Good morning. Thank you everyone for joining us at the Morgan Stanley TMT Conference. My name's Elizabeth Porter. I'm an analyst of the US software equity research team, and I am very, very pleased to have with us today GoDaddy CEO, Aman Bhutani, and CFO, Mark McCaffrey. We are taking audience Q&A, so there'll be some mics going around at the end. Lastly, for important disclosures, please see the Morgan Stanley disclosure website at www.morganstanley.com/researchdisclosures. With that, Aman, Mark, thank you so much for joining us today. Thanks for having us. Great to be here on a Monday morning. Yes. Starting off strong. High energy. Before we just dive into the business, I'd love to get your view on just the macro perspective. With 21 million customers, touchpoints to entrepreneurs, you guys really have a good sense of the pulse. What are you hearing from your customer base in terms of the health of their own businesses and their spending intentions into 2023? Yeah. You know, great place to start with our customers, we always say our customers are resilient. You know, they have to show up. These are micro-businesses. This is not your 50-person company. These are people that have one employee, two employees, five, 10 at the most, and they have to show up in the morning and make it work. What we see from them is definitely some pressure. You know, they're not immune to the economy. They're not immune to, you know, not being able to find people to work, the unemployment rate. But they wanna come in and make a difference. What they see with GoDaddy is a partner that wants to support them to succeed. The products we sell them are low-priced products, and these are products that they keep with them, the domain name, the website, even if they have pressure. Even though we see some pressure, just mathematically, you know, we always talk about 85%+ of our customers are retained with us every year. Our customer retention rates continue to be strong, and they've been strong even as we've seen the macro go up and down, right? We've stayed at that 85%+ customer retention rate. That shows that, you know, these customers believe in the future. They're gonna keep their domain names. They're gonna keep their businesses. They're not shutting everything down. They wanna make it happen. Yes, it's a little bit of a harder time, but they're here to stay. Mm-hmm. Got it. One of the headwinds that GoDaddy has had over the last couple years has just been digesting this pull forward from COVID. You had a time where everybody needed to get online, and that is fundamentally kind of what you guys are enabling. That was obviously more important than ever when businesses were closed physically. You know, it's tough to parse out maybe some of the impact from COVID versus a weaker macro. Mm-hmm. Kind of what inning do you think we're in in terms of when we can start to get back to a more normalized pace of demand? Yeah, there's no doubt that there was a tremendous amount of demand during the COVID period. We still have some of that in Q1, you know, from last year. Ultimately, our business is based on sort of the core secular trends. Those secular trends are around entrepreneurship and people starting their own businesses and having ideas that they wanna bring to the world. It's never been easier to bring your idea to the world than with the internet. Well, today, the largest opportunity in the world for our customers is to turn that idea from content into commerce, to bring their idea to the world and charge for it on the internet. I think we're still super early stages for micro-businesses to do that, so there's plenty of opportunity there. The second secular trend is more and more people being tech-enabled on the internet with products and solutions that are really simple to use. You don't have to be very sophisticated technologically to be able to use these services. You know, that's an area we're playing to. We've expanded our suite of products to provide a one-stop shop and omnicommerce solution. A customer, a very sort of small customer can start with their idea with very little out of their pocket and really get against this large opportunity. You know, for me, yes, it was big year and, you know, over the short to medium term things move around, but the core secular trends have not shifted, and that's what our business is based on, and you see that in the stability and durability of our business too. Mm-hmm. Got it. I'll just say, when you look at our core business, and you look at 85% of our revenue comes from subscription base, you look at our customer numbers, you look at our retention rates, the core business, the secular trend... Mm-hmm. is pretty consistent. Yeah. Despite COVID, despite, you know, macroeconomic environment. Yes, there's pressures. We have a broad business. We have aftermarket that's transactional. We've talked about the volatility in that. We've talked about hosting in Europe. When you look down to the core ability that 85% of our revenue generated from a subscription base in our 21 million customers, that has remained remarkably consistent from cohort to cohort to cohort, and it shows up in our ARPU, right? Coming back to the original question, our ARPU, you know, is $197 this year exiting. Yeah. Continues to go up every year. Yeah. -on a very, very consistent basis. You know, we feel pretty good about the