GoDaddy Inc (GDDY) 2021 Q1 法說會逐字稿

Good afternoon, and thank you for joining us for GoDaddy's First Quarter 2021 Earnings Call. I'm Mark Grant, Vice President of Investor Relations.

With me today are Aman Bhutani, Chief Executive Officer; and Ray Winborne, Chief Financial Officer; as well as Mark McCaffrey, who, as we announced today, will be joining as our new Chief Financial Officer in June. (Operator Instructions) Given Mark will not be starting as CFO until June, Aman and Ray will be answering all questions related to strategy, operations and financials, while Mark has made himself available for any questions regarding his background and skill set. (Operator Instructions)

On today's call, we'll be referencing both GAAP and non-GAAP financial results and operating metrics such as total bookings, unlevered free cash flow, normalized EBITDA, net debt and gross merchandise volume. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted to our Investor Relations website at investors.godaddy.net, or on our Form 8-K filed with the SEC with today's earnings release. A copy of today's prepared remarks can also be found now at our Investor Relations website.

The matters we'll be discussing today include forward-looking statements which include those related to our future financial results, new product introductions and innovations, partner integrations and our ability to integrate acquisitions and achieve desired synergies. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. Actual results may differ materially from those contained in the forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, May 5, 2021, and we undertake no obligation to update these statements as a result of new information or future events unless required by law.

With that, here's Aman.

Thank you, Mark, and thank you all for joining us today. GoDaddy exists to empower everyday entrepreneurs. We remain committed to a vision that can change the world, and radically shift the global economy in favor of small businesses.

The Internet has emerged as the greatest technological equalizer and every day more entrepreneurs are seizing that promised opportunity and making their own way. And we are thrilled to support them in their journey.

Today, we are also pleased to announce that Michele Lau and Mark McCaffrey will be joining GoDaddy as our new Chief Legal Officer and Chief Financial Officer, respectively. As we charge down the path of growth, Michele and Mark bring scale and experience to our already strong leadership team.

Michele joins us from McKesson, where she advises its Board and senior executives on strategic matters related to M&A, corporate strategy, executive compensation, corporate governance, the McKesson Foundation and so much more. She Co Chairs the national Asian Pacific Bar Associations in-house Council Mentoring Program and serves on the Board of Directors of the Asian Pacific Fund. Michele is talented and humble, experienced and curious, a strong cultural fit and will no doubt take us to the next level.

Mark joins us from PWC, where he led the U.S. technology, media and telecom sector. Mark is a visionary and a strategic leader who has developed a breadth of expertise, not just in finance but across all of software and technology. He is a thought leader in the industry and brings the depth of understanding that GoDaddy needs to wisely invest and drive growth. One of the things that appealed to me about Mark, is that he has been a strategic partner directly advising CEOs and CFOs of the world's greatest tech companies through important transitions. We are confident that Mark will be a fantastic addition to the strategic leadership of the company and together, we will do great things.

We wanted to take this opportunity to introduce mark to you. Here is Mark.

Thanks, Aman. I'm very excited to be here today. GoDaddy has an incredible history of empowering small businesses and delivering great value for its customers. I was obviously attracted to the vision and mission of the company to radically change the global economy in favor of small businesses. But there is so much more to it. The more I learned about Aman's strategic vision, the more I wanted to be part of what's coming next on this journey.

I'm thrilled to be joining such an accomplished leadership team and even more excited about what we're going to build in the future. I'm anxious to dive in, and I look forward to meeting with many of you on this call in the coming months.

Thank you, Mark. Both Michele and Mark have connected very well with the existing leadership team, and it is going to be fun working with them. We are grateful to have been in the position where a broad and diverse set of candidates were attracted with the GoDaddy story. And true to our commitment to velocity, we moved quickly and with purpose, to fill the large shoes our existing leaders are leaving behind.

Talking about moving quickly, our customers move quickly too. Our core focus has been about accelerating the velocity of innovation at GoDaddy. Ambitious goals and big ideas supported by operational discipline in the form of experimentation, both large and small. Last quarter, I talked about 3 priorities for the year: Commerce powered by our growth in presence, our focus on pros and our domains business. With 4 consecutive quarters of accelerating bookings growth, today, I'm delighted to share that in the last few months, we have brought to market new capabilities in all 3 of our priorities.

Our top priority this year, from a product perspective is commerce. As more and more of our customers are coming online with the explicit intent to sell products and services, we are rapidly innovating to meet those needs. Following our acquisition of Poynt in February, we have hit the ground running. We are live in market with payments functionality for WordPress and a beta launch of a seamless payments experience in Websites + Marketing is coming in a few weeks. And our teams are running in parallel, getting payments to market while continuing to make significant progress towards our true end goal: A holistic omni-commerce solution, purpose-built by GoDaddy for the everyday entrepreneur to be launched this year.

