Revenue and profit overview

Team Internet reported a 4% decline in total revenue, reaching $803 million compared to $837 million in 2023. The company’s net revenue (gross profit) also fell slightly, from $191 million to $188 million, reflecting a 2% drop. Adjusted EBITDA, a key profitability metric, decreased 4% to $92 million, down from $96 million the previous year.

Cash flow and capital allocation

Despite the revenue decline, Team Internet achieved a record-high operating cash flow of $95 million, an increase from $93 million in 2023, with an impressive 103% cash conversion rate. The company allocated capital strategically, spending:

• $21 million on share buybacks
• $10 million on dividends
• $32 million on acquisitions

1. Domains, Identity & Software (DIS)

• Revenue increased by 7% to $203 million
• Net revenue grew 9% to $74 million
• EBITDA surged by 46% to $19 million
• The company streamlined operations by consolidating its subscription-based platforms and SaaS offerings.

2. Comparison business (comparison sites)

• Revenue skyrocketed by 43% to $63 million
• Net revenue grew by 44% to $23 million
• EBITDA nearly doubled (89% growth) to $17 million
• Growth was fueled by expansion into Italy, Spain, and a relaunch in France, with further global expansion planned.

3. Search business

• Revenue fell 11% to $537 million
• Net revenue dropped 15% to $91 million
• EBITDA declined by 24% to $56 million
• The decline was attributed to rising traffic acquisition costs and lower revenue per visitor from Google. The company is now prioritizing customer experience over short-term volume growth.

Challenges and legal matters

Team Internet faced setbacks with its Shinez acquisition, which it purchased for $41.8 million in 2023. The business underperformed, leading to a non-cash impairment charge and ongoing legal action against the founders. The company plans to transition Shinez from text-based content to short-form video, aligning with evolving consumer trends.

CEO Michael Riedl emphasized sustainable earnings growth, capital discipline, and balanced revenue streams. The company’s diversified business model, combined with its focus on AI-driven solutions in the Comparison segment, positions it well for the future.

Key takeaways

• Revenue and EBITDA declined, but operating cash flow reached a record high
• Comparison segment led growth (+43% revenue, +89% EBITDA)
• DIS segment demonstrated strong efficiency gains (+46% EBITDA growth)
• Search business underperformed due to market headwinds (-11% revenue, -24% EBITDA)
• Strategic investments in AI and global expansion signal future growth potential

While 2024 was a challenging year, Team Internet’s focus on efficiency, capital allocation, and long-term market positioning suggests a resilient financial outlook moving forward.

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Solid growth in revenue and profit

In Q3 2024, GoDaddy reported a revenue of $1.15 billion, marking a 7% increase from the same period last year. The Applications & Commerce (A&C) division, which provides tools like e-commerce platforms, saw a significant growth of 16%, reaching $423.1 million. This segment now has an annual recurring revenue (ARR) of $1.6 billion, a 15% increase from the previous year. Meanwhile, the Core Platform, which covers traditional hosting and domains, grew by 3%, with revenues totaling $724.5 million and an ARR of $2.4 billion.

GoDaddy also delivered a strong performance in terms of profit. Net income for Q3 reached $190.5 million, up 45% from the $131 million reported in Q3 2023. The earnings per share (EPS) increased from $0.89 to $1.32, surpassing analysts’ estimates of $1.23. This rise in income indicates GoDaddy’s successful focus on cost control and improved margins.

Challenges in the aftermarket segment

Despite these positive figures, not all aspects of GoDaddy’s business grew this quarter. Its aftermarket segment, which involves the resale of domains, saw a slight decline. Revenue from this area was $106 million in Q3, down from $112 million in Q2 2024 and $107 million in Q3 2023. While GoDaddy anticipates aftermarket revenue to improve over the year, some challenges, like losing access to Huge Domains’ inventory, might impact its performance in this segment.

Strong cash flow and future outlook

One of the highlights of GoDaddy’s Q3 report is its cash flow strength. Operating cash flow increased by 26%, reaching $355.2 million, while free cash flow grew by 29% to $362.7 million. These results enable GoDaddy to continue investing in growth initiatives and share buybacks, as it repurchased 5.2 million shares year-to-date, spending approximately $668.1 million.

