GoDaddy Inc. Price & Performance (GDDY)

Actual results may differ materially from those contained in forward looking statements. Any forward looking statement that we make on this call are based on assumptions as of today, 02/13/2025, and except to the extent required by law, we undertake no obligation to update these statements because of new information or future events. With that, I'm pleased to introduce Aman. [indiscernible] Good afternoon, and thank you all for joining us today. At GoDaddy, our mission is to empower everyday entrepreneurs and make opportunity more inclusive, [indiscernible] Our strategy is relentlessly focused on creating customer value and transforming it to shareholder value through better conversion, [indiscernible] And retention This is the driving force behind our profitable growth model propelling us towards our North Star of maximizing free cash flow over the long term. Our team demonstrated strong execution in 2024. With annual results that are tracking ahead of our Investor Day targets. We drove top line bookings growth of over 9%, and expanded our bottom line normalized EBITDA margin to 31% for the full year.

Our impressive 21% growth in applications and commerce bookings alongside our nearly 400 basis points margin improvement were strong contributors to a 25% increase in free cash flow for the year.

Equally exciting, GoDaddy crossed a significant milestone this year delivering our first $5,000,000,000 of annual bookings. On our key initiatives from Investor Day, we continued to make great progress in pricing and bundling seamless experience commerce, cost optimization and strong traction in GoDaddy GoDaddy.

I'm excited to share these updates with you today. Pricing and bundling delivered impactful results throughout 2024, that were higher than our expectations. This bolstered our 21% applications and commerce bookings growth from focused efforts in productivity. We have shared that this is a multiyear journey, and our confidence in this initiative continues to grow.

In 2025, we are targeting a meaningful contribution to growth from this initiative. We will focus our 2025 efforts on our Presence products and specific customer populations within our hosting business. This continues to spread this initiative across applications and commerce and core platform. In parallel, we are working on the next evolution of this initiative for 2026 and beyond. Our Seamless Experience initiative also exceeded expectations in 2024, improving conversion, renewal rates and engagement across products. In Q4, we launched a redesigned managed WordPress platform with two times faster performance and enhanced security. Additionally, we started testing aero site designer for WordPress, an AI powered web design tool. This initiative will continue in 2025 with similar goals to reduce friction, enhance performance and improve customer experience. Our aim is to help customers save time and focus on what they love, running their businesses and engaging with their own customers. Our commerce initiative is performing well and annualized gross payment volume is growing at a fast pace. While our focus in 2024 was on profitable growth, through the creation and merchandising of our commerce subscription products, we also drove growth in our transactional payments business with annualized gross payment volume increasing 55% to $2,600,000,000 In addition, we launched new innovations such as GoDaddy Capital, a merchant cash advance program that helps our customers more easily access working capital, manage cash flow and invest back in their business.

As we look to 2025, our teams are focused on delivering more new and innovative capabilities for our commerce customers. Such as expanded payments processing options as well as same day payout, which give customers rapid access to their funds. On our cost optimization initiative, we drove measurable impact across the organization. From continued simplification of our integrated platform and global talent recruitment across multiple functions, to better technology and tooling. In 2025, we plan to maintain our disciplined approach across our cost structure and drive opportunities with technology and AI to provide better experience and service to our customers at lower costs.

Last but not least, GoDaddy aero continues to transform the customer experience. And reposition where our customers start with us. Aero is quickly gaining traction, and we view it as a key driver of future growth and customer lifetime value. Throughout 2024, aero has shown promising results with discovery and engagement. We have also made great progress in expanding aero across more customer entry points, and plans. Website building remains the biggest beneficiary of aero engagement and aero continues its momentum in becoming the largest funnel for websites plus marketing with 50% of paid subscriptions originating with the aero experience. We are excited to enter the monetization phase for Arrow, earlier than planned across two pathways: aero and aero plus. Aero has resulted in a combination of increased cost customer spend and better products attached and with the first aero cohort reaching the thirteen month mark, we are seeing green shoots in terms of improved renewal rates for both domains and websites plus marketing. AeroPlus takes the Aero experience to the next level with advanced logos, AI powered marketing tools and enhanced site building capabilities. We began testing aero plus as an independent SKU in the fourth quarter. We also launched a front of sight experience in connection with our Super Bowl ad that highlights Aero and all of its capabilities.

Our ad accomplished what we set out to do. Bring broad awareness to the full breadth of Aero's capabilities to a massive audience. We want the world to know about aero and the Super Bowl is one of the largest stages. Our aero landing page jumped dozens of spots to become a top six page on our website on Sunday. Telling us that customers were looking for This also kicked off our 2025 marketing campaign which will continue to highlight Aero's capabilities to take the guesswork out of building a successful online venture and showcase the unstoppable confidence Aero inspires in small businesses. In 2024, Aero demonstrated the power of our integrated platform, the value of automation, and the abilities generative AI can bring to our customers. As we look forward into 2025, Eyrie will take more leaps forward with personalized inputs for each customer that drives a new level of AI driven personalization. The first test using this technology on aero domain search beat the most recent generative AI based winning model opening a new vein of improvement that our teams can pursue. We will also see the introduction of Agentec AI across our platform and within the aero experience creating simplification for our customers and new engagement services that lead to monetization.

