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GoDaddy Inc (NYSE:GDDY)
Q4 2020 Earnings Call
Feb 11, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Mark Grant -- Vice President of Investor Relations

Good afternoon, and thank you for joining us for GoDaddy's Fourth Quarter and Full Year 2020 Earnings Call. I'm Mark Grant, Vice President of Investor Relations.

With me on the call today are Aman Bhutani, Chief Executive Officer; and Ray Winborne, Chief Financial Officer. Following prepared remarks by Aman and Ray, we will open up the call for your questions. [Operator Instructions]

On today's call, we'll be referencing both GAAP and non-GAAP financial results and operating metrics such as total bookings, unlevered free cash flow, normalized EBITDA, net debt, and gross merchandise volume. A discussion of why we use non-GAAP financial measures and reconciliations of our non-GAAP financial measures to their GAAP equivalents may be found in the presentation posted to investors.godaddy.net or on our Form 8-K filed with the SEC with today's earnings release.

The matters we'll discuss today include forward-looking statements, which include those related to our future financial results, new product introductions and innovations, partner integrations, our ability to integrate acquisitions and achieve desired synergies, changes to executive leadership, as well as the impact of the COVID-19 pandemic on our business, customers and employees. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. Actual results may differ materially from those contained in the forward-looking statements.

Any forward-looking statements that we make on this call are based on assumptions as of today, February 11, 2021 and we undertake no obligation to update these statements as a result of new information or future events, unless required by law.

With that, here's Aman.

Aman Bhutani -- Chief Executive Officer

Thanks, Mark, and thank you all for joining us today. GoDaddy exists to empower everyday entrepreneurs. Our mission is to make opportunity inclusive for all and the shift to digital represents the greatest opportunity for our customers to share their gifts with the world. With a differentiated offering, including guidance and tools with an intuitive seamless experience, specifically designed and built for our customers, it is clear why customers continue to adopt our products and ask us for more.

Everyday entrepreneurs are creative and resourceful and they want to be able to focus their time on their business from domain names to email and content creation to commerce and soon to include payments and point-of-sale. Customer focus for us is about building a seamlessly intuitive experience that saves them time and unlocks capabilities through ease of use.

In 2020, our digital presence was key for our customers and the increased demand led to accelerating bookings growth for the last three quarters for us. For 2020, GoDaddy neared $3.8 billion in bookings and topped $3.3 billion in revenue. We leaned into the surging demand with marketing spend and while we kept it efficient, the result was our best year of net customer adds, except 2017, which included the HEG acquisition. We welcome nearly 1.4 million net new customers in 2020.

By providing valuable products and offering the best care, we have also been able to maintain stable renewal rates and our churn metrics, well, those have always been low and they still found room to improve in 2020. Early last year, we spoke about our natural evolution into commerce. Everyday entrepreneurs are under-served and demand this from us and our investments have been focused on the simplest and most relevant commerce experience. No doubt, commerce continues to be a giant opportunity for us.

Internally, we are also evolving. We have made significant progress in implementing a broader experimentation program that allows us to more clearly measure the value we are creating for customers and deliver functionality faster. The discipline of measurement allows us to set more ambitious goals, while also giving us the confidence to achieve them. We are moving faster, putting more products in the hands of more customers and winning the right to do more for them.

Our leadership team is also evolving. 2020 was a year of milestones and career-defining achievements for many GoDaddy leaders. After having truly accomplished herculean tasks, both in 2020 and over their respective careers, our Chief Legal Officer, Nima Kelly, and our Chief Financial Officer, Ray Winborne, have each expressed a desire to retire at some point this year. They continue to be fully engaged with the company and will help with transition as we look to fill their incredibly big shoes. We have a strong leadership team with talented tenured folks and with continued leadership from Nima and Ray, we expect a seamless transition. We have strong internal candidates, and we will be looking for external candidates for both roles as well.

With acceleration in the numbers and also in our internal operating rhythm, I want to share three priority areas where GoDaddy will be bringing innovative solutions to our customers in 2021. Our top priority is commerce and 2021 is the year we will bring to market a holistic solution for everyday entrepreneurs that powers every facet of their online and offline commerce experience. In 2020, we created strong customer value with our commerce tools and GMV for Websites + Marketing and Sellbrite grew 75% year-over-year.

In 2021, GoDaddy will extend our current offerings with a focus on delivering omni-commerce solutions. Earlier this week, we closed on the Poynt acquisition. And as you know, Poynt extends our commerce offering with a set of products that span the full spectrum of commerce enablement. Poynt brings us payment capabilities as a payment facilitator and brings immense value to our customers through its innovative point-of-sale terminals, inventory management software, loyalty management tools and more. Poynt and GoDaddy customers are already seeing great success, represented by the combined $23 billion in annualized GMV that already flows through our platforms.

As we integrate and build the GoDaddy commerce platform, its scale will be back by the 6,000 guides that are ready to provide guidance we know our customers need. To help drive focus and continued momentum in commerce, we have created a new commerce division within GoDaddy. Poynt CEO, Osama Bedier, has joined GoDaddy and will lead this new division reporting to me.

The next priority I want to share is about our Pro customers. We already have a large group of designers and developers that are GoDaddy customers, but we know the opportunity is much, much larger. Last year, our partner's team, whose sole focus is to create value for designers and developers, went back to first principles. Deep research into the customer needs led to a new set of solutions organized in three pillars. The first pillar is all about a seamless intuitive experience in the tool set we offer.

