GoDaddy Inc. Q4 FY2020 Earnings Call

Good afternoon and thank you for joining us for GoDaddy’s Fourth Quarter and Full Year 2020 Earnings Call. I’m Mark Grant, Vice President of Investor Relations. With me on the call today are Aman Bhutani, Chief Executive Officer and Ray Winborne, Chief Financial Officer. Following prepared remarks by Aman and Ray, we’ll open up the call for your questions. On today’s call, we’ll be referencing both GAAP and non-GAAP financial results and operating metrics such as total bookings, unlevered free cash flow, normalized EBITDA, net debt and gross merchandise volume. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted on our investors' website or on our Form 8-K filed with the SEC along with today’s earnings release. The matters we’ll be discussing today include forward-looking statements related to our future financial results, new product introductions and innovations, partner integrations, our ability to integrate acquisitions and achieve desired synergies, changes to executive leadership, and the impact of the COVID-19 pandemic on our business, customers and employees. These forward-looking statements are subject to risks and uncertainties detailed in our documents filed with the SEC. Actual results may differ materially from those in the forward-looking statements. Any forward-looking statements made during this call are based on assumptions as of today, February 11, 2021, and we undertake no obligation to update these statements due to new information or future events unless required by law. With that, here’s Aman.

Thanks Mark and thank you all for joining us. GoDaddy exists to empower everyday entrepreneurs. Our mission is to make opportunity inclusive for all and the shift to digital represents the greatest opportunity for our customers to share their gifts with the world. With a differentiated offering, including guidance and tools within an intuitive seamless experience, specifically designed and built for our customers, it is clear that customers continue to adopt our products and ask us for more. Everyday entrepreneurs are creative and resourceful and they want to be able to focus their time on their business from domain names, email, and content creation to commerce and soon they will include payments and point-of-sale. Customer focus for us is about building a seamlessly intuitive experience that saves them time and unlocks capabilities through ease of use. In 2020, our digital presence was key for our customers, and the increased demand led to accelerating bookings growth for the last three quarters for us. For 2020, GoDaddy neared $3.8 billion in bookings and topped $3.3 billion in revenue. We leaned into the surge in demand with marketing spend, and while we kept it efficient, the result was our best year of net customer ads since 2017, which included the HG acquisition. We welcomed nearly 1.4 million net new customers in 2020 by providing valuable products and offering the best care. We've also been able to maintain stable renewal rates and our churn metrics, which have always been low, still found room to improve in 2020. Early last year, we spoke about our natural evolution into commerce. Everyday entrepreneurs are underserved and demanded that from us, and our investments have been focused on the simplest and most relevant commerce experience. No doubt commerce continues to be a giant opportunity for us. Internally, we are also evolving. We have made significant progress in implementing a broader experimentation program that allows us to more clearly measure the value we are creating for customers and deliver functionality faster. The discipline of measurement allows us to set more ambitious goals while also giving us the confidence to achieve them. We are moving faster, putting more products in the hands of more customers, and winning the right to do more for them. Our leadership team is also evolving. 2020 was a year of milestone and clearly defining achievements for many GoDaddy leaders. After having truly accomplished Herculean tasks both in 2020 and over their respective careers, our Chief Legal Officer, Nima Kelly, and our Chief Financial Officer, Ray Winborne, have each expressed a desire to retire at some point this year. They continue to be fully engaged with the company and will help with the transition as we look to fill their incredibly big shoes. We have a strong leadership team with talented, tenured folks, and with continued leadership from our team, we expect a seamless transition. We have strong internal candidates and we will be looking for external candidates for both roles as well. With acceleration in the number and also in our internal operating rhythm, I want to share three priority areas where GoDaddy will be bringing innovative solutions to our customers in 2021. Our top priority is commerce, and 2021 is the year we will bring to market a holistic solution for everyday entrepreneurs that powers every facet of their online and offline commerce experience. In 2020, we created strong customer value with our commerce tools, and GMV for websites plus marketing and Sellbrite grew 75% year-over-year. In 2021, GoDaddy will extend our current offering with a focus on delivering Omni-commerce solutions. Earlier this week, we closed on the Poynt acquisition, which extends our commerce offering with a set of products that span the full spectrum of commerce enablement. Poynt brings us payment capabilities as a payment facilitator and immense value to our customers through its innovative point of sale terminal, inventory management software, loyalty management tool, and more. Poynt and GoDaddy customers are already seeing great success, represented by the combined $23 billion in annualized GMV that already flows through our platforms. As we integrate and build the GoDaddy commerce platform, its scale will be backed by the 6,000 guides that are ready to provide the guidance we know our customers need. To help drive focus and continued momentum in commerce, we have created a new commerce division within GoDaddy. Poynt CEO, Osama Bedier, has joined GoDaddy and will lead this new division reporting to me. The next priority I want to share is about our pro customers. We already