GoDaddy Inc. Net Income dropped on 43.5% while EBITDA Margin increased on 2.2 pp from 12.2% to 14.4%
02/20/2019 • About GoDaddy Inc. (
$GDDY) • By InTwits
GoDaddy Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- GoDaddy Inc. is a fast growth stock: 2018 revenue growth was 19.2%, 5 year revenue CAGR was 18.7% at 2018 ROIC 4.6%
- EBITDA Margin is expanding: 14.4% in 2018 vs. 12.2% in 2017 vs. 6.6% in 2014
- GoDaddy Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 3.4% while average EBITDA Margin was 11.1% for the sames years. In 2018 SBC/Revenue was even higher: 4.7%
- GoDaddy Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.5%. At the same time it's in pair with industry average of 5.2%
- CAPEX is quite volatile: $127m in 2018, $111m in 2017, $50m in 2016, $46m in 2015, $38m in 2014
- In the last 5 years the company invested considerably less than D&A: $338m vs. $912m. In 2018 this situation was still the same: CAPEX was 88 while D&A was 234
- The company has potentially unprofitable business model: ROIC is 4.6%
- It operates with high leverage: Net Debt/EBITDA is 3.9x while industry average is 2.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
GoDaddy Inc.'s Revenue jumped on 19.2%. Revenue growth showed slowdown in 18Q4 - it was 15.5% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.2 pp from 12.2% to 14.4% in 2018. EBITDA Margin followed a growing trend at 2.0 pp per annum in 2014-2018.
Gross Margin increased slightly on 1.1 pp from 65.3% to 66.4% in 2018. Gross Margin followed a growing trend at 0.80 pp per annum in 2014-2018. SG&A as a % of Revenue showed almost no change in 2018. During 2014-2018 SG&A as a % of Revenue topped in 2015 at 26.2% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 1.3 pp from 3.4% to 4.7% in 2018. SBC as a % of Revenue stuck to a growing trend at 0.60 pp per annum in 2014-2018.
Net Income margin decreased on 3.2 pp from 6.1% to 2.9% in 2018. Net Income margin grew at 3.7 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 3.3%. The company's CAPEX/Revenue showed almost no change from 2015 to 2018. It's average level of CAPEX/Revenue for the last three years was 3.3%.
Accounts receivable as a % of Revenue showed almost no change in 2018. Accounts payable as a % of Revenue decreased slightly on 0.79 pp from 7.7% to 6.9% in 2018.
GoDaddy Inc. has spent
$147m on M&A in 2018 which accounts for 5.5% of revenue.
Return on investment
The company operates at good ROE (12.1%) while ROIC is low (4.6%). ROIC increased slightly on 1.9 pp from 2.7% to 4.6% in 2018. ROE dropped on 14.0 pp from 26.0% to 12.1% in 2018. ROIC followed a growing trend at 2.0 pp per annum in the last 5 years. ROE grew at 11.5 pp per annum in the last 5 years.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.9x and Debt / EBITDA is 6.3x. Net Debt / EBITDA dropped on 2.9x from 6.8x to 3.9x in 2018. Debt decreased slightly on 0.69% while cash surged on 60.0%.
GoDaddy Inc. has questionable short term financial stability: Interest coverage ratio (ICR) is only 1.5x. GoDaddy Inc. has no short term refinancing risk: cash is higher than short term debt (5,616.9%).
Average interest expence paid by the company was 4.1% in 2018.
Valuation and dividends
The company's trades at EV/EBITDA 37.2x and P/E 165.9x.
Management team
GoDaddy Inc.'s CEO Scott W Wagner is a founder and has spent 1 year with the company. CEO total compensation was
$22,520,839 in 2018 which included
$750,000 salary. The company's CFO Raymond E Winborne "Ray" has spent 3 years with the company.
0.45% of the company is owned by insiders. Insider ownership didn't change in 2018.
The company has 6,821 employees. The number of employees jumped on 13.9%. Average revenue per employee in 2018 was
$389,987 and it increased on 4.7%.
