Hey, good afternoon. Thank you for joining us on today's call to discuss GoDaddy's announced acquisition of Poynt. I'm Mark Grant, Vice President of Investor Relations. With me today are Aman Bhutani, Chief Executive Officer, and Ray Winborne, Chief Financial Officer. Today's call is being recorded, and all participants are currently in listen-only mode. Following brief prepared remarks by Aman and Ray, we'll open up the call for your questions. If you'd like to ask a question on today's call, please use the raise hand feature in the webinar to be added to the queue. On today's call, we may reference both GAAP and non-GAAP financial and operating metrics, such as total bookings, unlevered free cash flow, and net debt.
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 most recent earnings presentation posted to our investor relations website at investors.godaddy.net or on our Form 8-K filed with the SEC with the most recent earnings release. The matters we'll be discussing today include forward-looking statements, which include those related to our future financial results, new product introductions and innovations, and our ability to integrate Poynt and achieve desired synergies. These forward-looking statements are subject to risks and uncertainties that are discussed in detail in our documents filed with the SEC. Actual results may differ materially from those contained in the forward-looking statements.
Any forward-looking statements that we make on this call are based on assumptions as of today, December 15th, 2020, 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.
Thank you all for joining us today. GoDaddy exists to empower everyday entrepreneurs. Our team members come in every day with the goal of helping customer ventures succeed. Our strategy for long-term success is a straightforward one. It is about value creation, primarily for customers and employees, and shifting some of that value over time to shareholders. For over 20 years, we have delivered exceptional customer care and strong shareholder returns. In 2020, the pandemic brought an unprecedented level of challenges for our customers. They responded with tenacity and grit, reaching into the depths of their creativity and resilience. They pivoted online to reach their customers, and this resulted in two quarters of record net customer growth for GoDaddy. One of our fastest-growing product suites has been Websites + Marketing, especially the high-end commerce tier.
Everyday entrepreneurs are riding this huge wave of digitization, and as online and offline commerce come together, they have been demanding more from us. Well, today, I am excited to announce that we have signed a deal to purchase Poynt, a company providing amazing experiences in payments, invoicing, and point of sale for everyday entrepreneurs. The team at Poynt is committed to bringing all the technological advantages in commerce to everyday entrepreneurs. With over 100,000 customers and more than $16 billion in GMV on their robust platform, a strong NPS, they have much to be proud of. Bringing together GoDaddy's brand reach and marketing competency, strong digital commerce functionality in Websites + Marketing online store, WooCommerce, and Sellbrite, and capabilities from Poynt, we are positioned to bring together a seamless and intuitive commerce offering across both online and offline.
For our customers, wrapping that with GoDaddy care the way only GoDaddy can do it. We expect the deal to close in Q1, and at that time, I will share more details on our go-to-market plans. I will now turn it to Ray to cover the financials before we open it up for questions.
Hey, thanks, Aman. We're excited about the capabilities the Poynt team brings to the table and our ability to drive synergies with our existing commerce offerings. We believe that bringing Poynt into the GoDaddy family will accelerate Poynt's already strong growth and add mission-critical functionality for our customers. Driving customer value ultimately drives long-term shareholder value, and this acquisition enables that equation. As you saw in the press release today, we're acquiring Poynt for $320 million in cash at closing, plus an additional $45 million in deferred cash payments over the next three years. We expect to fund the acquisition with some combination of cash on hand and incremental debt. We believe Poynt will grow rapidly as we integrate and scale the offering within the GoDaddy ecosystem and expect to deliver more than $150 million in incremental bookings in 2023.
In the near term, the financial impact of the acquisition is expected to be relatively modest, less than one point of revenue growth and roughly $20 million dilutive to unlevered free cash flow in 2021. We plan to repurchase shares post-acquisition, effectively offsetting the dilution on a fully levered free cash flow per share basis. With that, we'll turn it over to Christie Masoner from our IR department to open it up for your questions.
Thanks, Ray. As a reminder, if you guys would like to ask a simple question, please use the raise hand feature to be placed into the queue. Our first question comes from the line of Sterling Auty from JP Morgan. Please go ahead.
