GoDaddy Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. GoDaddy operates as a single reportable segment, providing domain, hosting and presence, and business application subscriptions.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $931.3 million | $806.4 million | $1,832.4 million | $1,598.4 million |
| Operating income | $88.0 million | $22.9 million | $126.0 million | $87.3 million |
| Net income (loss) | $46.9 million | $(673.2) million | $57.7 million | $(630.0) million |
| Net income (loss) attributable to GoDaddy | $46.8 million | $(673.2) million | $57.6 million | $(630.3) million |
| Operating cash flow | $209.4 million | Approximately $168.1 million | $430.7 million | $401.4 million |
- Q2 revenue rose 15.5% (about 14.3% at constant currency). Domains revenue increased 18%, hosting and presence 9%, and business applications 22%. Growth reflected more customers, higher average revenue per user, and acquisition contributions.
- Q2 bookings were $1,054.8 million, up 12.7%; six-month bookings were $2,143.5 million, up 13.6%. Deferred revenue totaled $2,638.4 million at quarter-end.
- Q2 operating margin was 9.4%, versus 2.8% a year earlier; net margin was 5.0%, versus a loss of 83.5% of revenue. The prior-year net loss was dominated by a $674.7 million charge related to settlement of prior tax receivable agreements.
- Cash and cash equivalents were $1,375.2 million at June 30, up from $765.2 million at year-end 2020. Current assets were $1,990.8 million and current liabilities $2,456.5 million.
- Debt carrying value was $3,893.4 million, including $3,869.3 million long-term and $24.1 million current; principal outstanding was $3,937.4 million. GoDaddy had $600 million available under its undrawn revolver and reported compliance with debt covenants.
- Six-month investing cash outflow was $359.9 million, mainly reflecting acquisitions; financing provided $539.6 million, including $800 million from new senior notes. The company repurchased $275.9 million of shares during the half.
Material changes and notable items
- GoDaddy issued $800 million of 3.5% senior notes due 2029 in February and refinanced its 2027 term loans in March, reducing their interest-rate margins by 0.5 percentage points. Q2 interest expense increased to $32.6 million from $19.4 million.
- The February acquisition of Poynt cost $297.1 million in cash consideration. GoDaddy also paid $29.4 million recorded as compensation expense and may make up to $45 million in additional performance- and employment-conditioned payments over three years.
- In May, the board authorized up to an additional $775 million in share repurchases. At June 30, $999.2 million remained available under the repurchase authorizations.
- GoDaddy agreed to acquire top-level domains for approximately $200 million, subject to adjustments and up to $12 million in earn-out payments. It completed a portion in July for approximately $77 million and expected to complete the remainder in Q3, subject to approvals and closing conditions.
- Operating expenses reflected higher technology and development and marketing spending, partly offset by lower customer-care costs. Q2 restructuring charges were zero, compared with $39.4 million in Q2 2020.
Outlook, risks and contingencies
- The filing provides no specific numeric revenue or earnings guidance. Management said existing cash and expected operating cash flow should cover anticipated operating needs for at least the next 12 months; future capital needs depend on growth, investment, acquisitions, repurchases and other factors.
- Management said the COVID-19 pandemic had not materially affected results to date, while noting uncertainty about future effects. Remote work increased cybersecurity risk; the company expected to begin a volunteer-led return to some offices later in 2021.
- Key exposures include competition, customer retention and renewals, execution of acquisitions and new commerce offerings, cloud migration and third-party service reliance, cybersecurity and service interruptions, foreign exchange, variable-rate debt, and substantial indebtedness.
- The filing describes recent successful social-engineering attempts and a malicious file on hosting servers that compromised a small number of customers’ customers’ credit cards. It also discusses prior security incidents and ongoing regulatory response.
- A single objector’s appeal of the approved TCPA class settlement remained pending; GoDaddy’s estimated provision was $8.1 million at year-end 2020 and was unchanged during the first half of 2021. Management said other currently accrued legal matters were not material.
- GoDaddy recorded a $4.0 million tax charge after U.K. corporate tax-rate legislation. It reported $63.6 million of gross unrecognized tax benefits. Management said improved operating results could support a release of substantially all federal and state valuation allowances in 2021, but this was not assured.
Most important facts for investors to verify
- Whether revenue and bookings growth continues, including customer additions, renewals, and growth across product categories.
- Whether higher technology and marketing investment, cloud migration, and acquisitions translate into durable operating-margin and cash-flow improvement.
- Debt repayment capacity and interest costs, including the impact of variable rates and future financing needs.
- Completion and integration of the remaining top-level-domain purchases, and the returns and costs associated with Poynt.
- Developments in cybersecurity, the TCPA settlement appeal, tax valuation allowances, and other regulatory or litigation contingencies.