GoDaddy Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. GoDaddy provides domain, hosting, website, productivity, and commerce products, reported in Applications & Commerce (A&C) and Core Platform (Core). Amounts below are in millions unless stated otherwise.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $1,015.5 | $931.3 | $2,018.2 | $1,832.4 |
| Operating income | $124.6 | $88.0 | $234.2 | $126.0 |
| Net income | $90.5 | $46.9 | $159.1 | $57.7 |
| Diluted EPS | $0.56 | $0.27 | $0.97 | $0.33 |
| Operating cash flow | $250.9 | Not stated here | $501.8 | $430.7 |
Q2 revenue grew 9.0% year over year (about 10.1% in constant currency); bookings were $1,118.9, up 6.1% (about 7.7% in constant currency). Q2 operating margin was 12.2%, versus 9.4%; net margin was 8.9%, versus 5.0%. Six-month operating cash flow increased 16.5% year over year.
- Segments, Q2: A&C revenue was $317.2, up 14.8%, and segment NEBITDA was $131.8, up 21.7%. Core revenue was $698.3, up 6.6%, and segment NEBITDA was $198.4, up 25.4%. NEBITDA is a company-defined non-GAAP measure.
- Balance sheet at June 30: Cash and equivalents were $770.4, down from $1,255.7 at year-end 2021. Debt principal totaled $3,905.0; balance-sheet debt carrying value was $3,872.5. Stockholders’ deficit was $445.3.
- Liquidity: $600.0 was available under the revolver, with no borrowings and no reported covenant violations. Management said cash and operating cash flow should cover anticipated operating needs for at least 12 months.
- Deferred revenue: $2,751.2 total, including current and noncurrent balances; the company expects $1,333.3 to be recognized in the remainder of 2022.
Changes versus prior comparable periods
- Applications & Commerce grew faster than Core. A&C gains reflected productivity, Websites + Marketing, Managed WordPress, and commerce products; Core growth benefited from aftermarket domain sales, higher average revenue per user, and registry growth. Domains under management fell 0.5% year over year to 83.8 million.
- Q2 marketing expense fell 20% to $100.7, reflecting lower discretionary spending than in 2021. Technology and development expense rose 15% to $198.1, mainly from personnel, product investment, and cloud migration costs.
- Revenue and segment reporting were reorganized in 2022; prior periods were recast. The change did not affect total revenue, income, deferred revenue, or cash flows.
Outlook, risks, contingencies, and unusual items
- The filing provides no numerical full-year guidance. Management anticipates further technology and development investment and cloud migration; cost of revenue may rise with sales, customer growth, and product mix.
- Six-month financing cash outflow was $953.7, primarily reflecting $967.1 of share repurchases. The company completed $750.0 of accelerated repurchases and made additional Q2 open-market repurchases; $2,013.7 of authorization remained at June 30.
- Q2 included $9.6 of restructuring and other expense, principally asset impairment; segment reconciliation also identifies lease-related expenses associated with closed facilities. In July, GoDaddy completed an acquisition for $71.4 cash.
- On July 27, 2022, an appeals court vacated approval of a TCPA class-action settlement and remanded the case. GoDaddy retained its $8.1 accrual at June 30; the decision’s final impact was uncertain. A shareholder derivative action filed in June also alleges fiduciary-duty breaches and corporate waste concerning the TRA settlement agreements.
- Other exposures include substantial debt and a $1.74 billion principal maturity in 2024; foreign-exchange and interest-rate movements; inflation and uncertain customer demand; ongoing cloud-provider dependence; cybersecurity and privacy incidents, including pending inquiries; and regulatory, tax, litigation, and acquisition-integration risks. GoDaddy reported a $12.7 uncertain-tax-position reserve established in Q2 and $138.3 of gross unrecognized tax benefits.
Important facts for investors to verify
- Whether revenue and bookings growth, particularly constant-currency growth, continues as currency headwinds and uneven demand persist.
- Cash generation and liquidity after substantial buybacks, the July acquisition, debt service, and the 2024 maturity.
- Progress and costs of the public-cloud migration, and the effect of technology investment on margins.
- Developments in the TCPA appeal, shareholder derivative case, and cybersecurity or regulatory inquiries.
- Whether reported earnings trends remain comparable after considering equity-based compensation, restructuring charges, and the company’s non-GAAP segment measure.