2193

GoDaddy (NYSE:GDDY) Q2: Beats On Revenue But Quarterly Guidance Underwhelms


Kayode Omotosho /
2021/08/04 4:10 pm EDT
Add to Watchlist

Domain registrar and web services company, GoDaddy (NYSE:GDDY) reported strong growth in the Q2 FY2021 earnings announcement, with revenue up 15.4% year on year to $931.3 million. GoDaddy made a GAAP profit of $46.9 million, improving on its loss of $673.2 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) Q2 FY2021 Highlights:

  • Revenue: $931.3 million vs analyst estimates of $920.2 million (1.19% beat)
  • EPS (GAAP): $0.27
  • Revenue guidance for Q3 2021 is $945 million at the midpoint, below analyst estimates of $948.5 million
  • The company reconfirmed revenue guidance for the full year, at $3.75 billion at the midpoint
  • Free cash flow of $237 million, down 11.6% from previous quarter
  • Gross Margin (GAAP): 64.3%, in line with previous quarter

"We're pleased with the strong quarter, and we're even more excited about the incredible journey we see ahead for GoDaddy," said GoDaddy CEO Aman Bhutani.

Founded in 1997, 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.

As more businesses come online and the volume of digital transactions accelerate, the demand for no-code and low-code web making tools is expected to remain strong.

Sales Growth

As you can see below, GoDaddy's revenue growth has been solid over the last year, growing from quarterly revenue of $806.4 million, to $931.3 million.

GoDaddy Total Revenue

This quarter, GoDaddy's quarterly revenue was once again up 15.4% year on year. We can see that revenue increased by $30.2 million in Q2, up on $27.2 million in Q1 2021. While we've no doubt some investors are looking for higher growth, it's good to see that quarterly revenue growth is accelerating.

Analysts covering the company are expecting the revenues to grow 10.6% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better. 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 400% since the IPO in 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, licences, technical support and other necessary running expenses was at 64.3% in Q2.

GoDaddy Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.64 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 Q2 Results

Sporting a market capitalisation of $14.1 billion, more than $1.37 billion 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, it was less good to see that revenue growth is now a bit weaker and the revenue guidance for the next quarter missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is flat on the results and currently trades at $83.5 per share.

Should you invest in GoDaddy 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 full report which you can read here, it's free.

One way how to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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