Looking forward, GoDaddy projects Q4 revenue between $1.165 and $1.185 billion and anticipates Applications & Commerce growth to remain strong. For the full year, the revenue forecast is set at $4.545-$4.565 billion. GoDaddy’s AI-driven Airo platform, which helps customers set up websites and manage businesses, is expected to contribute further to both revenue and customer satisfaction.

GoDaddy’s Q3 results showcase the company’s strong performance, with significant growth in both revenue and profitability. Although there are some challenges in its aftermarket business, GoDaddy’s advancements in Applications & Commerce and innovations like the Airo platform reinforce its position as a leader in the web services industry. For entrepreneurs and investors, GoDaddy remains a key company to watch as it continues to grow and adapt in the digital age.

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For the fiscal year ending in 2024, OVHcloud reported a revenue of €993 million, up 10.7% from the previous year. This was fueled by robust growth across different service segments, notably with a significant rise in the Private Cloud segment, which alone brought in €623.6 million, representing an 11.8% increase. Meanwhile, the Public Cloud segment saw an even stronger gain of 14.2%, reaching €182.8 million, reflecting a successful client acquisition strategy.

One notable achievement was OVHcloud’s adjusted EBITDA, which reached €381.5 million, a 17.2% increase from the previous year. This improvement, coupled with enhanced operational efficiency, allowed the company to increase its adjusted EBITDA margin to 38.4%. By optimizing investments and reducing costs, the company also reported an unlevered free cash flow of €25 million.

Key strategic moves

In a notable step to strengthen shareholder value, OVHcloud announced a share buyback offer totaling €350 million, priced at €9 per share. This represents a premium over recent trading averages, offering shareholders an option to cash in on a strong year of growth. The buyback, if fully subscribed, could increase the Klaba family’s share in the company to as much as 81%, indicating long-term confidence from the founders.

OVHcloud’s growth was not limited to financial performance. The company also made strides in its product offerings, particularly within artificial intelligence (AI) and secure cloud solutions. It launched Bare Metal Pods, an ultra-secure platform designed to meet stringent security standards, which has already attracted institutional clients such as the French Ministry of Economy’s IT division. Moreover, OVHcloud broadened its AI capabilities by integrating cutting-edge NVIDIA GPUs and large language models into its public cloud infrastructure.

Future directions

As part of its transition to a new phase of growth, OVHcloud welcomed Benjamin Revcolevschi as its new CEO. Known for his leadership roles in the telecommunications and IT sectors, Revcolevschi takes over from Michel Paulin, who played a critical role in doubling OVHcloud’s revenue over the past six years. With this leadership change, the company signals its readiness for sustainable growth and profitability targets beyond 2025.

Looking forward, OVHcloud is setting ambitious goals for FY2025, aiming for a 9-11% increase in organic revenue and an adjusted EBITDA margin of around 40%. By 2026, it hopes to achieve positive levered free cash flow. The company plans to reinforce its position in the Private Cloud segment while expanding its Public Cloud offerings to further meet diverse customer needs in Europe and globally.

Expanding partnerships and market recognition

OVHcloud recently entered a partnership with Bouygues Telecom Enterprises to enable midsize businesses to access hybrid cloud solutions. It was also recognized as a “Major Player” in IDC’s latest European Public Cloud Infrastructure report, solidifying its standing among European cloud providers.

OVHcloud’s 2024 results underscore its resilience and potential for sustainable growth in the competitive cloud services market. With steady revenue increases, expanding product offerings, and strategic leadership changes, the company is positioning itself for a new chapter in its corporate journey. For investors, OVHcloud presents a case study of a European tech firm aiming for profitability while expanding its footprint in high-demand areas like AI and secure cloud solutions.

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Revenue performance

VeriSign reported total revenues of $391 million for the third quarter of 2024. This marks a 3.8% increase from the $376.3 million reported in the same quarter last year. The growth in revenue can be attributed to the increasing demand for domain names as more businesses look to strengthen their online presence. As companies adapt to digital markets, they are opting for memorable domain names to attract customers, which directly benefits VeriSign.

The company’s net income also saw an upward trend, reaching $201 million for the third quarter of 2024, compared to $188 million in the previous year. This increase translates to a rise in diluted earnings per share (EPS), which improved to $2.07 from $1.83 year-over-year. This growth in profitability indicates that VeriSign is not only increasing its revenues but also managing its costs effectively, providing a positive signal for investors.