In January, we launched The Hub for GoDaddy Pros where website designers and developers can perform their work in a simple intuitive way that saves them time and money. The Hub enables bulk updates across hundreds of sites for WordPress core, plugins and themes, allowing Pros to roll out updates for better security, new functionality and better availability. What may have taken hours now takes seconds and even works on WordPress sites not hosted by GoDaddy. Pros can also use The Hub's built-in project management tools and make it easier than ever to deliver customized sites for their clients. The Hub lets Pros manage all of their clients in one place and built-in delegated access allows Pros to collaborate with their clients more effectively to drive the results their customers want to see.

The second pillar is all about care. Pros have told us that they value the kind of guidance and care we offer, and they want us to do more. We have extended our care to support Pros for all their WordPress sites, not just the ones they host with us. With additional care guides armed with a higher level of training to support these Pros, we are ready for the unique needs of this customer population.

The third pillar brings it all together through marketing. With millions of Pros out there, we have planned a marketing launch to tell them about the added value and capabilities we are bringing forward. It all begins with the launch of the GoDaddy Pro program. Signing up to be a GoDaddy Pro gets Pros access to exclusive discounts for themselves and for their clients and direct access to the most advanced guides directly through The Hub, speaking their language exactly the way they want it. GoDaddy Pro is live in the U.S. with its first marketing campaign, and in April, we will be hosting our first virtual GoDaddy Pro conference and we're just getting started, look out for more benefits of being a GoDaddy Pro at its global launch.

The three pillars together embrace the needs of our Pro customers and enhance our relationship with them beyond a strong managed WordPress offering. Overall, our strategy is straightforward, WordPress is the largest CMS in the world with a market share of over 60% and growing. Pros know WordPress and prefer WordPress and our vision is all about making it seamless and intuitive, while retaining all its power and flexibility. We are not interested in forcing Pros to use a different tool that sounds like a job for Sisyphus.

While it is exciting to talk about new offerings like commerce and GoDaddy Pro, under these exciting new businesses is the solid foundation of our Domains business and that is the third priority I want to talk to you about. For years, we have outgrown the Domains industry with innovative ideas and execution in both the primary and secondary market. That growth isn't going away anytime soon.

Recently we added GoDaddy Corporate Domains and GoDaddy Registry, which promise to offer new and existing customers with innovative solutions, but that isn't all. Our fine team has really stepped up their experimentation velocity. These are the folks that run the search algorithm on godaddy.com. We are building an adaptive user experience, which leverages multiple inputs, including the customer's profile, the query, it's context, the available results and also available add-ons to make sure customers see the options and bundles that will create the most value.

Our aftermarket is also seeing tailwinds from the digital transformation of small business. More businesses coming online is resulting in more customers leveraging our Domain Broker Service to help them secure the perfect name for their online presence even if someone else already owns it.

Our new List for Sale tool has also seen an incredible first inning. This tool lets customers with unused domain names list them in our aftermarket and in just three months, we've seen over 350,000 domains get listed. The outcome here is a continued acceleration in this business as more customers are matched with better offerings and are exposed to attach opportunities as well. Most of the financial impact of this accelerating innovation in domains is still to come and we are confident that the outperformance we have seen in this category will continue well beyond 2021.

At our scale, innovation like this not only drives growth but also helps fund exciting new initiatives across the business. I look forward to sharing more on the three priorities I just went through as the year progresses. Before I wrap up, I know that many of you are eager to hear about the results of our Websites + Marketing freemium offering. In less than a year, it has shown itself to be an area of real promise for GoDaddy. Beginning in the spring of 2020, we conducted a small-scale experiment presenting our freemium offering to a limited number of visitors. Over the course of the year, we steadily increased the number of U.S.-based visitors that would see this offering to approximately 50% and we are pleased with the results we've seen along the way.

Millions of sign-ups and solid conversion rates that we are happy to note are higher than what we have seen elsewhere in the industry. There is certainly more to be done and this is an exciting outcome as we work to make freemium a tailwind to our business for years to come. Looking at 2021, while there are many unknowns and many things we plan to accomplish, we continue to see evidence in our business that supports aggressive forward momentum. As Ray will share through focused execution, GoDaddy delivered a strong result in 2020 in the face of many challenges. Our core strategy of creating value for customers and converting it to shareholder value over time is working. We are evolving as a company and are in a fantastic spot as we enter into 2021.

With that, here's Ray.

Ray Winborne -- Chief Financial Officer

Hey, thanks, Aman. I'll touch on the fourth quarter financial results and our outlook for 2021. Despite the operational challenges caused by the pandemic, we delivered a strong performance in 2020. We added 1.4 million net new customers, nearly double the number added in 2019. This was complemented by a decrease in our already low customer churn rates and resiliency in subscription renewal rates as our products and services became even more valuable to our customers.

Full year revenue grew 11% year-over-year, while unlevered free cash flow was up 12% even as we invested more in marketing to capture higher demand in the market. We also took advantage of the opportunities created by the uncertainty deploying $1.8 billion in capital, adding capabilities for customers and creating value for shareholders.

Turning to the fourth quarter results. We saw continued acceleration in top line. Bookings grew to $943 million, rising 13% year-over-year on a reported and constant currency basis as FX had little impact on the quarter. Growth was broad-based with the continued strength across product categories. Revenue came in at $874 million, outperforming expectations and growing 12% year-over-year. Business applications was again our fastest growing product line, increasing 20% year-over-year on continued strength in branded email and productivity solutions. Domains accelerated to 14% growth as new registrations, renewals and aftermarket sales remained strong, along with a modest contribution from GoDaddy Registry.

