change: <unk>.
Speaker Change: Actual results may differ materially from those contained in forward looking statements.
Speaker Change: Any forward looking statements that we make on this call are based on assumptions as of today may one 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'm happy to introduce them on <unk>.
Speaker Change: Good afternoon, and thank you all for joining us today.
Speaker Change: Godaddy, our mission is to empower entrepreneurs and make opportunity more impressive four all in an environment marked by global economic uncertainty with small businesses navigating more complexity, we continue to improve and expand the critical tools necessary for them to run their businesses backed.
Speaker Change: That helps make them successful the inherent value of our products discipline innovation and execution of our strategy is the backbone of our business and our strong Q1 results.
Speaker Change: In Q1, we drove 8% bookings growth and we expanded normalized EBITDA margin to 31% propelling free cash flow grew 26% growth supporting our north star of maximizing free cash flow over the long term these results and the durability of our model reinforce our.
Speaker Change: Confidence in our full year guide and Investor day targets.
Speaker Change: Our strategy is steadfastly focused on attracting high intent customers, creating customer value and transforming back value into long term shareholder value. The energy within the company is palpable with the continued acceleration and velocity of execution as we drive towards these goals.
As always I will touch on our key initiatives, starting with pricing and bundling focussed on our presence solutions and going across segments. This 2025 initiative delivered ahead of our expectations in Q1 pricing and bundling is a multi year initiative and we continued to do further testing with customer cohorts that span.
Speaker Change: Across our E&C and core platform segments, and we are encouraged by the results so far.
Speaker Change: The enhanced platform capabilities quickly integrate third party products into a bundle, resulting in expanded test options for this initiative.
Speaker Change: As we had shared we have continued to shift from the product lends to the customer cohort lens for pricing and bundling maintaining the dual goal of growing bookings and minimizing churn.
Speaker Change: Our seamless experience initiatives continued to deliver improved customer conversion product engagement and renewables. This initiative is powered by our most sophisticated experimentation pipeline and it's focused on removing friction and creating an intuitive experience saving customers time better spent on growing their businesses.
Speaker Change: The results of our efforts across many experiences and products are found in the increase in average order size and improvement in renewal rate driving customer retention and lifetime value on the godaddy platform.
Speaker Change: <unk> growth remained strong this quarter and annualized gross payments volume increased at a healthy pace with the primary driver continuing to be conversion within our existing base of customers. Our recently launched high margin offerings, such as Godaddy capital our merchant cash advance program and same day payouts, while still small are.
Speaker Change: Gaining traction these valuable additions priced competitively are important to our customers and strengthen our one stop shop Congress offering last but certainly not least godaddy aero continues to permeate across our products and customer experiences.
Speaker Change: Arrow has demonstrated results are showing up as better attach term left and renewals.
Speaker Change: Ada from the 13 month Arrow customer cohorts shows that we are driving changes in customer behavior with arrow, resulting in more customers purchasing second and third products websites plus marketing continues to be the biggest beneficiary and aero customers are getting better results from their websites to leave.
Speaker Change: Adding to our fantastic win win.
Speaker Change: Wildly arrow experience is driving financial results and Aero plus are directly monetize the experience is progressing with new improvement our focus continues to be to engage customers across the broader set of capabilities that <unk> provides this builds on the success, we are already seeing with arrow and represents a large.
Speaker Change: Long term opportunity for our customers and for Godaddy.
Speaker Change: And we are still at an early stage Arrow has already shown its powers to automate and used generative AI to provide magical experiences for customers and with <unk>. We expect to take this even further agents powered by a personalized AI platform will take recommendations to our customers to the next level doing.
Speaker Change: The work for them across multiple jobs to be done in.
Speaker Change: In closing I want to underscore that godaddy has built a durable business. One that has consistently performed across economic cycles and technological shifts we are driving results and remain focused on what we can control accelerating the pace of innovation in a disciplined manner. The result of our model is profitable growth.
Speaker Change: And the majority of our operations allows us to deliver results in the current period as we set up the next positioning the business for long term success with that here's Mark.
Mark: Thanks Ahmad I wanted to take a moment to acknowledge that the broader macroeconomic environment, including tariffs is top of mind to be clear for godaddy, our direct exposure to tariffs is not material for our customers their grit and determination alongside our integrated one stop shop solutions deliver.
Mark: During unmatched value remains mission critical to their needs, especially as they navigate a complex landscape.
Mark: Our tools and power them to compete efficiently and effectively our durable model and our customers' resilience.
Mark: Gives us confidence in our full year, 2025 guidance and our Investor day targets, including our North Star.
Mark: In Q1, we delivered ANC revenue growth of 17% expanded normalized EBITDA margins over 200 basis points and grew free cash flow to $411 million. We also have fully utilized the remaining portion of our 2022 4 billion dollar authorization to retire.
Mark: 25% of our fully diluted shares outstanding since inception of the program.
Mark: Total revenue was at the top end of our guided range growing 8% on a reported and constant currency basis to $1 2 billion.
Mark: Annual recurring revenue grew 7% to $4 1 billion <unk>.
Mark: International revenue grew 10%, surpassing our prior expectations on strong aftermarket sales in international regions.
Mark: For our high margin ANC segment, we drove 17% growth in revenue to $446 million and 14% growth in bookings on the ongoing strong adoption of our subscription solutions segment EBITA margin expanded nearly 200 basis points to 44%.
Mark: Our core platforms segment delivered revenue growth of 3% to $748 million core platforms performance. This quarter reflected strength in primary domains up on pricing and units as well as strength in aftermarket.
