Good afternoon, and thank you for joining us for GoDaddy's Second Quarter 2022 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. Following prepared remarks we will open up the call for your questions. [Operator Instructions] On today's webinar 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. Growth rates presented represent year-over-year comparisons unless otherwise noted. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted to our Investor Relations site at investors.godaddy.net or in today's earnings release on our Form 8-K furnished at 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 or objectives 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 forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today August 3, 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, our mission is to make opportunity more inclusive for all. The best moments of my week are when I'm engaging with GoDaddy customers. I am constantly inspired by their grit and determination and amazed by their resilience. Just a couple of weeks ago, I spoke at a small business summit. I've met so many GoDaddy customers there and some who will hopefully become GoDaddy customers in the future. While they're worried about the current economic environment, I found them driven, ambitious, upbeat and passionate about their businesses. One customer walked up to me and started with my life is on GoDaddy. I am inspired to do more for her and all our customers to be better every day. Our relentless focus on innovation, deliver seamless and intuitive technology complemented by human care helping customers grow their businesses and achieve their dreams. Our strategy to attract high-value customers continue to show success best illustrated by our customer retention rates, which have remained greater than 85%. The Q2 results demonstrate our steady operating discipline, 9% growth in revenue and 30% growth in normalized EBITDA despite the challenging FX environment. GoDaddy's strong and diverse business enables us to navigate fluid global demand patterns and inflation concerns from a solid position and we are committed to attention and action on what we control. As in the past, we aligned our marketing spend and other investments with demand signals, concentrating on success-based, disciplined and efficient spending. We actively identify and deploy marketing spend where we find opportunities to deliver long-term growth. Through this plan we create balance across all components of our business without sacrificing our investment in technology and development for future growth. Our strategic priorities have been consistent over the…

Thanks, Aman and thank you, everyone for joining us today. GoDaddy's resiliency and durable top line growth, profitability at scale and robust cash flow are evident in our Q2 financial results and enable GoDaddy to continue to invest to deliver long-term value while returning excess capital to investors in the form of share buybacks. Revenue in Q2 was $1 billion, growing 9% on a reported basis and 10% on a constant currency basis. Excluding the currency impact, our reported revenue would have come in at the high end of our Q2 guidance. Within total revenue international revenue grew 4% on a reported basis and 7% on a constant currency basis. Applications and Commerce revenue grew 15% within the target range of 14% to 16%, driven by continued strength in our Create and Grow products and Email attach. The ARR for Applications and Commerce grew 12% to more than $1.2 billion. And within that the ARR from our Create and Grow products grew 10% to $420 million. Additionally annualized GMV across the GoDaddy ecosystem was approximately $28 billion, growing 12%. Core platform revenue grew 7% delivering at the high end of our 5% to 7% Q2 guidance, primarily due to strength in domain registration, aftermarket and security, offset by a slight decrease in our hosting business. ARR for our core platform grew 5% to $2.3 billion. Q2 bookings totaled $1.12 billion, growing 6% on a reported basis and 8% on a constant currency basis. Applications and Commerce bookings grew 10% and core platform bookings grew 4% on similar growth factors noted for revenue. Normalized EBITDA grew 30% to $258 million. Our 25% margin represented over four points of margin expansion primarily because of expanded gross margins on product mix and reduced marketing spend. The decreased marketing spend is the result of…

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

Great. Thanks. Two if I may. First, what drove the sequential uptick in gross margin? How much of an impact was FX on GM given that maybe a bit more of COGS there, such as like domain pass-through costs and infrastructure are incurred in dollars versus the revenue mix? And then second, on the price testing, Aman, I think you alluded to it. It looks like what we saw in our end both basic premium and Commerce plan saw increases mid-July ranging from like $1 to $3 a month, which translates to some pretty healthy increases on a percentage basis. Could you just clarify are these increases just for new customers versus existing subs? Is it domestic versus worldwide? And what do you expect the weighted average increase to be once this is fully rolled out?

