Good afternoon, and thank you for joining us for GoDaddy's Fourth Quarter and Full Year 2021 Earnings Call. I'm Christie Masoner, Senior Director of Investor Relations. And with me today are Aman Bhutani, Chief Executive Officer; and Mark McCaffrey, Chief Financial Officer. [Operator Instructions] On today's call, we'll be referencing both GAAP and non-GAAP financial results and operating metrics such as total bookings, unlevered free cash flow, normalized EBITDA, annualized recurring revenue, or ARR; gross merchandise volume, or GMV; and net debt. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalence may be found in the presentation posted to investors.godaddy.net or on our Form 8-K filed with the SEC with today's earnings release. The matters we'll be discussing today include forward-looking statements, which include those related to our future financial results, our strategies are objective with respect to future operations, including our approach to capital allocation; new product introductions and innovations; and our ability to integrate acquisitions and achieve desired synergies. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. Actual results may differ materially from those contained in the forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, February 10, 2022, and except to the extent required by law, we undertake no obligation to update these statements as a result of new information or future events. With that, here's Aman.

Thank you, Christie, and thank you all for joining us today. At GoDaddy, we remain laser-focused on helping micro and small business owners succeed and grow their businesses. Our customers continue to show resilience and creativity through the pandemic, and our Q4 financial results were a strong end to a strong year. As we look back at 2021, I am excited by the unyielding acceleration in the pace of execution, best demonstrated by the integration of Poynt and the launch of the OmniCommerce offering. And we have a deep trust with our 21 million customers, evidenced by the 65-plus NPS we have in care and that in Q4, more than 60% of customers in the commerce tier of Websites + Marketing chose GoDaddy Payments over other established providers. We delivered strong growth in bookings, revenue and unlevered free cash flow in 2021, with Q4 being GoDaddy's first quarter of $1 billion in revenue. We ended the year with a significant outperformance in aftermarket, driven by sustained market demand. We continue to drive broad-based strength in our Create and Grow suite of products with ARR for them growing 19% year-over-year. And today, we announced a $3 billion share buyback program that Mark will cover in his section. While we delivered strong financial results, Omicron impacted our customers and our employees. In the U.S., the impact started to show late in the quarter as customer demand softened a little bit, and more and more employees were out sick due to the pandemic. As you might expect, the biggest operational impact of the higher absentee rates were in our care organization. As Omicron cases around the world have come down, we have seen better staffing in care and expect the impacts of Omicron to be limited to Q1 2022. Early this year, we…

Thanks, Aman, and hello. I am looking forward to connecting with everyone over the next 2 days. Today, I'll first touch on 2021 full year and fourth quarter financial results as well as an outlook for 2022. Tomorrow, at our Investor Day, I'll provide additional long-term guidance and introduce our new revenue disclosures and metrics. With that, let's move to our 2021 results. Total revenue for 2021 grew 15% year-over-year to $3.8 billion, exceeding our initial guidance on broad-based strength in new and renewal revenue attach and outperformance in our aftermarket. ARPU increased 10% to 182, and we added 600,000 net new customers in 2021 with continued strong retention and renewal rates. Moving on to our quarterly results. GoDaddy achieved a new quarterly revenue milestone of $1 billion, up 17% year-over-year, exceeding our guidance. International revenue grew 13% on a reported basis with approximately 1 point of currency tailwind. Q4 Domains revenue increased 24% year-over-year to $497 million. Aftermarket was the primary driver of the strength in Domains contributing nearly 2/3 of the growth in this line, with the remainder attributable to acceleration in GoDaddy Registry and continued strong new registrations and renewals. Hosting and Presence revenue grew 7% year-over-year to $330 million in the fourth quarter. We continued to drive growth in our Create and Grow products with legacy hosting and security growing low single digits. Q4 Hosting and Presence, Create and Grow ARR surpassed $410 million, growing 19% year-over-year. Within that suite, Q4 Websites + Marketing ARR grew 20% year-over-year. And more specifically, Websites + Marketing Commerce ARR grew 24%, demonstrating our Commerce opportunity in Websites + Marketing. As Commerce becomes more pronounced in our products, we'll continue to evolve this disclosure as we have multiple paths of growth for Commerce and more products in our suite. Lastly,…

Thanks, Mark. [Operator Instructions] Our first question comes from the line of Trevor Young from Barclays.

