UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-36904

GoDaddy Inc.

(Exact name of registrant as specified in its charter)

Delaware	46-5769934
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2155 E. GoDaddy Way

Tempe, Arizona 85284

(Address of principal executive offices, including zip code)

(480) 505-8800

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	GDDY	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    ☒    No    ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                    Yes    ☒    No    ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                         ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    ☐    No    ☒

As of July 29, 2022, there were 156,367,628 shares of GoDaddy Inc.'s Class A common stock, $0.001 par value per share, outstanding and 312,223 shares of GoDaddy Inc.'s Class B common stock, $0.001 par value per share, outstanding.

GoDaddy Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended June 30, 2022

TABLE OF CONTENTS

Note About Forward-Looking Statements		ii
PART I. FINANCIAL INFORMATION
Item 1	Financial Statements (unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Stockholders' Deficit	4
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4	Controls and Procedures	36
PART II. OTHER INFORMATION
Item 1	Legal Proceedings	37
Item 1A	Risk Factors	37
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	74
Item 3	Defaults Upon Senior Securities	74
Item 4	Mine Safety Disclosures	74
Item 5	Other Information	74
Item 6	Exhibits	75
Signatures		76

i

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this Quarterly Report), including the sections titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors," contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, involving substantial risks and uncertainties. The words "believe," "may," "will," "potentially," "plan," "could," "should," "predict," "ongoing," "estimate," "continue," "anticipate," "intend," "project," "expect," "seek," or the negative of these words, or terms or similar expressions conveying uncertainty of future events or outcomes, or that concern our expectations, strategy, plans or intentions, are intended to identify forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or expected. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements discussed under the heading "Risk Factors" and in our publicly available filings and press releases. These statements include, among other things, those regarding:

•our ability to continue to add new customers and increase sales to our existing customers;

•our ability to develop new solutions and bring them to market in a timely manner;

•our ability to timely and effectively scale and adapt our existing solutions;

•our dependence on establishing and maintaining a strong brand;

•the occurrence of service interruptions and security or privacy breaches and related remediation efforts and fines;

•system failures or capacity constraints;

•the rate of growth of, and anticipated trends and challenges in, our business and in the market for our products;

•our future financial performance, including our expectations regarding our revenue, cost of revenue, operating expenses, including changes in technology and development, marketing and advertising, general and administrative and customer care expenses, and our ability to achieve and maintain future profitability;

•our ability to continue to efficiently acquire customers, maintain our high customer retention rates and maintain the level of our customers' lifetime spend;

•our ability to provide high quality customer care;

•the effects of increased competition in our markets and our ability to compete effectively;

•our ability to grow internationally;

•the impact of fluctuations in foreign currency exchange rates on our business and our ability to effectively manage the exposure to such fluctuations;

•our ability to effectively manage our growth and associated investments, including our migration of the vast majority of our infrastructure to the public cloud;

•our ability to integrate acquisitions, including our recent acquisition of Pagely, our entry into new lines of business and our ability to achieve expected results from our integrations and new lines of business;

•our ability to maintain our relationships with our partners;

•adverse consequences of our substantial level of indebtedness and our ability to repay our debt;

•our ability to maintain, protect and enhance our intellectual property;

•our ability to maintain or improve our market share;

•sufficiency of cash and cash equivalents to meet our needs for at least the next 12 months;

•beliefs and objectives for future operations;

•our ability to stay in compliance with laws and regulations currently applicable to, or which may become applicable to, our business both in the United States (U.S.) and internationally;

•economic and industry trends or trend analysis;

•our ability to attract and retain qualified employees and key personnel;

ii

NOTE ABOUT FORWARD-LOOKING STATEMENTS (continued)

•anticipated income tax rates, tax estimates and tax standards;

•interest rate changes;

•the future trading prices of our Class A common stock;

•our expectations regarding the outcome of any regulatory investigation or litigation;

•the amount and timing of future repurchases of our Class A common stock under any share repurchase program;

•the potential impact of shareholder activism on our business and operations;

•the length and severity of the coronavirus (COVID-19) pandemic and its impact on our business, customers and employees;

as well as other statements regarding our future operations, financial condition, growth prospects and business strategies.

