GoDaddy Inc. (GDDY) Q1 2015 Earnings Report, Transcript and Summary

Good afternoon. My name is Tracy, and I will be your conference operator today. At this time, I would like to welcome everyone to the GoDaddy Q1 2015 Earnings Conference Call. [Operator Instructions] Thank you. Ms. Marta Nichols, VP, Investor Relations, you may begin your conference.

Thank you, operator. Good afternoon, and thank you for joining us for GoDaddy's First Quarter 2015 Earnings Call. With me today are Blake Irving, Chief Executive Officer; and Scott Wagner, Chief Operating and Financial Officer. Blake and Scott have some prepared remarks which will follow with a Q&A session. On today's call, we'll be referencing both GAAP and non-GAAP financial results, including bookings, adjusted EBITDA and unlevered free cash flow. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalent may be found in the presentation posted to our Investor Relations website at www.gddy.com or on our Form 8-K filed with the SEC with today's earnings release. The matters we'll be discussing today include forward-looking statements, which 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 12, 2015, and we undertake no obligation to update these statements as a result of new information or future events. With that, I'll turn the call over to Blake.

Thanks, Marta. Good afternoon, and thanks for joining us for our first public earnings call. I'd like to extend a warm welcome to all of our new shareholders. We're grateful for your interest and your confidence in our vision, our strategy and our business model. We delivered a strong first quarter, and we look forward to continuing to deliver for our customers in the months and the years ahead. Since our founding 18 years ago, GoDaddy has been a trusted partner and a champion for organizations of all sizes in their quest to build successful online ventures. GoDaddy's vision is to radically shift the global economy towards small business by helping individuals easily start, confidently grow and successfully run their own ventures. The passion and dedication of our customers inspire our employees every single day. Our more than 13 million customers want simple powerful solutions, and they want someone in their corner to help them perform online and that's what we do. We offer them a growing suite of simple, yet powerful, cloud-based products built on a single global technology platform and supported by empathetic, consultative customer care, real people that are here to talk with and help our customers every day. Our strategy and model have yielded a large high-growth business with strong cash flow, which serves a massive global market with growing needs. At the end of Q1, we've grown to serve nearly 13.1 million customers, an increase of more than 1 million customers versus a year ago. Our average revenue per user, or ARPU, rose nearly 10% to $115 in the first quarter. Bookings grew 13.7% to $499 million, and together, our strong customer and ARPU growth drove our revenue up 17.5% to $376 million. Our adjusted EBITDA jumped 17.8% to $94 million in the first quarter, producing an adjusted EBITDA margin of 25%. We've been particularly focused on expanding internationally and have grown to serve a total of 37 countries and 17 languages over the last 18 months. We ended the first quarter with more than 59 million domains under management, and that's roughly 21% of the world's domains. Now I see several big themes in our recent accomplishments and our results. First, we're continuing to innovate and expand our product portfolio; second, we're delivering strong financial performance and growth; third is the conscious evolution of our brand and it's showing real benefits. Let's run through each of those briefly. On my first point about expanding our product portfolio, we demonstrated continued innovation in recent months in all 3 of our major revenue lines. In Domains, we recently delivered our 300th top-level domain extension and acquired 200,000 domains, continuing to expand our inventory to offer the broadest choice of possible naming options to our customers. In Hosting and Presence, we recently launched GoDaddy Pro to a strong reception, with well over 10,000 web professionals signed up, and we've been rolling out new web presence products like our Online Store builder and our new SEO product as well. In Business Applications, we recently launched GoDaddy Email Marketing, or GEM, built by our recently acquired Mad Mimi team to help our customers market to their customers. All of these products and services demonstrate our focus on delivering truly distinctive products on a single technology platform, all wrapped with world-class customer care. We continue to serve our customers in a unique and special way, with products, technology and care all around the world. These capabilities, our breadth of products, the strength of our platform and our care team, allow us to grow with our customers as their ideas grow. For example, Candis Jones of thejonesmarket.com, who rang the bell for us at the NYSE, first used GoDaddy's Online Store builder to create a simple, elegant online storefront for selling her handmade jewelry and later added our bookkeeping software to easily create invoices, track her sales and expenses and made tax filing easy for her. On my second point about our financial performance, as you can see in our Q1 results, and as Scott's going to discuss in more detail, we're growing revenue across all 3 of our business lines while continuing to invest in innovation and growth, delivering strong cash flows and margins. And third, on our brand. We continue to drive our brand evolution with a laser focus on showcasing what we do and who we do it for, our customers. Our Super Bowl ad continued to honor the tenacity and dedication of small business owners and according to Adweek, delivered the highest brand lift of any advertiser in the 2015 Super Bowl. On April 1, a group of our customers stood with me on the podium at the New York Stock Exchange and our online store customer, Candis Jones, who I just mentioned, rang the bell on our behalf. More recently, we announced that this will be the last season of our NASCAR sponsorship. While NASCAR has been a powerful branding platform for us in the U.S., we're diversifying our marketing spend with a focus on international markets and a more personalized data-driven marketing approach. We believe our intense focus on our customers and their needs for easy-to-use products delivered on a single global technology platform, delivered with exceptional customer care, this rare combination of products, technology and care will continue to differentiate GoDaddy and produce strong financial results going forward. Now let me turn the call over to Scott to talk about the financials in more detail. Scott?

