GoDaddy Reports Third Quarter 2019 Earnings Results
SCOTTSDALE, Ariz., Nov. 6, 2019 /PRNewswire/ -- GoDaddy Inc. (NYSE: GDDY), the company that empowers everyday entrepreneurs, today reported financial results for the third quarter ended September 30, 2019.
"GoDaddy sits in a privileged position relative to a massive opportunity, strengthened by our differentiation in guidance, seamlessly intuitive experiences, and the potential in activating our community," said GoDaddy CEO Aman Bhutani. "Our execution focus is on strengthening our platform, increasing our experimentation, and continually accelerating our product, which lays the foundation to increase value to customers and returns to shareholders for years to come."
Consolidated Third Quarter Financial Highlights(1)
Three Months Ended
Nine Months Ended
September 30, September 30,
2019 2018 Change 2019 2018 Change
(in millions, except customers in thousands and ARPU)
GAAP Results
Revenue $
760.5 $
679.5 11.9% $
2,207.7 $
1,964.3 12.4%
Net cash
provided by
operating
activities(2) $
200.2 $
154.0 30.0% $
561.2 $
431.3 30.1%
Non-GAAP Results
Unlevered
free cash
flow $
191.3 $
175.6 8.9% $
557.9 $
492.7 13.2%
Operating Metrics
Total
bookings $
851.0 $
741.8 14.7% $
2,567.6 $
2,279.1 12.7%
Total
customers
at period
end 19,110 18,267 4.6% 19,110 18,267 4.6%
ARPU $
155 $
145 7.1% $
155 $
145 7.1%
(1) See reconciliation
tables for a
detailed listing
of certain items
included in our
condensed
consolidated
statements of
operations.
(2) Net cash provided
by operating
activities in
2018 includes
cash tax payments
made in
connection with
the gain on the
August 2017 sale
of PlusServer.
-- Total revenue of $760.5 million, up 11.9% year over year, or 13.3% on a
constant currency basis.
-- Total bookings of $851.0 million, up 14.7% year over year, or 15.7% on a
constant currency basis.
-- Net cash provided by operating activities of $200.2 million, up 30.0%
year over year.
-- Unlevered free cash flow of $191.3 million, up 8.9% year over year.
-- Customers of 19.1 million, up 4.6% year over year.
-- Average revenue per user (ARPU) of $155, up 7.1% year over year.
-- Domains revenue of $345.3 million, up 11.6% year over year.
-- Hosting and Presence revenue of $285.0 million, up 8.3% year over year.
-- Business Applications revenue of $130.2 million, up 21.9% year over
year.
-- International revenue of $254.3 million, up 7.8% year over year, or
11.7% on a constant currency basis.
Operating Highlights
-- GoDaddy's Websites + Marketing platform exceeded 1 million paid
subscriptions, reflecting the power and popularity of this rapidly
evolving suite since its debut as GoCentral in 2017.
-- In September 2019, GoDaddy announced InSight, a feature of Websites +
Marketing that delivers specific, tailored, step-by-step marketing plans
for customers across their websites, social media, online reviews and
marketplaces.
-- GoDaddy launched a platform-wide update to its Managed WordPress
platform, compounding its leading position in WordPress with
unparalleled simplicity, proprietary design tools, security, and plugin
automation.
-- GoDaddy announced a partnership with WooCommerce, the most popular and
powerful eCommerce engine available for WordPress, dramatically
simplifying the process of starting and running an eCommerce store.
-- In October 2019, GoDaddy refinanced the entire outstanding principal
amount of its term loans to lower the interest rate margins by 0.25%,
reducing annual cash interest by $4.6 million. The refinanced loans were
issued at a 0.125% discount at original issue, with no changes made to
the maturity date or other terms of the loans.
-- During Q3, GoDaddy repurchased 6.2 million shares of its Class A common
stock in the open market for an aggregate purchase price of $399.6
million. Subsequent to quarter end, GoDaddy repurchased an additional
1.0 million shares of its Class A common stock for an aggregate purchase
price of $59.0 million.
