U.S. & China Strike a Trade Deal?

Summary

Motley Fool Money Podcast Summary
Episode: U.S. & China Strike a Trade Deal?
Release Date: May 12, 2025
Hosts: Dylan Lewis, Ricky Mulvey, and Mary Long
Guests: Jason Moser (Motley Fool Analyst), Mark McCaffrey (CFO of GoDaddy)

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1. U.S.-China Trade Deal and Market Implications

Hosts: Dylan Lewis and Jason Moser
Timestamp Highlights: [00:35] - [16:10]

a. Market Reaction to the Trade Deal

The episode opens with host Dylan Lewis welcoming analyst Jason Moser to discuss the recent optimistic market movement, where major indices like the S&P 500, Nasdaq, and Dow Jones saw significant gains following reports of a potential U.S.-China trade agreement. Dylan notes, "[...] the market's excited about it," referencing the positive sentiment stirred by the news ([00:57]).

b. Nature and Scope of the Trade Agreement

Jason Moser elaborates on the headline, describing the deal as a "temporary trade truce" rather than a comprehensive agreement. He highlights that while this development isn't a permanent solution, it signifies progress in diplomatic talks between the U.S. and China, particularly following a similar UK deal that served as a catalyst ([01:17]).

c. Historical Context of U.S.-China Trade Relations

Moser provides a historical overview, noting the evolving trade deficit with China—from $85 billion around the 2000s to a peak of nearly $420 billion in 2018, and currently stabilizing around $300 billion. He emphasizes the necessity of balancing this relationship to mitigate dependencies on China, stating, "China is really seen as the most important of all of these deals" ([03:00]).

d. Temporary Nature and Future Outlook

The discussion underscores that the current trade truce is not a definitive resolution but an extension of the negotiation timeline. Moser warns against the "tit for tat" tariff escalation, suggesting that sustained tariffs could harm both economies, especially with consumer supply chains potentially tightening as the holiday season approaches ([05:00]).

e. Implications for Investors and Specific Stocks

Moving to investor insights, Moser highlights companies benefiting from the positive market response, such as Wayfair (up over 20%), Shopify, Amazon, and Nike. He underscores the importance of long-term investment strategies over market timing, advising regular investment and staying invested for wealth creation ([07:09]).

f. Media Companies and Streaming Services

The conversation shifts to Fox Corporation's strategic moves in the streaming space. Moser analyzes Fox’s upcoming streaming service, Fox One, which aims to attract both cord cutters and traditional cable subscribers by bundling all Fox properties, including Fox News and Fox Sports. He anticipates the service to leverage Fox's strong NFL partnerships and widespread viewership to compete effectively, contrasting it with past attempts by other legacy media companies ([09:01]).

g. Success of Ad-Supported Streaming Platforms

Moser further discusses Fox’s investment in Tubi, an ad-supported streaming service, highlighting its significant user base and revenue growth. He compares Fox’s strategy to Amazon’s Freevee, emphasizing the growing market for ad-supported video on demand (AVOD) services, projected to reach $55 billion by 2025. This model supports Fox’s diversification and revenue streams beyond traditional cable ([12:03]).

h. Final Thoughts on Fox’s Growth and Investor Confidence

Concluding the segment, Moser points out Fox’s impressive stock performance, noting a nearly 60% increase over the past year and attributing it to robust advertising revenue and strong viewership ratings across all Fox properties. He encourages investors to monitor Fox’s advertising revenue and ratings as indicators of sustained growth and investment potential ([14:18]).

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2. GoDaddy's Capital Allocation and Growth Strategy

Host: Ricky Mulvey
Guest: Mark McCaffrey, CFO of GoDaddy
Timestamp Highlights: [17:46] - [27:43]

a. Evolution of GoDaddy’s Business Model

Ricky Mulvey introduces Mark McCaffrey to discuss GoDaddy's transformation from a domain registration service to a comprehensive IT solutions provider for micro-businesses. McCaffrey explains, "We've become a one stop shop for micro businesses that provide them the IT services for them to be effective, them to be efficient, them to compete on a much broader scale" ([18:19]).

