What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-16 compared with 2022-02-17 · 308 added, 213 removed, 1009 unchanged (34% of the section changed)

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Business Combination – Valuation of Acquired Intangible Asset

Description of the Matter As discussed in Note 3 of the consolidated financial statements, the Company completed the acquisition of Poynt Co.

in February 2021 for purchase consideration of $297.1 million.

The Company accounted for this transaction as a business combination.

Auditing management's accounting for the acquisition was complex due to the significant estimation uncertainty in determining the fair value of the acquired finite-lived software and payments developed technology intangible asset totaling $37.3 million.

The software and payments intangible asset was valued using an income-based approach.

The fair value determination of the acquired intangible asset required management to make estimates and significant assumptions regarding the future cash flows of the intangible asset, including revenue growth rates, earnings metrics, a technological obsolescence curve, economic life, and discount rate.

These significant assumptions were forward-looking and could be affected by future market and economic conditions.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls that address the risks of material misstatement relating to valuation of the acquired intangible asset.

For example, we tested controls over management's review of the valuation model for the acquired intangible asset, as well as the completeness and accuracy of the valuation inputs.

To test the estimated fair value of the intangible asset, our audit procedures included, among others, assessing the fair value methodology used by the Company and testing the significant assumptions and the underlying data used by the Company in its analyses.

We involved firm valuation specialists to assist us in our evaluation of the Company's valuation model, related assumptions and outputs of the valuation model.

We evaluated the methodology used by the Company and significant assumptions included in the fair value estimate.

Revenue recognition

Description of the Matter As more fully described in Note 2 to the consolidated financial statements, the Company derives its revenue primarily from subscription fees for domain registrations, website hosting, website security, and applications and commerce products, which it generally recognizes ratably over the related contractual terms.

The majority of the Company's revenue recognition process involves the use of several systems responsible for the processing and recording of transactions originating from the Company's ecommerce websites based on the calculation of revenue in accordance with the Company's accounting policies.

The processing and recognition of revenue are highly automated and involve capturing and processing significant volumes of data.

Auditing the Company's accounting for revenue from contracts with customers was challenging and complex due to the high volume of transactions and the dependency on the design and operation of multiple systems, some of which are custom-made for the Company's business.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's accounting for revenue recognition.

With the assistance of information technology professionals, we tested controls over the initiation and billing of subscriptions and the Company's cash to billings reconciliation process.

We also tested controls related to the interfaces between the provisioning, billing, and accounting systems.

Our audit procedures included, among others, testing the completeness and accuracy of the underlying data within the Company's billing systems, performing data analytics to evaluate the completeness and accuracy of recorded revenue and deferred revenue amounts, testing samples of sales transactions to third-party documentation, and reviewing the Company's cash to billings reconciliations.

We also evaluated the Company's disclosures included in Note 2 to the consolidated financial statements.

/s/ Ernst & Young LLP

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Accumulated deficit ( 2,422.6 ) ( 1,474.6 )

Accumulated other comprehensive loss ( 38.6 ) ( 131.0 )

Accumulated other comprehensive income (loss) 178.0 ( 38.6 )

Total stockholders' equity (deficit) attributable to GoDaddy Inc.

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2022 2021 2020

Domains $ 1,809.9 $ 1,515.1 $ 1,351.6

Hosting and presence 1,283.4 1,200.6 1,126.5

Business applications 722.4 601.0 510.0

Applications & commerce $ 1,279.7 $ 1,128.3 $ 926.1

Core platform 2,811.6 2,687.4 2,390.6

Total revenue 4,091.3 3,815.7 3,316.7

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Unrealized swap gain (loss), net (1)

214.9 30.7 9.1

Change in foreign currency translation adjustment ( 22.1 ) 45.9 ( 44.2 )

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172,867 $ 0.2 1,490 $ — $ 1,003.5 $ ( 153.5 ) $ ( 78.2 ) $ 10.1 $ 782.1

Net income — — — — — 137.0 — 1.4 138.4

Net income (loss) — — — — — ( 495.1 ) — 1.0 ( 494.1 )

Equity-based compensation, including amounts capitalized — — — — 193.9 — — — 193.9

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Issuances of Class A common stock under employee stock purchase plan 493 — — — 29.6 — — — 29.6

Exchanges of LLC units 4,764 — ( 4,764 ) — 9.1 — ( 2.6 ) ( 6.5 ) —

Tax receivable agreements liability arising from exchanges — — — — ( 9.7 ) — — — ( 9.7 )

Distributions to holders of LLC Units — — — — — — — ( 6.0 ) ( 6.0 )

Impact of derivatives, net — — — — — — ( 8.5 ) — ( 8.5 )

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Vesting of restricted stock units and other 3,170 — ( 802 ) — 2.2 ( 0.6 ) ( 0.1 ) ( 2.1 ) ( 0.6 )

Adjustment to prior period non-controlling interests allocations — — — — 51.7 — ( 38.5 ) ( 13.2 ) —

Balance at December 31, 2020

169,157 0.2 688 — 1,308.8 ( 1,190.9 ) ( 131.0 ) 1.1 ( 11.8 )

Net income (loss) — — — — — ( 495.1 ) — 1.0 ( 494.1 )

Net income — — — — — 242.3 — 0.5 242.8

Equity-based compensation, including amounts capitalized — — — — 211.9 — — — 211.9

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Issuances of Class A common stock under employee stock purchase plan 489 — — — 30.7 — — — 30.7

Distributions to holders of LLC Units — — — — — — — ( 6.0 ) ( 6.0 )

Impact of derivatives, net — — — — — — 47.0 — 47.0

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Equity-based compensation 264.4 207.9 191.5

Gain on derivative instruments 27.6 6.3 7.0

Non-cash restructuring and other charges 10.4 15.1 29.0

Loss on debt extinguishment — — 14.8

Tax receivable agreements liability adjustment — — 674.7

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Investing activities

Purchases of short-term investments — — ( 64.1 )

Maturities of short-term investments — — 23.7

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Cash paid during the period for:

Interest on long-term debt, net of swap benefit $ 104.2 $ 80.5 $ 80.3

Interest on long-term debt, including impact of interest rate swaps $ 127.3 $ 104.2 $ 80.5

Income taxes, net of refunds received $ 11.2 $ 19.1 $ 16.2

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Accrued purchases of property and equipment at period end $ 12.4 $ 1.2 $ 3.0

Landlord paid tenant improvements included in purchases of property and equipment $ 0.3 $ 0.5 $ 11.2

Share repurchases not yet settled $ 5.8 $ — $ —

See accompanying notes to consolidated financial statements.

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Stockholders' Equity

Prepaid Expenses and Other Current Assets

Equity-Based Compensation Plans

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Defined Contribution Plan

Payable Pursuant to the TRAs

Income (Loss) Per Share

Geographic Information

Segment Information

Accumulated Other Comprehensive Loss

Subsequent Events

Organization and Background

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The calculation of non-controlling interests excludes any net income attributable directly to GoDaddy Inc.

We owned more than 99.8 % of Desert Newco's limited liability company units (LLC Units) as of December 31, 2021.

We owned approximately 99.8 % of Desert Newco's limited liability company units (LLC Units) as of December 31, 2022.

Basis of Presentation

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Prior Period Reclassifications

Reclassifications of certain immaterial prior period amounts have been made to conform to the current period presentation.

In the first quarter of 2022, we revised the presentation of revenue in our statements of operations, as described in Note 2.

Reclassifications of certain other immaterial prior period amounts have been made to conform to the current period presentation.

Use of Estimates

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• the fair value of assets acquired and liabilities assumed in business acquisitions;

• the assessment of recoverability of long-lived assets;

• the assessment of recoverability of our goodwill, intangible assets and long-lived assets;

• the estimated useful lives of intangible and depreciable assets;

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however, actual results may differ.

As of December 31, 2021, our chief operating decision maker was our Chief Executive Officer who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance for the entire company.

Accordingly, we have a single operating and reportable segment.

Beginning in the first quarter of 2022, we revised the presentation of segment information to reflect changes in the way we manage and evaluate our business.

As such, we report our operating results through two reportable segments:

Applications and Commerce (A&C) and Core Platform (Core), as further discussed in Note 18.