Balance Sheet
At September 30, 2019, total cash, cash equivalents and short-term investments were $990.2 million, total debt was $2,438.6 million and net debt was $1,448.4 million.
Share Repurchase Authorization
GoDaddy today announced that its Board of Directors has approved a new share repurchase authorization to acquire an incremental $500.0 million of the company's Class A common stock, bringing the total repurchase capacity to $541.0 million. GoDaddy may purchase shares from time to time in open market purchases, block transactions and privately negotiated transactions, in accordance with applicable federal securities laws. The new program has no time limit and may be modified, suspended or terminated by the company at any time without prior notice. The amount and timing of repurchases are subject to a variety of factors including liquidity, share price, market conditions and legal requirements. Share repurchases will be funded by available cash and cash equivalents.
Business Outlook
For the full year 2019, GoDaddy expects revenue in the range of $2.98 billion to $2.99 billion, representing full-year growth of 12% versus 2018, and unlevered free cash flow of $730 million to $740 million, representing full-year growth of 18% to 19% versus 2018. GoDaddy expects full-year cash interest payments of approximately $80 million.
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). We do not provide reconciliations from non-GAAP guidance to GAAP, because projections of changes in individual balance sheet amounts are not possible without unreasonable effort, and release of such reconciliations would imply an inappropriate degree of precision. Our reported results provide reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.
Quarterly Conference Call and Webcast
GoDaddy will host a conference call and webcast to discuss third quarter 2019 results at 5:00 p.m. Eastern Time on November 6, 2019. To hear the call, dial (833) 286-5800 in the United States or (647) 689-4445 from international locations, with passcode 5273677. A live webcast of the call, together with a slide presentation including supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, will be available through GoDaddy's Investor Relations website at https://investors.godaddy.net. Following the call, a recorded replay of the webcast will be available on the website.
GoDaddy Inc. uses its Investor Relations website at https://investors.godaddy.net as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor GoDaddy's Investor Relations website, in addition to following press releases, Securities and Exchange Commission (SEC) filings, public conference calls and webcasts.
Forward-Looking Statements
This press release contains forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on estimates and information available to us at the time of this press release and are not guarantees of future performance. Statements in this release involve risks, uncertainties and assumptions. If the risks or uncertainties materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking statements, including, but not limited to: our CEO transition; launches of new or expansion of existing products or services, any projections of product or service availability, technology developments and innovation, customer growth, or other future events; any statements about historical results that may suggest future trends for our business; any statements regarding our plans, strategies or objectives with respect to future operations, including international expansion plans and marketing strategy; any statements regarding our future financial results; and any statements of assumptions underlying any of the foregoing.
Actual results could differ materially from our current expectations as a result of many factors, including, but not limited to: our ability to manage our CEO transition successfully; the unpredictable nature of our rapidly evolving market; fluctuations in our financial and operating results; our rate of growth; interruptions or delays in our service or our web hosting; breaches of our security measures; the impact of any previous or future acquisitions; our ability to continue to release, and gain customer acceptance of, our existing and future products and services; our ability to manage our growth; our ability to hire, retain and motivate employees; the effects of competition; technological, regulatory and legal developments; intellectual property litigation; developments in the economy, financial markets and credit markets; and execution of share repurchases.
Additional risks and uncertainties that could affect GoDaddy's financial results are included in the other filings we make with the SEC from time to time, including those described in "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 as well as those described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2018 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, which are available on GoDaddy's website at https://investors.godaddy.net and on the SEC's website at www.sec.gov. Additional information will also be set forth in other filings that GoDaddy makes with the SEC from time to time. All forward-looking statements in this press release are based on information available to GoDaddy as of the date hereof. GoDaddy does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
Non-GAAP Financial Measures and Other Operating Metrics
In addition to our results determined in accordance with GAAP, this release includes certain non-GAAP financial measures and other operating metrics. We believe that these non-GAAP financial measures and other operating metrics are useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. The non-GAAP financial measures included in this release should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation between each non-GAAP financial measure and its nearest GAAP equivalent is included in this release following the financial statements. We use both GAAP and non-GAAP measures to evaluate and manage our operations.
