Go Daddy 2015 Annual Report Download

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Table of contents

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  • Page 5
    ...whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). As of June 30, 2015 , the aggregate market value of the registrant's Class A common stock held by non-affiliates, based upon the closing sales price for the registrant's Class A common stock as reported by the...

  • Page 6
    ... Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant's fiscal year ended December 31, 2015 .

  • Page 7
    ... About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III. Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of...

  • Page 8
    ... our future financial performance, including our expectations regarding our revenue, cost of revenue, operating expenses, including changes in technology and development, marketing and advertising, general and administrative and Customer Care expenses, and our ability to achieve and maintain, future...

  • Page 9
    .... L.P. (together with its affiliates, KKR), Silver Lake Partners (together with its affiliates, Silver Lake) and Technology Crossover Ventures (together with its affiliates, TCV) collectively as the Sponsors. We refer to YAM Special Holdings, Inc. (formerly The Go Daddy Group, Inc.) as Holdings. We...

  • Page 10
    ... successful online ventures. We are a leading technology provider to small businesses, web design professionals and individuals, delivering simple, easy to use cloud-based products and outcome-driven, personalized Customer Care. We operate the world's largest domain marketplace, where our customers...

  • Page 11
    ... media sites and an increasing number of horizontal and vertical marketplaces (e.g. Yelp and OpenTable); branded email communication; online marketing; and Internet-enabled reservation and scheduling capabilities. In addition, back-end activities such as invoicing, payment processing, accounting and...

  • Page 12
    ... them online. We believe a complete digital identity includes an elegant, mobile-enabled website and the ability to get found across various search engines, social media platforms and vertical marketplaces. Growing their business and running their operations . Our customers need to communicate with...

  • Page 13
    ... hosted approximately 10 million websites on servers located throughout our worldwide data centers. We focus on online security, customer privacy and reliable infrastructure to address the evolving needs of our customers. Receive high value . We price most of our products at a few dollars per month...

  • Page 14
    ... . We are a company whose people embody the grit and determination of our customers. Our world-class engineers, scientists, designers, marketers and Customer Care specialists share a passion for technology and its ability to change our customers' lives. We value hard work, extraordinary effort...

  • Page 15
    ... and 17 languages. To support our international growth, we will continue investing to develop our local capabilities across products, marketing programs, data centers and Customer Care. • Partner up . Our flexible platform also enables us to acquire companies and quickly launch new products...

  • Page 16
    ... such as web analytics and SSL certificates. Website Hosting on Virtual Dedicated Servers and Dedicated Servers . Our virtual dedicated and dedicated servers provide customers with greater control and higher performance than our shared hosting plans. Our virtual dedicated hosting offering utilizes...

  • Page 17
    ...-feature web interface for both desktop and mobile devices, accompanied by an integrated calendar and secure online storage. We offer a variety of plans, with pricing dependent on the customer's desired amount of storage and number of email addresses. All of our email accounts are advertising-free...

  • Page 18
    ... automated infrastructure based on OpenStack to enable next-generation hosting architecture. Platform-as-a-Service Our cloud platform offers our customers an integrated and comprehensive set of services saving them time. Our platform is designed to help us reduce costs, increase personalization and...

  • Page 19
    ... real-time product suggestions to customers after providing a world-class support experience allows our Customer Care team to provide an impactful contribution to bookings through the sale of product subscriptions, including domain products, hosting and presence offerings and business applications...

  • Page 20
    ... from companies like Amazon, Google and Microsoft, all of which are providers of web-hosting and other cloud-based services and have recently entered the domain name registration business as upstream registries, and eBay and Facebook, both of which offer robust Internet marketing platforms. We...

  • Page 21
    ... Lanham Act governs trademarks and false advertising. Case law interpreting the Lanham Act has limited liability for many online service providers such as search engines and domain name registrars. Nevertheless, there is no statutory safe harbor for trademark violations comparable to the provisions...

  • Page 22
    ... processes, technologies or websites infringe patents they now hold or might obtain or be issued in the future. Employees As of December 31, 2015 , we had 4,761 employees worldwide, including 3,243 in our Customer Care team, 811 in technology and development, 132 in marketing and advertising and 575...

  • Page 23
    ... change. Our revenue has grown historically due in large part to sustained customer growth rates and strong renewal sales of subscriptions to our domain name registration and hosting and presence products. Our future success depends in part on maintaining strong renewal sales. Our costs associated...

  • Page 24
    ... grow our total customers, increase our revenue or maintain our current high level of brand recognition. If we fail in these branding efforts, our business and operating results could be adversely affected. A security breach or network attack could delay or interrupt service to our customers, harm...

  • Page 25
    ... of $10.4 million of service disruption credits to certain customers. Our revenue depends in large part on the volume of traffic to our websites, the number of customers whose websites we host on our servers and the availability of our Customer Care operations. Accordingly, the performance, 20

  • Page 26
    ... typing its domain name into a web browser or navigation bar. The domain name serves as a branded, unique identifier not unlike a phone number or email address. People now use multiple methods in addition to direct navigation to access websites. For example, people increasingly use search engines...

