GoDaddy(GDDY) - 2024 Q2 - Quarterly Report

Note About Forward-Looking Statements This section cautions that forward-looking statements involve substantial risks and uncertainties, potentially causing actual results to differ materially - Forward-looking statements involve substantial risks and uncertainties that could cause actual results to differ materially from projections[9] - Key areas of uncertainty include the ability to add and retain customers, develop new solutions (especially with AI), maintain brand strength, manage service interruptions and security breaches, and ensure future financial performance[10] - The company operates in competitive and rapidly-changing environments, making it impossible to predict all risks or assess the full impact of factors on actual results[14] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents unaudited consolidated financial statements, including balance sheets, income, equity, and cash flows, with accounting notes Consolidated Balance Sheets Consolidated Balance Sheets | Metric | June 30, 2024 (Millions) | December 31, 2023 (Millions) | Change (Millions) | % Change | |:---|:---|:---|:---|:---| | Total Assets | $7,721.9 | $7,564.9 | $157.0 | 2.08% | | Total Current Assets | $1,297.2 | $1,255.9 | $41.3 | 3.29% | | Cash and Cash Equivalents | $444.9 | $458.8 | $(13.9) | -3.03% | | Deferred Tax Assets | $1,234.0 | $1,020.4 | $213.6 | 20.93% | | Total Liabilities | $7,607.9 | $7,502.7 | $105.2 | 1.40% | | Total Current Liabilities | $2,707.2 | $2,683.1 | $24.1 | 0.90% | | Deferred Revenue (Current) | $2,230.4 | $2,074.9 | $155.5 | 7.50% | | Total Stockholders' Equity | $157.0 | $62.2 | $94.8 | 152.41% | Consolidated Statements of Operations Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2024 (Millions) | Three Months Ended June 30, 2023 (Millions) | Change (Millions) | % Change | |:---|:---|:---|:---|:---| | Total Revenue | $1,124.5 | $1,048.1 | $76.4 | 7.29% | | Applications and Commerce Revenue | $405.6 | $351.7 | $53.9 | 15.33% | | Core Platform Revenue | $718.9 | $696.4 | $22.5 | 3.23% | | Operating Income | $208.2 | $119.6 | $88.6 | 74.08% | | Net Income Attributable to GoDaddy Inc. | $146.3 | $82.9 | $63.4 | 76.48% | | Basic EPS | $1.04 | $0.54 | $0.50 | 92.59% | | Diluted EPS | $1.01 | $0.54 | $0.47 | 87.04% | | Metric | Six Months Ended June 30, 2024 (Millions) | Six Months Ended June 30, 2023 (Millions) | Change (Millions) | % Change | |:---|:---|:---|:---|:---| | Total Revenue | $2,233.0 | $2,084.1 | $148.9 | 7.14% | | Applications and Commerce Revenue | $788.7 | $689.7 | $99.0 | 14.35% | | Core Platform Revenue | $1,444.3 | $1,394.4 | $49.9 | 3.58% | | Operating Income | $384.1 | $190.4 | $193.7 | 101.73% | | Net Income Attributable to GoDaddy Inc. | $547.8 | $130.2 | $417.6 | 320.74% | | Basic EPS | $3.86 | $0.85 | $3.01 | 354.12% | | Diluted EPS | $3.77 | $0.84 | $2.93 | 348.81% | - Equity-based compensation expense for the three months ended June 30, 2024, was $76.2 million, a slight decrease from $77.5 million in the prior year period. For the six months, it decreased from $151.4 million to $148.0 million[22] Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income | Metric | Three Months Ended June 30, 2024 (Millions) | Three Months Ended June 30, 2023 (Millions) | Change (Millions) | % Change | |:---|:---|:---|:---|:---|\n| Net Income | $146.3 | $83.1 | $63.2 | 76.05% | | Comprehensive Income Attributable to GoDaddy Inc. | $147.1 | $104.7 | $42.4 | 40.49% | | Metric | Six Months Ended June 30, 2024 (Millions) | Six Months Ended June 30, 2023 (Millions) | Change (Millions) | % Change | |:---|:---|:---|:---|:---| | Net Income | $547.8 | $130.5 | $417.3 | 319.77% | | Comprehensive Income Attributable to GoDaddy Inc. | $572.2 | $114.5 | $457.7 | 