GoDaddy Inc. Q2 FY2022 Earnings Call

Good afternoon, and thank you for joining us for GoDaddy's Second Quarter 2022 Earnings Call. I'm Christie Masoner, Senior Director of Investor Relations. And with me today are Aman Bhutani, Chief Executive Officer; and Mark McCaffrey, Chief Financial Officer. Following prepared remarks we will open up the call for your questions. On today's webinar we'll be referencing both GAAP and non-GAAP financial results and operating metrics such as total bookings, unlevered free cash flow, normalized EBITDA, annualized recurring revenue or ARR, gross merchandise volume or GMV and net debt. Growth rates presented represent year-over-year comparisons unless otherwise noted. 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 to our Investor Relations site at investors.godaddy.net or in today's earnings release on our Form 8-K furnished at the SEC with today's earnings release. The matters we'll be discussing today include forward-looking statements, which include those related to our future financial results our strategies or objectives with respect to future operations, including our approach to capital allocation, new product introductions and innovations and our ability to integrate acquisitions and achieve desired synergies. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. Actual results may differ materially from those contained in forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today August 3, 2022 and except to the extent required by law we undertake no obligation to update these statements as a result of new information or future events. With that here's Aman.

Thank you Christie, and thank you all for joining us today. At GoDaddy, our mission is to make opportunity more inclusive for all. The best moments of my week are when I'm engaging with GoDaddy customers. I am constantly inspired by their grit and determination and amazed by their resilience. Just a couple of weeks ago, I spoke at a small business summit. I've met so many GoDaddy customers there and some who will hopefully become GoDaddy customers in the future. While they're worried about the current economic environment, I found them driven, ambitious, upbeat and passionate about their businesses. One customer walked up to me and started with my life is on GoDaddy. I am inspired to do more for her and all our customers to be better every day. Our relentless focus on innovation, deliver seamless and intuitive technology complemented by human care helping customers grow their businesses and achieve their dreams. Our strategy to attract high-value customers continues to show success, best illustrated by our customer retention rates, which have remained greater than 85%. The Q2 results demonstrate our steady operating discipline, 9% growth in revenue and 30% growth in normalized EBITDA despite the challenging FX environment. GoDaddy's strong and diverse business enables us to navigate fluid global demand patterns and inflation concerns from a solid position and we are committed to attention and action on what we control. As in the past, we aligned our marketing spend and other investments with demand signals, concentrating on success-based, disciplined and efficient spending. We actively identify and deploy marketing spend where we find opportunities to deliver long-term growth. Through this plan we create balance across all components of our business without sacrificing our investment in technology and development for future growth. Our strategic priorities have been consistent over the past six quarters. First, driving Commerce through presence; second, delivering for GoDaddy Pros; and third, innovating in Domains. Beginning with Commerce, we are pleased to share that we continue to achieve positive trajectory with our GoDaddy Payments offering and more specifically the attach rates to our other products. For Websites + Marketing, more than 80% of our Commerce customers choose our payment solution and for Managed WordPress, 30% of our Commerce customers choose our payment solution. Annualized GMV also continues to rise with Q2 at $28 billion, growing 12% year-over-year. We continue to drive strong sales in payment hardware devices enabling robust in-store capabilities for customers, while also steadily approving payment applications. While our payments offering is still relatively new, GoDaddy's differentiated OmniCommerce solution is well-positioned in this space. Regardless of the consumers' preferences whether they are shopping online or in person, our solutions empower our customers to benefit from our industry-low transaction rates in all locations. We also rolled out Apple Pay on GoDaddy Payments improving the buying experience and Apple selected GoDaddy as a Tap to Pay partner. We are excited to work with Apple to bring Tap to Pay on iPhone to GoDaddy customers later this year. And as always we will share more information about this partnership as it becomes more meaningful. We embedded more