Good afternoon, and thank you for joining us for GoDaddy's Third Quarter 2021 Earnings Call. I'm Mark Grant, Vice President of Investor Relations. With me on the call today are Aman Bhutani, Chief Executive Officer; and Mark McCaffrey, Chief Financial Officer. Following prepared remarks, we will open up the call for your questions. On today's call, we'll be referencing both GAAP and non-GAAP financial results and operating metrics, such as total bookings, unlevered free cash flow, normalized EBITDA, annualized recurring revenue, or ARR, gross merchandise volume, or GMV, and net debt. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted to our Investor Relations website at investors.godaddy.net or on our Form 8-K filed with the SEC with today's earnings release. The matters we'll be discussing today include forward-looking statements, which include those related to our future financial results, our strategies or objectives with respect to future operations, new product introductions and innovations, partner integrations, our ability to integrate acquisitions and achieve desired synergies and the impact of the COVID-19 pandemic on our business. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. Actual results may differ materially from those contained in the forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today, November 3, 2021, and we undertake no obligation to update these statements as a result of new information or future events unless required by law. With that, here's Aman.

Thank you, Mark, and thank you all for joining us today. GoDaddy has made remarkable progress this quarter in our mission to make opportunity more inclusive for all, and we are incredibly excited about what the future holds for our company. We've continued accelerating our product innovation, maintained focus on gaining further customer traction. And in September, we celebrated what we consider to be the most significant product launch in our company's history. GoDaddy products are designed to serve various types of customers. We serve millions of independent entrepreneurs seeking to create and grow their business, both online and off-line. We serve the professional makers of the web who leverage our tools to build websites for their own clients, and we serve a growing body of domain investors who leverage the largest and most active domain aftermarket in the world. Today, I'd like to highlight a few of the most impactful initiatives for these customers and help this audience understand a little bit better why I have never been more excited to be leading this great company. Looking first at the macro environment, we track demand by monitoring a couple of key metrics, including search query volume. That is the number of potential customers searching online for products we sell as well as we look at gross customer adds in any given period. We are pleased that some of the uneven demand signals seen over the summer did not prevent us from delivering strong results in Q3. Relative to the demand signals we were seeing in July, we are starting to feel better as normal seasonality appears to be returning to the business. We are still hyperfocused on delivering customer value, unlocking new TAM and increasing new revenue streams, all while generating strong durable cash flow. We have exciting updates…

Thanks, Aman. I want to take a moment to discuss our financial results for the third quarter and then move to our financial outlook for the rest of 2021. Q3 was a strong quarter, which showed up in the financial results. Total revenue came in at $964 million, growing over 14% year-over-year, which includes 70 basis points of currency tailwind. Our international business grew at 13% on a reported basis, with approximately two points of currency tailwind. As an [Technical Difficulty] trends in the top of the funnel signals continue to be below the elevated demand we saw last year, but in line with 2019. Hosting and Presence grew 7% year-over-year, delivering at the high end of our expectations for mid-single-digit growth. We continue to see nice growth in our Presence products like Websites + Marketing, tempered by slower growth in our legacy hosting and security business. And while it's still too early to provide any details, we are really pleased with what we are seeing so far from our OmniCommerce launch in September as well as the uptake we're seeing from the GoDaddy Payments more broadly. Within Hosting and Presence, we're pleased to share an update to the previously disclosed ARR metric from our Create and Grow group of products, which includes Websites + Marketing, Managed WordPress, Sellbrite and GoDaddy Studios. The suite of products passed $400 million in ARR in Q3. Within that suite, ARR from Websites + Marketing grew more than 20% year-over-year in Q3, and more specifically, Websites + Marketing commerce ARR grew more than 30% year-over-year in Q3. Lastly, annualized GMV across the GoDaddy ecosystem was approximately $25 billion, growing nearly 30% year-over-year. We saw growth across all channels, primarily driven by off-line point-of-sale as we lap online tailwinds from COVID. Domains grew 17% year-over-year.…

Thanks, Mark. [Operator Instructions] Our first question comes from the line of Ygal Arounian from Wedbush. Ygal, please go ahead.

Okay, good afternoon, guys. I guess I'll start at the highest level. And just trying to understand, you had some good solid outperformance across the board in 3Q. You talked about customer softness at last earnings, it was kind of the peak of the summer and vacations and the shift to travel and entertainment and all that. Can you talk about how the customer trends have evolved since then? Why -- and why the outperformance in light of those headwinds, I feel like they were the strongest over the summer, aren't translating into your guidance on 4Q?

Thanks, Ygal. I can take that. Obviously, we're very happy that our strong execution enabled us to deliver strong results in Q3. Even though as we shared with you, there was sort of the uneven demand signals that we were seeing over the summer. To answer your question and give you a little bit of sort of chronological view on it, we saw the drop most in July. There was a stabilization in August and then improved a bit in September, and October is working out in line with September. So we're still continuing to monitor, but we're cautiously optimistic about normal seasonality returning to the business, and that's what you're seeing in the guidance. We would like to share with you exactly what we see, which we did last time, and we're looking to do that again this time.