And finally, Hosting and Presence grew over 5% in the fourth quarter. We continue to see terrific growth in our website creation platform products, though the strength was tempered somewhat by the headwinds from the GoDaddy Social service due to the elimination of the outbound sales motion in June.

The key metrics underlying our growth have remained consistently strong. ARPU rose to $166, up 5% year-over-year, while the customer base grew 7%. Unlevered free cash flow for the quarter was $181 million and $825 million for the full year. This reflected good operating leverage in the P&L as well as reduced capital expenditures for corporate real estate and infrastructure as we transition more workloads to the cloud.

Gross margin remained in the mid-60s in the quarter, consistent with our expectations. We continue to ramp investment in marketing to capture increasing demand resulting in a $40 million year-over-year increase in marketing expense. As we mentioned last quarter, we've been able to elevate investment, while remaining within our targeted return metrics even as we saw increased competition in performance advertising channels.

On the balance sheet, we finished the year with $765 million in cash and total liquidity of nearly $1.4 billion. Net debt landed at $2.4 billion, putting net leverage at 2.6 times on a trailing 12-month basis, illustrating our ability to deleverage quickly. The strength and resilience of our recurring business model has fueled a strong balance sheet, enabling us to execute across our capital allocation priorities.

During 2020, we completed four acquisitions, repurchased nearly 6% of our outstanding equity at average prices substantially below today's stock price and settled the TRA at an attractive valuation, removing an overhang, toning the stock, all prove points that we have the flexibility to take advantage of opportunity as it arises.

Rest assured, we'll continue to be prudent allocators of capital in the pursuit of long-term growth and levered free cash flow per share. As we look to the future, continued growth in cash flow and a strong balance sheet will provide us with the flexibility to deploy roughly $5 billion in capital through 2023.

Moving on to our outlook for 2021. We expect to deliver revenue of approximately $3.7 billion, representing growth of 12% versus 2020. From our product category perspective, we expect double-digit growth in Domains, high single-digit growth in Hosting and Presence and high-teens growth in Business Applications. This guidance includes $20 million in revenue we expect from the recent acquisition of Poynt. As for Q1, we started the year off on pace and expect to deliver revenue of $885 million, representing 12% growth versus last year.

We expect 2021 unlevered free cash flow of approximately $945 million or 15% growth versus 2020. This guidance reflects continued investment in marketing and product, plus $20 million in net dilution from Poynt as we build out our capabilities in commerce this year.

Finally, I'd like to provide some additional modeling points for the full year 2021. We expect bookings to grow at a rate similar to revenue and normalized EBITDA margin to be roughly flat as compared to 2020. We expect capital expenditures of approximately $65 million, income tax payments of $25 million, and cash interest payments of $100 million based on current debt outstanding in today's forward rate expectations.

We announced my retirement today and I want to thank all of you who have been along for the ride. I have had an incredibly rewarding career and feel blessed to have been able to top it off here at GoDaddy. It's been my privilege to serve with this amazing group of people dedicated to such a noble mission. We navigated a lot of change as GoDaddy has evolved into a truly customer-centric company, obsessed with creating value for customers, employees and shareholders. This last year was challenging for a lot of people, but also very rewarding as I've been able to witness our leadership team taking bold, decisive and strategically sound actions to help our customers, employees through an incredibly turbulent year.

As for what's next, I am planning to be deeply engaged in the search for a successor, and I'll stay on to ensure a smooth transition. I look forward to speaking with all of you again next quarter.

With that, we'll have Christie Masoner from IR team open up the call for questions.

Questions and Answers:

Christie Masoner -- Senior Manager, Investor Relations

Thanks, Ray. [Operator Instructions] Our first question comes from the line of Ron Josey from JMP Securities. Ron, please go ahead.

Ron Josey -- JMP Securities -- Analyst

Great. Thanks, Christie. And Ray, congrats on the decision, we'll miss you, though we have a few quarters of team, and Happy New Year, Aman. I wanted to ask two questions maybe, Aman, on commerce, that was the first pillar that you mentioned as a focus area. And with Poynt now, Websites and Marketing adoption of -- in the millions, I think new EC templates. I think I heard $23 billion in GMV, $7 billion of which through Websites and Marketing. I just -- can you talk to us a little bit more how you view e-commerce unfolding across GoDaddy going forward? The tools appear to be in place, you've got the scale, so what's next? And then, Ray, just real quick on the guidance with EBITDA flat year-over-year, and I'm assuming that's continued investments in marketing and product, is that a way to think about it? Thank you.

Aman Bhutani -- Chief Executive Officer

Ron, thanks for the question. And yes, commerce continues to be our number 1 priority and you're right, you laid it out really well. With Websites + Marketing in place, Sellbrite also growing quickly, which you did mention, also huge opportunity for us in the WooCommerce space. We haven't talked about that much, but you know about the SkyVerge acquisition that is helping us bring a program that we call a new Woo that we'll talk about in the future as well.

So yeah, all those things coming together, Poynt adding those core capabilities as a payment facilitator, invoicing point-of-sale and the idea is to bring all those pieces together and continue the pace of acceleration. If you just look at GMV for Websites + Marketing and SellBrite, the number -- annualized number we gave you last quarter was much lower than the one you're seeing today and that itself represents sort of quarter-over-quarter acceleration.

