GoDaddy Inc (NYSE: GDDY) Q1 2023 Earnings Call dated May. 04, 2023
Corporate Participants:
Aman Bhutani — Chief Executive Officer
Mark McCaffrey — Chief Financial Officer
Christie Masoner — Head, Investor Relations
Analysts:
Matt Pfau — William Blair — Analyst
Trevor Young — Barclays — Analyst
John Byun — Jefferies — Analyst
Clarke Jeffries — Piper Sandler — Analyst
Aaron Kessler — Raymond James — Analyst
Unidentified Participant — — Analyst
Mark Zgutowicz — The Benchmark Company — Analyst
Ygal Arounian — Citi — Analyst
Ella Smith — JPMorgan — Analyst
Presentation:
Operator
Good afternoon, and thank you for joining us for GoDaddy’s First Quarter 2023 Earnings Call. I’m Christie Masoner, Head of Investor Relations, and with me today are Aman Bhutani, Chief Executive Officer; and Mark McCaffrey, Chief Financial Officer. Following prepared remarks, we will open up the call for your questions. [Operator Instructions] On today’s call, we’ll be referencing both GAAP and non-GAAP financial results and other operating and business metrics. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted to our Investor Relations site at investors.godaddy.net or in today’s earnings release on our Form 8-K furnished with the SEC.
Growth rates represent year-over-year comparisons unless otherwise noted. The matters we’ll be discussing today include forward-looking statements, which include those related to future financial results, our strategies or objectives with respect to future operations including our approach to capital allocation, new product introductions and innovations and our ability to integrate acquisitions and achieve desired synergies. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC.
Actual results may differ materially from those contained in forward-looking statements. Any forward-looking statements that we make on this call are based on assumptions as of today May 4, 2023 and except to the extent required by law, we undertake no obligation to update these statements because of new information or future events.
With that, I’m pleased to introduce Aman.
Aman Bhutani — Chief Executive Officer
Thank you, Christie. Good afternoon and thank you for joining us today. GoDaddy’s mission is to empower entrepreneurs and make opportunity more inclusive for all. We learn from our customers every day and they are a resilient group and they value what GoDaddy brings to them. While many worry about a recession, our venture forward service found that our customers are noticeably more optimistic today about the future of their business than they were six months ago. One customer we showcased in the past is the Furlough Cheesecake founded by two sisters impacted by a government furlough. In a recent interview, one of them commented, with partners like GoDaddy we can manage our business from anywhere. GoDaddy helped us launch our business quickly from idea to up and running in one week because they had the tools in place.
GoDaddy’s unique combination of seamless intuitive technology and best-in-class human and digital guidance creates the ease of use that our customers want and need so they can focus on their business. This combination continues to differentiate us in the marketplace, helping us drive profitable growth and superb cash flow. We serve 21 million customers that have a high retention rate of 85%. In Q1, we drove double-digit growth of 12% in our Applications and Commerce segment supported by 10% ARR growth in our Create and Grow products. Additionally, we surpassed $1 billion in annualized GPV for GoDaddy payments. One area we continue to watch carefully is our aftermarket business. We faced tough compares last quarter and a continued unevenness in flow of large deals that we believe is impacted by broader macro headwinds.
Overall, we are pleased with our Q1 results and encouraged by the positive momentum over the quarter, especially in our Subscription and Commerce businesses. Our strategic priorities remain consistent and our teams continue to launch experiments and new experiences at a fast pace. As always, I will review each of our priorities. For our first priority, driving Commerce through presence, we are happy to share that we gained exciting traction in our Commerce offerings. We had our best quarter yet, attracting sellers, more than we anticipated and rapidly crossed over the $1 billion of annualized GPV. The largest opportunity for us remains our existing base, of 21 million customers and the many sellers that are already a part of it. The efficient motion of selling into our existing customer base, was the primary contributor to our GPV growth.
And hence, it remains our focus as we work to scale this sales team. Adopting our commerce product, paves the way for customers to deepen the relationship with us, which results in higher retention and increased lifetime value. Last month, we also launched Apple’s contactless Tap to Pay technology, within our GoDaddy app. As you know, Tap to Pay allows our customers to accept all types of contactless in-person payments, with only an iPhone just by tapping their credit card, mobile wallet or watch. We worked directly with Apple, to integrate this technology natively, creating a seamless, best-in-class, low-friction sign of experience for our app customers. We also made several other improvements to make websites plus marketing a more robust solution, for sellers including improved pay buttons, and new reports for merchants to help them prepare their taxes and understand their fees and payouts.
Our teams are also excited about, how generative AI can add ease of use for customers, by auto populating content for them and helping them create natural language, e-mails, chat and text messages, they engage with their customers. AI-powered tools are showing up across multiple experiences at GoDaddy. For example, we built instant video features in our Studios app and use cases like auto generating product descriptions, are coming soon. As always, we are focused on both technology tools and guidance for our customers. As our customers start exploring generative AI, we want to help them by launching a growing area of resources so our small business owners can begin harnessing, its power to save time and grow their sales. For example, we now provide an essential small business guide [Indecipherable] library.
