Domain registrar Go Daddy has decided not to attempt an initial public offering, citing difficult market conditions, the company said yesterday. "With a war and escalating hostilities throughout the Middle East, skyrocketing oil prices and technology stocks once again taking a beating on Wall Street - now just isn't the right time for us," said Bob Parsons, CEO and founder of The Go Daddy Group.
Go Daddy's plans to raise $200 million through an IPO had been closely watched in the U.S. hosting industry, which has seen many private mergers and acquisitions but no major new IPOs since dot-com era bankruptcies by Exodus and other hosting companies that borrowed heavily to finance growth. Hostopia, which focuses on the hosting reseller market, filed plans last month for an IPO that could raise up to $40 million.
Go Daddy is the the world’s largest domain registrar, and has built a huge hosting business since entering the market in earnest in 2003. Go Daddy recently became the world’s largest hosting provider, as measured by hostnames. While the Scottsdale, Ariz. company has been cash-flow positive since 2001, it has not yet reached profitability, and lost $13.8 million in 2005 on revenues of $139 million, according to its SEC filing.
On Monday, Parsons addressed Go Daddy's 1,200 employees, noting the recent poor performance of IPOs, particularly for technology stocks. "We are fortunate to control our own destiny," said Parsons. "Moving forward, we plan to continue to focus our efforts on growing our business and taking care of our customers, as we have always done. The withdrawal of our registration statement does not change the overall fundamentals of Go Daddy's business, which remain quite strong."
In an entry on his blog, Parsons offered additional details on the company's performance. "This decision comes after the best quarter in the company’s history," he wrote. "During this 2nd quarter The Go Daddy Group Inc. had GAAP (Generally Accepted Accounting Principles) revenue of $56,985,000, a net accounting loss of $733,000 and positive cash flow from operations of $14,240,000. This compares to the 2nd Qtr 2005 when our GAAP revenue was $31,082,000, and we had a net accounting loss of $3,389,000, and positive cash flow from operations was $6,871,000."
Nonetheless, Parsons said, the timing was not right to move forward. "I don’t expect market conditions to correct themselves for sometime," he wrote. "I feel we owe it to ourselves to withdraw our filing until better and more stable times arrive."
Parsons also said Go Daddy's losses and financial performance had been misunderstood due to deferred revenue from products that have been paid for but not delivered, such as multi-year registrations of domain names and SSL certificates. While the sale of these products provides Go Daddy with excellent cash flow, the revenue cannot be applied to earnings until the product is delivered on its renewal date.
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