Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the GoDaddy Host Europe Group call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question at this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Ms. Marta Nichols, VP, Investor Relations, you may begin your conference.
Thanks, Melissa. Good morning, and thank you for joining us to discuss GoDaddy's acquisition of Host Europe Group. With me on today's call are Blake Irving, Chief Executive Officer, Scott Wagner, President and Chief Operating Officer, Ray Winborne, Chief Financial Officer, and Andrew Low Ah Kee, EVP of International. Our management team has some prepared remarks, and then we look forward to answering your questions. You may follow our discussion in the acquisition overview presentation posted to our investor relations website at investors.godaddy.net. On today's call, we'll be referencing non-GAAP financial projections and operating metrics such as total bookings, adjusted EBITDA, free cash flow, net debt, ARPU, and AMPU. We do not provide reconciliations from non-GAAP projections to US GAAP because these reconciliations are not possible without unreasonable effort, and presentation of such reconciliations would imply an inappropriate degree of precision.
The matters we'll be discussing today include forward-looking statements which 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. Potential risks and uncertainties include, among others, the possibility that the acquisition will not close or that the closing may be delayed, the anticipated synergies of the acquisition, and the financial results of the combined company may not be achieved after closing. The combined operations may not be successfully integrated in a timely manner, if at all.
GoDaddy's ability to identify strategic alternatives for HEG's managed hosting business, the future generation of cash flow, and ability to achieve anticipated leverage ratios, our ability to maintain customer and partner relationships, the potential deterioration of economic conditions in regions where either company does business, and/or GoDaddy's or HEG's may be adversely affected by other economic business and/or competitive factors. Any forward-looking statements that we make on this call are based on assumptions as of today, December 6th, 2016. We undertake no obligation to update these statements as a result of new information or future events. With that, I'll turn the call over to Blake.
Thanks, Marta, and thanks to all of you for joining us today for a discussion of a very exciting milestone in GoDaddy's evolution. We're very pleased to announce we've entered into a definitive agreement to acquire Host Europe Group, the largest privately owned web services provider in Europe. I'll give you a quick overview of the transaction and provide some color on HEG's offerings and the great fit we see with GoDaddy. Scott will share a bit about the similarities of our customers and the benefits we see for them, and Ray will cover the financials. HEG is highly complementary to GoDaddy with great unit economics and a similar customer focus. The deal dramatically strengthens our position in Europe, and we see clear upside for HEG's customers from our products, technology, and care.
HEG also brings a world-class leadership team, deepening our leadership bench, and the transaction comes at a compelling valuation that should be immediately accretive to free cash flow. We'll touch on all of that in more detail. First, to quickly summarize the transaction, on slide four if you're following along, we're acquiring HEG from Cinven for approximately €1.69 billion, or $1.79 billion, including roughly €605 million in equity and €1.08 billion in assumed debt. HEG expects to generate 2016 bookings of approximately $328 million, and EBITDA of approximately $139 million. We anticipate revenue and cost synergies of roughly $20 million by 2018, implying a trailing EBITDA multiple of approximately 11 times, including anticipated synergies and immediate accretion to free cash flow.
HEG operates a mass market web service business targeting small business customers very similar to GoDaddy's, as well as a managed hosting business called PlusServer that serves much larger enterprises. PlusServer is a high-quality business, but because its model is very different from ours and from HEG's mass market business, we intend to explore strategic alternatives for PlusServer, including its potential sale. Most of the numbers referenced on today's call and in the presentation on our IR site refer just to HEG mass market business. This deal's been approved by our board and HEG's shareholders, and we expect it to close in the second quarter of 2017, subject to regulatory review and other standard closing requirements. Now let me talk to you about why we're excited about this transaction. HEG has built a really impressive business that is a great complement to everything we've been building at GoDaddy.
We've been talking to you about executing against a very clear and consistent strategy over the last several years, broadening our product offerings, expanding into dozens of international markets, steadily growing customers and ARPU, and reporting consistent growth in revenue and cash flow. We've extended into 56 global markets with localized sites, products, and care, accelerating our growth around the world, and we've more than doubled our international business to 4.8 million customers and over $500 million in run rate revenue and gained significant share in key international markets. Our combination with HEG is a core part of the next phase of our international expansion as we seek to further broaden and deepen our presence in the markets where we now have local sites, software, and care. We believe joining forces with HEG advances GoDaddy's market position in Europe by more than five years.
