Good afternoon, and thank you for joining us for GoDaddy's Fourth Quarter and Full-Year 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 call, we’ll be referencing both GAAP and non-GAAP financial results and operating and business metrics such as total bookings, unlevered free cash flow, free cash flow, normalized EBITDA, annualized recurring revenue or ARR, gross merchandise volume or GMV, gross payments volume or GPV, 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 investors.godaddy.net or in today’s earnings release included in our Form 8-K filed with the SEC. 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 February 14, 2023 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, here’s Aman.

Thank you, Christie, and thank you all for joining us today. GoDaddy’s mission is to make opportunity more inclusive for all. We achieve this by providing sage guidance and robust tools so our customers can have a one-stop shop with GoDaddy. GoDaddy is delivering tools that help our customers get online and start their digital journey, tools that merge the in-store and online experience for their customers and bring commerce to every surface. This empowers them to focus on running their business. Today, Mark and I will cover our 2022 financial results and key accomplishments in the context of our 3-year plan laid out at Investor Day last February. We will also share more information on our progress, especially in Commerce and the continued opportunity there and managing our P&L in the face of an uncertain macro environment. In 2022, GoDaddy delivered $4.1 billion in revenue, growing 8% on a constant currency basis and over $1 billion in Normalized EBITDA driving a 25% margin. Free cash flow increased 13% leading to a 22% increase in free cash flow per share of $6.20 higher than our 2022 targets. Our strategy, direction and priorities continue to be consistent with our 3-year plan as we work to empower new customers and our large base of existing customers with more of our product offerings, including enabling Commerce on every surface. I will go into a bit more detail in the Commerce priority section but just to touch on it now, in about 18 months, GoDaddy has added incredible new products to our lineup, including OmniCommerce offerings with Websites + Marketing and our newly launched SaaS solution, Managed WooCommerce Stores on WordPress, Payable Domains, Pay Links, Pay Buttons and much more. Our previously announced commerce offerings are now fully in market. And today, we are…

Thanks Aman. Hello, everyone, and thank you all for joining us. Last year, we hosted a comprehensive Investor Day, where we shared our financial goals for the coming 3 years around revenue growth, Normalized EBITDA, free cash flow per share and share buybacks. GoDaddy turned in a strong year against those financial goals, delivering revenue of $4.1 billion; Normalized EBITDA of $1 billion; free cash flow per share of $6.20 and executing $1.3 billion in share buybacks, meeting and exceeding our targets. While revenue growth has moderated in the short-term, we remain confident in our ability to deliver the profitability and cash flow we outlined at Investor Day and feel the strategic steps Aman described earlier will serve as tailwinds for accelerating our pace of growth going forward. We also remain committed to completing our share buybacks authorized by the Board last year. Reviewing our annual financial results, total revenue was $4.1 billion in 2022, growing 7%. Excluding a point and a half of FX headwind, total revenue for the year would have grown over 8% on a constant currency basis. Applications and commerce revenue for the year grew to $1.3 billion, representing 13% growth, and Core platform revenue for the year totaled $2.8 billion, representing 5% growth, both in line with the targets we set last year. International revenue was $1.3 billion for the year, representing 5% growth. Excluding the FX impact, international growth would have been 8% on a constant currency basis. Total bookings in 2022 was $4.4 billion, growing 4%, or 6% on a constant currency basis. Full year unlevered free cash flow grew to $1.1 billion, representing 14% growth, in line with our guide issued last year. Free cash flow grew 13% to $969 million. Free cash flow per share increased 22% to $6.20 per share,…

Thanks, Mark. Sorry about the technical difficulties in the middle of the call, our prepared remarks are posted to investors.godaddy.net for reference. As a reminder, if you’d like to ask a question, please use the raise hand feature on the bottom center of the webinar screen to be added to the queue. Our first question comes from the line of Aaron Kessler from Raymond James. Aaron, please go ahead.