capabilities within Websites plus Marketing plans to make it easier for entrepreneurs to market their products, sell online, manage their business and grow. New capabilities include product image enhancement, including background removal, quick view and buy capabilities enabling single-click add to cart, integrated discounting shipping labels, online appointment features making calendaring and appointments more intuitive. Enhancing our products helps our customers grow their business while building retention and creating greater lifetime value for GoDaddy. We also continue to test price increases for our highly competitive and feature-rich Websites plus Marketing product. Our approach to pricing is nuanced taking into consideration the right balance of increased price and market share while also closely monitoring shifts in customer behavior due to macro factors. We have limited the use of heavy discounting programs that frequent this space while maintaining our competitive position by offering products that our customers value. Our customer retention rates remain strong with consistent 15-month cohort retention, which is trending higher than prior year cohorts. And our overall customer retention metric has stayed above 85% even as we observe some pressure for customers due to macro factors. This is something we are extremely proud of because it is a sign that we continue to deliver for an often left behind customer the micro businesses that are the backbone of their local communities. We are proud that Websites plus Marketing delivers websites for customers that are highly performant. We have pushed the bar further on that and have implemented significant behind-the-scenes changes that result in improved website performance for millions of sites. These powerful improvements enable GoDaddy customers to achieve improved paid speed insights and Core Web Vitals scores. For example, our Core Web Vitals pass rate for our customers' sites increased by 75% making us the leader in this category. These improvements ensure GoDaddy's customers' websites rank higher in search results. And for small businesses this is extremely important. Moving on to GoDaddy Pros. This quarter we launched a beta WooSaaS solution to allow us to reach a larger customers those with sales of $1 million to a few million dollars. These larger customers will be able to sell anywhere including in-person on their online store and in online marketplaces and social platforms and benefit from omnichannel payment processing all managed in one place. This new online store offering provides growing merchants virtually infinite flexibility of WordPress plus WooCommerce combined with highly performing scalable and secure cloud hosting technology and a seamless intuitive and comprehensive software user experience. The fully managed technology stack allows our customers to focus on running their business. We brought together a team of experts in multiple technology domains to create this new premium offering which includes exclusive functionality with free premium extensions and exclusive capabilities such as an expert level dedicated support team. Our customers want a one-stop shop offering from us and WooSaaS solution is the latest proof point of GoDaddy's ability to move slightly up market over time. The beta program started in Q2 with an invite-only group of WooCommerce merchants and partners testing the integration and unification of multiple acquired technologies to offer a seamlessly managed all-in-one experience for WooCommerce stores. We are excited about the possibilities and looking forward to a full marketing launch. On our third priority, we are excited about the upcoming full launch of Payable Domains in Q3 a limited pilot program in Q2 focused on learnings demonstrated that customers value the offering. We also saw some green shoots in terms of meaningful GPV in the pilot being driven by customers without a website. In our Q3 launch, Payable Domains will be included for free and by default with every domain purchase creating a frictionless out-of-the-box experience for new businesses. We believe this will simplify the online payments process for our customers by giving them a professional branded checkout experience and the freedom to accept online payments without needing any other subscription. In closing, I want to acknowledge that while we are all in uncertain times GoDaddy's relentless focus on executing against our strategic priorities, delivering for our customers, building seamless and intuitive technology for our customers to succeed backed by human care, our scale and vast portfolio of offerings steadily drives GoDaddy's consistent financial results. Our incredible customers inspire us to continue to innovate and do even more for them. We will continue to be prudent stewards of capital investing behind long-term growth drivers and staying committed to delivering value to our customers, employees and shareholders. With that here's Mark.