With these and many other improvements on our roadmap, I'm excited by the innovation at the company and the focus on creating value for customers. In closing, I want to highlight that 2024 was a year of exceptional execution by the GoDaddy team. A year ago, we shared clear goals and strategic priorities at our Investor Day, and I'm proud to say that our team has driven great performance across the board, growing bookings over 9% revenue at 8%, almost 400 basis points of normalized EBITDA margin expansion to 31 percent and $1,400,000,000 in free cash flow. Our strategy is steadfastly focused on the entrepreneur's wheel across identity, presence and commerce, and it is working. The relentless focus of our operations continues to be to accelerate the pace of execution to create customer value and successfully transform it to long term shareholder value. With that, here's Mark. Thanks, Yvonne.

Throughout the last few years, we focused on creating significant value for our customers.

By integrating our platform to deliver seamless technology and provide one stop shop solutions that drive conversion, attach and retention. Our strong financial results are a testament to the continued disciplined execution of our strategy, as we drive towards our North Star. In the fourth quarter, we supported this goal through our delivery of Beginning with Q4 results, total revenue grew on a reported and constant currency basis to $1,200,000,000 exceeding the high end of our guided range. Consolidated annual recurring revenue grew 8% to $4,000,000,000 For our high margin applications and commerce segment, we drove 17% growth in revenue to $441,000,000 on continued strong performance from our key growth initiatives. A and C bookings grew 17% on the strength across all products within this segment, including our proprietary website less marketing, managed WordPress and commerce, as well as our productivity solutions. Segment EBITDA margin also improved to 47%.

Our core platform segment delivered revenue growth of 4 percent $751,000,000 driven by strength in domains from pricing and units this growth was slightly tempered by our proactive strategic initiatives around platform integration that included divestitures, migrations, and product end of life efforts in our hosting business. Core platform bookings grew 4% and segment EBITDA margin expanded to 34%. We grew normalized EBITDA ahead of expectations increasing 19% in the fourth quarter. To $385,000,000 and delivered an expanded margin of 32%, up nearly 300 basis points. Favorable product mix and continued operational discipline were the main drivers of expansion. While we simultaneously increased marketing expense, in support of the broader launch of our innovative ARO experience. On cash, unlevered free cash flow for the quarter grew 9% to $379,000,000 and free cash flow grew 12% to $342,000,000 This is supported by the $1,200,000,000 of bookings in the fourth quarter, representing 9% growth on both a reported and constant currency basis. Moving on to our annual financial results. We delivered $4,600,000,000 in revenue representing growth of 8% on a reported and constant currency basis. ANSI revenue grew 16% to $1,700,000,000 and core platform revenue grew 3% to $2,900,000,000 Bookings rose 9% with a slight currency headwind.

Full year normalized EBITDA grew 23% to $1,400,000,000 representing a 31% margin up almost 400 basis points over the prior year. Since 2020, we have driven cumulative expansion in normalized EBITDA margin of nearly 900 basis points, an impressive feat that we plan to continue building on. We also continue to demonstrate normalized EBITDA to cash conversion of approximately one:one. Unlevered free cash flow for the year grew 20% to $1,500,000,000 exceeding our guide for the year. And free cash flow grew an impressive 25% to $1,400,000,000 also exceeding our guide. Over the last few years, we have pivoted our go to market efforts to attract high valued customers and build profitable cohorts through seamless technology and enhanced experiences. By year end, nearly all customers are now on our integrated platform. Which boasts an impressive 85% -plus retention rate despite our overall company retention rate dipping slightly to 84%. This focus on quality over quantity has increased our model's resilience profitability and cash flow. By eliminating deep discounts, completing targeted divestitures and migrating certain offerings our customer base declined to 20,500,000. That said, these efforts are working. Our newer cohorts are delivering exactly as intended with higher attach and conversion.

Average order size, a leading indicator, is 16% higher, while ARPU is also up 8% to $220 Additionally, the percentage of customers purchasing two plus products has trended upwards. And over 50% of our total customers subscribed to multiple products. With us. This highlights successful efforts to boost cross selling and bundling on our integrated platform, reinforcing our strong profitability and cash flow generation opportunities for years to come.

Moving forward, we remain confident in our trajectory and anticipate a return to customer growth in 2025. Underpinned by our enhanced value proposition and strategic focus on high lifetime value customers. Turning to the balance sheet. We exited the year with $1,100,000,000 in cash, and total liquidity of $2,100,000,000 Net debt was $2,800,000,000 representing a net leverage of 1.7 times on a trailing twelve month basis. Last year, we bought back 5,200,000.0 shares totaling $668,000,000 and an average purchase price per share of about $129 Overall, we drove a 23% reduction in gross shares outstanding since January 2022. Three points ahead of our three year targeted reduction of 20%. And at the quarter end, 145,000,000 fully diluted shares remained outstanding. Shifting to our outlook for Q1 twenty twenty five. We are targeting total revenue of $1,175,000,000 to $1,195,000,000 representing 7% growth at the midpoint of the range. Within that, we expect ANC revenue growth of mid teens and core platform growth of low single digits. We anticipate elevated spending for marketing, focused on our broader ARO launch. As well as typical seasonal expenses in the first quarter. We project a normalized EBITDA margin of about 30%, an expansion of about 200 basis points over last year.