We operate in very competitive and rapidly-changing environments, and new risks emerge from time-to-time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Quarterly Report may not occur, and actual results could differ materially and adversely from those implied in our forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee the future results, levels of activity, performance or events and circumstances described in the forward-looking statements will be achieved or occur. Neither we, nor any other person, assume responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements for any reason after the date of this Quarterly Report to conform such statements to actual results or to changes in our expectations, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Unless expressly indicated or the context suggests otherwise, references to "GoDaddy," "company," "we," "us" and "our" refer to GoDaddy Inc. and its consolidated subsidiaries, including Desert Newco, LLC and its subsidiaries (Desert Newco).

iii

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

GoDaddy Inc.

Consolidated Balance Sheets (unaudited)

(In millions, except shares in thousands and per share amounts)

	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	770.4	$	1,255.7
Accounts and other receivables	60.5		63.6
Prepaid domain name registry fees	435.7		419.7
Prepaid expenses and other current assets	285.1		150.8
Total current assets	1,551.7		1,889.8
Property and equipment, net	222.3		220.0
Operating lease assets	93.6		109.2
Prepaid domain name registry fees, net of current portion	187.5		181.4
Goodwill	3,466.8		3,540.8
Intangible assets, net	1,298.6		1,384.7
Other assets	83.6		91.2
Total assets	$	6,904.1	$	7,417.1
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable	$	97.4	$	85.2
Accrued expenses and other current liabilities	355.2		437.3
Deferred revenue	1,980.5		1,890.1
Long-term debt	24.5		24.1
Total current liabilities	2,457.6		2,436.7
Deferred revenue, net of current portion	770.7		743.3
Long-term debt, net of current portion	3,848.0		3,858.2
Operating lease liabilities, net of current portion	125.9		142.7
Other long-term liabilities	87.9		77.7
Deferred tax liabilities	59.3		75.3
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.001 par value - 50,000 shares authorized; none issued and outstanding	—		—
Class A common stock, $0.001 par value - 1,000,000 shares authorized; 156,545 and 166,901 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	0.2		0.2
Class B common stock, $0.001 par value - 500,000 shares authorized; 312 and 320 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	—		—
Additional paid-in capital	1,756.3		1,594.7
Accumulated deficit	(2,302.3)		(1,474.6)
Accumulated other comprehensive income (loss)	98.6		(38.6)
Total stockholders' equity (deficit) attributable to GoDaddy Inc.	(447.2)		81.7
Non-controlling interests	1.9		1.5
Total stockholders' equity (deficit)	(445.3)		83.2
Total liabilities and stockholders' equity (deficit)	$	6,904.1	$	7,417.1

See accompanying notes to consolidated financial statements.

1

GoDaddy Inc.

Consolidated Statements of Operations (unaudited)