Ray Winborne -- Chief Financial Officer

Hey...

Ron Josey -- JMP Securities -- Analyst

Okay.

Ray Winborne -- Chief Financial Officer

Ron, it's Ray. Appreciate the kind words first, but our normalized -- our normalized EBITDA margin, we're holding that flat year-over-year, which we're pretty pleased with given the investment we're going to put in place, both in product -- Poynt will be a big piece of that, I mentioned in the call comments that we've got net dilution of about $20 million around commerce and we will continue to invest more in marketing this year as well. So those are the two big drivers, our normalized EBITDA margin.

Ron Josey -- JMP Securities -- Analyst

That's great. Thanks, guys. Appreciate it.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Ygal Arounian from Wedbush. Ygal, please go ahead. Ygal, please unmute yourself.

Ygal Arounian -- Wedbush Securities -- Analyst

Hey guys, thanks for the questions and I call the sentiment on Ray, congrats, we'll certainly miss you and big shoes to fill. I guess a couple of questions, so on -- and first, if we could just -- Aman, you gave some good commentary around Pro Hub. Maybe you could talk about the go-to-market strategy, the I guess marketing around that, how the sales and customer service team will kind of help drive that initiative and can you also talk about how many Pros versus -- DIYers are using your services today. And so, kind of maybe a little bit more just big picture around how that evolves. And then, domains, I think outperformed, and you talked a little bit about some of what's driving that. So today -- just how was the Neustar acquisition, the synergies you're seeing there, how much is that contributing? Can you talk about some of the things that you put in place, specifically from that acquisition and how that can add to growth in the coming years?

Aman Bhutani -- Chief Executive Officer

Yeah, thanks, Ygal. Happy to take that. On Pros, let's start with the numbers because I think that was sort of in the middle of your questions. We have about 1.5 million Pros as part of our 21 million customers. So we already have a lot of Pros that engage with us on a daily basis. But we know that the opportunity is much, much larger.

And what the Pro Hub is about is, it was about going to the Pros saying, what do you guys need in terms of the interface and then building that in a manner that works best for them. And the go-to-market strategy around it, there is a GoDaddy Pro program that is all about Pros signing up and getting benefits, benefits that over time grow and there is a marketing campaign now in place in the U.S. that is getting word out to say, hey, here's all these new things, it is the new experience where you can do a whole lot, you got project management tools, you got care with a click through messaging, there our guides in the background, there are more guides in number, they have higher level of training and they can execute on more asks from the Pros than ever before, because we've sort of opened up the aperture of what they can do.

So it's the combination of both of -- all of those things that we're clearly excited about. And then, in terms of sales and marketing, no doubt, care will continue to play a role there. But this is not an outbound motion, what we're really seeing is that Pros want to engage with us on the web. They want to engage with care through messaging, they want to move things quickly, they don't even want to wait two minutes for a page to load, they don't want to spend hours updating their sites, they want it done in one click and those are the type of capabilities we're opening up here.

And then, on Domains, Ray will take the sort of contribution for Neustar but just to remind you, it's still super early for us with Neustar. The innovation that we plan to bring to the table is all about having the full stack, being able to innovate on the registry side and the registrar side and bring new offerings and I have talked about that a little bit in the past.

So I'll turn it to Ray to just talk about synergies and contribution, as you asked.

Ray Winborne -- Chief Financial Officer

Yeah, Aman hit it on the head. This was more about the strategy and verticalization on domains, this is a future benefit to us as we get more control over the domain costs, which is one of our largest cost in P&L. You think about contribution to the top line, Ygal, the purchase accounting impacts for Neustar absolutely muted the impacts on the top line. If you're looking year-over-year '21 contribution, inorganic contribution from Neustar is going to be roughly half a point on the top line.

Ygal Arounian -- Wedbush Securities -- Analyst

Great, thanks. Appreciate it.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Jason Helfstein from Oppenheimer & Company. Jason, please go ahead.

Jason Helfstein -- Oppenheimer & Co. -- Analyst

Thanks. Kind of want to ask about acquisitions and then leverage. So first, Poynt was obviously a very strategic acquisition, but not particularly expensive if we think relative to the amount of free cash flow you guys generate a year. If we think about kind of your acquisition pipeline, would you say more of the acquisitions look like coin size or are you potentially looking at something that might be bigger? And then, if not bigger, again given the amount of free cash flow you generate and how the company's just very well positioned, you're seeing very good customer retention, why not leverage up particularly in this environment, is probably the number one question. We get investors, why not run this business at 3.5 to 4 times leverage and just accelerate kind of the free cash flow per share return to shareholders? Thanks.

Aman Bhutani -- Chief Executive Officer

Thanks, Jason, maybe I'll start and Ray can comment at the end of that. One, I love the idea that you agree that Poynt was a strategically important acquisition and it wasn't very expensive. Those are great acquisitions, I love them. But to answer your question, we are looking at the whole spectrum, Jason. We absolutely agree that M&A is a core part of our strategy, it's in my DNA, it's in the company's DNA, we are good at it, we've done it before.

But as we're out there looking at the assets, it's -- as you know, it's a competitive or a sort of difficult time in the marketplace and we're trying to make sure that the assets we look at truly form part of the advantage we want to create because at the end of the day what we're looking to have is that simple intuitive experience, right. There isn't a million things I talk about right, I'm talking about ease of use, I'm talking about saving people time, I'm talking about products, interfaces that truly are magical that lead to high NPS.