For the full year, we expect total revenue to be within a range of $4,860,000,000 to $4,940,000,000 representing growth of 7% at the midpoint of the range. We expect revenue growth in The U. S. To outpace international growth by approximately 200 basis points, primarily on currency headwinds that are expected to be more prominent in the first half of the year. In A and C, we expect revenue growth of mid teens And in Core Platform, we expect revenue growth of low single digits. To be clear, as Aman said, we are excited about the ARO experience and the longer term accelerant it represents for our business. In the near term, including 2025, the financial benefits are expected to be more modest. As monetization begins to take hold in the form of bookings before being recognized as revenue, in later periods. Looking back on the incredible progress of our A and C business, We take immense pride in its rapid growth rising from 30% of our overall revenue just three years ago to an expected nearly 40% year's end, This achievement reflects our relentless focus on innovation execution and customer impact. As we move forward, we remain committed to driving meaningful profitable growth and we have an exciting road ahead and we are just getting started.

As our record of accomplishment demonstrates, we remain dedicated to maintaining our operational discipline and looking for opportunities to gain further leverage. Looking ahead, we expect to drive this leverage through continued infrastructure simplification and global talent recruitment. While also making long term strategic investments in product innovation and marketing. In 2025, we expect normalized EBITDA margin expansion of approximately 100 basis points and we remain on track to deliver our Investor Day target of 33% by 2026. For the full year of 2025, we are targeting free cash flow of at least $1,500,000,000 representing growth of over 11%. We expect capital expenditures of $30,000,000 cash interest payments of $150,000,000 and $30,000,000 in cash taxes, primarily to foreign jurisdictions. With that, our disciplined capital allocation approach remains unchanged, and we plan to evaluate all opportunities for shareholder return On our buyback program, we are committed to at a minimum, covering dilution from share based compensation over the year. We are pleased with our strong 2024 performance.

And our progress towards our Investor Day target of $4,500,000,000 plus in cumulative free cash flow generation. Underpinned by 6% to 8% annual revenue growth an expansion of normalized EBITDA margin to 33% by 2026. Before we go to Q and A, I want to emphasize that our path ahead is clear and we remain dedicated to executing our strategy to deliver durable top line growth alongside expanded profitability. Balancing the two drives us towards our North Star of maximizing free cash flow With that, I'll hand it over to our Vice President and Head of Investor Relations, Christy Maisoner, to open up the call for your questions.

Thanks, Mark. As a reminder, if you'd like to ask a question, please use the raise hand feature at the bottom of the webinar screen to be added to the queue. Our first question comes from the line of Vikram Kasevabhutla from Baird.

Vik, please go ahead.

Hey, thanks. Can you hear me? I can. Hey, Vic. Rick. Hey, great. Hey. Thanks for thanks for taking the questions. My first one is on pricing and bundling. You talked about focusing this year on presence products and specific customer populations within the hosting business. Just wondering if you could elaborate some more on the strategy there. You know, why are you choosing to focus on those areas and how impactful do you think that could be relative to your work last year and productivity I think you mentioned the next evolution in 2026. Just wondering if you could share any color on what those next steps could look like And then my second question is on the customer count. Mark, you reiterated the comp [indiscernible] Just what are the drivers that you think will help you get there? And what does the timeline look like in terms of returning to growth on a quarter over quarter basis and year over year And maybe associated with that, just what are you seeing at the top of the funnel right now? And I'll leave it there. Thanks.

Thanks, Vik. I'll start with pricing and bundling. Continue to be very excited about that program. It delivered ahead of our expectations. 2024, and we have a very material target for it in 2025 as well. I feel like we've put the bread crumbs in place on the evolution of this program, so there isn't hard cut over 2026 or anything? Where we started with pricing and bundling is looking at our products bundling them with other products and looking at unique value based offers for our customers And what we learned through 2024 is that there is a better path to approaching customer cohorts rather than a product centric lens. What we're talking about here is that continued evolution where, of course, we focused on productivity solutions in 2024, In 2025, you'll see us continue to focus on some of our Presence products and that was the more product led mindset or approach to pricing in bundling. But then the customer cohort based lens is starting in 2025 as well in the first place we're going a customer called in the hosting business. And what it's really based on is the continued experimentation with customers, continued continuously looking at what bundles makes the most sense, where is the significant customer surplus and where can we sort of price up a little bit and ship some of that value to the farm and shareholders.

I think for customer count, Mark, I'll turn it to you.

Absolutely. And thanks for the question. Just a reminder, our focus is on high quality customer. And we want customers that are coming in with intent.

So our goal is really looking at the metrics around, what is the average order size that at the initiation with that customer? How are they attaching how is it ultimately impacting our retention rate. So the drive to getting customers is more in line with getting the high value customers versus just getting any customer.