b. Applications and Commerce Business as Growth Engine

McCaffrey highlights the significance of GoDaddy's Applications and Commerce segment, which now constitutes about a third of the company's revenue, contributing to a 17% sales growth. He emphasizes the high-profit margins from proprietary software, which drives ongoing growth: "This is the software that gets detached. It's more often than not a website or an email or commerce capabilities but it represents that second and third and fourth product attached that makes our customers successful" ([18:19]).

c. Impact of Artificial Intelligence on Small Businesses

The discussion delves into the role of AI in empowering micro-businesses. McCaffrey describes how GoDaddy's AI-powered tools automate customer interactions and streamline operations, enabling small business owners to manage their enterprises more efficiently without extensive technical expertise. He illustrates this with an example of a pizza business using GoDaddy’s AI to handle customer communications: "That's the type of customer we want. They don't sit there and think about, oh my God, I'm using AI" ([20:04]).

d. Differentiation from Competitors like Shopify

Addressing competition, McCaffrey contrasts GoDaddy's seamless, all-in-one platform with Shopify’s specialized services. He asserts that GoDaddy offers a more integrated and cost-effective solution for micro-businesses by combining domain services, website management, and transactional capabilities into a single application: "They don't have to manage eight apps, they manage one app" ([21:30]).

e. Capital Allocation: Share Buybacks Strategy

Ricky transitions to discuss GoDaddy's capital allocation, focusing on the company's aggressive share buyback programs. McCaffrey states, "We think investing in our own stock is one of the most attractive returns we have out there," highlighting the effectiveness of their buyback strategy in reducing the fully diluted share count by 25% over four years and maintaining strong free cash flow per share ([23:44]).

f. Outperformance and Long-Term Strategy

Reflecting on GoDaddy's market performance, McCaffrey attributes the company’s success to a disciplined focus on generating free cash flow and a durable, predictable business model. He emphasizes continuous improvement and operational efficiency as key drivers: "We know we have great products and innovation that bring people into our funnel... as our customer retention rates get stronger" ([25:34]). He also notes the importance of simplifying infrastructure to support scalable growth and effective capital allocation for sustained long-term value ([25:34]).

g. Conclusion of GoDaddy Segment

Ricky concludes the interview by acknowledging GoDaddy’s impressive stock performance and strategic capital allocation, thanking McCaffrey for his insights. McCaffrey reiterates the company's commitment to its growth and shareholder value ([27:38]).

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3. Final Remarks

Host Dylan Lewis wraps up the episode by reminding listeners to consider personal interests and Motley Fool's investment recommendations carefully before making financial decisions. He emphasizes the importance of conducting independent research and consulting the show's advertising disclosures for more information ([27:43]).

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Notable Quotes:

• Jason Moser: "This is not something that is locked in in a full on deal. But it does seem at least like there is some progress in diplomacy" ([01:17]).
• Jason Moser: "China is really seen as the most important of all of these deals" ([03:00]).
• Jason Moser: "tit for tat just doesn't work... there are going to be real problems" ([05:00]).
• Jason Moser: "It's always nice to see positive as opposed to negative... long term wealth creation." ([07:09]).
• Mark McCaffrey: "We've become a one stop shop for micro businesses" ([18:19]).
• Mark McCaffrey: "We think investing in our own stock is one of the most attractive returns we have out there." ([23:44]).
• Mark McCaffrey: "Our North Star... Free cash flow per share." ([25:34]).

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This episode of Motley Fool Money provided insightful discussions on the tentative U.S.-China trade deal's impact on the markets and a deep dive into GoDaddy's successful business strategies and capital allocation. Listeners gained valuable perspectives on global trade dynamics, investment strategies, and the evolving landscape of small business support through technology.

Transcript

[Jason Moser]

The Hoover Dam wasn't built in a day and the GMC Sierra lineup wasn't built overnight. Like every American achievement, building the Sierra 1500 heavy duty and EV was the result of dedication, a dedication to mastering the art of engineering. That's what this country has done for 250 years and what GMC has done for over 100. We are professional grade. Visit GMC.com to learn more. Assembled in Flint and Hamtranch, Michigan in.

