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GoDaddy (GDDY) Q3 Earnings and Revenues Outpace Estimates

Zacks Equity Research
·4-min read

GoDaddy Inc. GDDY reported third-quarter 2020 adjusted earnings of 38 cents per share, surpassing the Zacks Consensus Estimate of 31 cents. However, the bottom line was down 9.5% from the year-ago quarter.

The company generated revenues of $844.4 million, up 11% year over year or 11.2% on a constant-currency (cc) basis. The reported figure also surpassed the Zacks Consensus Estimate of $835.3 million.

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

International revenues were $283.7 million for the third quarter, up 11.6% year over year or 12% on a cc basis.

GoDaddy Inc. Price, Consensus and EPS Surprise

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

Segmental Revenues

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

Domains: The company generated revenues of $387.4 million (accounting for 46% of total revenues) from this segment. The figure improved 12.2% 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 $302.4 million (36% of revenues), which increased 6.1% 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 $154.6 million (18% of revenues), increasing 18.7% year over year.

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 third quarter, total bookings of $945 million increased 11% year over year or 11.2% on a cc basis.

It gained more than 1 million new customers in the third quarter, with more than 400,000 net customer additions.

Operating Results

Gross margin was 65.6%, up 40 basis points from the prior-year quarter.

Operating expenses (technology and development, marketing and advertising, & general and administrative) of $333.2 million increased 24.2% year over year.

Balance Sheet & Cash Flow

At third quarter-end, total cash and cash equivalents, along with short-term investments were $621.8 million compared with $772.7 million in second-quarter 2020. Accounts and other receivables were $38.7 million compared with $33.4 million in the second quarter.

Total debt was $3,161.7 million and net debt was $2,539.9 million for the third quarter.

Net cash provided by operating activities was $197.3 million compared with $168.1 million in the second quarter. Capital expenditure was $8.4 million at third quarter-end.

Additionally, adjusted free cash flow was $223.9 million for the reported quarter.

Guidance

For the fourth quarter, management expects revenues to be $865 million, indicating year-over-year growth of 11%. The Zacks Consensus Estimate for revenues is pegged at $855.63 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.

Zacks Rank and Other Stocks to Consider

GoDaddy currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Alibaba Group Holding Limited BABA, Overstock.com, Inc. OSTK and Revolve Group, Inc. RVLV, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Alibaba Group, Overstock.com, and Revolve Group is currently projected at 19.8%, 20% and 17.3%, respectively.

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