Accordingly, we have revised our segment information for the comparable prior year period.

Summary of Significant Accounting Policies

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Depreciation and amortization expense related to property and equipment was $ 61.2 million, $ 68.4 million and $ 73.4 million during 2022, 2021 and 2020, respectively.

Property and equipment, net by geography was as follows:

France 28.8 23.8

All other international 29.3 33.6

$ 225.6 $ 220.0

No other individual international country represented more than 10% of property and equipment, net in any period presented.

Capitalized Software Costs

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As individual domains are sold, our indefinite-lived domain portfolio intangible asset is reduced by the allocated carrying cost of each domain, which is included in cost of revenue.

Goodwill in our single reportable segment is assessed for impairment annually during the fourth quarter of each year.

Goodwill is assessed for impairment annually during the fourth quarter of each year.

We also perform an assessment at other times if events or changes in circumstances indicate the carrying value may not be recoverable.

If, based on qualitative analysis, we determine it is more-likely-than-not the fair value of our reporting unit is less than its carrying amount, a quantitative impairment test is performed.

If, based on qualitative analysis, we 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 is performed.

Our qualitative analysis did not indicate impairment of our goodwill during any of the periods presented.

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Derivative Financial Instruments

We are exposed to changes in foreign currency exchange rates as well as changes in interest rates associated with our variable-rate debt.

We are exposed to changes in foreign currency exchange rates, primarily relating to intercompany debt, the net assets of our foreign operations and sales transactions denominated in currencies other than the U.S.

dollar, as well as to changes in interest rates as a result of our variable-rate debt.

Consequently, we use derivative financial instruments to manage and mitigate such risks.

We do not enter into derivative transactions for speculative or trading purposes.

We utilize a variety of derivative instruments, all of which are designated as cash flow hedges.

We expect each derivative instrument qualifying for hedge accounting will be highly effective at reducing the risk associated with the exposure being hedged.

For each derivative instrument designated as a hedge, we formally document the related risk management strategy and objective, including identification of the hedging instrument, the hedged item and the risk of exposure, as well as how hedge effectiveness will be assessed prospectively and retrospectively over the instrument's term.

To assess effectiveness of our swap instruments, we use regression analysis performed utilizing the Hypothetical Derivative Method to compare the change in fair value of the derivative instrument designated as the hedging instrument to the change in the fair value of a

similarly modeled hypothetical derivative using the same discount rate.

Following our initial quantitative assessment, we may perform subsequent assessments on a qualitative basis unless facts and circumstances change such that we can no longer qualitatively assert that our hedges are highly effective.

We reflect unrealized gains or losses on our cash flow hedges as a component of accumulated other comprehensive income (loss) (AOCI).

Gains and losses, once realized, are recorded as a component of AOCI and are amortized to earnings over the same period in which the underlying hedged amounts are recognized.

At inception, and each reporting period, we evaluate the effectiveness of each of our hedges, and all hedges were determined to be effective.

We utilize a variety of derivative instruments and expect that each derivative instrument qualifying for hedge accounting will be highly effective at reducing the risk associated with the exposure being hedged.

For each derivative instrument designated as a hedge, we formally document, at inception, the related risk management strategy and objective, including identification of the hedging instrument, the hedged item and the risk of exposure.

In addition, we formally assess, both at the inception and at least quarterly thereafter, whether the financial instruments used in the hedging transactions are effective at offsetting changes in either the fair values or cash flows of the relating underlying exposures.

Our derivative instruments are recorded at fair value on a gross basis.

For cash flow reporting purposes, proceeds received or amounts paid upon the settlement of a derivative instrument are classified in the same manner as the related item being hedged, primarily within cash flows from operating activities.

For cash flow reporting purposes, proceeds received or amounts paid upon the settlement of a derivative instrument are classified in the same manner as the related item being hedged.

Cash Flow Hedges

We utilize a variety of derivative instruments designated as cash flow hedges:

• foreign exchange forward contracts to hedge certain forecasted sales transactions denominated in foreign currencies;

• cross-currency swaps used to manage variability due to movements in foreign currency exchange rates related to a Euro-denominated intercompany loan;

• pay-fixed rate, receive-floating rate interest rate swaps to effectively convert portions of our variable-rate debt to fixed.

We reflect unrealized gains or losses on our cash flow hedges as components of accumulated other comprehensive income (loss) (AOCI).

Gains and losses on these instruments are recorded as a component of AOCI until the underlying transaction is recorded in earnings.

When the hedged item is realized, gains or losses are reclassified from AOCI to earnings within the same line items as the underlying transactions.

At inception, and each reporting period, we evaluate the effectiveness of each of our hedges, and all hedges were determined to be effective.

Net Investment Hedges

We use cross-currency swaps to reduce the risk associated with exchange rate fluctuations on our net investments in certain foreign operations.

Changes in the fair value of these derivative instruments are recorded in equity as a component of AOCI in the same manner as foreign currency translation adjustments (CTA).

We elected to use the spot method to assess effectiveness of these derivatives.

Under this method, changes in fair value of the hedging instruments attributed to changes in spot rates are initially recorded in the CTA component of AOCI and will remain there until the hedged net investments are sold or substantially liquidated.

Changes in fair value of the hedging instruments other than those due to changes in the spot rate are initially recorded in the CTA component of AOCI and are amortized to interest expense using a systematic and rational method over the instruments' term.

See Note 11 for further discussion of our derivative instruments.

We lease office and data center space in various locations.

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We initially recognize and measure contracts containing a lease and determine lease classification at commencement.

Right-of-use (ROU) assets and operating lease liabilities are measured based on the estimated present value of lease payments over the lease term.

Right-of-use (ROU) assets and operating lease liabilities are measured based on the estimated present value of lease payments

over the lease term.

In determining the present value of lease payments, we use our estimated incremental borrowing rate when the rate implicit in the lease cannot be readily determined.

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Equity Investments

We hold investments in privately held equity securities, which are recorded in other assets and totaled $ 40.0 million at December 31, 2021.

We hold investments in privately held equity securities, which are recorded in other assets and totaled $ 40.5 million and $ 40.0 million at December 31, 2022 and 2021, respectively.

These securities are recorded at cost and adjusted for observable transactions for same or similar investments of the same issuer or impairment.

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We have determined that our contracts do not include a significant financing component.

Payments received in advance of our performance are recorded as deferred revenue.

Payments received in advance of our performance are initially recorded as deferred revenue and then recognized as revenue on a straight-line basis over the term of the contract.

Revenue is recognized net of allowances for returns and applicable transaction-based taxes collected from customers.

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Refunds result in a reduced amount of revenue recognized over the contract term of the applicable product.

Our revenue is categorized and disaggregated as reflected in our statements of operations, as follows:

Domains revenue primarily consists of domain registrations and renewals, aftermarket domain sales, domain add-ons such as domain protection and fee surcharges paid to ICANN.

Consideration is recorded as deferred revenue when received, which is typically at the time of sale, and revenue, other than for aftermarket domain sales, is recognized ratably 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.

In the first quarter of 2022, we revised the presentation of revenue in our statements of operations in order to provide better visibility into our business and products as well as a more consistent way to track our progress against our strategic

This change also aligns our revenue presentation with the products in each of our two reportable segments, which are discussed in Note 18.

Following this change, our revenue is categorized as follows:

Applications and Commerce .

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.

A&C revenue also includes revenue from sales of products, such as website security products, when they are included in bundled offerings of our proprietary software products.

Consideration is generally recorded as deferred revenue when received, which is typically at the time of sale, and revenue from most A&C products is recognized ratably over the period in which the performance obligations are satisfied, which is typically over the contract term.

Payment processing fee revenue is recognized at the time of the transaction and revenue from the sale of POS hardware is recognized at the time when ownership is transferred to the customer.

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.

Core revenue also includes revenue from sales of products not containing a software component such as professional web services as well as fee surcharges paid to ICANN.

Consideration is generally recorded as deferred revenue when received, which is typically at the time of sale, and revenue from most Core products is recognized ratably over the period in which the performance obligations are satisfied, which is typically over the contract term.

Aftermarket domain revenue is recognized at the time when ownership of the domain is transferred to the buyer.

