What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-17 compared with 2021-02-19 · 105 added, 135 removed, 284 unchanged (46% of the section changed)

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This section generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020.

Discussion of 2018 items and comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2019, and are incorporated by reference herein and considered part of this Form 10-K only to the extent referenced.

(Throughout this discussion and analysis, dollars are in millions, excluding ARPU, and shares are in thousands.)

Discussion of 2019 items and comparisons between 2020 and 2019 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2020.

(Throughout the tables and this discussion and analysis, dollars are in millions, excluding average revenue per user (ARPU), and shares are in thousands.)

COVID-19 Pandemic

As discussed in "Our Response to the COVID-19 Pandemic," we have implemented a variety of measures to attempt to minimize its impact on our business, including a restructuring announced in June 2020 to address the sustainability of our U.S.

outbound sales and operations, which is further described in Note 13 to our financial statements.

While the pandemic did not have a material impact on our 2020 results, the extent to which it may impact our future financial results and operations will depend on future developments.

Such developments, which are highly uncertain and cannot be predicted, may include the emergence of new information concerning the severity of the outbreak and the domestic and international actions being taken to contain and treat it.

Due to the speed with which the situation continues to evolve, we are currently unable to fully determine the extent of its impact on our business, but the impact could be material to any future period affected either directly or indirectly by this pandemic.

We have implemented a variety of measures to attempt to minimize the impact of the ongoing COVID-19 pandemic on our business, to ensure the availability and functioning of our critical infrastructure and to promote the safety and security of our employees.

These measures have included remote working arrangements for nearly all of our workforce since March 2020 and safety protocols for any on-site personnel in accordance with federal, state and local regulations.

In late 2021, we reopened certain offices and allowed employees to return to such offices on a voluntary basis.

We expect to do this for other offices and employees in 2022.

Incremental costs of these remote working arrangements have not been material, though such arrangements have increased the risk of cybersecurity incidents as individuals have been working through less secure network connections.

While the pandemic has not had a material impact on our results of operations so far, the extent to which it may impact our future results and operations will depend on future developments, including:

(i) the duration of the pandemic;

(ii) the widespread distribution and long-term efficacy of vaccines and the availability of effective treatments;

(iii) the duration and parameters of global governmental measures put in place to control the spread of the virus;

and (iv) the continuing economic impact of the pandemic.

We are actively monitoring the pandemic and the potential impacts it may have on our financial position, results of operations and cash flows in the future.

See "Risk Factors" for additional information on the risks we may face associated with COVID-19.

See "Risk Factors" for additional information.

We serve several customer populations:

Independents, Partners, Domain Registrars and Investors, other Registrars and Corporate Domain Portfolio owners.

While these customer populations tend to utilize many of the same GoDaddy product offerings, we consider the meaningful differences in their journeys, what they value, their ultimate goals and how they communicate with the rest of the world and aim to provide, and establish, solutions that address these differences.

We are the global market leader in domain registration.

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• Total bookings (2) of $4,231.7 million, an increase of 12.1%, or approximately 11.2% on a constant currency basis (1) .

• Net loss of $494.1 million, which includes a $674.7 million charge incurred in connection with the settlement of our obligations under the TRAs, as discussed in Note 16 to our financial statements.

• Operating income of $382.1 million, an increase of 40.4%.

• Net cash provided by operating activities of $829.3 million, an increase of 8.5%.

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We have developed a stable and predictable business model driven by efficient customer acquisition, high customer retention rates and increasing lifetime spend.

We grew our total customers from 17.3 million as of December 31, 2017 to 20.6 million as of December 31, 2020, through a combination of our industry leading products built on a single cloud platform, brand advertising, direct marketing efforts, customer referrals, world-class customer care and acquisitions.

We grew our total customers from 18.5 million as of December 31, 2018 to 21.2 million as of December 31, 2021, through a combination of our industry leading products built on a cloud platform, brand advertising, direct marketing efforts, customer referrals, world-class customer care and acquisitions.

In each of the five years ended December 31, 2021, our customer retention rate exceeded 85%, and in 2021, our retention rate for customers who had been with us for over three years was more than 93%.

We believe the breadth and depth of our product offerings and the high quality and responsiveness of our customer care team build strong relationships with our customers and are key to our high level of customer retention.

We generate bookings and revenue from sales of product subscriptions, including domain products, hosting and presence products and business applications products.

We generate bookings and revenue from sales of product subscriptions, including domain products, hosting and presence products and business applications products as well as from aftermarket domain sales.

We offer our subscriptions on a variety of terms, which average approximately one year, but can range from monthly to multi-annual terms of up to ten years depending on the product.

We monitor total bookings as we typically collect payment at the time of sale and recognize revenue ratably over the term of our customer contracts.

We monitor total bookings as we typically collect payment at the time of sale and generally recognize revenue ratably over the term of our customer contracts.

Accordingly, we believe total bookings is an indicator of the expected growth in our revenue and is a supplemental measure of the operating performance of our business.