While we plan these significant improvements, our customers continue to succeed on our platform, with GMV for Websites + Marketing and Sellbrite growing 100% year-over-year in Q1. Websites + Marketing commerce subscriptions also continued to stand out, increasing more than 70% year-over-year, demonstrating the preference of our customers for our seamless and intuitive experience.

We continue to see strong growth in Websites + Marketing overall. Our customers look to us for help attracting their customers to effectively market their products and services. The + Marketing side of the suite is critical for customers, and I wanted to share 4 incredible new features to help our customers do exactly that and do it in a simple way: First, we're excited to announce the launch of Facebook boosted posts, empowering GoDaddy customers to create and manage simple advertising campaigns on Facebook from within Websites + Marketing. Our seamless and intuitive experience eliminates duplicated effort for our customers, and we take it further for them. With one click, our customers can turn their social media posts into e-mail marketing campaigns.

Second, through direct API integration with Instagram, GoDaddy customers can create, edit, post and engage on Instagram directly from their Websites + Marketing dashboards. Customers love this capability, and we saw a 63% increase in account connections and a 22% increase in weekly social posts after we introduced this feature.

Third, we have a lot of service-based customers like personal trainers or accountants, and they have unique needs. We launched a new online appointment social composer, which enables them to create posts to market their business and drive appointment bookings on their website through their social media channels. The result: Customers who use the social composer saw an average order per site and an average GMV per site increased by 20%.

Last but not least, our brand is built on guidance, and we have been working hard to bring guidance online. Recently, we embedded guidance directly into the editor. This personalized action plan leverages data from millions of websites and provide our customers with their next best action. About 20% of Websites + Marketing customers have already engaged with this tool, and we saw an 86% increase in publication rates among those that did.

Websites + Marketing has grown into a suite of products with capabilities that help customers succeed in all digital channels. We continue to get the product out to as many customers as possible, with premium, with marketing dollars and customers consistently tell us they want more.

Moving to our second priority, pros. We're pleased to share that last week, we hosted Expand 2021, our first ever conference for web designers and developers, or GoDaddy pros. We created Expand to bring together the pro community and share best practices and tools that will help them scale their business, get work done more efficiently and keep clients happy. We have thousands of pros sign up for the event, and early feedback is they absolutely loved it.

Pros prefer the WordPress platform, and its success is clear from its market share gains. GoDaddy is committed to our pros and to WordPress. We have a lot to offer pros, and I wanted to highlight a couple of recent releases. The first is the public beta launch of a new WordPress editor, optimized for ease of use and simplicity, making site building in WordPress easier than ever. We've been rolling out the new editor to new users quickly over the last couple of months. About half of the new users globally are now starting with the new editor, and early indication is that their level of satisfaction is nicely higher than customers using the regular WordPress editor.

The second is the Pro Hub. We talked about the launch of the hub last quarter and now thousands of pros are using it and using it frequently. Our target is to have over 300,000 pros enrolled and actively using the hub by the end of the year. This is unique functionality for pros available for free, and every week, the team launches new features and capabilities. The opportunity with pros is huge. We're putting initiatives in place that will help us drive value for this important customer segment for many years. And we're equally excited about the value created for GoDaddy and its shareholders as we tap more meaningfully into this market.

Moving on to Domains. Last quarter, I shared with you the acceleration of velocity we are seeing in experimentation in our Domains business and the innovation it is driving for our customers. The acceleration is a function of focusing on the customer needs. And when we provide customers with better products, they reward us with high engagement with our products and higher revenue. It started showing up in our numbers meaningfully last quarter and accelerated in Q1. The result in Domains demonstrates the opportunities that exist for GoDaddy even in its most mature business. We are a 2-sided marketplace for Domains, independent customers on one side and domain investors on the other. The high-teens growth in Domains is driven by innovation on connecting these customers, and we will continue to innovate to drive these high levels of growth.

I wanted to share a couple of examples of this with you. We created new experiences for domain investors that allowed them to quickly do bulk searches and orders, that simplified the day-to-day experience for them. As domain investors engaged more, they added Domains into the aftermarket, which we then pulled into new search experiences for independents, so they could have access to more inventory and find the right name for their venture.

We also did the reverse. We give independent customers an easy way to list their domain in the aftermarket, a way that was seamless and custom-built for them. Independent customers added over 200,000 domain names that had otherwise been passive into the aftermarket spurring activity for domain investors. Creating these types of loops can quickly accelerate, and our team is reviewing every experience from basic parking to deep learning models and testing improvements that add value to the customer and spur network effects.

One such opportunity that we will bring to bear is with our GoDaddy Registry business. A few weeks ago, we announced some small acquisitions with big aspirations. We're adding about 30 new TLDs to GoDaddy Registry, including .club, .design and the MMX portfolio. The efficiencies of scale make obvious sense, and the reason for us to scale GoDaddy Registry is to be able to innovate for our customers.

Following the acquisitions that we've announced, GoDaddy will be the third largest registry in the world. And our platform allows us to add TLDs at near 0 incremental cost. The high-margin business gives us investment dollars while keeping costs low. This is key to us creating new experiences for customers while giving them a choice of the best TLDs, both from our partners and from GoDaddy.