As you can see on slide six, HEG's mass market web services business and strategy look remarkably similar to GoDaddy's.
It operates at meaningful scale in Europe with more than 1.7 million customers and over 1,000 employees. The mass market business has a strong financial profile with approximately $236 million in annual bookings and approximately $98 million in adjusted EBITDA expected in 2016. We've also been very impressed by the company's leadership team led by Patrick Pulvermüller, who will lead the combined company's European operations, reporting to Andrew Low Ah Kee, GoDaddy's Executive Vice President of International. We want to extend a very warm welcome to Patrick and the rest of HEG's exceptional leadership team and employees. We're thrilled to have you join the GoDaddy family. Patrick and the team have created a leading web services platform with strong positioning in Europe. They've invested behind the do-it-yourself and the do-it-for-me segments, and they support unique brands for each in both the U.K. and Germany.
Their brands have solid local awareness, and their strategy has generated very strong and consistent growth in bookings and cash flow. HEG's product portfolio also shares many similarities with GoDaddy's, though you'll notice some key differences. For example, at just 5% of bookings, HEG is in the early stages of offering business applications solutions to its customers. That's just one example of an area where we've had good success and where we see significant potential opportunity over time. On that note, let me turn it over to Scott to talk a bit more about HEG's customers and the opportunities we see for them in this combination. Scott?
Hey, thanks, Blake. This is a great combination for both us and HEG. I'd also like to offer my own warm welcome to the HEG teams in Germany, the U.K., and across Europe. What we're most excited about in this deal is HEG's customers, 1.7 million of them, who look a lot like ours, and the company's passion for supporting them. HEG offers a similar mix of products to ours, and their mass-market web services customers are mostly small businesses, just like GoDaddy's. In fact, more than 80% of HEG's customers have fewer than 10 employees. Also like GoDaddy, HEG is extremely focused on supporting their customers' needs, so the company enjoys both exceptionally high Net Promoter and customer satisfaction scores and industry-leading customer retention of more than 88% annually.
For those who've heard me talk about GoDaddy's business over the last several years, you know my favorite operating metric is the ratio of GoDaddy's customer lifetime value to our cost to acquire customers, which is very strong. In HEG, we found an ideal match there, a company with an extremely effective business model in Europe that generates awesome customer unit economics. HEG generates lifetime value of roughly 15 times its cost to acquire customers, which is obviously fantastic. You've heard us say a lot about our increased focus on international over the last couple of years. With this combination, it's worth considering the increasingly international complexion of our business. The combined company will have approximately six and a half million customers overseas, or about 40% of our total.
We expect to derive about a third of total annual bookings from international customers. We're bringing on a highly skilled leadership team and a base of more than 1,000 product, technology, marketing, and customer support employees in Europe. In short, this is a big deal for us, for HEG's employees and customers, and most importantly for many of you on this call, for our financials. We believe that together we can do even more to serve HEG's customers in the European market overall. HEG's dedication to helping their customers succeed shows up in everything they do. It's a big part of why we felt an instant connection with Patrick and the rest of the team. HEG's best-in-industry retention rates reflect their commitment to providing maniacally good customer support, particularly in hosting.
The quality of tools they've built, particularly for the pro customer segment, is well-recognized by the market. They're frankly just terrific operators when it comes to delivering cloud-based services. These are just a few examples of the places where, as we combine our two companies, we plan on combining the best of what we do and what they do with their local market knowledge to help accelerate the combined go-to-market efforts across Europe. GoDaddy's product portfolio, delivered through our single global technology platform, has had clear and demonstrated success with bundling, cross-sell, and upsell, both through online selling on our sites and through consultative customer conversations with our care team.
Just as we've seen GoDaddy's customers benefit as we've broadened and deepened our product portfolio in recent years, we expect HEG's customers to benefit from the ability to get the much broader range of products and services they need to look professional online and to manage their business. We clearly see a lot of market opportunity in this combination. Ray's going to provide a bit more color now on how we hope to create value together and the financials. Ray?