Thank you, and congrats on the year. Maybe just first on the revenue growth, can you just provide a little bit more details how are you thinking about 2023 revenue growth maybe between customer growth and pricing? And does guidance include any maybe price increases, or just your general thoughts on ability to raise pricing in the future as well?

Thanks, Aaron, and thanks for the question. When we look at 2023, we’re looking at a few things that are within our growth rate. One, we’re going to have some headwinds related to the FX in our bookings in 2022 rolling through the first part of the year, and therefore impacting our overall growth. Second to that, we have integrations we’re taking into effect. And we’ve put some headwinds related to those into our numbers. I think when you look at us overall and take into account those, you’re looking at around a 6% annualized growth rate before that, when it comes to pricing always nuanced for us, we have a broad set of products across our customer base, and what we continue to look at opportunities to price within the market, where we can take more – we need to take the price, and we continue to look for opportunities to take market share where we can. And, obviously, there’s a lot of things going on coming into 2023, we’ve assumed that some of the macroeconomic environment that we’ve seen in the second half of 2022 persists throughout the year. And, we think we’ll have some acceleration related to some things that we’ve talked about before around commerce. And, of course, we’re excited about the new Worldpay partnership that we signed recently.

That’s right. And maybe I’ll just add that all of those factors are included in the guide, as Mark would normally say. And we take those actions, especially pricing into account, when we do the guide.

Great. Thank you.

Thank you.

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

Great. Thanks for taking my question. I wanted to just expand on those macro comments a little bit. So if we look at your commentary, it seems like retention rates have held steady. So on the macro side, is it just more in terms of you’re seeing lower demand, and why might that be? And then when we look at those customer addition numbers you gave, how should we think about the net additions for 2022 in terms of rolling that forward? And what should be a reasonable net customer attrition expectation?

Yeah, Matt, I can start with that, and maybe Mark can cover a couple of the items just to step through all those items. Overall, when we look at 2022 retention rates continued to be strong. We talked about 85% plus retention rates for our customers, and we’re very happy with those. What we have talked about through the year was that our customers did see some headwinds. So we did see a little bit of pressure on that number. We also talked a little bit about the gross adds being slightly weaker on the – I think, in the last call. It’s a combination of those factors that really impact the net adds for 2022. Looking into 2023, I don’t know, Mark, if you want to touch on just, we don’t guide to net adds, particularly, but we’re generally assuming the same demand patterns going from 2022 to 2023. And we’re continuing to expect the same strong retention rates for the company, because we’re showing up every day delivering the great products and the great service. So we continue to expect those to continue.

Yeah. We continue to focus on customers with a greater propensity to spend with us and that will be our focus. And as we noted in our stated remarks, our definition of a customer is changing and we’re dealing more with resellers. We signed a partnership with Worldpay that we announced. In certain cases now, through those agreements, we’ll have access to their customers, but they will be our customers. So the ongoing definition and nature of net adds will change and become more broad for us going forward. We’re going to continue to focus on ARPU, continue to focus on being a one-stop shop, and we’re going to continue to focus on making sure that we can provide all the benefits to our customers going forward that will drive our growth.

Great. Thanks for taking my question. Appreciate it.

Our next question comes from the line of Trevor Young from Barclays. Trevor, please go ahead.

Great, thanks. On the decline in Core Platform arrive in the quarter; can you just talk about what areas were maybe stronger or weaker versus your own expectations? Was it greater declines than hosting and security? Or was that aftermarket flowing and converging with core domains? Or is it just the overall softer customer growth, appreciate the comments on the gross add cadence and that sort of thing. And then any color on how fast aftermarket is actually growing, or how large it is as a percent of revenue, just any update there would be appreciated?

Yeah. Perfect. Maybe I’ll start with the drivers within our Core Platform. And consistent with what we talked about coming out of Q3, we are continuing to see pressure on the aftermarket. Overall, it’s still contributing about 6% growth to our revenue today coming out of the year, it is about 10% of our overall revenue. So we’re still seeing progress. They’re just not at the pace that we saw in 2021. And also we talked about in Q3 hosting; we’re seeing impacts around the European market for hosting, especially when you take it outside of the GoDaddy core platform hosting platform. And we continue to see uneven demand and pressure on retention rates in that business. Overall, those are the things that I think have been consistent when we saw Q3 looking at Q4, and we see that going into Q1 of 2023. And, I think, I’m going to have to pause there, because I forgot the second half of the question.