Thanks, Aman and thank you, everyone for joining us today. GoDaddy's resiliency and durable top line growth, profitability at scale and robust cash flow are evident in our Q2 financial results and enable GoDaddy to continue to invest to deliver long-term value while returning excess capital to investors in the form of share buybacks. Revenue in Q2 was $1 billion, growing 9% on a reported basis and 10% on a constant currency basis. Excluding the currency impact, our reported revenue would have come in at the high end of our Q2 guidance. Within total revenue international revenue grew 4% on a reported basis and 7% on a constant currency basis. Applications and Commerce revenue grew 15% within the target range of 14% to 16%, driven by continued strength in our Create and Grow products and Email attach. The ARR for Applications and Commerce grew 12% to more than $1.2 billion. And within that the ARR from our Create and Grow products grew 10% to $420 million. Additionally annualized GMV across the GoDaddy ecosystem was approximately $28 billion, growing 12%. Core platform revenue grew 7% delivering at the high end of our 5% to 7% Q2 guidance, primarily due to strength in domain registration, aftermarket and security, offset by a slight decrease in our hosting business. ARR for our core platform grew 5% to $2.3 billion. Q2 bookings totaled $1.12 billion, growing 6% on a reported basis and 8% on a constant currency basis. Applications and Commerce bookings grew 10% and core platform bookings grew 4% on similar growth factors noted for revenue. Normalized EBITDA grew 30% to $258 million. Our 25% margin represented over four points of margin expansion primarily because of expanded gross margins on product mix and reduced marketing spend. The decreased marketing spend is the result of disciplined moderation of our investment as we zero in on success-based marketing and flex our spending to capture attractive returns. Our technology and development expenses increased as a percent of revenue this quarter as we advanced our commerce and innovation strategies. Lastly, we recognized a $10 million impairment charge related to IT licenses and facilities as we continue to simplify our infrastructure. Unlevered free cash flow for the quarter totaled $274 million, growing 16% driven by strong profitability. Additionally, year-to-date, we completed $1 billion of share buybacks, repurchasing 12.8 million shares and reducing our fully diluted share count by approximately 8% since year-end. Free cash flow per share rose to $5.67 on a trailing 12-month basis versus the prior year cash flow per share of $4.78, a 19% increase on strong cash flow and share repurchases. On the balance sheet, we finished Q2 with $770 million in cash and total liquidity of $1.4 billion. Net debt stands at $3.1 billion, at the midpoint of our targeted range of two to four times. Moving on to our outlook. We continue to be confident in our ability to execute in the second half of 2022, and are on target to meet our full year operational and strategic goals, including our targets around normalized EBITDA, unlevered free cash flow, and cash flow per share. With that said, we are not immune to the macro environment of the strengthening dollar and the impact that it has on our top line performance. Assuming a continuation of today's rates, over the rest of the year, we expect that the adverse FX impact for the full year to be approximately $35 million or approximately 1%, compared to our full year revenue guidance issued in February. As a result, we revised our 2022 full year revenue outlook to $4.1 billion to $4.13 billion. We remain focused on driving strong financial results, and are committed to delivering $1.1 billion in unlevered free cash flow and $6 plus free cash flow per share, as laid out earlier this year. We are also increasing our margin expectations for normalized EBITDA to 24% to 25% for the full year, based on strong execution and disciplined investments. For Q3, we are targeting total revenue in the range of $1.03 billion to $1.045 billion, representing growth of 8% at the midpoint. The adverse FX impact to the range assuming continuation of today's rates, would be approximately $10 million or 1%, flowing through this impact, we expect Applications and Commerce revenue to grow between 13% and 15%, and core platform revenue to grow between 4% and 6%. For Q3, and full year bookings, we expect growth to be approximately two points below revenue primarily driven by FX pressure. We will continue investing in technology and development to drive our robust product launch momentum while balancing our goal for margin expansion through efficiencies in customer care and marketing. Normalized EBITDA for Q3 is expected to be in the range of $250 million to $260 million, which would represent growth of 12% at the midpoint. Our capital allocation strategy remains the same. We fulfilled our $1 billion buyback target for 2022, and we'll continue to evaluate use of cash options for the remainder of the year, in line with our disciplined capital allocation framework. Lastly, as we said last quarter, we will evaluate the impact of rising interest rates and explore refinancing our term loan and revolver with the intention of maintaining our leverage ratio of two to four times. Before I close, I want to remind folks that during economic times like now, our strong balance sheet consistent cash flow and strength of execution enable us to improve upon our market-leading position through prudent investments and market share gains growing the business long term while also delivering on our profit and cash flow goals. Our 21 million customers create the foundation for our resiliency. We enjoy exceptional retention, and we continue to execute on our strategic priorities, build deeper relationships and partner alongside entrepreneurs on their journey. We are laser focused on operational execution and we are dedicated to delivering 10% plus top line CAGR, 15% plus normalized EBITDA CAGR and 20% or better free cash flow per share CAGR through 2024. And with $1 billion of buybacks complete, halfway through the year, we remain committed to executing against the remaining $2 billion of shares under our current authorization through 2024.

