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GoDaddy Inc (GDDY) Q1 2019 Earnings Call Transcript

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GoDaddy Inc  (NYSE: GDDY)
Q1 2019 Earnings Call
May. 02, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, my name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the GoDaddy Q1 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) I will now turn the call over to Sam Kemp, VP of Investor Relations and Strategy, you may begin your conference.

Sam Kemp -- Vice President of Investor Relations and Strategy

Good afternoon and thank you for joining us for GoDaddy's First Quarter 2019 Earnings Call. With me today are Scott Wagner, Chief Executive Officer, and Ray Winborne, Chief Financial Officer. Scott and Ray will share some prepared remarks and then we'll open up the call for 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, net debt and ARPU. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents maybe 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.

Unless otherwise stated when we refer to organic measures, we're referring to those measures excluding the impact of Main Street Hub. The matters we'll be discussing today include forward-looking statements which include those related to our future financial results, product introductions and innovations, our share repurchase program and our ability to integrate recent or potential future acquisitions and achieve desired synergies.

Any forward-looking statements that we make on this call are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC, are based on assumptions as of today, May 2nd, 2019 and may differ materially from actual results. We undertake no obligations to update these statements as a result of new information or future events.

With that, here's Scott.

Scott Wagner -- Chief Executive Officer

Thanks, Sam, and thanks to everyone for joining us today to discuss our first quarter of 2019, which has started off at a solid pace. GoDaddy revenue is up over 12% and our cash flow margins continue to expand even with the investments we're making across the business. Companies that thrive over the long term consistently focused on finding new ways to add customer value and here at GoDaddy, we're doing this through constant improvements in our entire experience across product, marketing and care as we build not just for 2019 and 2020 but for the years to come.

Today, we'll spend time on three topics. First, I'll share our quarterly product progress both organically and through our recent acquisitions. Second, an update on how we are driving growth in domestic and international markets. And finally, Ray will cover our first quarter financial performance and outlook for the remainder of 2019.

I'll start with our products. GoDaddy empowers the everyday entrepreneur by designing applications and services that help our customers look good. be everywhere and engage with their audiences. Our feature release pace continues to be rapid and in just the first several months of the year, we've taken a big steps forward in e-commerce, digital marketing and the WordPress ecosystem.

Let me touch on each briefly. First on e-commerce. Our functionality continues to build on what is now a multi-year effort behind both service and product commerce tools. In March. we launched support for digital downloads and online stores enabling customers to sell music e-books videos, art, and other digital content. In April, we acquired Celebrate a world-class, multi-channel commerce suite that has tens of millions of orders and billions of dollars of cumulative GMV and channels like Amazon, Etsy, e-Bay and Walmart.com. We partnered with Celebrate last year to power our first-go central marketplace offer and saw strong, early customer traction, by joining forces we will more deeply integrate Celebrate's e-channel capabilities inventory, management and fulfillment tools; Indigo central and eventually into our WordPress offerings.

Second, we continue to expand the suite of marketing tools available and go Central. At an enterprise or mid-market level, you'll hear the term CRM and marketing automation a lot but for our customers, these functions and their digital presence are really all blurred together and as we help our customers be everywhere we at Godaddy are at our best when we unite these tools into a simple and thoughtful experience.

Today we're tailoring marketing recommendations using data science in the GoCentral dashboard and in March, we launched a customer management tool called Connections which helps entrepreneurs organize and stay close to their customers. We have deep insights into the ventures using GoDaddy and their audiences and this tool is a foundation that will use to help us simplify, personalize and automate marketing for our customers. This is an important step as we expand what we do enabling not only the creation of an online presence but ensuring that it thrives.

And finally, we continue to invest behind WordPress' ecosystem of third-party themes which make websites beautiful and plug-ins which give them functionality. At the end of Q1, there were more than 3 million installs of GoDaddy own plug-ins and themes in WordPress websites around the world.

In April, we added this ecosystem by acquiring CoBlocks which streamlines the WordPress website creation process and ThemeBeans which is a library of elegant and modern website themes. As we expand the resources supporting our WordPress offer, we're bringing an increasingly differentiated experience to the world's largest open source CMS through simplicity, security and elegant design.

