GoDaddy (NYSE: GDDY) is proving that cash is king

GoDaddy (NYSE: GDDY), a hosting company known as a one stop shop to register a new domain and set up a website, has been on a roll, with its shares surging nearly 16% over the past month. It’s all about the benjamins, as the saying goes.

CEO Aman Bhutani made the company’s strategy abundantly clear in a recent call with investors, saying the maximization of free cash flow over the long term was its North Star. While most customers may interact with the company for the first time when they register a new website, GoDaddy has been working on a bundling initiative and is enhancing its e-commerce offerings with new AI-powered features in the hopes of upsells that increase those sticky monthly hosting fees.

“We continue to remove friction in the customer experience and improve purchase, onboarding and renewal path,” he said. “Given our scale, even modest improvements in conversion and renewal can yield meaningful results.”

It’s all being funneled into the bottom line. Total revenue in the third quarter of $1.2 billion resulted in free cash flow of nearly $363 million. At 31.5%, the ratio exceeded levels seen at competitors Shopify (NYSE: SHOP) and Wix.com (NASDAQ: WIX) that clocked in at 19.4% and 25.9%, respectively. GoDaddy, in other words, has gotten better than its peers at turning sales into the resource that investors care most about; its shares have surged 105% over the past year as a result. In the same period, Shopify saw gains of 50%.

In a sign that forward momentum should continue, GoDaddy—which is ahead of rivals like Cloudflare (NYSE: NET) when it comes to domain registration with a market share of 38%—raised its full year outlook and said that both revenue and margins should increase. It’s expecting total free cash flow to rise 22% for all of 2024 and hit $1.3 billion. The company, meanwhile, is continuing with a $4 billion share buyback program that has reduced outstanding shares by 23% since 2022. Year-to-date, it’s repurchased 5.2 million shares worth $668.1 million.

GoDaddy is proving that the old adage “cash is king” is as relevant as ever, especially for a company operating in a mature sector that has lots of competition. Strong cash flow not only underscores GoDaddy’s operating success but also reduces its reliance on debt and allows it to return capital to shareholders. New projects like GoDaddy Ario and GoDaddy Studio—both designed to help customers more quickly develop full websites—exemplify how ongoing investments can create a virtuous cycle of growth.