Mark, do you want to take the gross margin?

Yes, no problem. Hey, Trevor, how are you doing? So I would say, most of the gross margin mix was -- or change was based on product mix. The FX impact to that was pretty nominal.

And then on pricing, yes, what you saw Trevor was us testing some changes and those were the price test for Websites + Marketing. In terms of taking that international, as I've shared before, the price testing for us is quite nuanced. We base it on geography, on sort of customer expectations, changing on market share. So you'll see it appear in certain geographies, but not in others.

That's really helpful. And just, Mark, just to clarify on the gross margin. If FX rates stay where they're at today, should we expect some impact on gross margin in the balance of the year from currency?

Yes. So most of the impact on the FX affects our bookings, our costs are pretty much fixed and in line with the US dollar. So I would say, look for most of the FX impact to flow through to bookings and then ultimately lead to revenue with minimal impact on the cost in our structure today.

Great. Thank you.

Our next question comes from the line of Matt Pfau from William Blair. Matt, please go ahead and talk.

Great. Thanks, guts. Aman, you called out retention rates continue to remain strong. You did see some pressure from macro factors. Are there certain areas where you're seeing the macro impact your business more than others, maybe both on the product side as well as on geography?

Yes. Thanks, Matt. Perhaps one thing to call out geographically is that, we see some greater pressure for European customers right now, given inflation or other macro factors. So that's something we're keeping an eye on. But, overall, we have continued to sort of focus our efforts to bring in customers that have high LTV, have great intent to build businesses to stay with us. So that's allowing us to stay with the high retention rates the 85% plus. So we're pretty happy with that overall.

Got it. And then, just a question on the marketing spend. You adjusted debt for demand, should we expect if macro improves and demand ramps back up that then we could see that go back up as a percentage of revenue, or how do you think about that adjusting that dial going forward?

Yes. My broad view on marketing spend is that, we let it trail the demand and the signals we see and we look at both sort of external signals in terms of the Google universe and such, giving us data, but also our customers' data and what we're seeing in terms of return on marketing investment. So what you can expect is, if the demand spikes again, our marketing spend will follow, but we're also constantly improving the success-based metric for our marketing. So you'll see potentially some optimizations that continue to come. And we -- as an example, in Investor Day we shared some improvements in our SEM spend which was all based on improvement rather than just demand. So you'll see a mix of both.

And I'll add, we continue to expect to get leverage out of our marketing line, especially, as our business and our solutions are broader, as we get into more commerce as we get into more aftermarket. As once customers are into entrepreneur wheel, our efficiency and marketing gets better. So over time we expect to get leverage out of that marketing line and continue to be able to expand our normalized EBITDA margins based on that.

Okay. Great. Thanks, guys.

Our next question comes from the line of Brent Thill from Jefferies. Brent, please go ahead.

Thanks. Many of the companies in the peer group around SMB have been calling out higher churn impact from macro. I'm just curious if you can kind of drill in and ultimately give us a sense of what is leaving you more immune to this and what's resonating some of the new product set? And then I had a quick follow-up.

Yeah. Sure Brian. So let's start with the customer, right? GoDaddy's average customer is the micro business. A-third of our micro business customers are solopreneurs. We add to that the fact that the products we sell create tremendous value for our customers and the price we charge leaves plenty of consumer surplus for our customers right? So even if they have to adapt to changing economic environment the products we typically sell to them tend to be the last products they walk away from. So that's why we see sort of the continued high retention rates for customers. But also keep in mind, the more we have focused in terms of attracting the customer, to whom we can attach more and more products and reach higher LTV that sort of limits some of the – should I say, discounting and other techniques that companies might use to attract a lot of customers that may not have sort of good retention rates. But obviously, our strategy is to attract the customers that have high LTV have good retention rates.