Stepping back on our products overall, the investments we're making across both GoCentral and WordPress are increasingly being recognized in the market as we pursue strategies that lead to the success of our customers. Let me now turn to our go-to-market efforts where we are supporting the product momentum I just discussed by driving consideration and usage for both perspective and existing GoDaddy customers. Our underlying bookings growth accelerated for the second quarter, reflecting strong tailwinds from our brand initiatives and tactical marketing performance. Over the last several years, we've grown our incremental marketing spend largely by investing outside of the US which has helped drive our global scale.

In 2019, We're directing the bulk of our new marketing efforts and discretionary spend in the US and we're happy with the results, including the great early performance of the brand strategy that we launched in February. Our lineup of influencers has resonated well for reaching a more diverse audience and our marketing execution continues to acquire customers at attractive economics.

Importantly, the metrics we monitor for brand health and how well everyday entrepreneurs identify with GoDaddy, they are all moving in the right direction. Conversational marketing also continues to ramp nicely with a broader base of campaigns being run against a broader range of customer needs. Since the beginning of 2018, we've taken conversational marketing from a concept to a scaling channel for reaching our base and a helpful, impactful way all while exceeding our target thresholds for returns. Our international business has been a big success over the last several years and at a billion dollar run rate is now larger than all of GoDaddy in 2012 which is the year that we first began localizing international markets.

As we look forward, we remain bullish on our international potential and have three core priorities to continue driving growth. First, international market growth starts with localizing our existing products, marketing and care in a targeted geography. We've done this across well over 50 markets and we continue to ramp in the new and underpenetrated countries like Germany ,South Africa and the Philippines. As we do this, we benefit from both the tailwinds of continuing Internet adoption in developing markets and share gains from small and relatively fragmented local players which builds a nice runway in countries across Asia, Europe, Latin America and the Middle East.

The second priority is launching products and experienced tailored to markets unique needs which we've just started to do in a handful of regions. For example, in Asia, we're expanding support for care conversations in WeChat and other relevant messaging platforms. In India, which is a do-it-for-you-market, we have a vibrant pro community built around our web pro offering in the GoDaddy brand and in certain price sensitive markets like Brazil and Mexico and recently India we've launched value priced email through open Exchange which is double the run rate of email unit sales in these countries.

And finally, in our largest and most mature markets, we look to drive deeper customer engagement which ultimately shows up in ARPU. As you know, the US is our oldest market and we continued to grow at a double-digit pace showing that strategies like conversational marketing can sustain healthy growth over the long term. Our ramp of conversational marketing along with a broader and richer product portfolio and experience has been focused in the US where we're driving significant innovation. As we refine this new playbook, we expect to be able to export it to other maturing international markets as a core strategy to drive ongoing growth. The punch line is that we continue to see many vectors of growth in domestic and international markets supported by a diverse set of product and operational initiatives in each market. And for you, our shareholders, this creates a clear line of sight to continue double-digit top line growth.

Before I wrap up, I want to emphasize our focus on building a business that's aimed at customer success and that could deliver for years to come. We're proud of the consistency of our execution and more importantly how we've evolved as a Company. We got a good business, a great customer and market to serve and a fantastic team, all of which underpin what we deliver to our shareholders.

And with that, here is Ray to cover the financials.

Raymond E. Winborne Jr. -- Chief Financial Officer

Thanks, Scott. We started 2018 on a strong foot with an acceleration in underlying bookings trends, continued strengthening customer and ARPU growth and ongoing margin expansion, the balance is growing cash flow with the right rate of reinvestment for the long term. Q1 bookings grew to 871 million , rising 13.5% on a constant currency basis or about 100 basis points faster than fourth quarter growth. Reported bookings growth of 11% reflects about 230 basis points of currency headwinds.

And at today's exchange rates, we expect this to continue into Q2 and be a wash in the second half. Revenue came in at $710 million growing 13.5% on a constant currency basis and 12% on a reported basis, reflecting a 150 basis points of exchange rate headwinds. Like for like revenue growth decelerated a couple of hundred basis points from Q4 which reflects tough comps from a year ago, most notably in our aftermarket business.

Our key metrics remained strong reflecting goodness in both ARPU and customer growth. ARPU rose to $150, up 9% year-over-year and normalizing for acquisitions and currency remained steady in the mid-single digit range. Our customer base grew more than 6% to 18.8 million adding over 1 million net new customers in the past year as we see continued strength in new ads and modest reductions in churn.