Thanks, Mark. Our first question comes from Trevor Young from Barclays. Trevor, please go ahead.

Great. Thanks. Two if I may. First, what drove the sequential uptick in gross margin? How much of an impact was FX on GM given that maybe a bit more of COGS there, such as like domain pass-through costs and infrastructure are incurred in dollars versus the revenue mix? And then second, on the price testing, Aman, I think you alluded to it. It looks like what we saw in our end both basic premium and Commerce plan saw increases mid-July ranging from like $1 to $3 a month, which translates to some pretty healthy increases on a percentage basis. Could you just clarify are these increases just for new customers versus existing subs? Is it domestic versus worldwide? And what do you expect the weighted average increase to be once this is fully rolled out?

Mark, do you want to take the gross margin?

Yes, no problem. Hey, Trevor, how are you doing? I would say that most of the change in gross margin was due to product mix, and the impact from foreign exchange was quite minimal.

And then on pricing, yes, what you saw Trevor was us testing some changes and those were the price test for Websites + Marketing. In terms of taking that international, as I've shared before, the price testing for us is quite nuanced. We base it on geography, on sort of customer expectations, changing on market share. So you'll see it appear in certain geographies, but not in others.

That's really helpful. And just, Mark, just to clarify on the gross margin. If FX rates stay where they're at today, should we expect some impact on gross margin in the balance of the year from currency?

Yes. So most of the impact on the FX affects our bookings, our costs are pretty much fixed and in line with the US dollar. So I would say, look for most of the FX impact to flow through to bookings and then ultimately lead to revenue with minimal impact on the cost in our structure today.

Great. Thank you.

Our next question comes from the line of Matt Pfau from William Blair. Matt, please go ahead and talk.

Great. Thanks, guys. Aman, you called out retention rates continue to remain strong. You did see some pressure from macro factors. Are there certain areas where you're seeing the macro impact your business more than others, maybe both on the product side as well as on geography?

Yes. Thanks, Matt. Perhaps one thing to call out geographically is that, we see some greater pressure for European customers right now, given inflation or other macro factors. So that's something we're keeping an eye on. But overall, we have continued to sort of focus our efforts to bring in customers that have high LTV, have great intent to build businesses to stay with us. So that's allowing us to stay with the high retention rates the 85% plus. So we're pretty happy with that overall.

Got it. And then, just a question on the marketing spend. You adjusted debt for demand, should we expect if macro improves and demand ramps back up that then we could see that go back up as a percentage of revenue, or how do you think about that adjusting that dial going forward?

Yes. My general perspective on marketing spending is that we allow it to follow the demand and the signals we observe. We consider both external indicators from sources like Google as well as our customers' data in relation to the return on marketing investment. Therefore, if demand rises again, our marketing expenses will increase accordingly, but we are also consistently enhancing the effectiveness of our marketing metrics. You may notice ongoing optimizations. For instance, during Investor Day, we discussed improvements we made to our SEM spending, which were driven by enhancements rather than just demand. Thus, you will see a combination of both approaches.