Domain name registrations

Despite the overall growth in revenue and profit, VeriSign faced a decline in domain registrations. As of September 30, 2024, the total number of .com and .net domain registrations stood at 169.6 million, reflecting a 2.5% decrease from the previous year. The company processed 9.3 million new domain registrations during this quarter, down from 9.9 million in Q3 2023. This decline raises some concerns, as it may suggest a slowdown in the market for new domain registrations, which is a critical aspect of VeriSign’s business.

Cash flow and liquidity

VeriSign ended the quarter with $645 million in cash, cash equivalents, and marketable securities, down $281 million from the end of 2023. However, the company reported cash flow from operations of $253 million, a slight increase from $245 million in the same quarter of the previous year. This positive cash flow is essential for maintaining liquidity and supporting ongoing business operations and investments.

During the third quarter, VeriSign repurchased 1.7 million shares of its common stock at a total cost of $301 million. As of September 30, 2024, there remains $1.28 billion available for future share repurchases. This move reflects the company’s commitment to returning value to its shareholders, indicating confidence in its future performance.

Renewal rates analysis

The renewal rate for .com and .net domains was 72.7% for the second quarter of 2024, down from 73.4% in the same period last year. The renewal rate is a crucial metric as it indicates customer retention and ongoing demand for VeriSign’s services. A decline in this rate may suggest challenges in maintaining customer loyalty, which is vital for sustained revenue growth.

VeriSign’s financial results for Q3 2024 present a mixed outlook. While the company has achieved revenue growth and increased profitability, the decline in domain registrations and renewal rates raises some concerns. Investors should keep a close eye on these trends as they could impact future performance.

The company’s ongoing commitment to maintaining a strong balance sheet, generating positive cash flow, and repurchasing shares demonstrates a proactive approach to shareholder value. However, the potential slowdown in the domain registration market may require strategic adjustments moving forward.

As investors evaluate VeriSign’s performance, the key will be monitoring the company’s ability to adapt to market changes while continuing to capitalize on the growing demand for digital services.

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GoDaddy posted a 7% year-over-year revenue growth, reaching $1.124 billion in Q2 2024. The Applications & Commerce (A&C) segment was a key driver, with a remarkable 15% increase in revenue to $406 million, compared to $352 million in Q2 2023. This growth was fueled by new product launches, aggressive pricing strategies, and a focus on bundled services that added significant value to customers.

The Core Platform segment, which includes domains, hosting, and security services, showed a modest 3% growth, generating $719 million. Although this segment’s growth was slower, it remains crucial, contributing 64% of GoDaddy’s total revenue. The stability of this segment underscores GoDaddy’s ability to maintain a solid foundation while expanding into higher-margin areas.

EBITDA Margin and Profitability: GoDaddy’s normalized EBITDA margin expanded to 29%, reflecting improved operational efficiency and cost management. This margin expansion is significant, considering the competitive pressures in the digital services market. The company’s focus on reducing friction in customer journeys and leveraging AI to enhance product offerings has played a critical role in achieving this profitability.

In Q2 2024, GoDaddy reported a free cash flow of $323 million, a substantial 35% increase from the $240 million in Q2 2023. This strong cash flow performance is a testament to GoDaddy’s disciplined capital allocation and effective cost control measures. The company’s ability to generate consistent cash flow underpins its long-term growth strategy and shareholder value creation.

Strategic Initiatives: One of the standout initiatives in Q2 2024 was the continued rollout of GoDaddy Airo, an AI-powered website builder that has attracted over 1 million new customers since its launch. This tool not only enhances user experience but also positions GoDaddy at the forefront of AI integration in web services. The success of Airo highlights GoDaddy’s commitment to innovation, a key factor that contributed to the company’s soaring stock price earlier in 2024, as reported by webhosting.today.

GoDaddy also expanded its product bundling strategies, which played a crucial role in boosting the A&C segment’s performance. By offering seamless integration across its product suite, GoDaddy has been able to increase customer lifetime value and reduce churn rates, further solidifying its market position.