Mark: Core platform bookings grew 5% in segment EBITDA margin expanded by over 150 basis points to 31%.
Mark: Moving to profitability normalized EBITDA grew 16% to $364 million delivering an expanded margin of 31% up over 200 basis points and exceeding our guide for the quarter.
Mark: The expansion was driven by favorable product mix and sustained operational discipline from infrastructure simplification and global talent recruitment.
Mark: Longsight increased marketing for innovative Aero experience.
Mark: On bookings, we delivered $1 $4 billion, representing 8% growth on a reported basis and 9% growth on a constant currency basis.
Mark: As a reminder, bookings primarily represents the cash collected during the period free cash flow grew an impressive 26% to $411 million.
Mark: Our efforts are delivering the results, we set out to achieve bringing in higher lifetime value customers, who will drive stronger more profitable growth over time.
Mark: Our stronger more resilient cohorts are already translating into improvements with retention above 85% for customers on our godaddy platform.
Mark: We are driving a higher average order size and our ARPA grew 9% to $225 on a trailing 12 month basis, demonstrating the sustainability of our ongoing efforts.
Mark: Since year end, our customer count has remained stable at $1.5 million as we lap the impact of the last divestiture and looking ahead, we anticipate returning to customer growth later this year.
Mark: We remain confident that our strategic focus here centered on growing higher lifetime value customers will drive compounding growth in free cash flow over the long term.
Mark: Turning to the balance sheet, we exited the quarter with $719 million in cash and total liquidity of $1 $7 billion as we utilize the remaining $767 million under the 2022 share repurchase authorization.
Mark: Net debt was $3 $1 billion, representing a net leverage of 1.9 times on a trailing 12 month basis.
Mark: Our goal over the coming quarters is to continue to strengthen our already strong balance sheet and we are reducing our target net leverage ratio from the previous guidance of two to four times to under three times moving forward.
Mark: Aligned to how we've been operating.
Mark: In April we completed our $4 billion 2022 repurchase authorization program repurchasing a cumulative $43 7 million shares at an average price of $91, representing a gross share reduction of over 25% and our fully diluted shares outstanding since the inception.
Mark: Of the program.
Mark: Our commitment to a disciplined capital allocation framework is unchanged and share buybacks remain a key mechanism to return value to our shareholders with that I am pleased to announce that our board has approved the 2025 repurchase authorization of up to $3 billion through 2027.
Mark: This new authorization reflects our enduring confidence in the strength of our underlying business. The durability of our cash flows and our belief that investing in our shares currently represents an attractive return opportunity for our capital.
Mark: Shifting to our outlook given the strong start to our year and the durability of our model. We are reaffirming our full year 2025 outlook provided in February and expect total revenue to be within a range of 4.86 to 4.94 billion.
Mark: Representing growth of 7% at the midpoint of the range for.
Mark: For Q2, we are targeting total revenue of 1.1 95 to one point to one $5 billion, representing 7% growth at the midpoint of the range within that we expect ANC revenue growth of mid teens and core platform growth of low single digits.
Mark: Q2, we are projecting a normalized EBITDA margin of about 31% and we are reaffirming our full year normalized EBITDA margin expansion target of 100 basis points.
Mark: We expect normalized EBITDA to maintain an approximate one to one conversion to free cash flow. We are also reaffirming our full year free cash flow target of at least 1.5 billion representing growth of over 11%.
Mark: Our disciplined capital allocation approach remains unchanged and we plan to evaluate all opportunities according to our rigorous and returns based framework.
Mark: I am pleased with our Q1 accomplishments and strong financial results a great start to a year that is already underscored the importance of godaddy is a durable model.
Mark: The strength of Godaddy Foundation is evident in our long history of strong customer retention, the growing quality and stability of our customer cohorts and the competitive advantages. We have developed over time as a partner and champion for micro businesses.
Mark: We're executing with discipline and purpose as we drive towards our North star maximizing free cash flow over the long term.
Mark: We are making steady progress towards our investor day targets of achieving $4.5 billion plus in cumulative free cash flow generation underpinned by 6% to 8% annual revenue growth and expansion of our normalized EBITDA margin to 33% by 2026.
Christie Masoner: With that I will hand, the call over to go Daddy's, Vice President and head of IR Christie Masoner.
Speaker Change: Thanks, Matt as a reminder, if you'd like to ask a question Sandy is the Raytheon feature at the bottom of the webinar screen to be added to the queue.
Speaker Change: First question comes from the line of Elizabeth Park <unk> from Morgan Stanley. Please go ahead.
Speaker Change: Hi can you hear me okay.
Speaker Change: Yeah, Hey, Elizabeth.
Thank you so much.
Speaker Change: Thank you.
Speaker Change: Oh.
Speaker Change: Sure.
Speaker Change: That's kind of a macro changes.
Speaker Change: Sounds like it's a pretty resilient base.
Speaker Change: Signals that we could be deriving from.
Speaker Change: Conversations that maybe clouded when you look at things like small business sentiment index in Europe.
Speaker Change: And if we do see some pressure evolve if at all.
Speaker Change: More detailed view on how that can be incorporated.
Elizabeth Park: Thanks Elizabeth.
Speaker Change: I can take that.
Speaker Change: We look at customer sentiment and I think you are aware, we do survey is sort of on a consistent basis, we actually did a survey in April and we did see some pressure.
Speaker Change: In terms of how our customer base and micro businesses look at sort of a pause.