Unlevered free cash flow for the quarter grew 22% year-over-year to $199 million. Our trailing 12 month unlevered free cash flow margin expanded to 24%, up over 100 basis points versus a year ago.On the balance sheet, we finished Q1 with 1.1 billion in cash and short-term investments, net debt landed at 1.3 billion or about 1.9 times net leverage. As Scott touched on earlier, we made a couple of smaller acquisitions after the quarter ended which are immaterial in both cash outlay and their contribution to the P&L.

With that, I'll turn to our outlook for the rest of 2019. We continue to expect mid-single digit growth in customers and ARPU will produce full-year revenue of $2.97 billion to $3 billion implying full-year growth of 12% to 13%. For the second quarter, we expect revenue of $730 million to $740 million, representing 12% to 14% growth versus the second quarter of 2018.

For full year unlevered free cash flow, we expect to generate $730 million to $745 million representing a 1 to 1.5 of margin expansion versus 2018. With our recent credit rating upgrade, we now expect net cash payments for interest in 2019 to be $80 million to $85 million yielding slightly faster growth in levered free cash flow in 2019.

Stepping back, we continue to deliver consistent results while executing against our key priorities and customer experience, product and marketing laying the foundation for sustainable growth in the future.

Thanks everyone for joining us today. And with that, operator, let's open up the call for questions.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from Brent Thill from Jefferies.

Brent Thill -- Jefferies -- Analyst

Good afternoon. When you talk about the bookings growth acceleration to 13.5 from 12.5 in Q4. Can you just talk through, maybe what you saw in Q1 that led you to that. And then secondarily some of us are customers of yours and we noticed some small price changes in our bill where we haven't seen that in the last couple of years, is there a broader price increase going through the system or is this just selective in some areas, be helpful? Many others have obviously raised prices and across stack in the last year. And there's a lot of questions from investors around your (inaudible) pricing. Thank you.

Raymond E. Winborne Jr. -- Chief Financial Officer

Hey Brent, it's Ray, I'll take the first of those and then I'll pass it to Scott on pricing. As far as the acceleration in bookings quarter to quarter, it was broad based across a number of areas where we're driving change in product as well as go-to-market and merchandising and you can see that show up in both the customer growth as well as the ARPU growth.

Scott Wagner -- Chief Executive Officer

Hey Brent and on your price question. Overall, our strategy is having incredibly valuable product at a valuable price and over the time, we're constantly looking at how we wrap our products together, what the list price is and tweaking that so that again there's overall value and again our combination of ARPU is around adoption of products. It's around value add and then select pricing. And I think you're rapper comment was, is what you saw selective and the answer is yes Selective and fits with the philosophy and strategy we've had for a long time around value product at a value price.

Brent Thill -- Jefferies -- Analyst

Thank you.

Operator

Your next question comes from Jason Helfstein from Oppenheimer.

Jason Helfstein -- Oppenheimer -- Analyst

Good day. Two questions, one, can you talk about the currency impact on business applications. I think you did mention that it was tougher comps so I am just wondering -- kind of currency impact there. Question two: when we think about e-commerce, how do you expect to monetize that? Is that a function of getting customers to adopt higher ARPU or another way that you're kind of monetize that?

And then just lastly housekeeping, from here or do you think kind of expenses should be more linear just because of the moving parts. I think the Street and ourselves have kind of struggled with mildly expenses and kind of from here do you think it gets more smoother? Thanks.

Raymond E. Winborne Jr. -- Chief Financial Officer

Hey Jason , it's Ray, I'll take the first one. And the last one, I'll pass the one on e-com to Scott. When you're looking at bizapps, I wouldn't point as much to currency within there, that's about 150 basis points of currency headwind on the revenue this quarter and a disproportionate amount of that headwind is actually in the hosting and presence line, with biz apps it landed exactly where we expected in the quarter. If you recall from the last 4th quarter call, I talked about there was lapping a number of initiatives and merchandising changes from last year, just creating a little tougher comp this year, it is still by far fastest growing product category.

We're on a trajectory now for this to be a $0.5 billion business this year and if you look at the quantum of growth on a dollar basis, it's been pretty darn steady if you look past about four or five quarters. We continue to see line of sight there to hit that 3 to 4 times customer growth algorithm, we've been talking to you guys abut on a longer term.

