GoDaddy’s domain name revenue grows by 14% in 2017 to over $1 billion

Konstantinos Zournas February 23, 2018 Domain Name News Leave a comment

GoDaddy Inc. (NYSE: GDDY), reported complete financial results for the fourth quarter and year ended December 31, 2017.

GoDaddy’s domain name revenue grew by almost 14% in 2017. Revenue grew from $927.8 million in 2016 to $1,057.2 million in 2017.

“GoDaddy turned in another great quarter – with strong customer, revenue and cash flow growth – solidifying our leadership position as the place people go to start their ideas, grow and thrive online,” said Scott Wagner, CEO, GoDaddy. “We see nice momentum heading into 2018, and are confident that our value proposition to customers will enable us to continue to deliver growth at scale.”

Consolidated Fourth Quarter Financial Highlights

Total revenue of $602.2 million, up 23.9% year over year.
Total bookings of $657.9 million, up 25.4% year over year.
Net cash provided by operating activities of $104.3 million, up 17.1% year over year.
Unlevered free cash flow of $109.2 million, up 42.6% year over year.
Customers of 17.3 million at December 31, 2017, up 17.6% year over year.
Average revenue per user (ARPU) of $139, up 7.4% year over year.
Domains revenue of $281.6 million, up 16.1% year over year.
Hosting and Presence revenue of $228.8 million, up 29.5% year over year.
Business Applications revenue of $91.8 million, up 37.6% year over year.
International revenue of $207.3 million, up 52.9% year over year.

Operating Highlights

GoDaddy’s GoCentral is seeing continued strong adoption, increasing conversion from free to paid, and generating positive customer feedback and rising net promoter scores.
GoDaddy continues to enhance GoCentral’s features, recently launching Online Appointment scheduling, payments via Square, blogging capabilities, and integration with Google My Business, among many other features. GoCentral users can now book client appointments online 24×7, sync with the most popular calendars, get paid easily offline or online, and create powerful online identities via Google.
GoDaddy continued its successful integration of HEG, including the recent launch of localized marketing efforts in multiple European markets.
GoDaddy announced it will acquire Main Street Hub for approximately $125 million in cash plus up to $50 million in potential future earnouts. Main Street Hub provides small businesses with a complete “do-it-for-me” service for managing engagement on the most popular social networks. The transaction is expected to close late in the second quarter of 2018.
GoDaddy appointed Mark Garrett to its board of directors. Mr. Garrett, Executive Vice President and Chief Financial Officer at Adobe, brings deep financial technology leadership to the board.
GoDaddy announced it will host an Investor Day on March 28, 2018 at its Global Technology Center in Tempe, Arizona. Given limited space, interested shareholders and analysts are encouraged to email investors@godaddy.com for an invitation.
GoDaddy completed a secondary offering of 7.2 million shares of its Class A common stock sold by certain of its stockholders at $47.32 per share in December 2017, increasing the publicly available float.

Balance Sheet

At December 31, 2017, total cash and cash equivalents and short-term investments were $595.0 million, total debt was $2,482.3 million and net debt was $1,887.3 million.

Business Outlook

For the first quarter ending March 31, 2018, GoDaddy expects total revenue in the range of $620 million to $625 million. For the full year ending December 31, 2018, GoDaddy expects total revenue in the range of $2.58 billion to $2.61 billion, representing approximately 16% growth at the midpoint versus the $2.2 billion in revenue generated in 2017. The full year revenue outlook includes approximately $65 million to $70 million from HEG in Q1, and contribution of roughly $10 million per quarter in the back half of the year from our recently announced planned acquisition of Main Street Hub. The implementation of the new revenue recognition accounting standard is not expected to have a material impact on revenue.

For the full year 2018, GoDaddy expects unlevered free cash flow in a range of $605 million to $625 million, representing approximately 24% growth at the midpoint versus the $495.5 million in unlevered free cash generated in 2017. GoDaddy expects full year cash interest payments of approximately $90 million to $95 million and cash tax-related payments of $25 million to $30 million.

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). GoDaddy does not provide reconciliations from non-GAAP guidance to GAAP, because projections of changes in individual balance sheet amounts are not possible without unreasonable effort, and presentation of such reconciliations would imply an inappropriate degree of precision. Our reported results provide reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.

GoDaddy Inc. Consolidated Statements of Operations (unaudited) (In millions, except shares in thousands and per share amounts)

