Ken Wong: Great. Fantastic. Thanks, guys.
Christie Masoner: Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.
Elizabeth Porter: Hi. Thanks for the question. I was hoping to get a little bit more clarity and just the walk for the fiscal ’24 guide of 6% versus the exit rate in Q4 around 6%. I appreciate the disclosure on about one point from divestitures and migrations, but it feels like there’s a couple of benefits as well, whether it’s the aftermarket easing or pricing. And so, I’d love to just get a better sense on the view that you’re taking on the underlying growth of the business and how that changes relative to Q4, just given some of the momentum bookings — momentum that we’ve seen in bookings exiting the year. Thanks.
Mark McCaffrey: Yeah. Thanks Elizabeth. Just a little further color, we’re seeing the momentum in A&C and we’ve talked about the bookings. We’ve talked about the headwinds related to some of the divestiture activity. There are other things we built in there for the acquired or non-strategic hosting assets that still exist that haven’t been integrated. We’re assuming they’re flat to down for the year as we continue to evaluate their long-term prospects. Things like aftermarket, we’re assuming will be flat for the year, maybe slightly up, but again, no momentum being grown there — coming there from continued growth in that market. That could change. There’s some volatility in that market quarter to quarter, but we think on a long-term basis, that’ll be the way to measure it.
Still good growth in domains. It’s still something that we’re big in growing at percentage point wise is always difficult on a big base, but we think it’ll be a steady increase as we see that demand coming in. So, when you put that all up and you put the headwinds into there at the first part of the year, we think 6% is a good point for the middle of the range. We know there’s opportunities for the high-end of the range and we’ll continue to monitor those.
Elizabeth Porter: Great. Then just as a follow-up, when we think more holistically about the business, when you tend to have revenue upside, is that more likely to flow through on the margin side, just given you guys have already made a lot of improvements on the margin thus far? Or would you look to take any of that upside and potentially aggress more aggressively into the business, just given the opportunities ahead?
Aman Bhutani: I think it’s hard to project sort of multiple scenarios there, Elizabeth. It also kind of depends on the product mix in terms of which products exceed targets, but generally we’re looking to, on a regular basis, balance growth and profitability. Again, our teams have a pretty disciplined process of bringing proof points in on where we invest and how we double down. On investments, something changes, our goal is to be very transparent with you guys on the call as well, so you’ll be able to be on that journey with us.
Mark McCaffrey: I think Aman put it perfect. We balance the growth and the profitability. Our goal is to drive free cash flow and ultimately free cash flow per share. We’re constantly looking at the ways to do that and the ways to be creative to the long-term model. And we’ll constantly evaluate what creates that opportunity for us that we can go into the future.
Elizabeth Porter: Great. Thank you very much.
Christie Masoner: Our next question comes from the line of John Byun on for Brent Thill at Jefferies. John, please go ahead.
John Byun: Hi, thank you. I just had two questions. One, going back to Airo. I wonder if there’s a way for you to quantify how broadly it might be rolled out in the U.S. I mean, is it 5% of your users using it? Or if there’s any way to quantify in what you might think it might be by the end of the year or in sort of phase? And then the second question, kind of going back to the guidance and some of the headwinds, I think you had about 100 basis points in ’23, guiding for about 124 with, I guess, abating in the second half. But wondering, will it be pretty much done at this point? Or do you still have maybe, I guess, more to reorganize, given some of the — I guess, some of the still legacy hosting grantees who have left? Thank you.
Aman Bhutani: Yeah. Let me start with Airo, John. We don’t have sort of a number to disclose today, but we are looking forward to talking about this at our Investor Day. It’s one of the things we are going to share with you. But just to give you order of magnitude, in the first six, eight weeks, hundreds of thousands of customers had already seen the Airo experience. So, this was not a small rollout by any stretch of the imagination. And that’s just new customers, purchasing customers that I’m talking about. And you talked about sort of where we expect to get by the end of the year. Our timelines for Airo are much more aggressive than that. We expect a very large percentage of our new customers to be seeing Airo within the next few months. And by the end of the year, looking much more at how our existing customers are starting to engage with Airo and how can we make a real difference there. And I’ll turn it to Mark for the headwind, 100 bps.
Mark McCaffrey: Yeah. So, we did a lot of work in 2023, and that caused 100 basis points headwinds, both in ’23 and ’24. We’re still continuing to evaluate our portfolio and we’ll take any actions that we need to related to things that may not be strategic or things that aren’t going to be accretive long-term to our model. So I wouldn’t say we’re done. I would say we’ll continue to optimize, evaluate and make the decisions for the long-term business best we can.