Yeah. You’ve really addressed it with the aftermarket piece, just how large it is. But just to dovetail on what you were answered there, Mark, the brand that’s being sunset. Is that specifically a hosting product, so we should expect that trend to kind of continue perhaps worsen?

Yeah, the brand we’re talking about is Media Temple, and it is a big hosting brand for GoDaddy.

Great. Thank you.

Our next question comes from the line of Clarke Jeffries from Piper Sandler. Clarke, please go ahead.

Hello, thank you for taking the question. Firstly, on the Worldpay partnership encouraging to hear that that arrangement is expected to drive growth in the second half of this year. I was wondering if we get a little bit more of the specifics of the partnership. What does that refill arrangement look like? Will the economics be different for those partnerships, customers, and then any sense on the ARPU opportunity for those customers that would seem like those Worldpay customers might skew a lot higher in terms of size of customer compared to your existing pay?

Yeah, of course, it’s too early to talk about ARPU opportunity, or sort of the specifics of how the relationship would develop. But we’re super excited about the partnership given the reach of Worldpay. And you’re absolutely right, the small and medium sized business, that’s the customer Worldpay is sort of on the bigger end of our micro business customers. But we’re ready with the product and putting our products next to Worldpay reach is going to create an exciting new opportunity in the market. We’re looking, it’s a long-term partnership between the two companies, our teams are excited to work together, we’re starting to see some customers in the pilot, and we’re pretty excited about where this can go.

Yeah. And also the launch for 2023 is in the U.S. only. So there’s a lot more opportunity down the road, and we’re very, very excited about it. We have to hit some milestones that the first half of the year leading into the second half. But when you look at our overall commerce platform, and how revenue comes out of our commerce platform. We have hardware and software sales. We have reseller. We have GoDaddy payments, and then we have the attach-related to Websites + Marketing and Managed WordPress. And Worldpay partnership will hit several of those, we’ll start with hardware and software. It’ll have some reseller impact and it’ll also allow us to attach directly to their customers Websites + Marketing and Managed WordPress. So we think the ability to drive not only ARPU as we go into 2024, but our growth rates around commerce are going to be fantastic, given the nature of this relationship.

Perfect. And if I could just ask one follow-up, Create and Grow ARR slight improvement in year-over-year trends and if I look at it from what you disclosed maybe an improvement in sequential trends. At this point, I’m wondering if I could get your view on where we are in the curve of the macro. Does it feel like we’ve leveled out in terms of the customer trends in e-commerce? Any kind of comment there would be helpful?

Well, it’s – do you want to…

No. Go ahead.

Maybe I’ll go first, and you can jump in as well. I think, none of us have the crystal ball, it’s really hard to sort of predict the macro, but then we continue to see sort of uncertainty around it. And, we’re doing our best to look at the data that we have and look at the indicators in the marketplace. And I’m sure everybody else looks at it as well. But we’re trying to run the business and what we see and we’re pretty happy with our results, and we’re focused on the execution and what we control.

Yeah, I gave up trying to be an economist in this environment, that’s the truth. We have a broad business, too. So we see impacts in different areas. And example, we’ve talked about aftermarket, we’ve seen the impact in this environment around our transactions there. But commerce continues to make progress going into 2023, we’re seeing a lot of taking – talk about the attach-related to Websites + Marketing, when people are coming through the funnel, we’ve continued to see the progress of our existing customer base or 21 million customers converting over to payments. We’re really excited for the first time that we have all the revenue streams in place, and they’re making progress towards our stated objectives, especially as we look at 2024 and beyond. So, the one thing that we continue to evaluate as our business gets impacted in different ways based on different things happening, which gives us protection overall, but something we need to continue to monitor.

Really appreciate it. Thank you very much.