We are also working to bring these capabilities together, in a manner that even the smallest businesses can benefit from instantaneously accessing vast amounts of data and transforming it into something meaningful for their business. Websites + Marketing continues to be rated, as the highest-performing website builder according to Google Core, Web vitals and it is taking share in the marketplace. The team continues to focus on making it easy for customers, to build high-performance websites quickly. On our second priority, delivering for GoDaddy Pro. Our goal is to make them better serve their clients and grow their businesses. GoDaddy Pro’s value, platform capabilities like performance, availability and security, but also automation, support, ease of use and value-added offers. Our new managed WooCommerce store offering replaced our old managed WordPress Commerce offering, over the last few weeks. With this new product in place, we are bringing many more capabilities to the table and we’ll be able to test into higher-priced SKUs.
On our Hosting business, our focus is around stabilization and simplification. As discussed previously, we are on course to integrate brands more deeply which includes retiring the Media Temple brand with the final migration of customers to the GoDaddy full stack. In April, we also signed an agreement to exit a couple of our smaller European brands. Our goal remains to provide customers with a higher level of service at a lower cost to serve while sharpening our focus. On our third priority innovation in domains. We have continued to broaden our bundling offers for new and existing customers, while our initial focus was around bundling e-mail, we have increased experimentation velocity and are doing much more here. We are improving the onboarding flow for customers with the target of higher attach and encouraged by the results we have seen. This matters because we know that customers who activate and attach more products have higher retention rates.
And we continue to be excited about payable domains and have two clear insights since our launch: first customers who adopt this product are demonstrating their satisfaction by quickly doing a significant number of transactions through the default tailing we provide. Our initial efforts to drive more traffic to this product resulted in impressive early GPV. Second, we noticed that existing customers are more ready to use this product compared to potential customers who are new to purchasing a domain. We are currently focused on creating more opportunities for both existing and new domain customers to discover and utilize payable domains. Although there is still work to be done, we strongly believe in the enormous potential of this offering. On the aftermarket, you will remember our List for Sale feature that allows GoDaddy customers to list their domain in the aftermarket. This quarter we extended this capability to our registrar partners, opening a channel to bring more inventory to the aftermarket.
We’ve also added new features to the customer experience for brokered aftermarket transactions. We built a new lead center giving real-time status updates to the leads being pursued on behalf of domain sellers so they can have more visibility into progress on their transactions. Our aftermarket business continues to innovate and create value for our customers and all players in the industry. At GoDaddy, we are eager to help small businesses thrive. This fuels us to create better products that deliver greater value for our customers which drives our attractive financial model that then translates into sustained customer and shareholder value. This is the simple approach of how we work to grow GoDaddy and differentiate our offerings. We are proud of the consistency of our strong execution and our strategy. We have a great business with a loyal and growing customer base that continues to spend more time. With us through our strong competitive advantages and attractive financial profile GoDaddy is well positioned to continue to grow and deliver for all stakeholders in meaningful ways.
With that here’s Mark.
Mark McCaffrey — Chief Financial Officer
Thanks, Aman. Before getting into the detailed results, I wanted to summarize a few key points. First, we are making progress towards returning to double-digit growth while executing our three year plan to expand our operating margins and deliver on our free cash flow per share targets; second, we are delivering on our applications and Commerce segment growth through increases in new customers and the conversion of our existing customers to our payments platform in the US.; lastly, we are on target to complete our restructuring action in the second quarter, driving better operating leverage in our core platform segment and improving our overall operating margin in the second half of the year.
With that, Applications & Commerce revenue grew to $338 million up 12%, exceeding our guide of 8% to 10%. Additionally, the normalized EBITDA margin for Applications & Commerce was 39%. Taken together, this highlights the impressive performance we are driving in this business which delivered ARR for Create and Grow of $450 million, up 10% and over $1 billion of GPV. This segment is our largest opportunity to drive growth through the attachment of our Create and Grow products, Commerce platform and productivity solutions for both new and existing customers. ARR for Applications & Commerce grew 9% to more than $1.3 billion. Annualized GMV, across the GoDaddy ecosystem grew 18% to approximately $28 billion. Our core platform segment which includes Domains, Hosting and Security continues to serve as an important on-ramp to our overall business.