have a large group of designers and developers that are GoDaddy customers, but we know the opportunity is much larger. Last year, our partners whose sole focus is to create value for designers and developers went back to first principles. Deep research into customer needs led to a new set of solutions organized in three pillars. The first pillar is all about a seamless intuitive experience in the tools that we offer. In January, we launched the hub for GoDaddy pros where website designers and developers can perform their work in a simple intuitive way that saves them time and money. The hub enables bulk updates across hundreds of sites for WordPress, plug-ins, and themes, allowing pros to roll out updates for better security, new functionality, and better availability. What may have taken hours now takes seconds and even works on WordPress sites now hosted by GoDaddy. Pros can also use the hub's built-in project management tools, making it easier than ever to deliver customized sites for their clients. The hub lets pros manage all of their projects in one place, and built-in delegated access allows pros to collaborate with their clients more effectively to drive the results their customers want to see. The second pillar is all about care. Pros have told us that they value the guidance and care we offer, and they want us to do more. We have extended our care to support pros for all their WordPress sites, not just the ones that host with us. With additional care guides armed with a high level of training to support these pros, we are ready for the unique needs of this customer population. The third pillar brings that together through marketing, with millions of pros out there, we have planned a marketing launch to tell them about the added value and capabilities we are bringing forward. It all begins with the launch of the GoDaddy Pro program. Signing up to be a GoDaddy Pro gets pros access to exclusive discounts for themselves and for their clients, as well as direct access to the most advanced guides directly through the hub, speaking their language and exactly the way they wanted. GoDaddy Pro is live in the US with its first marketing campaign, and in April, we will be hosting our first virtual GoDaddy Pro conference and we're just getting started. Look out for more benefits of being a GoDaddy Pro and its global launch. The three pillars together embrace the needs of our pro customers and enhance our relationship with them beyond a strong managed WordPress offering. Overall, our strategy is straightforward. WordPress is the largest CMS in the world with a market share of over 60% and growing. Pros know WordPress and prefer WordPress, and our vision is all about making a seamless and intuitive experience while retaining all its power and flexibility. We are not interested in forcing pros to use a different tool; that does not align with our strategy. While it is exciting to talk about new offerings like commerce and GoDaddy Pro, under these exciting new businesses lies the solid foundation of our domains business, and that is the third priority I want to discuss. It’s clear we have outgrown the domains industry with innovative ideas and execution in both the primary and secondary markets. That growth isn't going away anytime soon. Recently, we added GoDaddy corporate domains and GoDaddy registry, which promise to offer innovative solutions for new and existing customers, but that isn’t all. Our client team has really stepped up their experimentation velocity. These are the folks that run the search algorithm on GoDaddy.com. We are building an adaptive user experience, which leverages multiple inputs including the customer's profile, liquidity, context, the available results, and add-ons to make sure customers see the options and bundles that create the most value. Our aftermarket has also seen tailwinds from the digital transformation of small businesses. More businesses coming online is resulting in more customers leveraging our domain broker service to help them secure the perfect name for their online presence, even if someone else already owns it. Our new list for sale tool has also seen incredible initial success; this tool enables customers with unused domain names to list them in our aftermarket, and in just three months, we've seen over 350,000 domains get listed. The outcome is a continued acceleration in this business as more customers are matched with better offerings and are exposed to more attachment opportunities. Most of the financial impact of this accelerating innovation in domains is still to come, and we are confident that the outperformance we have seen in this category will continue well beyond 2021. At our scale, innovation like this not only drives growth but also helps launch exciting new initiatives across the business. I look forward to sharing more on the three priorities I just went through as the year progresses. Before I wrap up, I know that many of you are eager to hear about the results of our websites plus marketing freemium offering. In less than a year, it has shown itself to be an area of real promise for GoDaddy. Beginning in the spring of 2020, we conducted a small-scale experiment presenting our freemium offering to a limited number of visitors. Over the course of the year, we steadily increased the number of US-based visitors that would see this offering to approximately 50%, and we are pleased with the results we've seen along the way. Millions of sign-ups and solid conversion rates that we're happy to note are higher than what we had seen elsewhere in the industry. There is certainly more to be done and this is an exciting outcome as we work to make freemium a tailwind to our business for years to come. Looking at 2021, while there are many unknowns and many things we plan to accomplish, we continue to see evidence in our business that supports aggressive forward momentum. As Ray will share through focused execution, GoDaddy delivered a strong result in 2020 in the face of many challenges. Our core strategy of creating value for customers and converting it to shareholder value over time is working. We are evolving as a company and are in a fantastic spot as we enter into 2021. With that, here is Ray.