[Mark McCaffrey]

Fort Wayne, Indiana of US and globally sourced parts.

[Dylan Lewis]

Set the time machine for a few weeks back. Motley fool money starts now. I'm Dylan Lewis and I'm joined over the airwaves by Motley fool analyst Jason Moser. Jason, thanks for joining me.

[Jason Moser]

Happy to be here Dylan, thanks for.

[Dylan Lewis]

Having me on this bright and sunny day for the market. Right S&P 500 up a little over 2%. Nasdaq up the Dow Jones up everybody up. On reports of the US China trade deal, I've seen this called tariff cuts, Jason. I've also seen it called temporary trade truce. The market's excited about it. What are you calling it?

[Jason Moser]

I definitely understand the excitement. And yes, bright and sunny day in the market. A fairly sort of bright and sunny day here in Northern Virginia. And hey, happy belated Mother's Day to all of the mothers out there. I mean what a tremendous to Sunday. We had a, we had a great time here and and I hope everyone else did too. Yeah, we woke up to a great headline. Of course the market responding obviously very positively to it. And, and I think that goes back to what we have been talking about for the last couple of months. Is it just day by day, you just don't know really what is going to happen. This is a very headline driven market and for as bad as things may seem one day you just don't know the next day they could turn on a dime. And it seems like today we sort of hit that turn on a dime status. And I think it's worth remembering this is a temporary solution. Right. This is not something that is locked in in a full on deal. But it does seem at least like there is some progress in diplomacy, in talks perhaps. The UK deal that was announced late last week is a bit of a catalyst here. Maybe that's a sign of good things to come. We will have to wait and see. But I think a lot of what we've been discussing in regard to tariffs in trade talks, most of this is really centered around ultimately China. Right. China is kind of the pot of gold at the end of the Rainbow, as they would say, right. This is kind of where we really need to figure this deal out. Because when you talk about trade deficits and there are positives and negatives that come with all of that. But, but in regard to China specifically, like, we've become very dependent on China through the years. And when you think about the, the relationship we've had, we've had with China through the years, going all the way back to the 1970s when we really started kind of diplomatically working together, over time we've seen this trade deficit, right? What we're importing more than we're exporting. This trade deficit has just continued to grow. You look at the 2000s, right around 2000, that trade deficit had reached around $85 billion. And from there it just continued to grow. I mean, it hit a peak of close to $420 billion in 2018. Today it's closer to around $300 billion. But the goal I think here is to try to balance that relationship out. And so hopefully this is a sign of good things to come. Again, it's one headline. We don't know a lot, there are not a lot of specifics, but it does seem like progress is at least being made.

[Dylan Lewis]

If you're like me, you've probably had a hard time following where we are relative to where we've started with a lot of these escalations. And from, from the reading and from some of the reporting out there, it seems like this essentially resets to where we were with the US And China relations in late March, initial tariffs announced by the Trump administration, retaliations on both sides. You were on the show last week with our colleague Ricky Mo, talking about how The S&P 500 had essentially retraced the Liberation Day losses. In terms of macro mentality, are we basically looking at like 90 day amnesia here where we, we, we lost some time, but we wound up kind of back in the same place?

[Jason Moser]

I mean, when we look at the numbers, it's just been such a boring year. Right. The market is essentially flat. I mean, ho hum, who cares? Yeah, I mean, this has just been a really bumpy ride in, in going back to. You remember how this all started? I mean, this was what, late February, early March, what? Or the conversation really centered around Canada and China and certain trade negotiations there, but also fentanyl stuff in border stuff. And then it expanded very quickly. It seemed like virtually every country on the face of the planet, which is, I don't know, something like 180, 190 countries. Yeah, it does feel like we are kind of back to where we started. It's nice to see at least some progress being made. I, you know, go back to that, that UK trade deal. Hopefully that is a sign of things to come. We know that companies are coming to the countries are coming to the, to the table and want to negotiate. But again, given our, our relationship with China into an extent, our reliance on China, I think China is really seen as the most important of all of these deals. And again, time will, time will tell there. I mean, this is, again, this is not a, this is not a permanent solution. This is just something that it's extending the timeline. It's indicating that, hey, conversations are being had. Because, I mean, if you think about it like this, tit for tat just doesn't work. We can, hey, I say 175%. Tariffs, well, hey, I'll say 185%. Well, I'm gonna go 195. And it could just go up and up and up and nobody ends up benefiting. And we certainly know that China's economy is suffering from this, but we also know that our economy will suffer from this as well, particularly as we get closer to the holiday season. If you start seeing supply dwindle and, and consumers aren't able to get what they want, there are going to be real problems. There will be political ramifications that come from that as well. So it's good to see progress being made. I certainly would not look at this as, as a solution, but it seems like at least a step in the right direction.