Core Platform revenue was $698 million with an ARR of $2.2 billion and a strong normalized EBITDA margin of 27%. Core Platform revenue was supported by a 5% growth in domains from a combination of new customer adds, attach and price increases on renewals. This was offset by tough compares for our aftermarket business as well as the continued uneven flow of large transactions. Additionally, there are modest impacts to our hosting revenue and customer count from migration of non-core hosting platforms being sunset. Total revenue, grew to $1.04 billion up 3% on a reported basis and 5% on a constant currency basis, reflecting a sequential lift from the Q4 growth rate. Within total revenue, international revenue grew 3% on a reported basis and 7% on a constant currency basis. Q1 bookings grew faster than revenue at a rate of 4% on a reported basis and 5% on a constant currency basis, totaling $1.2 billion.
Bookings growth on our subscription products outpaced the related revenue growth by approximately 100 basis points. Our durable model continues to generate cash flow through our strong customer relationships and cohort performance, highlighted by our customer retention rate of 85%. We build on this strength through intentionally focusing our marketing on attracting high-intent customers that stay with GoDaddy and spend more. This quarter, we added 100,000 net new high-quality customers, despite headwinds from our migration efforts noted above. Our ARPU grew 4% to $197 from $190 last year. Normalized EBITDA grew 11% to $250 million with a margin of 24%, representing approximately 160 basis points expansion. We expect to continue to drive operating leverage through strong execution and our restructuring efforts. Unlevered free cash flow for the quarter totaled $304 million, growing 6% driven by strong profitability, while free cash flow remained flat at $259 million, despite an increase in our cash interest expense due to the refinancing of our term debt in Q4 2022.
Free cash flow per share rose to $6.19 on a trailing 12-month basis versus the prior year’s cash flow per share of $5.25, an 18% increase driven by execution, operating leverage and share repurchases. Additionally, in Q1 we completed $114 million of share buybacks, repurchasing 1.6 million shares. This brings the cumulative share repurchase under our $3 billion authorization to $1.4 billion and 18.4 million shares reducing shares outstanding since inception by 11%. We remain on target for our commitment to reduce our fully diluted shares outstanding by 15% to 20% over the three-year period. On the balance sheet we finished Q1 with $892 million in cash and total liquidity of $1.9 billion. Net debt stands at $3 billion with 2.7 times net leverage within our targeted range of two to four times. Lastly as noted above we signed an agreement to divest certain non-core hosting assets which is expected to close by Q3. Our restructuring charge of $50 million in the quarter included $21 million of a non-cash impairment charge for these assets.
Moving on to our outlook. We are targeting Q2 total revenue in the range of $1.045 billion to $1.065 billion, representing growth of 4% at the midpoint. With the current momentum, we expect to exit the year at approximately 7% top line growth with a normalized EBITDA of 28%. We expect applications and Commerce segment growth to be between 8% and 10% for both Q2 and the full year. For core platform, we expect revenue growth 1% to 3% in Q2 and accelerate in the back half of the year to deliver between 2% and 4% for the full year. Q2 normalized EBITDA margin is expected to improve to approximately 25% with continued acceleration over the back half of the year to deliver full year normalized EBITDA margin of approximately 26%, showing improved operating leverage from the actions previously discussed.
I would like to spend a moment bridging our expected 2023 revenue growth to what we believe our strategy and model can produce going forward. Our current guide for the full year is 5% revenue growth at the midpoint. As a reminder, this year’s revenue growth rate includes approximately two points of FX pressure from last year’s bookings and is also impacted by difficult compares in our aftermarket business and the divestiture of certain non-core revenue-generating assets. Looking ahead to next year and beyond, absent those negative impacts and with the momentum we are driving through the strategic initiatives Aman spoke about earlier including ARPU expansion, even with the continuation of the current macro environment there is a path to returning to double-digit top line growth, while remaining committed to delivering our margin expansion and free cash flow targets.
We remain disciplined in how and where we spend with a focus on controlling our costs, optimize our marketing spend, monitoring headcount and investing in innovation so that we can strike the right balance between capturing attractive opportunities with delivering value to our shareholders always with an eye towards balanced long-term growth and profitability. In closing, we have strong confidence in our ability to execute and accelerate our growth. We believe our competitive position and strategic advantages, our diverse product offerings, our strong balance sheet and the consistent and predictable cash flow we generate will position GoDaddy as a leader amongst its peers. Our 21 million customers create the foundation for our resiliency. We remain focused on execution against our strategic priorities responsibly managing our business and building deeper customer relationships as we partner alongside entrepreneurs on their journey.
With that we will have Christie Masoner from our Investor Relations team open up the call for questions.
Questions and Answers:
Christie Masoner — Head, Investor Relations
Thanks, Mark. [Operator Instructions]. Our first question comes from the line of Matt Pfau from William Blair. Matt, please go ahead.
Matt Pfau — William Blair — Analyst
Great. Thanks for taking my questions. First wanted to understand the potential acceleration next year a little bit better. So if we look at the business absent those three headwinds that you cited do we need an acceleration in that business in order to get to double-digits? Or is just a normalization of those three headwinds sort of enough to get us there?