Thanks, Blake, and let me add my warm welcome to everyone as well. As Blake said, we feel great about what we delivered in the first quarter. We grew customers more than 9% over the last year, ending Q1 with approximately 13.1 million paying customers. Our average revenue per user, or ARPU, grew nearly 10% on an annualized basis year-over-year to $115, up from $105 a year ago. As Blake said, bookings grew 13.7%, and solid growth in both customers and ARPU drove revenue up 17.5%, with each of our 3 product lines Domains, Hosting and Presence and Business Applications growing at double-digit rates. Now we report and measure our top line in 2 ways: bookings and revenue. Our bookings represent the cash we collect when a customer purchases a product. We typically collect the full purchase price at the time of sale and then recognize GAAP revenue ratably over the term of a customer contract, which averages a bit more than a year. Over the past 5 years on average, we've generated 90% of our revenue each year from customers already in our base at the start of the year. While we experience annual customer churn of less than 15%, the 85% of customers who do stay with us typically spend more, which translates into limited annual revenue churn. In short, we have a very stable revenue model. I'll briefly run through the results in each of our 3 revenue lines. First, on Domains. We continued to extend our market leadership with Domains revenue up 10.4% in Q1 to $199 million. The domain market continues to grow on a secular basis as more businesses and individuals claim and name their ideas online. While Domains revenue continues to expand for us, it now contributes about 53% of revenue, down from 56% a year ago as our other 2 revenue lines grow faster. Our objective in Domains is pretty simple. It's to enable our customers to easily find the perfect name wherever they are in the world, and there are several ways that we're working to make that happen. First, we've continued to expand our domain inventory. With more than 300 gTLDs and ccTLDs now available through GoDaddy and over 760,000 new gTLD domains under management since we began launching the new gTLD program in early '14, including .guru, .club, .nyc and hundreds more names. Second, we're simplifying and improving our proprietary domain search experience. We see hundreds of millions of searches for domain names on GoDaddy every year, so we're in a unique position to use search patterns to reveal the most refined recommendations to our customers and help improve customer conversion. Third, we're integrating the primary and secondary markets to allow our users to identify the best domain amongst all available names, including entirely new domains alongside those already-registered domains that might be for sale. As Blake noted, we acquired over 200,000 domains in late April to increase the liquidity in the secondary market, and we've been really pleased with immediate interest in the names that we've acquired. Our second product group is Hosting and Presence, which grew 21.2% to $140 million in Q1. Hosting and Presence now makes up 37% of total revenue, up from 36% a year ago. We've been improving and expanding our offerings in Hosting over the past year, focusing on providing our customers with great performance, reliability and speed, while adding new options like our industry-leading Managed WordPress product and robust virtual private and dedicated server offerings. And just last week, we launched GoDaddy Pro into general availability, providing web designers and developers with a new suite of products and support that will help them save time as they build and manage websites for their clients. We worked with several thousand web pros in the beta of GoDaddy Pro, creating and refining tools that ease project management for these web professionals. Now we expect these various innovations to allow us to add more products and deepen our business relationships with our existing Pro customers and also to attract more end customers through this really important set of influencers. On the Presence side, we're continuing to see strong new sales and renewals of our DIY website builder product as well as terrific reception of new products like our Online Store builder and SEO product. In our third revenue line, Business Applications, we continued to see very strong growth, with revenue up 53% to $37 million for the quarter. Business Applications now makes up nearly 10% of our revenue versus just $7.5 million last year at this time. We're seeing strong adoption of the Microsoft Office 365 product suite we introduced in 2014 and solid renewals of our proprietary workspace email product as well. Our newest product, GoDaddy Email Marketing launched just last month, builds on our acquisition late last year of Mad Mimi and provides our customers with really simple, elegant and effective email marketing tools. The products in our Business Applications suite, in particular, demonstrate the power of our integrated platform to bring new products and service offerings to our customers over time. Now before we leave revenue, I'll touch briefly on our growth overseas. A key focus for us over the last couple years has been bringing all these products to customers in key international markets in localized form. We've made a huge push into Europe last