Scott Wagner -- Chief Executive Officer

Hey Jason, it's Scott. And on e-commerce, right now, both we as GoDaddy plus Celeberate both are monetized through subscription and as of right now our focus is going to be around driving unit adoption. So Celebrate combined with GoDaddy to have an incredibly valuable capability, not just to have it online site in the open Web but also connect that cart to every where it needs to be online and to have that for a monthly subscription.

Now, we will obviously think about and look at ways to think about transaction flow over time but as of right now our focus is going to be around driving units and driving adoption.

Jason Helfstein -- Oppenheimer -- Analyst

Yes and on you last question around expense growth, we talked to you guys through the back half of last year where we were investing back in the business given the tailwind we had on revenue, you will see that combined with the cash burn from Main Street impacting our expenses through the second half of this year then you should start to see those growth rates level out in the back half.

Thank you.

Operator

Your next question comes from Zachary Schwartzman from RBC Capital Market.

Zachary Schwartzman -- RBC Capital Market -- Analyst

Thanks for taking my questions. Scott, in your opening comments you spoke about your bullishness on the international opportunity including India and how does the do-it-for-you market and you also called out the launch of your opening exchange power business email there, can you remind us how many current customers you have in India? Can you talk more about the geographic opportunity and the ability to expand go-to-market capabilities there? Thank you.

Scott Wagner -- Chief Executive Officer

Hey, Zach. In India, we've said, we've got over a million paying customers in the market which is great. Obviously, India is still in pretty early stages of open Internet adoption and our own growth there will be continuing to ride that adoption curve. And as I mentioned particularly we have a couple of tailored products to the pros who build online presences for others. And so we think that India has continued trajectory. And I'd say what we're also seeing through open exchange and other things is really nice growth in other emerging markets like Brazil and Mexico.

Zachary Schwartzman -- RBC Capital Market -- Analyst

And a quick follow-up on Brent's question earlier on some of the selective or -- just the normal industry pricing changes from some of your peers, are you seeing any, I guess read through's from the amount that were from the selective price increases or do you feel that there is a further opportunity for your most engaged customers whether that's through additional product expansion or pricing levers? Thanks.

Raymond E. Winborne Jr. -- Chief Financial Officer

It is nothing that's I think particular to call out to everybody, again our the strategy around value product at a value price points create, I will say there are others in our industry that are very explicitly trying to drive significant price increases in a couple of categories. I think that puts us in a nice relative position, our biggest focus is around quality right now of the experience around adoption in units and being able to do more with our existing customers so in terms of the premise of your question, I don't think there's anything that I, or we should call out specifically. And again, our focus will be around doing more with our existing customers, driving value and adoption and that will show up well over time.

Zachary Schwartzman -- RBC Capital Market -- Analyst

Thank you.

Operator

Your next question comes from Sterling Auty from JP Morgan.

Unidentified Participant -- -- Analyst

Hi, this is (inaudible) on for Sterling Auty. Thanks for taking the question. So, I know you mentioned there is some FX headwinds in the hosting segment. I was wondering if you could touch a bit on the contribution from Main Street Hub and go Central in the quarter and what the performance was for those?

Raymond E. Winborne Jr. -- Chief Financial Officer

Yes, you mentioned with Jason's question around the FX exposure there. From a Main Street perspective, we had disclosed to you guys a $40 million run rate of $10 million a quarter for Main Street in that existing business and that's a good place, I'll refer you to continue to push in there. As far as GoCentral and managed WordPress, the two applications show up in that line, we're not disclosing that every quarter, Scott talked about it last quarter with the 40% growth. We're continuing to see good growth in those applications.

Analyst -- -- Analyst

Thank you.

Operator

Your next question comes from Matt Pfau from William Blair.

Matt Pfau -- William Blair -- Analyst

Hey guys. Thanks for taking my question. Just to have one on Celebrate too, So my understanding is that a lot of your e-commerce companies or at least are more weighted toward services business versus product business. So is the plan with Celebrate more to expand the product portfolio to bring new product selling businesses into the mix? or is there a sizable pace of product customers within your existing e-commerce space at that you can take the Celebrate too?

Scott Wagner -- Chief Executive Officer

Well, I think it's about expanding the range of capabilities within commerce. So you're right around service commerce and that's something that we've certainly ramped up over the last couple of years and Celebrate adds a capability, again where somebody's card can now absolutely get syndicated, managed and show up across the big marketplaces and that's just a great capability around product commerce and so we think that this will allow us to deliver incremental value, certainly it through GoCentral toward the product commerce and down the road, it's a great capability to add to WordPress and so if you think about a lot of the footprint of e-commerce retailer around, there is a frankly a huge chunk of installed base within or around WordPress and we're excited about the capability that Celebrate offers and how to deploy it not only the GoCentral but also to the WordPress community.

