GoDaddy (GDDY) Incurs Higher-than-Expected Loss In Q2

GoDaddy’s (NYSE:GDDY) second-quarter 2016 adjusted loss of 11 cents per share came in higher than the Zacks Consensus Estimate of a loss of 10 cents.

Revenues

Revenues of $456.2 million increased 5.2% sequentially and 15.6% year over year as well as beat the Zacks Consensus Estimate of $450.3 million. Balanced growth in customers and average revenue per user (ARPU) led to the improvement. On a constant currency basis, total revenues were up approximately 18.0%.

In the quarter, ARPU was $125, up 6.2% year over year.

Revenues by Segment

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

Domains revenues of $229.8 million contributed 50.4% to the total revenue. Revenues were up 10.2% year over year.

Hosting and Presence revenues of $167.5 million accounted for 36.7% of total revenue. The figure represented 15.1% year-over-year growth.

Business Applications revenues of $58.9 million, which accounted for 12.9% of total revenue, were up 45.4% 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 second quarter, total bookings of $538.6 million increased 13.2% year over year. On a constant currency basis, total revenues were up approximately 14.4%.

Margins

Gross margin was 64.5%, up 7 basis points (bps) sequentially but down 12 bps year over year. The sequential increase was driven by higher revenues and better operational efficiency.

Operating expenses of $284.4 million increased 2.3% sequentially but decreased 1.4% year over year.

Net Income

The quarter’s GAAP net loss was $8.9 million or loss of 11 cents per share compared with net loss of $29.8 million or loss of 46 cents a year ago.

Pro forma loss was 11 cents compared with a loss of 24 cents 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 Jun, 2016, total cash and cash equivalents and short-term investments were $481.7 million versus $440.1 million in the first quarter. Accounts and other receivables were $7.4 million versus $6.1 million in the prior quarter.

Total long-term debt, including current portion, was $1,078.0 million while net debt was $596.3 million in the second quarter.

Net cash provided by operating activities in the second quarter were $92.4 million versus $105.3 million in the prior quarter. Capital expenditure was $14.6 million versus $12.0 million in the prior quarter.

Guidance

For the third quarter, the company expects revenues in the range of $468–$471 million. The Zacks Consensus Estimate is pegged at $470.2 million. Adjusted EBITDA is expected in the range of $102–$105 million.

For full-year 2016, GoDaddy expects revenue and adjusted EBITDA in the range of $1,840 million to $1,847 million and $410 million to $416 million, respectively.

GODADDY INC-A Price, Consensus and EPS Surprise

GODADDY INC-A Price, Consensus and EPS Surprise | GODADDY INC-A Quote

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 incurred greater-than-expected loss in the second quarter but revenues beat the Zacks Consensus Estimate.

Going forward, investment in products, the technology platform and customer care as well as delivering innovative and increasingly personalized products and services globally should drive shareholder value.

Currently, GoDaddy has a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked stocks in the same space are Ambarella, Inc. (NASDAQ:AMBA) , Cirrus Logic, Inc. (NASDAQ:CRUS) and Silicon Motion Technology Corp. (NASDAQ:SIMO) , each of which carries a Zacks Rank #1 (Strong Buy).