momentum going into 2024. You know, 2023, no doubt some headwinds coming into the year, but, you know, those headwinds will turn into tailwinds, and they're gonna be give a lot of momentum going into future years. Mm-hmm. Got it. And Aman, you mentioned GoDaddy being a one-stop shop. Yep. Historically, you know, it's been known for more domain registration, but you've really built out the portfolio from everything to build, grow with commerce, marketing. You know, I wanted to ask, how successful have you been in attaching these capabilities to your core domain customers, and why is this so important from a customer lifetime value perspective? Yeah. I think the simple math on customer lifetime value is that GoDaddy wants to attract, and we've talked about it over the last two, three years a lot, we want to attract a customer that has a high intent to do something with the domain name that they buy. Because with that high intent comes all these other services. Our customers have been telling us for a long time that, you know, they get the domain with us or maybe the website, but then they go to other providers for other services, and that leads to complexity for them, where they have to sort of manage those different relationships. It is, of course, easier for them to do it with us when they have a great relationship with us. You know, we've expanded our product portfolio from domains and websites into commerce. We're innovating with new products. If you haven't seen it, I'm super excited about a product we call Payable Domains, where a domain name becomes a payment instrument on day one. We're pulling forward that moment in the customer's journey, in the entrepreneur's journey, where they have a payments relationship with someone, and we think it should just come with a domain name. In the U.S., as of this month, anybody that buys a domain or has a domain with GoDaddy is able to enable it as payable, which means a checkout path is set up for them. They have a QR code. They can send a link to someone and accept a payment just because they have a domain name, and then we make money on the transaction on the back. What it does is it enables people to just have an idea and start transacting. In terms of penetration, you know, the commerce products are very new for GoDaddy. Yeah. Penetration, obviously, we're just starting out with it, but we have a history of being able to go into our base and selling product. We shared last year, early last year, that our penetration with email was 25%. You know, most people thought email is kind of a done product. Everybody has email already, and we've continued to go into the base because of the service we provide, because it's a package. It's not just that we say, "Hey, here's email. You should have it." We actually have real reasons to believe. We actually have a service that helps customers get on email, and then when they have a problem, we are there to support them, right? Our care makes a difference, and then customers stay with us. you know, we're using the same template, that same simple, intuitive, seamless experience backed by human care, but now in commerce. Mm-hmm. We always say in the technology industry is you need two things. You need to own the customer relationship, which we own the customer relationship through our Care Guide, and you need to innovate with great products. Having those two allows that base to continue to grow, you know, into the future and achieve those long-term objectives. You have to have both elements. Coming into this, that is something we're very proud of, then we think is a key differentiator for our model. Digging into commerce a little bit more, when we think back, 2021 was really the year about product launches. 2022 was about bringing those products to market and innovating on the go-to-market strategy. Mm-hmm. What's the focus for 2023? Remind us, what are the different revenue streams that you enable from commerce? You know, is 2023 the year that we can start to see those scale? Yeah. Do you wanna take the revenue streams first, and then we'll? Yes. You'll add into that. All right. So excited about coming into 2023, having all of our revenue streams for commerce in market, right? We are connecting with our customers. We're growing our commerce business. We look at it, there's four pillars when we say commerce. We love to talk about GoDaddy Payments, which is something now that is really starting to take off and we're seeing great attach, but that is one of the four pillars. We also have the hardware and software element of it, and when we... I'm sure people will ask about the Worldpay agreement we just announced here recently, but a big element of that is the hardware and software element, which is transactional, but also subscription over a period of time. We have a great reseller business. We don't talk about it much 'cause we're on the back end. We do provide reseller services to other software companies that have to transact. That's a big part of our business and a growing part of our business. With that, we have the attach related to Websites + Marketing and Managed WordPress and WooCommerce. All of that now is in play. When we talk about, you know, "Hey, this was the year to kind of show the progress," that's what we're doing. We're gonna show the progress as commerce is really taking off for us. I think you asked about, you