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GoDaddy (GDDY) Q2 Earnings Miss, Revenues Beat Estimates

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GoDaddy Inc. ((GDDY - Free Report) 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%.

Segment Details

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 Inc. Price, Consensus and EPS Surprise

 

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 second quarter, total bookings of $846.1 million increased 12.2% year over year.

Operating Results

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.

Guidance

For third-quarter 2019, the company expects revenues within $755-$765 million. The Zacks Consensus Estimate for third-quarter revenues is pegged at $760.5 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%. The Zacks Consensus Estimate for full-year revenues is pegged at $2.99 billion.

Additionally, free cash flow in 2019 is projected between $730 million and $745 million, suggesting year-over-year growth of 18-20%.

Zacks Rank and Stocks to Consider

GoDaddy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Alibaba Group Holding Limited (BABA - Free Report) , Teradyne, Inc. (TER - Free Report) and eBay Inc. (EBAY - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Alibaba, Teradyne and eBay is currently projected at 26.8%, 11.4% and 9.4%, respectively.

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