Great. First, on Domains in 4Q. Obviously, sizable outperformance relative to the commentary last quarter, which I think was pointing to low double-digit growth. What drove the strength in aftermarket as I think the expectation was that there were some tailwinds that started in 4Q of '20 from new inventory unlock that were sort of expected to abate? And then specifically within core Domains, was there better retention or an uptick in new registrations? Or was most of the incremental growth there from the Reputation Protection Solution service that you launched?

Thanks, Trevor, and good to see you. Good to hear from you. Just real quick on the outperformance in looking at aftermarket. We couldn't be more excited at the momentum we're seeing in the marketplace today around our aftermarket. As we exited the year, we saw an uptick in both volume and average deal size and we exited with deals that we're pacing at a great momentum. Just a reminder, it's a transactional business. So the sales cycle is short on those, so our visibility out in any period can be limited. But we're going to talk about it a little bit more tomorrow, but we couldn't be more excited at the momentum as we continue to see great demand in the market related to the platform. On Domains, we saw strength across the board. Customer retention rates remain strong. We also had added benefit from the Registry items that we noted. So when I look at it across the quarter, it's broad-based, clearly driven by aftermarket was the big pickup, but we saw strength across the board.

That's really helpful. And just a quick follow-up, if I may. On the 3% customer growth throughout the year, can you just talk about how that trended in 4Q versus earlier in the year? I think Aman noted some maybe softness later in the quarter related to Omicron. And then have you seen that improvement in customer demand kind of uptick?

Yes, I'm happy to jump in on that, Trevor. Yes, as I noted in the prepared remarks, Omicron did have a slight demand impact. And it has continued going into January as well. But as I said, we expect that sort of be limited to Q1 of 2022 in terms of impact. Just reflecting on the full year of 2021, as you might expect, sort of the growth was a reflection of the sort of outperformance in 2022 -- in 2020, given just the huge forward we had a 1.4 million net new customers in 2020.

Our next question comes from the line of Clarke Jeffries from Piper Sandler. Q –Clarke Jeffries: First one is just maybe a reflection on what's resonating most with those customers that are adopting GoDaddy Payments. A little surprised to see nearly 25% of Managed WordPress customers convert. Just wondering if you had any kind of insights on what was the reason for them choosing GoDaddy? And what method was the sort of outreach or communication with those customers to kind of prompt the conversion?

Yes. Thanks, Clarke. Just to clarify, when we talk about Managed WordPress customers and 25 percentage is the customer sort of signing up for Commerce tier and 25% of them are choosing GoDaddy Payments over the 140 options they have in Managed WordPress today, and we're super excited about it. And in terms of what's driving that, we continue to have a team that is focused on sort of surfacing GoDaddy Payments, making sure customers see it, they understand what we're offering. And of course, we have really competitive pricing in the market. We think we're at a price point that is attractive for our customers that allows us to reach customers in a manner that sort of breaks through the other players, and that's been helpful for us.

Great. And then maybe one follow-up. Certainly encouraging to see the appetite to invest in the Commerce effort, both on the product side and the people side. I was particularly interested in the testing of a higher-end SKU for the commerce tier. I was wondering if you could help frame the sleeve of the market that you see as the opportunity for that higher-end solution, maybe bracket where you would like to go with that SKU?