Mark McCaffrey — Chief Financial Officer
Thanks Matt. I’ll handle the first part of that and it sounds like you have a second question too. So on the bridge we do see I would say easier comps on things like aftermarket coming into the second half of the year which will start to serve as a tailwind. So normalizing the core platform segment growth obviously is in the cards as it turns around into easy year compares in that end of it. Domains is growing at a good pace.
And obviously we’re taking some actions on hosting which will act as a headwind in the back half of the year but turn into a tailwind as well next year. So a lot of positive momentum. Obviously applications and commerce continues to be the higher growing segment for us. We’re seeing a lot of traction on commerce. And we’ve talked about the four pillars there and then being in the market and we’re really happy with the performance of those. So the ability to bridge to what we see as a path to that double-digit growth we’ve talked about we think starts to take that momentum in 2024.
Aman Bhutani — Chief Executive Officer
Yes. And maybe I’ll just add Mark, Matt that we see of course the headwinds away but we also have good momentum in the business. Mark already mentioned the growth in AMC, but also the domains business has done well and demand has been better and improving. So we’re very sort of encouraged by the momentum and that’s what we’re really talking about.
Matt Pfau — William Blair — Analyst
Great. And then just wanted to ask a follow-up on gross margins. It dipped sequentially in the quarter. I’m guessing that’s probably due to payments. So is that true? And how should we think about that trend throughout the year as presumably payments continues to gain traction?
Mark McCaffrey — Chief Financial Officer
Yes. No doubt Matt that we’ve talked about that product mix will impact our gross margin. And we’re focusing on operating margin as we run the business and expansion of that. But as we get into more of the transactional businesses we can continue to see pressure on the gross margin, but be in that 60 — low 60s to mid-60s range. As it scales it becomes more accretive. Obviously we get the leverage on the operating margin and it’ll help us deliver on our normalized EBITDA.
Matt Pfau — William Blair — Analyst
Great. Thanks. Appreciate it.
Mark McCaffrey — Chief Financial Officer
Thanks, Matt.
Christie Masoner — Head, Investor Relations
Our next question comes from the line of Trevor Young from Barclays. Trevor, please go ahead.
Trevor Young — Barclays — Analyst
Great. Thanks. Just first one Mark. On the 1Q segment results core platform a bit below guide and A&C a bit ahead, on either of these, could you maybe speak to which areas drove relative under or outperformance specific versus your expectations? And then, on repurchases in the quarter, a bit below run rate over the prior three quarters and a bit below what you’d expect given the $1 billion guide. Realized capital allocation strategy was reiterated here, but just wondering if there was something that gave you pause on those repurchases such as macro or just a conscious effort to kind of bolster cash on hand a bit? Any color there would be appreciated.
Mark McCaffrey — Chief Financial Officer
Yes. Thanks, Trevor. On core platform, aftermarket and the larger transactions continues to be the area that is uneven for us and becoming difficult to predict. We saw some strength as we were exiting the quarter, but it continues to be uneven and that pretty much drove our underperformance. So a moderate impact from some of the actions we were taking on integrating the non-core hosting platforms, but I would say aftermarket was probably the area of putting us below the original range. On application and commerce, the AGV is ahead of what we — at a great rate. We’re seeing a lot of conversion of our existing customer base which is driving the GPV including new customers signing on.
So we’re really pleased with the momentum there. Really pleased with the attach we’re getting around the websites related to our commerce SKUs. So all that has got great momentum in the quarter. We also saw the benefit of the stickiness of — as our customers and the applications with commerce are adding more than one product, the retention rates are improving. We’ve always seen that trend and now we’re seeing it more in Q1 with commerce. And with that, we’re issuing less refunds and that helped us in the quarter as well that we didn’t have to. We’re seeing that stickiness start to take place.
So we’re seeing between the two segments, I would say, as we’re integrating the core hosting assets, we are seeing some headwinds around retention of, what I would say, customers with more in the area of one product, but we are seeing a pickup in A&C of the customers with multiple products and multiple services, which is helping us. On capital allocation — sorry, I almost forgot there was two parts to that. Nothing to call out. We are ahead of schedule at the end of the year. We came into the year with the $1 billion target that hasn’t changed. There hasn’t been any changes to our capital allocation strategy. And I would still put in there a target of $1 billion for the year.
Trevor Young — Barclays — Analyst
Great. Thanks, Mark.
Mark McCaffrey — Chief Financial Officer
Thanks, Trevor.
Christie Masoner — Head, Investor Relations
Our next question comes from the line of John Byun from Jefferies on for Brent Thill. John, please go ahead.
Aman Bhutani — Chief Executive Officer
John?
Christie Masoner — Head, Investor Relations
Hi, John. You might be — I think you’re still muted.