Okay, thanks. I'll ask about the Neustar and the cohort growth there. Can you just maybe give a little bit more color on what exactly is happening there that is turning the business around from pre-M&A to post M&A? Thanks.

Yes, super excited and proud of the team. The GoDaddy Registry team is come into GoDaddy. They've had to go through the integration. We're growing scale for them, as you know, and we have new businesses to integrate with them. But all through it, they have maintained really strong execution. So it's really about good strong execution, the team coming together, it's a small team, but they've done a fantastic job. And of course, as much as we can, we have the ability of that team working with GoDaddy leaders and looking for opportunities and looking for brands. And as I've shared in the past, we'll continue to share with you specific innovations that come forward, but this one is just execution, right?

Great, thanks so much.

Our next question comes from the line of Clarke Jeffries from Piper Sandler. Clarke, please go ahead.

Hello. Great to see another quarter of strong results ahead of guidance. I wanted to understand what the expectations are for durable growth in the Create and Grow products? I know as we are exiting tough compares and some of that top of funnel softness you called out, I just want to understand what kind of growth rate you would orient us to looking beyond 2021? And maybe even if not talking about beyond 2021, could you help us maybe understand some historical context to what that segment was growing sort of pre-pandemic?

Yes. Thanks, Clarke. And I'll take the first part of it and then maybe hand it to Aman for the historical part. We're seeing positive signs in our Create and Grow, and we are really happy with the ARR around Websites + Marketing with 20% and Websites + Marketing commerce at 30%. Acknowledging the softness and looking at Q4, that funnel slowdown will take a little bit of time to rebuild like we said in our comments, but we're really optimistic on the positive signs. As we also said, we're comfortable with the 4-1-1 moving forward, and we are really looking forward to catching up with one everybody on Investor Day and kind of putting it all together so we can communicate to you.

Great. And then now with the OmniCommerce solution out in market, I just wanted to understand what allowed you to release industry-leading pricing on POS transactions, 2.3 plus 30. What gives you the flexibility to grant this kind of pricing compared to peers?

Yes. I'm happy to start there. The real build here is to look at it from the ground up and say, what do our customers need to make these products accessible for them? And we broke down the pricing structure, and it's about technology and innovation. And as you know, we have a fantastic team from Poynt. And our goal is to not lose any money in payments or in hardware. Our goal is to build it up from the bottom, innovate, pass on the value to the customer. And I'm excited about the idea that customers look at this pricing and they adopt and that we see a lot of demand for our products.

Okay. Thank you very much.

Thank you.

Our next question comes from the line of Nick Jones from Citi. Nick, please go ahead.

Great, thanks for taking the questions. I guess just on the Domains business, are you seeing any success kind of tilting Domain shoppers towards the TLDs that you own as opposed to maybe dotcom, which I think is generally more popular? And then the second question is, can you remind us how the Verisign kind of dotcom price increases will trickle through? I think it's likely to become a bigger impact next year as it flows through dot coms I think people are expecting to take another price increase sometime next year? So those are the two questions. Thanks.

Thank you, Nick. On the giving preferential treatment to certain TLDs that we may own, we don't do that. All TLDs work on our registrar side in terms of their merit. It's about value to the customer whatever works best irrespective of whether we own the registry side or not. That's what we'll sell in front of the customer. We do -- to your question on Verisign price increases, as you well know, I think we -- our pricing is quite nuanced. We have pricing that's different by customer populations. We have pricing that's different by geography. We're pricing that differs when we bundle as an example. So we are always experimenting with pricing. We're always looking to optimize. And we realize that as GoDaddy, we have an opportunity to truly look at our options. And if it makes sense, and as you know, over time, registrars have passed Registry price increases to the customer. We have the option to do that. But we also have the option to not pass the price and look for opportunity to really optimize for profit dollars. And I'll turn it to Mark and maybe Mark, if you have something to add on that.

Yes. Thanks, Aman. One, just to enforce pricing for -- pricing wasn't an impact on Q3 for us, just as an FYI. When we do look at pricing, we are solving for gross profit. But if it comes to market share versus gross profit, we will go with market share. And we do not use any type of broad brush approach to pricing increases. We really look at it on a market-by-market basis.

Got it. And maybe if I could just follow up on the first question and maybe say it a different way. I think you've given a statistic that like 50% of people searching for a domain don't kind of find the handle they're looking for right away. So they may be tilted more towards the dotcom or are you able to kind of present more options with the handle they want that maybe ends up yielding more purchases and TLDs that you own. I guess I don't know if that kind of helps clarify where I was going with it next.