Speaker Change: Positive outlook on the economy, we do see some pressure on that but the broad idea where our.
Speaker Change: <unk> continued to be resilient and they feel strongly about their own performance of their business will continue to grow is still within sort of the five year norms that we've seen so.
Speaker Change: What I would say about sentiment as well, we see a little bit of pressure I think generally our customer is still positive and also we have base specific data points within the company right in terms of our customer churn rate. Our average order size and we continue to see that performing sort of on a day to day or month to month basis.
Speaker Change: I'd also like to mention that when you think about the value that godaddy products bring to our customers.
Speaker Change: So much higher than the cost for our customers and when you attach that there are customer based indexes towards the service industry. It really puts godaddy in a very good position to sort of navigate whatever we see in the macro over the next few quarters. So we feel good about that and I'll turn it to Mark Yeah, I think you've covered a lot of it demand just a cut.
Speaker Change: Data points, one our customer base has a tendency to lean towards services.
Mark: And in this market they are very resilient, they're very optimistic they are still looking at growing revenue in our tools to help them do that effectively and efficiently compete with some bigger players out there so the sentiment right now.
Mark: Going on seems to be there looking for opportunities to do more with what they have in our products, obviously fit right into that so feeling good about it we're reaffirming the guidance we feel good about what we're seeing out there.
Mark: Obviously, we monitor constantly we have many different touch points, whether through the care organization, whether through our surveys with a huge just doing customer visits and we're seeing the consistent optimism although.
Mark: They are looking at what's going on around them at the same time.
Mark: Great and just.
Speaker Change: Follow up I was hoping to get some early signs from the Arab plus.
Mark: Just launched.
Mark: In Q4.
Mark: Feedback.
Mark: Pricing in particular, and then what's the right customers for Arrow.
Mark: The engine Aero work, you could just help us frame the applicable base would be super helpful.
Mark: As we shared in Aero continues to do very very well and we're seeing improvements in order size and sort of turn we're seeing improvements.
Mark: <unk>, the second and third product with Arrow and engagement with Arrow is a very good sign for us to put payroll plus forward to those customers and as you know.
Mark: Plus offer us an expanded offering.
Mark: Competitive price for our customers in terms of actual metrics from Uruguay. It is still very very early in the testing from Euro question as you know it's hardly a quarter.
Mark: We launched this and expanded it to our customer base. So there is still more to be done there, but we are encouraged by where we are today.
Mark: Great. Thank you very much thank you.
Speaker Change: Our next question comes from the line of Randy interest Citigroup. Please go ahead.
Randy: Hey, good afternoon guys.
Speaker Change: No.
Speaker Change: To follow up on Aero.
Speaker Change: On the average order size Mark you you quantified that last quarter I don't know if you can.
Speaker Change: Quantified again this quarter, if it's changed at all but.
Speaker Change: And just more broadly.
Speaker Change: What youre seeing how it's changing in terms of attach.
Speaker Change: Attach order size kind of.
Speaker Change: Moving up.
Speaker Change: Higher tiers and strong stronger conversion lift to get more color on that yes.
Speaker Change: Yes, Thanks Bill.
Speaker Change: I would say we're seeing similar.
Speaker Change: What we saw in Q4.
Speaker Change: On the increases in the average order size.
Speaker Change: Broad based we're seeing in going to that second product very quickly we're attaching very.
Speaker Change: Very prominently in those first few days, which has been fantastic still still early days on tiers and that type of things pluses.
Speaker Change: Very early to what we've introduced so we're looking at it from an overall impact to our customers in it of itself and continuing to see that positive behavior around the average order size that initiation seeing that second product coming in.
Speaker Change: <unk> a lot faster, we're starting to see that show up in our retention rates for our customers who are on the godaddy platform. So those are positive signals are out there seeing the engagement around narrow and then obviously plus we introduced and we will start to measure that is the SKU, but really early stage on the impact of that ended up itself, yes, maybe I'll just add you mentioned conversion.
Speaker Change: The wall has been good for Canadian it's been good for attach them and that continues and more and more of our customers are starting with arrow and the trend of.
Speaker Change: Customers coming to websites plus marketing.
Speaker Change: Arrow.
Speaker Change: This continued to grow nicely.
Speaker Change: That's something we're very happy about what we want our customers to start with that expanded tool set to have exposure to that broader base of products that we have because we think that puts our customers in a great position to get that value and puts us in a great position long term to sort of have.
Speaker Change: More and more products with our customer base.
Speaker Change: Coming back to our strategy is around attracting higher intent customers and we are very happy with the results. Because we are seeing those higher 10 customers coming in and those behaviors are showing that we're really getting to that customer base.
Speaker Change: Okay, great and one on the customer count given.
Speaker Change: Remains a focus for investors.
Speaker Change: Just to be clear.
Speaker Change: Expectation that.
Speaker Change: But.
Speaker Change: It would be down sequentially as we're still lapping some of those divestitures and is there any way.
Speaker Change: Parse out what it would have been ex that.
Speaker Change: And then maybe layering on top of that the Super glad.
Speaker Change: February than what you thought of that drove incremental.
Speaker Change: Sign ups customers free trials or anything like that thanks.
On the customer we saw stability in our customer base.
Speaker Change: We again are not focusing on customer growth itself, our intent and our strategy is around that higher intent customer. So it's hard to parse that out into the different buckets so to speak.
Speaker Change: We are happy that we were getting to that stronger cohort of higher intent customers and stability is really being generated by the fact, we're lapping the actions that we specifically took to get it put ourselves in this position in the first place.