Yes. We'll actually cover it quite -- in quite a lot of detail tomorrow, so I won't sort of cover it all today. But just as we talked about it a little bit, we're bringing a lot more value to the table with the integration of Poynt. Customer with GoDaddy now can not only sell sort of in their online stores, sell on the major platforms or on social media and in their physical store. We have a number of things like the Commerce Hub that bring it all together and make it very, very simple. So what we're doing is packaging up the best of that into a higher-end SKU. It's actually now available in the U.S. If you go to the website, you may not see. But if you try a few times, you will because it's sort of being AB test right now to see what sort of adoption we get for that higher-end SKU. But I will touch on more sort of related to Commerce and why we're so excited about Connected Commerce tomorrow.

Our next question comes from the line of Jo-Ann Lee from Evercore ISI.

Just the -- I guess follow-up on the kind of the Q1 outlook where you said that you expect the Omnicon impact to be limited in Q1. If you can talk a little bit more about what gives you confidence about that projection? Is there anything that you're seeing that kind of is pointing in the right direction? And if there's any color around the segment growth assumptions you can share? And where we could see upside to that full year guide?

Yes. Thanks, Jo-Ann. Let me take the first part, and I'll turn the second over to Mark. On Omicron what the data we're looking at is both sort of across the world, the number of cases. And you know those charts as well as we do. And a little bit of our experience over the last 2 years, where if you remember a couple of years ago, as COVID started for a couple of quarters, we had talked about the COVID Arc whereas we saw cases increase, we saw sort of shifts in customer behavior and demand. And we think we're seeing something similar here where with the rise of Omicron, we see it in our own employee base, too, especially with care employees. And as cases have come down, our expectation is that things will sort of get back to normal, if you will. And Mark, I'll turn the second part over to you.

Yes. Thanks, Aman. I'll ask it, we're going to talk a lot about segments tomorrow and some of our repositioning of our product pillars. So hang on tight with that question, if that's okay. I don't want to give away the lead story tomorrow. Having said that, on the upside, right, we couldn't have been more thrilled with the upside we saw in the market around aftermarket. And as I mentioned previously, it is a transactional business with a short sales cycle, and we're seeing great momentum in both volume and average deal size because it's transactional, it can provide some upside going forward. Now we don't have line of sight to that, and that's generally how we guide. But in answer to your question, we're excited about the upside there.

Great. If I may, just a quick follow-up on just the marketing. It looks like there's a little bit of marketing leverage this quarter. I know you guys talked about and probably we'll talk more about the marketing efficiency efforts. Is that mostly what's driving the leverage this quarter? Or if you can talk through the marketing spend environment, the CAC trend for Q4 and maybe Q1?

Yes. Let me touch on sort of the approach to marketing overall, Jo-Ann, and then maybe perhaps Mark can just touch on the leverage sort of across the other line items. Our approach to marketing over the last couple of years has been that when the demand was high, we wanted to make sure we lean into that demand. We wanted to make sure the customer we've maintained our share of voice and customers knew that GoDaddy had entered into Commerce. And we'll actually share more on that topic with you tomorrow as well. But as demand came down, we wanted to sort of bring the spend down with it, but not too fast. We didn't want to drag demand down for GoDaddy. So you saw us sort of bring that the demand -- the spend down as the demand came down. And in terms of leverage on the line items, I don't know, Mark, if you could just talk about that for a moment.

Yes. And the great thing about our model and our durable revenue and our ability to generate cash is we can do so great attach, increasing ARPU and get better leverage because our business is sticky. And we continue to see that in marketing. We continue to see that in care. As our relationships grow, our ability to upsell and cross-sell, just get easier and we get better leverage out of it. On top of that, we will continue to get leverage out of G&A. As we look to simplify our footprint, we're investing a lot in moving to the cloud. So again, the thing I love about our operating model is it flexible to agile and it creates a lot of leverage for us to both return cash to our shareholders as well as invest in durable growth.

Our next question comes from the line of Ygal Arounian from Wedbush.