Our next question is from Ygal Arounian from Citi. Ygal, please go ahead.

Hey, good afternoon, guys. So it sounds like you’re still committed to the 15% EBITDA, and then the free cash flow guidance gave, and it sounds like we’re stepping off of the commitment to the revenue growth given the macro business. So first, just thinking about – or can you help us think about the right way to think through revenue growth and where we should be thinking what you guys are thinking. And then on the OpEx in the $100 million savings, any more color you could share on where typically those are coming from which line items?

Yeah, I’ll start, and Aman you could add. So looking at our investment thesis going back to Investor Day, we talked about the revenue growth, Normalized EBITDA, cash flow per share, share buybacks, were our main components. And in looking at the profitability and the cash flow per share coming into 2022, we started the year in forecasting 23% to 24% for the year. We’re exiting the year 26%, so we’re ahead of target on profitability. We’re delivering cash flow per share greater than the $6, we had targeted at $61.20. So those two, we are really happy with our progress. Things like FX and the macro environment hit our bookings. In that booking, especially in our subscription revenue, takes time to roll out. So we’re seeing headwinds leading into 2023 related to that revenue growth. We also with some of the actions we’re taking or building in some headwind on revenue for the integrated brands that we’ve been talking about. So as time goes on, we think we are well positioned to be a double-digit revenue growth company going forward. But it will take time for our bookings to roll to our revenue to get back to the tailwinds versus the headwinds we’re facing coming into 2023. We feel really good about our ability to meet our other objectives around profitability around cash flow per share. And we stay committed to our share buybacks, so a lot of positive there. But we are controlling what we can control and we’re monitoring what what’s going on in the macro environment. Assuming that, we will see a headwind turn into a tailwind as we go into 2024.

I think you covered it all. I think what I might add is that our success GoDaddy is aligned with sort of secular trends around people coming to the internet, people transacting on the internet, people wanting to get their idea out there and be inspired and be an entrepreneur. And that opportunity is huge. And we’re super excited about it and pursuing it over the medium to long term. From my perspective, if the top-line metrics, if those milestones are moving a bit, it doesn’t change our direction, it doesn’t change our strategy, it actually allows us to focus the business and put ourselves in a position where we can grow faster and as the macro improve being a very good position to take share.

Great. And then, on the OpEx kind of where that’s coming from specifically for savings?

So a couple of different areas. One, most of the actions were primarily around our Core Platform segment to give some color of the area. And then, some of the areas in line items include, HR recruiting, marketing, I think, we’re the ones that were targeted during this event. And I think those were the primary things within our operating expense.

Okay. And then last question on the Worldpay partnership there, it’s really interesting. I think it’s the first major retail partnership you guys have done? Is this a shift in strategy to do more things like this, and that become a bigger part of the customer growth and kind of future growth?

Yeah, look, our path is to see GoDaddy terminals in every store, and to see GoDaddy software being used by millions and millions of micro and small businesses, a partnership like Worldpay gives us access to be able to reach a pool of customers faster. So I would say it’s very much aligned to our core strategy. And, yes, as opportunities present themselves to reach our goals or execute that strategy. We’ll look at other opportunities as well.

Okay, great. Thanks.

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

Great. Thank you so much. I just wanted to hit on the restructuring a little bit more. So could you help us understand just the restructuring announcement with the context for your outlook on revenue growth to start to improve from Q4 and Q1 guidance? Is this more about allocation of resources versus an outlook on demand? And then just related, how should we think about reinvestment in the business?