(In millions, except shares in thousands and per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue:
Applications & commerce	$	317.2	$	276.2	$	620.3	$	538.2
Core platform	698.3		655.1		1,397.9		1,294.2
Total revenue	1,015.5		931.3		2,018.2		1,832.4
Costs and operating expenses(1):
Cost of revenue (excluding depreciation and amortization)	360.5		332.0		730.7		653.2
Technology and development	198.1		172.0		388.2		358.4
Marketing and advertising	100.7		126.5		217.0		259.2
Customer care	78.9		78.3		156.6		156.9
General and administrative	94.7		84.5		185.3		179.7
Restructuring and other	9.6		—		9.6		—
Depreciation and amortization	48.4		50.0		96.6		99.0
Total costs and operating expenses	890.9		843.3		1,784.0		1,706.4
Operating income	124.6		88.0		234.2		126.0
Interest expense	(34.9)		(32.6)		(68.5)		(61.3)
Other income (expense), net	(1.2)		(0.9)		(2.3)		(0.2)
Income before income taxes	88.5		54.5		163.4		64.5
Benefit (provision) for income taxes	2.0		(7.6)		(4.3)		(6.8)
Net income	90.5		46.9		159.1		57.7
Less: net income attributable to non-controlling interests	0.1		0.1		0.3		0.1
Net income attributable to GoDaddy Inc.	$	90.4	$	46.8	$	158.8	$	57.6
Net income attributable to GoDaddy Inc. per share of Class A common stock:
Basic	$	0.57	$	0.28	$	0.98	$	0.34
Diluted	$	0.56	$	0.27	$	0.97	$	0.33
Weighted-average shares of Class A common stock outstanding:
Basic	159,822		168,204		162,060		168,816
Diluted	161,739		171,129		164,503		172,388
___________________________
(1) Costs and operating expenses include equity-based compensation expense as follows:
Cost of revenue	$	0.4	$	0.2	$	0.7	$	0.4
Technology and development	35.1		27.9		68.0		54.9
Marketing and advertising	7.5		7.0		14.5		13.2
Customer care	5.5		3.7		9.7		6.7
General and administrative	18.2		12.6		35.0		28.8
Total equity-based compensation expense	$	66.7	$	51.4	$	127.9	$	104.0

See accompanying notes to consolidated financial statements.

2

GoDaddy Inc.

Consolidated Statements of Comprehensive Income (unaudited)

(In millions)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net income	$	90.5	$	46.9	$	159.1	$	57.7
Foreign exchange forward contracts gain (loss), net	20.6		0.9		23.8		3.0
Unrealized swap gain (loss), net(1)	49.1		(6.1)		139.0		18.3
Change in foreign currency translation adjustment	9.0		(5.9)		(25.3)		27.8
Comprehensive income	169.2		35.8		296.6		106.8
Less: comprehensive income attributable to non-controlling interests	0.3		0.1		0.6		0.4
Comprehensive income attributable to GoDaddy Inc.	$	168.9	$	35.7	$	296.0	$	106.4
___________________________
(1) Amounts are net of the tax effects reflected below:
Unrealized swap gain (loss), net	$	—	$	1.0	$	(2.5)	$	1.5

See accompanying notes to consolidated financial statements.

3

GoDaddy Inc.

Consolidated Statements of Stockholders' Deficit (unaudited)

(In millions, except shares in thousands)

	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Non- Controlling Interests		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	166,901	$	0.2	320	$	—	$	1,594.7	$	(1,474.6)	$	(38.6)	$	1.5	$	83.2
Net income	—	—		—	—		—		68.4		—		0.2		68.6
Equity-based compensation, including amounts capitalized	—	—		—	—		62.2		—		—		—		62.2
Stock option exercises	202	—		—	—		8.5		—		—		—		8.5
Repurchases of Class A common stock	(6,532)	—		—	—		—		(750.2)		—		—		(750.2)
Impact of derivatives, net	—	—		—	—		—		—		93.1		—		93.1
Change in foreign currency translation adjustment	—	—		—	—		—		—		(34.3)		—		(34.3)
Vesting of restricted stock units and other	1,115	—		(8)	—		0.2		—		(0.1)		0.1		0.2
Balance at March 31, 2022	161,686	0.2		312	—		1,665.6		(2,156.4)		20.1		1.8		(468.7)
Net income	—	—		—	—		—		90.4		—		0.1		90.5
Equity-based compensation, including amounts capitalized	—	—		—	—		67.5		—		—		—		67.5
Stock option exercises	158	—		—	—		4.9		—		—		—		4.9
Repurchases of Class A common stock	(6,059)	—		—	—		—		(236.3)		—		—		(236.3)
Issuance of Class A common stock under ESPP	302	—		—	—		18.4		—		—		—		18.4
Impact of derivatives, net	—	—		—	—		—		—		69.7		—		69.7
Change in foreign currency translation adjustment	—	—		—	—		—		—		9.0		—		9.0
Vesting of restricted stock units and other	458	—		—	—		(0.1)		—		(0.2)		—		(0.3)
Balance at June 30, 2022	156,545	$	0.2	312	$	—	$	1,756.3	$	(2,302.3)	$	98.6	$	1.9	$	(445.3)

4

GoDaddy Inc.