year and began 2015 with offerings in 37 countries and 17 languages, with a primary focus on major English-speaking markets as well as Latin America and Europe. We gained share throughout 2014 across our major Tier 1 markets, including the U.K., India, Canada and Australia and expect to begin moving into Asia late this year in localized form. In the first quarter, our international revenue grew 23.4% to $96 million and now makes up over 1/4 of our total revenue. We feel good about how we're delivering on the top line. Turning to cost. Perhaps the most attractive attribute of our business is our customer unit economics. That's the profits that we generate over the lifetime of a customer relationship versus our cost to acquire that customer. In 2014, we acquired customers for roughly $50 to $60 each. Our average customer has generated more than $550 in gross profit during the course of their relationship with us. That's an LTV-to-CAC, or lifetime value versus our cost to acquire a customer, of approximately 10x and is personally my favorite metric for measuring the power of our business. We closely monitor and manage the metrics that contribute to this ratio. As we focus on moving overseas and target higher potential value segments like web professionals. Our costs to acquire customers may increase over time, but we expect to maintain attractive LTV-to-CAC ratios as the total spending and margin profiles of our customers increase as well. Looking briefly at our cost lines. Our gross margin increased by more than 280 basis points year-over-year to 63.5% in Q1. This is primarily because our 2 smaller higher-margin revenue lines, Hosting and Presence and Business Apps, are growing faster than our average. In Q1, our 2 go-to-market expense lines, marketing and advertising and customer care, grew the fastest year-over-year as we put more relative muscle behind the products and geographies that we've introduced over the past 15 to 18 months. By contrast, we got operating leverage from our 2 other major operating expense lines, G&A and technology and development. While the pace of growth slowed in technology and development in recent quarters, we still put nearly $68 million into that category in Q1, and over the past 5 years, we've invested nearly $1 billion in technology. Hopefully, you see and appreciate how we're balancing these various operating expenses to both serve our customers and help distance ourselves from other companies as well as, at the same time, allowing for modest margin expansion. And everyone can see how that played out in our Q1 results as our solid top line growth, combined with prudent investment, helped us grow adjusted EBITDA to $94 million in the quarter, up 17.8% year-over-year and producing margins of 25%. Now I'll note that Q1 typically represents our highest-margin quarter each year. We expect modest margin expansion for the full year overall, but we do expect our profit margins as a percent of revenue in the next several quarters to be lower than Q1. We also converted more than 90% of adjusted EBITDA into unlevered free cash flow in Q1. Unlevered free cash flow grew more than 70% year-over-year to $85 million. We expect our business will continue to generate substantial cash flow, but due to the timing of working capital needs and CapEx, our free cash flow generation may be lumpy quarter-to-quarter. Over time, we expect unlevered free cash flow to be roughly 70% to 90% of adjusted EBITDA. Turning to the balance sheet. We ended the first quarter with net debt of $1.3 billion. Now as you all know, we completed our IPO immediately following quarter end, issuing 26 million shares at $20 per share and yielding $520 million in gross proceeds. In late April, we paid off a $300 million senior note and $75 million on our credit revolver. If the IPO and use of proceeds had occurred on March 31, our net debt would have been approximately $851 million and our pro forma leverage ratio would have been approximately 3x, which is a really comfortable level for the business over time. Looking forward, I'll provide some quick color on what we expect for Q2 and the full year financials. For the second quarter ending June 30, 2015, we expect revenue between $390 million and $395 million and adjusted EBITDA to fall into the range of $75 million to $78 million. For the full year ending December 31, we expect revenues to fall in the range of $1.595 billion to $1.605 billion and adjusted EBITDA to fall in the range of $322 million to $327 million. The midpoint of our outlook for the full year translates into year-over-year growth of 15.3% for revenue and 19.5% for adjusted EBITDA, implying an adjusted EBITDA margin of approximately 20.3%. We believe these targets allow for a healthy level of reinvestment in products, technology and care for our customers to deliver long-term value as well as delivering a solid incremental return for our shareholders in the near term. And as we said earlier, we feel great about the strong first quarter that we've delivered, and we look forward to continuing to do more for our customers in the months and years ahead. We believe that GoDaddy's unique combination of products, technology and care will continue to differentiate us in the market and to produce strong financial results going forward. With that, we'll open it up for questions.