And having said that, we had some headwinds and we've talked about them around our customer count. We had divestments We ended deep discounting at the top of our funnel.

We had migrations. All of those created a drag on certain customers, certain brands that we had. And we are now getting through the majority of that work and we're looking at that starting to abate from a comparison basis. [indiscernible] funnel he asked about, we're still seeing at the top of funnel very solid traffic coming into our funnel. We're seeing customers attaching faster, All the positive signs around ARO that we are part of our strategy. So at the end of the day, we feel our strategy is working.

Okay, great. Thank you. [indiscernible] Our next question comes from the line of Ken Wong from Oppenheimer. Ken, please go ahead.

Can you guys hear me? Yes, we can. Great. I just wanted to maybe kind of dive in a little bit on the revenue growth for next year. I think we were generally expecting some convergence. Between revenue and bookings, and we are seeing a little bit of that. Just wondering if there's any kind of one off headwinds that we should be aware of, any quantification of how FX might have impacted that number? Yes. Thanks, Ken.

We're still seeing great momentum in bookings, and obviously, it depending on the terms, transactional over subscription, that's going to impact revenue in different periods. But on an overall basis, bookings is going to outpace revenue and continue to see that momentum going through 2025. FX, we did see, I would say, a small impact on FX in bookings towards the second half of the year, not much. Now, hits us in bookings first, then it rolls out into revenue. So it is very much in our model for 2025. But I would say at this juncture, it's it's relatively small overall.

Okay, perfect.

And then last year, you guys more or less deliberately kind of fired customers with the base falling. $20,500,000 You guys have been talking up investments in terms of customer acquisition for '25 Like how should we think about the contribution to growth from that aspect of your focus?

I'll start and then maybe Man, you could jump on. So we're looking this year and we've talked about our investment in more [indiscernible] we are starting to enter the monetization phase. But the monetization phase takes a while to build.

And, you know, goes to bookings first and ultimately to revenue. So for this year, I would say modest impact of the ARO launch and some of the efforts we're making around attracting customers into that experience, But as we go out, obviously, we expect that to increase.

And maybe I'll just quickly add, Ken, maybe two parts to it. One is Mark already talked about, which is attracting the higher value customer, the higher intent customer. And the second is that we want them to start with us in a different place. Years ago, a customer comes to GoDaddy, they started with domains, Well, more and more today, a customer comes to GoDaddy and they start with Aero. [indiscernible] ARO is a collection of products, collection of services that adds value them immediately. And that's super important to us because it allows to reposition the company and the starting point of the company with the customer.

Thank you, guys. Our next question comes from the line of Josh Beck from Raymond James.

Josh, please go ahead.

Good. Thanks so much for the question, team.

I wanted to go back to some of your comments about pursuing the monetization vectors or phase, if you will, of Aero and Aero Plus. It sounds like you're entering that phase maybe earlier than you had planned, say, six.

Twelve months ago. So just kind of curious what triggered that that change and really what was behind that?

Yes, happy to talk about that.

Definitely, we brought ARO to market in November, December for the first time with a small cohort of customers and expand and that's 2023 and then over the last year, we expanded it And then our regional estimates, and I think I've talked about it many times, the idea very much was that the focus was on discovery and engagement and then monetization. And we really wanted to solidify discovery and engagement because we want to change the base that people start with GoDaddy on.

What's happened in 2024 is that discovery and engagement have gone very well. Obviously, we've shared metrics of millions of customers discovering [indiscernible] half of them engaging with Aero and now we've continued to share the metric of how Aero has become the path where people started GoDaddy and then find their way to websites. Right, with the Aeropath sort of providing 50% of website starts. So that's very good discovery and engagement metrics. And what it's done is it's sort of bolstered our confidence and pulled forward some of the aero monetization. Which of course, Mark talked about the positive of aero in terms of just some green shoots on retention rates, some product attached, all of that's fantastic, some conversion improvements to But what happens now is that a SKU appears, which is a monetization SKU, which is ARO plus that we launched in Q4, you're going to start to see us fold in a number of the new and very innovative products. On the Aero platform as Aero Plus to the customer.

Super helpful. And then maybe just a quick follow-up. On the GPV. I think it was 2,600,000,000 growing mid-50s and obviously the comps are also very high with respect to growth. So I guess, how much Penetration, do you see in the years ahead, obviously, you've had tremendous success getting to this point. Is that something where there's still a lot of low hanging fruit and gains to be had? Or should we be thinking about growth maybe slowing there? Any guidance would be great.

Yes. I continue to be very excited about GPV growth and I think we want to continue it at a fast pace but our model is a profitable growth model. So what we did in 2024 is not just grew GPV very fast. What we did is we started to launch SaaS offerings as well, which has helped that sort of the higher margin revenue getting out there. And in terms of penetration into the base, I would say, still the largest contributor to our GPV growth is our base of customer and we're I'm afraid to even say we're getting started because this, you know, we have penetrated such a small percentage of our base and I feel there's so much more to go in front of us that that's what we're after.