And all the acquisitions we're doing or looking at big or small have to fit into that fold. So I wouldn't have any one think that we are not interested in large acquisitions, we absolutely are, we're just -- we've got a formula, we're working it and should the opportunities appear, you will find us at the table.

And Ray, I'll turn it to you for levering up and such.

Ray Winborne -- Chief Financial Officer

Yeah, Jason, when I think about leverage, right, we've had a targeted 2 to 4 times leverage since we've been public and we've been at the very top of that range when the opportunity presented itself and we've been more about balancing our capital allocation priorities. You saw every flavor ever in 2020, right. We leaned in the marketing, put a lot of money into organic growth because the opportunity presented itself, we closed on four acquisitions last year, we bought back stock and we also settle the TRA. So we're really using that cash flow, the incredibly strong and consistent cash flow that you talked about to drive significant returns for the company. And if we do see the opportunity to Aman's point, we are certainly not hesitant to take up leverage to 4 times.

Jason Helfstein -- Oppenheimer & Co. -- Analyst

Thank you. And Ray, we'll miss you, it's been fun. But it sounds like you've got at least one more quarter with you.

Ray Winborne -- Chief Financial Officer

Thanks, Jason. Appreciate it, man.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Drew Glaser from J.P. Morgan. Drew, please go ahead.

Andrew Glaser -- J.P. Morgan -- Analyst

Hey, this is Drew on for Sterling, thanks for taking my question. I was wondering if you could provide some more color on how much of the 2021 revenue growth is coming from acquisitions?

Ray Winborne -- Chief Financial Officer

Hey, Drew, it's Ray. When you look at the inorganic contribution on an incremental basis in '21, it's about a point, right, $20 million or so of that is coming from Poynt, I just mentioned on, I think it was Ygal's question earlier, that Neustar is about another half a point there. So those are the two biggies that are contributing and it's around that 1 point contribution.

Andrew Glaser -- J.P. Morgan -- Analyst

Got it. Thank you.

Ray Winborne -- Chief Financial Officer

You bet.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Nic Jones from Citi. Nic, please go ahead.

Nicholas Jones -- Citi -- Analyst

Great, thanks for taking the questions. Just one on the freemium, as you roll it out to more visitors to the site and people are converting to the freemium offering, is there -- are you losing any potential subs who entered the freemium and then eventually convert? And then, I guess what is kind of the timing to conversion for freemium like once they've kind of set up a site to when they convert to? Thanks a lot. Thanks.

Aman Bhutani -- Chief Executive Officer

Yeah, Nic, wasn't -- the question wasn't totally clear, but I think I caught most of it. On freemium, what we're seeing is that customers do come in and the metrics we are looking at include seven-day conversion and 90-day conversion, right. There isn't necessarily a fixed number of where everyone kind of makes a decision or not, you continue to see a sort of the tail of people converting over time. Both the seven-day and 90-day, especially as we got into later in the year on the 90-day conversion, we started to have a few cohorts that were reasonable size and we continued to sort of see stable conversion in that 90-day around, which is what we talked about.

In terms of -- and I didn't fully catch this part of your question, but I think the objective of freemium for us is to open up the aperture to allow our customers without friction to try our products, right. We fundamentally believe that whether you look at Websites + Marketing or Sellbrite, which we also turned freemium last year, the value that customers get compared to the prices we charge, really there's a tremendous amount of value and we want to remove any hesitation customers have of trying to use those products. These products are built from the ground up to the exact needs of our customers and if we feel we open up the aperture, get more customers to try that over time, it's just going to build a greater and greater battery that leads to better financial outcomes over time.

Nicholas Jones -- Citi -- Analyst

Great, great. And one follow-up on M&A, you laid out dream, create, grow, manage. As we look at 2021, where do you feel kind of the strongest pipeline is and where is kind of the focus in terms of potential M&A across the plans you laid out at the Investor Day? Thanks.

Aman Bhutani -- Chief Executive Officer

Yeah, our priorities on M&A are aligned with our broader priorities as a company, Nic, and those priorities simply are, we are the leader in dream and we absolutely have some amount of attention there. We're making great progress in create and that's fantastic, but we're putting disproportionate amount of time and energy resources into growth and that's what our M&A team -- that's how our M&A team is prioritizing as well because actually create and grow of -- are more and more working together and that's a massive opportunity. And when we talk about $180 billion TAM, a huge percentage of that is within the grow phase, so that's where the majority of our energy is.

Nicholas Jones -- Citi -- Analyst

Thanks, again.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Aaron Kessler from Raymond James. Aaron, please go ahead.

Aaron Kessler -- Raymond James -- Analyst

Unmute there. Great, maybe just -- maybe on Q4 net sub growth, I think I saw the 1.4 million or so for the year, any color on Q4 net sales and maybe the linearity of the quarter and then, also just -- and maybe for Ray, congrats on just taking some time off here. And then the cloud transition maybe, any updates on that and how maybe this incremental cost was kind of a dual sourcing right now as well if you can lay that out. Thank you.

Ray Winborne -- Chief Financial Officer

Hey, Aaron, I'll take both of those. And Aman you come over if I don't hit something. When you look at Q4 customer growth, still seeing a record type levels. The momentum has been good and momentum is carried on into January. So nothing different in the trajectory that we've seen at this point.