Thanks Aman. I'll touch on the fourth quarter financial results and our outlook for 2021. Despite the operational challenges caused by the pandemic, we delivered a strong performance in 2020. We added 1.4 million net new customers, nearly double the number added in 2019. This was complemented by a decrease in our already low customer churn rates and resiliency in subscription renewal rates as our products and services became even more valuable to our customers. Full year revenue grew 11% year-over-year while our free cash flow was up 12%, even as we invested more in marketing to capture higher demand in the market. We also took advantage of the opportunities created by the uncertainty, deploying $1.8 billion in capital adding capabilities for customers and creating value for shareholders. Turning to the fourth quarter results, we saw continued acceleration in topline. Bookings grew to $943 million, rising 13% year-over-year reported on a constant currency basis as FX had little impact on the quarter. Growth was broad-based with continued strength across product categories. Revenue came in at $874 million, outperforming expectations and growing 12% year-over-year. Business applications was again our fastest growing product line, increasing 20% year-over-year on continued strength in branded email and productivity solutions. Domains accelerated to 14% growth as new registrations, renewals, and aftermarket sales remained strong along with a modest contribution from GoDaddy registry, and finally, hosting new presence grew over 5% in the fourth quarter. We continue to see terrific growth in our website creation platform products, although the strength was tempered somewhat by headwinds from the GoDaddy social service due to the elimination of the outbound sales motion in June. The key metrics underlying our growth remain consistently strong; ARPU rose to $166, up 5% year-over-year while the customer base grew 7%. Unlevered free cash flow for the quarter was $181 million and $825 million for the full year. This reflected good operating leverage in the P&L as well as reduced capital expenditures for corporate real estate and infrastructure as we transition more workloads to the cloud. Gross margin remained in the mid-60s in the quarter consistent with our expectations. We continue to ramp investment in marketing to capture increasing demand, resulting in a $40 million year-over-year increase in marketing expense. As we mentioned last quarter, we've begun to elevate investment while remaining within our targeted return metrics, even as we saw increased competition in performance advertising channels. On the balance sheet, we finished the year with $765 million in cash and total liquidity of nearly $1.4 billion. Net debt landed at $2.4 billion, putting net leverage at 2.6 times on a trailing 12-month basis, illustrating our ability to deleverage quickly. The strength and resilience of our recurring business model has fueled a strong balance sheet, enabling us to execute across our capital allocation priorities. During 2020, we completed four acquisitions, repurchased nearly 6% of our outstanding equity at average prices substantially below today’s stock price, and settled the TRA at an attractive valuation, removing an overhang to stock. All proof points that we have the flexibility to take advantage of opportunity as it arises. Rest assured, we'll continue to be proven allocators of capital in the pursuit of long-term growth and levered free cash flow per share. As we look to the future, continued growth and cash flow, along with a strong balance sheet, will provide us with the flexibility to deploy roughly $5 billion in capital through 2023. Moving on to our outlook for 2021, we expect to deliver revenue of approximately $3.7 billion representing growth of 12% versus 2020. From a product category perspective, we expect double-digit growth in domains, high single-digit growth in hosting new presence, and high teens growth in business applications. This guidance includes $20 million in revenue we expect from the recent acquisition of Poynt. As for Q1, we started the year off on pace and expect to deliver revenue of $885 million representing a 12% growth versus last year. We expect 2021 unlevered free cash flow of approximately $945 million or 15% growth versus 2020. This guidance reflects continued investment in marketing and product, plus $20 million in net dilution from Poynt as we build out our capabilities in commerce this year. Finally, I'd like to provide some additional modeling points for the full year 2021. We expect bookings to grow at a rate similar to revenue and normalized EBITDA margin to be roughly flat compared to 2020. We expect capital expenditures of approximately $65 million, income tax benefits of $25 million, and cash interest payments of $100 million based on current debt outstanding and today’s forward rate expectations. I announced my retirement today and I want to thank all of you who have been along for the ride. I've had an incredibly rewarding career and I feel blessed to have been able to top it off at GoDaddy. It's been my privilege to serve with this amazing group of people dedicated to such a noble mission. We navigated a lot of change as GoDaddy has evolved into a truly customer-centric company, obsessed with creating value for customers, employees, and shareholders. This last year was challenging for a lot of people but also very rewarding as I've been able to witness our leadership team take bold, decisive, and strategically sound actions that help our customers and employees through an incredibly turbulent year. As to what's next, I plan to be deeply engaged in the search for a successor and I'll stay on to ensure a smooth transition. I look forward to speaking with all of you again next quarter. With that, we’ll have Christie Masoner from the IR team open up the call for questions.