know, what is 2023 about. We have the products lined up on the starting line, and it's really about getting out of the gate as quickly as possible. You know, with our partnership with Worldpay, we'll have tremendous reach into a customer that wants an omnicommerce solution. The product, the hardware will be branded GoDaddy. When they come in and use it will be co-branded GoDaddy and Worldpay. We really are maintaining that relationship with the customer. We'll help onboard, and our Care Guides will, you know, attach other products as we do it. Beyond that, we want commerce on every surface. You know, if you have a domain, it's enabled with commerce. If you, if you're doing Websites + Marketing, GoDaddy Payments already enabled. If you're in the WordPress and WooCommerce space, we have a new product with WooCommerce Stores, Managed WooCommerce Stores, that allows designers, developers to start with that product on day one, right? We've got the products lined up, and now it's go, go. Let's get customers to understand that GoDaddy has this offering and that we offer it at a really good price, and we want. They already love working with us, so let's make it happen. Good. I do want to dig into Worldpay in just a minute, but before we go over there, you know, Mark, you mentioned really strong attach rates to payments, and you guys have quoted about 80% of new customers for Websites + Marketing are picking GoDaddy Payments over another provider. When we think about adoption for GoDaddy Payments, you know, how much of it is new customers when, versus an opportunity to transition some of the legacy customers and their GMV over to the GoDaddy payment rails, and what levers do you have to do that? You can see me smiling a little bit 'cause the answer to both is yes, right? We came into 2022 looking at the attach and the selection process as customers entered into our funnel, and we saw the great results, and we see them to continue to improve. Given options, they're choosing GoDaddy Payments. We also knew with our existing customer base, who maybe had chosen a previous provider because we didn't offer the service at the time, that was gonna be a different muscle. This comes back to owning that relationship with the Care Guides. How is that gonna work? How effective could we be in our existing customer base? What we saw was almost remarkable coming into the year in the sense that because our price point was lower and because we were dealing with micro-businesses, when people were calling up, we were the only ones saying, "We're not gonna charge you more for something. We're gonna save you some money, and here's how we can do it. Give us a little, you know, give us a little interaction here, and we'll get you all set up." People were taking it, right? They liked it. They liked the one-stop shop theory, that now I didn't have to deal with a provider that was separate from, you know, my domain name, from my website. I could deal with one-stop shop. I had a Care Guide now who can help me with all of it. Oh, by the way, this is gonna cost me less. That's a lot of money in a microbusiness when you look at the transaction fees around it. We saw into the year a lot of success. Now keep in mind, we've only launched this in the U.S., so there is so much broader opportunity for us right now. We're focused on the U.S. because that's where we're set up to do. Once that playbook gets established and those muscles get developed on converting the existing customer base, it's going to be applicable to wherever we take this. Yeah. We're really excited. I know I'm smiling about it because it really has just given us. Again, when I talk about the tailwinds, this is part of what we see turning into tailwinds as we go throughout the year. Just, you know, on the metrics around it, we, you know, the funnel is pretty clear. We have to identify those customers in our base. You know, that's been an area of focus for us last year. We feel very good and confident about identifying those customers. We have very good idea of how many customers we have. We have very good idea of the verticals they're in. We have very good idea of how to contact them and reach them and what's attractive for them. You know, from identifying them, it's about being able to convert them. From being able to convert them, it's about activating them. We see good pull through in those metrics, you know, over the last six to nine months on that side as well. You know, there's no doubt that the larger opportunity is in our customer base already. We already have these customers. We don't have to market externally. Mm-hmm. To approach these customers, you know, that's the larger opportunity. We've built pieces of the funnel to be able to sort of go after it very, very aggressively. Great. Going back to the Worldpay announcement. So you guys are the preferred, you know, they're the preferred partner for your omni-channel commerce solution for U.S. small businesses and bank partners. How exactly does the partnership extend the reach for GoDaddy, and how meaningful of a growth contributor could it be for 2023? Yeah, it's, you know, think of Worldpay as a business that has this tremendous reach, reaching into financial institutions, reaching into banks, you know, sort of reaching customers that sell $1 million, $2 million, you know, still on the lower end... Yeah. of sort of maybe the