Thanks. Hi, guys. I've already gotten a couple of inbounds from investors. There's a number of investors in GoDaddy that are not as familiar with the payments arena. What might be helpful is if you could kind of walk through how does $16 billion in GMV then equate all the way through to revenue for GoDaddy? In other words, what percentage do they take of that? What goes to the partners, et cetera. Just give them the money train, if you will.
Thanks, Sterling, for that question. I'll give you the high level, and Ray can go a bit more into detail if needed. The $16 billion of GMV that Poynt has is through a reseller channel. The monetization of that is different from how our investors may look in monetization for something like Websites + Marketing Commerce, for example. What that $16 billion really represents is the success customers are having using the Poynt ecosystem, using the Poynt solutions. What it provides GoDaddy is a robust platform that has lots of merchants transacting huge amount of dollars, which then we can give to GoDaddy customers in a seamless, intuitive way, right? That's the opportunity that we're referencing. We're super excited to bring these two ecosystems together and create tons of value for customers.
Ray, I don't know if there's more that you can just touch on in terms of revenue short term.
Sterling, I think, aside from the obvious mechanics of payments, we've got a lot of options around Poynt. We'll update everyone on more of the specifics after the deal's closed, and we'll provide some color on 2020 at that point. For now, we're super excited to have this deal signed. We've got a number of different levers that we can pull once Poynt has been integrated into the business, but the ultimate target remains the same: generate $150 million in incremental bookings in 2023 and get to free cash flow accretion quickly.
Maybe one quick follow-up, who are the key distribution partners for Poynt at this point in time, no pun intended? I think they've had a couple of notable and interesting ones through the years.
Yeah. They work through a number of banks as their reseller channel, Sterling. We'll share more information about them after we close, so that it just lays out for investors more clearly at that time.
Elavon and Nexi are the two large ones for now.
Yeah.
They've got broader distribution beyond those two financial institutions.
Understood. Thank you.
Our next question comes from the line of Brent Thill from Jefferies. Brent, please go ahead.
Good afternoon. Aman, why Poynt? There's many assets in this sector. What stood out to you that made this the right fit? For Ray, having to go out to 2023 in a booking target is somewhat unconventional for some of the companies that we follow to look out that far. Why did you pick 2023 and the conviction around that $150 million number? Thank you.
Yeah. As we looked at players out there in this space, what we were looking for was a team and a company that was committed to building just amazing customer experiences. One of the things we do is when we go into a company, we not only look at the product and use it and try use cases, talk to customers, look at their NPS scores, but we actually do a bunch of research ourselves to validate that customers are getting the value from the products. What we found consistently talking to customers of Poynt was that they love the products. They rated it very, very highly. Poynt had been, over the years, very responsive to their needs.
Anytime as they learn new things or they found challenges, they were able to solve them and really come to the aid of entrepreneurs and merchants and give them what they needed. To have a company that's focused on building the best experiences, we felt was the entry point, and Poynt sort of hit that on the point, no pun intended. For us, that was a really big deal. Secondarily, Poynt has a robust platform in place already and a team around it that has the expertise, they have the background, that can really help us accelerate, right? We're trying to bring this capability to our customers very, very quickly, and we wanted a platform that already was battle-tested, that already had a ton of transaction flow and ton of merchants on it, and Poynt provides all of those to us.
Yeah, Brent, it's Ray. On your second question, as far as 2023. 2021 will be all about integration and getting that product and customer experience super tightly integrated, and then starting to ramp that over time. When you look at something like a payments offering, a lot of it is going to go to new customers. That ramps with the new customers that we're bringing in on the commerce offering. I think as you look at just how it builds in a model, 2023 is the natural point where it'll get to scale.
Okay, thanks for the call.
Our next question comes from the line of Mark Mahaney from RBC. Mark, please go ahead.
Okay. I think you mentioned that Poynt has something like 100,000 merchants. Could you talk about what overlap you may have with them, your customer base and their customer base has? Then just talk about how many more holes you think you may have to fill just in this kind of Websites + Marketing area, and this may have been the last hole you really wanted to fill, but just talk about your product roadmap just for that particular vertical. Thanks a lot.
Yeah. We haven't gotten to the specifics of the exact overlap between our customers. Suffice to say, with GoDaddy, with 20 million customers, I have to say that the opportunity is really huge for us, and any overlap is likely pretty small given our big base. In terms of the second part of your question, when actually, could you repeat the second part of your question again for me?
