May 8, 2018 / 8:24 PM / in 7 months

UPDATE 2-Web hosting firm GoDaddy's revenue beats on customer additions

(Adds CFO comment, background; Updates share price)

By Munsif Vengattil

May 8 (Reuters) - GoDaddy Inc on Tuesday forecast second-quarter revenue above expectations and beat Wall Street estimates for first-quarter revenue, as the web-hosting company gained more than a million customers from its acquisition of Host Europe last year.

The company's shares rose 2.3 percent in after-hours trading.

Scottsdale, Arizona-based GoDaddy had about 17.7 million customers as of March 31, up about 17 percent from a year earlier.

GoDaddy completed its $1.82 billion acquisition of Host Europe in April last year, adding about 1.6 million additional customers.

The company, which manages over 76 million domain names or roughly a fifth of all domain names worldwide, forecast current-quarter revenue between $640 million and $645 million.

Analysts on average were expecting $635.9 million, according to Thomson Reuters I/B/E/S.

"Two primary drivers of the business are ARPU and our customers," CFO Ray Winborne told Reuters.

Winborne pointed to small businesses that start with availing one particular service and sign up for more offerings over time, subsequently contributing to more average revenue per user (ARPU).

In the first-quarter, ARPU rose about 6 percent to $138.

The company had noted that there are more than 500 million small businesses globally, with Jefferies estimating that about half of them still do not have a website.

HOSTING GAINS MOMENTUM

The company, which a few years ago got nearly 56 percent of its revenue from the niche domain business, has seen that contribution fall to about 46 percent and has seen its hosting business taking over.

Revenue from hosting and presence grew 34.5 percent in the reported quarter, compared with a 21.1 percent growth in its domain business.

This is a positive sign as the hosting business has gross margins well north of 70 percent, compared with 35-38 percent for domains, JP Morgan analyst Sterling Auty said in February.

GoDaddy said net income attributable to the company rose to $3.3 million in the first quarter from about $600,000 a year earlier.

The company earned 2 cents per share, matching analysts' expectations.

Revenue jumped about 29 percent to $633.2 million, topping expectations of $622.4 million. (Reporting by Munsif Vengattil in Bengaluru; Editing by Shounak Dasgupta)

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