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We generated 47% of our 2021 total revenue from the sale of domain products, primarily from domain registrations and renewals, aftermarket domain sales and domain add-ons such as domain protection.

Total revenue from domain products grew at a CAGR of 12.7% over the three years ended December 31, 2020.

Total revenue from domain products grew at a compound annual growth rate (CAGR) of 14.0% over the three years ended December 31, 2021.

Hosting and Presence .

We generated 36% of our 2020 total revenue from the sale of hosting and presence products, primarily from a variety of website hosting products, website security products and website building products, which generally have higher margins than conventional domain registrations.

We generated 34% of our 2021 total revenue from the sale of hosting and presence products, primarily from a variety of website hosting products, website building products and website security products, which generally have higher margins than conventional domain registrations.

Total revenue from hosting and presence products grew at a CAGR of 8.0% over the three years ended December 31, 2021.

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Revenue derived from each of our product categories has increased in each of the last three years, with many of our non-domains products growing faster in recent periods.

In each of the five years ended December 31, 2020, greater than 85% of our total revenue, excluding the impact of purchase accounting, was generated by customers who were also customers in the prior year.

To track our growth and the stability of our customer base, we monitor, among other things, revenue, retention rates and average revenue per user (ARPU) generated by our annual customer cohorts over time, as well as corresponding marketing and advertising spend.

In each of the five years ended December 31, 2021, greater than 85% of our total revenue was generated by customers who were also customers in the prior year.

To track our growth and the stability of our customer base, we monitor, among other things, revenue, retention rates and ARPU generated by our annual customer cohorts over time, as well as corresponding marketing and advertising spend.

We define an annual customer cohort to include each customer who first became a customer during a calendar year.

For example, in 2014, we acquired 2.9 million gross customers, who we collectively refer to as our 2014 cohort, and spent $165 million in marketing and advertising expenses.

By the end of 2020, the 2014 cohort had generated an aggregate of $1,472 million of total bookings and we expect this cohort will continue to generate bookings and revenue in the future.

For the five years ended December 31, 2020, the average annual bookings retention rate of the 2014 cohort was approximately 94%.

To calculate a cohort's bookings retention rate, we compare the number of active customers within a specific cohort as of the end of the current year to the number of customers that were in the cohort in the year of acquisition.

Over this period, ARPU, excluding the impact of purchase accounting, for the 2014 cohort grew from $79 in 2015 to $181 in 2020, representing a CAGR of 18%.

By the end of 2021, the 2014 cohort had generated an aggregate of approximately $1.7 billion of total bookings and we expect this cohort will continue to generate bookings and revenue in the future.

For the five years ended December 31, 2021, the average annual revenue retention rate of the 2014 cohort was more than 98%, which is calculated by averaging the ratio of the cohort's annual revenue for each of the five years to its annual revenue for each respective preceding year.

Over this period, ARPU for the 2014 cohort grew from $106 in 2016 to $197 in 2021, representing a CAGR of 13%.

We selected the 2014 cohort for this analysis because we believe it is representative of the spending patterns and revenue impact of our other cohorts.

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General and administrative 345.8 9.1 % 323.8 9.8 % 362.1 12.1 %

Restructuring charges 43.6 1.3 % — — % — — %

Restructuring and other (0.3) — % 43.6 1.3 % — — %

Depreciation and amortization 199.6 5.2 % 202.7 6.1 % 209.7 7.0 %

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Income (loss) before income taxes 253.6 6.6 % (495.4) (14.9) % 126.4 4.2 %

Benefit for income taxes 1.3 — % 12.0 0.4 % 9.0 0.3 %

Benefit (provision) for income taxes (10.8) (0.3) % 1.3 — % 12.0 0.4 %

Net income (loss) 242.8 6.3 % (494.1) (14.9) % 138.4 4.6 %

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(1) Change in deferred revenue also includes the impact of realized gains or losses from the hedging of bookings in foreign currencies.

(1) Change in deferred revenue includes the impact of realized gains or losses from the hedging of bookings in foreign currencies.

Comparison of 2021 and 2020

We generate substantially all of our revenue from sales of subscriptions, including domain registrations and renewals, hosting and presence products and business applications products.

Our subscription terms average one year, but can range from monthly terms to multi-annual terms of up to ten years depending on the product.

We generally collect the full amount of subscription fees at the time of sale, while revenue is recognized over the period in which the performance obligations are satisfied, which is generally over the contract term.

We generate substantially all of our revenue from sales of subscriptions, including domain registrations and renewals, hosting and presence products and business applications products as well as from aftermarket domain sales.

Our subscription terms can range from monthly terms to multi-annual terms of up to ten years depending on the product.

We generally collect the full amount of subscription fees at the time of sale, while revenue, other than for aftermarket domain sales, is primarily recognized over the period in which the performance obligations are satisfied, which is generally over the contract term.