Operator?

[Operator Instructions] And your first question comes from the line of Deepak Mathivanan with Deutsche Bank.

2 questions for Scott and Blake. So first on the web pro strategy, you discussed in the past about the Managed WordPress product. How does this fit in the broader spectrum of web pro? And then how does this tie in with the GoDaddy Pro product? Would you consider both as different? Would you say the product offerings are expected to be integrated into one offering over time? And then secondly, the buildup of short-term deferreds seem to be a little bit higher than what we had expected. Was there any term difference in terms of contract, anything, which is specific to the first quarter? Or was there any difference in renewals?

Yes. Deepak, this is Blake. I'll answer your first question and hand it over to Scott for the second. The web pro strategy is a set of tools that allows a web pro to manage customers on the GoDaddy platform with a variety of different products. The different products range from a Managed WordPress product all the way to a fully dedicated server, whether being on a Linux platform or a Windows platform. The Managed WordPress product is one of the products in the developer or designer's portfolio that they can offer their customers and use the web pro tools that we've delivered to manage them on their customers' behalf, being able to actually buy things on the customers' behalf or be able to have the customer buy them themselves and allow the web pro to actually work on them as a delegate of their accounts. So it's a powerful set of tools, and we look at a web pro not just as a customer but also as a channel. And those new web pros will bring in new small business customers to us to allow us to service them as a customer with delegation capabilities so they can manage that small business customer's account. We know that 60% of small businesses today have somebody build their websites for them, and it's an incredible important channel for us and some really powerful tools to enable them to do their best work.

