A month has gone by since the last earnings report for GoDaddy (GDDY). Shares have added about 2.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is GoDaddy due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
GoDaddy’s Q4 Earnings & Revenues Beat Estimates
GoDaddy delivered fourth-quarter 2018 adjusted earnings of 28 cents per share (excluding acquisition costs) beating the Zacks Consensus Estimate by 15 cents.
Further, per the company, earnings of 28 cents per share were up from 8 cents in the previous quarter but significantly down from 54 cents in the year-ago quarter.
The company generated revenues of $695.8 million, increasing 2.4% sequentially and 15.5% year over year. The top line surpassed the Zacks Consensus Estimate of $693.2 million.
The top line was driven by strong performance of product segments. Moreover, growing subscription of GoDaddy’s mobile-optimized website builder, GoCentral contributed well throughout the reported quarter.
Additionally, the company’s customer base reached 18.5 million at the end of the fourth quarter. Notably, the figure advanced 6.8% from the prior-year quarter. Further, average revenue per user (ARPU) was $148 in the reported quarter, up 6.6% on a year-over-year basis.
This can primarily be attributed to the company’s solid momentum across United States and international markets. Moreover, growing website adoption in the emerging markets aided customer base growth.
Domain: The company generated $314.3 million revenues (45.2% of the total revenues) from this segment. The figure improved 11.6% from the year-ago quarter driven by strong liquid domain aftermarket and renewals.
Hosting and Presence: This segment generated $270 million revenues (38.8% of the revenues), surging 18% on a year-over-year basis during the reported quarter. This can be primarily attributed to robust feature engagements, bookings and appointments within this segment. Further, well-performing GoCentral remained a major positive.
Business Applications: Revenues from this segment came in $111.5 million (16% of the revenues) increasing 21.4% year over year. This was driven by strong Workspace renewals and growing momentum of Open-Xchange in emerging markets. Further, GoDaddy’s partnership with Microsoft for Office365 contributed well.
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. In the fourth quarter, total bookings of $732.4 million increased 11.3% year over year.
Gross margin was 66.9%, up 50 basis points (bps) from the prior-year quarter.
Operating expenses of $365.6 million increased 14.8% year over year.
Balance Sheet & Cash Flow
As of Dec 31, 2018, total cash and cash equivalents, along with short-term investments were $951.3 million compared with $852.2 million as of Sep 30, 2018. Accounts and other receivables were $26.4 million compared with $22.5 million in the last reported quarter.
Long-term debt was $16.6 million in the fourth quarter, down from $16.7 million in the previous quarter.
Net cash provided by operating activities came in $128.5 million compared with $154 million in the third quarter.
Additionally, adjusted free cash flow was $126.8 million during the reported quarter.
For first-quarter 2019, the company expects revenues to lie within the range of $705-$715 million.
For full-year 2019, revenues are expected to be within $2.97-$3 billion, representing year-over-year growth of approximately 12-13%. Additionally, free cash flow for 2019 is projected between $730 million and $745 million, reflecting year-over-year growth of 18-20%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -9.62% due to these changes.
Currently, GoDaddy has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
GoDaddy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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