higher end of micro business, but still on the lower end of the customer base. That customer is aware of GoDaddy. That customer knows and, you know, often has had services with GoDaddy. What we're bringing to that reach is a tremendous product, right? What they want is an omnicommerce solution. What they want is a simple, seamless solution that works in the physical store, that works online, that works on social media, that works on major platforms like Amazon and others. We have that offering all packaged up for them, and we will help them onboard the customers, convert them, activate them in our care, you know, mostly activate them because, you know, for the customer, going into a relationship like this is an important thing. They don't want to just buy it online and go with it. For a customer that sells about $1 million, they want engagement. They want to know that somebody's there to do it. Nobody does that better than GoDaddy. Our care offering, where we reach out to people or if people reach out to us, and we give them that human element, we do that very, very well. We do it very efficiently. We've demonstrated over the last few years, as our revenue has grown, we've been able to sort of maintain those costs pretty low. You know, we're extending that capability with Worldpay as well, right? They have the reach, we have the product. Together we can activate. We have co-branded solution. You know, it leads to a lot of exciting opportunity for us over the next few years. Mm-hmm. I don't know if you want to add something. No, no, just to answer your question on 2023, we feel really good about the relationship. We've been in beta with them for a number of months now, so we feel good about where we stand. We have some milestones to deliver this year. Going into the back half of the year, we think it's well within our reach to deliver those milestones based on the progress we've made. Great relationship. We think it'll be a great tailwind going into 2024, but minimal impact on 2023. I'm trying to make sure we you know, acknowledge the macroeconomic environment, our ability to hit those milestones, all that is, you know, considered, but the driver really is the momentum going into 2024. Gotcha. And again, this is just a U.S. launch. Yep. Yep. I wanted to move a little bit over to competition. I think we've seen that many peers in the web building space have been increasing prices. Do you view that as an opportunity for you to similarly raise prices, or are the changes at peers an opportunities for GoDaddy to be able to take more market share? You know, it's a mix of both. We have a global business, and we have multiple products, and the way we approach price is nuanced. We typically approach price on renewal. We typically don't push it into new, and we base it on the customer population that we're serving, but also geography and a couple of other factors. I can tell you, even in the last six months, we've seen opportunities where we, you know, in spite of what's happening in the world, we lowered prices, and the experiments clearly showed that we were able to get a good customer with high lifetime value and many more of them because of how we price that product in that market, right? You'll continue to see that testing from us. You'll continue to see us raise prices where, you know, we especially in some of the more mature markets, you'll see us raise prices, but then we'll continue to be very competitive priced in other markets and to certain customer populations where we have share to take. You know, that's what we're gonna keep doing. Yeah, it's a continued balance between making decisions in the short term, but keeping an eye on the long-term opportunity for us. The ability to generate LTV is one of our biggest advantages. Very nuanced. You know, we generate a lot of free cash flow. I had to get that in there, just to be clear. Very profitable. That allows us to be opportunistic on how we treat pricing, because we're not chasing anything. We're not chasing profitability. We generate the cash flow, we generate the profitability, so we can look at where it's an advantage to take market share versus an advantage to take price. And make the best of it. We do thank competition for announcing price changes beforehand to the world, 'cause it also allows us to tactically look at, okay, what's coming? Is it an opportunity? How can we react to it? There are pricing actions. I don't want to suggest there aren't. There are pricing actions that we're taking, and it's baked- Absolutely -into the guide where we feel, you know, pretty much in advance confident about where we wanna take price in certain areas, and we build that in. Gotcha. Mark, you guys just recently reported your Q4 results, where constant currency revenue and bookings grew about 4% and 2% respectively. When we look back at customer count, it grew about 1% for this past year. When we pair that with the forward guidance for 2023 revenue growth of about 5%, kind of what gives you that confidence to see some, you know, acceleration from some of the recent trends that we saw in Q4? Yeah. It's hard to be an economist in this macro environment, but we feel pretty good about where we stand and the momentum we have. We acknowledge the headwind. If you look at how we're exiting the year, and acknowledging we have about 2% headwind, you know, related to what I call