Condensed Consolidated Statements of Stockholders' Deficit (unaudited) (continued)

(In millions, except shares in thousands)

	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Non- Controlling Interests		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	169,157	$	0.2	688	$	—	$	1,308.8	$	(1,190.9)	$	(131.0)	$	1.1	$	(11.8)
Net income	—	—		—	—		—		10.8		—		—		10.8
Equity-based compensation, including amounts capitalized	—	—		—	—		53.2		—		—		—		53.2
Stock option exercises	309	—		—	—		11.8		—		—		(0.2)		11.6
Repurchases of Class A common stock	(2,544)	—		—	—		—		(195.1)		—		—		(195.1)
Impact of derivatives, net	—	—		—	—		—		—		26.5		—		26.5
Change in foreign currency translation adjustment	—	—		—	—		—		—		33.7		—		33.7
Vesting of restricted stock units and other	1,523	—		(209)	—		(0.4)		—		(0.4)		0.9		0.1
Balance at March 31, 2021	168,445	0.2		479	—		1,373.4		(1,375.2)		(71.2)		1.8		(71.0)
Net income	—	—		—	—		—		46.8		—		0.1		46.9
Equity-based compensation, including amounts capitalized	—	—		—	—		52.1		—		—		—		52.1
Stock option exercises	337	—		—	—		14.2		—		—		—		14.2
Repurchases of Class A common stock	(956)	—		—	—		—		(80.8)		—		—		(80.8)
Issuance of Class A common stock under ESPP	291	—		—	—		18.4		—		—		—		18.4
Impact of derivatives, net	—	—		—	—		—		—		(5.2)		—		(5.2)
Change in foreign currency translation adjustment	—	—		—	—		—		—		(5.9)		—		(5.9)
Vesting of restricted stock units and other	603	—		(100)	—		(0.1)		—		—		—		(0.1)
Balance at June 30, 2021	168,720	$	0.2	379	$	—	$	1,458.0	$	(1,409.2)	$	(82.3)	$	1.9	$	(31.4)

See accompanying notes to consolidated financial statements.

5

GoDaddy Inc.

Consolidated Statements of Cash Flows (unaudited)

(In millions)

	Six Months Ended June 30,
	2022		2021
Operating activities
Net income	$	159.1	$	57.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	96.6		99.0
Equity-based compensation expense	127.9		104.0
Other	45.8		16.8
Changes in operating assets and liabilities, net of amounts acquired:
Prepaid domain name registry fees	(24.8)		(40.6)
Deferred revenue	127.0		196.4
Other operating assets and liabilities	(29.8)		(2.6)
Net cash provided by operating activities	501.8		430.7
Investing activities
Business acquisitions, net of cash acquired	—		(320.1)
Purchases of property and equipment	(30.2)		(21.1)
Other investing activities	(0.3)		(18.7)
Net cash used in investing activities	(30.5)		(359.9)
Financing activities
Proceeds received from:
Issuance of senior notes	—		800.0
Stock option exercises	13.3		25.8
Issuance of Class A common stock under ESPP	18.4		18.4
Payments made for:
Repurchases of Class A common stock	(967.1)		(275.9)
Repayment of term loans	(16.2)		(16.2)
Other financing obligations	(2.1)		(12.5)
Net cash provided by (used in) financing activities	(953.7)		539.6
Effect of exchange rate changes on cash and cash equivalents	(2.9)		(0.4)
Net increase (decrease) in cash and cash equivalents	(485.3)		610.0
Cash and cash equivalents, beginning of period	1,255.7		765.2
Cash and cash equivalents, end of period	$	770.4	$	1,375.2

Cash paid during the period for:
Interest on long-term debt, including impact of interest rate swaps	$	59.6	$	45.7
Income taxes, net of refunds received	$	6.9	$	11.6
Amounts included in the measurement of operating lease liabilities	$	25.3	$	27.0
Supplemental disclosure of non-cash transactions
Operating lease assets obtained in exchange for operating lease liabilities	$	7.1	$	6.5
Accrued purchases of property and equipment at period end	$	6.1	$	2.2
Share repurchases not yet settled	$	19.3	$	—

See accompanying notes to consolidated financial statements.