Performance of Hosting and Domains in GoDaddy’s Q2 2024

Core Platform Segment Overview:

• Revenue Contribution: $719 million, representing approximately 64% of GoDaddy’s total revenue.
• Growth Rate: The Core Platform, which includes hosting, domains, and security services, grew by a modest 3% year-over-year. This segment remains stable but is growing slower compared to the Applications & Commerce segment.

Domains and Aftermarket:

• Annualized Recurring Revenue (ARR): Core Platform ARR increased by 2% to $2.3 billion.
• Domain Performance: Domains continue to be a reliable revenue stream, but growth has slowed, reflecting market saturation and increased competition.

Hosting and Security:

• Revenue Trends: The hosting and security sub-segments, though stable, did not experience significant growth. The emphasis remains on enhancing the existing services rather than expanding aggressively.
• Profitability: Despite the slower revenue growth, GoDaddy improved its Core Platform’s EBITDA margin reaching 31%. This indicates better cost management and efficiency in these services.

GoDaddy’s strategy in hosting and domains focuses on maintaining a stable revenue base while pushing for higher-margin growth in other areas like Applications & Commerce. The company’s modest growth in these traditional services suggests a shift in focus towards more innovative and high-growth segments, such as AI-powered tools and enhanced commerce solutions. The hosting and domain market is increasingly competitive, with many players offering similar services. GoDaddy must continue to innovate within these segments to retain market share and drive incremental revenue growth. The company’s current approach suggests a balanced strategy of sustaining its core business while pursuing new opportunities in higher-margin segments.

Revenue Overview:

• Total Revenue: $1.124 billion (7% YoY growth)
• Core Platform: $719 million (3% YoY growth)
• Applications & Commerce: $406 million (15% YoY growth)

Profitability:

• Normalized EBITDA Margin: 29% (400 bps improvement)
• EBITDA: $332 million (25% YoY growth)
• Net Income: $146.3 million (13% net income margin)

Cash Flow and Shareholder Returns:

• Free Cash Flow: $323 million (35% YoY growth)
• Unlevered Free Cash Flow: $369 million (30% YoY growth)
• Share Buybacks: $3.1 billion in cumulative share repurchases, reducing outstanding shares by 23% since January 2022.

Key Metrics:

• Average Revenue Per User (ARPU): $210 (6% YoY growth)
• Total Customers: 21 million (stable YoY)

Debt and Liquidity:

• Net Debt: $3.42 billion
• Leverage Ratio: 2.4x (improved from 2.8x in 2022)

GoDaddy’s stock demonstrated notable volatility following the release of its Q2 2024 earnings on August 1, 2024, but ultimately showcased a strong recovery, driven by market reassessment of the company’s solid financial performance and strategic direction.

Earnings day stock market reaction (August 1, 2024)

• Opening Price: $146.07
• Closing Price: $141.41
• Percentage Change: -3.2%

On the day of the earnings release, GoDaddy’s stock initially dropped by 3.2%, closing at $141.41 from an opening price of $146.07. The stock hit an intraday low of $140.51, reflecting investor uncertainty or profit-taking, despite the company reporting strong financials, including a 7% year-over-year revenue increase.

Immediate recovery (August 2-5, 2024)

• August 2, 2024 Closing Price: $151.25
• August 5, 2024 Closing Price: $157.53
• Percentage Change (August 1 to August 5): +11.4%

Following the initial dip, the stock rebounded sharply, gaining 11.4% from the August 1 close to reach $157.53 by August 5. This quick recovery suggests that the market’s initial reaction was overly cautious, and investor confidence returned as they digested the earnings details more thoroughly.

Sustained Upward Momentum (August 6-13, 2024)

• August 6, 2024 Closing Price: $152.02
• August 13, 2024 Closing Price: $160.11
• Percentage Change (August 5 to August 13): +1.6%

From August 6 onward, the stock continued to gain momentum, closing at $160.11 on August 13, 2024. This represents a more moderate 1.6% increase from the August 5 close, indicating sustained investor optimism. Overall, from the post-earnings low on August 1, the stock increased by 13.2% to reach $160.11, reflecting a strong recovery and positive market sentiment.

Year-to-Date Context

• Price on January 1, 2024: $100.22
• Price on August 13, 2024: $160.11
• Year-to-Date Percentage Increase: +59.7%

Looking at the year-to-date performance, GoDaddy’s stock has surged by nearly 60%, from $100.22 on January 1 to $160.11 by August 13. This remarkable growth highlights the company’s strong execution of its strategic initiatives, including expanding its high-margin Applications & Commerce segment and rolling out innovative AI-driven products like GoDaddy Airo.

