A month has gone by since the last earnings report for GoDaddy (GDDY). Shares have lost about 14.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is GoDaddy due for a breakout? 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 drivers.
GoDaddy Q2 Earnings Miss, Revenues Beat Estimates
GoDaddy Inc. reported second-quarter 2019 adjusted earnings of 13 cents per share, missing the Zacks Consensus Estimate by 4 cents. Nonetheless, the bottom line was up 85.7% sequentially and 18.2% year over year.
The company generated revenues of $737.2 million, increasing 23.8% sequentially and 13.1% year over year. Also, the top line surpassed the Zacks Consensus Estimate by 0.30%.
The revenue growth was driven by strong performance of its product segments, particularly presence applications and services.
The company’s customer base reached 19 million at the end of the second quarter. Notably, the figure advanced 5.5% from the prior-year quarter. Growing website adoption in emerging markets aided customer base growth. Average revenue per user was $153 in the reported quarter, up 7.8% on a year-over-year basis, attributable to solid momentum across international markets.
International revenues were $247.7 million in the second quarter, up 6.2% year over year or approximately 10.5% on a constant-currency basis.
Coming to share price performance, the stock has lost 15.4% in the past year compared with its industry’s decline of 29.4%.
GoDaddy generates revenues from three segments — Domain, Hosting and Presence, and Business Applications.
Domain: The company generated revenues of $334.4 million (45% of total revenues) from this segment. The figure improved 9.7% from the year-ago quarter driven by strong liquid domain aftermarket and renewals.
Hosting and Presence: This segment generated revenues of $279.8 million (37.9% of revenues), increasing 14.4% on a year-over-year basis during the reported quarter. The revenue growth 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 at $123 million (17.1% of revenues), increasing 20.4% year over year.
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 second quarter, total bookings of $846.1 million increased 12.2% year over year.
Gross margin was 65.5%, down 50 basis points from the prior-year quarter.
Operating expenses (technology and development, marketing and advertising, and general and administrative) of $322.3 million increased 27.1% year over year.
Balance Sheet & Cash Flow
At the end of the second quarter, total cash and cash equivalents, along with short-term investments were $1.2 billion compared with $1.1 billion in first-quarter 2019. Accounts and other receivables were $24.8 million compared with $35.4 million in the first quarter.
Total debt was $2.4 billion and net debt was $1.2 billion at the end of the second quarter.
Net cash provided by operating activities was $161.3 million compared with $199.7 million in the first quarter.
Additionally, adjusted free cash flow was $167.8 million during the reported quarter.
For third-quarter 2019, the company expects revenues within $755-$765 million.
For full-year 2019, management maintained its revenue and free cash flow guidance.
The company expects revenues within $2.97-$3 billion, indicating year-over-year growth of approximately 12-13%.
Additionally, free cash flow in 2019 is projected between $730 million and $745 million, suggesting year-over-year growth of 18-20%.
How Have Estimates Been Moving Since Then?
Estimates review followed a downward path over the past two months.
Currently, GoDaddy has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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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