Thanks, Ray. Our first question comes from Ron Josey from JMP Securities. Ron, please go ahead.

Thanks, Christie and Ray, congrats on the decision. We'll miss you. Happy New Year, Aman. I wanted to ask a few questions maybe Aman on commerce that was the first pillar that you mentioned as a focus area. With Poynt now, websites and marketing adoption of the millions, I think new EC templates, I think our $23 billion in GMV, $7 billion of which through website and marketing. Can you talk to just a little more how you view e-commerce unfolding across GoDaddy going forward? The tools appear to be in place, you've got the scale. So what's next? And then Ray, just real quick on the guidance with EBITDA flat year-over-year and I'm assuming that's continued investment in marketing and product, is that the way to think about it? Thank you.

Ron, thanks for the question and yes, commerce continues to be our number one priority, and you're right, you laid it out really well with websites plus marketing in place, Sellbrite also growing quickly, which you didn't mention, and also a huge opportunity for us in the WooCommerce space; we haven't talked about that much but you know about the SkyVerge acquisition that is helping us bring a program that we call a new Woo, that we'll talk about in the future as well. So yes, all those things coming together with Poynt adding those core capabilities as a payments facilitator, invoicing, point of sale; and the idea is to bring all those pieces together and continue the pace of acceleration. If you just look at GMV for websites plus marketing and Sellbrite, the annualized number we gave you last quarter was much lower than the one you're seeing today and that itself represents quarter-over-quarter acceleration.

Ron, it's Ray. Appreciate the kind words first, but our normalized EBITDA margin is holding flat year-over-year, which we're pretty pleased with given the investment we're going to put in place. Both in products, Poynt will be a big piece of that. I mentioned in the call comments that we've got net dilution of about $20 million around commerce and we'll continue to invest more in marketing this year as well. So those are the two big drivers for our normalized EBITDA margin.

Our next question comes from the line of Ygal Arounian from Wedbush. Ygal, please go ahead.

Hey guys, thanks for the question and I echo the sentiment on Ray, congrats. I am assuming that even there are big shoes to fill. I guess a couple questions, so first if we could just Aman you gave some good commentary on the Prohub. Maybe if you could talk about the go-to-market strategy, I guess marketing around that, how the sales and customer service team will help drive that initiative and can you also talk about how many pros versus the outliers are using your services today? So maybe a little bit more just big picture around how that evolves. And then you domains I think outperformed and you talked a little bit about some of what's driving that. So how is the Neustar acquisition, the synergies you're seeing there, how much is that contributing? Can you talk about some of the things that you put in place specifically from that acquisition and how that can add to growth in the coming years?

Happy to take that, on pros, let's start with the numbers because I think that was in the middle of your question. We have about 1.5 million pros as part of our 21 million customers. So we already have a lot of pros that engage with us on a daily basis. We know that the opportunity is much larger, and what the Pro hub is about is it was about going to the pro scene, figuring out what they need in terms of the interface, and then building that in a manner that works best for them. The go-to-market strategy around it, the GoDaddy program is all about pros signing up and getting benefits, benefits that over time grow and there is a marketing campaign now in place in the US that is getting word out to say, 'Hey, here are all the new things, the new experience where you can do a whole lot; you've got project management tools, you've got care with click-through messaging from our guides in the background.' There are more guides in number, they have higher levels of training and they can execute more acts for the pros than ever before because we've opened up the aperture of what they can do. So it's the combination of all of those things that we're really excited about. And then in terms of sales and marketing, there’s no doubt care will continue to play a role there, but this is not an outbound motion and what we're really seeing is that pros want to engage with us on the web, they want to engage with care through messaging; they want to move things quickly. They don't even want to wait two minutes for a page load. They don't want to spend hours updating their sites; they want it done in one click and those are the type of capabilities we're opening up here. And then on domains, Ray will take the contribution for Neustar, but just to remind you, it’s still super early for us with Neustar. The innovation that we plan to bring to the table is all about having the full stack, being able to innovate on the registry side and the registrar side and bringing new offerings and talked about that a little bit in the past. So I'll turn it to Ray to just talk about synergies and contribution as you asked.