And I'll just throw in there. The care relationship becomes extremely important in these times. And having that relationship and the person to go to, to help fix come up with more economic solutions to provide value seems to be and continue to be a winning formula and in these times even more important to that customer base.

Okay. And real quick, I think the Street unlevered free cash flow number is a little bit. Your number was a little bit below what the Street wanted. Was there anything to read into the number this quarter? I know, you're reiterating the long term but anything to comment there relative to the Street?

Nothing. We're really happy with our progress and we continue to work towards our annual goal.

Excellent. Thanks,.

Thank you.

Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead,

Great. Thank you so much. Just as the entrepreneurs while let's get a little bit stretched with inflation and higher interest rates are you guys seeing any change in behavior or willingness to pay up for more expensive tiers or functionality across the portfolio?

Thanks, Elizabeth. So, as you know, the higher premium tier offerings are especially in the case of Website + Marketing with the new Commerce Plus offering is relatively new for us right? And we're just super excited and announcing the launch of our WooSaaS solution, which is also going to be a premium offering. But all of these businesses are very new for us right? We have a base of 21 million customers. We have great relationships in Care. So we're sort of early in the process and not of course we realize that customers feel the pinch of inflation but these businesses are small for us in our core products they just deliver tremendous amounts of value. And one of the things we sometimes say here is people don't give up their dream because of an economic downturn. So they're not going to give up the domain name.

Got it. And then as a follow-up I was hoping if you could provide more color on what you're seeing in terms of those macro impacts on demand. I know Verisign reported a weaker outlook on domains, which raised some questions. And it sounds like churn is holding in pretty well. So just any incremental you could provide particularly on kind of the new customer demand would be really helpful.

Yeah. We're definitely in a fluid demand environment and it's different by geography. I didn't make a small comment earlier about the European demand being weaker. But just to take a step back and look at the customer or the domains business overall if we look at GoDaddy's business it's very broad. Obviously, we sell 400 TLDs. We have a primary market. We have a secondary market the aftermarket business. In both cases, we are leaders in those businesses. We've invested in a corporate domains business. You saw us take on a registry business over the last couple of years and that's grown very well for us too. So when we look at our Domains business we feel it's a much broader business with many levers that obviously we use to continue to grow it compared to any one registry out there that may have one or a few TLDs. So that we think our business is quite different.

Great. Thank you so much.

Thank you.

Our next question comes from the line of Aaron Kessler from Raymond James. Aaron, please our ahead.

All right. Maybe just if you can talk a little bit about the ad environment just kind of hearing with ad pricing kind of coming down. Are you seeing kind of less competition and maybe getting some more efficiencies from a pricing coming down, whether it's Google Search or other areas? And then maybe just talk a little bit about the M&A environment just in terms of how you're seeing valuations get more attractive with obviously public equities coming down as well? Thank you.

Yes. On the sort of ad environment, it's always a competitive marketplace. I would never quite ever call that easy. But as we shared with you at Investor Day we continued to sort of push more success-based improve our abilities with bidding with machine learning to get better and better efficiencies. So, you do see some of that in our marketing leverage improvements. But overall I would just say the competitive dynamics are still the competitive dynamics. Obviously, in certain quarters, it's a bit easier than others, but overall, I wouldn't say there's some huge shift in it yet. And Mark on M&A.

On M&A our approach hasn't changed. We have our capital allocation strategy that we've talked about. We have our M&A strategy that we've talked about has to fit strategically has to work financially and has to be able to be integrated. We'll evaluate anything that comes along those lines. Obviously, we don't talk about anything active in any way shape or form. But we try to balance our decisions for today based on keeping an eye on our long-term objectives and we remain laser-focused on executing our objectives right now and we feel good about having a strong and solid year.

Great. Thank you.

Our next question comes from the line of Mark Zgutowicz from Benchmark. Mark, please go ahead.