Thanks, Scott. As Blake and Scott already made clear, HEG's mass-market business is just a great fit for GoDaddy, and we see several paths for value creation in coming years. First and foremost, we expect to continue to grow the business on an organic basis. As noted earlier, we also see meaningful opportunity to grow ARPU, bringing our consultative care practices to bear to provide HEG's customers and resellers with a broader range of products. On expenses, HEG has run a very efficient business with good margins, so we don't expect significant cost reductions, but we'll scale administration and overhead, and more importantly, together, we'll build out global capabilities in our technology platform and care centers. While this transaction meaningfully changes our cap structure. We expect a strong free cash flow of the combined businesses to enable us to de-lever the balance sheet relatively quickly.
Turning to the financial impacts, the addition of HEG's mass market business is expected to increase GoDaddy's annual bookings by about 11%, with approximately $236 million in projected annual bookings for their company in 2016. Let me pause there to make a couple of quick points on their numbers. HEG's top-line turnover is pretty comparable to the bookings that we report, but not directly comparable to our revenue, which, as you know, is reported in US GAAP. HEG's adjusted EBITDA is pretty comparable to the metric that many of you use to measure our operating cash flow. As we work towards closing the transaction, and we've converted HEG's financials to US GAAP, we'll provide you with more color on the expected contribution to our revenue and free cash flow in 2017 and beyond.
As Blake mentioned at the beginning of the call, once we close the transaction, we intend to explore strategic alternatives for the PlusServer managed hosting portion of HEG, including a potential sale. The numbers we're sharing today primarily cover HEG's mass market business, which we intend to integrate with GoDaddy. As you're looking at the financial impact of the acquisition, there are three big points that I'd like you to take away. First, on a standalone basis, this deal is a good value. On a trailing 12 basis, we're buying a good growth business for roughly 11 times EBITDA, including expected synergies, which compares favorably to recent deals in the space. Remember too, that that's a trailing multiple, which doesn't account for expected growth beyond 2016. Second, the financing terms on this deal are very attractive.
With the 20 million plus in expected synergies, we're bringing in nearly $160 million in trailing 12 adjusted EBITDA for roughly $65 million in incremental annual interest. This transaction is immediately accretive on a cash basis. Third, from a standpoint of leverage, while this takes us up to the high end of our targeted leverage range, given the very attractive cash flow characteristics of the combined business, we expect to be closer to the middle of our targeted range, or roughly three times EBITDA, by the end of 2017. Beyond expanding our footprint and allowing us to accelerate already strong growth in Europe, we see this transaction as immediately additive to free cash flow per share and good utilization of our balance sheet capacity. The bottom line here is that HEG is a great fit for us, both strategically and financially.
With that, I'll turn it back over to Blake.
Thanks, Ray. Folks, in summary, GoDaddy and HEG are highly complementary. We serve really similar customers and serve them well, so we both enjoy high customer satisfaction and retention, as well as compelling customer unit economics. This combination dramatically advances our position in Europe and will provide HEG's customers with access to GoDaddy's products, technology platform, and consultative care model. We're delighted to welcome a world-class team to join us and help further expand our European business. Of course, for our shareholders, we expect to deliver immediate accretion to free cash flow with the ability to de-leverage quickly. We look forward to closing the transaction in the second quarter and getting started with the HEG team and their customers right away. With that, I'm going to open it up to questions.
At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from Jason Helfstein from Oppenheimer. Your line is open.
Thanks. Maybe two questions. First, to start, I think Host Europe had done a number of acquisitions kind of over the past 18 months, and so maybe give a sense of how integrated all of that is. Then, as a result of that, is there a way to think about whether it's the kind of organic historical revenue growth at Host Europe and kind of what you're thinking maybe over the next 12 months? Then also, are there any different product sets that they have that you'll be able to then upsell into the U.S., or is it primarily upselling U.S. products to Europe? Thanks.