And even adding to that, as new customers have come into funnel and started using payments over over the years, they will grow and add to that GPV as well. So there is plenty of runway on our GPV growth going forward.

Great.

Thank you, both.

Thank you. Our next question is from the line of Aaron Kessler from Seaport Research.

Erin, please go ahead.

Great. We unmute there. Perfect.

Couple of questions. Maybe back to the arrow. I think you said 50% of of bookings for web presence, which is pretty impressive. Just any thoughts on maybe how much those are kind of incremental versus in terms of that uplift. Do you have a sense for that? And then may you talk about some of the internal efficiencies? I know it's kind of a longer term process, but that you're gaining from AI just and then what would you expect from 2025 as well from a sort of internal efficiencies you're getting? Thank you.

Yes. On the first part, without breaking every piece of it down, overall, aero has demonstrated higher conversion, higher product attached. And just now starting to show better renewal, not just for domains, but for websites. When we talk about aero website, what we're really talking about is people starting with the aero experience and then launching into the website experience. And that's what's reached 50%. So, aero has become a very large funnel and obviously now is going to be the largest on all four website. But aero is helping across all these metrics even as I talk about them, I have to mention these are green shoots, right? Arrow is is an infant, it's about one year old and its first cohort just came up for renewal for the first time. So we have so much more to do here, but real excitement for me here is that We are starting the customer with something different at GoDaddy GoDaddy that different vehicle is aero and it offers us lots and lots of opportunities. And on the, Martha, do you want to add anything?

No, Aaron, on your incrementality, it's always hard to measure whether they would have gone to websites or they went to websites because of ARO. Having said that, the metrics we're tracking are things like average order size when they're initiating. Those are indicators to us that they're coming in and doing more than they previously did. And those are all very positive in the early stages of what we're seeing. And then on the question on internal efficiencies, where obviously, I'm super excited about AI and we continue to invest [indiscernible] AI, machine learning, generative AI and now agentic AI as well and we think there's great room for innovation for internal efficiencies there. Sort of across the company. And our model in some of the places, for example, in care, is a little bit different. Than other companies, but we've continued to make progress. For example, we've talked about Gabby. We've also talked about our conversational bot. And those tools continue to do better and better and I dare say a year from now, we'll be talking about them a lot more.

Great. Thank you. Our next question comes from the line of Trevor Young from Barclays.

Trevor, please go ahead.

Great. Thanks. On the EBITDA margin guide, 1Q implying about two part points expansion year on year, meanwhile only committing to 100 bps for the full year. I heard you correctly, the marketing spend is also going to be concentrated in 1Q.

So just help us understand, is there some additional spend layering in later in the year that we should maybe be contemplating as we think about margin progression And then similarly, is there any sort of FX headwinds, any nuances between where rev rec is and where costs lie that could be weighing on margin as well?

Thanks, Trevor. On the margin, as we say, every quarter, is going to be a little bit different for us. And so looking at Q1 versus the entire year, it gets a little tricky, but we do have a seasonality related to it. Now having said that, on the 100 basis points, it's just following the model that we have talked about, right? We're seeing the up front benefit last year from things like infrastructure simplification, global talent recruitment, those were very front end loaded for us. And now it's generally the tailwind related to the continued growth in A and C at a higher segment EBITDA margin. There's nothing in particular that we haven't called out. We have talked about marketing. We have talked about product innovation. But generally it's staying within the parameters that we've talked about within the model at we've talked about, and we're heading towards the 33% in 2020. Start 2026. Great. Thank you, Mark.

Our next question comes from the line of Robert Kulbrath from Evercore. Robert, please go ahead. [indiscernible] Great. Thank you for taking our question.

Wanted to ask a little bit more about the renewal rate improvement you're seeing on the very early aero cohorts, particularly in relation to domains. So wondering if it's just because they're doing multiproduct attach at a higher rate or maybe the domain the improvement in relation domains conveys that there's something, you know, more unique about the aero renewal motion. Then associated with that, are you seeing an opportunity for higher expansion at renewal from customers who have received the aero experience or engage with it. And does that, you know, potentially portend opportunity to put Arrow in front of the broader installed customer base of renewal, in the future.

Thanks.

Yes, thank you. When we talk about the aero cohort for domains, these are customers that bought a domain and were immediately sort of sort of engage with the aero experience, right? They were surrounded by the soil that chose to engage with it. [indiscernible] what we see there is that because Aero offers eight to nine what we call cars or areas for customers to engage where they can turn that domain into a PayLink. They can do a little social marketing or they can create a logo or they can get a one page website. That Aero just creates for them, right? This is before they go build a full website. All of these other interactions happen for free for these customers that have just bought [indiscernible] And our hypothesis is that because the customer now has greater value, that over time that should lead a little bit higher retention rate. Now it's going to be different from two plus products and such because there what we're talking about is two paid products. But what we have here is customer using multiple products and that should should lead to better renewal rate. In terms of expansion of other opportunities, for aero customers.