It’s unfortunate that GoDaddy has lost its edge in expanding its market share in hosting and domains, especially at a time when many other companies in the industry are achieving significant success in these areas. Despite its focus on innovation and growth in new segments, GoDaddy’s inability to strengthen its position in its traditional core services is a concerning trend.

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Revenue growth across segments

Tucows’ consolidated net revenue for Q2 2024 was $89.4 million, representing a 5.2% increase compared to $85.0 million in the same quarter of 2023. This growth was driven primarily by the company’s domain services and Ting Internet services, both of which showed year-over-year revenue increases.

• Ting Internet Services: Revenue from Ting Internet services increased by 17.4% year-over-year, reaching $14.6 million in Q2 2024, up from $12.4 million in Q2 2023. The growth is attributed to a steady increase in subscribers, with 48.2 thousand internet subscribers under management, a rise from 38.6 thousand in the same quarter last year.
• Tucows Domains: Tucows’ domain services segment, which remains the company’s largest revenue generator, reported a 4.0% year-over-year increase in revenue, totaling $62.4 million. The wholesale domain services saw growth from $51.5 million to $53.0 million, while the retail segment also increased from $8.4 million to $9.4 million.
• Wavelo: The Wavelo segment remained relatively stable with a slight increase in revenue, contributing $10.5 million, compared to $10.3 million in Q2 2023.

Gross profit and margin expansion

Tucows’ gross profit for Q2 2024 was $20.8 million, a 15.4% increase from $18.0 million in Q2 2023. The gross margin also improved significantly, driven largely by the Ting segment, which saw its gross margin increase by 39.2%, from $7.1 million to $9.8 million. This improvement is particularly noteworthy given the ongoing investments in expanding Ting’s fiber network, which has also led to increased depreciation costs.

Adjusted EBITDA and net loss

One of the standout metrics for Q2 2024 was the company’s adjusted EBITDA, which saw a 70% increase, reaching $9.2 million, compared to $5.4 million in the same period last year. This substantial improvement was fueled by both revenue growth and disciplined cost management across all segments.

However, despite these positive metrics, Tucows reported a net loss of $18.6 million for Q2 2024, an improvement from the $31.0 million loss reported in Q2 2023. The reduction in net loss was primarily due to the absence of a one-time debt extinguishment cost that significantly impacted the previous year’s results.

Cash flow and financial position

Tucows’ cash position showed a notable decline, with cash, cash equivalents, and restricted cash totaling $52.2 million at the end of Q2 2024, down from $159.6 million at the end of Q2 2023. This reduction was influenced by continued investments in the Ting network and the repayment of debt.

To summarize, Tucows has shown strong revenue growth, particularly in its Ting Internet and Domains segments, while also improving its gross profit and adjusted EBITDA. However, the company continues to navigate financial challenges, including a significant net loss and a reduction in its cash reserves.

In conclusion, while Tucows continues to face certain financial challenges, the company’s efforts to grow its key business segments are evident in the improved revenue, gross profit, and adjusted EBITDA figures. As the company continues to invest in its infrastructure and manage costs, it is poised to further solidify its position in the market.

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GoDaddy will replace Illumina Inc. (NASDAQ: ILMN) in the S&P 500, with Illumina moving to the S&P MidCap 400. Alongside GoDaddy, cybersecurity firm CrowdStrike (NASDAQ: CRWD) and private-equity giant KKR & Co. Inc. (NYSE: KKR) will also join the S&P 500, replacing Robert Half Inc. (NYSE: RHI) and Comerica Inc. (NYSE: CMA).

Market reaction

Following the announcement, GoDaddy’s stock experienced a notable uptick. Shares of GDDY jumped in after-hours trading as index funds, which track the S&P 500, began preparations to add the stock to their portfolios. As of the Monday following the announcement, GoDaddy’s stock had risen by 2.2% and has shown an impressive increase of 38.3% since the beginning of the year.

Implications for GoDaddy

Increased Visibility and Credibility: Being part of the S&P 500 enhances GoDaddy’s visibility and credibility among investors. This inclusion signifies recognition of the company’s market capitalization and stability, aligning it with some of the most influential companies in the U.S.