Matt Pfau -- William Blair -- Analyst

Great. Thanks guys for taking my question.

Operator

Your next question comes from Ron Josey from JMP.

Unidentified Participant -- -- Analyst

Great. Thanks for taking the question. Scott, I have two please. I think Scott, you mentioned mostly marketing efforts and discretionary spend would be directed here in the US and so can you just talk a little bit more about your marketing strategy here in the States, specifically and maybe the products you plan to highlight/lead with and then sort of secondary to that, I am pretty intrigue with the connections tool and bigger picture, just how you view connections with marketplaces and GoCentral in terms of the marketing messaging and just basically the product together and sort of bigger picture where that can go? Thank you.

Scott Wagner -- Chief Executive Officer

Great.Thanks, Ron. In the US, the strategy has been emphasized the GoDaddy brand and really standing for empowering everyday entrepreneurs and you're seeing that whether it's in social media or different executions but ways to show and link GoDaddy to the full life-cycle of things that we can do with our customers because right now the richness of our product portfolio is still something that frankly we've got opportunity here in the US to expose or almost reintroduce ourselves to both existing customers and prospects. And so that's been the strategy and focus of frankly incremental dollars through the year. And when we say both brand enhancement and conversational marketing, it's about those two things. So that's the first and frankly again we're happy. I think with the results, both in terms of the receptivity of the message and how it's showing up in dollars.

To your second question around connections, think about that as a foundation and it's a foundation in digital marketing that really brings together website digital marketing and social presence which are a continuing now and we are really poised to bring all three of those capabilities together and easy simple way for customers both at a product level and then obviously when you think about Main Street Hub that's a bit of a hands on execution that for certain people who need extra help or want somebody to take on those services for them or set up to do it.

So, I appreciate the interest in connections and I would think about that as a foundation in digital marketing that we're going to do a heck of a lot more with in the quarters to come. So stay tuned.

Unidentified Participant -- -- Analyst

Great, thank you.

Operator

Your next question comes from Ygal Arounian from Wedbush Securities.

Unidentified Participant -- -- Analyst

Hey guys, good afternoon. So maybe I'll start with a clearly a lot of focus on hosting a presence, building out the products that they are accelerating the pace of the rollouts. So we haven't heard as much about product rollouts in Business Applications, I just wanted to get your thoughts on kind of next steps, products that you could add to grow the value of that segment?

Raymond E. Winborne Jr. -- Chief Financial Officer

Yes, thanks. Well, don't run away from OX and what we've just done with open exchange which is to be able to enable with the world-class email and productivity and capabilities that are frankly really low price point and so that's rolling out across emerging markets and we've doubled unit sales in some of the emerging markets that's just been recently introduced and so that's been a really nice execution that we're ramping up around the world. And we're excited about that on what they can do and then per Brent's question around in a both digital marketing which really expands categories. Again, there is going to be more to come there too.

Unidentified Participant -- -- Analyst

Great. Yes, I guess I didn't mean to ignore Open-Xchange, I was just thinking outside of email but thanks to clarify. Let me just ask one more on managed WordPress and how you guys see the managed WordPress product? Again obviously, you're starting to build out that e-commerce side, a lot more it feels like more that is starting on the Go-Central side and understand that Celebrate will eventually work its way up. But how do you see managed WordPress and things you are doing there, how they fit in today's kind of more advanced website builder ecosystem, especially when it comes to e-commerce? Thanks.

Scott Wagner -- Chief Executive Officer

Great question. So first on managed WordPress. Again for context for those listening that may not know WordPress well, WordPress is far and away the largest online publishing CMS but obviously built on open source software and there's kind of four principal considerations and ways to add value around WordPress. One of which is site management, plug-in updates is the single biggest pain point that any user or WordPress faces. Second is security and then third is sort of performance speed availability of the sites themselves and the fourth is kind of ease of management simplicity of design right inherently as an open source system a simpler framework around design and management.

And so our strategy around WordPress is side by side with what we're doing around Go-Central and it's really aimed at those four things that we just talked about. And just to highlight what we do with ThemeBeans and CoBlocks both of those bring nice capability around the design making WordPress sites easier to design and manage. So we're excited about it.