Yes, this is Scott. Thanks, Deepak. I'll take the second question, and thanks for that. And it's a good notice. Term has or effective term has been shortening a bit, not only in the first quarter but really for the last several. And that's 2 things. One is product mix has a little bit to do it, but we've also been shortening our term lengths a bit, which has really been just selectively reducing long-term discounts for high-renewing products and again, managing the business over a lifetime value relationship. And so we don't really manage for term, but again, as you can see, the terms has been shortening a little bit, really, as we focus on long-term value in reducing some of those long-term marketing tactics.

Your next question comes from the line of Mark Mahaney with RBC.

You talked about the cadence of international launches and the potential impact on CAC. Could you quantify how much of an impact you could see on CAC in international markets and just remind us again of how aggressively you want to continue to roll out in international markets over the next 12 to 18 months?

Yes, thanks, Mark, it's Scott. So we're localized in Latin America and Europe right now. And as mentioned, we're going to go into Asia late this year and certainly, throughout 2016. And from a marketing standpoint, if you look at the marketing line specifically, you will see that on a year-over-year basis, we're spending a little bit more. And look, that reflects our continued buildup of markets geographically. And as mentioned, we're managing each of these markets on an LTV-to-CAC ratio and we get really attractive returns. And so we're going to continue to manage and feed out these markets based on that ratio and the success that we have.

Your next question comes from the line of Gene Munster with Piper Jaffray.

Just a quick question. You guys had acquired some domain names in the quarter through Marchex. I was curious with just how those kind of play into your broader domain strategy.

Yes. Gene, this is Blake. So our overall strategy is to make sure that we have the best tools available to find the exact right match for a customer who's searching for a particular domain name. And that means strategically, not only providing names that are in the primary market of unclaimed domain names, but also in the secondary market of names that have already been claimed. And we thought that the Marchex portfolio actually had a lot of names that were frankly very desirable, and we've seen demand for them. And Scott mentioned earlier in the release, we actually get to see search terms that come through in our search dialog box in our metrics. So we have a pretty good sense for what people find interesting and we thought there was a great match from our customers on what they were looking for and what was in that domain portfolio. So strategically, it matched our desire for primary and secondary market mix and increasing our inventories so we can match exactly what a customer wants.

You see -- you're doing that more in the future?

We -- one of our tenets strategically has been to combine those and make a very -- make it incredibly easy for finding a customer the perfect domain name for them. And if you're going to do a great job at that, you have to do a wonderful job mixing the primary and secondary markets, which is what we're doing and where we're making some significant investment.

Your next question comes from the line of Jason Helfstein with Oppenheimer & Co. [Technical Difficulty] Your next question comes from the line of Sterling Auty with JPMorgan.

Yes, I'm definitely interested in asking a question. I want to start with -- actually, let me do one question, one follow-up and then I'll hand it off. Looking at the marketing spend in the quarter and the kind of returns that you're getting on it, what I'm kind of curious about is what should we think that level of spending is going to do for that customer acquisition growth. So the 13.1 million better than we expected. Given this level of spend, how should we think about that customer growth as we move into the coming quarters?

Sterling, it's Scott. This is -- 13.1 million customers, right, it's a base that is hard to move in dramatic differences. And I think the pacing that you saw in the quarter follows a trajectory. And honestly, I wouldn't counsel you to think about the trajectory or pacing all that differently than what we did in the first quarter. Look, and I think at a higher level, I think the pacing of spend is really just part of our overall goal of delivering good top line and bottom line performance. We're managing the business so that in the next couple of quarters, you'll see us really probably feeding out these go-to-market expense lines a little more, whereas if we go back a couple of quarters, you'll notice a lot of our relative spend and investment was in technology and development. So what you're seeing now is really the go-to-market effort around those things. But the important thing is that they're working in harmony, and we're delivering good flow through to the bottom line.

Okay. And then the follow-up would be, can you give us a sense of was there any change in kind of the tie ratio? Meaning what percentage of the customers or the business in the quarter was kind of domain-only versus what was the success rate in tying in the Hosting and Presence and Business Applications?