Yeah, I think it was a really good question. That's a joke. I was asking about the suite of solutions you have in Websites + Marketing. Is that now with this, do you complete the suite of solutions? Are there still other missing pieces in terms of just the solution set in terms of products? Thanks.
Yes. As you know, we've been asked many times recently, there's a number of things that we want to continue to do to support our customers. Some of the most immediate gaps or the things that customers are asking us for, Poynt does fill. It gets us point-of-sale payments and very importantly, invoicing as well, which is a really important product for our customers, too. It puts those key items in place, and in terms of are there more areas, I would just tell you, every day we're getting more customers, and we hear from customers 2 million times a month, and there continue to be areas of opportunity where we can grow and meet more of their needs.
Okay. Thank you, Aman.
Our next question comes from the line of Naved Khan from Truist. Naved, please go ahead.
Yeah. Thanks. A couple of questions. The $150 million in bookings by 2023, versus maybe around, say, $30 million in revenue next year. If I have to think about the 2023 target, is it fair to assume most of that will be from online payment by then? How should I be thinking about that? Then I have a follow-up.
Naved, it's going to be obviously most closely connected to the commerce offering. There are a lot of different ways that we're looking at pursuing this opportunity. I think the most important takeaway for you guys at this point is that we've looked at it 10 ways to Sunday on how to attack it. As we looked at each of those impacts and how they would impact our fundamentals, 150 should be a conservative, realistic outcome. We obviously think we can do a lot more with this asset.
Understood, and then roughly 40% of your customers are international, so maybe just talk a little bit about the payment capabilities that you may have internationally with this acquisition?
We're going to look at that more carefully. Poynt does have certain connections with payment processors, others that are supported internationally, but it continues to be an area of opportunity, Naved. Our initial focus will be to not just support our customers in the U.S., but our primary markets, and you know our primary markets are U.S., Canada, India, Australia. We're very interested in using the Poynt platform, empowering our customers in multiple markets, and we have a great starting point with where they are already.
That was definitely one of the things that was appealing about them was the international capability.
Got it. Congrats, guys.
Thank you.
Our next question comes from the line of Ron Josey from JMP. Ron Josey, please go ahead.
Great. Thanks, Christie. Thanks, guys, for taking the question. I just want to understand a little bit more about the integration, Aman and Ray. Maybe can you help us understand if Poynt is something that just can be easily integrated with Websites + Marketing and Managed WordPress, or is there some work to be done on the product side? Then I know we're talking a lot about commerce, but maybe any insight on how the services opportunity might fit into your plan. Not just payments for goods purchased online, but any SMBs that require bookings like salons or fitness experiences or things along those lines would be helpful. Thanks.
Yeah. I take the first part first. On the integration piece, there are various integration options to provide a more sort of integrated feel for payments for our customers. We will do sort of various styles of it. We will look for short-term wins as we post-close, as we bring the teams together. Ultimately, our goal, Ron, is to build a very seamless, completely integrated experience where for the customer there is no friction in the path between their commerce interfaces, between their merchant payment interfaces, not just for their customers' customers, but for them as well to really reduce the friction between offline, between online, between commerce, payments. For them, it's one solution. It not just works across all of those, it also works across what they sell on Amazon and eBay and Etsy all from one place. Right? That's the solution we're building.
That's why this capability, these set of capabilities that Poynt has are really interesting for us. In terms of services, Poynt has a really interesting ecosystem where they allow a number of developers to work with their APIs. They actually have about 1,200 developers that today work in their sort of quote-unquote "app store." What those developers do is they take the Poynt sort of core systems and build on top of it to customize it for specific merchants, and that includes a number of services companies as well. I think you're aware that GoDaddy has a pretty significant percentage of customers that are services customers. Poynt does give us an entry point sort of into payments and invoicing in that area as well.
That's great. Thank you. Congrats on the acquisition.
Thank you.
Our next question comes from the line of Ygal Arounian from Wedbush Securities. Ygal, please go ahead.