And I'll add, we continue to expect to get leverage out of our marketing line, especially, as our business and our solutions are broader, as we get into more commerce as we get into more aftermarket. As once customers are into entrepreneur wheel, our efficiency and marketing gets better. So over time we expect to get leverage out of that marketing line and continue to be able to expand our normalized EBITDA margins based on that.

Okay. Great. Thanks, guys.

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

Thanks. Many of the companies in the peer group around SMB have been calling out higher churn impact from macro. I'm just curious if you can kind of drill in and ultimately give us a sense of what is leaving you more immune to this and what's resonating some of the new product set? And then I had a quick follow-up.

Yeah. Sure Brent. So let's start with the customer, right? GoDaddy's average customer is the micro business. A third of our micro business customers are solopreneurs. We add to that the fact that the products we sell create tremendous value for our customers and the price we charge leaves plenty of consumer surplus for our customers. So even if they have to adapt to changing economic environment, the products we typically sell to them tend to be the last products they walk away from. So that's why we see sort of the continued high retention rates for customers. But also keep in mind, the more we have focused in terms of attracting the customer, to whom we can attach more and more products and reach higher LTV that sort of limits some of the – should I say, discounting and other techniques that companies might use to attract a lot of customers that may not have sort of good retention rates. But obviously, our strategy is to attract the customers that have high LTV have good retention rates.

And I'll just throw in there. The care relationship becomes extremely important in these times. And having that relationship and the person to go to, to help fix come up with more economic solutions to provide value seems to be and continue to be a winning formula and in these times even more important to that customer base.

Okay. And real quick, I think the Street unlevered free cash flow number is a little bit. Your number was a little bit below what the Street wanted. Was there anything to read into the number this quarter? I know, you're reiterating the long term but anything to comment there relative to the Street?

Nothing. We're really happy with our progress and we continue to work towards our annual goal.

Excellent. Thanks.

Thank you.

Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.

Great. Thank you so much. Just as the entrepreneurs while let's get a little bit stretched with inflation and higher interest rates are you guys seeing any change in behavior or willingness to pay up for more expensive tiers or functionality across the portfolio?

Thanks, Elizabeth. So, as you know, the higher premium tier offerings are especially in the case of Website + Marketing with the new Commerce Plus offering is relatively new for us right? And we're just super excited and announcing the launch of our WooSaaS solution, which is also going to be a premium offering. But all of these businesses are very new for us right? We have a base of 21 million customers. We have great relationships in Care. So we're sort of early in the process and not of course we realize that customers feel the pinch of inflation but these businesses are small for us in our core products they just deliver tremendous amounts of value. And one of the things we sometimes say here is people don't give up their dream because of an economic downturn. So they're not going to give up the domain name.

Got it. And then as a follow-up I was hoping if you could provide more color on what you're seeing in terms of those macro impacts on demand. I know Verisign reported a weaker outlook on domains, which raised some questions. And it sounds like churn is holding in pretty well. So just any incremental you could provide particularly on kind of the new customer demand would be really helpful.

Yeah. We're definitely in a fluid demand environment and it's different by geography. I didn't make a small comment earlier about the European demand being weaker. But just to take a step back and look at the customer or the domains business overall if we look at GoDaddy's business it's very broad. Obviously, we sell 400 TLDs. We have a primary market. We have a secondary market the aftermarket business. In both cases, we are leaders in those businesses. We've invested in a corporate domains business. You saw us take on a registry business over the last couple of years and that's grown very well for us too. So when we look at our Domains business we feel it's a much broader business with many levers that obviously we use to continue to grow it compared to any one registry out there that may have one or a few TLDs. So that we think our business is quite different.

Great. Thank you so much.

Thank you.

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

All right. Maybe just if you can talk a little bit about the ad environment just kind of hearing with ad pricing kind of coming down. Are you seeing kind of less competition and maybe getting some more efficiencies from a pricing coming down, whether it's Google Search or other areas? And then maybe just talk a little bit about the M&A environment just in terms of how you're seeing valuations get more attractive with obviously public equities coming down as well? Thank you.