Investor Interest: With GoDaddy’s entry into the S&P 500, the stock is expected to attract more interest from institutional investors and index funds, potentially leading to increased liquidity and stock price appreciation.

Market Dynamics: The change is part of a broader realignment within the S&P 500, aimed at better representing the current market dynamics. CrowdStrike, KKR, and GoDaddy are seen as more representative of the large-cap range, reflecting the evolving landscape of the technology and financial sectors.

The inclusion in the S&P 500 is a testament to GoDaddy’s successful growth strategy and its prominent role in the internet domain and web hosting market. Investors will be keenly watching the stock as the official inclusion date approaches, with expectations of further positive momentum.

Conclusion

GoDaddy’s entry into the S&P 500 is a landmark achievement that underscores the company’s growth and strategic importance in the tech industry. This move not only boosts GoDaddy’s market presence but also positions it for continued success and investor interest. As the company prepares for this transition, all eyes will be on its performance and the broader implications for the market.

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Over the years, it has been widely believed that IONOS poses a strong and significant competition to GoDaddy. However, upon analyzing the financial results, a notable disparity in financial performance between the two companies becomes apparent.

Additionally, the fragmented structure of entities and independent brands in various countries (e.g., UK, Poland) is quite noticeable. IONOS, deriving from Europe, faced limitations in scalability compared to American companies driven by the force of globalization. Its current strength and position (TOP 1 in several European countries) were achieved through a combination of organic growth and acquisitions.

The history of 1&1’s entry into Poland serves as a classic example of the challenges associated with entering local markets with their own specific conditions and dynamics. Despite substantial investments and a highly aggressive marketing campaign, including television advertising and free services for 2 years, the brand withdrew from Poland. Simultaneously, it acquired the largest hosting company in Poland – home.pl, paying – ATTENTION – a multiplier of x15-16 EBITDA. This position seems to remain unchallenged to this day.

Let’s delve into the business performance of Ionos in 2023 and analyze its significant achievements and market dynamics.

Financial Overview

Table 1: IONOS Financial Performance in 2023

In 2023, IONOS achieved €1.42 billion in total revenue, representing a solid 10% year-over-year growth. The company’s adjusted EBITDA of €390 million, with a margin of 27.4%, indicates attractive profitability. IONOS serves approximately 6.19 million customers, leveraging its unparalleled access to European SMBs.

Market Expansion

IONOS continued its expansion into key markets, capitalizing on growing demand for web hosting services globally. The company strengthened its presence in both established and emerging markets, consolidating its position as a leading provider of cloud infrastructure and hosting solutions.

Table 2: IONOS Market Performance in 2023

IONOS experienced significant revenue growth across all major regions in 2023. The DACH region witnessed a growth rate of 8.3%, driven by strong customer demand and strategic initiatives. Moreover, Ionos expanded its footprint in Europe (excluding DACH), Americas, and APAC, achieving revenue growth rates of 10.1%, 12.7%, and 9.5%, respectively.

Product’s Performance

Ionos offers a comprehensive suite of services catering to the diverse needs of businesses, including web hosting, cloud infrastructure, domain registration, and website building tools.

Unfortunately, the reports do not provide details on the performance of specific product groups (hosting, domains, others).

As with other large companies, it is likely that hosting is still the company’s main source of revenue. It is very interesting to see how little attention this product gets in the market compared to many other services – mainly SaaS. Hosting has started to become more of a one-size-fits-all for the big players in the hosting market for many years, and it’s hard for the average customer to tell the difference between one service and another when they run on very similar (or the same) software.

IONOS, like almost all companies in the market, recognizes the changes associated with AI, which is why it (like other companies) is implementing an AI-enhanced website builder. 

Whether a whole bunch of such products will actually increase market penetration and encourage entrepreneurs to simply build their websites in my opinion is uncertain, but the coming years will clearly show the results. 

Conclusion

IONOS, like most hosting companies, is seeing steady, modest growth in its customer base. Reading the report presented below, we can guess that we should not expect a revolution in the coming years. Just another stable, reasonably run business. It may not be sexy, but it’s certainly predictable and secure which investors appreciate. This is reflected in the company’s stock market valuation reaching almost $3 billion (vs. GoDaddy’s $16 billion valuation)

As a curiosity, we will present a comparison of IONOS results with GoDaddy. The conclusions are quite clear. 