Total bookings. Total bookings represents cash receipts from the sale of products to customers in a given period adjusted for products where we recognize revenue on a net basis and without giving effect to certain adjustments, primarily net refunds granted in the period. Total bookings provides valuable insight into the sales of our products and the performance of our business since we typically collect payment at the time of sale and recognize revenue ratably over the term of our customer contracts. We report total bookings without giving effect to refunds granted in the period because refunds often occur in periods different from the period of sale for reasons unrelated to the marketing efforts leading to the initial sale. Accordingly, by excluding net refunds, we believe total bookings reflects the effectiveness of our sales efforts in a given period.
ARPU. We calculate ARPU as total revenue during the preceding 12 month period divided by the average of the number of total customers at the beginning and end of the period. ARPU provides insight into our ability to sell additional products to customers, though the impact to date has been muted due to our continued growth in total customers.
Unlevered Free Cash Flow. Unlevered free cash flow is a measure of our liquidity used by management to evaluate our business prior to the impact of our capital structure and purchases of property and equipment, such as infrastructure investments, that can be used by us for strategic opportunities and strengthening our balance sheet. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.
Net Debt. We define net debt as total debt less cash and cash equivalents and short-term investments. Total debt consists of the current portion of long-term debt plus long-term debt, unamortized original issue discount and unamortized debt issuance costs. Our management reviews net debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage and we believe such information is useful to investors. Furthermore, certain analysts and debt rating agencies monitor our net debt as part of their assessments of our business.
About GoDaddy
GoDaddy is empowering everyday entrepreneurs around the world by providing all of the help and tools to succeed online. With 19 million customers worldwide, GoDaddy is the place people come to name their idea, build a professional website, attract customers and manage their work. Our mission is to give our customers the tools, insights and the people to transform their ideas and personal initiative into success. To learn more about the company visit www.GoDaddy.com.
GoDaddy Inc.
Condensed Consolidated Statements of Operations (unaudited)
(In millions, except share amounts in thousands and per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---
2019 2018 2019 2018
---
Revenue:
Domains $
345.3 $
309.5 $
999.3 $
906.0
Hosting and presence 285.0 263.2 833.7 747.6
Business applications 130.2 106.8 374.7 310.7
---
Total revenue 760.5 679.5 2,207.7 1,964.3
Costs and operating expenses(1):
Cost of revenue (excluding depreciation and amortization) 265.0 226.9 756.0 663.5
Technology and development 116.4 112.2 367.6 319.3
Marketing and advertising 79.6 70.1 260.2 212.0
Customer care 86.0 81.8 263.9 238.5
General and administrative 72.2 89.7 270.0 247.1
Depreciation and amortization 49.9 61.3 160.9 176.1
Total costs and operating expenses 669.1 642.0 2,078.6 1,856.5
---
Operating income(2)(3) 91.4 37.5 129.1 107.8
Interest expense (22.9) (25.0) (70.4) (73.5)
Tax receivable agreements liability adjustment - 8.7 (0.1)
Loss on debt extinguishment - (14.5)
Other income (expense), net 5.6 0.7 17.0 1.9
---
Income before income taxes 74.1 13.2 69.9 36.1
Benefit for income taxes 2.7 0.9 7.4 2.4
---
Net income 76.8 14.1 77.3 38.5
Less: net income attributable to non-controlling interests 0.6 0.9 0.8 3.9
---
Net income attributable to GoDaddy Inc. $
76.2 $
13.2 $
76.5 $
34.6
===
Net income attributable to GoDaddy Inc. per share of Class A common stock:
Basic $
0.44 $
0.08 $
0.44 $
0.23
===
Diluted $
0.42 $
0.08 $
0.42 $
0.21
===
Weighted-average shares of Class A common stock outstanding:
Basic 174,820 162,359 173,957 151,015
===
Diluted 181,654 182,392 182,926 180,938
===
___________________________
(1) Costs and operating expenses include equity-based compensation as follows:
Cost of revenue $
0.1
$ $
0.3
$
Technology and development 10.6 14.5 50.9 41.8
Marketing and advertising 2.3 2.4 10.7 7.4
Customer care 1.5 1.4 6.7 3.9
General and administrative 3.2 12.3 37.6 37.2
Total equity-based compensation $
17.7 $
30.6 $
106.2 $
90.3
(2) See reconciliation tables for
certain items included in our
condensed consolidated statements
of operations.