Thanks Christie. Just a couple of questions quick ones on Payments and then on macro. On Payments you mentioned that 30% stat of WordPress customers using your Payments. I'm curious how you sort of move that number up and sort of what you see as sort of a trajectory over the next couple of years? And then in terms of the Apple Pay being added was that simply a cart conversion decision, or is there some potential pull in of new subscribers that potentially comes with that. And then on the macro, maybe just two sides of the coin. One those are centered around marketing, but how much of your marketing budget reduction is aligned to just lower absolute demand? And then on the flip side of that in terms of the success that you're seeing upselling products, what is the characteristic of that subscriber that is buying new product? Is it simply duration of a subscriber? Is there -- are there regional tier characteristics? Anything on that side of the coin would be interesting as well. Thanks.

Sure. Thanks Mark. Let me take the Payments and Apple Pay piece and maybe and I can tag team on the other two items. So, on Payments GoDaddy Payments for Managed WordPress, we're super excited to move that number for 25% to 30%. You asked what are the types of things that we do. Customers actually have a choice of -- I think it's 140 options that they can choose from in WordPress. So, we're continually improving the experience for customers. So, it's easier and easier for them to make that choice for them to be able to differentiate between those choices and pick the best choice. And in that -- with those simplification and improvements, we see in this improvement to 30%. In terms of without commenting on sort of specific numbers that we'd be at in a couple of years, what I would say is we're very, very focused on simplifying the customer experience. We're very, very focused on delivering the one-stop shop to our customers whether they're selling in-store on their online store or on social media or the major marketplaces. So, giving that one subscription to our customers and letting them do everything they want to do from one place clearly is our objective. In terms of Apple Pay, so there are a couple of things there. There is the Apple Pay support and the Tap to Pay partnership. I think you're referencing the Tap to Pay partnership. And it's just super early. This just got announced by Apple, we'll happily share more with you as that sort of partnership develops.

And I'll start on the macro and the marketing budget. No doubt demand has been fluid in 2022, but overall it's been pretty solid. We look at marketing more as efficiency and optimization. We do look at things like Aman mentioned demand is down in Europe and we just accordingly. But where we continue to look at the ROI and optimize it based on not only our expanded product offerings, but how successful we are on the entrepreneurs wheel and our ability to attach. So, it's -- like I said, demand is definitely fluid, but the marketing is being efficient and optimized to make sure we're capturing the demand that makes sense. And then, I think there was a -- and I apologize there's a few questions in there. I think we had...

Yeah. Sorry the other question was the other side of that coin in terms of the up-sell the success you're having up-selling products. Just curious, I guess the subscriber characteristics that are absorbing those products? Is it regional? Is it just the duration longer they're with you the more likely they're going to buy?

Yeah. Sure. So the core funnel for us continues to be folks coming in to buy domains and attaching Email, attaching Websites, attaching Websites turning into attaching Commerce and we're laser focused on optimizing conversion through those funnels. We're also very, very focused on tracking the customer that has that intention, right? So if our marketing is intent focused and the conversion funnel is good, that's what allows us to attach more-and-more products. And of course we shared at Investor Day, a lot of good data in terms of penetration for emails for example with our 21 million customer base. We're also creating new products and bringing them to the market. The best example of that is Payable Domains, where you don't have to attach payments to a domain. You buy a domain, you get checkout page that you can customize that's enabled for your domain automatically. So you literally buy the domain and you can start taking payments, right? And that's a bit of a different movement, in that we're not selling the product and then attaching more, we're bundling it in right with the first purchase and literally putting -- and the idea there is put Commerce on every surface we have because that is in a sense the OmniCommerce ethos right, like wherever you're transacting, whatever surface you're creating your Commerce or your Micro Business is enabled in there.

Thank you. Super helpful.

Thank you.

Our next question comes from the line of Mark Mahaney from Evercore ISI. Mark, please go ahead.