In closing, as we have shared in the past, our formula for success, first and foremost, is about creating value for our customers. Our operating velocity is about innovation driving a constant increase in customer value, allowing us to shift part of the value to shareholders. GoDaddy had a strong quarter, powered by good acceleration in bookings. And yes, our strong business model showed up. And yes, we flexed our organic and inorganic muscles for growth. And yes, we invested in products and marketing while delivering healthy unlevered free cash flow. But the key to long-term growth and value creation remains that we are a customer-led software company focused on innovation for our customers and our customers continue to want to do more with us.

With that, let's hear from Ray now in what will be his last quarterly call for GoDaddy. Thank you, Ray.

Thanks, Aman. I'll touch on the financial results for what was a terrific quarter for GoDaddy, then provide our outlook for Q2 and the rest of the year. Q1 is another solid proof point validating the strategy we laid out last year at our Investor Day. We've now seen 4 consecutive quarters of accelerating bookings growth, and the teams are pushing harder every day to increase velocity in innovation, giving us confidence we're just beginning to tap the huge opportunity in front of us. For the quarter, total revenue came in at $901 million, growing 14% year-over-year, while currency impacts were negligible.

Our international business grew 16% on a reported basis. That's the fastest growth in over 2 years as we see ever-increasing demand for digital presence in markets around the world. Business applications was our fastest-growing product line, increasing 21% year-over-year with continued strength in branded e-mail and productivity solutions. And Domains was not far behind, growing 19% on the heels of the experimentation efforts Aman talked about earlier.

We continue to see stellar growth in aftermarket domain sales. With over 20 million domains listed, GoDaddy operates the largest and most active domain aftermarket in the world, and it now contributes roughly 10% of total revenue. We also continue to see strength in primary domain registrations and strong product renewal rates. And finally, Hosting and Presence grew a little over 4% in the quarter. This line continues to reflect headwinds from the GoDaddy Social product due to the elimination of the outbound sales motion last June.

Putting some context on that impact, excluding GoDaddy Social from both periods, growth in Hosting and Presence would have been high single digits this quarter. We marked a major milestone from a scale perspective this quarter. For the first time ever, GoDaddy has reported quarterly bookings of more than $1 billion. Bookings rose 14% year-over-year with a point of currency tailwind. Strength was broad-based across products and geographies, with Domains seeing the most upside.

Gross margin came in at 64% in the quarter. As we've shared with you in the past, there are many variables that can impact gross margin in any given quarter, but product mix is one of the most important. Outsized growth in Domains impacted overall gross margins this quarter, but we remain within the mid-60s range we've always pointed to.

More importantly, we're pleased with the gross in gross profit dollars generated by the top line outperformance this quarter. Both G&A and tech and dev expenses accelerated this quarter, primarily related to acquisition expenses, pre and post consolidation. Importantly, our acquisition of Poynt in February required us to account for some of the acquisition price as GAAP operating expenses, which we call out in the reconciliation tables in the press release and slides.

Excluding these nonrecurring expenses, tech and dev expense would have been lower by $29 million, but still up nearly 20% year-over-year, as we press to accelerate product development. We also continue to invest in marketing to capture strong demand in the market. The net sum resulted in normalized EBITDA of $192 million in Q1, representing growth of 17%.

Moving to cash flow. Unlevered free cash flow for the quarter was $268 million, growing 14%, partially from lighter CapEx spend this quarter that should even itself out over the remainder of the year.

Now on to the balance sheet. We finished Q1 with $1.3 billion in cash and total liquidity of nearly $1.9 billion. In February, we issued $800 million of 8-year senior unsecured notes with a fixed rate of 3.5% to fund acquisition activity. We also took advantage of favorable market conditions, repricing the 2027 term loan, lowering the rate by 50 basis points and generating nearly $4 million in annual cash savings. Net debt stands at $2.7 billion, below 3x net leverage on a trailing 12-month basis and near the midpoint of our targeted range of 2 to 4x. And we have no significant debt maturities until 2024.

Additionally, we repurchased 3.5 million shares of our common stock through today for an aggregate purchase price of $276 million or an average price of just under $79 per share. These repurchases represent a 2% reduction in fully diluted shares outstanding.

We also announced that our Board of Directors approved a new share repurchase authorization to acquire an incremental $775 million of our common stock, bringing the total repurchase capacity to $1 billion. GoDaddy has a highly resilient recurring revenue model and a strong balance sheet. This enables us to execute against a number of priorities, as you saw this quarter, including investing for organic growth, acquisitions and share repurchases.

We remain confident that we have the liquidity and flexibility to pursue multiple capital allocation priorities in pursuit of long-term growth and free cash flow per share.