John Byun — Jefferies — Analyst
Okay. I think it was double muted. Thank you very much. So good sequential improvement in GPV from Q4 from $760 million to $1 billion. Wondering, in terms of the driver, was there anything more besides I guess the existing base converting pretty well? And for existing customers, would those be switching from other payment solutions? And if so, how do you convince them to do so other than for pricing?
Aman Bhutani — Chief Executive Officer
Yes, John thanks for that question. Mark has talked about the pillars of revenue for Commerce. And we actually saw goodness across all of them. But selling into our existing base of customers was the largest driver of this acceleration and growth and we continue to be very excited about it. In terms of how that sales cycle works, our customers have a fantastic relationship with GoDaddy. And we’re bringing not just sort of the surprise and delight element of hey you have this relationship with GoDaddy and we have more to offer, we also have great pricing for them.
So, when you put together the relationship all the basket of sort of one-stop shop and the pricing that leads to them switching over from other folks. And we — this is — of course, we’re excited about payable domains and that did its part and resellers did its part. And everyone — every piece helped, but the prime focus for us is selling into our base. We’re seeing goodness there. We’re going to keep attacking that. And from what we can see it seems to be a bit of a unique competitive advantage for GoDaddy because of the relationships we have. So, we absolutely are continuing on path on that.
John Byun — Jefferies — Analyst
Great. Thank you. And maybe one follow-up. On the GMV it was flat quarter-to-quarter. I don’t know if there was how that was versus your expectation whether you expected any seasonality or just increase from continued adoption?
Aman Bhutani — Chief Executive Officer
Yes. GMV as a whole if you remember is the broader sort of set of customers we have also inherited from Poynt and it tends to follow seasonality of the business Q4 versus Q1 and nothing new to sort of report that.
John Byun — Jefferies — Analyst
Thank you.
Aman Bhutani — Chief Executive Officer
Thanks John.
Christie Masoner — Head, Investor Relations
Our next question comes from the line of Clarke Jeffries from Piper Sandler. Clark please go ahead.
Clarke Jeffries — Piper Sandler — Analyst
Hello, thanks for taking the question. First one I think it’s for Mark I was hoping you could maybe give us some color on that exit rate of 28% EBITDA margins. How we might be able to think about that between the two segments kind of footing the disclosures you gave on A&C core platform and overhead?
Mark McCaffrey — Chief Financial Officer
Yes. Thanks Clarke. So, yes 28%. And we talked about the actions we’re taking in the first half that will help benefit as we get through the second half of the year and obviously exit the year at a strong run rate there of 7% and 28% of normalized EBITDA margins. A good way to look at it is as we’re going through the core platform actions that we’ve taken around the restructuring and the integration of those platforms into the GoDaddy technology stack. There is going to be some pressure on our retention rates. And we’re seeing customers that don’t have a higher propensity to spend with us are making that decision as we’re doing the transfer over to the GoDaddy stack.
On the flip side, the — being on the GoDaddy stack and having applications and commerce — and Commerce and our ability for our care guys to engage our customers at a better level is really showing that we’re getting more customers signing on to more than one product right now, which again pushes our retention rates higher, pushes our ARPU higher. We’re seeing a lot of benefit of that. And A&C comes at a higher margin. So, we’re in essence gaining more customers at the higher margin level while we’re seeing pressure on the core platform. Those are the lower margin or lower calorie customers I would say. And therefore we’re seeing the benefit of the mix start to improve and help us get momentum into the future years into 2024. So, hopefully, that helps kind of how we’re looking at it.
Aman Bhutani — Chief Executive Officer
Yes. And maybe just very quickly Clarke if I can add. If you look at items like marketing spend, obviously, I’ve talked about it a lot over the last couple of years, but we continue to sort of make our ability to measure return on ad spend better and better globally. And what we’re seeing is good gross ads good demand coming to the site and the lowest marketing spend sort of as a percentage of revenue that we’ve had in a while. So obviously, that continues to help us as well apart from sort of the actions that Mark talked about which are more on the people side.
Clarke Jeffries — Piper Sandler — Analyst
Perfect. And then just one follow-up. I know you’ve mentioned a couple of times the aftermarket. I just kind of want to be clear on compared to the guide for core platform is where the result came in compared to the guide maybe either at the midpoint or the low point completely describable by aftermarket? Or were there any other factors maybe accelerated movement in the hosting segment that might have also been a contributor there? Helping to clarify that would be great.
Mark McCaffrey — Chief Financial Officer
Yeah. You just called it. I think the primary driver was aftermarket and the continued absence of the large transactions. Just as a reminder, we don’t set the prices in the aftermarket. That’s a buyer and seller agreement and we kind of facilitate the transaction between two. So we’re still seeing that disconnect in the market related to the buyer and seller agreeing which shows up in the larger transactions. So it’s primarily the cause of the core platform missing the guide. There is a little bit on the hosting no doubt. I don’t want to say it’s 100% because there is some as we are migrating some of the noncore assets into the GoDaddy technology stack we have seen some pressure there. But I would say aftermarket was primary.