So I’ll start with – hi, Elizabeth. I’ll start with the Q4 leading into Q1, when we look at our growth and the impact, 2022 had on our bookings coming out of Q4. We needed to right size our operating structure to reflect the bookings growth and the impact that was going to have on revenue growth going into 2023. And that’s how we looked at it controlling what we can control from an operating perspective. And monitoring and assuming that the macroeconomic environment we’re in today will persist throughout the year. When it comes to investment in tech and dev, we primarily looked at core platform, and some of the non-strategic brands around hosting as we started to evaluate where we were going to look at productions versus invest. And the flip side of it is applications and commerce continues to be an area we invest in, commerce continues to be a growth driver for us leaving it to 2024. So when it comes to investment in tech and dev, we continue to push towards that. I always use the commentary, there’s two things you need to have to win in the tech industry going forward, you need innovation, and you need to own the customer relationship, we can continue to focus on both of those continue to innovate. Commerce, again, is one of the areas we continue to look for innovation and growth. And obviously, our customer care relationships have been something that has been strength for us going forward. So those two areas continue to be the areas of investment for us.

Great. And then just on the ARPU, given the change in customer count any context for how ARPU grew in 2021 versus the 10% that you just recorded for 2022. And, how should we think about the level of sustainability any opportunity there is to actually accelerate ARPU into 2023, just as you improve through the attach of commerce and payments?

Yeah, we’re absolutely focused on growing ARPU. And, our strategy around bundling more products and something we’ve talked about over many quarters, right, is about bringing new customers and existing customers and exposing them to more and more of our product range. So we’re absolutely looking at opportunities to increase ARPU. And just to touch on your comment over the years, the trends are similar. We’ve had sort of consistent ARPU growth over the years and we’re investing and making the right decisions to continue to see that happen.

Yeah, continued focus on customers with a greater entity to spend in commerce, we think it will be a big opportunity. 85% of our revenue comes from our existing subscription base right now, but as we get more into the transactional nature of the businesses on the one-stop shop, that will create an opportunity for us to continue to increase ARPU.

Great. Thank you so much.

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

Thanks. The increased disclosure is a good thing. So, thanks for doing that and doing it quarterly going forward. You talked about marketing launch for payables domain in the U.S., you provide any more color on that? And then any color on the timing for international Payable Domains enablement? Thank you.

Yeah, thanks, Mark. The marketing launch starts in about 2 weeks with some PR, and you’ll start to see Payable Domains really show up in a lot of our marketing collateral, including the site today, you can get to Payable Domains in fact, I think I’ve talked about it in the past that just given our large size of domains under management, we had to roll this out. So we could support all different kinds of domains. We’re ready with that in the U.S. Now we’re just going to bring it to the site, bring it into our marketing bring it into our merchandising and promotions, so that every customer new and existing is able to see it, and in this start to connect the dots for them so that they start to understand what a Payable Domain is. In terms of international, obviously, we feel this product is very global, just like a domain name Payable Domain with appealing, because just should work everywhere in the world, but no specific timing on international rollout just yet.

Okay. Thank you, Aman.

Thank you, Mark.

Our next question comes from the line of [John Bryan] [ph] from Jefferies on behalf of Brent Thill. John, please go ahead. Hey, John, you’re muted.

John?

Sorry about that, I guess, now unmuted. Thanks. This is John [ph] on behalf of Brent Thill. The first question on the FIS Worldpay, is there when you think about when that is scaled, what sort of impact they might have on gross margin and operating margin?

Yes. So as we think it’s going to start to have impact in 2023, as we hit certain milestones, now it’ll be relatively small within 2023, but it’ll give us momentum going into 2024. We expect it to be accretive to our margins overall, our operating margins. Again, as we start to scale, and the breadth of the relationship is just not about a transactional, but it’s hardware/software leads to other fees, and then leads to our ability to attach Websites + Marketing and Managed WordPress, that should give us the ability to get operating leverage and improve our operating margins down the road. We’re very excited about this. It’s a very broad relationship. Again, it’s focused on the U.S. right now. But we think the opportunity to go global on it overall is going to be exciting moving forward.

Great. Thank you. And then, we’re about halfway through Q1. I’m wondering, what you see in terms of the environment, in terms of the activity and demand trends? And does it feel like it’s similar to Q4? Are you starting to see any recovery at all with new customer base? Thank you.