Yes. On the sort of ad environment, it's always a competitive marketplace. I would never quite ever call that easy. But as we shared with you at Investor Day we continued to sort of push more success-based improve our abilities with bidding with machine learning to get better and better efficiencies. So, you do see some of that in our marketing leverage improvements. But overall I would just say the competitive dynamics are still the competitive dynamics. Obviously, in certain quarters, it's a bit easier than others, but overall, I wouldn't say there's some huge shift in it yet. And Mark on M&A.

On M&A our approach hasn't changed. We have our capital allocation strategy that we've talked about. We have our M&A strategy that we've talked about has to fit strategically has to work financially and has to be able to be integrated. We'll evaluate anything that comes along those lines. Obviously, we don't talk about anything active in any way shape or form. But we try to balance our decisions for today based on keeping an eye on our long-term objectives and we remain laser-focused on executing our objectives right now and we feel good about having a strong and solid year.

Great. Thank you.

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

Thanks Christie. I have a couple of quick questions, first about Payments and then about the macro environment. You noted that 30% of WordPress customers are using your Payments service. I'm curious about how you plan to increase that number and what your expectations are for growth in the next couple of years. Regarding the addition of Apple Pay, was that primarily a decision to boost cart conversion, or do you see the potential for new subscribers coming from that change? Now, on the macro front, I have two aspects to ask about. One is related to marketing; how much of the reduction in your marketing budget is due to lower overall demand? On the other hand, regarding the success you are having with upselling products, what characteristics do subscribers who purchase new products have? Is it just about how long they've been subscribers or are there regional differences? Any insights on that would be helpful. Thanks.

Thanks, Mark. I will address the Payments and Apple Pay aspects, and I can collaborate on the other two points. Regarding GoDaddy Payments for Managed WordPress, we're really enthusiastic about increasing that figure from 25% to 30%. You inquired about the types of options we provide. Customers can choose from around 140 options in WordPress, and we are continuously enhancing the experience for them. This makes it simpler for customers to distinguish between choices and select the most suitable one. With these simplifications and enhancements, we are aiming for that improvement to 30%. While I can't comment on specific numbers we might reach in the coming years, I want to emphasize that we are very focused on simplifying the customer experience. We are committed to providing a comprehensive solution for our customers, whether they are selling in-store, via their online stores, on social media, or on major marketplaces. Our goal is to give them one subscription that allows them to manage everything from a single location. Regarding Apple Pay, there are a few elements at play, including Apple Pay support and the Tap to Pay partnership. I believe you mentioned the Tap to Pay partnership, which is still in its early stages. This was just announced by Apple, and we will gladly provide more information as this partnership progresses.

I'll start by discussing the macro environment and our marketing budget. Demand has certainly been variable in 2022, but overall it has remained strong. We view marketing as a matter of efficiency and optimization. As Aman mentioned, demand in Europe is down, and we are responding accordingly. However, we continue to focus on return on investment and optimize based on our expanded product offerings and our success with the entrepreneurs wheel and our ability to connect with them. Demand is indeed fluid, but our marketing efforts are being made efficient and optimized to ensure we are capturing the appropriate demand. I believe there were a few questions within that statement, and I apologize for any confusion.

Yeah. Sorry the other question was the other side of that coin in terms of the up-sell the success you're having up-selling products. Just curious, I guess the subscriber characteristics that are absorbing those products? Is it regional? Is it just the duration longer they're with you the more likely they're going to buy?

The core process for us still involves attracting customers to purchase domains and then adding Email, Websites, and Commerce. We are highly focused on enhancing the conversion rate throughout these processes. Additionally, we are dedicated to identifying customers who have that purchasing intent. When our marketing is aimed at this intent and the conversion funnel is effective, it allows us to offer more products. At Investor Day, we shared significant data regarding our email penetration within our 21 million customer base. We are also in the process of developing new products to introduce to the market. A prime example is Payable Domains, which allows customers to purchase a domain without needing to attach payment solutions. When you buy a domain, you receive a customizable checkout page that is automatically set up for your domain. This means you can start processing payments immediately upon purchasing the domain. This approach is somewhat different because we are integrating these features right from the initial purchase rather than as separate add-ons. The goal is to enable Commerce across every platform we operate in, embracing the OmniCommerce philosophy where transactions can happen seamlessly wherever a customer engages with their Commerce or Micro Business.