I guess, Aman, you mentioned getting back to normal after COVID. So even after kind of the Omicron wave or outside of that, there's been investor concern just in the space broadly about demand, the demands have been pulled forward that overall demand levels are not just this year, but over the coming years, might be different. We've seen the kind of the new business application numbers come back down to normal. Whether just it's framed within the outlook or just kind of overall, how do you see the normal? What is the new normal? And what should we expect? I'm sure we'll touch on it tomorrow. It's kind of hard to parse out the long term from this. But maybe framed within the guidance, and then I have one follow-up.

Yes. I'll let Mark touch on the guidance, but Ygal, you asked a very hard question. And as you framed it yourself, no crystal ball to really be able to say how the demand looks or how the pandemic continues to impact demand or small businesses. I think the way we're looking at it is that 2020 was just a unique year. It was very, very different. And for multiple quarters, seasonality disappeared from the business, and every quarter was a bit different and very hard to look at. Now we tend to see more and more data points what I'll call normal seasonality is back in the business. And of course, it's going to be very hard to sort of see demand at the 2020 levels as a lot of companies saw. But the way -- when I say normal, what I mean is the normal seasonality pattern a bit more predictable demand that we are used to expecting in our business.

Okay. And then on the follow-up, I just want to make sure I understand the Payments adoption correctly. So are you saying at 60% of new Commerce hubs that are taking GoDaddy Payments? How should we think about that on renewals and kind of what the pace of overall adoption has been or what it can be?

Yes, Ygal, we should absolutely see those as new customers coming to GoDaddy, going through Websites + Marketing or Managed WordPress and the rate at which they're adopting GoDaddy Payments, right? But we -- it's too early to talk about our existing base. We do think we have an amazing product, GoDaddy Payments. We have great pricing, a great brand and there's an opportunity with our existing customers, but it's too early to talk about renewal cycle or things like that. We're literally almost like 6 months into GoDaddy Payments. So it's very, very early.

Okay. We should think in another 6 months is the kind of first big renewal cycle where people might start picking up GoDaddy Payments to previous customers.

When we do have more on it, Yigal, we'll definitely share a little bit with you.

Our next question comes from the line of Elizabeth Elliott from Morgan Stanley.

Congrats on the strong quarter. I don't want to dig in on the monetization per user. We got the customer count for the first time. And in a year and overall ARPU growth was pretty impressive. So I wanted to get some color on what type of uplift you're seeing in spend per customer and any trends to call out in the behavior of how new customers are landing versus kind of the existing customer base expanding?

Yes, I'm happy to jump in first on that, Elizabeth. When we think about overall customer, just to take the last part of your question, new customers, we continue to see -- if you take the sort of 2-year cycle instead of the 1-year cycle, I would say we see very consistent patterns with new customers. And we're particularly happy with the ARPU growth. It is a bit accelerated versus previous years. And we're very happy to see it. Our goal, of course, is to continue to maintain that type of ARPU growth. That's why we have the higher-priced products, the greater offering with Commerce. And we will touch on this tomorrow as well to just show you, again, the lifetime value of the customer as we attach more products with them, especially as we get into Commerce and how that opens up a bit more of the TAM for GoDaddy.

Yes. And I'll just add to that, Elizabeth, good to talk about again. Couldn't be more thrilled with the customer adds and the ARPU and the momentum. Really excited just showing the durability of the model and the strength of it going forward and the predictability of the revenue and the cash flow that we'll have into the future to invest and return to shareholders.

Got it. And then I just wanted a quick follow-up on Omicron that you highlighted, the headwind kind of limited to more Q1. Any color on you guys that Omicron impact to the Q1 guidance? Or any other headwinds, tailwinds like FX to call up to the growth in Q1?

Nothing more to add on the Omicron piece, Elizabeth, versus what I just already shared in terms of what we see in the cases, what we see in our employee base. We have the benefit of having a very large care organization that gets a lot of calls from customers. So we get a little bit, if you will, color on how people are feeling or doing. So that's what our estimate is based on. And in terms of FX, maybe Mark, you could weigh on that.

