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Item 7. Management’s Discussion and Analysis

2023-02-16 compared with 2022-02-17 · 197 added, 139 removed, 250 unchanged (57% of the section changed)

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(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

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.

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.

As of December 31, 2021, approximately 89% of our customers had purchased a domain from us and we had 84.4 million domains under management.

Based on information reported in VeriSign's Domain Name Industry Brief, we had over 23% of the world's domains registered as of September 30, 2021.

We also offer hosting, presence and business applications products and services (products) enhancing our value proposition by enabling our customers to create, manage and syndicate their, or their customers', digital identities.

These products are often purchased in conjunction with, or subsequent to, an initial domain registration.

As we have grown, these products have become increasingly important parts of our business, constituting approximately 53% of total revenue in 2021.

We are a global leader in serving a large market of everyday entrepreneurs, delivering simple, easy-to-use products, and outcome-driven, personalized guidance to small businesses, individuals, organizations, developers, designers and domain investors.

We manage and report our business in the following two segments:

• Applications and Commerce (A&C) , which primarily consists of sales of products containing proprietary software, commerce products and third-party email and productivity solutions as well as sales of certain products when they are included in bundled offerings of our proprietary software products.

• Core Platform (Core) , which primarily consists of sales of domain registrations and renewals, aftermarket domain sales, website hosting products and website security products when not included in bundled offerings of our proprietary software products as well as sales of products not containing a software component.

Financial Highlights

Below are key financial highlights for 2021, with comparisons to 2020.

Below are key consolidated financial highlights for 2022, with comparisons to 2021.

• Total revenue of $4,091.3 million, an increase of 7.2%, or approximately 8.4% on a constant currency basis (1) .

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• Operating income of $498.8 million, an increase of 30.5%.

• Net income of $352.9 million, an increase of 45.3%.

• Normalized EBITDA (2) of $1,013.0 million, an increase of 16.1%.

• Net cash provided by operating activities of $979.7 million, an increase of 18.1%.

(1) Discussion of constant currency is set forth in "Quantitative and Qualitative Disclosures about Market Risk."

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

(2) A reconciliation of Normalized EBITDA to net income, its most directly comparable GAAP financial measure, is set forth in "Reconciliation of Normalized EBITDA" below.

COVID-19 Pandemic

The extent to which the ongoing COVID-19 pandemic may impact our future results and operations will depend on future developments, including the duration of the pandemic and the parameters of global governmental measures put in place to control the spread of the virus as well as the continuing economic impact of the pandemic.

We continue to monitor the pandemic and the potential impacts it may have on our future financial position, results of operations and cash flows.

See "Risk Factors" for additional information.

Our Financial Model

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

We have broadened our business model over the past several years to encompass a meaningful set of transactional relationships with our customers in areas such as aftermarket, commerce and payments and reseller agreements where one account may give us access to many users.

We have also observed an increase in users that have converted from owning paid to free subscriptions during this time, coinciding with our experimentation with freemium services as our customers engage in more varied types of business with us.

This has changed the way in which we interact with and target our customers, and, as such, in 2022 we reevaluated our definition of a customer based on our current business model.

Under this new definition, we include all customer accounts with paid transactions in the trailing twelve months or with paid subscriptions as of the end of a period, but exclude customer accounts that have active free versions of our products but have not paid us in the trailing twelve months or do not have any paid subscriptions as of the end of the period.

As a result of this reevaluation, we revised both our customer and related ARPU disclosures to retrospectively present total customers and ARPU under our updated customer definition, as shown in the table below:

Year Ended December 31,

Total customers at period end (in thousands):

Previous definition 21,233 20,646

New definition 20,704 20,148

Average revenue per user:

Previous definition $ 182 $ 166

New definition $ 187 $ 170

We grew our total customers from 18.8 million as of December 31, 2019 to 20.9 million as of December 31, 2022, 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%.

In each of the five years ended December 31, 2022, our customer retention rate exceeded 85%, and in 2022, our retention rate for customers who had been with us for over three years was

approximately 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 as well as from aftermarket domain sales.

We generate bookings and revenue from sales of product subscriptions.

