GoDaddy Inc
For the period ended Dec 31, 2023. Filed Feb 29, 2024.
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FY2023 · Filed Feb 29, 2024
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of GoDaddy Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of GoDaddy Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 29, 2024 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
| Valuation Allowance – Realizability of Deferred Tax Assets | |
| Description of the Matter | As more fully described in Note 16 to the consolidated financial statements, at December 31, 2023, the Company had deferred tax assets related to deductible temporary differences and carryforwards of $1.03 billion, net of a $378 million valuation allowance. Deferred tax assets are reduced by a valuation allowance if, based on the weight of all available evidence, in management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized based on the available sources of income.Auditing management’s assessment of the realizability of its deferred tax assets involved complex auditor judgment because management’s estimate is highly subjective and based on significant assumptions that may be affected by future market or economic conditions, as well as management’s ability to execute against its forecasted plan. |
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| How We Addressed the Matter in Our Audit | Our audit procedures performed, among others, included evaluation of the assumptions used by the Company to develop the projections of future taxable income by tax-paying component and jurisdiction, and testing of the completeness and accuracy of the underlying data used in its projections as the primary source of income, as well as testing the Company’s analysis of the limitation related to tax character (capital vs. ordinary), ordering rules and/or limited carryforward periods of the expiring deferred tax assets, and uncertain tax positions as a source of income, where applicable. For example, we compared the projections of future taxable income with the actual results of prior periods, and we evaluated management’s consideration of current industry and economic trends. We also assessed the historical accuracy of management’s projections and compared the projections of future taxable income with other forecasted financial information prepared by the Company. We evaluated the Company’s disclosures included in Note 16 to the consolidated financial statements. |
| Sufficiency of audit evidence over revenue | |
| Description of the Matter | As more fully described in Note 2 to the consolidated financial statements, the Company derives its revenue primarily from subscription fees for domain registrations, website hosting, website security, and applications and commerce products, which it generally recognizes ratably over the related contractual terms. The revenue stream accounting for the majority of the Company's revenue involves the use of several IT applications responsible for the initiation, processing, and recording of transactions originating from the Company's ecommerce websites based on the calculation of revenue in accordance with the Company's accounting policies. The processing and recognition of revenue are highly automated and involve capturing and processing significant volumes of data.We identified the evaluation of sufficiency of audit evidence over this revenue as a critical audit matter due to the large volume of data and the number of revenue accounting IT applications. While this revenue consists of a large number of similar, individually low value transactions, the IT applications required a high degree of auditor judgment to evaluate the design of our audit procedures to ensure sufficiency of audit evidence obtained. Subjective auditor judgment was required to evaluate that revenue data was captured and aggregated accurately and completely throughout these various IT applications. Additionally, IT professionals with specialized skills and knowledge were required to evaluate the nature and extent of evidence obtained over this revenue stream. |
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| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's accounting for this revenue stream, including IT general controls and application controls, controls over data interfaces, and procedures used to initiate, process, and record transactions. For this revenue stream, we involved IT professionals with specialized skills and knowledge, who assisted in determining that the design of controls over the IT applications used by the Company in this revenue recognition process and the transfer of relevant revenue data between certain systems used in the revenue recognition process was appropriate.Our audit procedures also included, among others, testing the completeness and accuracy of the underlying data within the Company's billing systems, performing data analytics to evaluate the completeness and accuracy of recorded revenue and deferred revenue amounts, testing samples of sales transactions to third-party documentation, and reviewing the Company's cash to billings reconciliations. We also evaluated the Company's disclosures included in Note 2 to the consolidated financial statements.We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed. |
/s/Ernst & Young LLP
We have served as the Company’s auditor since 2004.
Phoenix, Arizona
February 29, 2024
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