[Dylan Lewis]

Your dogs seem to agree there, Jason.

[Jason Moser]

They do. They're big fan. They're big fans of diplomacy.

[Dylan Lewis]

Dylan, as we noted, good day for the market. Even better day for companies that are in the business of buying and selling and really anybody in retail, anybody with international supply chains, as you noted, this is kind of a reset, but a reprieve as well, not a full solution. Any wise words for investors seeing some major moves with their stocks today?

[Jason Moser]

I mean, I think it's great. We always love to see our portfolios in the green, right? Or the black, however you want to put it. But it's always nice to see positive as opposed to negative. I think it's really interesting to see the companies that are reacting most strongly to these results. I look at, at some of these companies that stand out. Wayfair, for example, up better than 20%. Totally understandable. I mean, they really depend on the supply chain centered around China. Shopify, again, we've talked about that before. Plenty of small and medium sized businesses that do not fare well during these heavy tariff times all the way down the line there. Amazon doing well, Nike doing well. So I think it's nice to see those companies at least starting to recover a little bit from these lows. Again, I think we just, this reiterates why we invest the way we do. Here it is. So if you tried to time your way in and out of this stuff, I mean, I can't imagine that many people would have been very successful. So continuing to invest regularly, staying invested, that is something we just need to reiterate to people because that is really, truly, that's the solution to long term wealth creation.

[Dylan Lewis]

We may get some more commentary on the big picture here. We see Walmart and some of the Chinese companies like Alibaba report later in the week, fairly big earnings week. And Fox got us started. They're out with earnings this week. And they also had an announcement that their upcoming streaming service, Fox One will be launching before the upcoming football season, which I can't imagine is an accident. I imagine that's quite intentional. This is something we've been looking forward to for a while. Jason, there's a history of legacy media companies getting streaming services right? There's a history of legacy media companies getting streaming services wrong. I think CNN plus lasted for about a month. What are you thinking about as you see Fox stepping up to the competition here?

[Jason Moser]

So I think it's noteworthy to acknowledge that Fox is looking at this streaming service as something where they want to attract the ca, the cord cutter. Right? I mean, there, there's sort of two sides of the coin here in that we've got folks who are still very happy cable subscribers. And, and we were looking at it countrywide. I mean, there's still plenty of cable subscribers out there. Now we know the trend is towards cord cutting, but Fox wants to make sure to offer something for everyone. And so if, for example, you are a cable subscriber and you get your Fox channels, well then you, it sounds like you're going to get access to this Fox One streaming service as well. And if you're not, if you're a cord cutter and you don't really want to participate in the cable network, well, then you have the opportunity to go ahead and subscribe to this Fox streaming service. And this, it's important to note, I think this, this Fox streaming service is going to be all of the properties, right? It's not just Fox News. I mean, it's, it's the standalone Fox channel. It's all of the Fox Sports channels. It's everything that comes within that Fox portfolio. And I mean, let's be clear, it's a very popular portfolio. It garners a lot of viewers and I think that really matters. And you referred back to that NFL relationship there and that is obviously a very big driver come August when we start talking about preseason and getting into September with, with the regular season games. NFL is just big business. We know that. And Fox benefits greatly from that. I think we don't really know exactly what pricing is going to look like for the service yet, but, but it does sound like at least they are not looking for some type of discount or low cost price point. Something like you think about when Disney initiated, when they introduced Disney plus for example. And, and I think they started that out at what, 5.99 or 6.99 per month. I mean, I, I don't think that's what this is going to be. It's going to be something that's a little bit more reflective of the value that they feel like they're returning to all of their viewers. But all things considered, I think this makes sense. I mean it's, it's going to be something that I think helps expand their viewership and, and gives everybody a chance to participate in, in that Fox portfolio how they want, whether they're cable subscribers or whether they are, you know, cord cutters that really just want to find access to the best content.