  • Page 27
    ...from companies such as Amazon, Google and Microsoft, all of which are providers of web-hosting and other cloud-based services and have recently entered the domain name registration business as upstream registries, and eBay and Facebook, both of which offer robust Internet marketing platforms. Google...

  • Page 28
    ... our universal terms of service and other agreements; increased expenses incurred in establishing and maintaining office space and equipment for our international operations; greater costs and expenses associated with international marketing and operations; greater risk of unexpected changes in...

  • Page 29
    ... groups, such as Web Pros and customers in non-U.S. markets; and investments in software systems and additional data center resources to keep pace with the growth of our cloud infrastructure and cloud-based product offerings. We have made significant investments in product development, corporate...

  • Page 30
    ... an integrated and comprehensive suite of products enabling our diverse base of customers to start, grow and run their businesses. The success of our domains, hosting, presence and business application offerings is predicated on the assumption that an online presence is, and will continue to be, an...

  • Page 31
    ...on our brand names and other search terms we use to drive traffic to our websites. Such actions could increase our advertising costs and result in decreased traffic to our websites. In addition, search engines or social networking sites may change their advertising policies from time to time. If any...

  • Page 32
    ... Care and resulting customer satisfaction; competition in the market for our products; our ability to expand internationally; changes in foreign currency exchange rates; rapid technological change, frequent new product introductions and evolving industry standards; systems, data center and Internet...

  • Page 33
    ...future, for example, to develop new technologies, expand our business, respond to competitive pressures and make acquisitions. We may try to raise additional funds through public or private financings, strategic relationships or other arrangements. Although our credit agreement limits our ability to...

  • Page 34
    ... service agreements with third-party data center facilities, which have built and maintain the co-located data centers for us and other parties. We currently serve all our customers from our GoDaddy-owned, Arizona-based data center as well as six domestic and two international co-located data center...

  • Page 35
    ... could result in compromised customer data, loss of or delay in revenues, an increase in our annual refund rate, which has ranged from 6.9% to 7.2% of total bookings from 2013 to 2015 , loss of market share, failure to achieve market acceptance, diversion of development resources, injury to our...

  • Page 36
    ...our business, operating results and financial condition could be harmed. In particular, with regard to transfers of personal data, as such term is used in the 1995 EU Data Protection Directive and applicable European Union member state legislation, from our employees and European customers and users...

  • Page 37
    ...us, could result in significant costs and substantially harm our business and operating results. In recent years, there has been significant litigation in the United States and abroad involving patents and other intellectual property rights. Companies providing web-based and cloud-based products are...

  • Page 38
    ... be costly, time-consuming or impossible. If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us, our business or operating results could be harmed. Our use of open source technology...

  • Page 39
    ... credit card payments or other form of online payments from customers, which would have a material adverse effect on our business, financial condition and operating results. We could also incur significant fines or lose our ability to give customers the option of using credit cards to pay their fees...

  • Page 40
    ...a provider of domain name registration and hosting and presence products, we may be subject to potential liability for the activities of our customers on or in connection with their domain names or websites or for the data they store on our servers. Although our terms of service prohibit illegal use...

  • Page 41
    ...and, therefore, increase our cost of doing business. The volume of domain name registration disputes may increase in the future as the overall number of registered domain names increases. We are dependent on the continued services and performance of our senior management and other key employees, the...

  • Page 42
    ... we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We...

  • Page 43
    ...persons located in countries subject to U.S. embargoes. As a result of that review and in connection with the closing of our acquisition, Mad Mimi filed an initial voluntary disclosure with OFAC in August 2014, terminated the unauthorized accounts, and filed a final report with OFAC in February 2015...

  • Page 44
    ...and sell our products to customers around the world, which geographically stretches our compliance obligations. In addition, changes in laws could result in increased regulatory requirements and compliance costs which could adversely affect our business, financial condition and results of operations...

  • Page 45
    ...private sector, not-for-profit corporation formed in 1998 operating pursuant to a memorandum of understanding with the U.S. Department of Commerce for the express purposes of overseeing a number of Internet related tasks, including managing the DNS allocation of IP addresses, accreditation of domain...

  • Page 46
    ... small businesses and ventures were no longer able to rely upon the existing domain name registration system. The domain name registration market continues to develop and adapt to changing technology. This development may include changes in the administration or operation of the Internet, including...

  • Page 47
    ... in particular sales and other transaction taxes, would likely increase the cost of doing business online and decrease the attractiveness of advertising and selling goods and services over the Internet. New taxes could also create significant increases in internal costs necessary to capture data and...

  • Page 48
    ... amounts, as the potential future tax savings we will be deemed to realize, and TRA payments to be made by us, will be calculated based in part on the market value of our Class A common stock at the time of exchange and the prevailing applicable federal tax rate (plus the assumed combined...