now FX hangover. Reminder, FX hits our bookings, but then rolls out into our revenue over a period of time. To the extent that's still rolling out in the beginning of the year, that becomes a headwind for us that will ultimately become a tailwind. Mm-hmm as this normalizes. Plus the actions we took in Q1. We did take some, you know, headwind around the revenue related to integration with some of our platforms. You start to talk about, you know, coming out 4% or 5%, adding 2% of headwind, you're already at 7%. Momentum around some of the business that we've talked about, we feel pretty good about where we are and our ability to. Mm-hmm you know, get back to double-digit growth. We feel very confident we can get back there. The other back of the envelope for anyone who hasn't done this already, I'm finding a lot of people are doing it, is if you look at our existing customer base, 21 million customers, you look at our ARPU of $197, and then you take what would it take, assuming no customer adds, to get to our growth rate, it's not that far of a stretch. We've tried to position this assuming that the macroeconomic environment will continue that we saw coming out of Q4, but the headwinds naturally become tailwinds going into the back half of the year. Mm-hmm. Okay. You mentioned kind of confidence and a double-digit growth rate on a revenue side, kind of longer term. Don't think anybody knows when we're gonna get through some of these macro headwinds. If we had to unpack some of the drivers of that double-digit growth rate, kind of where do you have some of the most confidence, or where do you see the most opportunity when you parse out things across ARPU, kind of customer addition, the impact of attaching more commerce and payments? Yeah. I think our core priorities as a business continue to be, number one, commerce, which is driven mostly by presence. We continue to see a lot of opportunity in the commerce area. Mark talked about the four pillars of revenue. You know, if you look at new relationships like Worldpay, if you look at new WordPress or WooCommerce solution, Payable Domain, these are all products that, you know, if you try to do math on Payable Domains with GoDaddy having 84 million domains under management, and you decide a very small% of those customers decide to use the payment side of it, the math adds up really quickly. Even though we're not at a point where we can do real math and put it out there for folks, these are very large TAMs that we're going after, and that's just in enabling commerce on our core offering. You know, in terms of second priority around WordPress and serving the designers and developers, you know, WordPress continues to be the largest content solution on the internet, and we are a large part of it, but we have been a large part of it on the hosting side and the unmanaged side. There's a large opportunity to bring these people over onto the managed side, and we're doing a lot of good work there and seeing some early results there too. We're going to continue to innovate in the domains business. That's not going to stop. You know, we are the leader in primary domains in the world. We've built an aftermarket business. We connected the primary market and the aftermarket over the last two, three years in a completely new way, and that's led to great growth in the secondary market. On top of that, we've built a brokerage business. We now have a corporate domains business where we're working with enterprises. You know, we bought a registry business and that's continued to grow well. You'll see us continue to use sort of our expertise in the domains business to look for new opportunities to serve new customer bases, to serve internationally as an example. We've done very well there. You'll see us push in all of those areas. As Mark said, you know, as some of the headwinds start to become tailwinds, you know, it doesn't take a lot, given our base, to push that revenue number up. It. I have to stress this point, because we talk about domains and innovation. You said everything perfectly there. We talked about Payable Domains in the commerce sense and as a growth driver, but sometimes I think it gets lost. We've innovated the domain space by making all the domains payment-enabled. We're the only one in the world who can provide that has the technology to do that. Now, we're just doing it in the U.S. right now, right? Because that's where we're launching payments. Think about the innovation around domains by allowing a domain to be able to accept payments for anybody who wants it. That to us is just changing the domain space in and of itself. We'll be the only ones out there who can do that. Mm-hmm. Yep. I have a GoDaddy domain, so I'm looking forward to enabling the Payable stuff. Well, let's get it enabled. Let's get enabled. Let's get it. Try it out a little bit. I'm gonna ask another question, and then we'll open it up to the audience if you have any questions, and Mike will go around. Obviously macro is a tough environment right now, but you guys are kinda controlling what you can via the cost side and taking actions to protect profitability. Last quarter, you noted about $100 million in cost reductions as well as the 8% reduction in global workforce. Can you just talk a little bit more about where these reductions are coming from? Do you feel that you have the right cost structure