With that, let's turn to our outlook. Given the strong pacing of the business, we're raising our guidance for full year revenue to $3.75 billion or 13% growth. We're also raising the outlook for unlevered free cash flow to $955 million or 16% growth. With respect to investment cadence, we're seeing good returns on marketing spend and plan to continue at similar levels of investment to drive growth. We also expect continued tech and dev investment as we push on the velocity and scope of product development, including the launch of an omni-commerce offer. These investments will be largely offset by the operating leverage we're seeing in customer care and G&A.

For Q2, we expect total revenue of approximately $920 million or 14% growth year-over-year, with high-teens growth in Domains and business applications and high single-digit growth in Hosting and Presence. Note that this updated guidance reflects $20 million of revenue and $20 million of unlevered free cash flow dilution from the Poynt acquisition, and does not incorporate the impact of any of the recently announced registry deals. We continue to expect Poynt to contribute more than $150 million in incremental bookings to our commerce solution in 2023.

In closing, 2021 has been strong out of the gate, exceeding our expectations, and we're not done yet. We're playing offense in a world where a digital presence is now table stakes, and commerce continues to evolve quickly. GoDaddy will lead in this space by providing differentiated customer experiences, growth opportunities for its employees, and creating significant value for shareholders.

With that, we'll have Christie Masoner from our IR team, open up the call for questions.

Thanks, Ray. (Operator Instructions) Our first question comes from the line of Sterling Auty from JPMorgan.

All right. Great. Can you hear me okay?

We can.

Ray, congratulations on finishing up your tenure at GoDaddy on such a high note. But I am wondering how happy Mark is with you raising guidance before you step out the door.

Thanks, Sterling. I appreciate it. It was a fantastic quarter. Happy with where the business is -- the trajectory of it.

So maybe you can help us on a couple of fronts. I think maybe the one that still drilling in, you mentioned the headwinds in Hosting and Presence. When do those headwinds abate? And where logically should the growth in that business go as it kind of gets back to a more normalized run rate?

Yes. Thanks for the question, Sterling. It's one we get pretty commonly. As I mentioned in the prepared remarks, ex social, the Hosting and Presence line grew in the high single digits in the first quarter. And the guide from -- on a forward basis, is continued growth in that range. Rest of the year, obviously, implies an acceleration as you move through. Yes, we've been super happy with what we're seeing in those subscription software products that we've talked about. And we really did start to see continued strong growth there. Aman highlighted a lot of the progress we're seeing from a commerce perspective. So there's upside from here.

The fact remains that traditional hosting and security products still make up a large percentage of that line item. I think the theme, as an investor, we should look at and remember is that these products are critical to the success of our partner audience, right, who serve entrepreneurs and while they're a little slower growing, they are super stable businesses. They're cash generative, and they support the investments we're making in those software-centric offerings like Website + Marketing, Managed WordPress, Over, Sellbrite. And now with the introduction of omni commerce later this year. All those investments are being funded by this. And so the create and grow phase of the customer journey. We've highlighted this. You'll see it in the investor deck, right? That's $175 billion TAM, huge opportunity for us. As these offerings continue to scale, we add capabilities. We do expect that to be a tailwind to the Hosting and Presence growth as we move forward.

That makes sense. And then maybe one follow-up on the domain side. With the new mix with the registry operations in there, no longer does this look like a segment that's going to grow in line with customer growth, the way that it's been articulated in the past, how should we think about the sustainability of what type of growth rate in Domains as we move forward?

Sterling, this is Aman. Maybe I'll start and Ray can jump in. The story here, and of course, there's growth from the primary market. We're seeing sort of new demand customers coming in, but the outsized growth in the aftermarket as well. And there's good demand there. But the real story here is about innovation, right? We want to increase the pace of innovation at the company. We've put that energy into the domain side, and you're seeing the results of that. As we continue to improve the product, we've seen more inventory, basically more domains going to the aftermarket. And on both sides, independents and domain investors sort of taking advantage of that.

Our view is that we'll continue to innovate, to look for opportunities sort of under every rock to improve the customer experience. And the innovation will continue to drive growth for the company. In terms of sustainability, we like to think that we're making changes that make the growth durable. But of course, we've said before that we started to see some goodness in Q4 last year. So we're going to have to continue to innovate to sort of continue to drive growth.

So I'll turn it to Ray to add a bit more color.

Yes. Just adding a little bit to that, Sterling. You could think of the driver of that 5 points of sequential acceleration of the Domains line item as being a lot of the aftermarket, right? So Aman mentioned, we feel good about the systemic changes we're making in the product in the flows. So we do expect the dollars to continue to drive meaningful growth as we move forward. That said, we do anticipate the Domains growth rates to moderate to the low double digits rate by the end of the year.

Our next question comes from the line of [Jan Lee] from Evercore ISI.

Congrats on the quarter. So this is [Jan] for Mark Mahaney. I guess, maybe one more question on websites and marketing. If you could put some color around just the overall web and marketing growth compared to prior quarters as the revenue base for W + M continues to grow? And also, like what's the cadence of the freemium rollout? Where are we in terms of like the U.S. rollout? And if you could put some color on the conversion.