The prior period statement of operations was revised to retrospectively present revenue in the new groupings as shown in the table below.

There was no impact on total revenue, operating income, net income, deferred revenue or our statement of cash flows as a result of these revisions.

Year Ended December 31,

As Previously Reported

Domains $ 1,809.9 $ 1,515.1

Hosting and presence 1,283.4 1,200.6

Hosting and presence revenue primarily consists of website hosting products, website building products, website security products, online visibility products and commerce products.

Consideration is recorded as deferred revenue when received, which is typically at the time of sale, and revenue is primarily recognized ratably over the period in which the performance obligations are satisfied, which is generally over the contract term.

Business applications 722.4 601.0

Business applications revenue primarily consists of third-party productivity applications, email accounts, email marketing tools and telephony solutions.

Total revenue $ 3,815.7 $ 3,316.7

Applications and commerce $ 1,128.3 $ 926.1

Core platform 2,687.4 2,390.6

Total revenue $ 3,815.7 $ 3,316.7

Disaggregated Revenue

Revenue by major product type was as follows:

Year Ended December 31,

2022 2021 2020

Applications and commerce $ 1,279.7 $ 1,128.3 $ 926.1

Core platform:

domains 1,959.2 1,815.9 1,521.4

Core platform:

other 852.4 871.5 869.2

$ 4,091.3 $ 3,815.7 $ 3,316.7

No single customer represented over 10% of our total revenue for any period presented.

Revenue by geography is based on the customer's billing address and was as follows:

Year Ended December 31,

2022 2021 2020

$ 2,757.3 $ 2,544.9 2,211.3

International 1,334.0 1,270.8 1,105.4

$ 4,091.3 $ 3,815.7 $ 3,316.7

No individual international country represented more than 10% of total revenue in any period presented.

See Note 8 for additional information regarding our deferred revenue.

See Note 18 for our revenue disaggregated by geography.

Performance Obligations

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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.

Restructuring and Other

Restructuring and other consists primarily of severance and other exit costs as well as charges recorded in connection with the impairment and gains and losses on disposition of certain assets.

Equity-Based Compensation

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We recognize the accounting grant date fair value of equity-based awards as compensation expense over the required service period of each award, taking into account the probability of our achievement of associated performance targets.

We apply the straight-line attribution method to recognize equity-based compensation expense associated with awards not subject to graded vesting.

For awards subject to graded vesting, we recognize expense separately for each vesting tranche.

We regularly estimate when and if PSUs will be earned and record expense over the estimated service period only for awards considered probable of being earned.

Any previously recognized expense is reversed in the period in which an award is determined to no longer be probable of being earned.

On the settlement date of each three-year performance period associated with our TSR-based PSU grants, and only if a participant remains a Service Provider (as defined in the 2015 Equity Incentive Plan) on such date, a participant will receive shares of our Class A common stock ranging from 0 % to 200 % of the originally granted PSUs based on our relative TSR as compared to the companies within the selected index.

Vesting of the PSUs is subject to the TSR market condition as well as approval of the performance by our board of directors (the Board) following the end of each performance period.

Vesting of the PSUs is subject to the TSR market condition as well as approval of the performance by our board of directors following the end of each performance period.

Equity-based awards are accounted for using the fair value method.

RSUs and financial-based PSUs are measured based on the fair market value of the underlying common stock on their respective accounting grant dates.

Grant date fair values for stock options are determined using the Black-Scholes option pricing model and a single option award approach.

The accounting grant date for financial-based PSUs is the date on which the applicable performance criteria are approved by our Board.

Grant date fair values for stock options, which we last granted in 2020, are determined using the Black-Scholes option pricing model and a single option award approach.

The accounting grant date for financial-based PSUs is the date on which the applicable performance criteria are approved by our board of directors.

The fair value of shares issued under our employee stock purchase plan is estimated on the first day of each offering period using the Black-Scholes option pricing model.

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The cumulative effect of any changes to the forfeiture rate is recognized in the period in which the estimate is changed.

Key assumptions used in the determination of fair value for stock options are as follows:

Expected term.

Because of the lack of sufficient historical data, we use the simple average of the vesting period and the contractual term to estimate the period the stock options are expected to be outstanding.

Expected volatility.

We determine the expected stock price volatility based on the historical volatility of our Class A common stock and the historical volatilities of an industry peer group.

Expected dividend yield.

We do not use a dividend rate due to our expectation of not paying dividends in the foreseeable future.

Risk-free interest rate.

We base the risk-free interest rate on the yield curve of a zero-coupon U.S.

Treasury bond with a maturity equal to the expected term of the option on the grant date.

The fair value of stock options granted was estimated using the following weighted-average assumptions:

Year Ended December 31,

2021 2020 2019

Expected term (in years) n/a 6.0 6.1

Expected volatility n/a 32.3 % 31.2 %

Risk-free interest rate n/a 0.9 % 2.2 %

We estimate the grant-date fair value of the TSR-based PSUs using a Monte Carlo simulation which requires assumptions for expected volatility, risk-free rate of return and dividend yield.

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Cash and cash equivalents:

Time deposits and money market funds $ 178.1 $ — $ — $ 178.1

Commercial paper $ — $ 120.0 $ — $ 120.0

Time deposits 347.3 — — 347.3

Derivative assets — 218.5 — 218.5

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Cash and cash equivalents:

Money market funds $ 98.0 $ — $ — $ 98.0

Time deposits and money market funds $ 178.1 $ — $ — $ 178.1

Derivative assets — 30.3 — 30.3

Total assets $ 178.1 $ 30.3 $ — $ 208.4

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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 as of the respective acquisition dates.

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Acquisition-related costs are charged to general and administrative expense as incurred.

Tax Receivable Agreements

Concurrent with the completion of our initial public offering (IPO), we became a party to five tax receivable agreements (TRAs) with our pre-IPO owners under which we were contractually committed to pay such owners 85 % of the amount of calculated tax savings that we would be deemed to realize as a result of certain transactions.

In July 2020, we entered into a series of agreements pursuant to which we settled all liabilities under the TRAs in exchange for aggregate payments totaling $ 850.0 million.

We recorded a charge of $ 674.7 million to our statement of operations during 2020 to adjust our liability under the TRAs at that time to the aggregate settlement amount.

No amounts remain payable under the TRAs as of December 31, 2022.

Concentrations of Risks

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We serve our customers and users from data center facilities operated either by us or third parties, which are most significantly located in Arizona, Virginia, France, the Netherlands and Singapore.

Even with these procedures for

disaster recovery in place, the availability of our products could be significantly interrupted during the implementation of restoration procedures.

Even with these procedures for disaster recovery in place, the availability of our products could be significantly interrupted during the implementation of restoration procedures.

Recent Accounting Pronouncements

In March 2020, the FASB issued guidance providing temporary optional expedients and exceptions to ease the financial reporting burden of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

The guidance is applicable to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met and to other derivative instruments if there is a change in the interest rate used for discounting, margining and contract price alignment.

The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

We continue to evaluate our contractual arrangements and hedging relationships that reference LIBOR.

In October 2021, the FASB issued final guidance changing the measurement of acquired liabilities from contracts with customers in a business combination.

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Under existing guidance, contract liabilities are measured at fair value, which generally results in a reduction to acquired contract liabilities and therefore lower revenue recognized during the post-acquisition period.

We have elected to early adopt the new guidance as of January 1, 2022, which we will apply to future business acquisitions.

We early adopted the new guidance on January 1, 2022.

Business Acquisitions

2022 Acquisition

In July 2022, we completed the acquisition of Dan.com for net cash consideration of $ 69.6 million.

The acquisition was not material to our results of operations.

The aggregate purchase price was preliminarily allocated based upon our assessment of acquisition-date fair values with $ 56.3 million allocated to goodwill, none of which is tax deductible, $ 17.6 million to identified finite-lived intangible assets and $ 4.3 million of net liabilities assumed.

The identified finite-lived intangible assets, which primarily consist of developed technology and customer relationships, were valued using an income-based approach and have a total weighted-average amortization period of 3.3 years.

The recognition of goodwill was made based on the strategic benefits we expect to realize from the acquisition.

