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GoDaddy Earnings: 16% Sales Growth and Tricky Tax Effects

Anders Bylund, The Motley Fool

Domain-name registrar and online content manager GoDaddy (NYSE: GDDY) reported fourth-quarter results on Wednesday, February 20. The company delivered double-digit growth in both revenue and cash profits, landing at the top end of management's guidance across the board.

GoDaddy's fourth-quarter results: The raw numbers

Metric

Q4 2018

Q4 2017

Year-Over-Year Change

Revenue

$696 million

$602 million

16%

Net income attributable to GoDaddy

$43 million

$92.6 million

(54%)

GAAP earnings per share (diluted)

$0.24

$0.54

(56%)

Data source: GoDaddy. GAAP = generally accepted accounting principles.

What happened with GoDaddy this quarter?

  • The GAAP profits listed above include a large tax benefit in the year-ago period, springing from the Trump administration's corporate tax reform of 2017. The company is not in the habit of providing adjusted earnings figures, but we do have some other profit metrics available. Operating income, which is calculated before tax effects come into play on the income statement, rose 82%, to $41.8 million. Unlevered free cash flow, which measures the company's direct cash profits and ignores the accounting effects of a non-cash tax adjustment, increased by 16% to land at $127 million.
  • GoDaddy saw $732 million of order bookings in the fourth quarter, 11% above the year-ago period's result. This line item gives us an early feel for the revenue growth this company can expect over the next year or so. To give this figure some context, GoDaddy's order bookings stopped at $658 million in the fourth quarter of 2017.
  • The average revenue per customer, or ARPU, rose 6.6%, to $148. That's exactly in line with the broader pace of ARPU growth across the whole fiscal year but below the 7.4% growth rate seen a year earlier.
Two young office workers sharing a laptop while one points to the screen while talking on a smartphone.

Image source: Getty Images.

What management had to say

In a conference call with financial analysts, GoDaddy CFO Ray Winborne explained the forces behind this quarter's solid customer growth.

Underneath the headline stats, the strong customer growth is a result of consistent performance in the U.S. and especially strong growth in international markets as we benefit from share gains across the world and increasing website adoption in emerging markets. Within the U.S., we focused on doing more with our customers through better site and product experiences, interactions with care, and conversational marketing driving double-digit U.S. ARPU growth in 2018.

Looking ahead

Turning to 2019, GoDaddy presented the following financial goals for the full fiscal year.

  • Customer growth should land in mid-single-digit percentages along with similar ARPU increases, resulting in approximately $2.99 billion of top-line revenues. That would be a 13% increase over this year's $2.66 billion.
  • Unlevered free cash flows are expected to land near $740 million, which would work out to roughly 19% growth over the $620 million that GoDaddy produced in 2018.
  • Zooming in on the first quarter of 2019, revenues should stop near $710 million for a 12% year-over-year increase.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends GoDaddy. The Motley Fool has a disclosure policy.