Revenue from aftermarket domain sales is recognized at the time when ownership of the domain is transferred to the buyer.

Revenue is presented net of refunds, and we maintain a reserve to provide for refunds granted to customers.

Domains revenue primarily consists of revenue from the sale of domain registration subscriptions, aftermarket domain sales and domain add-ons such as domain protection.

Domain registrations provide a customer with the exclusive use of a domain during the applicable contract term.

After the contract term expires, unless renewed, the customer can no longer access the domain.

Hosting and presence revenue primarily consists of revenue from the sale of subscriptions for website hosting, website security and website building products.

Hosting and presence revenue primarily consists of revenue from the sale of subscriptions for website hosting, website building, website security and commerce products.

Business applications revenue primarily consists of revenue from the sale of subscriptions for third-party productivity applications, email accounts, email marketing tools and telephony solutions.

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The increase in customers impacted each of our revenue lines, as the additional customers purchased subscriptions across our product portfolio.

These increases were partially offset by the impact of adverse movements in foreign currency exchange rates.

The 12.1% increase in domains revenue was primarily driven by the increase in domains under management from 79.6 million as of December 31, 2019 to 82.7 million as of December 31, 2020, incremental revenue from acquisitions completed in 2020 and increased aftermarket domain sales and international growth.

Domains under management in 2020 was impacted by:

(i) approximately 0.8 million domains added from an acquisition and (ii) the expiration of approximately 1.0 million .uk domains for which we provided free initial registration to the owners of the associated third-level domains (e.g.

.co.uk) following the 2017 launch of the .uk ccTLD.

The 19.5% increase in domains revenue was primarily driven by the increase in domains under management from 82.7 million as of December 31, 2020 to 84.4 million as of December 31, 2021, the approximately 70.0% increase in aftermarket domain sales fueled by our continued innovation in auction technologies and contributions from recent registry acquisitions.

Hosting and presence.

The 6.6% increase in hosting and presence revenue was primarily driven by increased demand for our website building and website security products, partially offset by the adverse impact of lower demand for certain higher-priced subscriptions, such as GoDaddy Social, as a result of the economic disruption resulting from the COVID-19 pandemic.

The 6.9% increase in hosting and presence revenue was primarily driven by increased demand for our website building and website security products as well as contributions from recent acquisitions, including commerce-related revenue from GoDaddy Payments (formerly Poynt).

The increase was partially offset by lower demand for certain higher-priced subscriptions, such as GoDaddy Social.

Business applications .

The 17.8% increase in business applications revenue was primarily driven by increased customer adoption of our productivity solutions as well as an increase in customers purchasing higher product tiers.

The 20.2% increase in business applications revenue was primarily driven by increased customer adoption of our productivity solutions.

The following table presents our total bookings for the periods indicated:

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(1) A reconciliation of total bookings to total revenue, its most directly comparable GAAP financial measure, is set forth in "Reconciliation of Bookings" above.

The 11.0% increase in total bookings was primarily driven by increases in total customers and domains under management, increased aftermarket domain sales, broadened customer adoption of non-domain products and acquisitions completed in 2020, partially offset by the negative impact the economic disruption resulting from the COVID-19 pandemic had on subscriptions for certain of our higher-priced services as well as the adverse impact of movements in foreign currency exchange rates.

The 12.1% increase in total bookings was primarily driven by increases in total customers and domains under management, increased aftermarket domain sales, broadened customer adoption of non-domain products and contributions from recent acquisitions.

Additionally, total bookings in 2021 was favorably impacted by approximately 90 basis points due to movements in foreign currency exchange rates.

Costs and Operating Expenses

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Similar to our billing practices, we pay domain costs at the time of purchase for the life of each subscription, but recognize the costs of service ratably over the term of our customer contracts.

The terms of registry pricing are established by agreements between registries and registrars, and can vary significantly depending on the top-level domain.

We expect cost of revenue to increase in absolute dollars in future periods related to the expansion of our domains business, higher sales of third-party productivity applications and growth in our customer base.

The terms of registry pricing are established by agreements between registries and registrars, and can vary significantly depending on the TLD.

We expect cost of revenue to increase in absolute dollars in future periods related to the expansion of our domains

business, higher sales of third-party productivity applications and growth in our customer base.

However, cost of revenue may fluctuate as a percentage of total revenue, depending on the mix of products sold in a particular period.

Subsequent to our acquisition of the registry operations of Neustar in August 2020, we no longer incur domain registration fees on purchases of former Neustar TLDs.

Year Ended December 31, 2021 to 2020 2020 to 2019

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$ 1,372.2 $ 1,158.6 $ 1,026.8 $ 213.6 18 % $ 131.8 13 %

The 12.8% increase in cost of revenue was primarily attributable to higher domain costs driven by increases in domains under management and aftermarket domain sales, increased software licensing fees resulting from higher sales of productivity solutions and increased payment processing fees resulting from our bookings growth.