399.74% | Consolidated Statements of Stockholders' Equity (Deficit) - Total stockholders' equity increased from $62.2 million at December 31, 2023, to $157.0 million at June 30, 2024[27] - Repurchases of Class A common stock amounted to $(502.8) million for the three months ended June 30, 2024, and $(147.1) million for the three months ended March 31, 2024, impacting accumulated deficit[27] - Net income attributable to GoDaddy Inc. was $146.3 million for the three months ended June 30, 2024, and $401.5 million for the three months ended March 31, 2024[27] Consolidated Statements of Cash Flows Cash Flow Activity | Cash Flow Activity | Six Months Ended June 30, 2024 (Millions) | Six Months Ended June 30, 2023 (Millions) | Change (Millions) | % Change | |:---|:---|:---|:---|:---| | Net Cash Provided by Operating Activities | $592.0 | $468.3 | $123.7 | 26.41% | | Net Cash Provided by (Used in) Investing Activities | $40.9 | $(52.0) | $92.9 | 178.65% | | Net Cash Used in Financing Activities | $(646.2) | $(608.3) | $(37.9) | 6.23% | | Net Decrease in Cash and Cash Equivalents | $(13.9) | $(191.4) | $177.5 | -92.74% | Notes to Consolidated Financial Statements Note 1. Organization and Background - GoDaddy Inc. is the sole managing member of Desert Newco, LLC, and consolidates its financial results. As of June 30, 2024, GoDaddy Inc. owned 100% of Desert Newco[37] - The DNC Restructure, completed on December 11, 2023, simplified the capital structure, converting all non-GoDaddy Inc. held Desert Newco units into Class A common stock. Effective January 1, 2024, Desert Newco became a disregarded entity for U.S. income tax purposes, treating GoDaddy Inc. as a consolidated C corporation group[38] Note 2. Summary of Significant Accounting Policies - The company reports operating results through two segments: Applications and Commerce (A&C) and Core Platform (Core)[44] Revenue Type | Revenue Type | Three Months Ended June 30, 2024 (Millions) | Three Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2024 (Millions) | Six Months Ended June 30, 2023 (Millions) | |:---|:---|:---|:---|:---| | A&C | $405.6 | $351.7 | $788.7 | $689.7 | | Core: Domains | $529.2 | $492.7 | $1,061.2 | $984.8 | | Core: Other | $189.7 | $203.7 | $383.1 | $409.6 | | Total Revenue | $1,124.5 | $1,048.1 | $2,233.0 | $2,084.1 | Geography | Geography | Three Months Ended June 30, 2024 (Millions) | Three Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2024 (Millions) | Six Months Ended June 30, 2023 (Millions) | |:---|:---|:---|:---|:---| | U.S. | $767.4 | $707.0 | $1,523.0 | $1,402.4 | | International | $357.1 | $341.1 | $710.0 | $681.7 | | Total Revenue | $1,124.5 | $1,048.1 | $2,233.0 | $2,084.1 | - Amortization expense for prepaid domain name registry fees was $195.8 million for Q2 2024 (vs. $192.1 million in Q2 2023) and $389.6 million for H1 2024 (vs. $377.2 million in H1 2023)[50] - The company holds certain assets measured at fair value on a recurring basis, including notice deposits ($50.0 million) and commercial paper ($29.9 million) as of June 30, 2024, classified within Level 1 and Level 2 respectively. Derivative assets totaled $149.4 million[54] Note 3. Goodwill and Intangible Assets Goodwill by Segment | Segment | December 31, 2023 (Millions) | Impact of Foreign Currency Translation (Millions) | Goodwill Related to Disposition (Millions) | June 30, 2024 (Millions) | |:---|:---|:---|:---|:---| | A&C | $1,513.6 | $(9.5) | — | $1,504.1 | | Core | $2,055.7 | $(13.1) | $(1.7) | $2,040.9 | | Total | $3,569.3 | $(22.6) | $(1.7) | $3,545.0 | Intangible Assets | Intangible Asset Type | Gross Carrying Amount (Millions) | Accumulated Amortization (Millions) | Net Carrying Amount (Millions) | |:---|:---|:---|:---| | Indefinite-lived: | | | | | Trade