  • Page 49
    ...Sponsors and Bob Parsons. Additionally, the TRAs provide that upon certain mergers, asset sales, other forms of business combinations or other changes of control, our (or our successor's) tax savings under the applicable agreements for each taxable year after any such event would be based on certain...

  • Page 50
    ...of KKR and Silver Lake, in their capacity as stockholders, and a majority of the members of the executive committee shall be required for corporate actions such as change in control transactions, acquisitions with a value in excess of $50 million and any material change in the nature of the business...

  • Page 51
    ... business with our partners or customers. In addition, under the terms of the TRAs, we may not elect an early termination of the TRAs without the consent of each of certain affiliates of the Sponsors and Bob Parsons until such affiliate has exchanged all of its LLC Units (and Class B common stock...

  • Page 52
    ... financing for working capital, capital expenditures, product development, satisfaction of debt service requirements, acquisitions and general corporate or other purposes; and limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at...

  • Page 53
    .... Our amended and restated certificate of incorporation provides that KKR, Silver Lake, Bob Parsons, their respective affiliates and any of their respective direct or indirect designated transferees (other than in certain market transfers and gifts) and any group of which such persons are a party do...

  • Page 54
    ... operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock. Since shares of our Class A common stock were sold in our initial public offering (IPO) in April 2015 at a price of $20.00 per share, the reported high and low closing sales prices...

  • Page 55
    ...during the one-year period following our IPO. If these additional shares are sold, or if it is perceived they will be sold, in the public market, the trading price of shares of our Class A common stock could decline. If securities analysts do not publish research or reports about our business, or if...

  • Page 56
    ... Customer Care and product development. We lease additional Customer Care centers and offices located throughout the United States as well as Canada, India and the United Kingdom. Additionally, we provide our cloud-based products through data centers located in the United States and internationally...

  • Page 57
    ... our IPO, there was no public market for our Class A common stock. The following table sets forth, for the period indicated, the range of high and low closing sales prices per share of our Class A common stock, as reported by the NYSE, since April 1, 2015 . Fiscal Year Ended December 31, 2015 Second...

  • Page 58
    ...transactions and the IPO have been adjusted to combine the previously separate entities for presentation purposes. The consolidated statements of operations data for the years ended December 31, 2015 , 2014 and 2013 and the consolidated balance sheet data as of December 31, 2015 and 2014 are derived...

  • Page 59
    ... Successor Year Ended December 31, 2015 Consolidated Statements of Operations Data: Total revenue Costs and operating expenses: (1) Cost of revenue Technology and development Marketing and advertising Customer care General and administrative Depreciation and amortization Total costs and operating...

  • Page 60
    ... in the period. Total bookings provides valuable insight into the sales of our products and the performance of our business since we typically collect payment at the time of sale and recognize revenue ratably over the term of our customer contracts. We report total bookings without giving effect to...

  • Page 61
    ... associated with consulting services provided by KKR Capstone and (vii) the loss incurred on the extinguishment of the $300.0 million senior note. As a result of our business model, we typically collect payment at the time of sale and generally recognize revenue ratably over the term of our customer...

  • Page 62
    ...Contents Year Ended December 31, 2015 (1) Adjusted EBITDA: Net loss Interest expense, net of interest income Depreciation and amortization Equity-based compensation expense Change in deferred revenue (3) Change in prepaid and accrued registry costs (4) Acquisition and sponsor-related costs (5) Sales...

  • Page 63
    ...an initial domain registration, they are also frequently the starting points in our customer relationships. As we have grown, our hosting, presence and business applications products have become increasingly important parts of our business, constituting over 48% of total bookings in 2015 . Financial...

  • Page 64
    ... webhosting offerings, website builder products, SSL certificates and e-commerce products. These products generally have higher margins than domains. Total bookings from hosting and presence products grew an average of 25% annually for the three years ended December 31, 2015 . Business Applications...

  • Page 65
    ... foreign currency exchange rates. Our hosting and presence and business applications bookings are growing at a faster rate than domains bookings as customers broaden their adoption of our products. Total bookings increased 19.8% from $ 1,397.9 million in 2013 to $1,675.2 million in 2014 , primarily...

  • Page 66
    ...Year Ended December 31, 2015 Revenue: Domains Hosting and presence Business applications Total revenue Costs and operating expenses: Cost of revenue (excluding depreciation and amortization) Technology and development Marketing and advertising Customer care....3 $ 671.6 380.6 78.6 1,130.8 2014 2013 61

  • Page 67
    Table of Contents Year Ended December 31, 2015 Revenue: Domains Hosting and presence Business applications Total revenue Costs and operating expenses: Cost of revenue (excluding depreciation and amortization) Technology and development Marketing and advertising Customer care General and ...