The 18.4% increase in cost of revenue was primarily attributable to higher domain costs, which were driven by the increase in domains under management, increased aftermarket domain sales and costs associated with our recently acquired registry business, as well as increased software licensing fees resulting from higher sales of productivity solutions and increased payment processing fees resulting from our bookings growth.

Technology and development

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$ 706.3 $ 560.4 $ 492.6 $ 145.9 26 % $ 67.8 14 %

As discussed in our 2019 Form 10-K, we recorded a $7.2 million reduction in equity-based compensation expense in 2019 to correct an error related to the accounting for certain PSUs in prior periods.

Excluding this correction, technology and development expenses increased 12.1%, primarily as a result of increased personnel costs driven by higher average headcount associated with our continued investment in product development and increased technology costs associated with the growth of our business and our migration to a cloud-based infrastructure.

The 26.0% increase in technology and development expenses was primarily as a result of increased personnel costs driven by higher average headcount associated with our continued investment in product development as well as increased technology costs associated with the growth of our business and our migration to a cloud-based infrastructure.

Additionally, during 2021 we recorded approximately $44.1 million in compensation expense resulting from our acquisitions, primarily Poynt (now known as GoDaddy Payments).

Marketing and advertising

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$ 503.9 $ 438.5 $ 345.6 $ 65.4 15 % $ 92.9 27 %

The 26.9% increase in marketing and advertising expenses was primarily attributable to increased discretionary spending and personnel costs associated with additional marketing investments we made in 2020 to capture increased demand for certain of our products during the COVID-19 pandemic.

The 14.9% increase in marketing and advertising expenses were primarily attributable to increased personnel costs and discretionary spending associated with the marketing investments we made to drive additional growth, partially offset by some expected deceleration due to the significant investments we made in 2020 to capture higher demand.

Customer care

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$ 306.1 $ 316.9 $ 348.7 $ (10.8) (3) % $ (31.8) (9) %

The 9.1% decrease in customer care expenses was primarily due to the headcount reductions related to the restructuring plan implemented during the second quarter of 2020, as further discussed below, in conjunction with operating efficiencies gained as we scale our business and increase our use of alternative methods of customer interaction.

We expect these expenses to remain lower in the short-term as a result of the headcount reductions associated with the restructuring.

The 3.4% decrease in customer care expenses was primarily due to the headcount reductions related to the restructuring plan we implemented during the second quarter of 2020 as well as operating efficiencies gained as we scale our business and increase our use of alternative methods of customer interaction.

General and administrative

General and administrative expenses primarily consist of personnel costs for our administrative functions, professional service fees, office rent for all locations, all employee travel expenses, acquisition-related expenses and other general costs.

General and administrative expenses primarily consist of personnel costs for our administrative functions, professional service fees, office rent and facilities expenses for all locations, acquisition-related expenses and other general costs.

We expect general and administrative expenses to fluctuate depending on the level of personnel and other administrative costs required to support our business as well as the significance of any strategic acquisitions we choose to pursue.

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$ 345.8 $ 323.8 $ 362.1 $ 22.0 7 % $ (38.3) (11) %

General and administrative, adjusted for certain items described below $ 333.8 $ 350.1 $ 334.0 $ (16.3) (5) % $ 16.1 5 %

The following items are included in general and administrative expenses in the periods indicated:

• As discussed in Note 12 to our financial statements, we recorded an $18.1 million legal settlement accrual in 2019.

During 2020, we reduced the settlement accrual by an aggregate of $10.0 million.

• As discussed in our 2019 Form 10-K, we recorded a $6.1 million reduction in equity-based compensation expense in 2019 to correct an error related to the accounting for certain PSUs in prior periods.

Excluding the items described above, the 4.7% decrease in general and administrative expenses was primarily driven by lower travel and other general costs, partially offset by an increase in acquisition-related expenses.

Restructuring charges

The $43.6 million in restructuring charges in 2020 were incurred pursuant to a restructuring plan implemented in June 2020, as further discussed in Note 13 to our financial statements.

We implemented the restructuring to address the sustainability of our U.S.

outbound sales and operations, which faced challenges with respect to soft customer demand for certain higher-priced, do-it-for-you services such as GoDaddy Social.

These challenges were exacerbated by the economic disruption resulting from the COVID-19 pandemic.

Restructuring charges included:

(i) $14.6 million in severance and related benefits to be paid to, or on behalf of, the approximately 470 employees who were involuntarily terminated and the approximately 110 employees who voluntarily did not accept alternate roles with us, as well as professional fees incurred in connection with the restructuring;

(ii) a $27.9 million impairment of operating lease assets associated with the closure of our leased offices in Austin, Texas;

and (iii) $1.1 million of accelerated depreciation and operating lease assets amortization related to the office closures.

We do not expect to incur any significant additional charges related to this restructuring.