(3) Equity-based compensation expense
for the three and nine months
ended September 30, 2019 has been
reduced by $20.4 million to
correct an immaterial error
related to our accounting for
certain performance-based awards,
decreasing operating costs and
expenses as follows: technology
and development $9.4 million,
marketing and advertising $2.0
million, customer care $1.1
million and general and
administrative $7.9 million.
GoDaddy Inc.
Condensed Consolidated Balance Sheets (unaudited)
(In millions, except per share amounts)
September 30, December 31,
2019 2018
---
Assets
Current assets:
Cash and cash equivalents $
966.7 $
932.4
Short-term investments 23.5 18.9
Accounts and other receivables 29.0 26.4
Registry deposits 22.5 28.3
Prepaid domain name registry
fees 382.7 363.2
Prepaid expenses and other
current assets 60.2 58.1
---
Total current assets 1,484.6 1,427.3
Property and equipment, net 255.4 299.0
Operating lease assets 190.4
Prepaid domain name registry
fees, net of current portion 182.1 183.6
Goodwill 2,932.2 2,948.0
Intangible assets, net 1,108.6 1,211.5
Other assets 14.3 14.0
---
Total assets $
6,167.6 $
6,083.4
===
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $
71.4 $
61.6
Accrued expenses and other
current liabilities 338.9 414.3
Deferred revenue 1,539.9 1,393.7
Long-term debt 19.1 16.6
Total current liabilities 1,969.3 1,886.2
Deferred revenue, net of
current portion 656.2 623.8
Long-term debt, net of
current portion 2,383.1 2,394.2
Operating lease liabilities,
net of current portion 184.0
Payable to related parties
pursuant to tax receivable
agreements 175.3 174.3
Other long-term liabilities 19.4 63.2
Deferred tax liabilities 100.4 117.2
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par
value -
Class A common stock, $0.001
par value 0.2 0.2
Class B common stock, $0.001
par value -
Additional paid-in capital 921.2 699.8
Retained earnings (accumulated
deficit) (155.0) 164.8
Accumulated other
comprehensive loss (98.5) (72.1)
---
Total stockholders' equity
attributable to GoDaddy Inc. 667.9 792.7
Non-controlling interests 12.0 31.8
---
Total stockholders' equity 679.9 824.5
---
Total liabilities and
stockholders' equity $
6,167.6 $
6,083.4
===
GoDaddy Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(In millions)
Nine Months Ended
September 30,
2019 2018
---
Operating activities
Net income $
77.3 $
38.5
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation
and
amortization 160.9 176.1
Equity-
based
compensation 106.2 90.3
Loss on
debt
extinguishment 14.5
Other 12.7 (9.8)
Changes in operating
assets and
liabilities, net of
amounts acquired:
Registry
deposits 5.5 9.5
Prepaid
domain
name
registry
fees (20.1) (23.0)
Deferred
revenue 182.8 168.5
Other
operating
assets
and
liabilities 21.4 (18.8)
---
Net cash
provided
by
operating
activities 561.2 431.3
Investing activities
Purchases
of short-
term
investments (64.1) (6.9)
Maturities
of short-
term
investments 59.9 18.4
Business
acquisitions,
net of
cash
acquired (40.3) (147.2)
Purchases
of
property
and
equipment (71.1) (49.5)
Other
investing
activities (1.8) (10.1)
---
Net cash
used in
investing
activities (117.4) (195.3)
Financing activities
Proceeds received
from:
Issuance
of Senior
Notes 600.0
Stock
option
