It has been about a month since the last earnings report for GoDaddy (GDDY Quick QuoteGDDY - Free Report) . Shares have lost about 10.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is GoDaddy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

GoDaddy Q4 Earnings Up Y/Y

GoDaddy fourth-quarter 2022 earnings of 62 cents per share came in line with the Zacks Consensus Estimate. The bottom line also jumped 19.2% year over year.

GDDY generated revenues of $1.039 billion, which came slightly below the Zacks Consensus Estimate of $1.042 billion. Revenues were up 2% and 3.6% year over year on a reported basis and a constant-currency (CC) basis, respectively.

Revenue growth was driven by strong momentum across the Applications & Commerce business. Growing demand for GoDaddy Payments remained positive.

Furthermore, the company's expanding global footprints contributed well.

However, sluggishness across the Core Platform remained a major concern.

Quarter in Detail

GoDaddy has two revenue pillars, namely Applications & Commerce and Core Platform.

Applications & Commerce, comprised of Websites + Marketing, Managed WordPress, productivity applications and payments & commerce, generated $333.4 million (accounting for 32.1% of total revenues), up 10.9% on a year-over-year basis. Expanding OmniCommerce suit and meeting the strong demand for domain-based email attachments contributed well.

Core Platform, consisting of domains, aftermarket, hosting and security, fell 1.7% from the prior-year quarter’s level to $706.5 million (accounting for 67.9% of total revenues).

Nevertheless, growing renewals and registrations, robust GoDaddy Registry and an expanding aftermarket remained positives.

For the reported quarter, Applications & Commerce annualized recurring revenues (ARR) were $1.3 billion, increasing 9% year over year. Also, core platform ARR climbed 1% from the prior-year quarter’s level to $2.3 billion.

In the fourth quarter, international revenues were $340.8 million, up 3% year over year or 7.8% at CC.

Total bookings of $1.05 billion increased by 0.1% year over year or 2.2% on CC basis.

Further, average revenue per user came in at $197, up 9.7% year over year.

Total ARR stood at $3.57 billion, up 4% from the prior-year quarter.

GoDaddy’s gross merchandise volume and gross payments volume were $28 billion and $760 million, respectively, up 10% and 198% year over year. This was attributed to robust commerce offerings.

Operating Results

On a non-GAAP basis, normalized EBITDA for the reported quarter was $266 million, up 4.7% year over year.

Operating expenses (technology and development, marketing and advertising, customer care, as well as general and administrative) of $475.1 million increased 4.1% year over year. As a percentage of revenues, operating expenses expanded 90 basis points (bps) to 45.7% from the year-ago quarter.

For the reported quarter, operating income was $134.9 million, up 8.1% year over year. As a percentage of revenues, operating income expanded by 70 bps from the year-ago quarter’s level to 12.9%.

Balance Sheet & Cash Flow

As of Dec 31, 2022, cash and cash equivalents were $774 million compared with $826.2 million on Sep 30, 2022. Accounts and other receivables were $60.1 million compared with $64 million in the prior quarter.

GoDaddy reported total debt of $3.9 billion and net debt of $3.1 billion in the previous quarter.
Total debt was $3.9 billion and net debt was $3.07 billion in the previous quarter.

Net cash provided by operating activities was $208 million in the reported quarter compared with the prior quarter’s figure of $269.9 million.

Additionally, unlevered free cash flow was $238.2 million for the reported quarter.

Guidance

For first-quarter 2023, management expects revenues in the range of $1.03-$1.05 billion, indicating growth of 4% at the midpoint from the year-ago quarter’s actuals.

For the first quarter, GDDY expects applications & commerce revenues to grow in the band of 8-10% year over year. The core platform revenues are anticipated to grow within the range of 1-3% from the year-ago quarter.

Normalized EBITDA margin is expected in the range of 24-25%.

For 2023, management expects total revenues in the range of $4.250-$4.325 billion, suggesting growth of 5% at the midpoint from the year-ago reading.

For 2023, GDDY expects revenue growth of applications & commerce and the core platform in the band of 8-10% and 2-4%, respectively.

The normalized EBITDA margin for the full year is projected at 26%.

For 2023, management expects unlevered free cash flow to be above $1.2 billion.

Management expects to repurchase shares worth $1 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -9.73% due to these changes.

VGM Scores

Currently, GoDaddy has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, GoDaddy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.