The 6.8% increase in general and administrative expenses was primarily due to increased acquisition-related expenses and professional fees, partially offset by the reversal of a $5.7 million indirect tax reserve as a result of a settlement agreement as well as the reversal of equity-based compensation expense resulting from the forfeiture of unvested awards as a result of certain executive departures.

Restructuring and other

Restructuring and other during 2021 includes (i) the $15.4 million gain on sale of the land and buildings of our former corporate headquarters and (ii) a $15.1 million charge related to the impairment of certain operating lease assets and related leasehold improvements associated with the decision to close one of our leased offices.

During 2020, we recorded $43.6 million in pre-tax restructuring charges pursuant to a restructuring plan implemented in June 2020, as further discussed in Note 13.

Depreciation and amortization

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$ 199.6 $ 202.7 $ 209.7 $ (3.1) (2) % $ (7.0) (3) %

The 3.3% decrease in depreciation and amortization expenses resulted from assets that became fully depreciated, partially offset by the impact of increased amortization expense related to acquisitions completed in 2020.

There were no material changes in depreciation and amortization.

Interest expense

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$ 126.0 $ 91.3 $ 92.1 $ 34.7 38 % $ (0.8) (1) %

The 0.9% decrease in interest expense was driven by more favorable effective interest rates on our variable rate borrowings, partially offset by the issuance of additional long-term debt in August 2020.

Loss on debt extinguishment

In 2019, we recognized a loss on debt extinguishment of $14.8 million, primarily related to the $600.0 million partial prepayment of term loan borrowings with the proceeds of the issuance of the Senior Notes.

See Note 9 to our financial statements for additional discussion.

The 38.0% increase in interest expense was primarily driven by the issuance of the 2027 Term Loans in August 2020 and the 2029 Senior Notes in February 2021, as further discussed in Note 9 to our financial statements, partially offset by a decrease in the effective interest rate on our variable rate borrowings.

Tax receivable agreements liability adjustment

In 2020, we recorded a $674.7 million charge as a result of the settlement of our obligations under the TRAs, as further described below and in Note 16 to our financial statements.

In 2020, we recorded a $674.7 million charge as a result of the settlement of our obligations under the TRAs, as further discussed in Note 16 to our financial statements.

Liquidity and Capital Resources

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Our principal uses of cash have been to fund operations, acquisitions and capital expenditures, as well as to make mandatory principal and interest payments on our long-term debt and to repurchase shares of our Class A common stock.

In general, we seek to deploy our capital in a prioritized manner focusing first on requirements for our operations, then on growth investments, and finally on equity holder returns.

Our strategy is to deploy capital from any potential source, whether debt, equity or internally generated cash, depending on the adequacy and availability of the source of capital and which source may be used most efficiently and at the lowest cost at such time.

In general, we seek to deploy our capital in a prioritized manner focusing first on requirements for operations, then on growth investments, and finally on stockholder returns.

Our strategy is to deploy capital, whether debt, equity or internally generated cash, depending on the adequacy and availability of the source of capital and which source may be used most efficiently and at the lowest cost at such time.

Therefore, while cash from operations is our primary source of operating liquidity and we believe our internally-generated cash flows are sufficient to support our day-to-day operations, we may use a variety of capital sources to fund our needs for less predictable investment decisions such as strategic acquisitions and share repurchases.

We have incurred significant long-term debt to fund acquisitions and the settlement of the TRAs (as further discussed below) as well as for our working capital needs, and as a result, we are limited as to how we conduct our business and may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities, strategic acquisitions or share repurchases.

We have incurred significant long-term debt, primarily to fund acquisitions, share repurchases and the settlement of our prior tax receivable agreements.

As a result, we are limited as to how we conduct our business and may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities, strategic acquisitions or share repurchases.

However, the restrictions under our long-term debt agreements are subject to a number of qualifications and may be amended with the consent of the lenders and the holders of the senior notes, as applicable.

We believe our existing cash and cash equivalents and cash generated by operating activities will be sufficient to meet our anticipated operating cash needs for at least the next 12 months.

However, our future capital requirements will depend on many factors, including our growth rate, macroeconomic activity, the length and severity of business disruptions associated with the COVID-19 pandemic, the timing and extent of spending to support domestic and international development efforts, continued brand development and advertising spend, the level of customer care and general and administrative activities, the introduction of new and enhanced product offerings, the costs to support new and replacement capital equipment, the completion of strategic acquisitions or share repurchases and other factors.

Some of the factors that may influence our operations are not within our control, such as general economic conditions and the length and severity of the ongoing COVID-19 pandemic.

Although there is uncertainty related to the potential impact of COVID-19 on our future results, we believe our business model and the strength of our balance sheet have well positioned us to manage our business through this crisis.

However, we will continue to monitor our liquidity position.

However, our future capital requirements will depend on many factors, including our growth rate, macroeconomic activity, potential business disruptions associated with the ongoing COVID-19 pandemic, the timing and extent of spending to support domestic and international development efforts, continued brand development and advertising spend, the level of customer care and general and administrative activities, the introduction of new and enhanced product offerings, the costs to support new and replacement capital equipment, the completion of strategic acquisitions or share repurchases and other factors.