Yeah, I think, the word that we’ve used in the past continues to work, which is – we continue to see sort of uncertainty around what’s going to happen. There is no large fluctuation. But even when we look at the geographies, when we look at certain products that we sell, we do see trends that are different from what we’ve seen in the long-term. And, right now, in any one geography, a trend can change very, very quickly. But, overall, I’d say over the last couple of quarters were – looking into Q1, we’re seeing some core stability, which is ultimately a good thing.

Yeah, it’s – we still think that the large opportunity is out there for us to go gather, obviously, we’re assuming the macro environment stays muted a bit as we go into 2023. And, again, coming back to one of my previous answers, different parts of our business are impacted differently in this environment, and we continue to see that and monitor that. We’ve talked about aftermarket, we’ve continued to see – not seeing the large transactions related to aftermarket. So that is something that has continued into 2023. On the other hand, we see greater attach around commerce, and we’re seeing the trend continue to grow throughout the year. So we’re excited about things going in to the rest of the year. However, we’re acknowledging that some of these may take some time to develop as we reset our bookings into revenue or under subscription business. Thank you.

Thank you.

Our next question comes to the line of Deepak Mathivanan from Wolfe Research. Deepak, please go ahead.

Hey, guys, thanks for taking the questions. And I just want to ask about the pricing expectations for 2023. There’s a lot of pricing tweaks happening in the market currently given the sustained inflation. Can you talk about philosophy – your philosophy in 2023 whether you see potential to raise prices on any products either on the domain side or on other areas? And then, second question, are you seeing any market share shifts in your core products in domains, or in Websites + Marketing currently?

Yeah. On pricing, Deepak, we continue to have a nuanced approach. As I’ve talked about before, we price our products based on the customer population we serve based on the geography, there is also specific bundling and channel dynamics, your pricing as well. We also maintain that we provide services and products to our customers, where the value we provide is much higher than the price that we have. So we do continue to feel that there’s pricing opportunity. But we’ll continue to be nuanced about it, because we have added a lot of capabilities over the last year for us to be flexible around how we price and how we market and how we sort of move dollars around within between geos and channels to allow us to get the best return on ad spend. So, yes, you’ll see some pricing actions from us, which are all in the guide like Mark says, but you’ll also see some sort of – as you see some increases, you’ll also see in some markets, some decreases, because our testing clearly shows that there’s room to take share there. And that’s sort of our approach to market share overall as well. We’re constantly now testing these things. And when we see an opportunity, we’re going to lean in and take market share, and we’re able to move marketing dollars around quickly much faster, I would say, than we were in the past. So we will lean in there and take market share. And in other markets where we see opportunity to take price, we will take price.

Got it. And then, if I can just ask one quick follow-up, and I apologize if this was asked already. Can you unpack the 2023 revenue guidance a little bit, maybe specifically in terms of how much you expect contribution from things like payments, and some of these other incremental growth areas?

Yeah. We haven’t gotten into the breakdown of each of the contributing areas we’re looking at in our revenue guidance right now is continued growth in ARR around our subscription businesses. Again, a focus on applications and commerce is obviously our higher growing area right now versus our core platform, which we’ve talked about some of the pressures we’ve seen around hosting and aftermarket. We continue to be excited about commerce, we haven’t broken down the dollars between all of that, but we look at that as a contributor. And remember, we we’re looking at some of the – in our subscription business, what I would say, a rollover effect of the FX that will be a headwind for our revenue in the first part of the year. But assuming macro condition stabilizes should become a tailwind as we get to the back half of the year, as well as looking out into 2024. So a lot of moving parts there, we haven’t gotten into this product versus this product type of things. We’re extremely excited about the progress of commerce that’s the one thing we continue to call out. We’re excited about the contribution of Worldpay, and the momentum it gives us going into 2024, again, those around our applications in commerce business. And we continue to see our ability to be that one-stop shop for our customers and be able to long-term opportunity that we continue to pursue.

Great. Thank you. I’ll now hand the call over to Aman for some final remarks.

Thank you, Christie, and thank you all for joining us. As always I’d like to thank all GoDaddy employees for another good quarter, and sort of the focused energy to continue to drive the business and grow the business. We’ll see you next quarter.