Yeah, Aman hit it on the head. This was more about the strategy and verticalization on domains. This is a future benefit to us as we get more control over the domain costs, which is one of our largest costs in the P&L. You think about contribution to the top line, Ygal, the purchase accounting impacts from Neustar absolutely muted the impacts on the top line. If you're looking year-over-year, '21 contribution inorganic contributions for Neustar are going to be roughly half a point on the top line.

Our next question comes from the line of Jason Helfstein from Oppenheimer and Company. Jason, please go ahead.

Thanks, kind of want to ask about acquisition and then leverage. So first point with a very strategic even acquisition but not particularly expensive. If we think relative to free cash flow you guys generate a year, if we think about kind of your acquisition pipeline, would you say more of the acquisitions look like Poynt in sight or are you potentially looking at something that might be bigger? And then if not bigger, again, given the amount of free cash flow you generate and how the company is very well positioned, you're seeing very good customer retention. Why not leverage particularly in this environment? We thought was the number one question we get from investors; why not run this business at 3.5 to 4 times leverage and just accelerate kind of the free cash flow per share return to shareholders, thanks?

Thanks, Jason. Maybe I'll start, and Ray can comment at the end of that. One, I love the idea that you agree that the point is strategically important acquisition and it wasn't very expensive. Those are great acquisitions; I love them. But to answer your question, we are looking at the full spectrum, Jason. We absolutely agree that many of the core part of our strategy is in my DNA; it's in the company's DNA. We're good at it; we've done it before. But as we're out there looking at the assets, as you know, it’s a competitive or sort of difficult time in the marketplace and we're trying to make sure that the assets we look at truly form part of the advantages we want to create. Because at the end of the day, what we're looking to have is that simple, intuitive experience. So there are a million things I could talk about, Ray. I'm talking about ease-of-use, I'm talking about saving people time, I'm talking about product interfaces that truly are magical that lead to a high NPS, and all the acquisitions we're doing or looking at, big or small, have to fit into that full picture. So, I wouldn't have anyone think that we're not interested in large acquisitions. We absolutely are, but just we've got a formula we're working on, and should be opportunities where you’ll find us at the table. Ray, I'll turn it to you for leveraging up and such.

Yeah, Jason, when you think about leverage, right, we've had a targeted 2 to 4 times leverage since we've been public, and we've been at the very top of that range when the opportunity presented itself. And we've been more about balancing our capital allocation priorities. You saw every flavor of it in 2020. We leaned into marketing and put a lot of money into organic growth because the opportunity presented itself. We closed on four acquisitions last year, we bought back stock, and we also settled the TRA’s. So we’re really using that cash flow, that incredibly strong and consistent cash flow that you talked about to drive significant returns for the company. And we do see opportunities, to Aman's point. We're certainly not hesitant to take our leverage to four times.

Our next question comes from the line of Drew Glaser from JPMorgan. Drew, please go ahead.

Hey, this is Drew on for Sterling. Thanks for taking my question. I was wondering if you could provide some more color on how much of the 2021 revenue growth is coming from acquisition?

Hey Drew, it's Ray. When you look at the inorganic contribution on an incremental basis in '21, it's about Poynt I'm talking about, roughly $20 million or so that's coming from Poynt. I just mentioned on I think it was Ygal's question earlier that Neustar is about another half a point there. So those are the two biggies that are contributing, and it's around that one-point contribution.

Our next question comes from the line of Nick Jones from Citi. Nick, please go ahead.

One on premium, as you announced visitors for the site and people are converting to the premium offering, is there time to enter the freemium and eventually convert and then I guess when is some of the timing to conversion for freemium as they kind of when they convert to the site?

Nick, the question wasn’t totally clear, but I think I caught most of it. On freemium, what we're seeing is that customers do come in, and the metrics we're looking at include seven-day conversion and 90-day conversion, right? There isn’t naturally a fixed number of where everyone makes a decision. You continue to see a sort of the tale of people converting over time. Both the seven-day and 90-day, especially as we got into later in the year on the 90-day conversion, we started to have a few cohorts that were reasonable to cite, and we continue to see stable conversion in that 90-day range, which is what we talked about. In terms of, I didn’t fully catch this part of your question, but I think the objective of freemium for us is to open up the aperture to allow our customers without friction to try our products, but we fundamentally believe that whether you look at websites plus marketing or Sellbrite, which we also turned freemium last year, the value that customers get compared to the price that we charge, really there is a tremendous amount of value, and we want to remove any hesitation customers have in trying to use those products. These products are built from the ground up to the exact needs of our customers, and we feel we open up the aperture and get more customers to try that over time; it's just going to build a greater and greater battery that leads to better financial outcomes over time.