  • Page 68
    ...sales of our security products. Business applications . Business applications revenue increased $58.4 million , or 50.3% , from $116.1 million in 2014 to $174.5 million in 2015 . These increases were primarily driven by our offering of expanded email and productivity solutions and increased customer...

  • Page 69
    ... expand our domains business and customer base. Cost of revenue may increase or decrease as a percentage of total revenue, depending on the mix of products sold in a particular period and the sales and marketing channels used. Year Ended December 31, 2015 Cost of revenue $ 565.9 $ 2014 518.4 $ 2013...

  • Page 70
    ... customers, primarily consisting of fees paid to third parties for marketing and advertising campaigns across television and radio, search engines, online display, social media and spokesperson and event sponsorships. These expenses also include personnel costs and affiliate program commissions...

  • Page 71
    ... costs associated with the expansion of our international third-party Customer Care locations. General and administrative General and administrative expenses primarily consist of personnel costs for our administrative functions, professional service fees, office rent for all locations, all employee...

  • Page 72
    ... A common stock at a public offering price of $20.00 per share, receiving $491.8 million in proceeds, net of underwriting discounts and commissions. We incurred $11.2 million of legal, accounting, printing and other professional fees related to the IPO, which were charged against additional paid-in...

  • Page 73
    ..., the timing and extent of spending to support domestic and international development efforts, continued brand development and advertising spend, the expansion of Customer Care and general and administrative activities, the introduction of new and enhanced product offerings, the costs to support new...

  • Page 74
    ... flows for the periods indicated: Year Ended December 31, 2015 Net cash provided by operating activities Net cash used in investing activities Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents...

  • Page 75
    ... be primarily affected by increases in total bookings. Our primary uses of cash from operating activities have been for domain registration costs paid to registries, personnel costs, discretionary marketing and advertising costs, technology and development costs and interest payments. We expect cash...

  • Page 76
    ... statements for information regarding the terms of our long-term debt agreements. Interest on long-term debt excludes the amortization of deferred debt issuance costs and original issue discounts. We lease office space in Tempe, Arizona under which we occupy the total available space. See Note...

  • Page 77
    ... may sell multiple products to customers at the same time. For example, we may design a customer website and separately offer other products such as hosting and an online shopping cart, or a customer may combine a domain registration with other products such as private registration or email. Revenue...

  • Page 78
    ... primarily of options. We grant options at exercise prices equal to the fair market value of our Class A common stock as reported on the NYSE on the date of grant. We measure and recognize compensation expense for equity-based awards made to employees, service providers and directors based on the...

  • Page 79
    ... of LLC Units (together with the corresponding shares of Class B common stock) for Class A common stock. When LLC Units are exchanged, we receive certain tax attributes, including the original basis adjustments (the OBAs) created from the original acquisition of the LLC Units plus any anticipated...

  • Page 80
    ... burdens on us in the future. Increased regulation could negatively affect our business directly, as well as the businesses of our customers. Taxing authorities may impose indirect taxes on the Internet-related revenue we generate based on regulations currently being applied to similar, but not...

  • Page 81
    ... be practicable based on the information available and the potential effect of future events and decisions by third parties impacting the ultimate resolution of the contingency. It is also not uncommon for such matters to be resolved over many years, during which time relevant developments and new...

  • Page 82
    ... our international operations grow, our exposure to fluctuations in currency rates may increase, which may increase the costs associated with our international expansion. During 2015 , our total bookings and total revenue growth in constant currency would have been approximately 320 basis points and...

  • Page 83
    Table of Contents Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders'/Members' Equity ...

  • Page 84
    ... of GoDaddy Inc. as of December 31, 2015 and 2014 and the related consolidated statements of operations, stockholders'/members' equity, and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our...

  • Page 85
    ... in thousands and per share amounts) December 31, 2015 Assets Current assets: Cash and cash equivalents Short-term investments Accounts and other receivables Registry deposits Prepaid domain name registry fees Prepaid expenses and other current assets Total current assets Property and equipment...

  • Page 86
    ...(199.9) (1.58) 38,826 Revenue: Domains Hosting and presence Business applications Total revenue Costs and operating expenses (1) : Cost of revenue (excluding depreciation and amortization) Technology and development Marketing and advertising Customer care General and administrative Depreciation and...

  • Page 87
    ..., 2013 Net loss Equity-based compensation expense Distributions to unit and option holders Change in value of redeemable units Reclassification of redeemable units to members' interest Other Balance at December 31, 2014 $ 1,013.7 (199.9) 16.4 Additional Paid-in Capital - - - $ Accumulated Deficit...

  • Page 88
    ... stock in initial public offering, net of offering costs Net loss subsequent to the Reorganization Transactions Liability pursuant to the tax receivable agreements resulting from the Reorganization Transactions Stock option exercises and other Issuance of Class A common stock under employee stock...