That is what we're after. We want to start with a set of products, we want to keep adding to that value over time. So you'll keep seeing us add more and more capabilities to Aero. But then we but as they start using it, expose them to a logo builder or an image creator, that's much better than what came naturally with Aero or marketing tool, marketing consultant, or the digital marketing tool we have, which do a much better job and then the customer can opt in and sort of upsell themselves into Aero plus.

And maybe the last piece is just the opportunity to perhaps at renewal. Put ARO in front of customers who haven't seen it before. Versus new customers?

Yes, we continue to work on taking ARO into the broader base of customers. I think I've talked about a little bit in the past too, our learnings from taking websites and then productivity solutions and now commerce into the basis that that go to market motion. Tends to be a bit different than new customers. So it tends to come a few quarters after we've nailed a new customer [indiscernible] We're continuing to work on that, and we're very excited about full base of customers continuing to be a very exciting place where, and if you're on the side, you'll see aero and aero plus over the next few months. Aero is already on many of the surfaces, but you'll actually see Aero Plus start popping up for existing customers too.

Okay, great. Thank you.

Our next question comes from the line of Chris Kuntaruk from UBS. Chris, please go ahead.

Great. Thanks for taking the question. I just want to go back to the comment Mark, that you had made on the 16% average order growth. You give us a sense for what that was growing in 2023? We don't haven't disclosed that back to 2023. So I would say it's a year over year comparison at 16%.

Remember, we were in a different environment in 2023.

So we're comparing it to Post arrow to pre arrow. So So again, we'll continue to update that as we go forward, but right now it's at 16%.

Got it. Yes, I think that was kind of really what I was trying to get at here was was that accelerating was that average order growth accelerating in the order of magnitude of 5% mid singles, high singles here, just as kind of a proxy for what what that performance improvement was coming from Era.

Yes. Chris, we haven't gone out and given numbers like that back that far. So we can take it offline, but we're making at 16%.

Got it. And just maybe on Aero Plus, curious how you're thinking about that product. You're obviously doing independent SKU tests now at this point. Is this something we should be looking for as Is something that you're going to be putting marketing dollars behind this year? Yes. We're going to test it first, Chris, and customers are going to start to see it on the site and only once that testing is complete, you'll see UIB tested pricing and so on. As we get to conference on its performance, then likely you'll see some marketing on it. As Mark has talked about, we are putting marketing dollars behind there, we think it's a fantastic experience and the world needs to know that. Got it. Our next question comes from the line of Ygal Arounian. Ygal, from Citigroup. Ygal, please go ahead.

First, just going back to the full year revenue guidance and the kind of point on convergence, 2024 bookings to 2025 revenue. Maybe you could just help kind of paint a little bit of what's embedded in in the range of the guidance. Like on the what would it take to get to the lower end of your guidance, meaning 6% revenue growth coming off a year of 9% bookings growth. Just what's the right way to think about that?

Yeah, Gal, thanks. And we continue to make great momentum. And the revenue growth comparison, obviously, trails the booking comparison and we're comparing it against different years, different periods, different aspects. We feel really good about where we are in the range. But there are transactional ends of the business that we continue to monitor. There are impact not only our core platform, they can also impact our ANSI we try to build that range to take into consideration that what is the volume, what are the units coming in, and what are the different ranges there? So would say if you really want to see the the what can get us One poll to the other poll, you have to look at the transactional business because the bookings take a period of time revenue on subscriptions. And I think we could a little color and say transactional businesses you're talking about the aftermarket business being a big part of that? That is the biggest part of it. We did have the return to some larger transactions last year. Making this year a tough compare in the aftermarket. As we always say, we don't anticipate those larger transactions, so that is always going to be of a swing for us depending on we see out there.

Okay, that's helpful. And another one for you Mark.

On capital allocation. So it's been a couple of quarters now with not a lot of buybacks or certainly less than what you've been buying kind of run rate. [indiscernible] you're below your leverage targets here. Just give us an updated thought of buybacks, capital allocation, that M and A environment any different or your approach to M and A How do we think about that as you're Miguel, no change to our approach. We were ahead of where we had targeted coming out of 2024. We bought back through Q3 and like I said never look at any particular quarter for a trend. Continue to evaluate on a quarter by quarter basis and we continue to look at what the right rate of return is for all of our capital allocation. Overall, no change in how we approach it, no change in how we look at things, and we'll continue to apply that in a very disciplined approach going forward. Thanks, Gal.

Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.

Great. Thank you so much. First, we generally think of websites as a pretty sticky market. And with the opportunity to drive more website attached, should we think about the opportunity as really skewed towards the new customer side Or do some of the products like site optimization allow you to actually dip back into that installed base of customers than maybe leveraging a different website builder and provide an opportunity to drive it attached to a GoDaddy website.

Yeah, Elizabeth, you're right on the spot. I mean, yes, there is the opportunity with new, but Site Optimizer is built to help reach existing customers that could renew their sites that could do a better job. I think we've shared publicly that while Site Optimizer is still being tested with a smaller cohort GoDaddy customers as a technology it's built to make any site better in the world.