During the measurement period, which will not exceed one year from each closing, we will continue to obtain information to assist us in finalizing the acquisition-date fair values.

Any qualifying changes to our preliminary estimates will be recorded as adjustments to the respective assets and liabilities, with any residual amounts allocated to goodwill.

2021 Acquisitions

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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.

We paid $ 14.3 million of these compensatory payments in 2022.

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.

We paid $ 9.3 million of these milestones in 2022.

The aggregate purchase price of these three acquisitions was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of each acquisition date, with the excess recorded to goodwill.

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The identified finite-lived intangible assets, which were valued using either an income or cost-based approach, primarily consist of developed technology and customer relationships, and have a total weighted-average amortization period of 4.1 years.

Pro forma financial information is not presented because these acquisitions were not material to our financial statements, either individually or in the aggregate.

2020 Acquisitions

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During 2020, we completed three other acquisitions for aggregate purchase consideration of $ 219.2 million in cash, of which $ 10.2 million is payable in future periods upon expiration of the respective contractual holdback periods.

We paid $ 7.2 million of these holdbacks in 2021.

We paid $ 3.0 million and $ 7.2 million of these holdbacks in 2022 and 2021, respectively.

The aggregate purchase price of these four acquisitions was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of each acquisition date, with the excess recorded to goodwill.

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The acquired finite-lived intangible assets have a total weighted-average amortization period of 5.5 years.

Pro forma financial information is not presented because the acquisitions occurring in each of the years ended December 31, 2022, 2021 and 2020 were not material to our financial statements, either individually or in the aggregate.

Other Acquisition-Related Payments

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Goodwill and Intangible Assets

The following table summarizes changes in our goodwill balance:

As described in Note 18, beginning in the first quarter of 2022, we revised the presentation of segment information to reflect changes in the way we manage and evaluate our business.

As such, we now have two operating segments, which are also our reporting units.

We evaluated the goodwill of each reporting unit for impairment immediately before and after this change;

no impairment was identified.

The following table summarizes changes in our goodwill balance by segment:

A&C Core Total

Balance at December 31, 2020 1,408.3 1,866.8 3,275.1

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Impact of foreign currency translation ( 19.1 ) ( 25.4 ) ( 44.5 )

Other ( 0.7 ) ( 0.7 ) ( 1.4 )

Balance at December 31, 2021 1,522.5 2,018.3 3,540.8

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Impact of foreign currency translation ( 31.7 ) ( 43.0 ) ( 74.7 )

Other ( 1.4 )

Purchase accounting adjustments related to prior period acquisitions 6.2 8.3 14.5

Balance at December 31, 2022 $ 1,497.0 $ 2,039.9 $ 3,536.9

_________________________________

(1) Includes immaterial measurement period adjustments related to acquisitions completed in 2020.

Intangible assets, net are summarized as follows:

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These purchases primarily consisted of a number of top-level domains (TLDs), of which $ 186.8 million were recorded as indefinite-lived contractual-based intangible assets.

In December 2020, we completed the purchase of a domain portfolio for $ 17.0 million in cash, of which $ 2.0 million was paid in 2021.

Amortization expense was $ 128.9 million, $ 127.9 million and $ 127.1 million during 2022, 2021 and 2020, respectively.

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Share Repurchases

Our Board authorized us to purchase up to $ 2,275.0 million of our Class A common stock from time to time in open market purchases, block transactions and privately negotiated transactions, in accordance with applicable federal securities laws.

This authorization has no time limits, does not obligate us to make any repurchases and may be modified, suspended or terminated by us at any time without prior notice.

The amount and timing of repurchases are subject to a variety of factors including liquidity, share price, market conditions and legal requirements.

Repurchased shares are immediately retired and returned to an unissued status.

We have elected to record the excess of the repurchase price over par value as a charge to retained earnings (accumulated deficit).

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

In August 2021, we entered into an accelerated share repurchase agreement (ASR) to repurchase shares of our Class A common stock in exchange for an up-front payment of $ 250.0 million.

The total number of shares ultimately delivered under the ASR, and therefore the average repurchase price paid per share, was determined based on the volume weighted-average price of our stock during the purchase period.

The shares received were retired at the time of delivery and the up-front payment was accounted for as a reduction in retained earnings.

The ASR is a forward contract indexed to our Class A common stock and met all of the applicable criteria for equity classification;

The total number of shares ultimately delivered under the ASR, and therefore the average repurchase price paid per share, was determined based on the volume weighted-average

price of our stock during the purchase period.

The shares received were retired at the time of delivery and the up-front payment was accounted for as a charge to accumulated deficit.

The ASR was a forward contracts indexed to our Class A common stock and met all of the applicable criteria for equity classification;

therefore, it was not accounted for as a derivative instrument.

The ASR was completed during 2021 and we repurchased a total of 3,425 shares of our Class A common stock at an average price of $ 72.99 per share under this arrangement.

Expenses incurred in connection with the ASR were recorded as a charge to retained earnings.

In addition to the ASR discussed above, we also made the following open market repurchases of our Class A common stock:

Expenses incurred in connection with the ASR were recorded as a charge to accumulated deficit.

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 board approvals, such that we have authority to repurchase up to $ 3,000.0 million of our Class A common stock.

Shares may be repurchased in open market purchases, block transactions and privately negotiated transactions, in accordance with applicable federal securities laws.

This authorization has no time limits, does not obligate us to make any repurchases and may be modified, suspended or terminated by us at any time without prior notice.

In February 2022, we entered into ASRs to repurchase shares of our Class A common stock in exchange for an up-front aggregate payment of $ 750.0 million.

The ASRs were completed in May 2022 and we repurchased a total of 9,202 shares of our Class A common stock at an average price of $ 81.50 per share under these arrangements.

Expenses incurred in connection with the ASRs were recorded as a charge to accumulated deficit.

In addition to the ASRs discussed above, we also made the following open market repurchases of our Class A common stock:

Year Ended December 31, Number of Shares Repurchased Aggregate Purchase Price (1)

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(1) The aggregate purchase price includes commissions paid in connection with the repurchases.

In January 2022, our Board 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 Board approvals, 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.

The counterparties to this ASR initially delivered 6,532 shares, which were immediately retired.

The total number of shares ultimately delivered under this ASR, and therefore the average repurchase price paid per share, will be determined based on the volume weighted-average price of our stock during the purchase period.

As of December 31, 2022, we had $ 1,699.9 million of remaining authorization available for repurchases.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

Derivative assets $ 209.6 $ 24.7

Prepaid software and maintenance expenses 29.5 25.7

Usage-based prepaid expenses (1)

Other 22.1 30.4

$ 271.8 $ 109.9

_________________________________

(1) Usage-based prepaid expenses include various cost of sales, marketing, rent and other prepaid commitments that are amortized as the funds are used.

Equity-Based Compensation Plans

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Outstanding at December 31, 2020 3,428 42.79

Granted 154 22.33 68.05

Exercised ( 1,168 ) 36.72 51.0

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RSUs 5,356 70.54

TSR-based PSUs 349 106.14

Financial-based PSUs granted for accounting purposes 223 66.97

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Outstanding at December 31, 2022 7,632

At December 31, 2021, total unrecognized compensation expense related to non-vested options and awards was $ 5.3 million and $ 352.1 million, respectively, with expected remaining weighted-average recognition periods of approximately 1.4 years and 2.4 years, respectively.

As of December 31, 2022, total unrecognized compensation expense related to non-vested equity grants was $ 406.9 million with an expected remaining weighted-average recognition period of approximately 2.4 years.

Such amounts exclude PSUs not yet considered granted for accounting purposes.