Yes, absolutely. And I think we're comfortable with the guidance that we're giving out here. We've seen the Omicron hit in January with our care, like Aman mentioned. We think it's limited. Obviously, we can't predict any other variants or other things happening out there for the quarter. But I think we're very comfortable right now with where we're pegging Q1.

Our next question comes from the line of Brent Thill from Jefferies.

Just on use of capital, you're committing to a fairly large buyback in the ASR. I guess when you think about just the overall ability to do tactical M&A, can you give us a sense of is the buyback to the way given how significant that commitment is? Or are you leaving yourself enough wiggle room to do some tuck-in M&A going forward?

Brent, perfect question, right? I would say we're going to get into the capital allocation strategy tomorrow. But one of the great things about our model, just leading up tomorrow is we have the ability to generate a lot of cash because of our predictability and bearability, but also look at other items that can accelerate growth and grow our business over the long term. So as I think I said in Q3, very much and versus an or for us and looking forward to getting the details of how we're thinking about that moving forward tomorrow.

Great. And Aman, when you think about some of the new product features, there's -- you've given -- there's a lot of great innovation. I guess when you think about kind of the 1 or 2 areas that you're most excited by, can you just give us your sense, we understand you love all your products equally, but 1 or 2 is standing out to you?

Yes. I'm particularly excited about our top priority, which is Commerce and bringing Commerce to every surface that we have, Brent. You will see that tomorrow, I have picked at least 1 idea that I'm particularly excited about. So I go into a bit of detail. I won't showcase it now, but suffice to say that just bringing Commerce to every surface of the company is what I'm most excited about.

Our next question comes from the line of Sterling Auty from JP Morgan.

This is Drew on for Sterling. Revisiting the OmniCommerce solution, I was wondering if you could speak to the trends you're seeing in customer behavior more specifically in the split between shopping in-store versus online?

Yes. Thanks, Drew. It's a bit too early to be giving our numbers on the OmniCommerce solution. We did share that we shipped -- we've got over 1,000 orders of point of sale. So definitely, customers are starting to realize that we have this solution and that they're excited to adopt it, but it's too early to be talking about split in terms of what we're seeing. We need a few more quarters of data and before we could talk about that.

Our next question comes from the line of Deepak Mathivanan from Wolfe Research.

Can you hear me?

Yes

So just a couple of questions, and apologies if this was already addressed. On that $40 million outperformance on the aftermarket side in Domains, was the contribution to fourth quarter bookings roughly the same because I mean if I exclude that, it seems like bookings were up like 7%, is that math accurate? Can you help with what are the factors of deceleration, if that's accurate? And then also related to that, on the first quarter guide, how should we think about this aftermarket contribution? And that you have factored into revenues? And then also maybe some color on bookings would be great?

Yes. A couple of things. On -- just on the aftermarket part of it, and I'll try to bridge this from Q4 to Q1. It's a transactional business. So it impacts both bookings and revenue when it's recorded, but does not impact deferred revenue at the end of any given period. So it can provide upside in any given quarter, but does not have a what I'd call deferred revenue impact in future periods. So our visibility into any given quarter could provide variability. On the deferred revenue, I would say we're coming off of 2020 cohorts that were very large and we're coming into 2021 cohorts that are a little smaller. So we're seeing the deferred revenue balances come down based on that trend, but that's generally what you're seeing out there.

Got it. If I can just follow up on that. So should we expect this trend to also continue in 2022?

So Deepak, I would say we're seeing great momentum in 2022 when it relates to continuing to grow our business and provide durable revenue. We are excited about the momentum of the aftermarket, but it's still early stage for us to see that momentum and the variability will have from quarter-to-quarter. We are extraordinarily excited at the volume of the transactions going up, the average deal size going up. So we expect some momentum. But like I said, it can vary from quarter-to-quarter.

Our next question comes from the line of Matt Pfau from William Blair.