Should we pursue additional strategic acquisitions or share repurchases, we may need to raise additional capital, which may be in the form of long-term debt or equity financings.

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Our long-term debt obligations consist of the Credit Facility and the senior notes.

In August 2020, we increased our borrowings under the Credit Facility through the issuance of an additional $750.0 million in term loans, which were used to partially fund the payments associated with the settlement of our obligations under the TRAs, as discussed below.

In February 2021, we issued the 2029 Senior Notes in the principal amount of $800.0 million, which bear interest at 3.50%.

The proceeds were retained for general corporate purposes, which may include working capital, capital expenditures, potential acquisitions and strategic transactions.

In addition, in March 2021, we refinanced the 2027 Term Loans to lower the interest rate margins by 0.5%.

Estimated future interest payments associated with our long-term totaled $554.8 million as of December 31, 2021, with $108.2 million payable within 12 months.

See Note 9 to our financial statements for additional information regarding our long-term debt.

Our long-term debt agreements contain covenants restricting, among other things, our ability, or the ability of our subsidiaries, to incur indebtedness, issue certain types of equity, incur liens, enter into fundamental changes including mergers and consolidations, sell assets, make restricted payments including dividends, distributions and investments, prepay junior indebtedness and engage in operations other than in connection with acting as a holding company, subject to customary exceptions.

As of December 31, 2020, we were in compliance with all such covenants and had no amounts drawn on our revolving credit loan.

We currently have no reason to believe we will be unable to satisfy these covenants;

however, the economic disruption resulting from the COVID-19 pandemic has made it more difficult to forecast our future results.

As of December 31, 2021, we were in compliance with all such covenants and had no amounts drawn on our Revolver.

As further discussed in Note 10 to our financial statements, we have hedged a portion of our long-term debt through the use of cross-currency and interest rate swap derivative instruments.

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See "Quantitative and Qualitative Disclosures About Market Risk" for additional discussion of our hedging activities.

Tax Receivable Agreements

As discussed in Note 16 to our financial statements, we entered into settlement and release agreements with respect to four of the TRAs and an amendment to the fifth TRA, pursuant to which settled all of our obligations under the TRAs in exchange for aggregate payments totaling $850.0 million, of which $849.8 million was paid during 2020.

Upon payment, we were released from all obligations to the parties to the TRAs, including the holders of unexchanged LLC Units.

The settlement payments were funded with a combination of cash and the proceeds from the issuance of the new term loans discussed above.

By entering into the TRA Settlement Agreements, we were able to achieve an attractive return by settling our obligations under the TRAs at a significant discount to the approximately $1.8 billion in estimated payments we would have potentially otherwise made under these agreements, assuming we are able to fully utilize the relevant acquired tax benefits.

Share Repurchase Programs

Our Board has authorized a $500.0 million share repurchase program, as described in Note 5 to our financial statements.

During 2019 and 2020, we repurchased a total of 7,125 and 9,986 shares of our Class A common stock in the open market, respectively, pursuant to our previous share repurchase programs, for an aggregate purchase price of $458.6 million and $541.7 million, respectively, including commissions.

As of December 31, 2020, we have $500.0 million remaining available under our current share repurchase program.

See Note 3 to our financial statements for a discussion of cash payments made in connection with acquisitions completed in 2020.

In February 2021, we acquired Poynt Co.

for $329.2 million in cash paid at closing and an additional $45.0 million in deferred cash payments subject to certain performance and employment conditions over the three years subsequent to the closing date.

Poynt offers a suite of products allowing small businesses to sell and accept payments anywhere, including point-of-sale systems, payments, invoicing and transaction management.

Restructuring

As discussed in Note 13 to our financial statements, we implemented a restructuring plan in June 2020 to address the sustainability of our U.S.

outbound sales and operations.

Cash payments of $14.4 million related to the restructuring were made during 2020, and no material amounts remain as of December 31, 2020.

Share Repurchases

During 2021, we repurchased a total of 3,500 shares of our Class A common stock in the open market for an aggregate purchase price of $275.9 million, including commissions, and entered into an accelerated share repurchase (ASR) program in August 2021 in which we repurchased an additional 3,425 shares for $250.0 million.

As of December 31, 2021, we had $749.2 million of remaining authorization available for repurchases.

See Note 5 to our financial statements for additional information.

In January 2022, our board of directors approved the repurchase of up to an additional $2,251.0 million of our Class A common stock.

Such approval was in addition to the amount remaining available for repurchases under prior approvals of our board of directors, such that we have authority to repurchase up to $3,000.0 million of shares of our Class A common stock.

Under this authority, in February 2022, we entered into a new ASR to repurchase shares of our Class A common stock in exchange for an up-front payment of $750.0 million.

See Note 5 to our financial statements for additional information.