6

GoDaddy Inc.

Notes to Consolidated Financial Statements (unaudited)

(In millions, except shares in thousands and per share amounts)

Note 1	Organization and Background	7
Note 2	Summary of Significant Accounting Policies	8
Note 3	Goodwill and Intangible Assets	12
Note 4	Stockholders' Equity	13
Note 5	Equity-Based Compensation Plans	13
Note 6	Deferred Revenue	15
Note 7	Accrued Expenses and Other Current Liabilities	15
Note 8	Long-Term Debt	16
Note 9	Derivatives and Hedging	17
Note 10	Leases	20
Note 11	Commitments and Contingencies	20
Note 12	Income Taxes	21
Note 13	Income Per Share	22
Note 14	Segment Information	23
Note 15	Accumulated Other Comprehensive Income (Loss)	25
Note 16	Subsequent Events	25

1.    Organization and Background

Organization

We are the sole managing member of Desert Newco, and as a result, we consolidate its financial results and report non-controlling interests representing the economic interests held by other members. The calculation of non-controlling interests excludes any net income attributable directly to GoDaddy Inc. As of June 30, 2022, we owned more than 99.8% of Desert Newco.

Basis of Presentation

Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and include our accounts and the accounts of our subsidiaries. All material intercompany accounts and transactions have been eliminated.

Our interim financial statements are unaudited, and in our opinion, include all adjustments of a normal recurring nature necessary for the fair presentation of the periods presented. The results for interim periods are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2022.

These financial statements should be read in conjunction with our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, as superseded by, and solely to the extent set forth in, our Current Report on Form 8-K filed on July 15, 2022 (collectively, the 2021 Form 10-K).

Prior Period Reclassifications

In the first quarter of 2022, we revised the presentation of revenue in our statements of operations, as described in Note 2. Reclassifications of certain other immaterial prior period amounts have been made to conform to the current period presentation.

7

Use of Estimates

GAAP requires us to make estimates and assumptions affecting amounts reported in our financial statements. We periodically evaluate our estimates and adjust prospectively, if necessary. We believe our estimates and assumptions are reasonable; however, actual results may differ.

Segments

Beginning in the first quarter of 2022, we revised the presentation of segment information to reflect changes in the way we manage and evaluate our business. As such, we now report our operating results through two reportable segments: Applications and Commerce (A&C) and Core Platform (Core), as further discussed in Note 14. Accordingly, we have revised our segment information for the comparable prior year period.

2.    Summary of Significant Accounting Policies

Property and Equipment

Property and equipment, net by geography was as follows:

	June 30, 2022		December 31, 2021
U.S.	$	165.2	$	162.6
France	26.1		23.8
All other international	31.0		33.6
	$	222.3	$	220.0

No other international country represented more than 10% of property and equipment, net in any period presented.

Derivative Financial Instruments

We are exposed to changes in foreign currency exchange rates, primarily relating to intercompany debt, the net assets of our foreign operations and sales transactions denominated in currencies other than the U.S. dollar, as well as to changes in interest rates as a result of our variable-rate debt. Consequently, we use derivative financial instruments to manage and mitigate such risks. We do not enter into derivative transactions for speculative or trading purposes.