  • Page 89
    ... Class A common stock sold in initial public offering, net of offering costs Option and warrant exercises and other Issuance of Class A common stock under employee stock purchase plan Term loan Revolving credit loan Payments made for: Distributions to LLC Unit and option holders Repayment of senior...

  • Page 90
    84

  • Page 91
    ...(In millions) Year Ended December 31, 2015 2014 2013 Supplemental cash flow information: Cash paid during the period for: Interest on long-term debt Income taxes, net of refunds received Supplemental information for non-cash investing and financing activities: Fair value of contingent consideration...

  • Page 92
    ... cloud-based products and outcome-driven, personalized customer care. We operate the world's largest domain marketplace and provide website building, hosting and security tools to help customers easily construct and protect their online presence and tackle the rapidly-changing technology landscape...

  • Page 93
    ... within 72 hours. Amounts receivable for payment processor transactions totaled $12.2 million and $ 11.6 million at December 31, 2015 and 2014 , respectively. Short-Term Investments Our short-term investments consist of certificates of deposit or bank time deposits with an original maturity in...

  • Page 94
    ... be used by us to make payments for future domain registrations or renewals. Prepaid Domain Name Registry Fees Prepaid domain name registry fees represent amounts charged by a registry at the time a domain is registered or renewed. These amounts are amortized to cost of revenue over the same period...

  • Page 95
    ...included in cost of revenue. We assess impairment annually for our single reporting unit during the fourth quarter of each year. We also perform an assessment at other times if events or changes in circumstances indicate the carrying value of our goodwill or indefinite-lived trade names and branding...

  • Page 96
    ...the product or service is delivered to the customer. Our multiple-element arrangements may include a combination of some or all of the following: domain registrations, website hosting products, website building products, Secure Sockets Layer (SSL) certificates and other cloud-based products. Each of...

  • Page 97
    ...online calendar, online data storage, third-party productivity applications, email marketing and enrollment fees paid by our resellers. Fees are recorded as deferred revenue at the time of sale, and revenue is recognized as the product or service is delivered to the customer. Operating Expenses Cost...

  • Page 98
    ... marketing agreements with future payments totaling $20.4 million due in 2016 . Customer Care Customer care expenses primarily consist of personnel costs associated with our customer consultation and care team. Customer care expenses also include third-party customer care center operating costs...

  • Page 99
    ... TRAs relating to NOL carryforwards is recorded. Fair Value Measurements Fair value is defined as an exit price, representing the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. The framework for measuring fair...

  • Page 100
    ...our customers and users from data center facilities operated either by us or third parties, which are located in Mesa, Scottsdale and Phoenix, Arizona; Los Angeles, California; Ashburn, Virginia; Singapore and Amsterdam, The Netherlands. Even with these procedures for disaster recovery in place, the...

  • Page 101
    ... were valued using either income- or cost-based approaches, include an indefinite-lived domain portfolio and customer-related intangible assets, developed technology and branding. The acquired finite-lived intangible assets have a weighted-average amortization period of 2.0 years . 2014 Acquisition...

  • Page 102
    ... identified finite-lived intangible assets, which primarily include developed technology and customer relationships valued using either income- or cost-based approaches, have a weighted-average amortization period of 4.5 years . The acquisition was expected to provide enhanced online capabilities to...

  • Page 103
    ... was valued at cost and will be amortized over 48 months based on expected customer attrition. Transaction costs were immaterial and were expensed as incurred. Customer-related intangible assets, developed technology, trade names and other intangible assets have weighted-average useful lives from...

  • Page 104
    ... 90,425 shares of Class B common stock to the Continuing LLC Owners. We incurred $11.2 million , including $1.8 million paid in 2014, of legal, accounting, printing and other professional fees related to the IPO, including $1.3 million and $0.1 million paid on behalf of the Sponsors and Bob Parsons...

  • Page 105
    ... certain other option plans assumed in connection with acquisitions. The number of shares reserved for issuance will be increased automatically on January 1st of each year, beginning in 2016 , by a number equal to the least of (i) 20,571 shares, (ii) 4% of the total shares of all classes of common...

  • Page 106
    ... of these options, whether Time Options or Performance Options, have a contractual term of ten years. The following table summarizes our option activity: WeightedAverage GrantDate Fair Value ($) $ $ 4.98 WeightedAverage Remaining Contractual Life (in years) Number of Shares of Class A Common Stock...

  • Page 107
    ... share amounts) 7. Deferred Revenue Deferred revenue consisted of the following: December 31, 2015 2014 497.2 330.8 109.7 $ 937.7 288.5 149.7 40.3 $ 478.5 $ $ $ $ 462.9 283.4 75.1 821.4 266.8 131.5 30.9 429.2 Current: Domains Hosting and presence Business applications Noncurrent: Domains Hosting...

  • Page 108
    ... 31, 2015 based on observable market prices for this loan, which is traded in a less active market and is therefore classified as a Level 2 fair value measurement. Senior Note On December 16, 2011 , we issued the 9% Senior Note to Holdings. In April 2015, we made a payment to Holdings totaling $316...