Speaker Change: And then to the Super Bowl or the new campaign that we have.
Speaker Change: The campaign is going very well, we're very happy with the results in terms of just getting the awareness.
Speaker Change: A very large base.
Speaker Change: Folks that godaddy has much more to offer than domains.
Speaker Change: Obviously, a very important message and we think arrow has a fantastic vehicle.
Speaker Change: Liver that but we'll continue to innovate.
Speaker Change: I would say that in a manner that is discipline will continue to invest in awareness, what godaddy godaddy has to offer and the current campaign.
Speaker Change: Well.
Speaker Change: Okay, great. Thanks, I definitely know Walter Goggans.
Speaker Change: A lot better now than it did a few months.
Speaker Change: Ill be happy to hear that and I think he has done great for us it's been great.
Speaker Change: Thanks, guys.
Speaker Change: Our next question comes from the line of Vikram <unk> Baird go ahead.
Vikram: Hey, Vivek.
Vikram: Hey can you hear me, yes, Okay, all right great Hey.
Vikram: Thanks for taking the questions Hey, My first one is on Arrow you referenced the opportunity there with <unk> AI is just wondering if you could talk more about your vision for that and just how you plan to further enhance the era of experience from what it looks like today and then second question is on pricing and bundling I think you mentioned that that has been delivering ahead of your expectations in <unk>.
Vikram: Q1, just wondering if you can elaborate more on where you are having the most success with that strategy. This year and it sounds like Youre doing some additional testing as well just where do you see the most opportunity to continue leveraging that across the platform and not and I'll leave it there. Thanks.
Vikram: Thanks, Vic Arrow, the power arrow sort of with it.
<unk> has been around automation, taking friction out for customers.
Speaker Change: But that automation is deterministic and what generative AI has done is it's allowed our customers to create content to be able to move very quickly based on the large data set that we have but what <unk> offers is take that simplification that arrow brings to the next level.
Speaker Change: Micro businesses, our customers can have agents deployed on their behalf that can get the jobs to be done across different products now as the customer shifts context across those products. Typically what you will find is the customer runs out of time, the customer runs out of energy and customer run.
Speaker Change: Actually out of just the idea of what they want to do.
Speaker Change: AI agents, we can feel a lot of those gaps and really support our customers in a different way, we had godaddy or also investing I think we've talked about this in the past.
Speaker Change: Our scale data platform and AI platform that works that is very much with the platform mindset at the company and one of its new capabilities over the last couple of quarters is this idea of personalized AI for that specific customer, which is very important to provide that fortunately the genentech experience. So that's something.
Speaker Change: Pretty excited about it's something that I personally spent quite a bit of time on on a weekly basis. So that that's the next thing we want to see over the next capability, we wanted to bring to Aero and in terms of pricing and bundling.
Speaker Change: Don't think Thats changed in the program. It continues to be a multiyear program. It's delivering ahead of our expectations in Q1, and we feel very good about it for the rest of the year based on our testing and yes as I noted.
Speaker Change: We are continuing to test, new bundles, and new pricing options with those bundles.
Speaker Change: Over the next few quarter, then that sort of sets up the next period for us.
Speaker Change: <unk> here.
Speaker Change: The one stop shop solution that we have and when we can bring in third party products to the value we bring to our customers. So much more than the $225 that we have the services are mission critical to our customer the simpler we can make it the easier we can make it the more we can we think bill just adopt our services. So that's what we're really trying.
Speaker Change: To do with pricing and bundling and it's done Greg.
Speaker Change: Okay, great. Thank you.
Trevor Young: Next question comes from the line of Trevor Young from Barclays. Please go ahead.
Trevor Young: Great. Thanks, just back to returning to active customer growth later in the year what needs to go right from here for that to play out is it just lapping that last divestiture, which I think maybe lapse and three Q and are we now largely done with that brand rationalization, which I think was mostly in the hosting area or is that kind of an ongoing.
Trevor Young: Initiative and then second question gross margin continues to expand year on year I think it's fourth quarter in a row can you speak to what's driving that is it just a function of the favorable product mix or have there been some underlying savings realized maybe in areas like exited data centers and shifted more workloads to the cloud. Thank you.
Trevor Young: Yeah. Thanks Trevor.
Christie Masoner: On the first part of this.
Speaker Change: Just want to emphasize that our strategy is not around returning to your customer growth per se our strategies around the tracking of the higher intent customers and Thats. What we continue to go after we are lapping the actions that we took over the last year or so.
Christie Masoner: Knowledge.
Christie Masoner: And that will put us on a more comparable base going forward, which adds to that tailwind that we should be returning to positive customer growth here later in the year, but again, we're happy with where we are in attracting that higher end customer who is coming in with a higher average order size is attaching to that second product is retention is strong.
Christie Masoner: And therefore, driving that long term value that we talk about and obviously that gets us to our lessor.
Christie Masoner: On margin expansion and product mix nothing nothing to call out on savings per se, we continuing to favorable product mix. What I always say is we will be around 64% give or take.
Christie Masoner: 100 basis points, depending on the product mix and we continue to fall within that range every quarter, it's a little favorable here or there at times.
Christie Masoner: But at the same it's the same drivers as the product mix since it's software, that's being sold which ones are selling a little bit more than others.
Speaker Change: Thanks Mark.
Speaker Change: Our next question comes from the line of Alan <unk> from Wells Fargo. Please go ahead.
Speaker Change: Thank you so much for the question I would love to dig in.