exercises 46.0 54.8
Issuance
of Class
A common
stock
under
ESPP 16.6 11.9
Payments made for:
Repayment
of term
loans (618.7) (18.7)
Repurchases
of Class
A common
stock (399.6)
Contingent
consideration
for
business
acquisitions (35.5) (9.2)
Financing-
related
costs (13.1)
Leases and
other
financing
obligations (3.1) (4.8)
---
Net cash
provided
by (used
in)
financing
activities (407.4) 34.0
---
Effect of
exchange
rate
changes
on cash
and cash
equivalents (2.1) (1.5)
---
Net
increase
in cash
and cash
equivalents 34.3 268.5
Cash and
cash
equivalents,
beginning
of period 932.4 582.7
---
Cash and
cash
equivalents,
end of
period $
966.7 $
851.2
===
Reconciliation of Non-GAAP Financial Measures and Other Operating Metric
The following tables reconcile each non-GAAP financial measure and other operating metric to its most directly comparable GAAP financial measure:
Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions)
Total Bookings:
Total revenue $
760.5 $
679.5 $
2,207.7 $
1,964.3
Change in
deferred revenue 26.3 16.6 183.6 171.1
Net refunds 64.7 45.9 176.8 145.8
Other (0.5) (0.2) (0.5) (2.1)
Total bookings $
851.0 $
741.8 $
2,567.6 $
2,279.1
Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions)
Unlevered Free
Cash Flow:
Net cash provided
by operating
activities $
200.2 $
154.0 $
561.2 $
431.3
Impact of
discontinued
operations(1) 2.4 23.8
Cash paid for
interest on
long-term debt 13.6 21.3 53.4 61.8
Cash paid for
acquisition-
related costs 2.7 5.5 14.4 19.3
Capital
expenditures (25.2) (13.6) (71.1) (49.5)
Cash paid for
indirect taxes 6.0 6.0
Unlevered free
cash flow $
191.3 $
175.6 $
557.9 $
492.7
(1) Impact of
discontinued
operations in
2018 relates to
cash tax payments
made in
connection with
the gain on the
August 2017 sale
of PlusServer.
The following table details certain items included in our condensed consolidated statements of operations:
Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(in millions)
Operating income includes the
following:
Accrual for legal settlement
expenses recorded in general
and administrative expenses
$
$ $
18.1
$
Acquisition-related expenses
recorded in general and
administrative expenses $
1.5 $
9.2 $
6.7 $
25.7
Equity-based compensation
expense error correction $
(20.4)
$ $
(20.4)
$
The following table provides a reconciliation of net debt:
September 30, 2019
(in millions)
Net Debt:
Current portion of long-term
debt $
19.1
Long-term debt 2,383.1
Unamortized original issue
discount on long-term debt 11.8
Unamortized debt issuance costs 24.6
Total debt 2,438.6
Less: Cash and cash equivalents (966.7)
Less: Short-term investments (23.5)
Net debt $
1,448.4
Shares Outstanding
Shares of Class B common stock do not share in our earnings and are not participating securities. Total shares of common stock outstanding are as follows:
September 30,
2019 2018
(in thousands)
Shares Outstanding:
Class A common stock 171,422 166,928
Class B common stock 1,529 6,319
Total common stock outstanding 172,951 173,247
Effect of dilutive securities(1) 5,291 9,775
178,242 183,022
(1) Calculated using
the treasury
stock method,
which excludes
the impact of
antidilutive
securities.
© 2019 GoDaddy Inc. All Rights Reserved.
Source: GoDaddy Inc.
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