In February 2021, we completed the acquisition of Poynt (now known as GoDaddy Payments) for $297.1 million in cash consideration to expand our commerce capabilities.

At closing, we also paid an additional $29.4 million in cash that was recorded as compensation expense during the three months ended March 31, 2021.

The acquisition agreements also call for $45.0 million in additional compensatory cash payments subject to certain performance and employment conditions over the three-year period following the closing date.

During 2021, we completed two other acquisitions for aggregate purchase consideration of $65.7 million in cash paid at closing and additional contingent earn-out payments of up to $18.5 million subject to the achievement of certain operational and financial milestones over the two-year periods following the respective closing dates.

See Note 3 to our financial statements for additional discussion of our business acquisitions.

During 2021, we purchased intangible assets for a total of $200.1 million in cash.

One of these purchases also includes a variable earn-out payment of up to $12.0 million based on the achievement of specified future performance conditions.

See Note 4 to our financial statements for additional discussion.

The following table summarizes our cash flows for the periods indicated:

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Our primary source of cash from operating activities has been cash collections from our customers.

We expect cash inflows from operating activities to be primarily affected by increases in total bookings.

Our primary uses of cash from operating activities have been for domain registration costs paid to registries, licensing fees related to third-party productivity solutions, personnel costs, discretionary marketing and advertising costs, technology and development costs and interest payments.

We expect cash outflows from operating activities to be affected by the timing of payments we make to registries and increases in personnel and other operating costs as we continue to grow our business and increase our international presence.

Our primary uses of cash from operating activities have been for domain registration costs paid to registries, software licensing fees related to third-party productivity solutions, personnel costs, discretionary marketing and advertising costs, technology and development costs and interest payments.

We expect cash outflows from operating activities to be affected by the timing of payments we make to registries as well as by increases in personnel and other operating costs as we continue to grow our business.

Net cash provided by operating activities increased $64.7 million from $764.6 million in 2020 to $829.3 million in 2021, primarily driven by our bookings growth.

This increase was partially offset by $29.4 million in compensatory payments made in connection with the closing of our acquisition of Poynt (now known as GoDaddy Payments) as well as increased discretionary spending associated with the marketing investments we made to drive additional growth.

Investing Activities

Our investing activities primarily consist of strategic acquisitions and purchases of property and equipment to support the overall growth of our business.

Our investing activities generally consist of strategic acquisitions and purchases of property and equipment to support the overall growth of our business.

We expect our investing cash flows to be affected by the timing of payments we make for capital expenditures and the strategic acquisition or other growth opportunities we decide to pursue.

Net cash used in investing activities increased $347.0 million from $135.3 million in 2019 to $482.3 million in 2020, primarily due to a $384.4 million increase in spending for business acquisitions, partially offset by a $21.1 million decrease in capital expenditures and a $27.9 million increase in net inflows from short-term investments.

Net cash used in investing activities increased $153.3 million from $482.3 million in 2020 to $635.6 million in 2021, primarily driven by a $187.1 million increase of purchases of intangible assets and $40.0 million in purchases of equity investments in 2021, partially offset by a $57.0 million decrease in spending for business acquisitions.

Financing Activities

Our financing activities primarily consist of long-term debt borrowings, the repayment of principal on long-term debt, stock option exercises and share repurchases.

Net cash used in financing activities increased $124.8 million from $456.9 million in 2019 to $581.7 million in 2020, primarily due to $849.8 million in TRA settlement payments in 2020 and an $83.1 million increase in share repurchases, partially offset by the receipt of $746.3 million in net proceeds from the issuance of new term loans and a $54.3 million decrease in acquisition contingent consideration payments.

Our financing activities generally consist of long-term debt borrowings, the repayment of principal on long-term debt, stock option exercises and share repurchases.

Net cash from financing activities increased $879.8 million from $581.7 million used in 2020 to $298.1 million provided in 2021, primarily due to $849.8 million in payments made to settle our prior tax receivable agreements in 2020 and $800.0 million in proceeds from the issuance of the 2029 Senior Notes in 2021, partially offset by the receipt of $746.3 million in net proceeds from the issuance of the 2027 Term Loans in 2020.

Deferred Revenue

See Note 7 to our financial statements for details regarding the expected future recognition of deferred revenue.

Contractual Obligations

The following table summarizes our material contractual obligations and commitments as of December 31, 2020:

Total Payments Payments due by period

1 year 2-3 years 4-5 years 5+ years

Long-term debt, including current maturities (1)

$ 3,153.6 $ 32.5 $ 65.0 $ 1,747.5 $ 1,308.6

Interest on long-term debt (2)

455.1 86.0 169.9 105.8 93.4

Operating leases (3)

253.6 50.8 63.2 50.2 89.4

Service agreements (4)

208.2 83.3 112.5 12.3 0.1

Total material contractual obligations $ 4,070.5 $ 252.6 $ 410.6 $ 1,915.8 $ 1,491.5

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(1) See Note 9 to our financial statements for information regarding the terms of our long-term debt agreements.