I think you'll see no dramatic differences, Sterling. But if you look over the last 8 quarters, obviously, you're seeing ARPU and ARPU continue to grow and attachment grow. And this quarter, I think, in the results are just indicative of that strategy in action. Whereas we innovate in our product portfolio and we continue to get both elegant and sophisticated against the touch points, we're seeing attachment and adoption of these services go up, which is ultimately showing up in ARPU.

Your next question comes from the line of Ronald Josey with JMP Securities.

I'm Ignatius Njoku, I'm here for Ron. Just a quick question. In terms of products, can you talk about GoDaddy's mobile offering? The acquisition of M.dot clearly helps, but curious on your thoughts on app development.

Yes, so thanks, Ignatius. So our development on mobile has been primarily and will continue to be primarily a web-based mobile development platform. The thing that's very clear of what small businesses will tell you is that they want to develop a web presence, and they want to do it once. And they want that to be adaptable and readable and beautiful on mobile devices of varying screen sizes. What they don't want to do is actually have to go develop an application specifically for an iOS device or an Android device or a third possible device, whether it be a Windows phone or something else. They would like to make sure that their website, if they designed it specifically for a mobile device, shows up beautifully on a PC and vice versa. So the tools that we have been building are focused on making sure small businesses would show up wonderfully on handsets, on tablets and on PCs. As far as our e-commerce for our own business, you'll see us increasingly start focusing on making it incredibly simple for people to buy and manage their products from GoDaddy on mobile devices. I'll give you one example. We have a GoDaddy domain finder that is a native app, that has some hybrid web capability in it. And it is incredibly simple to find the perfect domain name for you, and honestly, I even consider it to be just a darn fun application to use when you're looking for a domain name. And it can use all the things that a phone has that are contextual, like location and movement, et cetera. So I think that's a good example of directionally of where we're going with our mobile devices across the entire product line, not just website-building, but hosting and our e-commerce work.

[Operator Instructions] Your next question comes from Brian Essex with Morgan Stanley.

I just wanted to pivot off of maybe Sterling's question a little bit and talk about the international expansion. And I guess the question is are you seeing a different profile of opportunity as you expand internationally and particularly with -- as it relates to ARPU? In other words, you have a more robust set of domain names with the ccTLDs to choose from that enables a little bit better uplift or margin. And then the second part of that question is are you able to penetrate that market with greater attach, whereas historically, you may have led with domains and hoped to land and expand through those customers? Are you able to kind of attach an initial sale at a better rate?

Brian, this is Blake. It's remarkable how similar the characteristics are and homogenous they are across the countries in which we've entered. We're finding that the dynamics of, "I get a great name, I attach something to it and I'll get an email to run my back office," are almost identical to the United States. So the ARPU we're seeing across global markets today are very similar to what we've modeled in the U.S., and we have not seen any different or unusual purchase patterns where the entry point is considerably different than it has been in the U.S. And that said, we still, to this day, have not launched every single product we have in our portfolio internationally, so there is an opportunity for us to see a differing dynamic going forward over the course of the next quarters. But I think so far, we've seen almost identical behavior in international markets to the U.S. market.

And I'll add one point, Brian, to your question. The CPAs, on a media basis, between the international and domestic, are very similar. So on -- and each markets have different profiles and we manage them on a localized basis, but U.S. versus non-U.S. markets of CPAs are pretty darn similar.

Got it. Real helpful. And I think a follow-up to it is do we see kind of -- you've anniversary-ed Media Temple. So a nice shot into you, I think you made a -- just a domain acquisition in this quarter. But 17% growth year-on-year, is that representative of what you might expect on an organic basis going forward? Or are there opportunities such as continued incremental up-sell of Hosting and Presence into the installed base? Or are you still kind of selling it on a standalone basis?