Yes. Nick, just to quickly respond to that, you're right. A lot of customers don't get the dotcom they're looking for because it's already taken, pizza.com, somebody's already got it. What we do is we're improving our search results more and more, where we use machine learning and AI to give the customer options, and those options include TLDs. And it's actually very specific to the search. So it's really not about what TLDs we might own. It's really about what the search is and then providing the customers high up on search as it makes sense with those options with different TLDs and letting the customer make the choice.

Great, thank you.

Yes. And I'll just add to that, Aman. Aftermarket does help us present to them names that they might not be able to get otherwise. So it is driving some of our aftermarket growth as well.

Great, thanks.

Our next question comes from the line of Brent Thill from Jefferies. Brent, please go ahead.

Great, thanks. As it just relates to the seasonality, I'm curious, it seems like to me -- you mentioned there's a rebound. I'm curious kind of when you think about the trajectory of this rebound? And can you may be put in context the -- historically what you're hearing from that side? And then I had a quick follow-up.

Sure, Brent. There a couple of data points here. We're looking at overall demand, sort of Google Search traffic as an example. And we're looking at how that's changing and evolving. And obviously, I know you have access to that data, too. But we parse it and we say, okay, is there a shift in the overall universe. And then we're looking at folks coming to our site, the gross customer ad and saying, okay, what percentage of that population is actually becoming customers for GoDaddy or approaching GoDaddy. So what do you see in the guide, the assumptions in it are around what we see over the last four, five months, and we see signals match up in the broader macro with our data. In terms of answering your question on what do we -- how does it compare to the past? Obviously, 2020 was a very large demand cycle, it was big cohorts and so on. So what we're really comparing against is 2019, and these demand signals are more in line with 2019 than 2020.

Okay. That's great. And just a quick follow-up on the financials. I mean, the delta between bookings and revenue, and I know there's a lot of factors, but it's never, I think, been this wide at 9% FX versus 13.5% on -- so what is the divergence? Why is it so large? And I know you mentioned they're going to converge. But why are we seeing that right now?

I kind of look at it as a cycle. We are -- we saw a divergence. Now we're seeing a convergence come back the other way. And we do, like you said, expect them to equal out over time, and we're starting to see that happen now. But we had large cohorts last year. They went into our deferred revenue. They're being amortized out now. And as they're being replaced by smaller cohorts, it's going to result in that divergence you're seeing right now.

Great, thank you.

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

Hi, thank you so much for questions. So I'll try to dig in a little bit on Payments and super helpful color on about 20% savings on fees versus other providers. Any color you could share with us and kind of the mix of new eligible users? How many of those are opting for GoDaddy Payments?

Thanks, Elizabeth. It's really too early to talk about new versus existing users. As you know, we did a big launch called OPEN 21 and attracted a lot of customers, 20,000 folks plus got to see it. We have thousands of folks engaged in detailed sessions where we talked about how to do their marketing, how to sort of manage their off-line and online portfolios and get into the big markets and platforms. So -- but it's all very, very early. And unfortunately, it's too early to comment on any specific numbers.

Got it, thank you.

Elizabeth, I'll just add what we're seeing. We're really excited about it. And the great thing about launching a quarter early is we'll get to see data a quarter early. So we're really looking forward to adding some color on the Investor Day.

Great. And then just a quick follow-up for me on the Pro Hub. It's great to see kind of you're on track for that ambitious 300,000 goal on Pros. I know that the Hub itself is free. So any color you could provide on just the ability to grow the mix of Pros and attach kind of more products to those users in order to monetize the opportunity?

Yes. As you know, we have 1.5 million web Pros on our platform. Given the businesses we're in, we have access to a lot of these Pros. But we built the Hub so we could have engagement with them on a regular basis, give them ways to save them time, giving them ways to be able to do their jobs better and focus on growing customers and their business. The Pros focus on WordPress, that's what the hub is all about optimizing their experience there. And ultimately, what we're looking for is to get a bigger share of wallet with GoDaddy forum. We know Pros support lots of multi-sites. They have a percentage with us, and we know it's a very, very large opportunity for us to get a piece of the rest. Other places that where you'll see some monetization experiments, of course, we launched Invoicing. So that's a good tool. It creates lots of stickiness, but it also creates some economics. We're also experimenting with special offers within the Hub. So where we can try to see what encourages Pros to sort of buy something with GoDaddy versus something else. And just it's -- the idea there is let's try to share with them and say, hey, if you sell this product, we'll give you a piece of it. Those are the types of experiments you'll see, and those also create economics for us.

Great, thank you very much for color.

Thank you.

Next question comes from the line of Sterling Auty from JPMorgan. Sterling, please go ahead.

Yes, thanks. Hi, guys. So I'm curious if you could give us some color geographically on the trends that you talked about. So in other words, the sluggishness that's turning into improving signs back to 2019, how does that look in the U.S. versus Europe versus Brazil, et cetera?