[Dylan Lewis]

One thing that might bolster some market confidence here and what Fox is able to do. This is not their first horse in the streaming race. They already own Tubi, which is a free ad supported streaming service. Kind of a sleeper in the streaming space in a lot of ways, but at a critical mass. I think with what they saw for super bowl editions, they are probably over 100 million monthly active users at this point. It's not a profitable operation for them yet, but they've done over a billion dollars in trailing twelve month revenue. So there is some track record of success. And I think crucially, Jason, there's success in connecting with advertisers and working that ad supported model. That really seems to be the future of where a lot of this industry is going.

[Jason Moser]

Yeah, well, we've talked about this a lot in regard to ad supported video on demand. Right. This is a massive market opportunity worldwide. I mean, I think in when you get outside of the US and you get to economies that are a little bit more cost sensitive, it makes even more sense. But when you look at revenue in the advertising video on demand supported market, right there Worldwide, it's projected to reach around $55 billion in 2025. And that's only going to continue to grow. And so for me it makes a lot of sense that they continue to pursue this. It's just interesting that I don't know about you, Dylan, but Tubi is just not something that is, it's not top of mind for me. I'm not the biggest Tubi user. I mean, I know we have the app on our TV and I guess we use it every once in a while if we're searching for content. But again, I mean, you know, you mentioned this, this massive base of users, 100 million closing in on 100 million monthly active users they saw in the quarter, their total revenue is up 27%. Right? Fox's total revenue is up 27% for the quarter. Advertising revenue increased 65% and that primarily was due to the impact of, of, of Tubi. Right. They, they saw tremendous benefit there from, from the super bowl and, and I think that's something that is slated to continue. So for me it makes sense that they continue to invest in this business because not only do they benefit from this portfolio of, of sort of central Fox offerings that they have, but then they've got these other little, little sort of ancillary properties that they just continue to invest in. They sort of fly under the radar. But, but obviously it's working out very well for the company. I mean, I think it's worth noting. And if you look at Amazon, for example, I mean Amazon making a lot of investments in their Freevee offering, which is something essentially you're going to get Amazon Freebie if you just have Amazon at all. Right. If you're a prime member, however your relationship is with Amazon, you're going to have access to Freevee and so Amazon clearly sees an opportunity there as well. And again, I think going back to those growth numbers in the AVOD market there, it's nice to see that Fox continues to invest in this business because it's obviously working out for them.

[Dylan Lewis]

Fox is not a name that we talk about all that often to our detriment. Shares up almost 60% over the last 12 months. I was glad that we had the opportunity to check in on it because it's one that not a lot of folks have been paying attention to. Stock basically set new all time highs earlier this year. Not too far off of those levels now it seems like advertising is a big part of the recent run. If this is getting onto people's radar at all. Anything else you'd pay attention to.

[Jason Moser]

Yeah, I think just continue to pay attention to the overall advertising revenue. The ratings that Fox brings in. I think we all know, I mean, Fox does pretty well with all of its properties and I think they, they really benefited tremendously from this most recent, this most recent election cycle. Right. They noted in the call from last quarter that on election night they saw over 13 and a half million viewers tuning in. And then I think they said what Fox News Channel had grown, what it become the most watched cable network in total day and prime time in that space, growing total day audience by nearly 40% and then their primetime audience by 45% year over year. And so it's not just Fox News. We go back to the NFL relationship in all of, all of the different ways they can really win. It's not just Fox News. Right. It's Fox Sports Fox News. It's the standalone Fox offering there. So they do have a lot of different ways they can win with their media properties. And at the end of the day, it really just, it does boil down to ratings. And as it stands right now, Fox continues to bring in strong ratings across all of its properties. And that, that would be a very encouraging thing for investors looking to maybe get some exposure to the entertainment space.