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Deferred revenue consisted of the following:

Domains $ 897.1 $ 810.7

Hosting and presence 607.3 574.8

Business applications 385.7 325.8

A&C $ 622.1 $ 568.0

Core 1,331.9 1,322.1

$ 1,954.0 $ 1,890.1

Domains $ 426.1 $ 410.4

Hosting and presence 213.4 218.1

Business applications 103.8 96.6

A&C $ 173.1 $ 187.3

Core 597.2 556.0

$ 770.3 $ 743.3

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2023 2024 2025 2026 2027 Thereafter Total

Domains $ 897.1 $ 226.1 $ 85.5 $ 48.3 $ 28.1 $ 38.1 $ 1,323.2

Hosting and presence 607.3 135.2 41.3 15.5 6.5 14.9 820.7

Business applications 385.7 76.9 21.2 3.1 1.2 1.4 489.5

A&C $ 622.1 $ 120.9 $ 38.4 $ 7.7 $ 3.1 $ 3.0 $ 795.2

Core 1,331.9 333.7 114.8 63.5 35.0 50.2 1,929.1

$ 1,954.0 $ 454.6 $ 153.2 $ 71.2 $ 38.1 $ 53.2 $ 2,724.3

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Accrued payroll and employee benefits $ 116.3 $ 124.2

Derivative liabilities 89.5 216.4

Current portion of operating lease liabilities 36.9 41.5

Tax-related accruals 42.8 35.6

Accrued acquisition-related expenses and acquisition consideration payable 24.5 9.4

Accrued legal and professional 34.3 23.2

Current portion of operating lease liabilities 33.3 36.9

Accrued acquisition-related expenses and acquisition consideration payable 26.2 24.5

Accrued marketing and advertising 13.6 22.9

Derivative liabilities 4.9 89.5

Other 85.3 80.5

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2027 Term Loans (effective interest rate of 4.3 % at December 31, 2022 and 2.4 % at December 31, 2021)

February 15, 2024 $ 1,782.4 $ 1,807.4

2027 Term Loans (effective interest rate of 2.4 % at December 31, 2021 and 3.0 % at December 31, 2020)

August 10, 2027 $ 731.3 $ 738.8

2029 Term Loans (effective interest rate of 4.1 % at December 31, 2022 and 2.3 % at December 31, 2021)

November 10, 2029 1,770.0 1,782.4

2027 Senior Notes (effective interest rate of 5.4 % at December 31, 2022 and December 31, 2021)

December 1, 2027 600.0 600.0

2029 Senior Notes (effective interest rate of 3.6 % at December 31, 2021)

2029 Senior Notes (effective interest rate of 3.6 % at December 31, 2022 and December 31, 2021)

March 1, 2029 800.0 800.0

February 15, 2024 — —

November 10, 2027 — —

Total 3,901.3 3,921.2

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Credit Facility

Our secured credit agreement (the Credit Facility) includes our previously-issued term loans (the 2024 Term Loans), a new tranche of term loans issued in August 2020 (the 2027 Term Loans) and a revolving credit facility (the Revolver).

Our secured credit agreement (the Credit Facility) includes two tranches of term loan (the 2027 Term Loans and the 2029 Term Loans, the latter of which refinanced and replaced our previously issued term loans maturing in 2024, as described below) and a revolving credit facility (the Revolver).

A portion of the term loans is hedged by interest rate swap agreements, as discussed in Note 11.

In August 2020, we amended the Credit Facility to allow for the issuance of the 2027 Term Loans in an aggregate principal amount of $ 750.0 million.

The 2027 Term Loans were issued at a 0.5 % discount on the face of the note at original issue for net proceeds of $ 746.3 million, which were used to partially fund the payments associated with the settlement of our obligations under certain tax receivable agreements (TRAs), as discussed in Note 16.

In conjunction with the issuance of these loans, we recognized an additional $ 6.5 million in debt issuance costs.

The 2024 Term Loans bear interest at a rate equal to, at our option, either (a) LIBOR plus 1.75 % per annum or (b) 0.75 % per annum plus the highest of (i) the Federal Funds Rate plus 0.5 %, (ii) the Prime Rate or (iii) one-month LIBOR plus 1.0 %.

The 2027 Term Loans were originally issued in 2020 in an aggregate principal amount of $ 750.0 million at a 0.5 % discount on the face of the note at original issue.

The net proceeds of these loans were used to partially fund the payments associated with the settlement of our obligations under certain tax receivable agreements in 2020.

In March 2021, we refinanced the 2027 Term Loans to lower the interest rate margins by 0.5 % with no changes made to the maturity date or any other terms.

Following this refinancing, the 2027 Term Loans bear interest at a rate equal to, at our option, either (a) LIBOR plus 2.0 % per annum or (b) 1.0 % per annum plus the highest of (i) the Federal Funds Rate plus 0.5 %, (ii) the Prime Rate or (iii) one-month LIBOR plus 1.0 %.

Fees incurred in connection with the refinancing were not material.

The Revolver bears interest at a rate equal to, at our option, either (a) LIBOR plus a margin ranging from 1.25 % to 1.75 % per annum or (b) the higher of (i) the Federal Funds Rate plus 0.5 %, (ii) the Prime Rate or (iii) the one-month LIBOR rate plus 1.0 % plus a margin ranging from 0.25 % to 0.75 % per annum, with the margins determined based on our first lien secured leverage ratio.

In November 2022, we amended our Credit Facility to provide for a new $ 1,770.0 million tranche of term loans maturing in 2029 (the 2029 Term Loans), the proceeds of which were used to refinance all of the outstanding previously issued term loans maturing in 2024.

The 2029 Term Loans were issued at a 2.0 % discount on the face of the note at original issue and bear interest at a rate equal to at our option, either (a) Secured Overnight Financing Rate (SOFR) for an interest period of one month plus an initial margin of 3.25 % per annum or (b) an initial margin of 2.25 % per annum plus the highest of (i) the Federal Funds Rate plus 0.5 %, (ii) the Prime Rate or (iii) SOFR for an interest period of one month plus 1.0 %.

In evaluating the above refinancings, we compared the net present value cash flows of the previous instruments and the refinanced instruments to determine whether the terms of the new debt and original instruments were "substantially different" on a creditor-by-creditor basis.

In each case, certain of the creditors in the loan syndication did not reinvest in the refinanced debt, and we accounted for their proportionate share of the unamortized original issue discount and deferred financing costs as an aggregate loss on debt extinguishment.

As the cash flows for the continuing creditors varied by less than 10% between the old and new instruments, we concluded that the refinancing represented a debt modification.

Neither fees incurred nor loss on debt extinguishment recognized in connection with the refinancing of the 2027 Term Loans was material.

With respect to the refinancing of the 2029 Term Loans, aggregate fees paid to lenders of $ 9.3 million were recorded as additional discount, and we recognized a loss on debt extinguishment of $ 3.3 million.

In November 2022, we also increased the borrowing capacity under our Revolver from $ 600.0 million to $ 1,000.0 million under a new revolving credit facility maturing in November 2027.

In connection with this transaction, we capitalized aggregate fees of $ 4.1 million as debt issuance costs as well as recognized a loss on debt extinguishment of $ 0.3 million.

The Revolver bears interest at a rate equal to, at our option, either (a) SOFR plus a margin ranging from 1.25 % to 1.75 % per annum or (b) the higher of (i) the Federal Funds Rate plus 0.5 %, (ii) the Prime Rate or (iii) SOFR for an interest period of one month plus 1.0 % plus a margin ranging from 0.25 % to 0.75 % per annum, with the margins determined based on our first lien secured leverage ratio.

The Revolver also contains a financial covenant requiring us to maintain a leverage ratio of 5.75 :1.00 when our usage exceeds 40.0 % of the maximum capacity.

This ratio is calculated as the ratio of first lien secured debt less cash and cash equivalents to consolidated EBITDA (as defined in the Credit Facility).

All LIBOR-based interest rates under the Credit Facility are subject to a 0.0 % floor on LIBOR.

All LIBOR- and SOFR-based interest rates under the Credit Facility are subject to a 0.0 % floor.

Principal payments comprising 0.25 % of the initial principal balances of the term loans are due quarterly.

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The aggregate principal amount outstanding is payable at maturity, subject to earlier repurchase or optional redemption as described below.

The 2027 Senior Notes are redeemable at our option, in whole or in part, at any time prior to June 1, 2022 at a redemption price equal to 100.0 % of the principal amount, plus accrued and unpaid interest, plus an applicable premium equal to the greater of 1.0 % and the remaining scheduled payments of interest discounted to a present value amount.

In the event of an equity offering prior to June 1, 2022, the 2027 Senior Notes may be partially redeemed with the net cash proceeds of such offering at our option at an amount equal to 105.25 % of the principal amount, plus accrued and unpaid interest.