Yes. Let me take the last bit of that first. This is Aman, [Jan]. In terms of the freemium rollout, we continue to be super happy with the rollout. A majority of customers in the U.S. are now seeing the freemium product. We are still gathering the last bits of data on it, but we are satisfied from a conversion standpoint that it is doing better than free trial, and it's going to be the way forward for us. Our path there, the next steps there will be about taking freemium into other English-speaking markets and then our other international markets. So that's sort of the road map for freemium moving forward.

And in terms of the comparison, year-over-year, I'll turn it to Ray.

Yes. Yes, [Jan]. The rates on those products, the growth rates are consistent with what we've been talking about in recent quarters, continue to be really happy with both attachs that we're seeing there as well as the SKUs that folks are choosing.

Great. And if I may add one more question on this point. Going out a couple of years. I know you talked about $150 million by 2023. What kind of assumptions are you using in terms of just the GMV capture? How much of that GMV do you expect to be flowing through Poynt at that time?

That's -- those are conservative, right? I don't want to get into the details yet because we're still a good ways out from actually launching that, iterating on the go to market, whether it's new versus existing. So there's going to be a lot of factors to consider as we roll that product out. But $150 million is the minimum we're looking at. We think there's a lot more opportunity beyond that.

Our next question comes from the line of Nick Jones from Citi.

I guess, first, could you just maybe give an update on quarter-to-date trends as kind of COVID concerns and uncertainty persists? And then second question is maybe bigger picture. As you roll out new features for social API integrations with Instagram, things like that, what is the level of kind of the current sub base awareness of these rollouts that are pretty frequent? And then how does this come into play with winning new subs who are in market to choose a platform and maybe in particular, the e-commerce solutions at GoDaddy?

Nick, let me take the first one and then Aman can hit on the product. As far as trajectory, we continue to see really strong year-over-year growth in new customer cohorts. That's both in the number of customers and the absolute dollar value of the cohort. If you look at the first quarter cohort, it's comparable to sizes we were seeing in Q2, Q3 last year when the COVID demand surged. We are seeing differences in demand around the world, just like we have for the last year, but the numbers are still really strong, as you can see in the results and in the guide. And this is consistent with what you're seeing in a lot of the other external data points with respect to small businesses, including still a real, robust new business formation in the U.S., in particular. The Q2 guide that we put out as well as the full year is what we see with respect to current trajectory.

And then in terms of the feature set, Nick, it's all about very, very quickly bringing features to market that create value for customers, that increases their engagement, that increases their customer success, right? That drives aware -- that success for them drives sort of the awareness of the product, not just with them but with other people and the beautiful word of mouth, that continues there. But internally, what it does is that customer success leads to us being able to build an ecosystem of upsell, be able to build an ecosystem where they're able to adopt new and new capability and we're able to offer them more. And then we're able to bring that success to sort of earlier in the sales path, where we can use that messaging in terms of confidence to say, x percent of customers are using this, you should try to and get it with this starter package of Websites + Marketing. Hopefully, that answers a little bit of, I think, the question that you were asking. There's just a ton of opportunity for us to drive awareness about our product. I look at a lot of research where customers are just surprised to see how simple and intuitive and kind of powerful Websites + Marketing is for their needs, but they just didn't know that it existed or that it did XYZ, and us continuing to launch those features, just makes it very, very big.

And then quick mention on the pros side. This is why we did the Expand program. We have a new editor in play for WordPress. We've launched the hub, and we've got to get word out there that GoDaddy is bringing to the table new feature set functionality, a huge amount of it for free, that can really make life easier for the pros. And so far, they're liking what they're seeing.

The next question comes from the line of Trevor Young from Barclays.

Can you comment on how you think you can monetize the boosted post for Facebook as well as the Instagram API? And do you have any preliminary stats on customer adoption? And then Aman, you had noted targeting, I think, 300,000 pros enrolled in Pro Hub by year-end. That's probably about 20% penetration. Where do we stand today, knowing that it's still very early days and just what's going to drive that adoption?

Yes. It's super early days. And I've mentioned a couple of metrics for some of the features where we have a little bit more data. And no doubt for things like boosted posts and others, we'll see, I think, really, really good engagement from our customers on those. In terms of engagement with the hub, the 300,000 number comes from looking at our base of customers. As you know, we have 1.5 million pros on our platform, which is just a massive number. But to engage them at a much deeper level, our -- what we did is we segmented those customers. And we said, look, here are the types of subsegments within those, that could really benefit from a tool like the hub. And those are the customers we're targeting. You're going to see us sort of reach out to them with sort of innovative marketing solutions that bring them to the hub, that allow them to try tools and then sort of add value to it every week, literally, every week, every other week we put something out there. So that if you go to the hub today, for example, one of the things we have out there is more data for them for their websites that we're capturing. And you'll see some data set, and then you'll see right in front of it coming soon on the next thing. So that they feel that the velocity of change that they feel that, okay, I'm seeing this today, and I'm going to have something in a week or 2, and I need to come back to get it. So that's the type of loop we're trying to create to bring 300,000 folks into the hub.