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.

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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.

See "Reconciliation of Bookings" below for a reconciliation of total bookings to total revenue.

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 compound annual growth rate (CAGR) of 14.0% over the three years ended December 31, 2021.

Hosting and Presence .

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.

Business Applications .

We generated 19% of our 2021 total revenue from the sale of business applications products, primarily from third-party productivity applications, which generally also have higher margins than conventional domain registrations.

Total revenue from business applications products grew at a CAGR of 19.6% over the three years ended December 31, 2021.

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.

Applications and Commerce .

We generated 31.3% of our 2022 total revenue from the sale of A&C products.

A&C revenue primarily consists of revenue from sales of products containing proprietary software such as Websites + Marketing and Managed WordPress and commerce products such as payment processing fees and point-of-sale (POS) hardware as well as sales of third-party email and productivity solutions such as Microsoft Office 365.

Total revenue from A&C products grew at a compound annual growth rate (CAGR) of 11.4% over the three years ended December 31, 2022.

Core Platform .

We generated 68.7% of our 2022 total revenue from our Core platform.

Core revenue primarily consists of revenue from sales of domain registrations and renewals, aftermarket domain sales, website hosting products and website security products when not included in bundled offerings of our proprietary software products.

Total revenue from Core Platform products grew at a compound annual growth rate (CAGR) of 5.6% over the three years ended December 31, 2022.

Revenue derived from both 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, 2022, 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.

To track our growth and the stability of our customer base, we monitor, among other things, revenue and retention rates 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.

For example, in 2016, we acquired approximately 3 million gross customers, who we collectively refer to as our 2016 cohort, and spent $229 million in marketing and advertising expenses.

By the end of 2022, the 2016 cohort had generated an aggregate of approximately $1.6 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, 2022, the average annual revenue retention rate of the 2016 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.

We believe our cohort analysis is important to illustrate the long-term value of our customers.

We selected the 2016 cohort as an example for this analysis, which we believe helps to illustrate the long-term value of our customers.

Results of Operations

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$ % of Total Revenue $ % of Total Revenue $ % of Total Revenue

Domains $ 1,809.9 47.4 % $ 1,515.1 45.7 % $ 1,351.6 45.2 %

Hosting and presence 1,283.4 33.7 % 1,200.6 36.2 % 1,126.5 37.7 %

Business applications 722.4 18.9 % 601.0 18.1 % 510.0 17.1 %

A&C $ 1,279.7 31.3 % $ 1,128.3 29.6 % $ 926.1 27.9 %

Core 2,811.6 68.7 % 2,687.4 70.4 % 2,390.6 72.1 %

Total revenue 4,091.3 100.0 % 3,815.7 100.0 % 3,316.7 100.0 %

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$ 352.2 8.6 % $ 242.3 6.3 % $ (495.1) (14.9) %

Operating Metrics

In addition to our results determined in accordance with GAAP, we believe the following operating metrics are useful as supplements in evaluating our ongoing operational performance and help provide an enhanced understanding of our business:

Non-GAAP Financial Measure and Other Operating Metrics

In addition to our results determined in accordance with GAAP, we believe the following non-GAAP financial measure and other operating metrics are useful as supplements in evaluating our ongoing operational performance and help provide an enhanced understanding of our business:

Year Ended December 31,

2022 2021 2020

Normalized EBITDA $ 1,013.0 $ 872.2 $ 722.2

Annualized recurring revenue $ 3,570.1 $ 3,433.7 $ 3,136.8

Total bookings $ 4,413.8 $ 4,231.7 $ 3,775.5

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Average revenue per user $ 197 $ 187 $ 170

Normalized EBITDA (NEBITDA).

NEBITDA is a supplemental measure of our operating performance used by management and investors to evaluate our business.

We calculate NEBITDA as net income excluding depreciation and amortization, interest expense (net), provision or benefit for income taxes, equity-based compensation expense, acquisition-related costs, restructuring-related expenses and certain other items.

We believe that the inclusion or exclusion of certain recurring and non-recurring items provides a supplementary measure of our core operating results and permits useful alternative period-over-period comparisons of our operations but should not be viewed as a substitute for comparable GAAP measures.