names and branding | $445.0 | n/a | $445.0 | | Domain portfolio | $231.8 | n/a | $231.8 | | Contractual-based assets | $292.7 | n/a | $292.7 | | Finite-lived: | | | | | Customer-related | $402.5 | $(325.3) | $77.2 | | Developed technology | $237.1 | $(207.4) | $29.7 | | Trade names and other | $95.0 | $(64.1) | $30.9 | | Total | $1,704.1 | $(596.8) | $1,107.3 | - Amortization expense for intangible assets was $19.2 million for Q2 2024 (vs. $26.1 million in Q2 2023) and $39.7 million for H1 2024 (vs. $58.8 million in H1 2023). The weighted-average remaining amortization period for amortizable intangible assets was 25 months in total as of June 30, 2024[58] Note 4. Stockholders' Equity - The board of directors authorized a share repurchase program of up to $4,000.0 million. As of June 30, 2024, $1,031.3 million remained available for repurchases[60] - During the six months ended June 30, 2024, the company repurchased 3,303 thousand shares of Class A common stock for an aggregate purchase price of $404.2 million[60] - During Q2 2024, the company entered into Accelerated Share Repurchase (ASR) agreements for an upfront payment of $245.0 million, with shares to be delivered in Q3 2024[61] Note 5. Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets | Component | June 30, 2024 (Millions) | December 31, 2023 (Millions) | |:---|:---|:---| | Derivative assets | $149.4 | $128.6 | | Prepaid software and maintenance expenses | $49.2 | $23.0 | | Other | $39.5 | $25.6 | | Total | $238.1 | $177.2 | Note 6. Equity-Based Compensation Plans - Stockholders approved the 2024 Omnibus Incentive Plan (9,085 thousand shares reserved) and the 2024 Employee Stock Purchase Plan (4,605 thousand shares reserved) at the Annual Meeting on June 6, 2024[63][64] Stock Option Activity | Stock Option Activity | Number of Shares of Class A Common Stock () | Weighted Average Exercise Price Per Share ($) | |:---|:---|:---| | Outstanding at December 31, 2023 | 845 | 49.60 | | Exercised | (126) | 30.71 | | Outstanding at June 30, 2024 | 719 | 52.92 | | Vested at June 30, 2024 | 719 | 52.92 | - Total unrecognized compensation expense related to non-vested equity grants was $483.8 million as of June 30, 2024, with an expected remaining weighted-average recognition period of 2.1 years[66] Note 7. Deferred Revenue Deferred Revenue by Type | Deferred Revenue Type | June 30, 2024 (Millions) | December 31, 2023 (Millions) | |:---|:---|:---| | Current: | | | | A&C | $776.6 | $683.8 | | Core | $1,453.8 | $1,391.1 | | Total Current | $2,230.4 | $2,074.9 | | Noncurrent: | | | | A&C | $194.5 | $173.5 | | Core | $671.6 | $628.9 | | Total Noncurrent | $866.1 | $802.4 | | Grand Total | $3,096.5 | $2,877.3 | - The increase in deferred revenue was primarily driven by payments received in advance of satisfying performance obligations, offset by $616.1 million (Q2 2024) and $1,426.4 million (H1 2024) of revenue recognized from deferred revenue as of December 31, 2023[68] Deferred Revenue by Segment and Expected Recognition Period | Segment | Remainder of 2024 (Millions) | 2025 (Millions) | 2026 (Millions) | 2027 (Millions) | 2028 (Millions) | Thereafter (Millions) | Total (Millions) | |:---|:---|:---|:---|:---|:---|:---|:---| | A&C | $544.1 | $312.5 | $85.5 | $19.5 | $5.8 | $3.7 | $971.1 | | Core | $963.5 | $712.7 | $230.1 | $96.7 | $52.1 | $70.3 | $2,125.4 | | Total | $1,507.6 | $1,025.2 | $315.6 | $116.2 | $57.9 | $74.0 | $3,096.5 | Note 8. Accrued Expenses and Other Current Liabilities Accrued Expenses and Other Current Liabilities | Component | June 30, 2024 (Millions) | December 31, 2023 (Millions) | |:---|:---|:---| | Accrued payroll and employee benefits | $106.8 | $143.6 | | Tax-related accruals | $62.3 | $56.2 | | Current portion of operating lease liabilities | $31.1 | $29.1 | | Accrued legal and professional | $27.0 | $34.2 | | Accrued marketing and advertising | $19.0 | $12.3 | | Accrued interest | $13.5 | $13.6 | | Accrued restructuring costs | $6.5 | $7.4 | | Accrued acquisition-related expenses | $6.3 | $20.6 | | Derivative liabilities | $3.6 | $46.4 | | Other | $89.0 | $78.8 | | Total | $365.1 | $442.2 | Note 9. Long-Term Debt Long-Term Debt | Debt Instrument | Maturity Date | June 30, 2024 (Millions) | December 31, 2023 (Millions) | |:---|:---|:---|:---| | 2029 Term Loans | November 10, 2029 | $1,466.2 | $1,752.3 | | 2031 Term Loans | May 31, 2031 | $1,000.0 | — | | 2027 Term Loans | August 10, 2027 | — | $723.8 | | 2027 Senior Notes | December 1, 2027 | $600.0 | $600.0 | | 2029 Senior Notes | March 1, 2029 | $800.0 | $800.0 | | Total Long-Term Debt | | $3,866.2 | $3,876.1 | | Less: Unamortized original issue discount and debt issuance costs | | $(61.5) | $(59.7) | | Less: Current portion of long-term debt | | $(17.0) | $(17.9) | | Long-Term Debt, Net of Current Portion | | $3,787.7 | $3,798.5 | - In January 2024, the company refinanced existing term loans with new 2029 Term Loans. In May 2024, new 2031 Term Loans were issued to refinance and extend the maturity of 2027 Term Loans and repay a portion of 2029 Term Loans[72][73] - As of June 30, 2024, $998.7 million was available for borrowing under the Revolver, and the company was in compliance with all debt covenants[74][75] Note 10. Derivatives and Hedging - The company uses foreign exchange forward contracts, cross-currency swaps, and interest rate swaps as cash flow hedges and cross-currency swaps as net investment hedges to mitigate foreign currency and interest rate risks[78][80] Derivative Instruments | Derivative Type | Notional Amount (June 30, 2024, Millions) | Fair Value Asset (June 30, 2024, Millions) | Fair Value Liability (June 30, 2024, Millions) | |:---|:---|:---|:---| | Foreign exchange forward contracts | $718.2 | $3.9 | $3.6 | | Cross-currency swaps (cash flow hedges) | $541.4 | $1.0 | — | | Interest rate swaps | $1,949.4 | $143.2 | — | | Cross-currency swaps (net investment hedges) | $694.0 | $1.3 | — | | Total Hedges | $3,903.0 | $149.4 | $3.6 | - As of June 30, 2024, an estimated $96.9 million of net deferred gains related to designated hedges are expected to be recognized in earnings over the next 12 months[83] Note 11. Leases - Operating leases primarily consist of office and data center space, with a remaining weighted-average lease term of 6.3 years and a weighted-average discount rate of 5.5% as of June 30, 2024[89] Lease Cost Components | Lease Cost Component | Three Months Ended June 30, 2024 (Millions) | Three Months Ended June 30, 2023 (Millions) | Six Months Ended June 30, 2024 (Millions) | Six Months Ended June 30, 2023 (Millions) | |:---|:---|:---|:---|:---| | Operating lease costs | $6.9 | $9.6 | $14.5 | $19.4 | | Variable lease costs | $3.0 | $3.8 | $6.7 | $7.6 | | Sublease income | $(1.8) | $(2.2) | $(4.7) | $(4.5) | | Total Net Lease Cost | $8.1 | $11.2 | $16.5 | $22.5 | - During the six months ended June 30, 2024, $6.0 million of expense was recognized related to the abandonment of certain operating leases, included in restructuring and other charges[90] Note 12. Commitments and Contingencies - No material changes to legal proceedings or contractual obligations from the 2023 Form 10-K[91][92] - Accrual for estimated indirect tax liabilities was $25.7 million as of June 30, 2024, up from $23.6 million at December 31, 2023, reflecting the best estimate of probable liability[94] Note 13. Restructuring and Other Charges and Disposition of Businesses and Related Assets - During H1 2024, the company implemented restructuring activities, including a reduction in force impacting