On and after June 1, 2022, we may redeem the 2027 Senior Notes, in whole or in part, at an amount equal to 102.625 % of the principal amount, decreasing to 101.75 % at June 1, 2023, 100.875 % at June 1, 2024 and 100.0 % at June 1, 2025, plus accrued and unpaid interest.

The 2027 Senior Notes are redeemable at our option, in whole or in part, at an amount equal to 102.625 % of the principal amount, decreasing to 101.75 % at June 1, 2023, 100.875 % at June 1, 2024 and 100.0 % at June 1, 2025, plus accrued and unpaid interest.

Upon the occurrence of a change of control, we are required to offer to repurchase the 2027 Senior Notes from the holders at a price equal to 101.0 % of the principal amount, plus accrued and unpaid interest.

In February 2021, we issued the 2029 Senior Notes in an aggregate principal amount of $ 800.0 million in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

The 2029 Senior Notes were issued at par and bear interest at 3.5 % per annum, payable annually on March 1 and September 1, commencing on September 1, 2021.

The 2029 Senior Notes were issued at par and bear interest at 3.5 % per annum, payable annually on March 1 and September 1.

The aggregate principal is payable at maturity, subject to earlier to earlier repurchase or optional redemption as described below.

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The 2029 Senior Notes are redeemable at our option, in whole or in part, any time prior to March 1, 2024 at a redemption price equal to 100.0 % of the principal amount, plus accrued and unpaid interest, plus an applicable premium equal to the greater of 1.0 % or the remaining scheduled payments of interest discounted to a present value amount.

In the event of an equity offering prior to March 1, 2024, the 2029 Senior Notes may be partially redeemed with the net cash proceeds of such offering at our option at an amount equal to 103.5 % of the principal amount, plus accrued and unpaid interest.

In the event of an

equity offering prior to March 1, 2024, the 2029 Senior Notes may be partially redeemed with the net cash proceeds of such offering at our option at an amount equal to 103.5 % of the principal amount, plus accrued and unpaid interest.

On and after March 1, 2024, we may redeem the 2029 Senior Notes, in whole or in part, at an amount equal to 101.75 % of the principal amount, decreasing to 100.875 % at March 1, 2025 and 100.0 % at March 1, 2026, plus accrued and unpaid interest.

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We do not enter into derivative transactions for speculative or trading purposes.

We utilize a variety of derivative instruments, all of which are designated as cash flow hedges, including:

• foreign exchange forward contracts to hedge certain forecasted sales transactions denominated in foreign currency;

• a cross-currency swap arrangement used to manage variability due to movements in foreign currency exchange rates related to a Euro-denominated intercompany loan;

• pay-fixed rate, receive-floating rate interest rate swap arrangements to effectively convert portions of our variable-rate debt to fixed.

The following table summarizes our outstanding derivative instruments on a gross basis:

We utilize the following derivative instruments designated as cash flow hedges:

• foreign exchange forward contracts to hedge certain forecasted sales transactions denominated in foreign currencies;

• cross-currency swaps used to manage variability due to movements in foreign currency exchange rates related to a Euro-denominated intercompany loan;

• pay-fixed rate, receive-floating rate interest rate swaps to effectively convert portions of our variable-rate debt to fixed.

We also utilize cross-currency swaps designated as net investment hedges to mitigate the risk associated with exchange rate fluctuations on our net investment in certain foreign operations.

The following table summarizes our outstanding derivative instruments on a gross basis, all of which are considered Level 2 financial instruments:

Notional Amount Fair Value of Derivative Assets (2)

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December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021

Derivative Instrument:

Cash flow hedges:

Foreign exchange forward contracts $ 364.7 $ 360.3 $ 9.4 $ 5.6 $ 2.0 $ 1.0

Cross-currency swap (1)

Cross-currency swaps (1)

549.7 1,346.8 15.8 — 2.2 80.9

Interest rate swaps 1,980.5 2,001.2 173.0 24.7 — 7.6

Net investment hedges:

Cross-currency swaps (1)

704.6 — 20.3 — 0.7 —

Total hedges $ 3,599.5 $ 3,708.3 $ 218.5 $ 30.3 $ 4.9 $ 89.5

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(2) In our balance sheets, all derivative assets are recorded within prepaid expenses and other current assets and all derivative liabilities are recorded within accrued expenses and other current liabilities .

The following table summarizes the effect of our designated cash flow hedging derivative instruments on AOCI:

The following table summarizes the effect of our hedging relationships on AOCI:

Unrealized Gains (Losses) Recognized in Other Comprehensive Income (Loss)

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2022 2021 2020

Derivative Instrument:

Cash flow hedges:

Foreign exchange forward contracts (1)

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Interest rate swaps 158.3 48.4 ( 4.9 )

Net investment hedges:

Cross-currency swaps 20.3 — —

Total hedges $ 256.9 $ 49.2 $ ( 6.3 )

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(1) Amounts include gains and losses realized upon contract settlement but not yet recognized into earnings from AOCI.

The following table summarizes the locations and amounts of gains (losses) recognized within earnings related to our cash flow hedging relationships:

The following table summarizes the locations and amounts of gains (losses) recognized within earnings related to our hedging relationships:

Year Ended December 31,

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Revenue Interest Expense Other Income (Expense), Net Revenue Interest Expense Other Income (Expense), Net Revenue Interest Expense Other Income (Expense), Net

Cash flow hedges:

Foreign exchange forward contracts:

Reclassified from AOCI into income $ 5.3 $ — $ — $ ( 8.9 ) $ — $ — $ 2.7 $ — $ —

Cross-currency swap:

Cross-currency swaps:

Reclassified from AOCI into income (1)

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Reclassified from AOCI into income — ( 5.0 ) — — ( 35.0 ) — — ( 25.6 ) —

Net investment hedges:

Cross-currency swaps:

Reclassified from AOCI into income — 11.3 — — — — — — —

Total hedges $ 5.3 $ 21.2 $ 41.5 $ ( 8.9 ) $ ( 7.7 ) $ 100.6 $ 2.7 $ 3.3 $ ( 120.4 )

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(1) The amounts reflected in other income (expense), net include $( 41.3 ) million, $( 101.8 ) million and $ 119.3 million reclassified from AOCI to offset the earnings impact of the remeasurement of the Euro-denominated intercompany loan hedged by the cross-currency swap during 2022, 2021 and 2020, respectively.

As of December 31, 2021, we estimate that $ 9.3 million of net deferred losses related to our cash flow hedges will be recognized in earnings over the next 12 months.

As of December 31, 2022, we estimate that $ 87.3 million of net deferred gains related to our cash flow hedges will be recognized in earnings over the next 12 months.

No amounts were excluded from our effectiveness testing during any of the periods presented.

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Cross-Currency Swap Contract

In April 2017, in order to manage variability due to movements in foreign currency rates related to a Euro-denominated intercompany loan, we entered into a five-year cross-currency swap arrangement.

The cross-currency swap, which matures on April 3, 2022, had an amortizing notional amount of € 1,243.3 million at inception (approximately $ 1,325.4 million).

It converts the 3.00 % fixed rate Euro-denominated interest and principal receipts on the intercompany loan into fixed U.S.

dollar interest and principal receipts at a rate of 5.44 %.

Pursuant to the contract, the Euro notional value will be exchanged for the U.S.

In April 2017, in order to manage variability due to movements in foreign currency rates related to a Euro-denominated intercompany loan, we entered into five-year cross-currency swaps.

In March 2022, we entered into a transaction to extend the maturity of these swaps to August 31, 2027.

We and the existing counterparties executed cancellation agreements to terminate all rights, obligations and liabilities associated with the original swaps.

On the modification date, the existing cash flow hedging relationships were de-designated and new hedging relationships incorporating the terms of the new swaps (the 2022 Cross-Currency Swaps) were designated as either cash flow hedging relationships or net investment hedging relationships.

The 2022 Cross-Currency Swaps had an aggregate amortizing notional amount of € 1,184.2 million at inception (approximately $ 1,262.5 million).

The swaps designated as cash flow hedging relationships convert the 3.00 % fixed rate Euro-denominated interest and principal receipts on the intercompany loan into U.S.

dollar interest and principal receipts at a fixed rate of 4.81 %.