Clarke Jeffries — Piper Sandler — Analyst
Perfect. Thank you very much.
Christie Masoner — Head, Investor Relations
Our next question comes from the line of Aaron Kessler from Raymond James. Aaron, please go ahead.
Aaron Kessler — Raymond James — Analyst
Great. Thank you. A couple of questions. Maybe just first on the macro, I mean outside of aftermarket can you just maybe talk to the top of the funnel traffic you’re seeing kind of gross sub additions? And then just how should we think maybe about the ARPU outlook for 2023? Should we think about it similar to Q1? And just maybe talk about the adoption of higher ASP solutions that you’re seeing as well? Thank you.
Aman Bhutani — Chief Executive Officer
Yeah. Thanks Aaron. Maybe I’ll just take the top of the funnel and Mark if you want to touch on ARPU. So like I started to say earlier top of the funnel I think we see good demand year-over-year. We see good gross adds and we’re pretty happy with what we’re seeing and as we had talked about last quarter as well a bit the momentum seemed to improve through the quarter. So our customers by just nature tend to be resilient and tend to be a creative group. So and we serve them like I talked about as well all, but it does seem to be showing up in the numbers to a good extent as well. So we remain optimistic about the rest of the year. And of course we’ll keep you updated on it with Mark on ARPU.
Matt Pfau — William Blair — Analyst
Yeah. And I’ll start with we don’t guide towards ARPU, but looking at the outlook for the year when we think about our goal to attract customers with a higher intent to spend with us our goal is to raise that ARPU number. What we’re seeing around the commerce is obviously giving us that momentum that we believe we’ll be able to continue to drive that. Q4 to Q1 is a normal pattern for us.
I know we haven’t gone into quarterly disclosures of ARPU in a while, but based on our billing cycles and bookings happening earlier in the process and in the year that revenue from the bookings will flow through to our ARPU as it rolls out in our subscription business. So it will be a natural benefit that we will start to see. So we’re excited about attracting more customers with higher intent. We’re seeing that especially in the commerce area, which showed up in Q1. The momentum there has been really, really good and we continue to be driving towards adding that ARPU as we go throughout the year.
Aman Bhutani — Chief Executive Officer
And we can – those two thoughts together with bookings growing faster than revenue both those pieces basically come together.
Aaron Kessler — Raymond James — Analyst
Great. Thank you.
Christie Masoner — Head, Investor Relations
Our next question comes from the line of Elizabeth Porter from Morgan Stanley. Elizabeth, please go ahead.
Unidentified Participant — — Analyst
Great. [Indecipherable] on the line from Elizabeth’s team. Thank you for taking the question. I wanted to ask on the regional banking crisis. We’ve seen in some of the senior loan officer surveys that are pointing to tougher requirements to get loans. How important is this financing channel for your target customer base? Are you seeing any impact today? And what is incorporated into your outlook?
Aman Bhutani — Chief Executive Officer
I think from two views, one from our customer’s view I think the challenges in the financial banking crisis have not had a significant impact for our customers. I would remind you that many of our customers are micro businesses and they don’t even access to banking services or capital and they really are a very creative group. And for our business as a whole obviously, we’re not dependent on SVB or sort of risks that come close to the regional banking places. I don’t know Mark if – what you would add?
Mark McCaffrey — Chief Financial Officer
Yes, it’s a good inquiry. When you think about our ARPU at $197 and the cost of that to our customers and the value that we provide to them in new business, not a real impact there. Even when you talk about the FDIC limits and all that and the micro businesses and entrepreneurs, we think our customers are optimistic and we’re seeing them eager to sell in the marketplace but we’re not seeing any limitations based on the banking prices.
Unidentified Participant — — Analyst
Great. Thank you for the question.
Christie Masoner — Head, Investor Relations
Our next question comes from the line of Mark Zgutowicz from The Benchmark Company. Mark, please go ahead.
Mark Zgutowicz — The Benchmark Company — Analyst
Thank you. Good evening. Just a couple of quick ones. Your A&C revenue guide for this year,it looks like potentially a modest sequential decline if you look on a two-year stack basis throughout the year. So I’m just curious with new products coming to – does the market an infancy there, what that might be attributed to? And related if you can maybe speak to the attachment rates you’re seeing early on with your OmniCommerce rollout and whether there are any initial demand signals that you’d like to share? And then last on the 2Q and annual revenue growth guides, if there’s any material contribution from payables – payable domains and then and also from Worldpay? Thank you.
Mark McCaffrey — Chief Financial Officer
Okay. So I’m going to hand – there was a few things in there Mark. So I’m going to try to go through them sequentially. If I miss anything, please point it out. A&C revenue guide, we are really excited about the 12% in Q1, showing great momentum coming into the year. We talked about it. This is the first quarter in which we had all four pillars in market. And that we’ve been engaging our customers converting our existing customer base in the US and just unbelievable traction.