Great. And then just as a follow-up, the pricing and packaging in 2025 seems to be more focused on web presence and cohorts and hosting. How should we think about the relative benefit of this strategy to these areas in 2025? Compared to the impact the strategy had on productivity in 2024. Productivity just in general seems to be a bigger contributor within A and C. And we know hosting has gotten a little bit smaller with divestitures. So can you just help us understand how big of an opportunity these areas represent?

Pricing and bundling continues to be a multiyear [indiscernible] Okay.

Being a product led lens to pricing and bundling to moving to a customer cohort based lens and we think the opportunity is very large over multiple years. In terms of contribution, that I had wanted to share, which is why we included it, is that we have a very material contribution from pricing and bundling in 2025 as And I think there's a bit of a sort of It is a bit of confusion for people because there's too much focus on productivity. Rather than looking at GoDaddy's very large customer base and all sets of products that they have and also the products that we can bundle with those products to create these new value based softwares. That's really the scope that we should be looking at versus looking at one specific product within the within our P and L, if you will.

Great. Thank you so much. Thank you, Elizabeth. Our next question comes from the line of Mark Zegudowicz from Benchmark.

Mark, please go ahead.

Appreciate it. Mark, just maybe a follow on to Trevor's question on the the margin guidance for the year. I'm curious what your A and C and platform adjusted EBITDA margin expectations are for 25%. And the question stems from I would just expect to see perhaps more leverage than the 100 bps just given the mix shift to A and C. So where that question stands from. And then also noticed that there was some deleverage in corporate quarter over quarter and fourth quarter. And wondered if any of that I guess what drove that and what if there's any of that lingering into [indiscernible] And thanks, Mark. Real quick on the margin guidance. We were very front end loaded when we went from 23 to 24 with some of the actions we had taken. We talked about the three buckets and each of them having a certain contribution in the first two were very friend led. We feel really good about our pace towards the 33.

And the 100 bps of improvement is based on the fact that we are now going to be seeing more of the tailwind related to the A and C growth. And then that'll help in that segment EBITDA margin, and that will help be that tailwind that helps us get there. Now at the same time, we are continuing to look at marketing investment around ARO and product innovation. So we're investing in the long term. And we feel good about our path to get there. I always say our North Star is free cash flow. So we are well on track on the free cash flow targets coming out of the year, and we continue to have that great momentum to get there. On the second question, I'm going to say De leverage on. Leverage on. Yeah, nothing to call out. We were finishing up some infrastructure projects towards the end of Q4. But there's nothing specific or nothing lingering into 2025 to call out. We're on a good track to continue to get operating leverage on our P and L. Okay, great. And then just one last question. You touched on it a little bit, but aftermarket, you had a nice acceleration in four and I'm just curious what drove that.

What your assumptions are with aftermarket in 1Q and for '25 Thanks.

Yes. We continue to see it as a low single digit grower and we're seeing good volume at the I would say that the base level of the smaller transactions. Like I said, we don't build in any of the larger transactions, which can create some volatility. And that pattern seems to be holding. Every quarter may be a little different, up or down. Depending on some of that, but that's what we build into our model going forward.

Okay, got it. Thanks guys. Appreciate it.

Thanks, Mark.

Thanks.

Our next question comes from the line of Alexi Gogolov from Morgan. Alexi, please go ahead. Hi. This is Ellis Smith on for Alexi.

Thank you so much for taking our questions. Hey, Ella. So, hey, so maybe first with Arrow, how many of Arrow users are And how do you think about that distinction in customer groups moving forward?

Currently more the greater percentage of aero customers are going to be in the new because all new customers are getting exposed to Aero and we see great engagement from them with new customers. On existing customers, the go to market is a bit different. But that is an area of larger opportunity over time. Also, the new continues to sort of weave into the base as well. So over time, you're going to see the base become larger and larger in terms of aero customers. And we have a lot more to do on that and a lot of great ideas to bring to customers.

Got it. Thank you, Aman. That makes a lot of sense. And for a quick follow-up, how did your GMV fare in 2024? And looking ahead, do you still expect GPV to outpace GMV growth?

Yes. Ella, we've strayed away from GMV. And just the disclosures around it only because it's not a clear indicator of how it translates directly into our revenue.

GPV is the number we base it on. And obviously, we talked about the growth in the GPV. So nothing to really call out in GMV related to GPV at this time.

Got it. Thank you, Mark. Appreciate it.

Our next question comes from the line of Alek Rondolo from Wells Fargo. Alek, please go ahead.

Hey, thank you so much. Maybe two from me. On Aero Plus, I think all of the AI products in the bundle right now are built by GoDaddy. How do you think about potentially adding a third party AI product to that subscription tier over time? And then maybe secondly, if I had to characterize AeroPress, there's the logo maker, there's the enhanced website building tool, and I think it's a marketing product. Do you think you found like the killer feature or tent pole feature for the bundle at this point in time? Thanks.

Yes. On the third party products for AeroPlus, just like we included a product within Aero that was third party, We're very curious about third party products and we actually test with a number of our partners. When we find something, you'll see it emerge. Sort of within the product with the right packaging And in terms of the second part of the question, When I think about sort of a tent pole feature or there's something really good, what I would say is we have brave sort of starting point with Site Optimizer and the marketing suite, the digital marketing suite. We know from early testing that those two products that attract customers, so we really double down on those to get those two very large group customers, and we don't necessarily need a fourth, fifth one, right, new one right now.