Thank you. Super helpful.

Thank you.

Our next question comes from the line of Mark Mahaney from Evercore ISI. Mark, please go ahead.

Thank you, Christie. I have two questions. First, international revenue growth seems to consistently lag behind your global growth. Is there something specific that needs to be addressed to improve that? Second, Mark, regarding share repurchases, you mentioned that you are on track or even slightly ahead of your plans. Given the considerable free cash flow you’re generating, what factors might lead you to increase that range? What would have to change for buying back stock to become even more appealing? I know you're already repurchasing a significant amount of stock, so what would motivate you to accelerate that process? Thank you.

Aman, why don't you take the first part of that? And I'll take the second.

Thanks Mark. We are very pleased with our international business. More than nine million of our 21 million customers are located outside the U.S., presenting significant opportunity as we introduce more products to that segment. We remain very optimistic and satisfied with this aspect. There are some macro challenges, such as foreign exchange impacts and some demand issues, but we have no structural concerns regarding our international operations. We're continuing to invest marketing resources where we expect the best returns. Over the past two to three years, we've adjusted our spending a bit, which has had some effect, but overall, we are very content with the situation. And Mark, back to you.

And Mark thanks for pointing out we have a lot of free cash flow. Obviously that's a good thing in the especially in this day and age. We're really happy we've been able to execute on the $1 billion six months in. And we are continuing to balance our decisions today based on what our objectives are and driving long-term value. I'd say the best way to answer that question is, we have a very disciplined capital allocation strategy. We will continue to look at use of cash. It's an active discussion between us and the Board. And right now okay we're authorized at $3 billion.

Okay. Okay, thank you, Mark. Thanks Aman.

Thank you.

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

Thank you. Could you discuss the price increase you are testing? You mentioned reducing discounts, is that the direction you're taking? Are you also implementing explicit price increases for your existing customers? How should we interpret this from an external perspective? Additionally, I joined a bit late, but could you elaborate on demand trends and whether there were any month-to-month changes throughout the quarter? How did July perform? Any insights would be appreciated.

On the pricing, there was a specific example regarding Websites + Marketing pricing mentioned earlier. Let me provide some context. Our pricing is influenced not only by geographic factors or shifts in customer demographics due to macroeconomic conditions but also by different customer segments. In the past, we've discussed how pricing varies for different populations, such as our main investor customers compared to micro business customers. We consider all these factors, and that involves extensive testing. When we identify the optimal balance of pricing and market share based on geography and customer demographics, we implement those changes. Mark can elaborate on this, but these adjustments are incorporated into our plans and forecasts. It isn't just a one-time event; we have a diverse range of products, so we continuously evaluate and test pricing strategies. Typically, we adjust prices after adding value for the customer, aiming to increase their willingness to pay while ensuring customer satisfaction remains high. Regarding demand trends, I mentioned that Europe is showing some weakness. Generally, we see minor shifts month-to-month across different businesses, but we're not observing any significant changes overall.

Yeah. And Naved, I'll add on the pricing part of it, right? Anything we plan on doing on pricing has been included in our forecast. And we always keep in mind that 85% of our revenue comes from our existing 21 million customers. And we're very, very particular about making sure that the pricing we do is matched up the value we're providing with them and we see it in our retention rates staying at a stronger at higher than 85%.

That concludes our Q&A for this session. I'm going to turn the call over to Aman for closing remarks.

Thank you Christie. I'll just say thank you all for joining and a big thank you to all GoDaddy employees around the world for another solid quarter.