GoDaddy Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; year-over-year comparisons are to Q1 2023. GoDaddy provides domain, hosting, website, commerce, and productivity products through Applications and Commerce (A&C) and Core Platform (Core).
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $1,108.5 million | $1,036.0 million | +7.0% |
| Operating income | $175.9 million | $70.8 million | +148.4% |
| Operating margin | 15.8% | 6.8% | +9.0 percentage points |
| Net income attributable to GoDaddy | $401.5 million | $47.3 million | Substantially higher |
| Diluted EPS | $2.76 | $0.30 | Substantially higher |
| Normalized EBITDA (non-GAAP) | $313.0 million | $249.7 million | +25.4% |
| Operating cash flow | $297.2 million | $270.3 million | +10.0% |
Net income included a one-time, non-cash $267.4 million income tax benefit from the January 2024 tax-entity restructuring, including a $13.0 million valuation-allowance reversal. The reported effective tax benefit was $258.3 million. Accordingly, the increase in GAAP net income and EPS is not a like-for-like indication of operating growth.
A&C revenue was $383.1 million (+13.3%) and segment EBITDA was $161.9 million (+22.3%). Core revenue was $725.4 million (+3.9%) and segment EBITDA was $216.7 million (+14.7%). Applications and commerce growth reflected productivity/email, online-presence, and commerce adoption; Core growth in domains and aftermarket sales was partly offset by lower hosting revenue.
Total bookings were $1,312.7 million (+9.5%); annualized recurring revenue was $3,772.6 million (+6.5%); period-end customers were 20.995 million, approximately flat; and ARPU was $206 versus $197. Cost of revenue rose 7.4% to $414.5 million. Lower technology and development, marketing, restructuring, and depreciation and amortization expenses contributed to improved operating margin. Restructuring and other charges were $22.4 million versus $52.3 million.
Cash, debt, and liquidity
Cash and cash equivalents were $664.0 million at March 31, 2024, up from $458.8 million at year-end; current assets were $1,495.8 million and current liabilities $2,722.3 million. Operating cash flow was $297.2 million; property and equipment purchases were $4.4 million, implying cash flow after those purchases of approximately $292.8 million. Investing activities provided $43.7 million, including $40.0 million from investment maturities and $8.1 million of disposition proceeds. Financing activities used $135.0 million, including $128.3 million of cash share repurchases.
Debt principal totaled $3,869.9 million, before $57.5 million of unamortized discounts and issuance costs; reported current and long-term debt carrying value together was $3,812.4 million. The company had no revolver borrowings and $998.8 million of availability, and reported compliance with debt covenants. It repurchased 1.245 million shares for $147.7 million during the quarter; $1,287.8 million remained authorized.
Outlook, risks, and unusual items
The filing provides no specific numerical full-year revenue or earnings guidance. Management said existing cash and operating cash generation should be sufficient for anticipated operating needs for at least 12 months. It expects cost of revenue to increase in absolute dollars with domain, productivity, and customer growth, and technology and development expense to decline as a share of revenue following product investment and infrastructure migration.
- The January 2024 restructuring reduced the workforce by approximately 180 employees; the quarter included $11.1 million in related charges and $5.8 million for abandoned lease assets. Substantially all remaining restructuring payments were expected by the end of Q3 2024.
- GoDaddy refinanced its 2029 term loans in January. Debt, variable-rate exposure, and related interest costs remain important risks; interest-rate swaps hedge portions of variable-rate borrowings.
- Management reported a material weakness in income-tax controls; disclosure controls were therefore not effective at quarter-end. Remediation was in progress and was not yet complete. Management stated it did not believe the weakness adversely affected reported results or financial condition.
- Key disclosed risks include competition, customer retention and renewals, hosting declines, cybersecurity and service interruptions, dependence on third-party cloud services including AWS, privacy and regulatory requirements, AI-related risks, and macroeconomic and foreign-exchange exposure.
- The filing reported no material change in legal proceedings from the 2023 Form 10-K. Indirect-tax accruals were $25.5 million; the ultimate outcome of audits or other tax matters could differ. The FTC investigation relating to a 2020 cybersecurity incident remained ongoing.
Important facts for investors to verify
- How much future earnings and EPS reflect ongoing operations versus the one-time tax benefit, and whether the tax benefit affects cash taxes.
- Whether A&C growth and Core domain growth continue, and whether hosting revenue stabilizes after product migrations and asset dispositions.
- Progress in remediating and testing the income-tax control weakness, including whether disclosure controls become effective.
- Debt repayment, interest-rate exposure, liquidity, and the pace of share repurchases relative to operating cash generation.
- Developments in cybersecurity, the FTC inquiry, indirect-tax contingencies, and execution of restructuring and cloud migration.