[Dylan Lewis]

Jason Moser, thanks for joining me today.

[Jason Moser]

Thank you.

[Dylan Lewis]

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[Ricky Mulvey]

So a lot of our listeners may know GoDaddy is a domain registration business. They may not know GoDaddy is a sort of long term market outperformer which I want to get into. We'll focus on the quarterly results though because right now the growth engine and about a third of your revenue is coming from this applications and commerce business. This is not just registering websites. That's where you're getting 17% sales growth. For our listeners who just know GoDaddy is a spot where you're buying websites, what should they understand about the applications and commerce business?

[Mark McCaffrey]

Yeah, absolutely. It's a great question. We've become so much more than just being a domain company over the years. We just hit our 10 year anniversary of being a public company. We've been around 28 years. We've become a one stop shop for micro businesses that provide them the IT services for them to be effective, them to be efficient, them to compete on a much broader scale. We're talking the mom and pop shops. I always refer to them the underdogs. They're doing what they love, they are passionate about what they do, they want to do it broader, they want to connect to more customers. They may not be IT savvy. We provide them. I sometimes refer to IT as the operating systems for the micro businesses. That's what our application in commons commerce segment represents. Our core platform was the traditional domain part of our business. But this is the software that gets detached. It's more often than not a website or an email or commerce capabilities but it represents that second and third and fourth product attached that makes our customers successful because it's proprietary software and some third party software. Proprietary software. It comes at a much higher profit margin for us and therefore has been our growth engine and has become a bigger and bigger part of the business.

[Ricky Mulvey]

We've been talking on the show about how very large companies are using artificial intelligence. Microsoft building up with with OpenAI, Palantir getting inserted into every government and any company they can find. You're at a micro level with very small businesses in helping them use AI to build and grow their businesses. At a very broad level. How do you see AI impacting small business creation in the US right now.

[Mark McCaffrey]

When you think about it? And again when we say micro businesses, we're probably smaller than the small businesses others refer to. They don't think about AI as to, oh my God, I want to use AI, but they want to have help. They don't want to hire necessarily more employees, but yet, for example, they have to respond across multiple different social media platforms to inbounds. And our tools do that automatically. They write in their voice. They allow them to be in multiple places at multiple times. I was just meeting with a. I call them the pizza guys, but they're two guys who run a mobile pizza oven between putting a pizza in for 90 seconds. They're on our conversations tool, just clicking send to make sure that they're setting up their next gig. That's the type of customer we want. They don't sit there and think about, oh my God, I'm using AI. They're sitting there going, oh my God, this just works better. That is the customer we want. That's what our product does. Arrow A I R O. Just for the record, it allows our customers using AI to respond more effectively and more efficiently within their customer base to grow. And it works because we have so much data around it.

[Ricky Mulvey]

So this is a zone where Shopify also plays. We talk about Shopify a lot on the show. What's the differentiation of Aero? If I'm a micro business, if I am starting my own pizza business with my brother, why would I do it on GoDaddy's platform instead of Shopify?

[Mark McCaffrey]

Number one, it's a seamless experience for us. You come to one place and you're able to get all the functionality. Number two, the cost effectiveness of it. We do it at such a good price point for the value our customers are getting. It allows them to start up, be more successful, and quite frankly manage across one application. When you think about it, we're the only company in the world that has technology stack all the way from the domain to the transaction because we can combine that into one seamless experience with them. They don't have to manage eight apps, they manage one app. And when they need help, they go to our care organization. Our care organization is designed to work with this customer base, work with the micro business. This is what they do best and why they're so effective. Between the technology itself and our ability to guide them through all of this, I always say you can be up and running with a business in 15 minutes. I get corrected by my internal people to say, no, actually we can do it in three minutes. Can you stop saying it takes so long, but you can get everything you need almost instantaneously bundled together at a great price. Be up and Running with website transactions, professional email and a domain. And you can be getting all your traffic across multiple social media platforms. That's what we offer. It's simple, it's easy, it's easy to use, and it's easy to maintain.