Annualized recurring revenue (ARR).

ARR is an operating metric defined as quarterly recurring revenue (QRR) multiplied by four.

QRR represents the quarterly recurring GAAP revenue, net of refunds, from new and renewed subscription-based services.

ARR is exclusive of any revenue that is non-recurring, including, without limitation, domain aftermarket, domain transfers, one-time set-up or migration fees and non-recurring professional website services fees.

We believe ARR helps illustrate the scale of certain of our products and facilitates comparisons to other companies in our industry.

Total bookings .

Total bookings represents cash receipts from the sale of products to customers in a given period adjusted for products where we recognize revenue on a net basis and without giving effect to certain adjustments, primarily net refunds granted in the period.

Total bookings provides valuable insight into the sales of our products and the performance of our business since we typically collect payment at the time of sale and recognize revenue ratably over the term of our customer contracts.

We report total bookings without giving effect to refunds granted in the period because refunds often occur in periods different from the period of sale for reasons unrelated to the marketing efforts leading to the initial sale.

Accordingly, by excluding net refunds, we believe total bookings reflects the effectiveness of our sales efforts in a given period.

Total bookings is an operating metric representing the total value of customer contracts entered into during the period, excluding refunds.

We believe total bookings provides additional insight into the performance of our business and the effectiveness of our marketing efforts since we typically collect payment at the inception of a customer contract but recognize revenue ratably over the term of the contract.

Total customers .

We define a customer as an individual or entity, as of the end of a period, having an account with one or more paid product subscriptions.

A single user may be counted as a customer more than once if they maintain paid subscriptions in multiple accounts.

We define a customer as an individual or entity with paid transactions in the trailing twelve months or with paid subscriptions as of the end of the period.

A single user may be counted as a customer more than once if they maintain paid subscriptions or transactions in multiple accounts.

Total customers is one way we measure the scale of our business and is an important part of our ability to increase our revenue base.

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ARPU provides insight into our ability to sell additional products to customers, though the impact to date has been muted due to our continued growth in total customers.

Reconciliation of Bookings

The following table reconciles total bookings to total revenue, its most directly comparable GAAP financial measure:

Reconciliation of NEBITDA

The following table reconciles NEBITDA to net income, its most directly comparable GAAP financial measure:

Year Ended December 31,

2022 2021 2020

Total revenue $ 3,815.7 $ 3,316.7 $ 2,988.1

Change in deferred revenue (1)

Net income (loss) $ 352.9 $ 242.8 $ (494.1)

Depreciation and amortization 194.6 199.6 202.7

Equity-based compensation 264.4 207.9 191.5

Interest expense, net 135.0 124.9 86.9

Tax receivable agreements liability adjustment — — 674.7

Acquisition-related expenses 35.1 78.2 25.0

Restructuring and other (1)

27.4 8.0 36.8

Net refunds 224.2 247.3 233.4

Other 5.2 1.0 (0.8)

Total bookings $ 4,231.7 $ 3,775.5 $ 3,401.2

Provision (benefit) for income taxes 3.6 10.8 (1.3)

NEBITDA $ 1,013.0 $ 872.2 $ 722.2

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(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 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.

(1) Includes lease-related expenses associated with closed facilities, charges related to certain legal matters, and expenses incurred in relation to the refinancing of our long-term debt.

Year-Over-Year Comparison

We generate substantially all of our revenue from sales of product subscriptions, as described in Note 2 to our financial statements.

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

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.

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.

Beginning in the first quarter of 2022, we revised the presentation of revenue, as described in Note 2 to our financial statements, and accordingly, have revised the prior period amounts in the table below to retrospectively present revenue in the new format.

