GoDaddy Inc. — Q3 2021 Form 10-Q
Business context and reporting period. This unaudited quarterly filing covers the three and nine months ended September 30, 2021. GoDaddy reports as a single operating segment. Revenue is primarily subscription-based, across domains, hosting and presence, and business applications.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $964.0 million | $844.4 million | $2,796.4 million | $2,442.8 million |
| Operating income | $131.3 million | $92.4 million | $257.3 million | $179.7 million |
| Net income (loss) attributable to GoDaddy | $97.5 million | $64.7 million | $155.1 million | $(565.6) million |
| Diluted EPS | $0.58 | $0.38 | $0.90 | $(3.35) |
| Operating cash flow | $226.4 million | $197.4 million | $657.1 million | $598.7 million |
- Q3 revenue rose 14.2% year over year; bookings increased 9.9% to $1,038.1 million. Management reported approximately 13.5% constant-currency revenue growth and 9.1% constant-currency bookings growth.
- Q3 operating margin was 13.6%, versus 10.9%; net margin was 10.1%, versus 7.7%. Cost of revenue excluding depreciation and amortization was 35.9% of revenue, compared with 34.5%.
- Q3 revenue by category: domains $453.2 million (+17%), hosting and presence $324.7 million (+7%), and business applications $186.1 million (+20%). Management cited customer growth, higher average revenue per user, and acquisitions as key drivers.
- At September 30, cash and cash equivalents were $1,143.4 million, versus $765.2 million at year-end 2020. Total current assets were $1,769.5 million and current liabilities $2,485.0 million. Deferred revenue totaled $2,656.8 million.
- Debt principal was $3,929.3 million, including $800 million of 2029 notes issued in February. Cash less debt principal was approximately $2,785.9 million. The company had $600 million available under its revolver and reported compliance with debt covenants.
- For the first nine months, operating cash flow was $657.1 million; investing cash flow was $(570.3) million and financing cash flow was $292.4 million. Cash rose $378.2 million from the beginning of the year.
Material changes and unusual items
- Nine-month 2021 net income contrasts with the prior-year loss, which included a $674.7 million tax receivable agreement liability adjustment. The comparison is therefore materially affected by this prior-year charge.
- Q3 2021 restructuring and other included a $15.4 million gain on sale of the former headquarters land and buildings; 2020 included restructuring charges.
- GoDaddy acquired Poynt in February for $297.1 million cash consideration to expand commerce and payment capabilities. It also paid $29.4 million in acquisition-related compensation and may pay a further $45 million subject to performance and employment conditions.
- The company spent $201.8 million on intangible assets, primarily top-level domains, and $40 million on equity investments during the nine months.
- Share repurchases totaled $526.0 million during the nine months, including a $250 million accelerated repurchase. The company reported $749.2 million remaining under its authorization.
- Interest expense increased to $32.5 million in Q3 from $23.9 million, primarily due to debt issuance, partly offset by lower effective rates on variable-rate borrowings.
Outlook, commentary and risks
- No specific forward revenue or earnings guidance is provided in this filing. Management said cash and operating cash generation should be sufficient for anticipated operating needs for at least the next 12 months.
- Management noted that customer demand declined in Q2 and improved in Q3, but future demand and growth remain uncertain. It also cited continued investment in products, marketing, and migration to public-cloud infrastructure.
- Key risks include competition and customer retention, execution and integration of Poynt and other acquisitions, substantial indebtedness, variable interest rates, foreign exchange, service availability, cybersecurity and privacy, and regulatory changes.
- The filing describes recent social-engineering attempts and a malicious file distributed across hosting servers that compromised a small number of customers’ customers’ credit cards. GoDaddy also reported responding to FTC Civil Investigative Demands concerning a 2020 hosting-credential incident; timing and outcome are uncertain.
- A TCPA class-settlement objector’s appeal remained pending; the company made no change to its $8.1 million estimated settlement provision in the period. The filing says other accrued legal matters were not material.
- Gross unrecognized tax benefits were $99.3 million. Management cited uncertainty about realizing certain deferred tax assets and maintained valuation allowances.
Most important facts for investors to verify
- Whether bookings and customer growth translate into sustained recognized revenue, renewals, and margins.
- Debt maturity and refinancing exposure, interest costs, and the company’s capacity to balance investment, acquisitions, and repurchases.
- Integration progress and returns from Poynt, recent registry acquisitions, and substantial intangible-asset purchases.
- Updates on cybersecurity incidents, the FTC inquiry, and the pending TCPA settlement appeal.
- How ongoing cloud migration, customer demand, and pandemic-related operating changes affect costs and service reliability.