	Three Months Ended December 31,				Year Ended December 31,
	2017		2016		2017		2016
Revenue:
Domains	$	281.6	$	242.5	$	1,057.2	$	927.8
Hosting and presence	228.8		176.7		847.9		678.7
Business applications	91.8		66.7		326.8		241.4
Total revenue	602.2		485.9		2,231.9		1,847.9
Costs and operating expenses⁽¹⁾:
Cost of revenue (excluding depreciation and amortization)	202.0		172.1		775.5		657.8
Technology and development	94.5		73.6		355.8		287.8
Marketing and advertising	64.5		57.9		253.2		228.8
Customer care	75.3		58.5		292.3		242.1
General and administrative	84.2		67.4		282.4		221.2
Depreciation and amortization	58.7		38.5		205.8		160.1
Total costs and operating expenses	579.2		468.0		2,165.0		1,797.8
Operating income (loss)	23.0		17.9		66.9		50.1
Interest expense	(23.8)		(14.2)		(83.0)		(57.2)
Loss on debt extinguishment	(0.3)		—		(7.3)		—
Tax receivable agreements liability adjustment	86.2		(3.1)		123.2		(12.5)
Other income (expense), net	0.9		(1.1)		7.0		(1.9)
Income (loss) from continuing operations before income taxes	86.0		(0.5)		106.8		(21.5)
Benefit (provision) for income taxes	12.3		(0.3)		18.9		(0.4)
Income (loss) from continuing operations⁽²⁾	98.3		(0.8)		125.7		(21.9)
Income from discontinued operations, net of income taxes (includes $33.2 gain on disposal, net of tax)	(3.5)		—		14.1		—
Net income (loss)⁽²⁾	94.8		(0.8)		139.8		(21.9)
Less: net income (loss) attributable to non-controlling interests	2.2		1.1		3.4		(5.4)
Net income (loss) attributable to GoDaddy Inc.	$	92.6	$	(1.9)	$	136.4	$	(16.5)
Net income (loss) attributable to GoDaddy Inc. per share of Class A common stock—basic:
Continuing operations	$	0.74	$	(0.02)	$	1.17	$	(0.21)
Discontinued operations	(0.02)		—		0.08		—
Net income (loss) attributable to GoDaddy Inc.	$	0.72	$	(0.02)	$	1.25	$	(0.21)
Net income (loss) attributable to GoDaddy Inc. per share of Class A common stock—diluted:
Continuing operations	$	0.56	$	(0.02)	$	0.71	$	(0.21)
Discontinued operations	(0.02)		—		0.08		—
Net income (loss) attributable to GoDaddy Inc.	$	0.54	$	(0.02)	$	0.79	$	(0.21)
Weighted-average shares of Class A common stock outstanding:
Basic	128,388		87,774		108,779		79,835
Diluted	176,732		87,774		177,054		79,835

___________________________ (1) Costs and operating expenses include equity-based compensation expense as follows:
Technology and development	$	10.5	$	6.3	$	37.1	$	23.2
Marketing and advertising	2.1		2.3		7.3		8.1
Customer care	1.0		0.9		3.6		3.9
General and administrative	7.6		7.0		28.4		21.6
(2) See reconciliation tables for a detailed listing of certain items included in our consolidated statements of operations.

GoDaddy Inc. Consolidated Balance Sheets (unaudited) (In millions, except per share amounts)

	December 31,		December 31,
	2017		2016
Assets
Current assets:
Cash and cash equivalents	$	582.7	$	566.1
Short-term investments	12.3		6.6
Accounts and other receivables	18.4		8.0
Registry deposits	34.7		20.6
Prepaid domain name registry fees	351.5		307.0
Prepaid expenses and other current assets	59.9		24.5
Total current assets	1,059.5		932.8
Property and equipment, net	297.9		231.0
Prepaid domain name registry fees, net of current portion	180.8		172.1
Goodwill	2,859.9		1,718.4
Intangible assets, net	1,326.0		716.5
Other assets	14.2		16.1
Total assets	$	5,738.3	$	3,786.9
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	59.6	$	61.7
Accrued expenses and other current liabilities	469.6		143.0
Payable to related parties for tax distributions	—		10.0
Deferred revenue	1,264.8		1,043.5
Long-term debt	16.7		4.0
Total current liabilities	1,810.7		1,262.2
Deferred revenue, net of current portion	596.8		532.7
Long-term debt, net of current portion	2,410.8		1,035.7
Payable to related parties pursuant to tax receivable agreements	153.0		202.6
Other long-term liabilities	75.0		39.5
Deferred tax liabilities	145.5		—
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value	—		—
Class A common stock, $0.001 par value	0.1		0.1
Class B common stock, $0.001 par value	—		0.1
Additional paid-in capital	484.4		608.3
Retained earnings (accumulated deficit)	87.7		(48.7)
Accumulated other comprehensive income (loss)	(85.7)		2.7
Total stockholders’ equity attributable to GoDaddy Inc.	486.5		562.5
Non-controlling interests	60.0		151.7
Total stockholders’ equity	546.5		714.2
Total liabilities and stockholders’ equity	$	5,738.3	$	3,786.9

GoDaddy Inc. Consolidated Statements of Cash Flows (unaudited) (In millions)