The following table presents our revenue for the periods indicated:

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2022 2021 2020 $ change % change $ change % change

Domains $ 1,809.9 $ 1,515.1 $ 1,351.6 $ 294.8 19 % $ 163.5 12 %

Hosting and presence 1,283.4 1,200.6 1,126.5 82.8 7 % 74.1 7 %

Business applications 722.4 601.0 510.0 121.4 20 % 91.0 18 %

Applications & commerce $ 1,279.7 $ 1,128.3 $ 926.1 $ 151.4 13 % $ 202.2 22 %

Core platform $ 2,811.6 $ 2,687.4 $ 2,390.6 $ 124.2 5 % $ 296.8 12 %

Total revenue $ 4,091.3 $ 3,815.7 $ 3,316.7 $ 275.6 7 % $ 499.0 15 %

The 15.0% increase in total revenue was driven by the 2.8% growth in total customers, the 9.7% growth in ARPU as well as incremental revenue from acquisitions completed in 2021.

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

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 6.9% 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 20.2% increase in business applications revenue was primarily driven by increased customer adoption of our productivity solutions.

2022 compared to 2021

Total revenue increased 7.2%, due to the increases in our A&C and Core revenues, as described below:

The 13.4% increase in A&C revenue was primarily driven by:

(i) 13.1% growth in revenue related to our productivity applications, most notably our email solutions;

(ii) 8.7% growth in revenues due to increased customer adoption of our subscription-based products designed to establish and grow online presence, such as Websites + Marketing and Managed WordPress hosting;

and (iii) 103.2% growth in commerce-related revenue primarily associated with our acquisition of Poynt Co.

(now known as GoDaddy Payments).

The 4.6% increase in Core revenue was primarily driven by:

(i) 8.5% growth in domain-related revenues as a result of our continued enhancement of online presence and offerings and the continued growth of our registry business;

(ii) a 5.8% growth in aftermarket revenues due to our continued innovation in auction technologies as well as contributions from our Dan.com acquisition;

and (iii) 4.0% growth in our security and SSL product offerings resulting from higher customer renewals year over year, specifically with respect to Website Security.

Partially offsetting these increases was a 5.9% decrease in hosting revenues, which was primarily due to end-of-life migrations from certain products and lower demand for these products amid the uncertain macroeconomic environment.

2021 compared to 2020

Total revenue increased 15.0% due to the increases in our A&C and Core revenues, as described below:

The 21.8% increase in A&C revenue was primarily driven by:

(i) 15.5% growth in revenue related to our productivity applications, most notably our email solutions;

(ii) 29.2% growth in revenues due to increased customer adoption of our subscription-based products designed to establish and grow online presence;

and (iii) new commerce-related revenue primarily associated with our acquisition of Poynt Co in 2021.

The 12.4% increase in Core revenue was primarily driven by:

(i) 9.8% growth in domain-related revenues as a result of a 1.7 million increase in domains under management and the continued growth of our registry business;

(ii) 69.2% growth in aftermarket revenues due to continued innovation in our auction technologies;

and (iii) 7.9% growth in our security and SSL product offerings resulting from increased customer adoption and higher customer renewals year over year.

Partially offsetting these increases was a 33.6% decrease in certain higher-priced subscriptions, specifically GoDaddy Social, due to lower demand for such products.

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

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$ 4,413.8 $ 4,231.7 $ 3,775.5 $ 182.1 4 % $ 456.2 12 %

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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 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.

The 4.3% increase in total bookings was primarily driven by increased aftermarket domain sales, broadened customer adoption of our productivity solutions and our Websites + Marketing and Managed WordPress products as well as an increase in ARPU due to a higher product attach rate and contributions from recent acquisitions, partially offset by approximately 170 basis

points due to adverse movements in foreign currency exchange rates due to the strength of the U.S.

In addition to the currency headwinds, our bookings growth rate was also impacted by uneven demand patterns related to inflation and continued economic uncertainty.

Costs and Operating Expenses

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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.

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.

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$ 1,484.5 $ 1,372.2 $ 1,158.6 $ 112.3 8 % $ 213.6 18 %

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.

The 8.2% increase in cost of revenue was primarily attributable to (i) higher domain costs, which were driven by increased aftermarket domain sales, cost increases implemented by various TLD registries and costs associated with our growing registry business, (ii) increased software licensing fees resulting from higher sales of productivity solutions and (iii) increased costs associated with the growth of our payment processing business.