Down the road and looking forward, we think there are nice opportunities to the lend of the capabilities between GoCentral and WordPress but we'll get to that a little bit in the future but we see these two things as both critically important in addressing the major needs of not just websites but really publishing site creation and bringing website social media and digital marketing together.

Unidentified Participant -- -- Analyst

Awesome. Thank you. That's really helpful.

Operator

Your next question comes from Naved Khad from SunTrust .

Unidentified Participant -- -- Analyst

Thanks a lot. I have couple of questions. So maybe just on FX, the FX headwinds and intensify a bit versus when you guided back in February and then maybe a high-level question on marketplaces. Scott, when you acquired Main Street Hub you kind of spoke about the opportunity there, may be up to 2 million subscribers could be using it over time, could you sort of give us a big picture opportunity for marketplaces may be?

Raymond E. Winborne Jr. -- Chief Financial Officer

Hi Naved, it's Ray I'll take the first one on FX. Now the headwinds we are right in line with what we expected. I think I said 200 to 250 basis points on the fourth quarter call and it came in right in the middle there. As we look into the rest of the year as I mentioned on my call comments, we would expect a similar pressure in the second quarter and then that will balance out over the remainder of the year.

Scott Wagner -- Chief Executive Officer

Thanks and on Main Street Hub. We've been focused on doing two things with the capability of Main Street Hub, the first of which is bringing the product of Main Street Hub which is really social media reputation management and assisted reputation management through social and bringing it together with GoDaddy's website building and site creation capabilities. And we're pleased with the progress there. That's one team in our presence unit and it has been set up really well. The second has been to rebrand the Main Street Hub social media services as GoDaddy and introduce it into GoDaddy's base and as you mentioned we have shared 2 million-ish white space or customers that were either buying those services from others or had high interest in it. And as we've rebranded those services as GoDaddy and are starting to introduce it into our base we're seeing really nice take rate far above what Main Street Hub did on a stand-alone basis. And I would say that's on top of the acquisition pieces in case. And so we're tracking where we want to be.

Unidentified Participant -- -- Analyst

And just to sort of extrapolate from that if I, look at marketplaces launch, the e-commerce product, what percent of your base do you think could be adopters of that over time?

Scott Wagner -- Chief Executive Officer

You could rather than share a specific number, our potential to grow product commerce is from the base which we were starting is quite high. And again, I would think about ways to frame it as I think about the number of WordPress sites that actually sell a product and we think again with the sub right that's a really need capability to add unique value to WordPress sites in particular, if GoDaddy is the largest WordPress, the WordPress host is rate, I think mentioned we have over 3 million plug-ins and installs obviously all of those are not product commerce but there is a base of WordPress sites that are product commerce that we think have-- that's the target environment within the base for incremental sub-rate activity.

Analyst -- -- Analyst

Great , thank you.

Operator

Your next question comes from Nick Jones from Citi.

Nick Jones -- Citi -- Analyst

Hi. Thank you for taking the question. I guess I want to touch on CoBlock and ThemeBeans, have there been opportunities there for to consolidate third party plug-in and things like that, I know you have kind of premier deep offering there.

Scott Wagner -- Chief Executive Officer

Thanks. I'm not sure it's consolidation as much as boy (ph) bring capability to have world-class plug-ins within the GoDaddy environment. I mean there is a lot of opportunity for us to add value for all of the WordPress sites, sitting in our base and as you mentioned both CoBlocks and ThemeBeans we were really able to do with those two is we are going to make the site design process easier and simpler that's going to be great. And this is a step and we're going to do more of these kinds of things around WordPress both organically and in the right spot through M&A too.

Nick Jones -- Citi -- Analyst

Great and one follow-up on the kind of standing sub domains, is that (inaudible) is that something that you are going to invest and monitoring closely, how should we think about that (Technical Difficulty)

Scott Wagner -- Chief Executive Officer

Sorry, can I have the question again? I didn't catch the first part of part of it.

Nick Jones -- Citi -- Analyst

I was asking about the stand sub domain.

Scott Wagner -- Chief Executive Officer

It was just regular part of our practice, super tiny number of sites and this is just part of our ongoing legal site review process, but nothing special to call out there and it was a tiny number of sites.

