GoDaddy Inc. Q3 FY2024 earnings call

• GoDaddy's mission is to empower entrepreneurs, with a strategy focused on customer value and shareholder value. Q3 results showed free cash flow grew 29% YOY, application and commerce bookings up 20%, and normalized EBITDA margin expanded by over 400 basis points.
• Pricing and bundling initiative is a multiyear journey, expanding to more product suite including Core Platform starting in Q4. Seamless experience initiative improved conversion and renewal. Managed WordPress added security enhancements and AI-powered features. GoDaddy Digital Marketing Suite launched.
• Commerce initiative introduced new AI-powered features, with SaaS plans like Point-Of-Sale Plus and Invoicing Plus having positive adoption. Cost optimization via generative AI-powered conversational bot in 20 markets led to double-digit improvement in containment rates.
• GoDaddy Airo continues to gain momentum with nearly 3 million customers discovered, over half engaging, and 40% of websites plus marketing paid subscriptions in Q3 originating from Airo.

For the Applications & Commerce (A&C) segment, bookings grew 20% and revenue was up 16% to $423 million, with a segment EBITDA margin of 46%. The Core Platform segment had 3% growth in revenue and bookings, generating $725 million in revenue, with a segment EBITDA margin of 33%. ARR for A&C grew 15% to $1.6 billion, and for Core Platform grew 4% to $2.4 billion. ARPU for the company was $215, and customer count was $20.7 million.

• Raised full-year revenue guide to $4.545 billion to $4.565 billion, up ~7% at midpoint. Q4 revenue targeted between $1.165 billion and $1.185 billion, ~7% growth at midpoint.
• A&C expected mid-teens revenue growth in Q4 and full-year; Core Platform expected low single-digit growth. Normalized EBITDA margin targeted 31% in Q4, raised full-year normalized EBITDA expectation to 30%. Unlevered free cash flow target raised to $1.475 billion plus, free cash flow to $1.325 billion plus for full-year.
• Plan to increase marketing investment to support Airo enabled solutions launch.

• Market volatility and aftermarket fluctuations can impact performance. Dependencies on technology initiatives like conversational bots and AI for cost optimization and customer experience, with risks if these initiatives fail to deliver as expected.

Q: Thoughts on Applications & Commerce bookings growth tracking in Q4 and relationship to forward revenue growth?

A: Bookings acceleration can be a tailwind for revenue. Timing of product mix (monthly, annual, multiyear terms) affects difference between bookings and revenue. Overall, bookings will outpace revenue by ~2 points, driven by A&C.

Q: Expansion of pricing and bundling into Core Platform?

A: Pricing and bundling methodology is similar, but it will take a quarter or more to see run rate with data. Testing is ongoing across customer cohorts in A&C and Core.

Q: Aftermarket growth in 3Q?

A: Aftermarket is volatile, low single-digit grower over time. Q3 was down slightly with no specific one-time event, just market variability.

Q: Resuming customer acquisition in 2025?

A: Lapping divestitures and integrations, and with product portfolio including Airo, there's opportunity to spend more in marketing to get more customers.

Q: Progress with Airo monetization and paywalls?

A: Airo focuses on discovery, engagement, and monetization. Paywalls are used to get customers to decide on subscriptions during engagement. Airo is a bigger on-ramp for website products, with 40% of websites plus marketing subscriptions originating from Airo.

Q: Bundling initiatives beyond productivity?

A: Pricing and bundling testing is ongoing across products, with focus on cohorts generating best results. Will guide better on return in next quarters as testing continues.

Q: Macro impact on GoDaddy's customer base?

A: Broadly, good traffic and gross adds, with conversion and pricing initiatives offsetting any pockets of weakness. ARPU increasing and attachment rates strong when divestitures and virals are excluded.

Q: Margin impact from increased marketing for Airo?

A: Q3 benefited from favorable product mix. Margins will be affected by product mix, front-loaded benefits from restructuring, and timing of expenses like marketing. Still on track for 31% normalized EBITDA margin in Q4.

Q: Airo discovery and monetization balance?

A: Focus on discovery and engagement first to build a flywheel, then monetization. Discovery is important, but engagement is key for favorable monetization. Monetization experiments ahead of original design, with website paywall doing well.

Q: Reseller program strategic thinking?

A: Reseller program is a natural progression of product capabilities, using APIs to expose products in partner systems, leveraging Airo and expanded capabilities.

Q: Airo launch in international markets?

A: Initial launch in U.S., then expanding to English-speaking markets like Canada, U.K., Australia, with learnings from U.S. applied. Emerging markets still early to comment.

Q: Investment needs in 2025 and marketing guardrails?

A: Marketing investments to accelerate Airo, with guardrails driven by data and machine learning. Focus on kickstarting the Airo flywheel with disciplined ROI measurement. Investor Day framework still intact for growth, margin, and free cash flow targets.

Q: 40% of paid subscriptions from Airo trend and on-ramp sizes?

A: Share from Airo increasing, with 40% of websites plus marketing subscriptions originating from Airo. On-ramp sizes will continue to be expanded with Airo, aiming to make all on-ramps similar through Airo.

Q: A&C EBITDA margin drivers and WordPress event impact?

A: High margin proprietary solutions (like websites with marketing) contribute to A&C EBITDA margin. WordPress event is irrelevant to long-term progress, as GoDaddy focuses on empowering customers with WordPress through magical experiences without technical expertise.