GoDaddy Inc. Q2 FY2025 earnings call

Key Points - Mission: GoDaddy's mission is to empower entrepreneurs and make opportunity more inclusive. - Second Quarter Results: The company achieved strong results with A&C bookings up 12%, normalized EBITDA margin expanding nearly 200 basis points, and free cash flow growing 21%. - AI and Agentic AI: Testing a new conversational experience for Airo, and employees are leveraging AI to accelerate execution across the company. - Growth Initiatives: - Pricing and Bundling: On track, with new bundles based on partnership capabilities and AI-driven coding improving velocity. - Seamless Experience: Enhancing the customer journey, boosting conversion rates and attach. - Commerce: Surpassed $3 billion in annualized gross payments volume, and the Rate Saver feature is showing promising momentum. - Airo: Continues to grow, with Airo cohorts outperforming non-Airo cohorts in key metrics such as average order size, multiproduct attach rates, and renewals.

Total revenue for GoDaddy grew 8% to $1.2 billion in the second quarter. The A&C segment saw a 14% revenue growth, reaching $464 million, which accounts for 38% of the total revenue, with its segment EBITDA margin expanding nearly 100 basis points to 44%. The Core Platform segment had a 5% revenue growth, amounting to $754 million, and its segment EBITDA margin expanded by over 200 basis points to 33%. Total bookings grew 7% to $1.3 billion, with A&C bookings up 12% and core platform bookings up 3%. Free cash flow experienced a significant 21% growth, reaching $392 million.

• Full year 2025 free cash flow guidance has been raised to approximately $1.6 billion. - The full year 2025 revenue outlook is revised to a range of $4.89 billion to $4.94 billion. - Q3 total revenue is targeted to be between $1.22 billion and $1.24 billion. - A ~50 basis point headwind to bookings and revenue is anticipated in Q4 due to the Dotco registry change. - Projecting a normalized EBITDA margin of approximately 32% in Q3 and aiming for 33% by the end of 2025 with sequential expansion each quarter, and normalized EBITDA is expected to maintain a greater than 1:1 conversion to free cash flow for the full year.

• The transition from being the registry service provider for the .co top-level domain in Q4 will result in approximately a 50 basis point headwind to bookings and revenue primarily in the fourth quarter.

Q: How should we consider the deceleration in A&C growth and whether it will continue through 2025?

A: A&C growth faced tough comparisons, but there is no trough expected; bookings and revenue will be in line for the year excluding foreign exchange impacts. The comps will ease in the second half. Cohorts from Airo are converting at higher rates, driving ARPU increase and near-perfect retention.

Q: How do you view ensuring the relevance of the website ecosystem and app ecosystem with the Agentic web?

A: AI and Agentic AI provide the ability to offer simpler products for customers. Ask Airo is a new conversational experience being tested, and AI is transforming internal work processes. Airo Plus is still in testing with varied success, but there is excitement about its potential to drive higher average order size and attach.

Q: Regarding the Dotco registry change, is there a shift in thinking about being a registry versus a registrar? And on the 3Q EBITDA margin and full-year margin, are there any costs or mix differentials?

A: This is a one-off situation related to that specific country code, with no change in philosophy. There are no specific expense call-outs for the diminished margin expansion; the comparisons for margins in the second half are more challenging, but no specific expenses are to be noted. Free cash flow is driven by strong bookings and cohorts coming in with higher average order size and better retention.

Q: About Ask Airo, what is the timeline for bringing solutions to the market and initial feedback, and when can we expect customer count to return to growth?

A: Ask Airo is already being tested on a few pages, with initial tests showing good user interaction, and more Agentic capabilities will be added over the next few months. Regarding customer count, the focus is on high-intent customers spending over $500, with positive signals seen in the last couple of months, but there is no exact timing for the return to growth of the total customer count.

Q: Are you observing any changes in the top of the funnel or share shift due to AI coding tools?

A: No direct issues are observed. The strategy is successful in attracting high-intent customers with strong top-of-funnel conversion, attach, and average order size. AI and Agentic capabilities present a significant opportunity given GoDaddy's brand awareness and customer base.

Q: On Airo and conversion/monetization, provide an update on the landing page flow and the trajectory of pricing and bundling.

A: The percentage of customers ending up in a website product through the Airo path is increasing, with AI facilitating the creation of paid sites. Pricing and bundling is on track with tests for Q4/Q1 launches, and both pricing and bundling and seamless experience have strong road maps with good contribution potential.

Q: On the sustainability of the Rate Saver and the exposure of Airo at the top of the funnel?

A: The Rate Saver is a sustainable product feature helping merchants reduce costs with rapid adoption. All top-of-funnel customers are now exposed to Airo, which is driving growth in the high-intent customer base.

Q: How is GoDaddy managing SEO impact and assisting customers in navigating the new landscape?

A: GoDaddy is diversified in traffic channels and conversion rates, compensating for SEO changes. Using Agentic AI to help customers with SEO optimization and other website optimizations, with internal projects testing autonomous optimizations.

Q: On the expansion of Ask Airo capabilities and near-term focused workflows, and the strength sustainability of the core platform?

A: Focus is on customer job requirements with a conversational experience. Integration with partners using AI is a key area. The core platform is seeing renewed strength from pricing and bundling in domains, with aftermarket activity and pricing bundling impact sustainable. The Dotco registry change impact is minor and does not affect strategic initiatives.