Speaker Change: Dichotomy, I guess between Aero and Aero plus <unk> plus cross how do you think about what products Kent.
Speaker Change: I guess are in the bundle or in kind of a direct monetization bundle <unk> plus versus what products are given away to customers for free and arrow.
Speaker Change: Yes, just very broadly what arrow does is it provides a basic set of functionality across different jobs to be done to the customer with every domain.
Speaker Change: Overtime any product purchases that godaddy.
Speaker Change: By something you get those Aero services for free to show up and Theyre ready to go when Aeroplan.
Speaker Change: Across those key services plus.
Speaker Change: <unk> provides a higher end SKU, Florida.
Speaker Change: And that's the key difference.
Speaker Change: <unk> allows the customer to try the product and see that it performs and then when they get to a certain level of engagement that triggers for us the idea that this customer like we should be in Europe less so they can expand the job to be done. So that's the key difference between arrow and robust.
Speaker Change: Perfect. If I can maybe just ask one more.
Speaker Change: We purchased $700 million I think that was the largest repurchase in the last several quarters had a function of the pressure on the stock after fourth quarter earnings are there other dynamics to consider any feedback there would be helpful. Yes.
Speaker Change: Yes so.
Speaker Change: The first half of this year, so far we bought back $767 million.
Speaker Change: 2022 authorization program.
Speaker Change: You go back and look we've been opportunistic in the market from period to period and we continue to evaluate it under that same strategy. We will do the same with the 245 authorization here as we go forward, we always say at a minimum we're going to buy back our dilution but.
Speaker Change: But we will continue to be opportunistic in marketing.
Speaker Change: Thanks, so much.
Speaker Change: Next question comes from the line of Ken Wong from Oppenheimer. Please go ahead.
Fantastic Thanks for taking my question.
Speaker Change: I realize you guys haven't seen any any kind of immediate pressures in terms of macro.
Speaker Change: If you think back to kind of past downturn.
Speaker Change: You've talked about potentially being kind of counter macro counter recession in terms of of your business. I guess, how are you thinking about some of the objectives. You guys are focused on as far as one customer growth and then two kind of getting customers to buy more do you think that you can still see that kind of resilience.
Speaker Change: In a downturn.
Speaker Change: Yes, when we look back godaddy is growing pretty much through every kind of macro situation that includes sort of every recession. We've been part of now every recession is different we can look back and predict exactly into the future, but when we think about the business as a whole and our very large customer base of over 20 million customers.
Speaker Change: The key things we look at it is number one the value we bring to our customers versus the price. We charge. There is a tremendous amount of consumer surplus that customers get tremendous value from your domain names from our website from other services, we offer and we're priced competitively on those.
Speaker Change: Beyond that when we look at our opportunity to continue to get high intent customers, which is our strategy and we've been executing it for a few years, we've been very successful getting high end to end customer I think we continue to see that being a strength of.
Of ours and third when you think about our business, we have sophisticated capabilities in terms of pricing what is what we call pricing and bundling that allows us to approach our customer base.
Speaker Change: Specific cohorts and test and make sure that the changes, we're making both optimize growth on the topline and minimize churn for us.
Speaker Change: Yes. It is also true that.
Speaker Change: We mentioned that.
Speaker Change: In tougher economic times, it can be some counter cyclical behavior and we feel that.
Speaker Change: Our offerings are critical situations.
Speaker Change: Need more support.
Speaker Change: It's hard to guess what the future is going to be so we're keeping a keen eye on it but like I said those three things make us feel good about our position and that no doubt our customers today is more suited to operate effectively and efficiently in their markets.
Speaker Change: They need they need more care.
Speaker Change: Sure.
Speaker Change: In this complex landscape. So we feel really good about what we're seeing is a resilient group.
Speaker Change: We continue to monitor but.
Speaker Change: I never want to say, we are a counter recessionary, but we have a tendency to be more mission critical to the micro business in these environments.
Speaker Change: Okay.
Speaker Change: Got it really appreciate the color and then if I could just one more for you Mark I know this quarter it sounds like <unk> held up well.
Speaker Change: Any color in terms of what you might be seeing on that GPU front in April in a post tariff world.
Speaker Change: Yes, nothing to call out we're still seeing the conversion of our existing customer base. We are still seeing it at a good pace, we're seeing our customers.
Speaker Change: Transacting healthily.
Speaker Change: Nothing to highlight at this juncture.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Josh <unk> from Raymond James.
Speaker Change: Go ahead.
Speaker Change: Hey, Josh.
Speaker Change: Much for taking the question if we all can hear me.
Speaker Change: Yes, I wanted to ask.
Speaker Change: Coming back to the pricing and bundling.
Speaker Change: It seems like these third party products is something that you are adding to the what is probably already a pretty big array of tests.
Speaker Change: If you can share on.
Speaker Change: Where youre looking to maybe add third party solutions kind of where they fit in.
Speaker Change: And then second part just as we think through the bookings I think ANC bookings was.
Speaker Change: 14%.
Speaker Change: If you look at it on a two year CAGR right you get accelerated.
I think the comps get a little bit tougher as we go into Q2. So just any puts and takes that we should be thinking about.
Speaker Change: With respect to E&C bookings for the year would be great.
Speaker Change: Yes, I can start and mark.
Speaker Change: On the second part when we think about pricing in one way and one of the advantages. We have is yes, we have a breadth of products, but our platform now allows us to bundle third party products quickly and test them and we're actually testing across quite a broad spectrum of our customer cohorts of customers that may have.
Speaker Change: Products that are in our core segment or ESG.