Trevor, when you think about monetization on those Websites + Marketing capabilities, right, we're focused on delivering that customer value first, then we'll get to monetization once we've gotten that closer to scale.

Great. And congrats, Ray, on leaving on a strong mark.

We appreciate it.

The next question comes from the line of Ron Josey at JMP Securities.

Always good to talk to you. So I wanted to ask maybe 2 on, Aman, on payments and the commerce solution. You talked about getting both ready to market, I guess, payments ready to market and the end goal, the commerce solution launching here. Websites and marketing commerce, I think subscriptions or subs rose 70% year-over-year. And so can you talk to us maybe how GoDaddy looks once these solutions are fully launched? And really, what we can expect around building awareness, given your commentary of new products and services are being launched, but awareness is still something that's being worked on? And then maybe another question more just on the organization. With things reopening now, are the Guides back in the office and just wondering how the organization -- if folks are back in the office, how that's coming along from just an efficiency perspective?

Yes, happy to take that. On the payments piece, we have a WordPress solution out there. That's a small start because we're trying to see how things work and push through things through the pipe. But the big launch, as you said, is about Websites + Marketing and having a completely seamless experience. The way I'd want you to visualize that is a customer comes to us, they start with a website or a domain, ultimately, they have an online store online. And as they're picking their payments provider, they have a clean default choice that says, start with GoDaddy payments. And it just works seamlessly. Every interface they go into looks the same, feels the same, works the same way, is connected in the background. So they are not copy pasting anything.

Every thing related to their sort of selling capability, whether it's on their site or with partners like Amazon or Etsy or others is handled seamlessly and just taken care of. And of course, the omni-commerce solution, which we are committed to launching this year is about bringing the capability of in-store into that same ecosystem as well. Outside of that, we're also targeting a Managed WordPress, which is our instance of WordPress and a GoDaddy payment solution for Managed WordPress, which we will also be launching in a few weeks.

As we put those pieces together, the point about awareness, of course, continues to become bigger and bigger. But once we have a full solution, we can actually go-to-market in a different way. We can actually go-to-market and talk to customers about having the full capability, about them being able to do it in the manner that they like to do it with GoDaddy, where the solutions are simple, the technology is intuitive and the human guidance is always available to them. So that's what you should expect from us.

In terms of reopening, we are still evaluating reopening, like many other companies. We have done some surveys of the employee base. We have put in some dates where we're going to ask folks to come in on a volunteer basis. And so far, there's not a lot of folks taking us up on that. I think folks continue to be concerned. I think folks in many places -- and it depends on country, as you well know, obviously, the situation in India very, very difficult right now. But depending on country, there are some locations where people are slightly more open to it. But at this point, we think it's looking more like later in the summer that we'll have a set of folks back in the office.

And maybe from a productivity perspective, we're now a year, call it, 3 quarters in of the Guides working from home, maybe improvements there?

Yes. We're happy with the productivity that we've continued to add more sort of tech. We've continued to add more capability for the guys to work remotely because we realize that this is sort of a new normal for quite a bit. So far, we're pretty happy with the productivity. We start to lap some of that going into April and May here. So far, we're pretty happy with it.

The next question comes from Brent Bracelin from Piper Sandler & Co.

This is Clarke Jeffries on for Brent. First question, certainly, top of mind, is that 19% Domains growth number, highest in 3 years with a high teens guide. And Ray, I appreciate the disclosure around percentage of the business from aftermarket. Could you maybe give us a sense of what percentage of the business aftermarket was a year ago or in the past? And maybe how much volumes versus ASPs are driving the benefit today? And I have one follow-up.

Yes. Clarke, we've been disclosing for a while it's been a single digit. And now it's climbed up to double digit. We've been really happy with all the work that the team have been putting in place, and Aman articulated a lot of the things we're doing, and it's not just one thing. It's different purchase pass, it's different UX on it, and it's more inventory in the pipe. So the lift there has been really strong, and you saw that 5-point difference on the sequential that you just talked about.

From a unit versus ASP perspective, this is primarily unit, right? These are more inventory going through the pipe versus higher ASPs. Now we do see our share of strong ASPs, 6-digit plus numbers. But that's not what's driving the revenue growth.

All right. Perfect. And then second question. Obviously, strong global demand seen with 16% growth in international. But I was wondering if you could give a little bit more detail about where you're seeing strength in the different regions. Any pockets of particular strength to call out? And then is there any takeaway for investors with this being 1/3 of the business and now growing faster than overall revenue?

Yes. Fantastic results out of the international team. They've really stepped up during the COVID demand surge, particularly on the marketing side. If you look at some of the campaigns that we put out there in different markets, it's really driving a lot of sign-ups. As far as any areas of strength, our developed markets are growing incredibly strong. So Canada, Australia, U.K., India, those all sequentially stepped up and we've been really happy with the results we're seeing there.

Our next question comes from Ygal Arounian from Wedbush.

