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GoDaddy (GDDY) Misses Q2 Earnings Estimates, Beats Revenues

Zacks Equity Research
·4-min read

GoDaddy Inc. GDDY reported second-quarter 2020 adjusted loss of $4.06 per share against the Zacks Consensus Estimate of earnings of 17 cents. Also, the bottom line was down significantly from the year-ago quarter.

The company generated revenues of $806.4 million, up 9.4% year over year or 10.2% on a constant-currency (cc) basis. The reported figure surpassed the Zacks Consensus Estimate of $798 million.

The revenue growth was driven by strong performance of its product segments. Also, strong global expansion remained a positive.

International revenues were $266.1 million for the second quarter, up 7.4% year over year or 9.9% on a cc basis.

Segmental Revenues

GoDaddy generates revenues from three segments — Domains, Hosting and Presence, & Business Applications.

Domains: The company generated revenues of $369.6 million (accounting for 46% of total revenues) from this segment. The figure improved 10.5% from the year-ago quarter on higher average selling price. The increase was driven by strong renewals and registrations.

Hosting and Presence: This segment generated revenues of $292.2 million (36% of revenues), increasing 4.4% on a year-over-year basis. The revenue growth can be primarily attributed to higher subscriptions to Websites and Marketing, as well as broad integrations. Also, partnerships aided revenue growth in this segment.

Business Applications: Revenues from this segment came in at $144.6 million (18% of revenues), increasing 17.6% year over year. The increase was driven by strong workspace renewals.

GoDaddy Inc. Price, Consensus and EPS Surprise

GoDaddy Inc. Price, Consensus and EPS Surprise
GoDaddy Inc. Price, Consensus and EPS Surprise

GoDaddy Inc. price-consensus-eps-surprise-chart | GoDaddy Inc. Quote

Operating Metrics

GoDaddy uses total bookings as a performance measure since payment is usually collected at the time of sale and recognizes revenues ratably over the term of customer contracts. For the second quarter, total bookings of $936.3 million increased 10.7% year over year or 12.1% on a cc basis.

It gained more than 400 thousand new customers in the second quarter. The company now has more than 20 million paying customers.

Operating Results

Gross margin was 64.1%, down 140 basis points from the prior-year quarter.

Operating expenses (technology and development, marketing and advertising, & general and administrative) of $322.5 million increased 0.1% year over year.

Balance Sheet & Cash Flow

At second quarter-end, total cash and cash equivalents, along with short-term investments were $772.7 million compared with $851.4 million in first-quarter 2020. Accounts and other receivables were $33.4 million compared with $31.6 million in the first quarter.

Long-term debt was $18.1 billion at second quarter-end versus $18.4 billion in the first quarter.

Net cash provided by operating activities was $168.1 million compared with $233.3 million in the first quarter. Capital expenditure was $17.2 million at second quarter-end.

Additionally, adjusted free cash flow was $185.9 million for the reported quarter.

Guidance

For the third quarter, management expects revenues to be $835 million, indicating year-over-year growth of 10%. The Zacks Consensus Estimate for revenues is pegged at $793.74 million for the quarter.

Segment wise, revenue growth is expected to be in double digits in Domains, mid single digits in Hosting and presence, and high teens in Business Applications.

For the full year, GoDaddy expects revenue growth of 10% from 2019.

Zacks Rank and Stocks to Consider

GoDaddy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Dropbox DBX, Asure Software, Inc. ASUR and Analog Devices ADI. While both Dropbox and Asure Software sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dropbox, Asure Software, and Analog Devices are scheduled to report earnings on Aug 6, Aug 10 and Aug 19, respectively.

Long-term earnings growth rate of Dropbox, Asure Software, and Analog Devices is pegged at 16.83%, 14% and 13.33%, respectively.

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