Okay. Thanks, Christie. Two questions, one, international revenue growth I think is pretty consistently trailed out of your global growth. Is there anything there that you need to solve for to change that? And then secondly, Mark on share repurchases and you've repurchased what you said, you were going to do on trail or on track or even a little bit faster. So just thinking about it going forward you're generating a lot of free cash flow. What would cause you to even up that range? Like, what would you have to see that would make buying back the stock even more attractive than it's already been? I don't want to -- I'm not asking what more can you do for us, but I guess I am asking that a little bit. You obviously purchased back a lot of stock. You had the ability to purchase more. What would cause you to amp that up faster? Thanks.

Aman, why don't you take the first part of that? And I'll take the second.

Thanks Mark. Yes, we're very happy with the international business. Over nine million of our 21 million customers are outside the U.S. and represent tremendous opportunity as we bring more and more products to that customer base outside the U.S. so, super bullish super happy with it. Some macro headwinds there, of course FX is there and we see some demand challenges too. But structurally, no concern with the international business, continue to be very happy with it, continue to allocate marketing dollars where we see the best return. And over the last two, three years I will say you've seen us move those dollars back and forth a bit. And that has some impact but no -- like super happy with it overall. And Mark for you.

And Mark thanks for pointing out we have a lot of free cash flow. Obviously that's a good thing in the especially in this day and age. We're really happy we've been able to execute on the $1 billion six months in. And we are continuing to balance our decisions today based on what our objectives are and driving long-term value. I'd say the best way to answer that question is, we have a very, disciplined capital allocation strategy. We will continue to look at use of cash. It's an active discussion between us and the Board. And right now okay we're authorized at $3 billion.

Okay. Okay, thank you, Mark. Thanks Aman.

Thank you.

[Operator Instructions] Our next question comes from the line of Naved Khan from Truist. Naved, please go ahead.

Yeah. Hi. Thank you. Maybe I just wanted to just -- can you talk about the price increase that you're testing? You said you're kind of discounting less. Is that sort of the way you're thinking about it? Are you also doing explicit price increases to your existing base of customers? How should we understand this from the outside looking in? And then I don't know if you touched on this already, I joined a little late but maybe just talk about demand trends and monthly -- in terms of just month-on-month, did you see any changes through the course of the quarter? How does July look like? Any color would be helpful.

Yeah. On the pricing, so I think there was a specific example for Websites + Marketing pricing in the earlier question. But let me pull it back, Naved, a little bit and talk about -- remember our pricing is nuanced not just by geographies or customer shifts with macro but also customer populations. So I think in the past you and I have talked about how for certain populations, for example, are the main investor customer, the pricing that we will have will be different from let's say a micro business customer. So we take a look at all of that. That's the testing that happens, right? Then when we find the best balance of that versus share depending on geography, depending on customer population you see us roll those out. And I think Mark can comment on it but those get built into our plan and into our forecast basically. So we're -- it's not a single event type thing. We have a large broad portfolio of products. So we're constantly evaluating and doing tests and seeing where we should take price. And typically we're taking price after we have added more value for the customer, right? We want to continue to push the willingness to pay up and then take price so that the surplus for the consumer continues to be maintained and the customer stay super happy with us. And then I think you had a question about -- the second part was around the overall demand trends. I did comment a little bit about Europe being a bit weaker. But overall month-to-month there are some small shifts depending on different businesses, but we're not seeing a tidal wave change in any way.

Yeah. And Naved, I'll add on the pricing part of it, right? Anything we plan on doing on pricing has been included in our forecast. And we always keep in mind that 85% of our revenue comes from our existing 21 million customers. And we're very, very particular about making sure that the pricing we do is matched up the value we're providing with them and we see it in our retention rates staying at a stronger at higher than 85%.

Got it. Thank you both.

That concludes our Q&A for this session. I'm going to turn the call over to Aman for closing remarks.

Thank you Christie. I'll just say thank you all for joining and a big thank you to all GoDaddy employees around the world for another solid quarter.