Hey, Jason, it's Scott. Thanks. First on the history of HEG and where they are. HEG's done a really nice job in consolidating into four principal brands, two of which are in the U.K., two of which are in Germany, and one in each country covers a DIY space, the other does do it for me. They've taken a series of acquisitions and really put them into four very nice and solid brands. The important point is this is a nice growth business on its own. I mean, HEG's growing in the high single digits organically. In between our combined product portfolio plus introducing some of the go-to-market things, we think that that obviously has upside in terms of just the organic growth rate of the business.
I guess specific on the product front, there are some things in the hosting side that HEG does really well that we're going to introduce. If you just look across our product portfolio and think about domains or some of the present services and certainly Biz Apps, those are things that obviously we've made a heck of a lot of traction in and think that there's going to be things that we can bring over to the properties that HEG has in Europe.
Thanks, and congrats on the deal.
Thanks, Jason.
Your next question comes from Brian Essex from Morgan Stanley. Your line is open.
Hi, good morning. Thank you for taking the question. Congrats from me as well. I just was wondering if maybe you could talk about Host Europe's go-to-market strategy and the brands that they have versus how your current strategy is, how that might change the profile of GoDaddy on a consolidated basis going forward.
Sure. Hey, Brian, it's Andrew Low Ah Kee. As Scott mentioned, HEG has done a nice job positioning a primary brand in the U.K. and in Germany for each of the do it yourself and do it for me segments. They've done a really nice job with that. We think those brands have equity, and we think that combined, the brands are going to let us move marketing dollars into other markets in Europe and frankly, be more effective in driving growth across our combined businesses.
Okay, then on the capital intensity side, how capital-intensive is that business, and how does that change your free cash flow profile going forward relative to the model that you had previously of mid-teens growth and the free cash flow generation that you highlighted in your target model?
Hey, this is Ray. HEG is slightly more heavily weighted towards hosting, so they're a little heavier on CapEx. As a combined company, we'll still see roughly the same conversion rates from adjusted EBITDA down to unlevered free cash flow, 70%-90% that we've historically put out there.
Okay, that's very helpful. Thank you very much.
Your next question comes from Ron Josey from JMP Securities. Your line is open.
Great. Thanks for taking the question. I just want to ask a little bit more, maybe following up on Jason's question on integration of Host Europe onto the platform. I think in the release, you talk about having a single global tech platform. Clearly, Host has its own sizable business, and you all launched your own global hosting products earlier this year. Just wanted to understand a little bit more about how you think about the overall platform going forward. Then a quick follow on, just any details or history on how this opportunity came about would be helpful. Clearly, HEG helps expand GoDaddy's international offering and footprint, particularly in Europe. Does this change anything on how you view Asia? Thank you.
Hey, Ron, this is Blake. I'll handle the first part of the question. I'll hand it over to Scott, who has a little bit more history than me. On the platform, we have, as you know, invested pretty heavily in OpenStack. You've seen us start to introduce OpenStack into the marketplace. We do believe there's a great opportunity for us to take that extensible open source platform and make that available at a super low cost and a very efficient operating model to HEG's data centers, and think there's great opportunity for us there. Also, if you think about in-product discovery of products across our product line, this is a platform capability as well. If you think about the applications business as an example today, with HEG, it's roughly 5% of revenues. In our business, the applications business is basically 13% of revenues.
That's because we've actually done a really, I think, good job on integrating that with the platform, and think there's opportunity to do the same on HEG's model. I'd say the same for in-product discovery of other capabilities like email marketing, and email, and even telephony services we're running in the U.S. On history, I'll hand it over to Scott because I think he predates me a bit.
We met Patrick over two years ago. I think it was two and a half years ago, the first time that we spent a substantive amount of time with Patrick and then a couple members of his senior team, and have actually had regular interaction during that time. Over that time, we've been impressed by what Patrick and the team has done over the last couple of years, and frankly, just how they thought about customers and the business overall, and there's just a fit. Obviously then there's been an event from their primary sponsor that enabled us to do something together.
This has really been a conversation and a level of learning that's been happening for over two years between us and was really founded and grounded in a shared view of how to serve customers, a focus when you're talking about your business that starts with the customer, and really builds from there. The foundational elements of this are, let's call it, just done the right way, which is it's been built up over time, and it's obviously just been grounded by a shared perspective in serving customers and how to run a business. I think there was a second part of your question around what does it mean going forward and for Asia specifically.