Thanks, Brian, it's Scott. So if you look at, on a bookings basis, and I'll talk about revenue, Q4 and Q1, were organic. So on a trajectory basis, those 2 are pretty pure. And if you look at our '15 guidance, you can see approximately 15% revenue growth, which I think reflects on ongoing organic rate. Yes, just for the quarter, if you think about that '15 full year versus the first one, in Q1, there was approximately 150 basis points of purchase accounting that impacted us in Q1.

Your next question comes from the line of Paul Vogel with Barclays.

This is Mark Kelley in for Paul. I was wondering if you could share a bit more detail on bookings in the quarter, either split by domestic, international or by segment. Just broadly, did any region stand out more than others?

Thanks, Mark. Not really. So I mean, I think bookings just reflects the same trajectory of both balance and growth internationally as well as the product lines. There isn't anything in the quarter relative to bookings that would give you any different feel for the business than the breakouts either by product or geography that we shared. I would say one thing that's helpful though. In bookings, obviously, we, like everybody else in the world, have been affected by the strong dollar. Our bookings line in Q1 had a shade over 200 basis points of currency headwind. And so again, if you're thinking about the pacing of bookings in Q4 to Q1 being pure organic numbers, obviously, FX hit us like just about every other USD business that operates globally in Q1. Again, our guidance incorporates where we stand at an FX basis going forward.

Great. That's helpful. And I know international churn is a bit higher than it is in the U.S., with things like auto-renew not really a thing outside the U.S. What can you guys do from a customer retention standpoint internationally? Is it trying to get people to sign up for auto-renew? Or is there anything else that you guys can do on that front?

I can't be specific, Mark, but we had a number of things that we're working on that we think can help solve the auto-renew problem. And understand that auto-renew is flatout illegal in some places. So geographically, as you point out, there are some very specific issues with it. We have been -- we actually have some things that weigh heavily in our favor, like having a care organization that can call individuals and manage that. But even then, there are some laws against even contacting folks. Still, with that said, our retention globally is actually very, very good. So we see retention and renewal rates very similar to what we see in the U.S. and feel good about them, but we do believe that there are some things technically we can do that can help us do a better job, making sure folks are aware that their products are up for renewal, which is probably one of the biggest issues I think subscribers -- subscribing businesses have outside of the U.S. today.

Your next question comes from the line of Jason Helfstein with Oppenheimer & Co.

Kind of 2 questions relating to marketing. So as we think about the rest of the year, and you think about marketing, do you -- how much of this will be around new gTLDs, newer products or kind of a combination of both? And then when you think about it, are we seeing more digital or less TV? Just how you're thinking about the mix.

Yes, it's Scott. Thanks, Jason. Look, I think what you're seeing is a continued increase into our international markets. And now as we've added both products, whether it be Online O 365 or Email Marketing or new Online Store, we are both experimenting and feeding out more product-specific efforts on things that are non-domain related. And as we develop experiences for segments like the Pro, there's marketing dollars that are feeding behind those introductions. And again, like everything we do here, we test and learn, and the things that continue to work, we're going to feed them out. And look, I think it's important for everybody to realize that as we look at the full year, obviously, Blake mentioned that we're going to -- we're stopping our NASCAR sponsorship at the end of this year. That amount and that activity is still going on, and we're basically trialing, experimenting and feeding out some of these new growth areas while we're still carrying the full efforts and marketing spend of a NASCAR sponsorship through this year.

So with that, next year, we probably should see even more leverage as you redeploy those dollars?

Again, we're managing this on the LTV-to-CAC ratio, so -- and know that when we find good spots to spend marketing dollars, we're going to spend it and then it will deliver great long-term value for the franchise.

At this time, there are no further questions in queue. I'll turn the call back over to the presenters.

Hi, everyone. Hey, thanks. This is Blake. I just wanted a -- one last very quick call out. Thank you, all, for joining us today on our first quarterly earnings report, and we look forward to talking with you next quarter. So thanks a bunch for spending the time with us today.

Thank you for joining. This concludes today's conference call. You may now disconnect.