Technology and development

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$ 794.0 $ 706.3 $ 560.4 $ 87.7 12 % $ 145.9 26 %

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).

The 12.4% increase in technology and development expenses was primarily due to (i) increased personnel costs driven by higher average headcount associated with our continued investment in product development and (ii) increased technology costs associated with the growth of our business, advancement of our commerce and innovation strategies and our migration to a cloud-based infrastructure.

The increase was partially offset by a $27.0 million decrease in compensation expense related to prior acquisitions, primarily Poynt.

Marketing and advertising

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$ 412.3 $ 503.9 $ 438.5 $ (91.6) (18) % $ 65.4 15 %

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.

The 18.2% decrease in marketing and advertising expenses were primarily attributable to a lower level of discretionary spending in 2022 as compared to the significant additional marketing investments we made in 2021 to drive growth during a period of high demand.

Customer care

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$ 305.9 $ 306.1 $ 316.9 $ (0.2) 0 % $ (10.8) (3) %

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.

There were no material changes in customer care expenses.

General and administrative

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.

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.

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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$ 385.5 $ 345.8 $ 323.8 $ 39.7 11 % $ 22.0 7 %

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.

The 11.5% increase in general and administrative expenses was primarily due to (i) increased personnel costs driven by higher average headcount and the reversal of equity-based compensation expense in 2021 due to the forfeiture of unvested awards related to certain executive departures;

(ii) increased legal and professional fees;

and (iii) the reversal of an indirect tax reserve as a result of a settlement agreement in 2021.

These increases were partially offset by lower acquisition related expenses and office rent expense.

Restructuring and other

Year Ended December 31, 2022 to 2021 2021 to 2020

2022 2021 2020 $ change % change $ change % change

Restructuring and other

$ 15.7 $ (0.3) $ 43.6 $ 16.0 (5333) % $ (43.9) (101) %

Restructuring and other of $15.7 million during 2022 primarily includes the impairment and loss on disposition of certain assets.

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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$ 146.3 $ 126.0 $ 91.3 $ 20.3 16 % $ 34.7 38 %

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 discussed in Note 16 to our financial statements.

The 16.1% increase in interest expense was primarily driven by the higher effective interest rates on our variable-rate debt in 2022, as further discussed in Note 10 to our financial statements.

Loss on debt extinguishment

In 2022, we recognized a loss on debt extinguishment of $3.6 million, primarily related to the refinancing of the 2029 Term Loans.

See Note 10 to our financial statements for additional discussion.

Segment Results of Operations

Our two operating segments, A&C and Core, reflect the way we manage and evaluate the performance of our business.

Our chief operating decision maker evaluates segment performance based upon several factors, of which the primary financial measures are revenue and Segment EBITDA.

See Note 18 to our financial statements for a reconciliation of Segment EBITDA to net income, its most directly comparable GAAP financial measure.

Applications & Commerce

The following table presents the results for our A&C segment for the periods indicated:

Year Ended December 31, 2022 to 2021 2021 to 2020

2022 2021 2020 $ change % change $ change % change

$ 1,279.7 $ 1,128.3 $ 926.1 $ 151.4 13 % $ 202.2 22 %

Segment EBITDA $ 522.8 $ 447.7 $ 349.7 $ 75.1 17 % $ 98.0 28 %

2022 compared to 2021

The 13.4% increase in A&C revenue was primarily driven by:

(i) 13.1% growth in revenue related to our productivity applications, most notably our email solutions;

and (iii) 103.2% growth in commerce-related revenue primarily associated with our acquisition of Poynt Co.

(now known as GoDaddy Payments).

The 16.8% increase in A&C Segment EBITDA for the year ended December 31, 2022 primarily resulted from the revenue increases noted above, in conjunction with lower discretionary marketing spend in 2022.

These increases were partially offset by higher personnel costs resulting from headcount additions made to support the continued development of our A&C products.

2021 compared to 2020

The 21.8% increase in A&C revenue was primarily driven by:

(i) 15.5% growth in revenue related to our productivity applications, most notably our email solutions;

and (ii) 29.2% growth in revenues due to increased customer adoption of our subscription-based products designed to establish and grow online presence;

and (iii) new commerce-related revenue associated with our acquisition of Poynt Co in 2021.