	Year Ended December 31,
	2017		2016
Operating activities
Net income (loss)	$	139.8	$	(21.9)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	205.8		160.1
Equity-based compensation	76.4		56.8
Loss on debt extinguishment	7.3		—
Deferred taxes	(34.5)		(3.8)
Tax receivable agreements liability adjustment	(123.2)		12.5
Domain portfolio cost of revenue	4.4		10.7
Gain on sale of PlusServer	(33.2)		—
Other	8.9		9.8
Changes in operating assets and liabilities, net of amounts acquired:
Registry deposits	(10.1)		(1.9)
Prepaid domain name registry fees	(13.5)		(22.8)
Accounts payable	(8.4)		19.6
Accrued expenses and other current liabilities	32.6		10.0
Deferred revenue	220.0		160.8
Other operating assets and liabilities	3.3		(3.4)
Net cash provided by operating activities	475.6		386.5
Investing activities
Purchases of short-term investments	(28.3)		(10.5)
Maturities of short-term investments	22.6		8.4
Business acquisitions, net of cash acquired	(1,876.9)		(118.5)
Purchases of intangible assets	(52.0)		(1.3)
Proceeds received from sale of PlusServer	447.7		—
Purchases of property and equipment	(83.2)		(61.5)
Net cash used in investing activities	(1,570.1)		(183.4)
Financing activities
Proceeds received from:
Acquisition Term Loan	1,421.4		—
Bridge Loan	531.7		—
Sales of Class A common stock, net of expenses	22.9		—
Option and warrant exercises	61.1		55.0
Issuance of Class A common stock under employee stock purchase plan	17.4		5.0
Payments made for:
Repurchases of LLC Units and distributions to holders of LLC Units	(285.0)		(18.8)
Repayment of Bridge Loan	(596.6)		—
Repayment of term loans	(15.3)		(11.0)
Financing-related costs	(39.7)		—
Capital leases and other financing obligations	(10.4)		(15.1)
Net cash provided by financing activities	1,107.5		15.1
Effect of exchange rate changes on cash and cash equivalents	3.6		(0.1)
Net increase in cash and cash equivalents	16.6		218.1
Cash and cash equivalents, beginning of period	566.1		348.0
Cash and cash equivalents, end of period	$	582.7	$	566.1

Reconciliation of Non-GAAP Financial Measures and Other Operating Metric
The following tables reconcile the most directly comparable GAAP financial measure to each non-GAAP financial measure and other operating metric:

	Three Months Ended December 31,				Year Ended December 31,
	2017		2016		2017		2016

	(in millions)
Total Bookings:
Total revenue	$	602.2	$	485.9	$	2,231.9	$	1,847.9
Change in deferred revenue	10.1		5.2		214.4		163.5
Net refunds	44.9		33.1		170.0		141.9
Other	0.7		0.6		1.9		2.2
Total bookings	$	657.9	$	524.8	$	2,618.2	$	2,155.5

	Three Months Ended December 31,				Year Ended December 31,
	2017		2016		2017			2016

	(in millions)
Unlevered Free Cash Flow:
Net cash provided by operating activities	$	104.3	$	89.1	$	475.6	$	386.5
Impact of discontinued operations	—		—		(3.5)		—
Cash paid for interest on long-term debt	21.5		11.5		80.8		46.5
Cash paid for acquisition-related costs	6.4		2.7		35.8		3.5
Capital expenditures	(23.0)		(18.7)		(83.2)		(61.5)
Cash paid for tax-related distributions	—		(8.0)		(10.0)		(18.3)
Unlevered free cash flow	$	109.2	$	76.6	$	495.5	$	356.7

The following table details certain items included in our consolidated statements of operations:

	Three Months Ended December 31,				Year Ended December 31,
	2017		2016		2017		2016

	(in millions)

Income (loss) from continuing operations includes the following:
Loss on debt extinguishment related to the retirement of the Bridge Loan following the sale of PlusServer	$	—	$	—	$	(5.3)	$	—
Loss on debt extinguishment related to debt modifications	$	(0.3)	$	—	$	(2.0)	$	—
Indirect tax expenses recorded in general and administrative expenses	$	(11.7)	$	—	$	(11.7)	$	—
Acquisition-related expenses recorded in general and administrative expenses	$	(6.2)	$	(10.5)	$	(27.0)	$	(13.1)
Benefit to tax receivable agreements liability resulting from Tax Cuts and Jobs Act of 2017	$	86.2	$	—	$	86.2	$	—
Net income (loss) includes the following:
Gain (loss) on disposal of PlusServer, net of tax	$	(3.5)	$	—	$	33.2	$	—
Benefit for income taxes resulting from Tax Cuts and Jobs Act of 2017	$	7.9	$	—	$	7.9	$	—

							December 31, 2017
							(in millions)
Net Debt:
Current portion of long-term debt							$	16.7
Long-term debt							2,410.8
Unamortized original issue discount on long-term debt							33.0
Unamortized debt issuance costs							21.8
Total debt							2,482.3
Less: Cash and cash equivalents							(582.7)
Less: Short-term investments							(12.3)
Net debt							$	1,887.3

Shares Outstanding
Shares of Class B common stock do not share in our earnings and are not participating securities. Total shares of common stock outstanding are as follows:

	December 31,
	2017	2016

	(in thousands)
Shares Outstanding:
Class A common stock	132,993	88,558
Class B common stock	35,006	78,554
Total common stock outstanding	167,999	167,112
Effect of dilutive securities⁽¹⁾	10,276	13,880
	178,275	180,992

GoDaddy’s domain name revenue grows by 14% in 2017 to over $1 billion

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