Speaker Change: Segment, so that those the.
Speaker Change: The number of test is growing and that gives us confidence that we're going to get more winners.
Speaker Change: No specific area to call out again, we're sort of focused the next area versus Y Y area. We actually have a decent set of shortlisted compete on products that were working with and the testing is going well.
Speaker Change: That's really the key communicated with you that we have those more of those.
Speaker Change: A larger set of offerings to put forward and we like what we're seeing.
Speaker Change: Yes on the <unk>.
Speaker Change: Bookings.
Speaker Change: Just a reminder, bookings represents the cash collected in the period.
Speaker Change: Reinforced our reaffirmed our free cash flow targets for the year.
Speaker Change: Our charters going out through 2026, so we feel really good about the progress were making overall as a business and the platform and the one stop shops no doubt Q Q1, this year versus Q1 of last year tough compare it was when president bundling really took off last Q1.
Speaker Change: While we don't guide to bookings.
Speaker Change: We expect revenue growth for the rest of the year in the mid teens and we will continue to look at the progress of the pricing and bundling is performing okay.
Speaker Change: Yes, just to clarify the ANC revenue growth.
Steve: Got it thanks, Steve.
Speaker Change: Our next question comes from the line of Brad Erickson from RBC Patchy go ahead.
Speaker Change: Cool.
Speaker Change: One more on pricing and bundling by not.
Speaker Change: You have a 2024.
Would you say pricing or bundling had kind of a bigger effect or were they kind of the same in <unk>.
Speaker Change: Linda Unpacked does but we get a lot of questions from investors on this.
Speaker Change: Maybe just as you think about what that mix looks like in 2024.
Speaker Change: As we look towards 2025 and the bookings there do you see that mix kind of staying the same or is maybe one stronger than the other and what are kind of the inputs of any mix shift there if there are any.
Speaker Change: Yes.
Speaker Change: Perhaps one way to address this in the past I have talked about how hard it is to build these things separately because the model is to bundle some can create that value for the customer test that value in them.
Speaker Change: The price on it.
Speaker Change: Price is always actually determine who testing given engagement with that with those set of products.
Speaker Change: It's kind of hard to separate but one way to talk about it might be that where we see the best return.
Speaker Change: Long standing lifetime value creation is where we create that value for customers through some sort of bundle.
Speaker Change: And I know thats, not exactly sort of answering right here right now 24 versus 25, but that is a good signal to have that.
Speaker Change: When one of the biggest part of it.
Speaker Change: And as intertwine, well, we see the greater lifetime value.
Speaker Change: Through it hopefully that helps yes.
Speaker Change: Yes, yes, no. That's helpful and then just to follow up on Aero.
Speaker Change: It's always good to hear kind of some of the examples of how you're seeing customers kind of taking advantage of that and hopefully a value accretive way. So maybe any anecdotes or kind of latest observations you can share just in terms of.
Speaker Change: How people are taking advantage in thinking of it in the context of the paywall testing and where you see value creation that you could.
Speaker Change: Eventually monetize thanks.
Speaker Change: Yes.
Speaker Change: As you know, we really track very very carefully the engagement across all of the euro product and if I had to highlight one of the product thats getting a lot of engagement right now we've got our conversations product its something thats cause briefly about once in a while but this is really the application that our customers can download and use to talk to their customers.
Speaker Change: Within this obligation we use AI to actually create responses on behalf of water customers.
Speaker Change: Micro business is deliberate and only one person, but they can sort of talk to a lot of their customers very very easily. So we're seeing some good sort of some really good engagement on conversation and not necessarily specific to conversations with wherever we see that engagement that sort of.
Speaker Change: It gets our attention in terms of that Theres monetization opportunity, especially with something like conversations, which we talked about a large scale.
Speaker Change: One of our customers using it and I have to tell you in this environment conversations is becoming quite popular we were beating the pizza guys refer to them when youre talking about someone's, making pieces during the day and they are still having to book there.
Speaker Change: Next event, while they're making those pieces are P side, Larry takes 90 seconds to make so and then 90 seconds to responding using conversations to their incoming calls so that they can line up there. So that's and we're seeing that more and more in this environment because revenue and making sure people have pipelines is becoming more prevalent for them yes.
Speaker Change: It's great to have conversations with your customers when they have a real business English often using our products, it's really really fun.
Speaker Change: Got it that's great. Thanks, guys.
Speaker Change: Our next question comes from the line of Alexia <unk>.
Speaker Change: J P. Morgan OFC. Please go ahead.
Speaker Change: Hi, This is Alex Smith on for Alexia <unk>. Thank you so much for taking our questions. So first I was hoping to ask about the impressive <unk> growth can you rank order some of the products and contributions which drove <unk> growth to an impressive 9%.
Speaker Change: Yeah, well you talked about it a little bit of a flow out right.
Speaker Change: Remember bookings as always.
Speaker Change: Front end front end of the cycle and Mark who is always at the back end of the cycle. The trailing 12 month revenue number when you really look at our success last year around pricing and bundling the seamless experience even some of the momentum around arrow. Those are all been contributing to bookings growth and now we're rolling into our <unk> growth, which is again.
Speaker Change: It kind of points to the sustainability of the efforts, we're making around going after these higher intent customers. So I would say across the board its the strategy working around the higher intent customers, who were pushing the average order size up which are attaching to that second product faster who is retention rates is getting stronger on our godaddy platform. So so.
Speaker Change: Just the strategy is working.