  • Page 109
    ... into an 11 year lease agreement for new office space in Tempe, Arizona under which we occupied the total available space commencing in September 2014 . The lease agreement allowed for rent abatement during the first full year, with rent payments of $0.3 million per month thereafter, consisting of...

  • Page 110
    ...-cancelable agreements with initial terms in excess of one year at December 31, 2015 are as follows: Year Ending December 31: 2016 2017 2018 Thereafter Total minimum payments Litigation From time-to-time, we are a party to litigation and subject to claims incident to the ordinary course of business...

  • Page 111
    ... 2014 , we made payments totaling $17.2 million to various jurisdictions for indirect tax liabilities relating to prior periods. We recorded an expense of $4.1 million to increase our indirect tax liability for current period sales activity and reduced our liability by $1.2 million due to changes...

  • Page 112
    ... $7.7 million and $6.8 million during 2015 , 2014 and 2013 , respectively. 12. Income Taxes We are required to file federal and applicable state corporate income tax returns and recognize income taxes on pre-tax income, which in prior years consisted primarily of our share of Desert Newco's pre-tax...

  • Page 113
    ...which are reflected in thousands and per share amounts) A reconciliation of the statutory federal income tax rate to our effective income tax rate was as follows: Year Ended December 31, 2015 Expected benefit at federal statutory tax rate (35% for 2015, 34% for 2014 and 2013) Effect of rates due to...

  • Page 114
    ... whole or in part, by credits allowable for taxes paid to foreign jurisdictions. The actual tax costs will depend on the income tax laws and circumstances at the time of the realization events. We have filed income tax returns for years through 2014 . These returns are subject to examination by the...

  • Page 115
    ... to KKR, $1.1 million to SLP, $0.6 million to TCV and $0.4 million to other Desert Newco owners. No tax distributions were paid in 2014 or 2013 . 13. Loss Per Share Basic loss per share is computed by dividing net loss attributable to GoDaddy Inc. by the weighted-average number of shares of Class...

  • Page 116
    ... by geography is based on the customer's address, and was as follows: Year Ended December 31, 2015 2014 $ $ 1,038.8 348.5 1,387.3 $ $ 2013 862.8 268.0 1,130.8 U.S. International $ $ 1,192.6 414.7 1,607.3 No individual international country represented more than 10% of total revenue in any period...

  • Page 117
    ...ordinary course of business, we purchase and lease computer equipment, technology licensing and software maintenance and support from affiliates of Dell Inc. (Dell). Silver Lake and its affiliates have a material ownership interest in Dell. During 2015 , 2014 , and 2013 , we paid $17.5 million , $16...

  • Page 118
    ... amounts) Note 17. Subsequent Events In January and February 2016 , we granted options to purchase an aggregate of 634 shares of Class A common stock with a weighted-average exercise price of $28.65 per option. The weighted-average grant date fair value of these awards was determined to be $11.20...

  • Page 119
    ... Annual Report on Form 10-K does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies...

  • Page 120
    ...Principal Accounting Fees and Services The information required by this item will be included in the 2016 Proxy Statement and is incorporated herein by reference. Part IV. Item 15. Exhibits, Financial Statement Schedules We have filed the following documents as part of this Annual Report on Form 10...

  • Page 121
    ...(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GODADDY INC. Date: March 2, 2016 /s/ Blake J. Irving Blake J. Irving Chief Executive Officer POWER OF ATTORNEY Each person whose signature...

  • Page 122
    ... Go Daddy Operating Company, LLC, Kohlberg Kravis Roberts & Co. L.P., Silver Lake Management Company III, and TCV VII Management, LLC Restated and Amended Executive Chairman Services Agreement, dated March 4, 2015, by and between Desert Newco, LLC and Bob Parsons Amendment No. 4 to Credit Agreement...

  • Page 123
    ... List of subsidiaries of the Registrant Consent of independent registered public accounting firm Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K) Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d14(a), as...

  • Page 124
    ... Stock Plan and The Go Daddy Group, Inc. 2006 Equity Incentive Plan, of our report dated March 2, 2016, with respect to the consolidated financial statements of GoDaddy Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2015. /s/ Ernst & Young LLP Phoenix, Arizona March...

  • Page 125
    ... and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 2, 2016 By: /s/ Blake J. Irving Blake J. Irving Chief Executive Officer...

  • Page 126
    ... fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 2, 2016 By: /s/ Scott W. Wagner Scott W. Wagner Chief Financial Officer and Chief Operating Officer (Principal Financial...

  • Page 127
    ... of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of GoDaddy Inc. Date: March 2, 2016 By: /s/ Blake J. Irving Blake J. Irving Chief Executive Officer...

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    ... ACT OF 1934 For the fiscal year ended December 31, 2015 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36904 GoDaddy Inc. (Exact name of registrant as specified in its charter...