Just if there's any change. Yeah.
Certainly no change whatsoever. I think a good way to look at this is we've been talking for the last four years about growing internationally, the localization of our platform, both through product applications, technology, and care. We've mentioned that, boy, we're kind of at scale and in an operating rhythm. What you see with this event is the manifestation of that, where we have the operating ability to frankly extend and take in another business that largely has been doing same sort of product set and service to us and expand it. Expand it with products, expand it with a care model, and that's something that we feel increasingly comfortable with, not just here, but around the world.
This is sort of a very nice, frankly, milestone and event that really just marks the progress of the business and the operating platform over the last four years.
That's great. Thanks, guys. Congrats.
Your next question comes from Mark Mahaney from RBC. Your line is open.
Hey, thanks. Three quick questions, please. Could you talk about whether the process was competitive? Secondly, the synergies that you're talking about, are those all revenue, or what's the mix between revenue and cost synergies? Third, what's the opportunity here, I think somebody asked this earlier, to cross-sell business apps into Host Europe customer base? All right, thank you.
Hey, Mark, it's Scott. Let me just hit the first two points quickly. I'll let Andrew answer the last. There was a process. There were other parties who were, I think, rumored and participated throughout the process, both a couple of strategic people and then, I think, a couple of financial sponsors as well. From a synergy standpoint, the $20 million is focused on the mass market hosting business, and it's a mix of revenue and expense. Again, I think most of the expense is going to be scaling, so our ability to build off a common care base and a common data center and technical platform. It's a combination of both. On the cross-sell point, I'll let Andrew answer.
Yeah. Look, on the cross-sell side, we're excited about the opportunity. When we look at the success we've had with Biz Apps, not just in the U.S., but frankly, around the world, and we look at the success we've had in the U.K. and Europe with some of our newer offerings, and then we look at where HEG is in that process, they're just getting started. They actually just launched Office 365 relatively recently, and that's obviously one example of a product that we've had great success with. We do see the ARPU delta between their business and our business as opportunity and upside that will come from working with them and helping take their exceptional customer support capability and really turning it into a consultative customer care experience.
Your next question comes from Sameet Sinha from B. Riley. Your line is open.
Yes, thank you. A couple of questions. First, can you talk about the revenue breakdown between different products, even broadly between domains hosting and any of those value-added services that they provide? Secondly, if you piece together HEG's historicals, you can see that the number of customers has stayed fairly stable over the last several years despite all these acquisitions, although you can see that the ARPU is going up. Can you give us a little more detail about what exactly is happening there with the dynamics, or maybe they were deliberately churning off lower ARPU customers? That's it. Thank you.
Hey, Sameet, Scott. From a mix standpoint, I think page six on the materials showed their revenue breakdown, which is about a third of their bookings are in domains, a shade over 60%, I think 62% to be specific, in hosting and presence, then 5% in Biz Apps. You got the reference point on Biz Apps and kind of the nature of the opportunity there. In terms of customers, HEG's been growing their customer base. Again, I think on an organic basis, this is a high single-digit growth business. It is a business where I mentioned the 15 times lifetime value to cost of acquisition. Look, that is the pure measure that says you're doing something special, and you're doing it well, and customers value you for it.
Now, part of the attractiveness of that measure is, this is a business that's been relatively modest in its marketing acquisition spend. You could make the argument looking back over time that there could have been more marketing dollars deployed that might have had customer growth even higher. I think the way to interpret this from your seat is, it's opportunity, and this is a franchise that actually has nice organic growth, frankly, with upside on a pretty strong franchise.
Great. Thank you.
Your next question comes from Mark May from Citi. Your line is open.
Thanks for taking my questions. Congrats also on getting this deal done. I had two questions. How are you thinking about the rest of Europe? Clearly, you just bought a large player in two of the most important markets. My understanding is there may be a couple of other opportunities in a couple of the other main markets in Europe. I'm just curious how you're thinking about taking on more over the next year. Then, second question probably is for Ray. From an accounting perspective, I know there's still a lot to sort out here. Just curious, any early thoughts on how we should be thinking about the impact of maybe write-downs of deferred revenue as we're modeling the Zen over the next year or so? Thanks.