First wanted to ask for 2022 if it'd be possible if you could give us some direction on how you're thinking about the growth by your 3 different revenue line items?

Matt, I'm going to give you the -- hey, can we wait until tomorrow. We're disclosing some new information on how we're going to be describing our revenue pillars going forward, and I think that will be able to answer your questions.

Okay. Great. And then to follow up on some of the previous questions about ARPU and customer growth. If we look prior to the pandemic, your overall revenue growth was kind of split evenly between customer growth and ARPU. And then obviously, the last 2 years have been not normal. How are you thinking about the split between those 2 drivers as we move forward here?

Matt, the way I think about it, and Aman can add on to me the way I think about it is we have great opportunities going forward coming out of the pandemic, both to attract new customers as well as upsell our existing customer base. And while we don't get into which one is going to provide more, we think both create an exceptional opportunity for us to continue to grow the business at a durable rate which we've shown over time we can do.

Our next question comes from the line of Naved Khan from Truist.

Can you hear me?

Yes.

So I just wanted to touch on the inflationary environment there in and how we think -- how you are thinking about the additional pressures on your P&L as well as maybe your ability to cut asset on to your customer base? And then secondarily, just on e-commerce, I think last year, Aman, I think you spoke about maybe 1/4 of your new customer kind of customers being an e-commerce customer. Is that still the case? Is that mix holding up? Or -- has it kind of come back down to more normal levels or maybe even gone up?

I'll take the first part of that, and maybe Aman, you can take the second part of that, the inflationary comment. Obviously, we're living in interesting times with inflations, and we saw a lot in the press today. The fallback I always look at it is, hey, we have a very durable model that has been around for a while, and we've seen the ups and the downs, and we've been able to continue to generate growth, continue to move forward. So we'll see what the ultimate impact in the macro is around inflation, but we're confident that we continue to meet our strategic objectives going forward. Example I always used to use or like to use, I think in 2008, our cohort has generated $1.9 billion over the period of time, which is fantastic when you think about that looking back at what that type of macro environment was. So we believe our model remains durable.

And Naved, on the Websites + Marketing, e-commerce customers, I think that's the data point you were referencing. We did share today the Websites + Marketing had grown 20%, but the Commerce SKU had been growing 24%. So we continue to see more customers in -- and that was ARR number. So we continue to see more attention in the Commerce SKU. And as I've shared earlier, we're actually launching a higher-end Commerce SKU, and it's testing in the U.S. now. So in terms of that -- in terms of the overall business, Commerce is becoming a bigger part of our Websites + Marketing business.

Our next question comes from the line of Sunil Rajgopal from Berenberg Capital Markets.

Can you hear me?

We can.

All right. Can you shed some light on what is impacting the gross margins this quarter? And secondly, what does the management think about the recent announcement from Apple turning their handsets into payment terminals?

I'll take the first part of that. And Aman, maybe you take the second part of that. The gross margin this quarter was impacted by aftermarket. It's a lower gross margin point than some of our other products. So the outperformance impacted our gross margin. We still feel very confident in our operating margin and our ability to grow normalized EBITDA given the leverage that those models actually provide for us. But that is -- and the aftermarket did provide some downward pressure on our gross margin.

And Sunil, on the Apple announcement, again, I'll touch on this tomorrow, but we have a firm belief that the commerce use cases are going to appear on every surface that exists. And be tightly coupled to every product that's out there that where it makes sense. So I actually touch on it tomorrow a bit to share at GoDaddy, we believe that Commerce use cases are just going to be Omnipresent on everything we do. So no surprise that Apple is sort of bringing forward capability that allows folks to sort of tap in there just with the icon.

At this time, I'll turn the call back over to Aman. Aman, please to share some closing remarks.

Thank you, Christie, and thank you all for joining us. We look forward to spending more time with you tomorrow at our Investor Day. And I'll just end by thanking all the GoDaddy employees all over the world for another great quarter and all the hard work they put in coming in every day with everything else going on. Thank you very much.