Nick Jones -- Citi -- Analyst

Great. Thanks for taking my questions.

Operator

Your next question comes from Lloyd Walmsley from Deutsche Bank.

Analyst -- -- Analyst

Thanks for taking the question. This is Seth on for Lloyd. Last quarter you talked about Mexico and Brazil being able to provide an email seat $1.50, so we're just wondering how the uptake has been trending there? And if there any levers in the future that you'd be able to pull in order to raise ARPU? And then just as a follow-up, It doesn't look like you bought back any stock this quarter and in last quarter, just curious as to your updated thoughts on capital allocation and as well as what you're seeing in the M&A market so far this year? Thank you.

Scott Wagner -- Chief Executive Officer

Sure. On the first, we are seeing kind of two level of unit sales in those markets and we're in the process of rolling out open exchange around the world. (inaudible) to drive unit adoption and usage and that will create a lot of value. So right now we're focused on driving OX adoption into emerging markets around the world. I'll let Ray comment on the second question.

Raymond E. Winborne Jr. -- Chief Financial Officer

Yes, I mean you know we can't get into the details around stock buybacks but economically money management team. As far as capital allocation priorities go, they haven't changed its organic growth M&A share repurchases in that order.

Operator

Your next question comes from Mark Grant from Goldman Sachs.

Mark Grant -- Goldman Sachs -- Analyst

Thanks for taking the question. I just wanted to touch on the investments around technology and platform that you've been making. we've been talking about this for over a year now and really building out that technology platform, it seems like those investments are making it easier to make some of these tuck-in technology acquisitions and just plug them in and have it work so whether it's managed WordPress GoCentral, where do you think you are in terms of bringing in all of the capabilities that you hope to offer? Are there any features or products that you think the platform is missing that you need to focus on?

Scott Wagner -- Chief Executive Officer

Mark, I wouldn't talk about it as specific feature capabilities. I think there's a couple of things that you're seeing us do, if you look at not just feature releases but what we're doing. The first is bringing site creation which is really publishing into the open web, social media presence and digital marketing together. And I could pick off certain features and elements in each one of those categories, but we've got -- I think a whole different level of capability that's coming in the intersection of those three things. And what we're trying to do at a high level is have somebody's idea there whether it's business or venture look great, be every it needs to be and allow somebody to engage with their own audience. Those are the customer things that we're driving and really it cuts across sites, social media and digital marketing.

And this is an important and, the elegant thing about GoDaddy is that we're creating DIY technical tools to allow people to do that in an elegant way and building a service capability where we can put hands-on work for the 50% plus of the world that actually want somebody else to either build or manage their online presence. And that's the strategy and we continue to build capability to fulfill, frankly that value proposition.

Mark Grant -- Goldman Sachs -- Analyst

Thanks. That's very helpful.

Operator

Your next question comes from Brian Essex from Morgan Stanley.

Analyst -- -- Analyst

Hi. This is Ashley (ph) Chris on for Brian. Thanks for taking the question. Just a quick one for me. Can you talk about some of the initiatives to increase attach rates as you're working with better data, better analytics and is that something that's a localized in your core geographies or can we expect to rollout toward international market soon as well. Thanks.

Scott Wagner -- Chief Executive Officer

Yes, great question. If you think about attach. There's a lot underneath that, I would say we were one, working at ways within the GoDaddy site experience to present the relevant next thing to somebody. Obviously, the core name, site email are different ways that those are presented again through whether it's connections what I just described or a number of things within security. We're adding sophistication on kind of the next level of attach that really shows up through our site experience. That's one.

Two, what we've termed conversational marketing to everybody is a way of taking data insight and science across our 18.8 million customers and being able to profile what's the one next thing that we should at least introduce talk to them about and that's the muscle that we're really focusing on here in the US. We're seeing good traction and in both of those two things that I described we're kind of proven amount in the Core US region and then we're going to expand to markets around the world.

Analyst -- -- Analyst

Got it. And just a quick follow-up in terms of Plasso, are you able to provide any incremental color on that?

Raymond E. Winborne Jr. -- Chief Financial Officer

Only that we're integrating into the core GoCentral experience and as I described earlier, it's creating all sorts of digital commerce capabilities, downloads books, music, art et cetera that it just adding richness to our GoCentral experience, it's great like we're six months into the integration into the integration and it's taken right along.

Analyst -- -- Analyst

Perfect, thank you.