  • Page 130
    ...shell company (as defined in Rule 12b-2 of the Exchange Act). As of June 30, 2015, the aggregate market value of the registrant's Class A common stock held by non-affiliates, based upon the closing sales price for the registrant's Class A common stock as reported by the New York Stock Exchange, was...

  • Page 131
    Table of Contents TABLE OF CONTENTS Page PART I. Item 1. Business PART II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations PART IV. Item 15. Signatures Exhibit Index Exhibits, Financial Statement Schedules 37 38 39 19 6 3

  • Page 132
    ...web-hosting offerings, website builder products, SSL certificates and e-commerce products. These products generally have higher margins than domains. Total bookings from hosting and presence products grew an average of 25% annually for the three years ended December 31, 2015." "Business Applications...

  • Page 133
    ... 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In accordance with applicable SEC rules, this Amended Filing includes new certifications required by Rule 13a-14 under the Securities and Exchange Act of 1934 ("Exchange Act") from our Chief Executive Officer...

  • Page 134
    ... successful online ventures. We are a leading technology provider to small businesses, web design professionals and individuals, delivering simple, easy to use cloud-based products and outcome-driven, personalized Customer Care. We operate the world's largest domain marketplace, where our customers...

  • Page 135
    ... email communication; online marketing; and Internet-enabled reservation and scheduling capabilities. In addition, backend activities such as invoicing, payment processing, accounting and tax preparation, which are typically separate point solutions, can now increasingly be linked to the front-end...

  • Page 136
    ... them online. We believe a complete digital identity includes an elegant, mobile-enabled website and the ability to get found across various search engines, social media platforms and vertical marketplaces. Growing their business and running their operations. Our customers need to communicate with...

  • Page 137
    ... hosted approximately 10 million websites on servers located throughout our worldwide data centers. We focus on online security, customer privacy and reliable infrastructure to address the evolving needs of our customers. Receive high value. We price most of our products at a few dollars per month...

  • Page 138
    ...culture. We are a company whose people embody the grit and determination of our customers. Our world-class engineers, scientists, designers, marketers and Customer Care specialists share a passion for technology and its ability to change our customers' lives. We value hard work, extraordinary effort...

  • Page 139
    ... and 17 languages. To support our international growth, we will continue investing to develop our local capabilities across products, marketing programs, data centers and Customer Care. • Partner up. Our flexible platform also enables us to acquire companies and quickly launch new products...

  • Page 140
    ... such as web analytics and SSL certificates. Website Hosting on Virtual Dedicated Servers and Dedicated Servers. Our virtual dedicated and dedicated servers provide customers with greater control and higher performance than our shared hosting plans. Our virtual dedicated hosting offering utilizes...

  • Page 141
    ...-feature web interface for both desktop and mobile devices, accompanied by an integrated calendar and secure online storage. We offer a variety of plans, with pricing dependent on the customer's desired amount of storage and number of email addresses. All of our email accounts are advertising-free...

  • Page 142
    ... automated infrastructure based on OpenStack to enable next-generation hosting architecture. Platform-as-a-Service Our cloud platform offers our customers an integrated and comprehensive set of services saving them time. Our platform is designed to help us reduce costs, increase personalization and...

  • Page 143
    ... real-time product suggestions to customers after providing a world-class support experience allows our Customer Care team to provide an impactful contribution to bookings through the sale of product subscriptions, including domain products, hosting and presence offerings and business applications...

  • Page 144
    ... from companies like Amazon, Google and Microsoft, all of which are providers of web-hosting and other cloud-based services and have recently entered the domain name registration business as upstream registries, and eBay and Facebook, both of which offer robust Internet marketing platforms. We...

  • Page 145
    ... Lanham Act governs trademarks and false advertising. Case law interpreting the Lanham Act has limited liability for many online service providers such as search engines and domain name registrars. Nevertheless, there is no statutory safe harbor for trademark violations comparable to the provisions...

  • Page 146
    ... processes, technologies or websites infringe patents they now hold or might obtain or be issued in the future. Employees As of December 31, 2015, we had 4,761 employees worldwide, including 3,243 in our Customer Care team, 811 in technology and development, 132 in marketing and advertising and 575...

  • Page 147
    ... points in our customer relationships. As we have grown, our hosting, presence and business applications products have become increasingly important parts of our business, constituting over 48% of total revenue in 2015. Financial Highlights Below are our key financial highlights for the year ended...

  • Page 148
    ...of web-hosting offerings, website builder products, SSL certificates and e-commerce products. These products generally have higher margins than domains. Total revenue from hosting and presence products grew an average of 25% annually for the three years ended December 31, 2015. Business Applications...

  • Page 149
    ... in foreign currency exchange rates. Our hosting and presence and business applications bookings are growing at a faster rate than domains bookings as customers broaden their adoption of our products. Total bookings increased 19.8% from $1,397.9 million in 2013 to $1,675.2 million in 2014, primarily...