Table 1: IONOS vs. GoDaddy – Financial Performance in 2023

Sources:

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As the second largest domain registrar in the world after GoDaddy while never seriously trying to compete with them 1:1 looking for its way through primarily successful projects such as OpenSRS. 

Since its inception in 1993, Tucows has been at the forefront of the internet revolution, carving out a niche for itself in the domain registration and internet services sector. The company’s journey from a humble software download site to a global player in domain management is a testament to its resilience, adaptability, and strategic foresight.

In its formative years, Tucows began as a software distribution platform, offering users access to a wide array of shareware and freeware applications. This early foray into digital distribution laid the groundwork for Tucows’ future expansion into domain registration and internet services.

As the internet landscape evolved, Tucows recognized the burgeoning demand for domain registration services and seized the opportunity to diversify its offerings. Leveraging its established reputation and user base, Tucows transitioned into the domain registration business, establishing itself as a reliable and trusted registrar.

One of the pivotal moments in Tucows’ history came with its strategic focus on the reseller market. Understanding the power of partnerships and distribution networks, Tucows positioned itself as a leading wholesale domain registrar, catering primarily to resellers and domain service providers. This emphasis on the reseller channel proved instrumental in expanding Tucows’ reach and market penetration.

With a focus on the reseller market, Tucows has made significant strides by acquiring key players such as eNom and Ascio Technologies, solidifying its foothold in the industry.

The acquisition of eNom, for a substantial amount of $83.5 million, and Ascio Technologies ($29,44 million – 7,36x EBITDA) bolstered Tucows’ presence in the domain market, allowing it to tap into new customer segments and expand its service offerings.

When assessing domain renewals, Tucows consistently demonstrates a robust renewal rate of 79%, showcasing its unwavering commitment to customer satisfaction and retention. This figure not only exceeds industry standards but also reflects Tucows’ ability to consistently deliver value and maintain strong client relationships.

Delving into the financial metrics, Tucows’ fourth-quarter results for its domain services portray a positive trajectory. The company reported a total domain service revenue of $61.8 million vs GoDaddy’s $385 million, marking a significant 10% increase compared to the previous quarter. This notable growth highlights Tucows’ adeptness in capitalizing on market opportunities.

Moreover, Tucows exhibited an efficient customer acquisition process, evidenced by a customer acquisition cost (CAC) of $53 for the fourth quarter of 2023. This improvement in CAC signifies Tucows’ effectiveness in acquiring new customers and optimizing operational efficiency.

To illustrate the trend over time, let’s examine the comparison between the fourth quarter of 2023 and the preceding quarters:

An important open question remains that the increase in revenue is not necessarily related to an increase in the number of domains serviced or higher margins on resellers. In recent years, and especially throughout 2023, we may see a significant acceleration in the growth rate of domain maintenance prices on the part of registries which also translates into prices for resellers and end customers.

The reported Adjusted EBITDA of $10.8 million for Q4 marks a tiny uptick of 2.1% compared to the same period last year, underscoring Tucows’ resilience and ability to navigate evolving market dynamics. The outlined EBITDA guidance of $43 million for Tucows Domains in 2024 presents an ambitious target, indicative of the company’s confidence in its ability to drive sustained financial performance and value creation.

Interestingly – since the announcement of Q4 2023 results, Tucows’ share price has lost almost 20 percentage points. The consistent decline in Tucows’ stock price, currently hovering around levels last seen in 2016, underscores a concerning trend for investors. This stagnation, coupled with low growth dynamics, points to underlying challenges within the company’s operations. High indebtedness and subdued investor optimism towards the relatively low-profitability nature of the business could potentially be contributing factors to this downward trajectory.

Despite Tucows’ efforts to maintain a competitive edge and drive financial performance, the market sentiment appears to reflect skepticism regarding the company’s ability to generate sustainable returns. The limited upward momentum in share price suggests a lack of confidence among investors, potentially stemming from concerns surrounding Tucows’ profitability prospects and its ability to effectively manage its debt obligations. Looking at the share price, however, one should not forget that there are also other projects operating under the Tucows brand, which are not related to the domain registration market, and whose performance and prospects may affect the valuation on the stock market.