So I actually thought that one of the most important things you said on the call so far today is just that the cohorts, the 1Q cohorts comparable to 2Q and 3Q last year, and I think that's an incredibly positive sign. So I want to dig into that a little bit. Maybe you could if there's anything around core behavior, where they're coming into the funnel? Is it around Domains? Is it more on the Website + Marketing side? Is it Managed WordPress? Is the pro push helping push that and some of those behaviors? So just some color around that.

And then on the hosting side, I know it's the slower growing piece and not the fanciest part of the business, but it remains important. Are there opportunities to grow that business? And are you seeing pressure there from the larger cloud providers taking share in the market? Or do you guys not really play in the same ballpark?

Ygal, thanks for the question. On the cohorts, as Ray said, Q1 came in as a strong cohort and definitely behaving similar to the Q2, Q3 cohorts that he talked about. I think overall, that's great customer numbers, they're coming in through similar channels. As an example, you talked about pros, the stuff we're talking about pros is still early. So what you're going to expect is the channels are pretty similar. And it's similar to what we saw through the pandemic last year. So there isn't a lot of sort of change in terms of the shape. It's just a nice increase, continued nice increase in customer numbers and just more going through the pipe.

And then on the second piece, I'll let Ray take it.

Yes, Ygal, as far as competition, right, there is some consolidation taking place in hosting. But we are very sharply priced on our offering, and the Pro Hub is another way we're enhancing the benefit for those folks that are coming in and using that product.

Our next question comes from the line of Deepak Mathivanan from Wolfe.

We will move on to the next question coming from the line of Brent Thill from Jefferies.

Ray, congrats on a great run.

Thanks, Brent.

When you think about the cash flow, it was about 11% ahead of the street. And I'm just curious, nice to see the commitment to the buyback, but also questions around -- you've done some great tuck-ins with Poynt and others. Your commitment on that side, too, and how you're going to balance the buyback versus overall tuck-ins to solidify the tech platform.

You got a question there, Brent? Or are you making comment?

No. I'm just curious, when you think about the mix and how you're incorporating that, it was nice to see the commitment to the buyback, but I was just curious if you could comment as it relates to M&A and part of the strategy going forward. You've done some nice tuck-ins like Poynt, should we continue to expect that going forward? Are you increasing the buyback? Just how you think about capital allocation.

Yes. It's the beauty of this business model, right? Significant, predictable cash flow generation. We can execute across all of the capital allocation priorities, right? Whether that's organic M&A and share repurchases. To your point, we've made a string of acquisitions over the last 18 months that have added significant product capability. Some incredible talent and some strategic optionality when you think about registry and that verticalization there.

Since the last earnings call, 2% of our outstanding equity at really attractive prices because we were able to take advantage of the market volatility. And honestly, when you look at capital allocation for us, it's pretty easy. We're -- net leverage is near the midpoint, leaves us a whole turn of EBITDA in capacity there. But those priorities and the order don't change, right? We're going to invest prudently, but at an accelerated rate in the organic business. M&A, we've got a strong pipeline. And then we'll continue to be opportunistic with that $1 billion of capacity we got on repurchases.

Our next question comes from the line of Matt Pfau from William Blair.

I just wanted to ask another question on the Pro Hub product. Maybe my understanding is incorrect, but I think that it's free for professionals to sign up for the product and that you can actually use it to manage WordPress websites that aren't created on GoDaddy. So maybe just sort of be helpful if you could dig into the monetization model and strategy with the Pro hub?

Yes, for sure, Matt. So the approach here is very much aligned with our broader approach as a company. The idea is to build tools and capabilities that add value to the customer, drive engagement, drive value, right, over time, take some of that value and shift it to shareholders, right? Absolutely, the Pro Hub is a fantastic tool. It not only helps pros come in and manage WordPress instances, both hosted at GoDaddy and outside, but it also gives them a place where they can do a bit of project management or manage their clients, and we are adding more and more capabilities to it. The idea is to create value for the pro. As an example, we already know that just the pros that are using it right now are saying that they can save about 3 hours per site, right, per month already with just what we have today.

So as we save those pros time, we expect to have a bigger part of their business with GoDaddy. And it forms a great starting point for us to be able to put in front of them new capabilities, new products because they have a high engagement product that they come to all the time that creates value for them and gives us the opportunity to now expose them to products that we monetize.

Got it. And just one follow-up on that. Within your pro base, are you seeing similar uptake or interest in launching commerce sites that you're seeing in the Websites + Marketing business?

I think we're very early in that space. We know that pros are super interested in commerce. We know that WooCommerce supports a huge percentage of the online e-commerce sort of GMV today. So we know there's great demand there. We know there's a strong community behind it. We're still pretty early in that process. As you will remember, in Q4 last year, we did an acquisition called SkyVerge. So we now have a team that is dedicated to commerce, they're part of the overall commerce division, which, as you know, is led by Osama Bedier, who joined us from Poynt. So we're actually bringing all the different pieces together at the company and saying, here's the commerce division. They are going to deliver a platform that works across Website + Marketing and Managed WordPress.