With cloud, you saw some of the impact of cloud in 2020 showing up or manifesting itself in lower capital expenditures because we have continued to move workloads into the cloud. That is putting pressure on the tech and dev line, that's one of the investments we're making there, but if you recall back when we signed our contract with AWS, we were going to manage this thing to a cash basis. And that's what we're continuing to do and that's one of the reasons we use unlevered free cash flow as our key metric there, is the balance from normalized EBITDA down there obviously includes the capex versus the opex up in the P&L.

Aaron Kessler -- Raymond James -- Analyst

Got it. Great, thank you.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Mark Zgutowicz from Rosenblatt Securities. Mark, please go ahead.

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

Thank you. Aman, just a follow up on your freemium content -- or comment, is it safe to say that the 90-day conversion you hope to do -- hope to improve upon, and if so, what potentially are the missing pieces there and if Poynt can help? And then, appreciated the commentary in your presentation highlighting returns on your marketing spend last year, just curious how those compared to the prior year and as you look into '21 sort of what considerations you're making in terms of absolute or relative spend, and how Poynt perhaps fits into that picture? Thanks.

Aman Bhutani -- Chief Executive Officer

Yeah, let me take freemium and a little bit on the marketing spend and perhaps Ray wants to comment on that as well. On freemium, I'll actually go back to the comments, Mark that -- in the prepared comments. What we're seeing in terms of conversion is a rate that's higher than what we see in the industry. So of course, it's still early in the journey for us, but that's really good, that's really comforting, it's sort of pushed to bed a certain set of concerns that people may have had.

But when I look at being able to improve conversion over time, absolutely, we have people dedicated to doing that. But for me, the biggest thing is I want to get it out broader and broader and broader, right. I'd like to have it at 100% in the U.S. soon, I'd like to go global with it and that's where I'm really pushing the team because we know that at the end of the day, it's about attracting more people to our products and getting them to use our products because once they use our products, people see that we have something differentiated to offer that it works in a manner that they didn't fully understand that GoDaddy would have that offering.

And then, in terms of marketing, Ray can talk a little bit about the numbers and the unit economics and how we've continued to sort of maintain our benchmarks and wants to breakeven, but I'd like to give you a little context of how I think about the marketing spend. And the approach there is one of that you want to spend up in marketing and as you spend up, you have to continually improve your measurement, your ability to sort of get into more and more channels.

And as you do that and you improve your internal capabilities to market better, you can then spend even more in marketing and I have talked about sort of this idea, improvement in growth and improvement in spend in the past and it's something that I have experienced with and I'm pretty pleased with what I'm seeing in terms of GoDaddy in 2020 and what we have forecasted for 2021.

Ray Winborne -- Chief Financial Officer

Yeah, I think if you look at what we've been spending on marketing, it's roughly 13% of revenue in 2020 but it's disciplined, right. We're disciplined in the approach, we're disciplined in the execution and delivering the P&L and the P&L in totality. We've got a really good track record of investing in marketing over time with good returns. Our -- Aman mentioned the strong unit economics that we've got and we're always challenging the team to stretch and look at that next marginal customer at an acceptable return because it is all about balance, but when we do see that, we extend the payback period and that does create more risk or higher risk profile for us because it does hit the bottom line in the short term. But for the right paybacks, we're willing to do that.

You might have noticed in the slides that we put out with the earnings. We put a new slide in for marketing with a different lens on how we see the returns. So go take a look at that, but in summary, we did roughly $0.85 in incremental bookings and $0.45 in incremental gross profit in 2020 for every dollar that we spend on marketing and advertising. So that -- when you compare that against others in the industry, that's going to shape up pretty darn well.

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

Okay, thank you so much.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Brent Thill from Jefferies. Brent, please go ahead. Brent, please unmute yourself.

John Byun -- Jefferies -- Analyst

Okay, it took a couple of clicks. Hi, this is John Byun on behalf of Brent Thill, thank you. When you look at the newer products, Websites + Marketing and Managed WordPress, is there any way to think about what the relative size and growth rates are between the two of them?

Ray Winborne -- Chief Financial Officer

We gave you a kind of a view into those website creation products last quarter with an ARR of $350 million, growing in the high 30s and we have continued to see strong growth on both of those metrics.

John Byun -- Jefferies -- Analyst

That's helpful, but is there a way to differentiate between the two at all? I don't know if it's a indication between the Pro and DIY at all.

Ray Winborne -- Chief Financial Officer

Both are growing strongly. Obviously, we've put a lot more shoulder into Websites and Marketing recently. We heard Aman's comments earlier, one of the things with Poynt that is going to help us there is continuing to push on commerce, which will stretch into the Managed WordPress and WooCommerce offering as well.

John Byun -- Jefferies -- Analyst

Great, thanks, Ray. Thank you very much.

Ray Winborne -- Chief Financial Officer

Yeah.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Naved Khan from Truist. Naved, please go ahead.

Naved Khan -- Truist Securities -- Analyst

Yeah, thanks. A couple of questions, if I may. In terms of this year outlook, what are you baking in, in terms of potential synergies from Poynt's integration maybe later on in the year into your e-commerce packages? And then, another question just guidance-related as well. How should we think about the drag from the social and outbound for this year, is it material, if it is, then can you just call it out? Thanks.