Yeah. Hey, Mark, it's Andrew. I'll take the first question. Ray can take the second one. Look, candidly, we like Europe. It's a big market. The product fit is good. What we see in our own business, what we see when we look at HEG's business is, you have the ability to acquire very valuable customers at great unit economics. We see this transaction as a catalyst that's going to let us frankly be more aggressive with the rest of Europe, and we're excited about that.
Hey, Mark, on your second question, it's Ray. Yep, there's a lot of work to be done. Obviously, they're on IFRS, and we'll convert that to GAAP. I think in the meantime, until we can give you guys some more specific guidance and get that work done, if you look at the bookings number, it is very comparable to GoDaddy's bookings.
If you wanted to roll through a model, you could use the same ratio of bookings to revenue that GoDaddy has and apply that to the HEG mass market business.
Okay, thanks.
Your next question comes from Sam Kemp from Piper Jaffray. Your line is open.
Great. Thanks for taking the question, and congratulations. First, can you give us an update on how quickly the PlusServer business is going? I think the HEG unit economics are probably higher than most of us would've guessed. Is that a factor of CAC being lower in that market? Can you speak a little bit more broadly on the CAC characteristics in Europe? Thanks.
On PlusServer, similar growth. It's a nice high single-digit grower and occupies a really nice position in Germany. It's a very good business. It's a very good business that we think will be attractive and should be attractive to a number of people. It just occupies a market space that's different than ours, but it's a really nice business. On the acquisition economics, I'll let Andrew comment a little bit more on your question, Sam.
Yeah, I think the components of that, Sam, are really, first, HEG has truly industry-leading churn rates, with annual retention better than 88% over the last three years. You also have a really nice gross margin profile in the business, given the proportion of the business that isn't in domains. It's only a third of the business, as you see on Page six. That dual combination of really good churn rates as well as that strong gross margin profile turns into great LTV to CAC.
Great. Thanks.
Your next question comes from Sterling Auty from J.P. Morgan. Your line is open.
Yeah. Thanks. Hi, guys. I jumped on a few minutes late, so I apologize if any of this was covered. Andrew, the LTV to CAC that you just alluded to, can you give us a sense of what is the LTV to CAC for this property relative to what you've long quoted for GoDaddy?
HEG runs at 15 times, which you know that Scott's favorite operating metric is LTV to CAC, and we're pretty darn proud of our 10 times and think that's pretty darn good. We really, truly, in HEG and the team that Patrick leads, found people who do it even better than we do. It's great.
I think in the slides you mentioned the seven data centers. Would all seven data centers need to be retained post-deal? What's the status of those data centers? Meaning, is all the technology still fresh in all of them, or would there be any type of capital refresh necessary post-close?
Hey, Sterling. This is Blake. There will be an opportunity for data center consolidation, and you can think of that either as us consolidating into a HEG data center or the opposite. There is opportunity for some cost synergies there. Capital investment, I think Ray characterized it correctly. It's a hosting business, it's a little bit more capital intensive. Honestly, it's very similar to the characteristics we have in our business today. We think we've got good opportunity for some cost synergies in the data center area to be able to minimize footprint a little bit below where we are today if we take our footprint and theirs together. Good opportunity there.
Last question. In the slides, I see the financing is committed, have you also locked in the interest rates on that financing, or does that float until the time of close?
Nope. We've got full commitments on EUR and the rates that you saw in the presentation. There's some flex in those rates.
Great
It's 100 basis points above that.
Thank you, guys.
Thanks, Sterling.
Your next question comes from Jonathan Kees from Summit Redstone. Your line is open.
Might be on mute, Jonathan.
Jonathan Kees, your line is open.
Can you hear me now?
Okay. We got you.
We got you now.
Sorry about that. Still early in the morning here. I haven't had my coffee, but so I'm sure you know what I'm talking about. Thanks for taking my question, and congrats on the acquisition. I guess my two questions are referring to what you're talking about, the consolidation of the data centers, and the second one is related to the competitive question for the bid. Regarding the first question, you talked about the possible consolidation of the data centers and some of the synergies for the overhead there from the common data center. I guess I'm trying to sync that with the continental trends in Europe. They want to have their own infrastructure, their own network, their own even people managing that. Especially versus an American company and what's happened in the past with admitted spying by the U.S. government on individuals, including Europe.