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According to the report, GoDaddy’s revenue for the fiscal quarter exceeded expectations, reaching a robust $1.5 billion, marking a significant increase from the previous quarter’s $1.3 billion. This represents a notable growth trajectory for the company, showcasing its ability to capitalize on emerging opportunities in the digital marketplace. Notably, the revenue growth was driven by strong performance across key segments, including domain registration, hosting, and online presence solutions. Such results affirm GoDaddy’s position as a market leader in providing essential web services to businesses and individuals worldwide.

Hosting and Presence segment revenue experienced a robust 17% year-over-year growth, amounting to $680 million, fueled by increased adoption of hosting solutions and website building tools. Online Stores revenue soared by 25% year-over-year, totaling $335 million, reflecting the growing demand for e-commerce solutions among businesses and entrepreneurs.

Product Performance Insights:

• The earnings presentation highlights GoDaddy’s continued investment in product innovation and enhancement, with a focus on driving customer engagement and satisfaction.
• Notable product achievements include the launch of GoDaddy Commerce, a comprehensive e-commerce platform designed to empower small businesses in establishing and growing their online stores.
• GoDaddy’s website building tools, such as Websites + Marketing, have seen significant traction, with over 1.5 million websites created on the platform during the quarter.
• The company’s Managed WordPress offering continues to attract users seeking reliable and scalable solutions for their WordPress-powered websites, contributing to the overall growth of the Hosting and Presence segment.

The latest financial results from GoDaddy reaffirm that hosting remains the largest revenue contributor for the company. Hosting services accounted for $680 million in revenue, constituting 45% of the total revenue. Meanwhile, domain-related revenue amounted to $385 million, representing 26% of the total, showcasing the enduring importance of domain services. Additionally, revenue from other products totaled $335 million, contributing only 29% to the overall revenue. This breakdown underscores the diversified revenue streams of GoDaddy, with hosting standing out as the primary driver of its financial performance.

In Q4 2022, GoDaddy achieved an ARPU of $197, reflecting the average revenue generated per user across its various product segments. Fast forward to Q4 2023, and we see a notable increase in ARPU to $203. This upward trend indicates GoDaddy’s success in enhancing its monetization efforts and extracting more value from its customer base over time.

The increase in ARPU from Q4 2022 to Q4 2023 suggests several positive developments within GoDaddy’s business model. It could be attributed to the successful implementation of pricing strategies, upselling of premium products and services, or improved customer retention efforts. Additionally, advancements in technology and product offerings may have contributed to higher ARPU by providing customers with more opportunities to engage with and spend on GoDaddy’s platform.

Despite these positive financial indicators, the letter from Starboard Value LP raises pertinent questions regarding capital allocation, operational efficiency, and shareholder value creation. Specifically, Starboard emphasizes the importance of optimizing GoDaddy’s portfolio and cost structure to unlock shareholder value and ensure sustainable long-term growth.

In response to these concerns, GoDaddy reaffirms its commitment to shareholder value creation and transparent governance practices. The company acknowledges the need for effective capital allocation and operational efficiency to maximize returns for shareholders. Moreover, GoDaddy emphasizes its dedication to ongoing dialogue and collaboration with shareholders to address their concerns and align corporate strategies with investor expectations.

While GoDaddy’s financial results speak volumes about its growth trajectory and market positioning, the shareholder letter serves as a reminder of the importance of effective communication and alignment with investor interests. By addressing shareholder concerns and leveraging its strengths in innovation and market leadership, GoDaddy aims to navigate the evolving landscape of the digital economy while delivering sustainable value to shareholders.

Looking ahead, GoDaddy remains committed to driving growth and profitability through product innovation, customer-centricity, and operational excellence. As the company continues to execute its strategic roadmap, effective engagement with shareholders will remain paramount in building trust, fostering transparency, and driving long-term shareholder value.

Interestingly, amidst GoDaddy’s robust financial performance, Tucows, a notable player in the domain services industry, experienced a decline in its stock value yesterday. While GoDaddy reported impressive revenue figures, Tucows faced a stark contrast as its stock (TCX) dropped by 10%. This discrepancy underscores the dynamic nature of the market and the divergent fortunes of companies within the same sector.

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