Ray Winborne -- Chief Financial Officer

Yeah, when you think about Poynt synergies, we are giving you guys some guidance around the top line and the bottom line there. It's going to be an investment year for Poynt. As we integrate it into our offering, we'll be spending money on marketing, spending money on product as well as experimenting across the front side with that. So that will be dilutive to the tune of $20 million in '21. On Social, think about that being a headwind through the first half and less so in the back, post our decision to take out the outbound calling motion. So first quarter will be the highest headwind and then it starts to diminish as we move through the back half.

Naved Khan -- Truist Securities -- Analyst

Got it. And then, maybe just a quick clarification on the synergy comment, Ray. So the curve you kind of gave us at the time of acquisition, I think it's around $150 million in bookings by 2023. Should we expect any kind of revenue synergies to emerge this year at all or not?

Ray Winborne -- Chief Financial Officer

Yeah, you will see some. This year is going to be a lot more focused on getting it to market, right. Payments will be first, but it's certainly not going to be linear. Next year 2022 will be more of the go-to-market strategy and starting to drive revenue and then our expectation is, we'll start to scale in year three and that number that we put out of there of $150 million in '23 is -- should be a conservative number based on what we're looking at.

Naved Khan -- Truist Securities -- Analyst

Understood. Thank you, Ray.

Ray Winborne -- Chief Financial Officer

You bet.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Clarke Jeffries from Piper Sandler. Clarke, please go ahead.

Clarke Jeffries -- Piper Sandler & Co. -- Analyst

Hi, this is Clarke on for Brent. Thanks for taking the question. I wanted to circle back to Domains growth, 14%, another quarter of acceleration. I just wanted to dig in there. What is driving that growth, is that all the primary market, and if so, I see the dot com and dot net registrations came down in Q4, but still at elevated levels. I guess, what is giving you the confidence for that guidance of double-digit growth for Domain in 2021 and will there be any contribution from the new products of Corporate Domains or anything like that, that will be an offset?

Ray Winborne -- Chief Financial Officer

Yeah, we've been really pleased with the performance in Domains, closing out 2020 with really solid growth and then obviously you saw the guide into 2021, continuing to see good strength. And it is broad-based, that's the beauty of that business. Aman mentioned earlier, we own the dream phase of the customer journey. So its strength across primary registrations, renewals have been strong, we've got aftermarket that is really doing well as we continue to improve the customer experience, but also the merchandising on a front of site. And then, last there is a modest contribution from registry that I mentioned earlier, roughly a half a point on total revenue in 2021.

Clarke Jeffries -- Piper Sandler & Co. -- Analyst

Got it. Thank you. And now that Poynt is closed, I was just -- was wondering if you could frame the journey that [Technical Issues] sorry, could you frame the journey for that company to become the payment facilitator and how much are they offering their own payment solution versus a third-party processor and will you aggressively move to the internal solution for sort of a digital-only commerce?

Aman Bhutani -- Chief Executive Officer

Yeah. When we look at Poynt, Clarke, the -- obviously, Poynt today has sort of a go-to-market strategy that's through a channel -- distribution channel, but when you see Poynt and GoDaddy together, obviously with GoDaddy's brand and 21 million customers and lots of folks being attracted to us with Websites + Marketing, Managed WordPress, which include sort of commerce on both sides, we're -- what we're excited about is bringing those pieces together and using the capabilities GoDaddy has.

And we have multiple capabilities there, Clarke. We have the opportunity to go direct to customers, right, because people know GoDaddy, they come into the sales fab, they noticed that the capabilities are aware and it's seamless, it's integrated. That works super well. We also work, like I said, with 1.5 million designers and developers, right.

As we make the WooCommerce and WordPress ecosystems easier for them to use and we integrate these capabilities of payments and others into that experience, we think there is a great channel there for us to work with customers that we already have that work with other folks and give them the right incentives to sort of continue to fuel that pipeline.

And then, we always have care, right. We continue to have folks that call us, message us and although, again, we believe less in the outbound motion, so we're not talking about that -- about doing that, but we do have a huge amount of inbound coming to us and that will continue to be a avenue of growth for us as well.

So the incremental effort, the investment that we're putting in here, we think it's fantastic, right. And in terms of, I think your question around using our internal systems, Poynt is already a payment facilitator, so we will be doing this ourselves, right, it will not be -- that part will not be with a third-party.

Clarke Jeffries -- Piper Sandler & Co. -- Analyst

Makes perfect sense. Thank you very much.

Aman Bhutani -- Chief Executive Officer

Thank you.

Christie Masoner -- Senior Manager, Investor Relations

[Operator Instructions] Our next question comes from the line of Ygal Arounian. Ygal, please go ahead, again.

Ygal Arounian -- Wedbush Securities -- Analyst

Hey, thanks for taking one more. I wanted to come back to commerce and just ask with the Poynt acquisition, maybe with some of what you're doing around Pro Hub and the greater focus just around commerce over the past year and into the next year, you guys have always talked about your core customer as being the micro-business. Does this change that at all or is it still kind of the same type of business, but those that are more focused on commerce and -- where you see what's becoming -- maybe I won't call it crowded but at least a more crowded commerce software arena, where do you guys see yourselves kind of competing the most? Thanks.

Aman Bhutani -- Chief Executive Officer

Yeah, Ygal, we are still laser-focused on our customer segment. This -- these are the micro-businesses or the small of the small businesses, folks that have 20 employees or less, 10 employees or less. And in 2020, they have had to pivot online very, very quickly. I mean, I don't need to explain that to you, I think you guys know that very, very well. But let me tell you just a small story, we did a -- we have a customer in the U.K., they make vegan pies and the place is called Magpye and they just have a fantastic product and we got to know them, we love the folks that run Magpye and our marketing team decided to have -- to showcase them in one of our marketing campaigns, you should check out the ad, it's phenomenal.