Financial and operational results
FY ended 12/31/2018
GoDaddy Inc. ($GDDY) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,387 | 1,607 | 1,848 | 2,232 | 2,660 | 19.2% |
| Gross Profit | 869 | 1,041 | 1,190 | 1,456 | 1,766 | 21.3% |
| SG&A | 333 | 422 | 450 | 536 | 625 | 16.8% |
| EBITDA | 91 | 128 | 210 | 273 | 384 | 40.7% |
| EBIT | -62 | -31 | 50 | 67 | 150 | 123.6% |
| Interest expence | 85 | 69 | 57 | 83 | 98 | 18.6% |
| Tax | -3 | -0 | 0 | -19 | -9 | |
| Net Income | -143 | -76 | -17 | 136 | 77 | -43.5% |
| Stock Based Compensation | 30 | 40 | 57 | 76 | 126 | 64.3% |
Balance Sheet
|
|---|
| Cash | 139 | 348 | 566 | 583 | 932 | 60.0% |
| Accounts Receivable | 4 | 5 | 8 | 18 | 26 | 43.5% |
| Accounts Payable | 32 | 39 | 62 | 60 | 62 | 3.4% |
| Short Term Debt | 4 | 4 | 4 | 17 | 17 | -0.6% |
| Long Term Debt | 1,410 | 1,040 | 1,036 | 2,411 | 2,394 | -0.7% |
Cash flow
|
|---|
| Capex | 68 | 45 | 54 | 83 | 88 | 5.4% |
| Dividends | | 1 | 19 | 40 | | |
| Acquisitions | 41 | 65 | 119 | 1,877 | 147 | -92.2% |
Ratios
|
|---|
| Revenue growth | 22.7% | 15.9% | 15.0% | 20.8% | 19.2% | |
| EBITDA growth | 951.6% | 40.6% | 64.5% | 29.7% | 40.7% | |
|
|---|
| Gross Margin | 62.6% | 64.8% | 64.4% | 65.3% | 66.4% | 1.1% |
| EBITDA Margin | 6.6% | 8.0% | 11.4% | 12.2% | 14.4% | 2.2% |
| EBIT Margin | -4.5% | -1.9% | 2.7% | 3.0% | 5.6% | 2.6% |
| SG&A, % of revenue | 24.0% | 26.2% | 24.4% | 24.0% | 23.5% | -0.5% |
| SBC, % of revenue | 2.2% | 2.5% | 3.1% | 3.4% | 4.7% | 1.3% |
| Net Income Margin | -10.3% | -4.7% | -0.9% | 6.1% | 2.9% | -3.2% |
| CAPEX, % of revenue | 4.9% | 2.8% | 2.9% | 3.7% | 3.3% | -0.4% |
|
|---|
| ROIC | -3.3% | -1.7% | 2.9% | 2.7% | 4.6% | 1.9% |
| ROE | -23.4% | -18.1% | -3.3% | 26.0% | 12.1% | -14.0% |
| Net Debt/EBITDA | 14.0x | 5.4x | 2.3x | 6.8x | 3.9x | -2.9x |
| Interest coverage ratio (ICR) | | | 0.9x | 0.8x | 1.5x | 0.7x |
| Interest expence / Average debt | 6.0% | 5.6% | 5.5% | 4.8% | 4.1% | -0.7% |
People
|
|---|
| Insider ownership | 0.5% | 0.5% | 0.5% | 0.5% | 0.5% | 0.0% |
| Employees | 4,908 | 4,761 | 4,749 | 5,990 | 6,821 | 13.9% |
| Revenue/Employee, th. $ | 283 | 338 | 389 | 373 | 390 | 4.7% |
GoDaddy Inc. ($GDDY) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 633 | 652 | 680 | 696 | | 29.3% | 16.8% | 16.7% | 15.5% |
| EBITDA | 85 | 101 | 99 | 100 | | 126.8% | 63.1% | 7.3% | 22.2% |
| Net Income | 3 | 18 | 13 | 43 | | 450.0% | -13.0% | -41.1% | -54.1% |
Balance Sheet
|
|---|
| Cash | 711 | 810 | 851 | 932 | | 8.0% | 39.9% | 58.5% | 60.0% |
| Short Term Debt | 17 | 17 | 17 | 17 | | 178.3% | -97.1% | 3.7% | -0.6% |
| Long Term Debt | 2,407 | 2,403 | 2,398 | 2,394 | | 133.3% | -0.7% | -0.7% | -0.7% |
Ratios
|
|---|
| Gross Margin | 66.0% | 66.0% | 66.6% | 66.9% | | 2.1% | 1.2% | 1.0% | 0.4% |
| EBITDA Margin | 13.4% | 15.4% | 14.5% | 14.3% | | 5.7% | 4.4% | -1.3% | 0.8% |
| Net Income Margin | 0.5% | 2.8% | 1.9% | 6.1% | | 0.4% | -1.0% | -1.9% | -9.3% |
Peers in Internet Services & Infrastruc
Below we provide GoDaddy Inc. benchmarking against other companies in Internet Services & Infrastruc industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | | 20.4% | 108.0% |