Our next question comes from the line of Naved Khan from Truist.

Just curious to know if the 70% growth in the Websites + Marketing and Sellbrite is comparable to what you have been saying in the last 3 quarters? Or is there a pickup or about the same? And also, maybe if you can give some color on the mix of e-commerce packages within that, that would be great.

Yes. Sorry, I can take that. Naved, overall, the growth we talked about is -- was all commerce across Websites + Marketing suite. That grew 70% year-over-year. And it's -- if I remember right, about consistent with what we've talked about. We've consistently seen that SKU grow faster than the other SKUs. And I think it matches the demand we have in the market today, right? Customers are coming online. They're looking for an online store. You also saw a shift -- I think I talked about it in the previous call, some of our merchandising where you come to the homepage of GoDaddy and unless we already know you and personalize it, what we put right in front of you is the ability to build an online store with Websites + Marketing.

In terms of the percentages going into the commerce SKU versus others, broadly in line with what we've talked to you about. It continues to be the product the customers are excited about. It continues to be the product that we're putting a lot in. And it's not just about product commerce, as I've talked in my prepared remarks, we're doing more and more for services commerce customers as well. And their needs are unique and different. What they're looking for is tools that help them do the online appointment and sort of things that go along with that.

So overall, I would say, the similar trend, but hopefully, to have a little bit of color helps.

No, that's helpful. And maybe a quick follow-up. On the payments front, at what point do you think maybe you can start to maybe share some numbers that you think you can be generating maybe either in the back half or maybe for 2022? And also, with respect to your own expectations, how are you tracking with the launch of -- or integrating Poynt into the online packages?

Yes. We continue to be very happy with the Poynt integration. We're moving very aggressively the products that we're building and testing right now. And as I said, we've got something out there for WordPress already, and you'll see more from us on Websites + Marketing within a few weeks. From my perspective, they look fantastic. It's exactly sort of seamless intuitive experience that our customer base needs, and we're absolutely excited about providing that. We're still on track to provide an omni-commerce solution this year. Our teams are working in parallel and burning the midnight oil on that. We are all super excited about it. We think it's going to make a difference in the market. And bringing sort of in-store, online and platforms, Amazon, Etsy, all of those sales together in one place, bundled with payments. And honestly, more opportunities coming right behind with invoicing and others. We think it's just fantastic. But overall, in terms of talking about numbers a bit too early. As Ray said, we have a number out there for 2023. And we think it's conservative because we really think the opportunity is very large.

Our next question comes from the line of Frank Volpe from Wolfe Research.

Frank Volpe here for Deepak. Congratulations on the great quarter. I just wanted to ask about the registry business, obviously, acquired more extensions. Before you spoke a lot about innovation being central to your strategy. I'm just curious if you could highlight kind of which innovations you're most excited about, as well as how we should think about timing for building that business here larger?

Yes. One of the things we realized is to innovate, we needed a bit more scale in that business. We need more TLDs. We need to be able to give the customer more choice. So what you see here is us adding a bit of scale. And of course, there's some financial advantages to that, too, but adding a bit of scale so that we can really drive a more innovative experience for our customers. Believe me, we're doing some small things there. And as soon as we have something that we're super excited about, you guys will hear about it.

Frank, and you asked those TLDs we picked up, right? Those are either owned or perpetual contract TLDs, meaning 0 incremental cost, which makes it easier to innovate.

Got it. And then just as a follow-up, we also spoke a little bit about websites and marketing. As we -- coming out of the pandemic and things are starting to reopen, have you guys seen any kind of impact on customer acquisition costs? Or kind of anything notable we should be thinking about in terms of your marketing channels?

Yes. I think as we talked about a little bit, the Q1 cohort was a strong cohort. And we'll continue to spend in marketing until we see the returns. And as Ray guided right now, we intend to continue to spend in marketing. As best as we can see today, we see good returns for that marketing spend or at least well within our guidelines. So that's what we're expecting to do. Obviously, there's no crystal ball, and I can't talk about what's going to happen. But overall, we still feel pretty good about it.

Great. So no impact yet is what I'm hearing?

No. In fact, as I mentioned, that first quarter cohort looked a lot like the size of the Q2, Q3 last year. So --

Thank you for joining us today. I'm going to turn the call over to Aman for some closing remarks.

Thank you, Christie. I wanted to take just a moment to thank Nima Kelly and Ray Winborne. Nima has been the backbone of this company for almost 20 years, and her contribution is immeasurable. I know this group doesn't get to see her, but Nima is always in the background with us on these calls and always helping out and has done so much for the company.

And Ray, just -- you guys get to see him all the time, total joy to work with, such a professional. And Ray, I'm really glad you get to go out on a beat and raise and as Sterling joked, which Sterling, you gave me a big laugh. This is a good point to hand off to Mark, for sure. So thank you, Nima and Ray, and thank you all GoDaddy employees for a great quarter, and thank you all for joining the call.