Hey, guys. Thanks for taking the question. Maybe first on the Poynt GMV, how much of that is coming from in-store versus online? What's the right way to think about that? Then I'm assuming Poynt integrates with multiple different kind of e-commerce solutions right now. As you think about the acquisition, do you bring everything in-house, kind of rebrand as GoDaddy Payments, as we've seen many competitors do? What's kind of the progression from where Poynt is right now with.
various platforms it's working with, and how you intend to bring all those pieces in-house versus where it is right now. Thanks.
To start with the GMV part of the question, Poynt, given its origin and history, actually had a higher percentage of its GMV in-store versus online. Obviously with COVID, some of that has shifted, and they have much more exposure to online transactions. That is what actually makes bringing these two teams together very powerful, that we have complementary technologies, complementary skill sets. GoDaddy has the ability to bring the online store, all of the online pieces, the marketing pieces, together with Poynt's strong in-store capabilities. Poynt also has capabilities over the last couple of years where they invested to be a PayFac. As a payment facilitator, Poynt is able to have many more options for GoDaddy, and that's something then that GoDaddy doesn't have to build, right?
We get all of that in a package, and we're able to enable it both online and offline. Hopefully, that makes sense. Happy to go into that in more detail at all if you like. On your question on the integrations and the integrating, Poynt integrates with multiple solutions. GoDaddy integrates with multiple solutions, too, and absolutely, you can expect something like a GoDaddy Payments that provides that fully seamless integrated experience for our micro and small business customers. Having said that, we know that customers have preferences and choices that they want to make. We expect to continue to work with partners as well.
Great. Thank you so much.
Our next question comes from the line of Brent Bracelin from Piper Sandler. Please go ahead, Brent.
Thank you. Obviously excited to hear the narrative around kind of payments evolve here over the next couple of years. My first exposure to Poynt dates me back to the Mindbody days, where Mindbody actually partnered up with Poynt on the point-of-sale terminal. My first question is how much of the Poynt business today is driven by point-of-sale device terminals? Is it a small portion of revenue? Is it a large portion of revenue? Just help me kind of understand the mix today of how much of it is actually device terminal revenue versus software services revenue.
I'll give it to Ray to maybe give a little bit of color, but I just want to be clear, the opportunity we're looking at, of course, they started in-store point of sale, and they've continued to evolve online. The real opportunity here is to take all those pieces together with the large set of customers that are coming through the GoDaddy side, coming to care every day, and be able to give them that fully integrated experience end to end, right? That's the value that we're looking at in the future. That's the set of opportunities we're going after. There's lots of things we can do there, and we have lots of opportunities with how we treat sort of the existing revenue, the existing channels, and so on.
I'd love to make sure that we're being clear about how we're looking at these set of capabilities and growing them into the future. And Ray, I don't know if you have anything you'd like to add there.
Yeah. I think you hit it on the head, Aman. Guys, this is not about the hardware specifically. It's about that integration with our commerce offering, but also being able to provide offline because a lot of our customers do have needs for both. They're not just exclusively online. They need the offline capability as well.
I mean, just a simple data point, we know that over half of GoDaddy's customers in Websites + Marketing have an offline store as well, and we know that, COVID times aside, a very significant percentage, in fact, a majority of their transactions are actually offline today.
I'm sorry, did you say 50% or 15% of GoDaddy have offline stores?
50% of GoDaddy's customers that are Websites + Marketing commerce customers for GoDaddy also have an offline store.
Interesting.
Yeah.
Very interesting there. Then I guess my next question is really just looking at the acquisition purchase price. This payment space is very hot, but it does look like this was an interesting opportunistic buy. I went back, and it looked like Poynt raised $100 million Series C in late 2018. Obviously, you're buying this for a whole asset for $360 million here. Was this business kind of maybe impacted by COVID, and that was really the opportunity for you to go in and partner with this company to really leverage this asset and team to build out your payment strategy? Walk me through how big of an impact COVID had on their business, creating an opportunity for you to partner with them.
Yeah. The way we went about it is that we were looking to make the decision sort of partner, buy, build, sort of in that order, in terms of a number of capabilities to provide better commerce and greater commerce functionality to our customers. We engaged with Poynt initially as a partner, and as we dug into it more, what we found was an amazing team, great product, complete focus on creating value for customers, and a highly engaged customer base, great ecosystem around the tools as well. It just was a really, really fantastic opportunity. We turned it from a partner conversation into an acquisition conversation, and we've worked with the leaders there over the last few weeks to really hone down and understand what they want to do and what we want to do, and we found alignment in really a number of places.
