Go Daddy 2015 Annual Report Download - page 33

Table of Contents
expectations for these or any other reasons, our business and stock price could be materially and adversely affected and we could face costly lawsuits, including
securities class action suits.
We have a history of operating losses and may not be able to achieve profitability in the future.
We had net losses on a GAAP basis of $120.4 million , $143.3 million and $199.9 million , in 2015 , 2014 and 2013 , respectively. While we have
experienced revenue growth over these same periods, we may not be able to sustain or increase our growth or achieve profitability in the future or on a consistent
basis. We have incurred substantial expenses and expended significant resources upfront to market, promote and sell our products. We also expect to continue to
invest for future growth. In addition, as a public company, we expect to incur significant accounting, legal and other expenses we did not incur as a private
company.
As a result of our increased expenditures, we will have to generate and sustain increased revenue to achieve future profitability. Achieving profitability will
require us to increase revenues, manage our cost structure and avoid significant liabilities. Revenue growth may slow or decline, or we may incur significant losses
in the future for a number of possible reasons, including general macroeconomic conditions, increased competition, a decrease in the growth of the markets in
which we operate, or if we fail for any reason to continue to capitalize on growth opportunities. Additionally, we may encounter unforeseen operating expenses,
difficulties, complications, delays and other unknown factors that may result in losses in future periods. If these losses exceed our expectations or our revenue
growth expectations are not met in future periods, our financial performance will be harmed, and our stock price could be volatile or decline.
We may need additional equity, debt or other financing in the future, which we may not be able to obtain on acceptable terms, or at all, and any additional
financing may result in restrictions on our operations or substantial dilution to our stockholders.
We may need to raise funds in the 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 incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and may be amended with
the consent of our lenders. Accordingly, under certain circumstances, we may incur substantial additional debt.
Our ability to obtain debt or equity funding will depend on a number of factors, including market conditions, interest rates, our operating performance, our
credit rating and investor interest. Additional funding may not be available to us on acceptable terms or at all. If adequate funds are not available, we may be
required to reduce expenditures, including curtailing our growth strategies, foregoing acquisitions or reducing our product development efforts. If we succeed in
raising additional funds through the issuance of equity or equity-linked securities, then existing stockholders could experience substantial dilution. If we raise
additional funds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences and privileges senior to those of the
holders of our Class A common stock. In addition, any such issuance could subject us to restrictive covenants relating to our capital raising activities and other
financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential
acquisitions. Further, to the extent we incur additional indebtedness or such other obligations, the risks associated with our substantial leverage described elsewhere
in this 10-K, including our possible inability to service our debt, would increase.
Because we are generally required to recognize revenue for our products over the term of the applicable agreement, changes in our sales may not be
immediately reflected in our operating results.
As described in Note 2 to our consolidated financial statements, we generally recognize revenue from our customers ratably over the respective terms of their
subscriptions in accordance with GAAP. Our subscription terms are typically one year, but can range from monthly terms to multi-annual terms of up to 10 years
depending on the product. Accordingly, increases in sales during a particular period do not translate into immediate, proportional increases in revenue during such
period, and a substantial portion of the revenue we recognize during a quarter is derived from deferred revenue from customer subscriptions we entered into during
previous quarters. As a result, our margins may suffer despite substantial sales activity during a particular period, since GAAP does not permit us to recognize all
of the revenue from our sales immediately. Conversely, the existence of substantial deferred revenue may prevent deteriorating sales activity from becoming
immediately observable in our consolidated statement of operations.
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