  • Page 150
    ... of future results. Year Ended December 31, 2015 2014 2013 Revenue: Domains Hosting and presence Business applications Total revenue Costs and operating expenses: Cost of revenue (excluding depreciation and amortization) Technology and development Marketing and advertising Customer care General and...

  • Page 151
    Table of Contents Year Ended December 31, 2015 2014 2013 Revenue: Domains Hosting and presence Business applications Total revenue Costs and operating expenses: Cost of revenue (excluding depreciation and amortization) Technology and development Marketing and advertising Customer care General and ...

  • Page 152
    ... sales of our security products. Business applications. Business applications revenue increased $58.4 million, or 50.3%, from $116.1 million in 2014 to $174.5 million in 2015. These increases were primarily driven by our offering of expanded email and productivity solutions and increased customer...

  • Page 153
    ...absolute dollars in future periods as we expand our domains business and customer base. Cost of revenue may increase or decrease as a percentage of total revenue, depending on the mix of products sold in a particular period and the sales and marketing channels used. Year Ended December 31, 2015 2014...

  • Page 154
    ... customers, primarily consisting of fees paid to third parties for marketing and advertising campaigns across television and radio, search engines, online display, social media and spokesperson and event sponsorships. These expenses also include personnel costs and affiliate program commissions...

  • Page 155
    ... costs associated with the expansion of our international third-party Customer Care locations. General and administrative General and administrative expenses primarily consist of personnel costs for our administrative functions, professional service fees, office rent for all locations, all employee...

  • Page 156
    ... A common stock at a public offering price of $20.00 per share, receiving $491.8 million in proceeds, net of underwriting discounts and commissions. We incurred $11.2 million of legal, accounting, printing and other professional fees related to the IPO, which were charged against additional paid-in...

  • Page 157
    ..., the timing and extent of spending to support domestic and international development efforts, continued brand development and advertising spend, the expansion of Customer Care and general and administrative activities, the introduction of new and enhanced product offerings, the costs to support new...

  • Page 158
    ...Year Ended December 31, 2015 2014 2013 $ 259.4 $ 180.6 $ 153.3 (145.9) (107.3) (208.5) (29.7) 95.7 91.1 (0.2) - - $ 209.0 $ 43.6 $ 35.9 Net cash provided by operating activities Net cash used in investing activities Net cash provided by (used in) financing activities Effect of exchange rate changes...

  • Page 159
    ... be primarily affected by increases in total bookings. Our primary uses of cash from operating activities have been for domain registration costs paid to registries, personnel costs, discretionary marketing and advertising costs, technology and development costs and interest payments. We expect cash...

  • Page 160
    ... costs and original issue discounts. (3) We lease office space in Tempe, Arizona under which we occupy the total available space. See Note 10 to our consolidated financial statements for information regarding the terms of our lease financing obligation. (4) We lease office space, data center space...

  • Page 161
    ... may sell multiple products to customers at the same time. For example, we may design a customer website and separately offer other products such as hosting and an online shopping cart, or a customer may combine a domain registration with other products such as private registration or email. Revenue...

  • Page 162
    ... primarily of options. We grant options at exercise prices equal to the fair market value of our Class A common stock as reported on the NYSE on the date of grant. We measure and recognize compensation expense for equity-based awards made to employees, service providers and directors based on the...

  • Page 163
    ... of LLC Units (together with the corresponding shares of Class B common stock) for Class A common stock. When LLC Units are exchanged, we receive certain tax attributes, including the original basis adjustments (the OBAs) created from the original acquisition of the LLC Units plus any anticipated...

  • Page 164
    ... burdens on us in the future. Increased regulation could negatively affect our business directly, as well as the businesses of our customers. Taxing authorities may impose indirect taxes on the Internet-related revenue we generate based on regulations currently being applied to similar, but not...

  • Page 165
    ... Accounting Pronouncements See Note 2 to our consolidated financial statements for information regarding recent accounting pronouncements. Part IV. Item 15. Exhibits, Financial Statement Schedules Exhibits See the Exhibit Index immediately following the signature page of this Annual Report on Form...

  • Page 166
    ..., thereunto duly authorized. GODADDY INC. Date: April 5, 2016 /s/ Scott W. Wagner Scott W. Wagner Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities...

  • Page 167
    ... Go Daddy Operating Company, LLC, Kohlberg Kravis Roberts & Co. L.P., Silver Lake Management Company III, and TCV VII Management, LLC Restated and Amended Executive Chairman Services Agreement, dated March 4, 2015, by and between Desert Newco, LLC and Bob Parsons Amendment No. 4 to Credit Agreement...

  • Page 168
    ...LLC and Elissa Murphy Offer Letter, dated October 8, 2014, by and between GoDaddy Inc. and Matthew B. Kelpy List of subsidiaries of the Registrant Consent of independent registered public accounting firm Power of Attorney Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14...

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