The 28.0% increase in A&C Segment EBITDA for the year ended December 31, 2021 primarily resulted from the revenue increases noted above, partially offset by higher personnel costs resulting from headcount additions made to support the continued development of our A&C products as well as increased discretionary marketing spending associated with investments made to drive additional growth.

Core Platform

The following table presents the results for our Core segment for the periods indicated:

Year Ended December 31, 2022 to 2021 2021 to 2020

2022 2021 2020 $ change % change $ change % change

$ 2,811.6 $ 2,687.4 $ 2,390.6 $ 124.2 5 % $ 296.8 12 %

Segment EBITDA $ 783.7 $ 679.7 $ 628.2 $ 104.0 15 % $ 51.5 8 %

2022 compared to 2021

The 4.6% increase in Core revenue was primarily driven by:

(i) 8.5% growth in domain-related revenues as a result of our continued enhancement of online presence and offerings and the continued growth of our registry business;

(ii) 5.8% growth in aftermarket revenues due to our continued innovation in auction technologies as well as contributions from our Dan.com acquisition;

and (iii) 4.0% growth in our security and SSL product offerings resulting from higher customer renewals year over year, specifically with respect to Website Security.

The 15.3% increase in Core Segment EBITDA for the year ended December 31, 2022 primarily resulted from the revenue increases noted above, in conjunction with lower discretionary marketing spend in 2022.

These increases were partially offset by higher third-party commissions associated with the increased aftermarket domain sales as well as cost increases implemented by various TLD registries.

2021 compared to 2020

The 12.4% increase in Core revenue was primarily driven by:

(i) 9.8% growth in domain-related revenues as a result of a 1.7 million increase in domains under management and the continued growth of our registry business;

(ii) 69.2% growth in aftermarket revenues due to continued innovation in our auction technologies;

and (iii) 7.9% growth in our security and SSL product offerings resulting from increased customer adoption and higher customer renewals year over year.

Partially offsetting these increases was a 33.6% decrease in certain higher-priced subscriptions, specifically GoDaddy Social, due to lower demand for such products.

The 8.2% increase in Core Segment EBITDA for the year ended December 31, 2021 primarily resulted from the revenue increases noted above, partially offset by increased discretionary marketing spend in 2021 and higher third-party commissions associated with the increased aftermarket domain sales.

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 operations, then on growth investments, and finally on stockholder returns.

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 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.

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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, 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.

However, our future capital requirements will depend on many factors, including our growth rate, macroeconomic activity, 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.

Credit Facility and Senior Notes

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

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.

Our long-term debt obligations consist of our Credit Facility, which includes our secured credit agreement and a revolving credit facility (the Revolver), and the senior notes.

In November 2022, we amended our Credit Facility to provide for a new $1.8 billion tranche of term loans maturing in 2029, the proceeds of which were used to refinance all of the outstanding previously-issued term loans maturing in 2024.

In addition, we increased the borrowing capacity under our revolving credit facility from $600.0 million to $1.0 billion and extended its maturity to November 2027.

Estimated future interest payments associated with our long-term debt totaled $1,455.3 million as of December 31, 2022, with $241.6 million payable within 12 months.

See Note 10 to our financial statements for additional information regarding our long-term debt.

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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 discussed in Note 5 to our financial statements, 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 ASRs to repurchase shares of our Class A common stock in exchange for an up-front aggregate payment of $750.0 million.

We completed the ASRs in May 2022, repurchasing a total of 9,202 shares of our Class A common stock at an average price of $81.50 per share under these arrangements.

In addition to the ASRs discussed above, during the year ended December 31, 2022, we also repurchased a total of 7,642 shares of our Class A common stock in the open market for an aggregate purchase price of $550.1 million.

As of December 31, 2022, we had $1,699.9 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.

In July 2022, we completed an acquisition for $69.6 million in net cash consideration.

See Note 3 to our financial statements for a discussion of this acquisition.