The swaps designated as net investment hedging relationships hedge the foreign currency exposure of our net investment in certain Euro denominated functional currency subsidiaries.

Pursuant to the contracts, the Euro notional value will be exchanged for the U.S.

dollar notional value at maturity.

The cross-currency swap has been designated as a cash flow hedge.

Accordingly, it is recognized as an asset or liability at fair value and the unrealized gains and losses on the contract are included in gain (loss) on swaps and foreign currency hedging, net within AOCI.

Gains and losses are reclassified to interest income or expense over the period the hedged loan affects earnings.

As such, amounts recorded in other comprehensive income (loss) (OCI) will be recognized in earnings within or against interest expense when the hedged interest payment is accrued each month.

In addition, an amount is reclassified from AOCI to other income (expense), net each reporting period, to offset the earnings impact of the hedged instrument.

Interest Rate Swap Contracts

In April 2017, we entered into a five-year pay-fixed rate, receive-floating rate interest rate swap arrangement to effectively convert a portion of the variable-rate borrowings under the 2029 Term Loans to a fixed rate of 5.44 %.

This arrangement, which matures on April 3, 2022, had an amortizing notional amount of $ 1,325.4 million at inception.

In August 2020, in conjunction with the issuance of the 2027 Term Loans discussed in Note 9, we entered into seven-year pay-fixed rate, receive-floating rate interest rate swap arrangements to effectively convert the variable one-month LIBOR interest rate on the 2027 Term Loans borrowings to a fixed rate of 0.705 %.

In March 2022, we entered into a transaction to extend the maturity of the swaps to August 31, 2027.

We and the existing counterparties executed cancellation agreements to terminate all rights, obligations and liabilities associated with the original swaps.

On the modification date, the existing cash flow hedging relationships were de-designated and new hedging relationships incorporating the terms of the new interest rate swaps (the 2022 Interest Rate Swaps) were designated.

The 2022 Interest Rate Swaps, which had an amortizing notional amount of $ 1,262.5 million at inception, serve to convert a portion of the variable-rate borrowings under the 2029 Term Loans to a fixed rate of 4.81 %.

In November 2022, in conjunction with the Credit Facility refinancing discussed in Note 10, we terminated these swaps and entered into new SOFR-based interest rate swaps.

This modification impacted no critical terms other than the reference rate change from LIBOR to SOFR and thus had no impact on our hedging relationship or financial results.

In August 2020, in conjunction with the issuance of the 2027 Term Loans, we entered into seven-year pay-fixed rate, receive-floating rate interest rate swaps to effectively convert the variable one-month LIBOR interest rate on the 2027 Term Loans borrowings to a fixed rate of 0.705 %.

These interest rate swaps, which mature on August 10, 2027, had an aggregate notional amount of $ 750.0 million at inception.

The objective of these arrangements, which are designated as cash flow hedges and recognized as assets or liabilities at fair value, is to manage the variability of cash flows in the interest payments related to the portion of the variable-rate debt designated as being hedged.

The unrealized gains and losses on the contracts are included in gain (loss) on swaps and foreign currency hedging, net within AOCI, and will be recognized in earnings within or against interest expense when the hedged interest payments are accrued each month.

The unrealized gains and losses on the swaps are included in AOCI and will be recognized in earnings within or against interest expense when the hedged interest payments are accrued each month.

Our operating leases primarily consist of office and data center space expiring at various dates through November 2036.

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Sublease income ( 8.3 ) ( 4.3 ) ( 3.0 )

Net lease costs $ 54.3 $ 59.4 $ 61.4

$ 48.2 $ 54.3 $ 59.4

We recognized impairment charges related to certain operating lease assets during 2022, 2021 and 2020, as discussed in Note 14.

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On September 23, 2019, the parties fully executed a written settlement agreement.

On December 16, 2019, we amended the settlement agreement to include two additional putative class

action cases, which also alleged violations of the TCPA:

On December 16, 2019, we amended the settlement agreement to include two additional putative class action cases, which also alleged violations of the TCPA:

John Herrick v.

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Court (the Court) to refine the class definition, resulting in a reduction in the total number of class members from the original estimated class.

On May 14, 2020, the Court granted approval of the plaintiffs' unopposed motion for preliminary certification of the settlement class, subject to the parties' execution of an amended settlement agreement to remove John Herrick as a class representative.

On May 14, 2020, the Court granted approval of the plaintiffs' unopposed motion for preliminary certification of the settlement class,

subject to the parties' execution of an amended settlement agreement to remove John Herrick as a class representative.

The parties executed such amendment on May 26, 2020, and on June 9, 2020, the Court granted preliminary approval of the final settlement agreement.

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The timing of any settlement payments is pending resolution of the appeal.

We have denied and continue to deny the allegations in the complaint.

On July 27, 2022, the 11th Circuit vacated the settlement approval order and remanded the case for further action due to standing issues among the class members.

On August 18, 2022, the plaintiffs filed a petition for a rehearing before the 11th Circuit, which remains pending as of the date of this filing.

On December 7, 2022, the 11th Circuit was notified of the death of one of the plaintiffs, Jason Bennett.

The parties are currently briefing the effect, if any, of his death on the appeal.

Given the pending nature of this petition, the possibility for one or more parties to seek relief from the Supreme Court and the ongoing briefing regarding the effect of the plaintiff's death, the finality and/or impact of the July 27, 2022 decision is uncertain.

As a result, we have not adjusted our estimated loss provision for this settlement as of December 31, 2022.

We have denied and continue to deny the allegations in the complaints.

Nothing in the final settlement agreement shall be deemed to assign or reflect any admission of fault, wrongdoing or liability, or of the appropriateness of a class action in such litigation.

33 unchanged sentences

Cash payments of $ 14.4 million related to the restructuring were made during 2020.

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 due to the impairment of certain operating lease assets and related leasehold improvements associated with the decision to close one of our leased offices.

During 2021, we recorded other charges and credits, which included (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 due to the impairment of certain operating lease assets and related leasehold improvements associated with the decision to close one of our leased offices.

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

Defined Contribution Plan

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Despite its partnership treatment, Desert Newco is liable for income taxes in certain foreign jurisdictions in which it operates, in those states not recognizing its pass-through status and for certain of its subsidiaries not taxed as pass-through entities.

acquired the outstanding stock of various domestic and foreign entities taxed as corporations, which are now wholly-owned by us or our subsidiaries.

We have acquired the outstanding stock of various domestic and foreign entities taxed as corporations, which are now wholly-owned by us or our subsidiaries.

Where required or allowed, these subsidiaries also file and pay tax as a consolidated group for U.S.

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State taxes, net of federal benefit 2.9 ( 31.5 ) 44.9

Effect of restructurings of domestic subsidiary ( 7.0 ) — —

Other ( 1.9 ) 3.8 0.9

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NOLs 523.2 599.7

Credit and incentives 101.4 77.1

Tax credits 134.4 101.4

Deferred interest 38.2 40.0

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Net DTLs $ ( 50.7 ) $ ( 70.0 )

On March 11, 2021, the U.S.

federal government enacted the American Rescue Plan Act of 2021, which did not have a material impact on our provision for income taxes.

On June 10, 2021, the UK enacted legislation increasing its corporate income tax rate to 25%, beginning in April 2023, which did not have a material impact on our provision for income taxes.

On August 16, 2022, the U.S.

government enacted the Inflation Reduction Act (IRA Act), which is effective January 1, 2023 and contains provisions implementing a 15% minimum corporate income tax and a 1% excise tax on stock repurchases.

While we are continuing to evaluate the impact of the IRA Act, at this time, we do not believe it will have a material impact on our consolidated financial statements.

Provisions enacted in the Tax Cuts and Jobs Act related to the capitalization for tax purposes of research and experimental expenditures became effective on January 1, 2022.

These provisions require us to capitalize research and experimental expenditures and amortize them on the U.S.

tax return over five or fifteen years, depending on where research is conducted.

The enacted provision did not have a material impact on our consolidated financial statements.

In determining the need for a valuation allowance, we prepare quarterly estimates using historical and forecasted future operating results, based upon approved business plans, including a review of the eligible carryforward periods and tax planning strategies.