John Byun: Thank you.
Christie Masoner: Our next question comes from the line of Chris Kuntarich from UBS. Chris, please go ahead.
Chris Kuntarich: Hi, great. Thanks for taking my question. Maybe the first one would just be a clarification. When you’re talking about the current Airo flow versus the Commerce Airo flow that we’re going to be learning more about at the Analyst Day, can you just talk about maybe what products are not being included today as we’re thinking about the existing flow? Is it really just payments or is there something else, kind of key products that we should be thinking about existing flow versus an Airo Commerce flow?
Aman Bhutani: Yeah. What you saw us launch in November was Airo capabilities, mostly on our identity and presence products. And if you look at the entrepreneur’s wheel, right, we lay out identity, presence and commerce and the customer needs that surround them. What we’re going to show you at Investor Day is a sneak peek into all of the commerce capability layered with Airo, which includes not just payments capability, but core commerce functionality like inventory management and catalogs and how Airo will work on hardware, for example, versus on the web where today when we talk about identity and presence, you’re seeing Airo capabilities mostly on the web. But how does that translate to a piece of hardware that a customer is holding and taking a transaction on?
Chris Kuntarich: Got it. Very helpful. And just one follow up on the divestitures, any color to help us think about the margin benefit that they deliver from divestiture versus the full year guide?
Mark McCaffrey: Yeah. I haven’t quantified it out to the exact numbers, but keep in mind it benefits us in two areas. One, obviously it helps on normalized EBITDA on a go forward basis, but also reduces our CapEx spend because a lot of these divestitures related to also data centers that we no longer need and will go with the acquiring entity. So, there are two benefits we see. Both triangulate around helping our free cash flow and generating our free cash flow growth going forward.
Chris Kuntarich: Got it. Thanks Mark. Thanks Aman.
Christie Masoner: Our next question comes to the line of Ella Smith on for Alexei Gogolev at JP Morgan. Ella, please go ahead.
Aman Bhutani: Hey, Ella.
Ella Smith: Hi, team. Thank you for taking my question. It seems like price had the most to do with the margin expansion in the A&C segment. Is the spread of margin profiles of A&C products wide? If so, can you remind us what are the highest margin A&C products that drove the expansion?
Mark McCaffrey: Yeah. I don’t know, Ella, if we’ve gotten into that detail before, so I’ll give you some high level and then hopefully that’s helpful for you. A&C in and of itself is a higher margin business for us. There are certain areas that are from a gross margin perspective a little lower, for example, payments where we have the transaction fee, but they’re coupled with software and subscriptions that drive it up. So when we look at it from a bundling perspective, they are very accretive to the margin as well as the normalized EBITDA line. I would say when I look at what’s driving the growth in A&C, you have to look at it from — there is a pricing aspect of it, no doubt, as we increase prices across certain products, but there also is a demand element of it, which when we see that customer go to that second product, we get the increase on that as well.
So I would say it’s a good mix. We haven’t gotten into breaking down X times Y, but all that’s contributing to the growth in A&C right now.
Aman Bhutani: Yeah. And maybe to add some of the data we have shared, our website products, so Websites + Marketing, Managed WordPress are our highest margin products and they’re growing double-digits. So obviously that’s driving goodness in the A&C segment.
Ella Smith: Great. Thank you, Aman and Mark. And for my second question, can you please speak about GoDaddy Payments and your latest strategies there? Also, how would you describe the customer profile of those who are adopting GoDaddy Payments?
Aman Bhutani: The customer profile for GoDaddy Payments very much sort of squarely within the overall GoDaddy customer. We started with the micro seller, people selling $50,000, $100,000 a year, and we built up the million dollars, a customer who sells million dollars a year are now over a million dollars. That’s the target market. That’s what the product is targeted towards. So, we’re very happy with the products we’re growing. We’re adding more capabilities in 2024. We’re just going to keep broadening the omni commerce solution and tuning our go-to market. And that’s what we’re most excited about is just selling that broader view to our customers, like Mark said, getting to that really that third product that locks in retention for the long-term.
Ella Smith: Great. Thank you so much.
Aman Bhutani: Thank you.
Christie Masoner: [Operator Instructions] It doesn’t look like we have any more questions. We are at the top of the hour, so I’m going to hand it back over to Aman.
End of Q&A:
Aman Bhutani: Thank you, Christie. And thank you all for joining us. We’re looking forward to seeing you at our Investor Day. We’re excited about it. We have a lot of cool stuff to show and hopefully you’re able to make it. Thank you.
