GoDaddy’s (GDDY - Free Report) second-quarter 2017 adjusted earnings of 13 cent per share surpassed the Zacks Consensus Estimate by 10 cents.
The increase in earnings was driven by growing revenues, strong adoption of its new products, including its new mobile-optimized website builder, GoCentral and contribution from HEG acquisition.
The company's shares have gained 18.2% year to date, underperforming the industry’s gain of 29.8%.
Revenues of $557.8 million increased 13.9% sequentially and 22.3% year over year and beat the Zacks Consensus Estimate of $551.0 million. Moreover, the reported figure came above management’s guidance of $548–$553 million.
At the end of the second quarter, customers were nearly 17 million, increasing 17.8% year over year. Also, ARPU was $129, up 2.8% year over year.
Strong growth in customers, contribution from HEG acquisition and expanding average revenue per user (ARPU) led to the improvement.
Revenues by Segment
GoDaddy generates revenues from three segments — Domain, Hosting and Presence, and Business Applications.
Domain revenues of $263.3 million contributed 47.2% to the total revenue. Revenues were up 9.3% sequentially and 14.6% year over year.
Hosting and Presence revenues of $214.9 million accounted for 38.5% of total revenue. The figure represented 20.5% sequential and 28.3% year-over-year growth.
Business Applications revenues of $79.6 million, which accounted for 14.3% of total revenue, increased 12.7% sequentially and 35.1% year over year.
GoDaddy uses total bookings as a performance measure since payment is usually collected at the time of sale, and recognizes revenue ratably over the term of customer contracts. In the second quarter, total bookings of $667.5 million increased 23.9% year over year.
Gross margin was 64.8%, up 89 basis points (bps) sequentially and 32 bps year over year.
Operating expenses of $355.3 million increased 15.7% sequentially and 24.9% year over year.
The quarter’s GAAP net income was $20.8 million or 10 cents per share compared with net loss of $8.9 million or a loss of 11 cents per share a year ago.
Pro forma earnings were 13 cents against a loss of 11 cents reported in the year-ago quarter. Our pro forma calculation excludes restructuring, intangibles amortization, asset impairments and other one-time charges on a tax-adjusted basis.
Balance Sheet & Cash Flow
On June 30, 2017, total cash and cash equivalents and short-term investments were $591.2 million compared with $670.6 million in the first quarter. Accounts and other receivables were $17.4 million compared with $8.4 million in the prior quarter.
Total long-term debt, including current portion, was $3,065.3 million, while net debt was $2,474.1 million in the second quarter.
Net cash provided by operating activities in the second quarter was $113.3 million compared with $126.6 million in the prior quarter.
For the third quarter, the company expects revenues in the range of $577–$582 million, including HEG. The Zacks Consensus Estimate is pegged at $551.0 million.
For full-year 2017, GoDaddy raised its revenue guidance to $2.215–$2.225 billion from its earlier guidance range of $2.195–$2.225 billion. The new guidance represents a year-over-year growth of approximately 20%. The Zacks Consensus Estimate is pegged at $2.21 billion.
GoDaddy, Inc. is engaged in the designing and development of cloud-based technology products for small businesses, Web design professionals and individuals.
Management remains positive about strong product and marketing roadmap for 2017. The company’s new mobile-optimized website builder, GoCentral, has been gaining momentum. The company intends to release additional new GoCentral verticals, markets and features throughout 2017. During the quarter, the company also witnessed a 17.8% increase in its customer base from the year-ago quarter.
Moreover, in April, the company completed the acquisition of Host Europe Group for €1.69 billion (US$1.79 billion) and the integration remains well on track. The deal expands GoDaddy's presence in international markets. It also complements GoDaddy's business as HEG has a similar customer base comprising small ventures and web professionals.
Going forward, investment in products, the technology platform, international expansion and customer care, as well as in delivering innovative and increasingly personalized products, and services globally should drive shareholder value.
Zacks Rank and Stocks to Consider
Currently, GoDaddy has a Zacks Rank #3 (Hold). A few better-ranked stocks in the same space are Lam Research Corporation (LRCX - Free Report) , carrying a Zacks Rank #1 (Strong Buy), and Applied Materials (AMAT - Free Report) and Fortive Corporation (FTV - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Lam Research delivered a positive earnings surprise of 4.44%, on average, in the trailing four quarters.
Applied Materials delivered a positive earnings surprise of 3.35%, on average, in the trailing four quarters.
Fortive Corporation delivered a positive earnings surprise of 5.80%, on average, in the trailing four quarters.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>