| GTT Communications, Inc. ($GTT) | | 78.1% | 41.3% | 58.7% | 80.1% |
| MongoDB, Inc. ($MDB) | | | | 55.3% | 63.8% |
| Twilio Inc. ($TWLO) | | 87.9% | 66.1% | 43.9% | 62.9% |
| Okta, Inc. ($OKTA) | | | 109.5% | 86.6% | 60.0% |
| |
|---|
| Median (15 companies) | 25.5% | 11.7% | 14.1% | 10.6% | 16.9% |
|---|
| GoDaddy Inc. ($GDDY) | | 15.9% | 15.0% | 20.8% | 19.2% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | 68.1% | 77.5% | 84.9% |
| VeriSign, Inc. ($VRSN) | 81.3% | 81.8% | 82.6% | 83.4% | 84.2% |
| Wix.com Ltd. ($WIX) | 81.6% | 82.8% | 84.4% | 83.7% | 79.0% |
| MongoDB, Inc. ($MDB) | | | 68.0% | 70.5% | 74.2% |
| Carbonite, Inc. ($CARB) | 68.5% | 71.6% | 70.6% | 70.7% | 71.2% |
| |
|---|
| Median (15 companies) | 48.4% | 54.3% | 59.2% | 61.7% | 64.9% |
|---|
| GoDaddy Inc. ($GDDY) | 62.6% | 64.8% | 64.4% | 65.3% | 66.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| VeriSign, Inc. ($VRSN) | 62.2% | 63.0% | 65.2% | 65.0% | 67.1% |
| Liberated Syndication Inc ($LSYN) | | | 32.0% | -29.9% | 32.2% |
| Internap Corporation ($INAP) | 20.0% | 21.0% | -5.4% | 28.4% | 30.5% |
| Akamai Technologies, Inc. ($AKAM) | 37.5% | 34.8% | 33.9% | 27.6% | 29.4% |
| Endurance International Group Holdings, Inc. ($EIGI) | 23.2% | 24.0% | 14.8% | 20.0% | 26.0% |
| |
|---|
| Median (15 companies) | 4.5% | 1.3% | -5.1% | -7.1% | 16.8% |
|---|
| GoDaddy Inc. ($GDDY) | 6.6% | 8.0% | 11.4% | 12.2% | 14.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Akamai Technologies, Inc. ($AKAM) | 16.2% | 20.2% | 13.5% | 16.7% | 14.9% |
| 21Vianet Group, Inc. ($VNET) | 32.6% | 29.0% | 15.8% | 11.7% | 12.8% |
| Internap Corporation ($INAP) | 24.0% | 17.5% | 14.9% | 12.7% | 12.1% |
| Limelight Networks, Inc. ($LLNW) | 11.5% | 14.5% | 5.7% | 11.2% | 8.2% |
| GTT Communications, Inc. ($GTT) | 2.8% | 3.8% | 4.6% | 5.1% | 5.2% |
| |
|---|
| Median (15 companies) | 3.9% | 3.8% | 4.0% | 4.1% | 3.0% |
|---|
| GoDaddy Inc. ($GDDY) | 4.9% | 2.8% | 2.9% | 3.7% | 3.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| VeriSign, Inc. ($VRSN) | 60.6% | 68.7% | 65.2% | 54.3% | 81.9% |
| Liberated Syndication Inc ($LSYN) | | | | -13.2% | 12.1% |
| Akamai Technologies, Inc. ($AKAM) | 15.5% | 12.5% | 11.9% | 7.9% | 8.2% |
| Endurance International Group Holdings, Inc. ($EIGI) | 1.0% | 4.2% | -2.3% | 2.0% | 7.5% |
| 21Vianet Group, Inc. ($VNET) | -1.5% | -3.6% | -8.9% | -14.6% | 2.8% |
| |
|---|
| Median (16 companies) | -2.4% | -6.9% | -18.5% | -14.6% | 1.0% |
|---|
| GoDaddy Inc. ($GDDY) | -3.3% | -1.7% | 2.9% | 2.7% | 4.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| GTT Communications, Inc. ($GTT) | 3.1x | 7.4x | 6.8x | 7.2x | 12.7x |
| Internap Corporation ($INAP) | 5.1x | 5.3x | | 6.5x | 6.9x |
| Endurance International Group Holdings, Inc. ($EIGI) | 7.3x | 6.0x | 11.8x | 7.8x | 5.8x |
| VeriSign, Inc. ($VRSN) | 1.9x | 2.5x | 2.2x | 2.6x | 1.8x |
| 21Vianet Group, Inc. ($VNET) | 10.7x | 5.6x | | | 1.0x |
| |
|---|
| Median (9 companies) | 2.5x | 2.5x | 1.3x | 2.6x | 1.0x |
|---|
| GoDaddy Inc. ($GDDY) | 14.0x | 5.4x | 2.3x | 6.8x | 3.9x |