And one follow-up on M&A, you laid out dream create manage. We like that. Growing probability in the pipeline is where you're trying to focus in terms of essential M&A across the trends you laid out?

Our priorities on M&A are aligned with our broader priorities as a company, and those priorities simply are; we are the leader in Dream and we absolutely have some intention there. We're making great progress in creating, that's fantastic, but we're putting disproportionate amounts of time and energy towards 'manage' and that's how our M&A team is prioritizing as well because 'create' and 'grow' are more and more working together and that's a massive opportunity, and when we talk about our $180 billion TAM, a huge percentage of that is within the growth phase. So that's where the majority of our energy is.

Our next question comes from the line of Aaron Kessler from Raymond James. Aaron, please go ahead.

Maybe just on Q4 and that's at $1.4 million or so for the year. Any color on Q4 perhaps the linearity of the quarter and then also maybe for Ray congrats you're taking some time off here and then the cloud transition maybe any updates on that and how this incremental cost was kind of a dual sourcing right now as well if you can lay that out, thank you.

Hey, Aaron, I'll take both of those, and Mark you can chime in as well. When you look at Q4 customer growth, we're still seeing record type levels. The momentum has been good and momentum has carried on into January. So nothing different in the trajectory that we've been seen at point. With cloud, you saw some of the impacts of cloud in 2020, showing or manifesting itself in lower capital expenditures because we have continued to move workloads into the cloud. There is pressure on the second outline and that's one of the investments we're making there, but if you recall back when we signed our contract with AWS, we were going to manage this thing to a cash basis, and that's what we are continuing to do, and that's one of the reasons we use unlevered free cash flow as our key metric there, because the balance from normalized EBITDA down there obviously includes the CapEx versus the OpEx up in the P&L.

Our next question comes from the line of Mark Zgutowicz from Rosenblatt Securities. Mark, please go ahead.

Thank you. Aman, just a follow-up on your freemium comment; is it safe to say that the 90-day conversion you hope to improve upon? And if so, what potentially are the missing pieces there and how can point help? And then appreciate the commentary in your presentation highlighting returns on your marketing spend last year. Just curious how those compared to the prior year and as you look into '21 sort of what consideration you're making in terms of absolute or relative spend and how Poynt perhaps fits into that picture? Thanks.

Thanks, let me take freemium and a little bit on the marketing spend, and perhaps Ray wants to comment on that as well. On freemium, I actually go back to the comments Mark that in the prepared comments, what we're seeing in terms of conversion is a rate that's higher than what we've seen in the industry. So of course, it's still early in the journey for us, but that's really good; that's really comforting. It's what's the concerns that people may have had. But when I look at being able to improve conversion over time, absolutely we have people dedicated to doing that, but for me, the biggest thing is I want to get it out broader and broader and broader right. I'd like to have it at 100% in the US soon. I'd like to go global with it, and that's what I'm really pushing the team because we know that at the end of the day, it's about attracting more people to our products and getting them to use our products; because once they use our products, people see that we have something differentiated on offer that works in a manner that they didn't fully understand that GoDaddy would have that offering. And then in terms of marketing, Ray can talk a little bit about the numbers and the unit economics and how we've continued to maintain our benchmarks and want to break even, but I'd like to give you a little context of how I think about marketing spend. The approach there is one of: if you want to spend up in marketing, you have to continually improve your measurement and your ability to get into more and more channels. As you do that and improve your internal capabilities to market better, you can then spend even more in marketing. And I've talked about this idea of improvement in growth and improvement in spend in the past, and I'm pretty pleased with what I'm seeing in terms of GoDaddy in 2020 and what we have forecasted for 2021.

Yeah, I think as you look at what we've been spending on marketing, it’s roughly 13% of revenue in 2020, but it's disciplined. We're disciplined in approach, we're disciplined in the execution of delivering on the P&L. And the P&L we've got a really good track record of investing in marketing over time with good returns and strong unit economics that we've got. And we've trained the team to stretch and look at the next marginal customer at an acceptable return. That is all about balance. But when we do see that, we extend to pay that period, and that does create more risk or a higher risk profile for us because it does hit the bottom line in the short term. But for the right paybacks, we are willing to do that. You might notice in those slides that we put out with the earnings, we've put a new slide in for marketing with a different lens on how we see the returns. So we'll take a look at that, but in summary, we did roughly $0.85 in incremental bookings and $0.45 in incremental gross profit in 2020 for every dollar that we spent on marketing and advertising. So when you compare that against others in the industry, that's going to shape up pretty well.