Speaker Change: That makes a lot of sense Mark. Thank you. So much for a quick follow up I was hoping to hear an update about gabby and how that's being used internally.
Speaker Change: Can you speak to the optimized optimization potential there and do you think gabby would ever become externally facing to your customers.
Speaker Change: Yes Super excited about our continued evolution of technology automation AI within care.
Speaker Change: Abbvie continues to take on more and more jobs to be done. We are very excited about sort of gabby and the conversation about which is the external facing version of it sharing more and more data.
Speaker Change: Sort of immediate plans to make <unk> external just yet.
Speaker Change: Fast evolving space so.
Speaker Change: Hard to say.
Speaker Change: But it will happen in six months I can tell you about tools that we're using AI on just three months ago and now we have new technology, that's like Oh, My God, it's changed amazingly in three months.
Speaker Change: Yeah Super Happy about obviously, we're happy and I'm bullish on AI just being.
Speaker Change: Great enhancements, where productivity within our organization.
Mark: Great. Thank you so much mark.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Chris Zhang from UBS go ahead.
Chris Zhang: Hi, Thanks for taking our question Hi, Chris a question is on the.
Speaker Change: Godaddy agency announcement.
Chris Zhang: It's great to see the announcement last week.
Chris Zhang: As footnoted anecdotal evidence of agencies already using godaddy subscription subscription products just wanted to see if we can talk about.
Chris Zhang: A addressable opportunity for your current product suite and the target customer segment of your product and I guess, if you could provide either revenue or user mix.
Chris Zhang: Being handled already by agencies today, and then also directionally the adoption within your ANC adoption.
Chris Zhang: Managed wordpress your own subscription solutions, and I guess last but not least the.
Chris Zhang: The adoption of Arrow.
Chris Zhang: We understand the ANZ segment may be still the agency space, maybe still kind of already for you guys, but.
Chris Zhang: If you could provide any comments along those metrics that'd be really appreciate it.
Chris Zhang: Yes, I think you're right.
Speaker Change: Question as well.
Chris Zhang: Early.
Chris Zhang: In terms of the agency space for Godaddy.
Chris Zhang: As you know over the last year that our products improve leaps and bounds we have some great offerings in websites with marketing that.
Chris Zhang: We're able to do a certain jobs to be done for those customers. We also have.
Chris Zhang: New and much improved manage wordpress since then.
Chris Zhang: It's just really really good.
Chris Zhang: Yes.
Speaker Change: There's a couple of products out there I think we are still exploring we're still looking at that market. I think it continues to be a great long term opportunity for godaddy to step in that space.
Chris Zhang: But nothing to share yet.
Chris Zhang: Small and just some little exploration here or there that's definitely a great longer term opportunity nothing that we've built into anything we're talking about today are excited about it.
Chris Zhang: Our new customer base for us somewhat.
Chris Zhang: But nothing to call out today.
Chris Zhang: As things get.
Chris Zhang: Get traction will share more.
Chris Zhang: Alright, it sounds great Mark.
Just a quick follow up.
Chris Zhang: Just wanted to see if it could provide an update on <unk>.
Chris Zhang: Bundling efforts this year aimed at some of the specific hosting customers.
Chris Zhang: Yes, so the bundling and pricing and bundling effort. This year does have a focus on presence products. Those presence products do include hosting which sits in the core segment and they include.
Chris Zhang: Marketing and managed Wordpress, which are part of <unk>. So this is the way we approach this testing of the bid based on customer cohort and the customer engagement.
Chris Zhang: The term of the cosmetic and wall products that customer has but thats an area that is that continues to be an area of focus for us.
Speaker Change: Alright, thanks, so much.
Chris Zhang: Yes.
Speaker Change: Our next question comes from the line of Mark <unk>.
Speaker Change: Benchmark Mark. Please go ahead.
Alex Smith: Hey, guys. This is Alex on for Mark Thanks for taking the question.
Speaker Change: I understand you're no longer speaking to <unk>, but as we think about the reduced barriers to service SMB. Your larger clients broadly afforded three AI driven product development inefficiencies, which clearly highlights youre differentiated single signal, how would you characterize or quantify the upmarket opportunity today relative to 12 months ago, especially as narrow index as your top of funnel.
Alex Smith: All exposure away from domains. Thank you.
Speaker Change: Yes.
Speaker Change: We've got our commerce offering thats growing and I've talked about in the prepared remarks, even at this time.
Speaker Change: <unk> offering and sort of expand our one stop shop.
Speaker Change: I would say maybe a couple of years.
Speaker Change: Two years ago, we didn't really have an offering today, we are a very compelling offering for the micro business, we're edging up too.
Speaker Change: Business that so the $1 million or just above that and there's plenty of opportunity above that for.
Speaker Change: For now we continue to be very focused on our existing customers serving their needs very well and continuing to evolve the product suite and keeping the pricing competitive so thats, our current strategy with commerce and <unk>.
Speaker Change: But we're able to grow <unk> in a healthy manner.
Speaker Change: Able to do it.
Speaker Change: I'd say very very efficiently because we have access to our customer base and our customers love working with us and they accept the new offering with delight.
Speaker Change: Got it very helpful. Thank you.
Speaker Change: Thank you.
Brent Thill: Our next question comes from the line of Brent Thill from Jefferies. Please go ahead.
Speaker Change: Hi, Yes. This is John again.
Bill Thanks.
The way to the Unmeet blend to pop up.
Speaker Change: Two questions one on the.
Speaker Change: Yes.
Speaker Change: I think it's the dinner last year.