(2) Interest on long-term debt excludes both the amortization of deferred debt issuance costs and original issue discount and the expected benefits associated with our interest rate swap arrangements.

Interest on our variable rate debt is calculated using the rate in effect at December 31, 2020.

(3) See Note 11 to our financial statements for information regarding our operating lease commitments.

The amounts include the imputed interest component of our operating lease liabilities.

(4) See Note 12 to our financial statements for information regarding our service agreement commitments.

Off-Balance Sheet Arrangements

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Refunds are estimated at contract inception using the expected value method based on historical refund experience and updated each reporting period as additional information becomes available.

Our annual refund rate has ranged from 6.4% to 6.9% of total bookings from 2018 to 2020.

Our annual refund rate has declined from 6.9% of total bookings in 2019 to 5.3% in 2021.

We may sell multiple products to customers at the same time.

For example, we may design a customer website and separately offer other products such as hosting and a SSL certificate, or a customer may combine a domain registration with other products such as Websites + Marketing or email.

Judgment may be required in determining whether products are considered distinct performance obligations that should be accounted for separately or as one combined performance obligation.

For example, we may design a customer website and separately offer other products such as hosting and an SSL certificate, or a customer may combine a domain registration with other products such as Websites + Marketing or email.

Judgment may be required in determining whether products contain multiple distinct performance obligations that should each be accounted for separately or as one combined performance

The majority of our revenue arrangements consist of multiple performance obligations, with revenue recognized over the period in which each performance obligation is satisfied, which is generally over the contract term.

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We sell our products directly to customers and also through a network of resellers.

In certain cases, we act as a reseller of products provided by others.

In certain cases, such as for aftermarket domain sales, we act as a reseller of products provided by others.

The determination of gross or net revenue recognition is reviewed on a product-by-product basis and is dependent on whether we act as principal or agent in the transaction.

See Notes 2 and 7 to our financial statements for additional information regarding revenue recognition and deferred revenue.

Business Combinations

We determine whether substantially all of the fair value of assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

If this threshold is met, the single asset or group of assets, as applicable, is accounted for as an asset acquisition.

We include the results of operations of acquired businesses in our financial statements as of the respective dates of acquisition.

Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date, with respect to tangible and intangible assets acquired, liabilities assumed and pre-acquisition contingencies.

Accounting for business acquisitions requires us to make significant estimates and assumptions, especially at the acquisition date, with respect to tangible and intangible assets acquired, liabilities assumed and pre-acquisition contingencies.

The purchase price, including estimates of the fair value of contingent consideration when applicable, is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values on the respective acquisition dates, with the excess recorded as goodwill.

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Contingent consideration is adjusted to fair value in subsequent periods as an increase or decrease in general and administrative expenses.

See Notes 2 and 3 to our financial statements for additional information regarding business combinations.

See Notes 2 and 3 to our financial statements for additional information regarding business acquisitions.

Goodwill and Indefinite-Lived Intangible Assets

We make estimates, assumptions and judgments when valuing goodwill and other intangible assets in connection with the initial purchase price allocations of business combinations, as well as when evaluating the recoverability of our goodwill and other intangible assets on an ongoing basis.

We make estimates, assumptions and judgments when valuing goodwill and other intangible assets in connection with the initial purchase price allocations of business acquisitions, as well as when evaluating the recoverability of our goodwill and other intangible assets on an ongoing basis.

We assess our goodwill and indefinite-lived intangible assets for impairment at least annually during the fourth quarter.

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As of December 31, 2021, we believe such assets are recoverable;

however, there can be no assurances these assets will not be impaired in future periods.

however, there can be no assurance these assets will not be impaired in future periods.

Any future impairment charges could adversely impact our results of operations.

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We recognize DTAs to the extent we believe these assets are more-likely-than-not to be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

In evaluating our ability to realize our DTAs, in full or in part, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, prudent and feasible tax planning strategies and recent results of operations.

The assumptions utilized in determining future taxable income require significant judgment and are consistent with the plans and estimates we use to manage our business.

Actual operating results in future years could differ from our current assumptions, judgments and estimates, which could have a material impact on the amount of DTAs we ultimately realize.

We recognize tax benefits from uncertain tax positions only if it is more-likely-than-not the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

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We are subject to the possibility of various loss contingencies arising from uncertain and unresolved matters in the ordinary course of business and from events or actions by others having the potential to result in a future loss.

Such contingencies may include, but are not limited to, intellectual property claims, putative class actions, commercial and consumer protection claims, labor and employment claims, breach of contract claims, regulatory proceedings, product service level commitments and losses resulting from other events and developments.

Such contingencies may include, but are not limited to, intellectual property claims, putative class actions, commercial and consumer protection

claims, labor and employment claims, breach of contract claims, regulatory proceedings, product service level commitments and losses resulting from other events and developments.

We consider the likelihood of loss, the impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis