Matthew Pfau: Hey, great. Thanks. Wanted to start off asking on payments, and perhaps you could just give us an idea about where you are at in terms of penetrating your existing customer base, or at least the addressable customer base. As we go into 2024, do you expect converting existing customers to be the biggest driver of growth again?
Aman Bhutani: Yes, thanks, Matt. We are still in very, very early stages of penetrating our customer base. We feel very comfortable that we have access to a lot of commerce intent customers within the base already. We do expect it to continue to be the largest driver of our growth in payments in 2024 as well. So, we expect very healthy growth. As I said in my prepared comments, we are going to expand what we’re selling to these customers. We’re going to go after more of the omni commerce solution. We’re ready. We’ve got some great products, some great offerings. You’ll see much of it in March as well. So, we’re going to go broader with our offering to these customers, but the core payments functionality, we feel really good that will keep growing well.
Matthew Pfau: Great. And just to follow-up on the guidance for A&C, the bookings growth of 16% in Q4 and then guiding for low to mid-teens in Q1, what’s the discrepancy there? Is there payments or something else that drives that difference?
Mark McCaffrey: Thanks Matt. I would look at the overall business and the momentum we have going in. Remember, it’s not just a subscription business. We have transactional and we have hardware shipments as well. So, we take that into account and we take into account the timing of those orders and when we think they’re going out. So, there’ll always be a little bit of a discrepancy between bookings and revenue related to that.
Aman Bhutani: Yeah. Just to make sure, what we talked about is 16% is bookings, right? Revenue is always going to lag a little bit, like Mark said, and you’ll see it show up, of course.
Matthew Pfau: Perfect. Thank you.
Christie Masoner: Our next question comes from the line of Mark Mahaney from Evercore ISI. Mark, please go ahead.
Unidentified Analyst: Thanks. This is Jennie from Mark Mahaney. Just — first a question on Airo again. Can you just give us more color, which international markets are you testing right now? And maybe also apart from driving product attach, what are the other potential monetization opportunities that you may be exploring for Airo? And then the second question is, you kind of mentioned greater attach gives you greater pricing flexibility. So, can you talk about ARPU? How should we think about ARPU growth drivers this year between just growing attach versus potentially taking up pricing? Like is price action baked into your full year out? Thank you.
Aman Bhutani: Yeah. On the international markets, our typical rollout plan is always English, large English markets first. So those are the markets we’re testing now. But our absolute view is that Airo is a capability that should go across to all our markets. And there’s a long tail of great tickets for us to approach there. So super excited about that. In terms of product attach and other monetization means, of course, product attach is the first level we’re looking for. But as we’ll share a little bit at our Investor Day, we’re also looking for new monetization methods. And I’ll just give you an example. One of the things that we want to test is a premium offering for logo building. Where — as you see in Airo, you buy a domain and Airo builds you a logo and it builds you or gives you the ability to be able to edit that logo.
But there are more services that we can offer around it. And we’re going to test a new paywall for it and a new monetization method that GoDaddy has never done before. So that’s one example of one of the types of things our teams are testing. And then I think in terms of the second part, I’ll turn it to Mark.
Mark McCaffrey: Yeah. So, anything we plan on doing pricing wise, just so you know, is built into our guide as we sit here today. We’re excited about the bundling and the attach that’s happening within Airo, within our software platform all together. And with 21 million customers, 14 million interactions with them, we get a lot of data about how they’re getting value out of our products, which creates a lot of opportunity going forward around pricing bundles, elasticity around that, seeing the value they’re driving. So, we think there’s a lot of opportunity out there as we go forward. But right now, we’ve built in pricing actions as we usually do within our guide for the rest of the year. And we’ll continue to evaluate and update as we go forward.
Christie Masoner: Our next question comes to the line of Clarke Jeffries at Piper Sandler. Clarke, please go ahead.
Clarke Jeffries: Hello. Thank you for taking the question. Two questions for Mark. One is, you mentioned 100 basis point revenue headwind from some of those divestitures. Based off of the 7% or 8% domain bookings, it seems like there’s strength there. I just wanted to ask clarification on when we’ll see the revenue headwind sort of peak or trough during calendar 2024. It’s 100 bps for the full year, but just any more color on intra quarter trends and then follow up.
Mark McCaffrey: Yeah. Clarke, I would say it will be primarily the first half with some in the second half, but primarily in the first half.
Clarke Jeffries: All right, perfect. And then for that 200 bps of EBITDA margin expansion for next year, reflecting on what happened in 2023, marketing and advertising dollars did fall. But we’ve had a good discussion around the intent to reduce tech and dev spend. So, when you think about the driver of that 200 bps, any way you could frame mix shift of A&C reduction in tech and dev and anything incremental around marketing advertising dollar growth or percent of revenue for calendar ’24 would be great. Thank you.
Mark McCaffrey: Yeah. Thanks Clarke. And the way I look at it is if you take where we’re exiting at Q4 of 2023 and where we’re going for Q4 of 2024, the things that you have to look at are, reduced T&D spend, right? We’re leveraging more of the AWS cloud. We’re reducing dependency on data centers. There’ll be a natural leverage we’ll get in our P&L related to that. We’re getting leverage in our care organization through the use of AI and automation, also access to global workforces that’ll help us as we go forward. And then some of it is just the natural growing A&C picture, right? It’s a more profitable segment. It’s software based. Therefore, as that grows and becomes a bigger part of the picture, it helps expand our margins just naturally again, that leverage we get from the 2+ products starts to kick in the bigger A&C gets all together. So those are kind of the levers I’m looking at. Hopefully that’s helpful.
Clarke Jeffries: Absolutely. Thank you.
Christie Masoner: Our next question comes to the line of Ygal Arounian from Citigroup. Ygal, please go ahead. Hey, Ygal.
Ygal Arounian: Hey. Good afternoon, guys. I want to focus maybe on customer growth for a second. Is there any way to help us understand the impact of customers from the hosting divestitures? And I guess even if we normalize for that, we look at what customer growth has been historically versus what it’s been over the past couple of years. You talk about a continued strong top line or top of the funnel, sorry, a customer growth that around 1%, let’s call it. Historically, it’s been anywhere from 2% to 4%. How are you guys thinking about customer growth right now? Or are you focused on a smaller subset of customers that might convert more easily? And you’re looking to ARPU to fill in the gap. Do you think we can get back to that lower single-digit versus single digit or flattish customer growth number the next year or two?
Mark McCaffrey: Yeah. So I’ll give some color for you, Ygal. When we look at our customers, we’ve always said we are targeting customers with a higher intent to do something when they come into the funnel, add that second product, start that business, generate value for themselves, and therefore generate value for us. What we’ve seen coming out of ’23 and continuing into 2024 at the gross ads level is that consistent, strong demand that we’ve talked about all year and that continuing. And to put it in perspective, ’23 gross customer ads was higher than 2022, right? And so not only are we seeing an increase there, we’re seeing it more consistent from quarter to quarter and more stable. With that, we’re seeing that also that intentful customer come in with those gross ads, which is the momentum we’re seeing in the bundling, the growth you see materialize in A&C.
And we’re seeing through the divestitures, we are losing customers, but they are generally customers that were low intent customers. So they were on a single product, maybe weren’t doing things, hadn’t done things for years. So that trade off is in there and continues to be something that we are working through on a net customer ad basis. Obviously, as we continue our divestitures and look at our portfolios, we’ve done a lot of that work in ’23. So that will begin to abate for the work we’ve done in ’23 and we’ll continue to review our portfolio going forward. But it is bringing in the demand that has that higher intent customer and that stable demand we’re seeing at the front of the funnel now.
Ygal Arounian: Okay, great. That’s really helpful. And then on — understand the driver of GPV and bring more customers onto your paying platform. GMV is also continues to be really strong. Is there any way to qualify the growth drivers of GMV, whether it’s by, I don’t know, segment or business type or product, just to help to give a little bit more color around that? Thanks.
Aman Bhutani: Yes, Ygal. A lot of what we talk about is GMV is often through our partnerships that we have. They tend to sell in the big categories, in the big verticals that you know about. Nothing significant to call out there, right? It follows to some extent the macro and sort of how customers are doing. Our focus very much is to provide them with a very competitive product so that they’ve got a system that works really well for them and it shows up in the results.
Mark McCaffrey: Yeah. And I’ll just add, the GPV is what we focus on because that’s what we monetize within our customer base and that’s what we’re targeting to help grow payments.
Ygal Arounian: Thanks, guys.
Aman Bhutani: Thank you.
Christie Masoner: Our next question comes from the line of Ken Wong from Oppenheimer. Ken, please go ahead.
Ken Wong: Perfect. I just want to maybe kind of circle up on that 31% exit margin. You mentioned, a heavier spend in Q1 for renewals and launch costs. As we track to 31, would you expect that to be fairly linear or more back-end loaded, just given that there are some product investments up front?
Mark McCaffrey: Yeah. So, giving you color around, I’ll say how we expect it to rollout. We talked about 27 in Q1 because of the spending related to our renewals and certain other timing and expenses. And then, 31 is our exit strategy with 29 being the average. So we do think — we do, like we saw last year, believe it’ll ladder up. We haven’t gotten to the exact numbers yet. We’ll provide more color around that as we get further into the year. But I think you can put a trajectory around there. Now, there might be some timing of marketing expenses that we’ll talk you through if that were to happen. But other than that, I would expect it to be similar to what we saw this year in laddering up through the year.
Ken Wong: Got it. And then just a quick follow-up on the optimization side. Obviously, those are efforts that you guys will continue to push forward on and perhaps some new ones that you guys will talk about at Investor Day. As we look at the outlook, I guess, how much incremental optimization is already baked in there or are those plans yet to launch post-Investor Day?
Aman Bhutani: Yeah. When we think about optimization and guiding to it, everything we have line of sight to is in the guidance already. But the fact is we’re constantly evaluating new opportunities. Our teams have a very disciplined approach to looking at those opportunities and they bring forward proof points and what they need to do to be able to achieve those targets. And every quarter we’re evaluating them and moving forward with new ideas. And if anything were to evolve, we would absolutely tell you more. We have a great track record of doing that over the last couple of years. And our goal is to just continue that momentum, continue that discipline. And it just compounds and that’s a great thing.