Well here was what I imagine was a local pie place where people in the same neighborhood probably came to them and bought pies from them. Well, the day they went live in our advertising, now they're shipping pies all over the U.K., right. By definition, they are now a company that is online. And we think that opportunity exists for every micro-business, right. The Internet is the great equalizer, it allows customers to reach these micro-businesses. And with the tool set, with the guidance we offer in care, these micro-businesses can absolutely provide the experience to their customers that is professional, that does the job in a manner that leaves their customers impressed.

So to your question, are we focused on our customer segment? Absolutely, we're building all our products ground up for those customers and all those customers are going online. In our research that clearly show that they want commerce and they want it online because any one of them can be like Magpye.

Ygal Arounian -- Wedbush Securities -- Analyst

Very helpful, and thanks for taking another question.

Aman Bhutani -- Chief Executive Officer

Thanks, Ygal.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of James Wu. James, please go ahead.

Trevor Young -- Barclays -- Analyst

Hey guys, this is actually Trevor on from the Barclays team. You're hosting in-presence guidance for the full year is high single-digit, while 1Q is mid-single digit implying an acceleration throughout the year. Is that just a matter of the tougher comp in 1Q or the abating impact from social and outbound as the year progresses? Thanks.

Ray Winborne -- Chief Financial Officer

Yeah, Trevor, it's Ray. You answered your own question there, it's exactly that. It's the -- last year, pre-COVID Social was growing and in second quarter, we started seeing the impact and then obviously beginning in early July, we took out the outbound calling motion. So that's the progression you'll see as you move through 2021, but the implication in that guide is that we will see high single digits in that line item this year.

Trevor Young -- Barclays -- Analyst

So could you exit the year at double-digit rates?

Ray Winborne -- Chief Financial Officer

Could, yes.

Trevor Young -- Barclays -- Analyst

Okay, thank you.

Christie Masoner -- Senior Manager, Investor Relations

Our next question comes from the line of Chris Kuntarich from Deutsche Bank. Chris, please go ahead.

Chris Kuntarich -- Deutsche Bank -- Analyst

Hi, thanks for taking my question. Just going back to the question before last, you had talked about really how you guys' core focus is still on the businesses of a 10 to 20 employees, the micro-SMB segment. How do you think about driving more value in the product to the lower end, specifically on the e-commerce product side versus driving value at the higher end, just through the lens of the Websites + Marketing subscriptions. How do you think about driving pricing leverage and value to those customers differently, that is? Thanks.

Aman Bhutani -- Chief Executive Officer

Yeah. Chris, these customers, they -- we can definitely differentiate certain items and say, look here are certain features that are better for these customers, create more value, and we have tiers that different customers get it on, but I'd like to just bring it back to the idea that most of these customers are going online and doing commerce online in a significant way for the first time. Even the base set of features, they need those to be super-simple and what they really need is when they're confused to call someone and to get it to work just the way they want it.

We've given the example in the past and I'll share a little bit of an update on it. We talked about how for the super small customers, the templates that create a one page commerce site, when we created the first one, it just took off, it became the biggest thing, right. We've now added more templates, and we find all of our customers sort of going toward those templates because even -- I hate to call them bigger customers, but even customers that have 20 employees are learning their way through e-commerce and immediately, they want a set of things where they're having trouble managing their inventory and they're calling us. They're having trouble taking their -- what they're doing in the store to online and they need help and where they are or they want to manage between their online, in-store and what they're selling on the major platforms.

And it's that feedback that we're taking, we're saying, OK, clearly, these customers need the same thing, which is they want from one place to be able to sell in their store, sell on their website and sell on any platform, and hence you saw the Poynt acquisition, us bring together Websites + Marketing, Sellbrite that we already own and the Poynt capabilities because we know that it works across the spectrum of customers we have and it's not really about truly separating out the value of sort of the top-end of that or the bottom-end of that.

Christie Masoner -- Senior Manager, Investor Relations

Thank you, everyone, for joining us today. I will turn the call over to Aman for some closing remarks.

Aman Bhutani -- Chief Executive Officer

Thank you, Christie. I'll just end with a thank you to all GoDaddy employees all around the world. 2020 brought many challenges for many of us at a personal level, and I feel like every person leaned in to produce these fantastic results. Thank you all again for joining us, and I look forward to talking to you next quarter.

Duration: 46 minutes

Call participants:

Mark Grant -- Vice President of Investor Relations

Aman Bhutani -- Chief Executive Officer

Ray Winborne -- Chief Financial Officer

Christie Masoner -- Senior Manager, Investor Relations

Ron Josey -- JMP Securities -- Analyst

Ygal Arounian -- Wedbush Securities -- Analyst

Jason Helfstein -- Oppenheimer & Co. -- Analyst

Andrew Glaser -- J.P. Morgan -- Analyst

Nicholas Jones -- Citi -- Analyst

Aaron Kessler -- Raymond James -- Analyst

Mark Zgutowicz -- Rosenblatt Securities -- Analyst

John Byun -- Jefferies -- Analyst

Naved Khan -- Truist Securities -- Analyst

Clarke Jeffries -- Piper Sandler & Co. -- Analyst

Trevor Young -- Barclays -- Analyst

Chris Kuntarich -- Deutsche Bank -- Analyst

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