Great. Well, it certainly sounds like there's a great cross-sell opportunity here. Look forward to seeing how this platform evolves over time. Thank you.
Thank you.
Our next question comes from the line of Nick Jones from Citi. Nick, please go ahead. Oh, I think we lost Nick. Our next question comes from the line of Aaron Kessler. Aaron from Raymond James. Aaron, please go ahead. Aaron, please unmute yourself.
There we go. Sorry about that. I'm talking to myself. If you guys give us a sense maybe what some of your customers were using before, and have they been asking for deeper integration? Second, for Ray, maybe just can give us a sense for the $150 million of bookings, what type of margin structure should we be thinking about? Maybe what are the gross margins of this business as well? Thank you.
Yeah, Aaron, if a call in 2020 goes by without somebody saying you're on mute, the year wouldn't be complete. Thank you for doing that for all of us on this call. In terms of our customer asks for deeper integration, we continue to get customers asking us all the time for better, more seamless integration. They want the minimum sort of relationships. They want the minimum complexity. They don't want to login into multiple places. They want all their data in one place, and they want online and offline together. Right? It's very hard. Imagine you're a small business, you've got a store, you've got an online side, you're powering both, and you're literally taking your inventory from one system and typing it into the other system to say that you've got something available and not got something available. That adds no value.
That's not valuable time that our customers are spending. Similarly, when things are not connected up between system, that's not valuable time that our customers are spending. By putting ourselves in the position to build this seamless experience, we truly believe we will create a lot of low friction sort of advantage for our customers. At GoDaddy, we're committed to creating the simplest experience for our customers, and we're going to wrap it with care just the way we do it. That's what you can expect from us. Ray, alternatively.
Aaron, on the gross margin profile for Poynt itself is about what you'd expect for a point-of-sale and payments company. I mentioned dilution in 2021. Obviously, we're going to invest to drive awareness, adoption, as well as some capabilities on that integration. That'll be marketing R&D in the P&L. We'll share more about the strategy and the financial profile in February when we report Q4.
Okay, great. Thank you.
Our next question comes from the line of Naved Khan from Truist. Naved, please go ahead.
Yeah, thanks. Thanks for taking my question. Aman, you talked about PayFac, payment facilitator, maybe just can you elaborate on that a little bit and give us some sense of what the opportunity is there?
Yeah, I'll share Naved much more about this post-close and as we formalize some of the integration plans. If you're asking the question, I assume you understand the topic well. Poynt investing into PayFac capability allows us to streamline the experience significantly for customers, right? If we control the core of how funds are moved, if we control the core risk calls and how those are sequenced and articulated and when things are asked for from customers, we can continually sort of take cohorts of customers that we understand well, lower the barrier to entry for them, increase conversion for them, and that's the game, right, of payments. That payment isn't about pay the actual transaction piece of it.
What payments is about is can it really power commerce better because it comes into every part of commerce, and it's just seamless, and the merchant is able to just build their business as they go, and new capabilities or new data points are needed as they go, versus having to do everything up front before they even start. That's why we're excited about that opportunity, and we're really glad Poynt invested in that, I think over the last couple of years.
Thanks. Ray, maybe can you talk about maybe is there a purchase accounting impact for next year at all?
Sorry, Naved, I missed that. What kind of impact on 2021?
Any kind of impact from purchase accounting?
Relatively small. There was a little bit of deferred revenue hung up on the balance sheet that we'll take care of, but we'll come back with all of the impacts on Q4.
Thank you.
As a quick reminder, if you'd like to ask a question, please use the raise hand feature in the Zoom chat. Okay, looks like we don't have any further questions, so I'll turn it back over to Aman for any closing remarks.
Thank you, Christie. Thank you everyone for joining us. Also, a big thank you to all the teams across GoDaddy and Poynt that worked together to get us here. We couldn't be more excited about bringing these two great companies together and just creating an awesome experience for our customers. Thank you very much. We'll share more with you in the next call. Bye-bye