Domain registrar and web services company, GoDaddy (NYSE:GDDY) reported revenue in line with analyst expectations in Q2 FY2022 quarter, with revenue up 9.04% year on year to $1.01 billion. Guidance for the next quarter missed analyst expectations with revenues guided to $1.03 billion at the midpoint, or 0.94% below analyst estimates. GoDaddy made a GAAP profit of $90.5 million, improving on its profit of $46.9 million, in the same quarter last year.
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GoDaddy (GDDY) Q2 FY2022 Highlights:
- Revenue: $1.01 billion vs analyst estimates of $1.01 billion (in line)
- EPS (GAAP): $0.56
- Revenue guidance for Q3 2022 is $1.03 billion at the midpoint, below analyst estimates of $1.04 billion
- The company reconfirmed revenue guidance for the full year, at $4.11 billion at the midpoint
- Free cash flow of $250 thousand, down 99.8% from previous quarter
- Gross Margin (GAAP): 64.5%, in line with same quarter last year
"GoDaddy's strong second quarter results reflect our focus on achieving the strategic initiatives and financial targets we laid out at our Investor Day earlier this year," said GoDaddy CEO Aman Bhutani.
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.
As you can see below, GoDaddy's revenue growth has been unremarkable over the last year, growing from quarterly revenue of $931.3 million, to $1.01 billion.
GoDaddy's quarterly revenue was only up 9.04% year on year, which might disappoint some shareholders. But it increased $12.8 million quarter on quarter, a strong improvement on the $16.6 million decrease in Q1 2022, and a sign of acceleration of growth, which is very nice to see indeed.
Guidance for the next quarter indicates GoDaddy is expecting revenue to grow 7.62% year on year to $1.03 billion, slowing down from the 14.1% 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 8.38% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
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 64.5% in Q2.
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. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.
Key Takeaways from GoDaddy's Q2 Results
With a market capitalization of $11.9 billion, more than $770.4 million in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.
It was good to see GoDaddy improve their gross margin this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations Overall, it seems to us that this was a mixed quarter for GoDaddy. The company is flat on the results and currently trades at $75.57 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.