Thank you.

Thank you.

Our next question comes from the line of John Bayoun from Jefferies.

John, please go ahead. [indiscernible] You hear me okay?

Yeah. We can hear you. Okay. Edward, it's Michael. First question is both of them are on AI, but for Aero plus it's been out a couple of months. But just curious what you're seeing in terms of acquiring paying subs. I mean, I know we're still testing it, And then second on HNTech AI, just wondering how they might look. I don't know if there's any examples you could share of of what they might be.

Yes, John, super early for Aero plus but we'll definitely talk about it more. In future earnings call.

In AgenTek AII, without giving away any competitive info, but I would just say that from last year, what you saw in Aero was the power of automation and generative AI. And if you look at some of the capabilities that ARO already automates and does, agentic AI has the opportunity to really super power even what Vero does. So that's In terms of the use cases, there are lots and lots of use cases. But if you look at the core use cases that are and Aerokin do them a lot better.

Great.

Thank you very much.

Thank you. Our next question comes from the line of Navik Khan from B. Riley.

Naved, please go ahead.

Great, thanks. A clarification before I ask my question. So just on the guide, Mark, Yeah. For the full year, are you baking in any kind of impact from FX in your guide? And then I have some questions. Naved, we are seeing some, but it's small at this point. It's a little bit of a headwind we came out in our bookings that will roll over into the first part of the year, but nothing really significant.

Okay.

And then I have Two part question. One is, we are seeing the cost of using generative AI models, you know, kind of getting cheaper and cheaper with models like DeepSig How should we think about the P and L impact of this kind of development? And then then the other question is just around customer growth. So Now that the noise from the divestiture is going to be behind us in 2025. Do you expect to return to positive customer growth?

Yes. On the cost of generative AI and Navida, just pointed to sort of our commentary over the last couple of years. We've been very judicious in terms of costs on generative AI. I've been a huge proponent of generative AI. I do feel as the platforms get out there, We have more and more people are going to build better models, models that are trained faster, that are trained cheaper. But we already are very careful about that and If it gets cheaper and better, that's only good for our customers and good for us. So that's fantastic. And then on the customers, a reminder, we're focusing on high valued customers and we're making sure that we're getting those customers into the funnel. Having said that, we are starting to move past a lot of the efforts we've made around consolidating our technology stacks. And we're seeing strong top of the funnel. So we do expect customer accounts to return to positive. And we'll continue our focus on our strategy because it's working.

Great. Thank you.

Next question comes from the line of Brad Erickson from RBC. Brad, please go ahead.

Thanks.

For putting me on. I got the echo too. It sounds like And I guess start with can you give your latest thinking around how you think about your marketing tools comparing the tools on some of the big walled gardens out there. I know this isn't like a new topic, but just curious to hear your latest thinking on that dynamic given how quickly it's evolving And then maybe a follow-up from Naved's question on Deepsea. Just curious, like in your management conversations across companies etcetera, has Are you feeling like there could be infrastructure efficiencies over time? Clearly, that's where points, but just pragmatically, what do those conversations sound like as you have them Thanks. Yes. On the marketing tools, Brad, we have very early stage products on marketing tools, but our tools are custom built for our customer, which is the micro business third of them are solopreneurs, These are very, very small businesses. So our tools are really factored and built for that customer. We think of ourselves as the base of the pyramid and only place for us to go is up and that's fantastic. So we're just starting out on those. And in terms of AI and infra surgical costs, and discussions internally on infrastructure This is a quickly evolving situation, like my view is AI is moving so quickly most people have no idea or we can't really guess.

Different things are going to be in three to six months. So while we want to stay on top of it, our real focus is how do we take AI, create value for customers, then transform their value to shareholder value in terms of greater attach upsell pricing as well. [indiscernible] next question comes from the line of Deepak Mahtabanin Cantor Fitzgerald. Deepak, please go ahead.

Hey, guys. For taking the question. I'll ask a couple of moments.

First, can you just talk broadly about the macro trends in early twenty twenty five? How is the top of the funnel trends, particularly in the context of new business formation, that's driving your business? And then the second question, obviously earlier in the year there was a lot of news flow around WordPress. Are you seeing any tailwinds to certain products or maybe to your customer growth or maybe sort of like DIY products at this time? Any color you can share there would be helpful. Thank you so much.

Deepak, with a minute left, I'm going to be quick on this one.

On business formations, we've talked about how business formation data doesn't fully correlate. To GoDaddy GoDaddy. What I will say is that our customer continues to be resilient, They got to put food on the table. And these people have shown the creativity under different economic conditions and happy to talk about that more, but I think we've talked about that quite a about WordPress new version that we've launched, it's twice as fast, fantastic product, and I'm looking forward to sort of getting into market very broadly, but we've just launched it recently.

All right.

Well, thank you all very much for joining and a big thank you to all Goretti employees for a fantastic 2024.