Based primarily on the negative evidence outweighing the positive evidence as of December 31, 2021, including our three year cumulative, consolidated GAAP loss, our historical tax losses and the difficulty in forecasting excess tax benefits related to equity-based compensation, we believe there is uncertainty as to when we will be able to utilize certain of our net operating losses (NOLs), credit carryforwards and other DTAs.

Based primarily on the negative evidence outweighing the positive evidence as of December 31, 2022, we believe there is uncertainty as to when we will be able to utilize certain of our domestic net operating losses (NOLs), credit carryforwards and other deferred tax assets (DTAs).

This negative evidence includes our historical tax losses, the difficulty in forecasting excess tax benefits related to equity-based compensation, as well as the difficulty in forecasting profits due to the current uncertain macroeconomic conditions, such as inflation and the possibility of a recession or an economic slowdown in the U.S.

Therefore, we have recorded a valuation allowance against the DTAs for which we have concluded it is more-likely-than-not they will not be realized.

Should our operating results continue to improve and projections show continued utilization of the tax attributes, we would consider that as significant positive evidence and our future reassessment may result in the determination that all or a portion of the valuation allowance is no longer required.

If the current uncertain macroeconomic conditions dissipate making it easier to forecast in the long-term, our operating results continue to improve and our projections show sufficient utilization of tax attributes, we will consider that as significant positive evidence and our future reassessment may result in the determination that all or a portion of the valuation allowance is no longer required.

If this were to occur, any reversal of the valuation allowance would result in a corresponding non-cash income tax benefit, thereby increasing total DTAs.

As of December 31, 2022, we had U.S.

federal, state and foreign gross NOLs, credits and incentives, a portion of which will begin to expire in 2030, as follows:

Gross NOLs, Credits and Incentives Portion Subject to a Valuation Allowance

federal, state and foreign gross NOLs and tax credits, a portion of which will begin to expire in 2030, as follows:

Gross NOLs and Tax Credits Portion Subject to a Valuation Allowance

Federal $ 2,148.4 2,148.4

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Our liability for unrecognized tax benefits was as follows:

(revised) (1)

Balance at beginning of period $ 120.7 $ 51.8

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Balance at end of period $ 139.7 $ 120.7

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(1) The amounts for 2020 were revised to exclude interest and penalties, which are required to be excluded from the liability for unrecognized tax benefits.

The total amount of gross unrecognized tax benefits was $ 139.7 million as of December 31, 2022, of which $ 41.5 million, if fully recognized, would decrease our effective tax rate.

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We do not expect a significant decrease in our liability for unrecognized tax benefits in the next 12 months.

We have filed all income tax returns for years through 2020, other than for Germany and the Netherlands.

We have filed all income tax returns for years through 2021, other than for the UK, Germany and the Netherlands.

These returns are subject to examination by the taxing authorities in the respective jurisdictions, generally for three or four years after they were filed.

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A tax position successfully challenged by a taxing authority could result in an adjustment to our benefit for income taxes in the period in which a final determination is made.

Payable Pursuant to the TRAs

Concurrent with the completion of our initial public offering (IPO), we became a party to five TRAs with our pre-IPO owners.

Under the TRAs, we were generally required to pay to such owners approximately 85 % of the amount of calculated tax savings, if any, we were deemed to realize based on the relevant tax benefits allocated to us as a result of our acquisition of their LLC Units in the pre-IPO organizational transactions or from subsequent exchanges of their LLC Units (together with the corresponding shares of Class B common stock) for shares of our Class A common stock.

On July 31, 2020, we entered into settlement and release agreements with respect to four of the TRAs, and an amendment to the fifth TRA (collectively, the TRA Settlement Agreements), pursuant to which we settled all liabilities 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.

We recorded a charge of $ 674.7 million to our statements of operations during 2020 to adjust the liability under the TRAs from $ 175.3 million to the aggregate settlement amount.

No amounts remain payable under the TRAs as of December 31, 2021.

As a result of the TRA Settlement Agreements, we retained all of the future cash tax savings from the utilization of the tax attributes we acquired as a result of acquisitions or exchanges of LLC Units subject to the TRAs.

These attributes entitle us to the depreciation and amortization deductions previously allocable to the original owner of such units.

Unutilized deductions related to these items are converted to NOL carryforwards.

Upon execution of the TRA Settlement Agreements, we generated approximately $ 180.0 million in additional DTAs, which were reduced by a full valuation allowance.

See Note 15 for additional discussion of the valuation allowances associated with our DTAs.

Income (Loss) Per Share

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2022 2021 2020

Net income (loss) 242.8 ( 494.1 ) 138.4

Net income $ 352.9 $ 242.8 $ ( 494.1 )

net income attributable to non-controlling interests 0.7 0.5 1.0

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Each share of Class B common stock (together with a corresponding LLC Unit) is exchangeable for one share of Class A common stock.

Geographic Information

Revenue by geography is based on the customer's billing address and was as follows:

Segment Information

Beginning in the first quarter of 2022, we revised the presentation of segment information to reflect changes in the way we manage and evaluate our business.

Effective January 1, 2022, we report our operating results through two reportable segments:

A&C and Core.

Previously we had a single operating and reportable segment.

Our chief operating decision maker (CODM), which, as of December 31, 2022, was our Chief Executive Officer, evaluates the performance of and allocates resources to our segments based on each segment's revenue and earnings before interest, taxes, depreciation and amortization (Segment EBITDA).

Segment EBITDA is defined as segment revenues less costs and operating expenses, 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 Segment EBITDA serves as a measure that assists our CODM and our investors in comparing our segments' performance on a consistent basis.

Our CODM does not use assets by segment to evaluate performance or allocate resources;

therefore, we do not provide disclosure of assets by segment.

See Note 2 for property, plant, and equipment, net as well as revenue disaggregated by geography.

The A&C and Core segments provide a view into the product-focused organization of our business and generate revenue as follows:

• A&C 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 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.

There are no internal revenue transactions between our reportable segments.

Corporate overhead primarily includes general and administrative expenses and items not allocated to either segment as well as those costs specifically excluded from Segment EBITDA, our segment measure of profitability, such as depreciation and amortization, interest expense and income and provision or benefit for income taxes.

The following table presents our segment information for the periods indicated:

Year Ended December 31,

2022 2021 2020

$ 2,544.9 $ 2,211.3 1,979.6

International 1,270.8 1,105.4 1,008.5

A&C $ 1,279.7 $ 1,128.3 $ 926.1

Core 2,811.6 2,687.4 2,390.6

Total revenue $ 4,091.3 $ 3,815.7 $ 3,316.7

Segment EBITDA:

A&C $ 522.8 $ 447.7 $ 349.7

Core 783.7 679.7 628.2

Total Segment EBITDA 1,306.5 1,127.4 977.9

Unallocated corporate overhead ( 293.5 ) ( 255.2 ) ( 255.7 )

Depreciation and amortization ( 194.6 ) ( 199.6 ) ( 202.7 )

Equity-based compensation expense ( 264.4 ) ( 207.9 ) ( 191.5 )

Interest expense, net of interest income ( 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 )

No individual international country represented more than 10% of total revenue in any period presented.

Property and equipment, net by geography was as follows:

France 23.8 27.0

All other international 33.6 32.0

Income before income taxes 356.5 253.6 ( 495.4 )

Benefit (provision) for income taxes ( 3.6 ) ( 10.8 ) 1.3

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

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No other individual international country represented more than 10% of property and equipment, net in any period presented.

(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.

Accumulated Other Comprehensive Loss

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Amounts reclassified from AOCI — 84.0 84.0

Other comprehensive loss - 2020 ( 44.2 ) ( 8.5 ) ( 52.7 )

Other comprehensive income - 2021 45.9 47.0 92.9

$ ( 52.9 ) $ 14.2 ( 38.7 )

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See Note 11 for the effect on net income of amounts reclassified from AOCI related to our cash flow hedging instruments.

Subsequent Events

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 and approximately $ 25.0 million represents non-cash pre-tax charges in connection with the disposition of certain assets.

We expect that the majority of these charges will be incurred in the first quarter of 2023 and that the restructuring will be substantially complete in the first half of 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data