And we’re also seeing play out is that the stickiness of going from the one to the two to the three products is playing out and improving – I want to say improving our refunds but lowering our refunds to our customers. So we saw a benefit of that in Q1. We are early stage though. So we – it’s one quarter in and we like the momentum. We’ll see how it rolls out throughout the year but we feel excited about the ability to continue that momentum throughout the year and into 2024. I think on the attach of the OmniCommerce, Aman, do you want to talk about it?
Aman Bhutani — Chief Executive Officer
Maybe, I’ll just talk about attach more broadly real quick and then get into OmniCommerce as well. We talked about bundling a little bit. And as Mark said bundling is a great option for us to bring two-plus products to our customers and it helps obviously not just the average order size but it helps with the retention, because customers that engage with more than one product tend to retain at higher rate. And that’s an area of focus for us and we’re pretty excited about where we’re going.
On the OmniCommerce issue, we’ve had great success selling into our base but it’s still very, very early days. Very similar to your question about payable domain. I’m super excited about payable domains. We have some early results that I indicated and there’s more to do. But all of these things we’re very early in the process. We’re very excited about the opportunity in the future. And overall the attach of these products to our existing customers continues to be good. I think in terms of sharing specific numbers on that, we’d want to have it reach certain milestones so we can share more with you.
Mark McCaffrey — Chief Financial Officer
And on the Worldpay, we had talked about that last quarter. We’re really excited about the Worldpay agreement in the — they’re selling our product in the market. We have a — I would say a hard launch in the second half of the year. Minimal impact this year we’re planning on. But going into next year, it should have some great momentum.
Mark Zgutowicz — The Benchmark Company — Analyst
Great. Thanks guys. Appreciate it.
Mark McCaffrey — Chief Financial Officer
Thank you.
Aman Bhutani — Chief Executive Officer
Thanks.
Christie Masoner — Head, Investor Relations
Our next question comes from the line of Ygal Arounian from Citi. Ygal, please go ahead.
Ygal Arounian — Citi — Analyst
Hey, good afternoon, everyone. So I want to ask about AI. Apologies, if it has been asked. But I know you mentioned some of the generative AI, prompt library and some things you’re doing on that front. But certainly recently but really over the past couple of months there’s been a greater dialogue about generative AI disrupting the web builder business. And I want to get your thoughts on that, how you’re approaching it and how you think about AI maybe not just in the near-term but over the long-term as well?
Aman Bhutani — Chief Executive Officer
Well, Ygal thanks for that question. And no it hasn’t been asked yet. So let me just take a moment and just take a step back to talk about the long-term and then give you a couple of examples of how we’re thinking about it in the immediate term. Obviously like many other folks we want a future where AI is a positive contributor to humanity and society as a whole. And we’re absolutely aligned with that view of the world. Where we see opportunities and some of them are a little ways away, some of them are sooner, is that AI creates moments of delight and surprise for customers. It allows us to create a new set of tools that allow customers to get more value faster easier, so they can focus on the things that they need to do growing their business and they have to worry less about the mechanics of things that technology can take care of.
And that is the history of tools. Tools make — allow people to do things that they otherwise would have had a hard time doing. And AI for us and in our business, in our industry I think is going to provide another set of new tools for our customers. In terms of how our customers think about this I happen to sit on, like, yesterday for two hours in the seat next to one of our customers that customer actually uses our entire solution from GoDaddy Studio to the website to the hardware device in their store and we had a great conversation for two hours. And I asked him about AI and what he feels as a micro business owner. And his point was very, very simple, which actually aligns with our company’s view of it. He said, of course I want AI to help me message a customer or prompt me and tell me what the customer is asking about so I can help my customer.
But my business relies on the personal relationship I have. And this him I’m talking, I have with our customer. And I don’t want a machine talking to our customers. The difference happens in our business because of the owner himself his wife, who’s the creative person behind that business. They are the ones that make the difference. So they want to hold that interaction. And for them AI is a tool. And frankly, if GoDaddy can make it easier by using AI tools to make it easier for them to engage with their customers, they’re all for that. But at the end of the day it is about tools and not about replacing what they actually do for them.
If you translate that into our business, we — well, one a large part of our business domains hosting and other is sort of not related to AI in the same way. But when it comes to content creation, when it comes to websites, what we see for the foreseeable future is great opportunities to create new set of capabilities for customers that allow micro businesses to compete with larger businesses in a manner that has not been seen before. And that’s what we’re focused on and we’re very excited about achieving that.
Ygal Arounian — Citi — Analyst
Okay. That’s really helpful. I think some of the ways — it’s been depicted about how AI disrupts your business model. So, a little bit too simplistic. So it’s good to hear that from you. I think you also mentioned taking share within the website builder space. And you guys give your overall customer count but not the specific customer count on Websites + Marketing and Managed WordPress. So I wanted to maybe see if you can elaborate on that point a little bit more and get a little bit more color. Thanks.