Operator

Your next question comes from Deepak Mathivanan from Barclays.

Deepak Mathivanan -- Barclays -- Analyst

Hey guys, sorry if this question was asked, was jumping around a couple of calls. So first, I know you've been making domain bracing tweaks recently, should we think of that largely as a pass-through for Verisign hikes that's coming up over the next few months or will there be another adjustment when that becomes effective. And then secondly, I know there were a couple of questions on the M&A but what is the reason thought process on potentially consolidating the side of the market where you have pretty good cost structure advantages like domains and hosting. Thank you.

Scott Wagner -- Chief Executive Officer

Hey, Deepak, in terms of the former -- no comment on our future pricing. As you know, we're always testing price, but particularly new renewal from a value standpoint and particularly around combining individual products. And so, again, that's sort of both strategy and tactics in both of those are going to continue.

In terms of consolidating domain that hosting companies where we have the capability, certainly in naming where we have complete frankly confidence in our ability to operationally tuck-in and integrate anything we're doing. From a hosting standpoint, the focus has been to selectively, think about our geographic scope through acquisition, and that's probably the way that everybody should think about any future action that we do in what you call the conventional domain and hosting companies which again would be get a footprint in a market that we can increase our half-to-end scope and then rollout GoDaddy's product portfolio over time.

Raymond E. Winborne Jr. -- Chief Financial Officer

Used as a way to accelerate the organic growth.

Deepak Mathivanan -- Barclays -- Analyst

Great, thank you so much.

Operator

(Operator Instructions) The next question comes from Aaron Kessler from Raymond James.

Unidentified Participant -- -- Analyst

Great. It's made a couple of things may have missed it but can you speak to kind of the uptake or kind of shifting over to cloud with AWS. And then just on GoCentral kind of where do you feel you are in terms of kind of adding various services to the app in terms of where you want to be kind of over the next year? Kind of which inning are you in there. Thank you.

Raymond E. Winborne Jr. -- Chief Financial Officer

Hi Aaron, it's Ray I'll take the first one on Cloud and Scott will take GoCentral. Making great progress on transition to the cloud. As I've mentioned before on previous calls, this will be a multi-year transition, we're taking a lot of the workloads outside of our core hosting products and moving those to the cloud that will occur over the next 18 months. We're moving a lot of the (inaudible) teams today, so new product design we'll go there production is next so all going according to plan, but you won't see any dramatic impacts either in operating expense or capital over the next, call it 12 to 18 months.

And in terms of go Central . We've added a heck of a lot of capability into the core editor and site design of what we can do and extending GoCentral into both social media and marketplace, whether it's Facebook Yelp integration or through Celebrate what we're doing around e-commerce. So, it's extending a website into the social media ecosystem that frankly, I think we put a heck of a lot of capability under the field right now and I am excited about what's coming.

And again the third sort of pillar of Digital Marketing is funneling through and bringing capability into GoCentral that helps our customers talk to their customers. Frankly, I think we've got a lot more richness into the product. And frankly, perhaps even users of existing product realize and that's going to be a big effort of ours going forward. So I think the rapper on the question would be, we have a ton of capability within the product. Now that we're excited about and can deliver great outcomes for customers and if I'm looking ahead over the next couple of quarters and I am excited about what I think we're going to deliver into the marketplace along those same areas.

Unidentified Participant -- -- Analyst

Great, thank you.

Operator

That was our last question. At this time, I will turn the call back over to the presenters.

Raymond E. Winborne Jr. -- Chief Financial Officer

Hey everybody. Thanks for joining us. Appreciate the questions, as always, and we'll talk to everybody next quarter . Take care.

Operator

This concludes today's conference call. You may now disconnect.

Duration: 47 minutes

Call participants:

Sam Kemp -- Vice President of Investor Relations and Strategy

Scott Wagner -- Chief Executive Officer

Raymond E. Winborne Jr. -- Chief Financial Officer

Brent Thill -- Jefferies -- Analyst

Jason Helfstein -- Oppenheimer -- Analyst

Zachary Schwartzman -- RBC Capital Market -- Analyst

Unidentified Participant -- -- Analyst

Analyst -- -- Analyst

Matt Pfau -- William Blair -- Analyst

Nick Jones -- Citi -- Analyst

Mark Grant -- Goldman Sachs -- Analyst

Deepak Mathivanan -- Barclays -- Analyst

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