GoDaddy (GDDY) Earnings And Revenues Beat Estimates In Q1

GoDaddy’s (NYSE:GDDY) first-quarter 2017 adjusted earnings of 1 cent per share surpassed the Zacks Consensus Estimate of a loss of 4 cents.

Following strong first-quarter results and upbeat full-year guidance, share price rose 3.56% in after-hours trading.

In the last one year, shares of GoDaddy outperformed the Zacks categorized Internet Services Delivery industry. While the industry gained 29.5%, the stock returned 36.4%.

Revenues

Revenues of $490 million increased 0.8% sequentially and 12.9% year over year and beat the Zacks Consensus Estimate of $488 million. Moreover, the reported figure came in at the high end of management guidance of $485–$490 million. Balanced growth in customers and average revenue per user (ARPU) led to the improvement.

In the quarter, ARPU was $130, up 6.4% year over year.

Revenues by Segment

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

Domain revenues of $240.8 million contributed 49.2% to the total revenue. Revenues were down 0.7% sequentially but up 10.0% year over year.

Hosting and Presence revenues of $178.3 million accounted for 36.4% of total revenue. The figure represented 0.9% sequential and 11.2% year-over-year growth.

Business Applications revenues of $70.6 million, which accounted for 14.4% of total revenue, increased 5.8% sequentially and 29.8% year over year.

Booking

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 first quarter, total bookings of $624.8 million increased 12% year over year.

Margins

Gross margin was 63.9%, down 68 basis points (bps) sequentially and 50 bps year over year.

Operating expenses of $307.2 million increased 3.8% sequentially and 10.5% year over year.

Net Income

The quarter’s GAAP net income was $0.6 million or 1 cent per share compared with net loss of $10.5 million or a loss of 15 cents per share a year ago.

Pro forma earnings were 1 cent against a loss of 15 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 Mar 31, 2017, total cash and cash equivalents and short-term investments were $670.6 million compared with $572.7 million in the fourth quarter. Accounts and other receivables were $8.4 million compared with $8 million in the prior quarter.

Total long-term debt, including current portion, was $1,072.5 million while net debt was $401.9 million in the first quarter.

Net cash provided by operating activities in the first quarter was $126.6 million compared with $89.1 million in the prior quarter. Capital expenditure was $18.7 million, flat sequentially.

Guidance

For the second quarter, the company expects revenues in the range of $548–$553 million. The Zacks Consensus Estimate is pegged at $537.2 million.

For full-year 2017, GoDaddy raised its revenue guidance to $2.195–$2.225 billion from its earlier guidance range of $2.18–$2.22 billion. The new guidance represents a year-over-year growth of approximately 20%. The Zacks Consensus Estimate is pegged at $2.2 billion.

Going Forward

GoDaddy, Inc. is engaged in the designing and development of cloud-based technology products for small businesses, Web design professionals and individuals. The company reported a decent first quarter with both the top and the bottom lines beating the Zacks Consensus Estimate.

Management remains positive about strong product and marketing roadmap for 2017. During the quarter, the company also witnessed a 7% increase in its customer base from the year-ago quarter.

Moreover, last month the company completed the acquisition of Host Europe Group for €1.69 billion (US$1.79 billion). The deal expands GoDaddy's presence in the international markets. It also complements GoDaddy's business as HEG has a similar customer base comprising small ventures and web professionals. This will give GoDaddy a better understanding of the needs of customers.

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). Some better-ranked stocks in the industry are Lam Research (NASDAQ:LRCX) and KLA-Tencor (NASDAQ:KLAC) , each carrying a Zacks Rank #1 (Strong Buy), while Applied Materials (NASDAQ:AMAT) , carries 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 6.14%, on average, in the trailing four quarters.

KLA-Tencor delivered a positive earnings surprise of 11.55%, on average, in the last four quarters.

Applied Materials delivered a positive earnings surprise of 3.92%, on average, in the trailing four quarters.

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