GoDaddy (GDDY) Beats Earnings & Revenue Estimates In Q4

GoDaddy’s (NYSE:GDDY) fourth-quarter 2017 adjusted earnings of 11 cents per share were above the Zacks Consensus Estimate by 2 cents. Earnings increased 10% from the year-ago quarter.

Management remains positive about strong product and marketing roadmap for 2018. The company’s mobile-optimized website builder, GoCentral, has been gaining momentum. The company has been making continuous efforts to enhance its features. It recently added online appointment scheduling, payments via Square (NYSE:SQ), blogging capabilities and integration with Google (NASDAQ:GOOGL) My Business, among many other features.

Notably, on a 12-months basis, the stock has underperformed the industry it belongs to. It gained 56.3% compared with the industry’s growth of 60%.

Revenues

Revenues of $602 million increased 3.4% sequentially and 23.9% year over year, beating the Zacks Consensus Estimate of $593.0 million. Moreover, the reported figure came above management’s guidance of $591-$596 million.

At the end of the fourth quarter, customers were nearly 17.3 million, increasing 17.6% year over year. Also, average revenue per user (ARPU) was $139, up 7.4% from the prior-year quarter.

Strong growth in customers, contribution from HEG acquisition and expanding ARPU led to the improvement.

Segmental Revenues

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

Domain revenues of $281.6 million contributed 46.8% to total revenues. Revenues were up 3.7% sequentially and 16.1% year over year.

Hosting and Presence revenues of $228.8 million accounted for 38% of total revenues. The figure represented 1.3% sequential and 29.5% year-over-year growth.

Business Applications revenues of $91.8 million, which accounted for 15.2% of total revenues, increased 8.3% sequentially and 37.6% from the year-ago quarter.

Booking

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 $657.9 million increased 25.4% year over year.

Margins

Gross margin was 66.5%, up 86 basis points (bps) sequentially and 188 bps from the prior-year quarter.

Operating expenses of $377.2 million increased 28% year over year.

Net Income

The quarter’s GAAP net income was $94.8 million against net loss of $0.8 million in the year-ago quarter.

Pro forma earnings were 11 cents compared with 10 cents reported in the prior-year quarter.

Balance Sheet & Cash Flow

On Dec 31, 2017, total cash and cash equivalents and short-term investments were $595 million compared with $553.3 million in the third quarter. Accounts and other receivables were $18.4 million compared with $17.3 million in the prior quarter.

Total long-term debt, including current portion, was $2.48 billion, while net debt was $1.89 billion in the fourth quarter.

Net cash provided by operating activities in the fourth quarter was $104.3 million compared with $131.4 million in the prior quarter.

Guidance

For the first quarter of 2018, the company expects revenues in the range of $620-$625 million. The Zacks Consensus Estimate for first-quarter revenues is pegged at $600.8 million.

For full-year 2018, GoDaddy raised its revenue guidance within $2.58-$2.61 billion, representing year-over-year growth of approximately 16%. The Zacks Consensus Estimate for full-year revenues is pegged at $2.54 billion.

GoDaddy Inc. Price, Consensus and EPS Surprise

GoDaddy Inc. Price, Consensus and EPS Surprise | GoDaddy Inc. Quote

Zacks Rank and Stocks to Consider

GoDaddy has a Zacks Rank #3 (Hold). A few better-ranked stocks in the technology sector are PetMed Express (NASDAQ:PETS) , Teradyne (NYSE:TER) and Mercadolibre (NASDAQ:MELI) . While PetMed and Teradyne sport a Zacks Rank #1 (Strong Buy), Mercadolibre carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for PetMed, Teradyne and Mercadolibre is projected to be 10%, 12% and 25%, respectively.

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