[Ricky Mulvey]

One of the reasons I'm happy to have you on the show is, is that GoDaddy has a very interesting capital allocation story. And you know, there's a long term outperformance for your stock since, since GoDaddy IPO'd. But 2023 is when it really when a lot of that performance came. And that's sort of in line with when you started a stock repurchase authorization program. Since 2022, GoDaddy bought back $4 billion worth of stock. And I don't want to dismiss the growth in the actual business, but there's a capital allocation story here that's important for shareholders. And as CFO, you've really focused on share buybacks. You've got another 3 billion dollar authorization plan moving forward for the next few years. But just conceptually, you know, you've got a lot of options at your disposal. You can buy back stock, you can pay a regular dividend, you can pay a special dividend. Why stick with the buyback so much?

[Mark McCaffrey]

I'll start with the underlying premise that we think investing in our own stock is one of the most attractive returns we have out there. We've shown that we've been able to execute on this buyback strategy very effectively. Thank you for pointing out. We've done it over four years. $4 billion. Not many companies have reduced their fully diluted share count by 25% over a period of time such as this. We're very proud of that. And we're very proud to not only share the success we've had, obviously we generate a lot of free cash flow that allows us to have these options, but also return that value back to our shareholders and do it in a manner that we continue to, I would say, create this great model. I'll even take it a step further. How many companies out there today are growing 6 to 8% have expanded their normalized EBITDA margins by 900 basis points in five years and then bought back 25% of their fully diluted shares over a similar period of time and still are able to compound to free cash flow per share on a CAGR of 20%. That whole model works together for us fantastically. It's durable, it's resilient. We continue to put it forward because it works. And our investors Keep giving us the feedback. They really like the program, they really like how we do this, and they want us to continue doing this.

[Ricky Mulvey]

Since GoDaddy's IPO 10 years ago, I mentioned this at the top. It's been a quiet market beater, and a lot of that performance has come within the past few years. I don't want to dismiss that. But when you look at the overall results, the S&P 500 compound annual growth rate of about 12%, the NASDAQ about 16%, and GoDaddy at 25%, smashing the return of the S&P 500. When you look back on 10 years as a public company, any reflections on the outperformance or maybe what's been the recipe for that at GoDaddy?

[Mark McCaffrey]

Yeah, so the recipe is focusing on what we call our North Star and making sure that everything we do is in honor of that North Star. North Star we call our North Star. Free cash flow per share. We generate free cash flow, whether it's growth, whether it's profitability. We're always looking to do that in a way to maximize that equation. Understanding that our model is durable, it's predictable. We can use the levers to make sure we continue to compound into that equation and drive that value. As we've done that, as we've grown as a company, as we've hit this milestone, because we are a very large tech company, we know that 90% of our revenue starts with our existing customer base. We know we have great products and innovation that bring people into our funnel. We know this model compounds on itself year after year as our customer retention rates get stronger. That compounding free cash flow is what creates the value within the business, business itself, and that's the same value we can use to return to our shareholders. I would say the model works. Our execution of our strategy works, our model works behind it. And it's about the compounding effect of layering on every year just to be a little bit better and to grow based on these metrics that just continue to generate cash flow. I would also say three years ago, we took an effort to really simplify our infrastructure so that our operating leverage just supported this. Going forward, we're growing revenue at over two times. We're growing our operating expenses right now. That allows us to be so efficient in how we do things. And when we're efficient, we can do what we do best, which is focus on our customers. Again, it all holds together, but it all compounds on each other. The balance sheet gets stronger. We're able to generate free cash flow. We're able to look at at the options for capital allocation, and it puts us in a great spot going forward.

[Ricky Mulvey]

Good place to end it. Mark McCaffrey, that is the chief financial officer of GoDaddy. Appreciate your time and your insight. Thanks for joining us on Motley Fool Money.

[Mark McCaffrey]

All right. Thanks, Ricky. Thanks for having me.

[Dylan Lewis]

As always. People on the program may have interests in the stocks they talk about, and Motley fool may have formal recommendations for or against. So don't buy or sell anything based on what you hear. All personal finance content follow us motifool well as standards is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For the Motley Fool Money team, I'm Dylan Lewis. We'll be back tomorrow.