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GoDaddy (NYSE:GDDY) Q1: Beats On Revenue


Jabin Bastian /
2022/05/04 4:43 pm EDT
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Domain registrar and web services company, GoDaddy (NYSE:GDDY) beat analyst expectations in Q1 FY2022 quarter, with revenue up 11.2% year on year to $1 billion. However, guidance for the next quarter was less impressive, coming in at $1.01 billion at the midpoint, being 0.13% below analyst estimates. GoDaddy made a GAAP profit of $68.6 million, improving on its profit of $10.8 million, in the same quarter last year.

Is now the time to buy GoDaddy? Access our full analysis of the earnings results here, it's free.

GoDaddy (GDDY) Q1 FY2022 Highlights:

  • Revenue: $1 billion vs analyst estimates of $989.1 million (1.36% beat)
  • EPS (GAAP): $0.41
  • Revenue guidance for Q2 2022 is $1.01 billion at the midpoint, 0.13% below analyst estimates
  • The company reconfirmed revenue guidance for the full year, at $4.15 billion at the midpoint
  • Free cash flow of $238.6 million, up 17.4% from previous quarter
  • Gross Margin (GAAP): 63%, down from 64.3% same quarter last year

"GoDaddy's value proposition for helping small businesses succeed by simplifying their needs is resonating in the market, as evidenced by our strong first quarter financial results," said GoDaddy CEO Aman Bhutani, "We continue to execute well against our strategic priorities, including building a one-stop shop for connected commerce, ubiquitous presence and digital identity, wrapped in our world-class customer service."

Founded by Bob Parsons after selling his first company to Intuit, GoDaddy (NYSE:GDDY) provides small and mid-sized businesses with the ability to buy a web domain and tools to create and manage a website.

While e-commerce has been around for over two decades and enjoyed meaningful growth, its overall penetration of retail still remains low. Only around $1 in every $5 spent on retail purchases comes from digital orders, leaving over 80% of the retail market still ripe for online disruption. It is these large swathes of the retail where e-commerce has not yet taken hold that drives the demand for various e-commerce software solutions.

Sales Growth

As you can see below, GoDaddy's revenue growth has been mediocre over the last year, growing from quarterly revenue of $901.1 million, to $1 billion.

GoDaddy Total Revenue

This quarter, GoDaddy's quarterly revenue was once again up 11.2% year on year. But the revenue actually decreased by $16.6 million in Q1, compared to $55.3 million increase in Q4 2021. We'd like to see revenue increase each quarter, but a one-off fluctuation is usually not concerning and the management is guiding for growth to rebound in the next quarter.

Guidance for the next quarter indicates GoDaddy is expecting revenue to grow 8.98% year on year to $1.01 billion, slowing down from the 15.4% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 8.27% over the next twelve months.

There are others doing even better than GoDaddy. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. GoDaddy's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 63% in Q1.

GoDaddy Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.63 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and we would like to see it start improving.

Key Takeaways from GoDaddy's Q1 Results

Sporting a market capitalization of $13.2 billion, more than $742.7 million in cash and with positive free cash flow over the last twelve months, we're confident that GoDaddy has the resources it needs to pursue a high growth business strategy.

GoDaddy topped analysts’ revenue expectations this quarter, even if just narrowly. That feature of these results really stood out as a positive. On the other hand, revenue growth is overall a bit slower these days and the revenue guidance for the next quarter slightly missed expectations. The company is up 1.91% on the results and currently trades at $83.75 per share.

GoDaddy may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.