Thanks, Sterling. It truly follows sort of the COVID arc that we've talked about in the past and likely UC as well. The demand environment that I talked about actually covered U.S. and international and we see a lot of similarities. Having said that, in certain geos, there is a bigger impact from COVID, and we see demand bounce around a little bit in those geos. But overall, in the GoDaddy portfolio, that's small. So if I look at the overall portfolio, there isn't really 1 geo to specifically call out as having any significant impact. And broadly, the trends are similar.

All right. Great. And then one follow-up on the Payments side. You mentioned being given the opportunity to experiment with pricing. So is that to mean that the lowest pricing that you just announced is something that's kind of a test bed and could fluctuate? Or what is it that you want to experiment with?

Sterling, the pricing that we announced, the 2.3% plus $0.00 in-store and 2.3% plus $0.30 online, that's the pricing for Payments. But as you know, we have a lot of opportunity to build SKUs and bundles, including new value for these. So the experimentation that we'll be looking at is new SKUs that offer the full suite where customers get the force bang, if you will, and how do we price those things when we bundle things differently, the pricing for the hardware, those are the areas that you'll see us experiment more.

Excellent, thank you.

Thank you.

Our next question comes from the line of Trevor Young from Barclays. Trevor, please go ahead.

Well, I think we might have lost Trevor. So Naved, if you are available, Naved Khan from Truist, please go ahead.

Yes, thank you. Can you hear me okay?

We can.

Great. So with $20 billion in GMV kind of going through Poynt, maybe can you just touch on the opportunity to maybe gradually maybe move over some of this on your own rails GoDaddy Payments versus the legacy? And what are the things you can -- what are the different levers you can pull to do that?

Thanks, Naved. As you know, Poynt built its customer base, predominantly through channel partners, and those channel partners have banks want to use their rails for payments. But what that GMV does show is customer success. That customers at a very large scale are having a lot of success using this tool set. And obviously, our thesis of having Poynt be a part of GoDaddy is about us selling direct to customers, right? So I would look at that $20 billion as customer success and over time, more and more GPV flowing directly as we sell directly to customers.

Got it. And then a quick follow-up, if I may. If I just look at marketing efficiency, it seems like it improved sequentially. Any changes that you might have made to a channel mix? Or how should we just kind of think about this going forward?

Yes. Overall, we are happy with the returns on our marketing spend. And what you're really seeing here is over the last year, as demand was very high, we wanted to maintain share of voice. We wanted to lean into that demand. And as the demand came down, we didn't want to pull back on marketing so hard that we actually pull demand down for ourselves. So we let the demand pull the marketing spend down. You're seeing some of that in the efficiency. You're also seeing some optimizations across channels, but no specific comment on channels that we're doing more on or less on. Overall, our demand profile, especially in the way we get bookings broadly remains the same.

I'll add to that, Naved. We expect it to be flat for Q4, just in case we're asking that question as well.

That's helpful.

Our next question comes from the line of Trevor Young from Barclays. Trevor, please go ahead.

Great, thanks. Just two, if I may, on Payments. First acknowledging that it's kind of early days, can you talk about the initial adoption on Payments, feedback on the POS devices? What seems to be resonating well with merchants versus maybe what needs some refinement? And then Mark, your comments were helpful on the margin profile. It sounds like maybe lower gross margin, but higher overall OMs over time. But can you help us unpack the fees there, like in terms of interchange fees, fraud and security, other cost of revenue lines and then OpEx and opportunities for savings there as it scales? Thank you.

Thanks, Trevor. On Payments, the feedback on the products has been positive. One thing I talked about previously, if you remember, we had introduced just GoDaddy Payments. I'm not talking about Omnicommerce, GoDaddy Payments in the Websites + Marketing flow. And we had shared that we've seen good adoption from customers on Payments. We continue to see good adoption there. So we know that it's been holding over the last few months. And in terms of other numbers related to OmniCommerce, the devices are getting shipped all over the U.S. So you'll see them soon. But it's really too early to comment on specifics, except that the customer feedback is good.

And Trevor, I'll just add, without getting into the breakdown of some of that pricing. Just a couple of data points. One, we don't plan to lose money on the hardware and the payments. And our expectation, although we'll see a little bit of margin pressure at the gross level, it should be accretive to our normalized EBITDA going forward.

Great, thank you, guys.

Thank you for joining us today. I will turn it over to Aman for closing remarks.

Thank you, Christie. I'll just end with thanking you for joining. We appreciate your questions. I look forward to engaging with you over time and seeing you at our Investor Day in February. A quick thank you to all the GoDaddy teams. A lot goes on for us to be able to deliver these strong results in the quarter, and a big thank you to everyone at GoDaddy. Thank you very much.