Aman Bhutani — Chief Executive Officer
Sure. As you know, Websites + Marketing allows, customers the best way the simplest way to build a high-performing website. And given the domains funnel that we have a lot of customers that we see are sort of folks with new ideas. It’s their dream they want to take it to market and Website + Marketing provides them just a great, great way to start there. We do look at share numbers internally and we — as you know, there’s no sort of public way to look at website share, but we do spend time and energy understanding the counter websites and what our share in it and it is across all our presence products. And that’s what we try to share with you to say, look, we see us taking share.
And out of the product — presence products we have actually Websites + Marketing continues to be doing the best. And we continue to keep it very focused on the customer serves well. We are not distracted about that product serving everybody. It has a target customer segment. It’s doing a fantastic job. And of course, there’s more to be done and we can talk about that separately. But I’m very happy that Websites + Marketing is continuing to take share.
Ygal Arounian — Citi — Analyst
Okay. Great. Just to be clear, your — when you’re talking about taking share, are you including WordPress on that or not?
Aman Bhutani — Chief Executive Officer
We have overall taken share as well in the website space, but I didn’t break it down by each of the Presence products we have. But amongst — across the products the product that took the most share was Websites + Marketing.
Ygal Arounian — Citi — Analyst
Great. Thank you.
Aman Bhutani — Chief Executive Officer
Thank you.
Christie Masoner — Head, Investor Relations
Our next question comes from the line of Ella Smith from Morningstar. Ella, please go ahead.
Ella Smith — JPMorgan — Analyst
Hi. This is Ella from JPMorgan. First question is, I was wondering if you could speak more about your partnerships — recently announced partnerships, specifically with Apple and Microsoft teams. Especially, I would appreciate if you could talk more about the Tap to Pay partnership, because that seems like a pretty unique opportunity. Thank you.
Aman Bhutani — Chief Executive Officer
Yes. Super excited about the Tap to Pay opportunity. And obviously, I think all of you know well what the functionality offers. I think what GoDaddy has to bring that’s a bit special is that we work with Apple directly to create a truly seamless experience. I would love to in a different setting showcase that for our analysts and customers on a bus tour or something. So you can actually, see how much easier it is when GoDaddy creates that what we call the seamless and intuitive experience. And our goal there really is to have a set of services or experiences for our customers that are also easy to use that the customer doesn’t hesitate to use it.
As you know, our customer is the micro business owner. And there is a cost for them to take on something new, right? Because they need to put energy into growing their business and not trying to learn new technology. So when we lower the friction bar when we make it easy for them the adoption is much faster. And that’s the early signal with Tap to Pay as well that GoDaddy merchants are just very very quickly adopting Tap to Pay. And there’s actually much more we’re going to give them with Tap to Pay.
With Microsoft Teams, the idea there is that, we want to be able to serve our customers to any of the sort of services that they used to engage their customers. This is a new opportunity. It’s something that we’re exploring and are curious about, where as you well know Microsoft Teams has grown and sort of has very large user base. And what we’re really offering is the payments capability within Teams. And it extends our existing sort of beautiful relationship with Microsoft through the productivity products already.
Ella Smith — JPMorgan — Analyst
Great. That’s super helpful. Thank you. And as a quick follow-up I know on the last question we spoke at length about the impacts of AI to the web tool side of the business. And you did say that you don’t see much impact to the core platform side of the business but I just want to confirm that. Do you think that there’s even on the back end any opportunity for AI destruction to domains and hosting? Or is that just not as relevant at this juncture?
Aman Bhutani — Chief Executive Officer
Actually, over the last couple of years, I’ve talked about it a little bit, but let me update some of my comments. At GoDaddy, we’ve been using AI to provide customers with better domain names and we’ve put more energy into that over the last two or three years. It was actually one of the things we had mentioned where when we had first seen the acceleration of the aftermarket that we were actually using machine learning models to find better names for customers that were available where they were available in the primary market or the secondary market., So there is an impact of AI into our core business. But that impact so far has been a positive one and one that creates tools that allows customers to find better things. And at least so far we have not found any reason for those technologies to be negative on a negative impact to us.
Ella Smith — JPMorgan — Analyst
Perfect. Thank you, so much.
Aman Bhutani — Chief Executive Officer
Thank you.
Christie Masoner — Head, Investor Relations
This concludes our Q&A. I’ll turn it back to Aman.
Aman Bhutani — Chief Executive Officer
Thanks Christie. Just a quick shout out to all GoDaddy employees for another solid quarter. We are super excited about the execution of the company. We’re clear in our strategy and it takes all of us to get it there. And we appreciate you taking the time today to join this call and ask us a few questions. Thank you.