Our next question comes from the line of Brent Thill from Jefferies. Brent, please go ahead.

This is John on behalf of Brent Thill, thank you. When you look at the newer products, websites plus marketing and manage, then when you think about what's the relative sizing in growth rate size you see being achievable?

I'll give you a kind of view into those website creation products. Last quarter, with an ARR of $350 million growing in the high 30%. We've continued to see strong growth in both of those metrics.

Is there a way to differentiate between the two if it's an indication between the core and DIY at all?

Both are doing strongly. Obviously, we've put a lot more focus on the websites and marketing recently. You heard Aman's comments earlier. One of the things we would point out is going to help us there is continued push on commerce which will stretch into the managed WordPress and e-commerce offering as well.

Our next question comes from the line of Naved Khan from Truist. Naved, please go ahead.

A couple of questions if I may. In terms of just your outlook, what are you baking in, in terms of potential synergies from points integration maybe later on in the year into your e-commerce packages and then another question just guidance related as well, how should we think about the drag from the social and outbound for this year? Is it material if it is and can you just call it out, thanks?

When you think about Poynt synergies, we gave you guys some guidance around the top line and the bottom line. There is going to be investment year for Poynt. As we integrate into our offerings, we'll be spending money on marketing, spending money on products, as well as experimenting across the front side of that. So that will be dilutive to the tune of $20 million in 2021. On Social, think about that being a headwind through the first half and less so in the back post our decision to opt out of the outbound calling motion. So the first quarter will be the highest headwind, and then it starts to diminish as we move through the back half.

And then maybe just a quick clarification on the synergy comment Ray, so the curve you kind of gave us at the time of acquisition I think it's around $150 million in bookings by 2023. Should we expect any kind of revenue synergies to emerge this year at all or not?

Yeah, you'll see some. This year is going to be a lot more focused on getting to market right. Payments will be first, but it's certainly not going to be linear. Next year, 2022 will be more of the go-to-market strategy starting to drive revenue, and then our expectation is we'll start to scale in three, and that number that we put out, sort of $150 million in 2023, should be a conservative number based off of what we're looking at.

Our next question comes from the line of indiscernible from Piper Sandler. Please go ahead.

This is Cart on for Brent. Thanks for taking the question. I wanted to circle back to domain growth, 14% another quarter of acceleration. I just wanted to dig in there, what is driving that growth? Is that all primary markets and if so, I see the .com and .net registration came down in Q4 but still at elevated levels. I guess what has given you the confidence from that guidance as double-digit growth for domain in 2021, and will there be any contribution from the new products for corporate domains or anything like that, that will be an offset?

Yeah, we're really pleased with the performance in domains, closing out 2020 with solid growth, and obviously you saw the guidance into 2021 continuing to see good strength and it is broad-based. That's the beauty of that business. Aman mentioned earlier, we own the dream phase of the customer journey. So it's strength across primary registrations. Renewals have been strong; we got aftermarket that is really doing well as we continue to improve the customer experience, but also the merchandising on the front of site. Lastly, there is a modest contribution from the registry that I mentioned earlier, roughly half a point on total revenue in 2021.

And now that Poynt is closed, I was wondering if you could frame the journey that company took to become a payment facilitator. How much of the offering is the payment solution versus third-party profits, and will you aggressively move to the internal solution for digital only commerce?

When we look at Poynt, it currently has a distribution channel strategy. However, when Poynt is combined with GoDaddy, especially considering GoDaddy's brand and its 21 million customers, we see many attracting to us through websites, marketing, and managed WordPress services that include commerce on both ends. We are excited about integrating these elements and leveraging GoDaddy's capabilities. We can reach customers directly because they recognize the GoDaddy brand. They enter the sales journey and discover a seamless and integrated experience, which works very well. Additionally, we engage with 1.5 million designers and developers. By making the WooCommerce and WordPress ecosystems more user-friendly and incorporating payment capabilities into that experience, we see a strong channel to work with existing customers who currently use other services and provide them with incentives to keep that pipeline active. We also have Customer Care support; we receive numerous inquiries from customers, and while we focus less on outbound efforts, we anticipate continued inbound growth opportunities. Therefore, the investment we are making here is promising. To address your question about our internal systems, Poynt is already functioning as a payment facilitator, so we will be managing this in-house without involving a third party.