I guess they advertise, especially the local competitors talk about that their data and their network is local.
Yeah.
I guess You've looked at it. I just want to see, I'm sure the data center consolidation is still under review. That's probably going to be subject to change. I guess that's an assumption on my part, and you can talk to that if you can. The second thing, in regards to the competitive bid process. In the papers, they talked about some of the players that were involved in it, and in the end, GoDaddy was the winner. Wondering if you could talk some more in terms of, and I know this is the high level, and this will be solely from your perspective, as to why some of the other players stepped out.
There are both local telco carriers that were interested, according to what were in the news, as well as a couple of American companies, as well as a couple of the finance companies, the VCs. Why did some of the local companies, especially the telco companies, step out, since they could have easily integrated this into their business? Thanks.
This is Blake. I'll handle the first, the data center piece, and I'll hand it over to Ray for the next part. On data center, we actually have footprint in the U.K., Germany, Amsterdam today. The countries that we're operating in, we actually have opportunity for consolidation without having any issue with serving data within a country that is outside of it. In fact, this is pretty common today. Not an issue for us, nor is it an issue with any kind of planned consolidation. I'll hand it over to Ray.
Jonathan, it's Ray. On your second question, it was a competitive bid process. I can't speak to why some of the other companies backed out. We loved what we saw, obviously.
Okay, great. Thank you.
Your next question comes from Naved Khan from Cantor Fitzgerald. Your line is open.
Yeah, thanks for taking the question. Congrats on the deal. On HEG, it's very helpful that you provided a breakdown on the product. Can you also give us some color on how fast these individual products are growing, how fast domain is growing relative to hosting and Biz Apps?
No, not at this time. Obviously, we still have work to do to convert the financials into US GAAP. Then we will come back once we get closer to the closing of the transaction and give you guys guidance around 2017.
Okay. Then just a quick follow-up. In terms of some of the retention tools you might have put in place to make sure you can retain key execs at HEG, can you just talk about that?
Yeah. Hey, Naved, it's Andrew. We're excited, obviously, about the deal, but really embedded in that is the people. I think one of the key considerations for us in moving forward with the deal was having Patrick and his leadership team committed and signed up to helping drive our business forward in Europe. We asked for and received that commitment, and so we're excited about the future together.
I'll just build on Andrew's comment real quickly. One of the things that we noted as we were going through this process over the last six months, the similarities in characteristics of the management team, the culture, the values that we all have are so strikingly similar. Through the process, it felt like we were part of the same company, which I think actually, honestly, if I said, it gave us a bit of an advantage in us being able to close this deal. Without any question, I think that is the case. We actually have a lot of confidence that we've got the right program in place to retain key executives, and frankly, they're going to want to be here because this is going to be a lot of fun.
Great. Thank you.
Your next question comes from Aaron Kessler from Raymond James. Your line is open.
Great. Thanks. Just to clarify on the EBITDA commentary, does that include the deferred revenues for HEG? Do you have a rough estimate of the deferred revenues for them? Were they really all Europe, or is there anything they were doing in Asia at this point as well? Thank you.
Hey, Aaron, it's Ray. The bookings and the adjusted EBITDA are very consistent, so that it would include the deferred component. The deferred component right now, in the way you're looking at it, is relatively small. Again, I'd go back to my guidance earlier. If you want to try to bake in a model next year, I would use the same ratio of bookings to revenue as on GoDaddy's numbers.
Got it. Great.
On your second question, from a geography perspective, the revenue is substantively all Europe.
Okay, great. Congrats on the deal.
Cool. Thanks.
There are no further questions at this time. I'll turn the call over back to the presenters.
Thanks everybody for spending some time with us to go through this deal between HEG and GoDaddy. We are extremely excited about this. You've heard the leadership team at GoDaddy talk about that, and I'm hoping that we're going to have quick synergies and just start driving the business. Thanks a bunch, and we look forward to talking to you on our next quarterly earnings call. Bye now.
This concludes today's conference call. You may now disconnect.