Restructuring

As discussed in Note 20 to our financial statements, on February 8, 2023, the audit and finance committee of our board of directors authorized a restructuring plan to reduce future operating expenses and improve cash flows through a combination of a reduction in force and a rationalization of our portfolio.

As part of this plan, we announced a reduction in our current workforce of approximately 550 employees, representing approximately 8% of our total employees.

We estimate we will incur approximately $55.0 million to $65.0 million of pre-tax restructuring and exit related charges, of which $30.0 million to $40.0 million represents future cash expenditures for the payment of severance and related benefit costs.

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

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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.

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

Net cash provided by operating activities increased $150.4 million from $829.3 million in 2021 to $979.7 million in 2022, primarily driven by the growth in total bookings as well as lower acquisition-related payments and discretionary marketing spending.

These increases were partially offset by higher personnel costs to support our growth, increased domain costs and higher software licensing fees related to increased sales of third-party productivity solutions.

Investing Activities

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 $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.

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

Net cash used in investing activities decreased $503.6 million from $635.6 million in 2021 to $132.0 million in 2022, primarily due to a $295.2 million decrease in spending for business acquisitions and a $201.7 million decrease in purchases of intangible assets.

Financing Activities

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.

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

Net cash from financing activities decreased $1,624.8 million from $298.1 million provided in 2021 to $1,326.7 million used in 2022, primarily due to $800.0 million in proceeds received from the issuance of the 2029 Senior Notes in 2021 as well as a $768.6 million increase in share repurchases.

Deferred Revenue

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

If the threshold is not met, further assessment is undertaken to ascertain whether the acquisition meets the definition of a business.

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

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We perform our impairment assessment based on qualitative analysis, which includes considering various factors including macroeconomic conditions, industry and market conditions and our historical and projected operating results.

If, based on our qualitative analysis, we were to determine it is more-likely-than-not the fair value of our single reporting unit is less than its carrying amount, we would record an impairment loss for the amount equal to such excess.

If, based on our qualitative analysis, we were to determine it is more-likely-than-not the fair value of either of our reporting units is less than its carrying amount, a quantitative impairment test would be performed to determine if an impairment loss should be recorded.

Our qualitative analyses during 2022, 2021 and 2020 did not indicate any impairment.

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See Notes 2 and 16 to our financial statements for additional information regarding income taxes and the considerations that could lead to a release of substantially all of the valuation allowance against our DTAs.

Indirect Taxes

We are subject to indirect taxation in some, but not all, of the various states and foreign jurisdictions in which we and our subsidiaries conduct business.

Laws and regulations attempting to subject communications and commerce conducted over the Internet to various indirect taxes are becoming more prevalent, both in the U.S.

and internationally, and may impose additional burdens on us in the future.

Increased regulation could negatively affect our business directly, as well as the businesses of our customers.

Taxing authorities may impose indirect taxes on the Internet-related revenue we generate based on regulations currently being applied to similar, but not directly comparable, industries.

There are many transactions and calculations where the ultimate indirect tax determination is uncertain.

In addition, domestic and international indirect taxation laws, or interpretations thereof, are subject to change.

The calculation of our reserve for indirect taxes involves significant management estimates and is based on an ongoing analysis of our business activities, revenues subject to indirect taxes and applicable regulations.

Although we believe our indirect tax estimates and associated liabilities are reasonable, the final determination of indirect tax audits, litigation or settlements could be materially different than the amounts established for indirect tax contingencies.

See Note 12 to our financial statements for additional information regarding indirect taxes.

Loss Contingencies

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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We regularly review all contingencies to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made.

Development of a meaningful estimate of loss, or a range of potential loss, is complex when the outcome is directly dependent on negotiations with, or decisions by, third parties such as regulatory agencies, court systems in various jurisdictions and other interested parties.

Development of a meaningful estimate of loss, or a range of potential loss, is complex when the outcome is directly dependent on negotiations with, or decisions by, third parties such as regulatory

agencies, court systems in various jurisdictions and other interested parties.

Such factors bear directly on whether it is possible to reasonably estimate a range of potential loss and boundaries of high and low estimates.

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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