GoDaddy Files For $100M IPO

Today GoDaddy, the popular domain and web-services company, filed its S-1 document to go public. The company has seen quick revenue growth in recent years and massive losses measured using generally accepted accounting principles (GAAP).

The company’s 2013 revenue totaled $1.13 billion. The company lost $199.88 million during that period. The company had revenue of $910 million in 2012, and around $894 million in revenue in 2011.

The company’s GAAP losses are declining: GoDaddy lost $279 million in 2012, making its 2013 deficit slightly less painful than it might already seem. GoDaddy lists its “total indebtedness” as of the end of May, 2014, or around $1.5 billion. The company has $133 million in cash and equivalents.

The company has an adjusted EBIDTA figure, of course, which totaled $199 million in 2013, up from $173 million in 2012. It is a very adjusted figure:

We calculate adjusted EBITDA as net income (loss) excluding depreciation and amortization, interest expense (net), provision (benefit) for income taxes, share-based or unit-based compensation expense, change in deferred revenue, change in prepaid and accrued registry costs, acquisition and sponsor-related costs and a non-recurring reserve for sales taxes. Acquisition and sponsor-related costs include (i) retention and acquisition-specific employee costs, (ii) acquisition-related professional fees, (iii) costs incurred under the transaction and monitoring fee agreement with the Sponsors and TCV, which will cease following a final payment in connection with the completion of this offering, and (iv) costs associated with consulting services provided by KKR Capstone.

The company is heavily leveraged and loses quite a bit of money. It will be interesting to see how the market responds to the offering. There has been uncertainty in the market recently regarding companies that wish to go public on the strength of their revenue expansion rather than profitability. Square and Box generally fall in this category.

GoDaddy had revenue of $320 million in the first quarter of 2014, up from $262 million in the same period a year prior. That’s a 22.14 percent increase. If investors find that figure strong, GoDaddy’s IPO could proceed smoothly. If that figure isn’t enough in the eyes of the street to compensate for the company’s staggering GAAP losses, it could encounter headwinds.

Adding to the offering’s potential hangups is a complex management structure. Private equity groups including KKR bought GoDaddy in 2011 for a reported $2.25 billion. It will interesting to see the delta they expect the company to provide them financially in this offering.

If the GoDaddy IPO goes well, we could see a few other players get off the bench.