We utilize a variety of derivative instruments and expect that each derivative instrument qualifying for hedge accounting will be highly effective at reducing the risk associated with the exposure being hedged. For each derivative instrument designated as a hedge, we formally document, at inception, the related risk management strategy and objective, including identification of the hedging instrument, the hedged item and the risk of exposure. In addition, we formally assess, both at the inception and at least quarterly thereafter, whether the financial instruments used in the hedging transactions are effective at offsetting changes in either the fair values or cash flows of the relating underlying exposures.

Our derivative instruments are recorded at fair value on a gross basis. For cash flow reporting purposes, proceeds received or amounts paid upon the settlement of a derivative instrument are classified in the same manner as the related item being hedged.

Cash Flow Hedges

We utilize a variety of derivative instruments designated as cash flow hedges:

•foreign exchange forward contracts to hedge certain forecasted sales transactions denominated in foreign currencies;

•cross-currency swaps used to manage variability due to movements in foreign currency exchange rates related to a Euro-denominated intercompany loan; and

•pay-fixed rate, receive-floating rate interest rate swaps to effectively convert portions of our variable-rate debt to fixed.

8

We reflect unrealized gains or losses on our cash flow hedges as components of accumulated other comprehensive income (loss) (AOCI). Gains and losses on these instruments are recorded as a component of AOCI until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from AOCI to earnings within the same line items as the underlying transactions. At inception, and each reporting period, we evaluate the effectiveness of each of our hedges, and all hedges were determined to be effective.

Net Investment Hedges

We use cross-currency swaps to reduce the risk associated with exchange rate fluctuations on our net investments in certain foreign operations. Changes in the fair value of these derivative instruments are recorded in equity as a component of AOCI in the same manner as foreign currency translation adjustments (CTA). We elected to use the spot method to assess effectiveness of these derivatives. Under this method, changes in fair value of the hedging instruments attributed to changes in spot rates are initially recorded in the CTA component of AOCI and will remain there until the hedged net investments are sold or substantially liquidated. Changes in fair value of the hedging instruments other than those due to changes in the spot rate are initially recorded in the CTA component of AOCI and are amortized to interest expense using a systematic and rational method over the instruments' term.

See Note 9 for further discussion of our derivative instruments.

Revenue Recognition

In the first quarter of 2022, we revised the presentation of revenue in our statements of operations in order to provide better visibility into our business and products as well as a more consistent way to track our progress against our strategic objectives. This change also aligns our revenue presentation with the products in each of our two reportable segments, which are discussed in Note 14. Following this change, our revenue is categorized as follows:

Applications and Commerce. A&C revenue primarily consists of revenue from sales of products containing proprietary software such as Websites + Marketing and Managed WordPress and commerce products such as payment processing fees and point-of-sale (POS) hardware as well as sales of third-party email and productivity solutions such as Microsoft Office 365. A&C revenue also includes revenue from sales of products, such as website security products, when they are included in bundled offerings of our proprietary software products. Consideration is generally recorded as deferred revenue when received, which is typically at the time of sale, and revenue from most A&C products is recognized ratably over the period in which the performance obligations are satisfied, which is typically over the contract term. Payment processing fee revenue is recognized at the time of the transaction and revenue from the sale of POS hardware is recognized at the time when ownership is transferred to the customer.

Core Platform. Core revenue primarily consists of revenue from sales of domain registrations and renewals, aftermarket domain sales, website hosting products and website security products when not included in bundled offerings of our proprietary software products. Core revenue also includes revenue from sales of products not containing a software component such as professional web services as well as fee surcharges paid to ICANN. Consideration is generally recorded as deferred revenue when received, which is typically at the time of sale, and revenue from most Core products is recognized ratably over the period in which the performance obligations are satisfied, which is typically over the contract term. Aftermarket domain revenue is recognized at the time when ownership of the domain is transferred to the buyer.

9

The prior period statement of operations was revised to retrospectively present revenue in the new groupings as shown in the table below. There was no impact on total revenue, operating income, net income, deferred revenue or our statement of cash flows as a result of these revisions.

	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
As Previously Reported
Revenue:
Domains	$	436.7	$	859.4
Hosting and presence	318.5		628.8