right now? You know, and if things do get tougher, like, do you have incremental levers that you can pull? Do you wanna start? I can start. No, I'm Look, yeah. So the action in Q1 that we're taking, that we talked about for Q4 earnings, and just to put it in perspective, we're very focused on our core platform, integrating certain acquired brands into our core GoDaddy technology stack. With that allows us more efficiency in our core platform operations and allowed us to look at, you know, really driving profitability and being in a place where we should be related to that. At the same time, we're turning and we're investing where we think our growth levers are around applications and commerce in the commerce end of the business. A lot of this is about, you know, really refocusing into where we think are gonna be the growth drivers going forward, and making sure we have that infrastructure in place to meet those needs. Now, if going back to Q3, Q4, you know, we've said this, we will continue to take actions necessary to make sure we're in a right place to manage through this appropriately. We believe we're in the right space now, we can't predict the future, so we will always look at the macroeconomic environment. We did things like the AWS contract in Q3, which is important to control our cost structure. We're looking at how our data centers can be more efficient. We're constantly looking at driving that efficiency. It's just, it has never been and will not stop here, but it'll never just be a one-time event for us. That is something just profitability, cash flow, we think it creates an opportunity for us, and we'll continue to manage through that aggressively. I think the thing I'd add, you know, without sort of trying to get about different states in the future, you know, my view is that as we did these actions, we also looked at it, how do we provide a better service to our customers? Even, you know, the brand integrations that Mark talked about, you know, we're looking at all of them as if we take X amount of actions and we lower the cost, are we still providing that high level of service? In fact, you know, for some of those brands, can we provide a better level of service because we can leverage more of GoDaddy core, if you will, into these brands. You know, to me, that's a two-step process. You know, we want to continue to make sure that we're always thinking from the customer back, we're always thinking from the customer's perspective because that is what drives our long-term growth. Again, 85% of our revenue comes from our base. We want, you know, to make sure we maintain these relationships with these customers, right? At the same time, we'll continue to look for ways to serve them at a lower cost, but that same high level of service. You know, if folks ask us about it, we'll give you examples, you know, of how we've used technology or different ways of working or having, you know, how our global workforce is organized for us to be able to do that successfully. Great. Do we have any questions? Definitely keep going. We have about two minutes left. I wanted to hit back on the growth algorithm that you laid out at the Analyst Day, the 10% revenue CAGR, 15% EBITDA CAGR, and 20% free cash flow CAGR. Obviously, top line piece has shifted a little bit, just given the macro. Can you just give us the puts and takes around the updated thinking around that growth algorithm? Yes, the 10, the 15, the 20, the Investor Day thesis, we, you know, we believe the long-term opportunity, and our strategy still is there. We've been very open. The one area around growth because of the macroeconomic environment, FX pressures, you know, whether we achieve the first end of that 10% was a little bit dependent and out of our control, we continue to believe we will get there. The 15% and the 20%, if you look at what we did in 2022, we exited ahead of schedule, right? Example being, I think when we did our Investor Day thesis, we said, at the end of three years, we would be around 26% operating margins. We exited 2022 with 26%. We feel really good about our progress and our ability to manage through that element. If you look at our cash flow, per share and our growth in there, again, we exited ahead of schedule, and we continue to focus on it. Those are things we can control, and we continue to believe those remain intact for the three years thesis we put out there. You know, we're, we're fortunate. We, we've, we put out there a buyback program. We, we've taken, you know, we've used it as an opportunity, given the current market. We'll continue to look at that as an opportunity when it makes sense for us to continue. Reminder, we're authorized up to $3 billion. I get a question a lot with, you know, "Hey, is it gonna go ahead of that?" We are authorized up to $3 billion. We're about $1.3 billion through it right now. We still are trying to target around $1 billion a year, so we continue to, you know, use the levers at our hand to make sure we're getting through this, you know, unstable environment in a very stable manner. I think that's something we'll continue to do. Great. Well, that actually brings us. Wow, I got two minutes on that answer. All right. Great. Perfect timing. Thank you so much, Aman and Mark, for joining us. Thank you. Sharing your insights with us today. Thank you. All right. Thank you very much. Thank you.