Our next question comes from the line of Ygal Arounian. Ygal, please go ahead again.

Hey, thanks for taking one more. I wanted to come back to commerce and just ask with the Poynt acquisition maybe with some of what you're doing around Pro Hub and the greater focus just around commerce over the past year and into next year. You guys have always talked about your core customer as being micro-business. Does this change that at all, or is it still kind of the same type of business, but those that are more focused on commerce? And where do you see what's becoming mid-level crowded, but at least a more crowded commerce software arena? Where do you guys see yourselves competing the most?

Yeah, Ygal, we are still laser-focused on our customer segment. These are the micro businesses or the small of the small businesses – folks that have 20 employees or less, 10 employees or less. And in 2020, they’ve had to pivot online very, very quickly. I need to explain that; I think you guys know that very, very well. But let me tell you just a small story. We have a customer in the UK; they make vegan pies, and the place is called Magpie, and they just have a fantastic product. We got to know them, and we love the folks that run Magpie; and our marketing team decided to showcase them in one of our marketing campaigns — just to check out the ad; it’s phenomenal. Here was what I imagine was a local place where people in the same neighborhood probably came to them and bought pies from them. Well, the day they went live in our advertising, now they’re shipping pies all over the UK. By definition, they are now a company that is online, and we think that opportunity exists for every micro business; right? The Internet is the great equalizer. It allows customers to reach these micro businesses, and with the toolset, guidance, and care we offer, these micro businesses can absolutely provide the experience for their customers that is professional and does the job in a manner that leaves their customers impressed. So to your question, we focus on our customer segment; absolutely, we're building all our products around for those customers, and all those customers are going online. In our research, they clearly show that they want commerce and they want it online because anyone of them can be like Magpie.

Our next question comes from James. James, please go ahead.

Hey guys, this is actually Trevor on from the Barclays team. You're hosting in presence guidance for the full-year is high single digit while 1Q is mid-single-digit implying acceleration throughout the year. Is that just a matter of the tougher comp in 1Q or the updating impact from social and outbound as the year progresses? Thanks.

You answered your own question there exactly that. It’s last year pre-COVID. Social was growing and then in the second quarter, we started seeing the impact. And obviously, beginning early July, we took out the outbound calling. So that’s the progression you’ll see as you move through 2021, but the implication in that guide was that we will see high single digits in that line.

So could you exit the year at double-digit rates?

Yes.

Our next question comes from the line of Chris Kuntarich from Deutsche Bank. Chris, please go ahead.

Just going back to the question before last, you talked about how your guys' core focus is still on the businesses with 10 to 20 employees, the micro-SMB segment. How do you think about driving more value in the product to the lower-end, specifically on the e-commerce product side versus driving value at the higher end just through the lens of websites plus marketing subscriptions? How do you think about driving pricing leverage and value to those customers differently?

Yeah, Chris, these customers, we can definitely differentiate certain items and say, look, here are certain features that are better for these customers, create more value, and we have tiers that different customers can target. But I'd like to just bring it back to the idea that most of these customers are going online and doing commerce online in a significant way for the first time. Even the base set of features they need those to be super simple, and what they really need is when they're confused to call someone and to get it to work just the way they want it. We've given the example in the past, and I'll share a little bit of an update on it. We talked about how for the super small customers, the templates that create a one-page commerce site when we created the first one, it just took off. It became the biggest thing, right? We've now added more templates, and we find all of our customers going towards those templates because even, I hate to call them bigger customers, but even customers that have 20 employees are learning their way through e-commerce, and immediately they want to set the things where they're having trouble managing their inventory and they're calling us. They're having trouble taking what they're doing in the store to online and they need help, and we're there, or they want to manage between their online and in-store and what they're selling on the major platforms. That feedback that we're talking about, we think, clearly these customers need the same thing, which is they want, from one place, to sell in their store, sell on their website, and sell on any other platform; and hence you saw the Poynt acquisition us bringing together websites plus marketing and Sellbrite that we already own, and the Poynt capabilities because we know that it works across the spectrum of customers we have, and it's not really about truly separating out the value of sort of the top end of that or the bottom end of that.

Thank you, everyone for joining us today. I'll turn the call over to Aman for some closing remarks.

Thank you, Christie. I'll just end with a thank you to all GoDaddy employees all around the world. 2020 brought many challenges for many of us at a personal level, and I feel like every person leaned in to produce these fantastic results. Thank you all again for joining us, and I look forward to talking to you next quarter.

Goodbye.