Speaker Change: Talked about Andrew.
Speaker Change: Maybe also helping with the pros maybe it'll be on the manager what percent I'm wondering if you could talk about how thats going how that some of the year.
Speaker Change: Look professional developer type users are responding to it and then second question was.
Speaker Change: Related to E&C bookings growth.
Speaker Change: It was little bit slower than revenue growth this time.
Speaker Change: I guess did accomplish tougher, but I'm wondering if that's the pattern now in the last year.
Speaker Change: First three quarters was running faster than revenue growth. So if you could tell that dynamic would be great. Thank you very much.
Speaker Change: Yeah on marriage of aircraft that can take that and Mark and Paul on the second part we have a couple of great products that use arrows capability. We have the site optimize where we also have new editor that zero capability allows customers to build a managed wordpress site despite talking to the.
Speaker Change: To the agent about it.
Speaker Change: Sort of like a chatter interest rate. So those products are now in the market.
Speaker Change: This takes a little time Warner.
Speaker Change: Born out in sort of the go to market on these things, but we like the products. We like the starting point is just very very early.
Speaker Change: In that area.
Speaker Change: As you will know that we started with arrow with independent customers.
Speaker Change: We have yourself customer and that with our focus further most of the first year.
Speaker Change: We have the new products that we just showcased at the dinner and we're excited about getting them to more customers.
I think we said on the bookings bookings or prevent the cash receipts, we get in the quarter. We we've talked about our free cash flow targets and reaffirming them for the year. So we feel really good about the days no.
Speaker Change: Q1 bookings compared to Q1 bookings number is tougher than revenue comp. So we have this year.
Speaker Change: We don't guide to bookings, but we expect revenue to grow in the mid teens for AMC.
Speaker Change: So we continue to begin with the progress we continue to be good with the generating for us and we continue to be good with the targets that we put out there.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question comes from the line of Robert <unk> from Evercore ISI.
Speaker Change: Okay.
Speaker Change: Hi, Thanks.
Speaker Change: Great to hear you confirm the sort of services SKU within the customer base overall, but just wondering specifically within the commerce business inside ANC.
Speaker Change: Does that dynamic sort of hold true as well that that that there's a skew towards services businesses within your commerce.
Speaker Change: Business with AMC and then second what are they getting questions on is just related to office 365, or some of the other Microsoft products I think that they.
Speaker Change: They rolled out some price increases in February for consumers, but now it sounds like there was one also for commercial products.
Speaker Change: So just wondering if that was sort of baked into your guide.
Speaker Change: Obviously or if thats incremental that alter your view for 25 bookings. Thanks.
Speaker Change: Therefore, our commerce customers since the largest source of customers into our commerce offering is our base of customers.
Speaker Change: Naturally sort of.
Speaker Change: Have a tendency to skew towards services customers great. So.
Speaker Change: We.
Speaker Change: We feel that.
Speaker Change: There is.
Speaker Change: We feel that there is nothing to sort of say that differentiates our commerce customers from our broader base. So let me put it that way.
Speaker Change: Because we are going to the base were enormous customer and in terms of office 365, we have a long term relationship with Microsoft is the contractual relationships, so that sort of price increases on their site don't directly impact us.
Speaker Change: Again, we've been working with them for a decade now and we're very happy with that relationship.
Speaker Change: Okay, great. Thank you.
Speaker Change: The next question comes from the line is not the time from B Riley. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Great. Thank you.
Speaker Change: Two questions. Please.
Speaker Change: One on gross margin I noticed the Q1 gross margins.
Speaker Change: Dipped a little bit more than as usual.
Speaker Change: I'm wondering if there's anything there to point out and should we expect margins to improve sequentially from here on.
Speaker Change: And the other question I have is around the.
Speaker Change: Digital marketing suite, which you guys introduced last year, what kind of attach rates that you're getting on that product. Thank you.
Speaker Change: Hey, thanks.
Speaker Change: On the gross margin.
Speaker Change: Within the parameters we talked about.
Speaker Change: I would say 64 give or take 100 basis points, depending on the product mix.
Speaker Change: Ed.
Speaker Change: Thesis still holds true for us.
Speaker Change: Any given quarter could shift a little bit based on that product mix, whether it's between core platform ANC or even within the product mix within those separate groups so nothing to call out.
Speaker Change: We still are making progress on our normalized EBITDA margin happy with their ability to expand it and looking forward to hitting our targets in 2026 and is quickly to touch on digital marketing.
Speaker Change: Nothing sure so small doing well.
Speaker Change: Lots to do there over the next few years to make it a bigger bigger part of our offering.
Speaker Change: On the digital marketing suite.
Speaker Change: Think about the bundling and pricing.
Speaker Change: Is there a sizable opportunity.
Speaker Change: Offering.
Speaker Change: How should we be thinking about it longer term.
Speaker Change: Yes.
Speaker Change: Without going into any one product.
Operating suite, obviously is an opportunity for us to bundle differently than we do today, but it has to go through the testing and we have to be able to find the right customer cohorts sort of attached to.
Speaker Change: It is one of the many options that we have.
There are some that are better option than others. We just have to work through the pipeline how that test so it's great.
Speaker Change: Hopefully, we'll call out more over the next few quarters.
Speaker Change: Thanks, so much.
Speaker Change: Thank you that concludes that hanmi attack carrying out a timeline for closing remarks, well. Thank you all for joining and a big thank you.
Speaker Change: Our employees for another fantastic quarter, and we will talk to you next quarter.
Speaker Change: Goodbye.