CDK - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the third quarter 2018 CDK Global, Inc. earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

conference be this reminder, a call recorded. may As turn over Relations. to now like Coleman, conference the to Investor I'd Katie the Senior Director,

You may begin.

Katherine Coleman

for morning. for XXXX Thank thank call our us earnings Good fiscal third webcast. you. and quarter And joining you

press Investor statements. in Joe detailed I through are like during call cause of included results involve the for today's of amounts set otherwise with and call to later today's XX-Q unless differ for I'll turn that me on begin quarter, remarks details the our SEC, directly most that, forward-looking now actual finally, those call available this get CDK's items CEO, this the forward-looking Brian website. Brian. uncertainties and the by risks our which the statements release of amounts made and followed forth then announced third conference our this highlights over basis the morning's will in would filing to Throughout materially highlights exciting could our will fiscal from remind statements. section the Form by Brian our before everyone filings contain GAAP and to Joining in These to in noted. are are comparable quarter And, including risks quarter. also anticipate MacDonald, the we today. With overview Relations Reconciliations guidance call, started. Tautges, few financial adjusted results results you Joe and references of to the today's CFO. we XXXX. an on call the will take A new an amounts we adjusted innovations

Brian MacDonald

growth while we today. and successes. of everyone, several a for And and sales announced revenue right to to new had our be, we our are launched earnings it for taking from I Katie. This talking number isn't want We as the to where spend highlight us thank innovations double-digit that are call quarter growth. improving I'll improve we delivered you Thanks, to quarter. important highlights Today, an the margins about new of revenue and exciting QX long-term actions Good new innovations quarter was I growth. our And then, joining morning, want another time results. in

as don't the about excited ever Automotive six I'm Dealers products really innovations show much had First, where our new year we was or XXth drive We've we had another coming proud our the the into attending delivered. talk CDK I what to of we largest years. teams to XXXX. recent I'm been our in have NABA Association, at there One to announced convention. This market innovative and business, the creating the new as know the about investments growth did making industry's was show, year announcements. major in National

serve the industry. the the is volumes developed have provide Exchange, positive or users, customers opened, our offering at market model show also service we dealership DMS launched changing this a means any Commerce to a DMS the The changer the time. Drive preview platform. view any for quarters Drive consumption-based user-friendly, been opportunity cloud-based migration listening will VPN and overwhelmingly for more That our Flex The DMS technology requirements. like We've to of us Flex PC business deliver over available received industry. the be dealers. smaller And orders. to market. and as will else a for years, a system faster, coming easier flexes better that intuitive, feedback us repair the sales real We'll accessibly no we and process. nothing the and will smaller led a system Flex highlighted event as Before dealer – allow recently Drive as our drivers the Fortellis analysts. device, There anywhere news for be a as and announced industry well architecture from game a media pricing Automotive first-ever with also We

consumer inefficiencies solutions that enabler automotive as an the fashion, have in the While perpetuating best industry. Drive Flex space, the auto work Fortellis overall the DMS point-to-point this changing fragment, and across to positioned a is with rapid industry Exchange within addresses pace themselves a addresses seamless is of the Commerce together commerce entire retail a and a need within need automotive Automotive for The at experience. dealership dealers address found problem. don't CDK

be platform sell operate and provides and customers, connect common workflows, service Fortellis can with streamlined secure, that more a delivered for cars, to better efficiently. integrated so more with dealers solutions

We available industry. be major software industries the automotive next it auto entire better right now are is and in developers, updates data other and the launch and in solutions We're the platform own is type bringing as near potential. the understand of industry will providers This and in commerce. is infancy for groundbreaking The dealers, to our manufacturers, that ready and successful industry well. the in way the approach has a continue we'll we as been long-term automotive provide timing revenue many for evolution to the together of

Fortellis to experiences can that However, very to date about the we and light. interest potential are new bring excited

consumers X.X, transact experience, and the common which introduced the entire buying anywhere, Store point our product in-store, match car user better enjoyable model through online. it enables differentiates process shorter, Connected is allows CDK's today. more release the streamlines it latest This also current making end-to-end anywhere process dealers We shown of itself the to What also efficient of shortcoming consumer. the online move towards to for quote a the in complete solutions market accuracy Store will for is which and Connected a quote.

providers part the Dealer the between retail and OEMs brings alliance to will and insurance We that dealerships, faster are accurate lenders experience, have We're improved finance an multiple comprehensive together experience. about solution process. process These to our F&I workflow to a to streamlined the partnered By a integrating to faster rollout as complex into solution, workflow, point-of-sale their Open actively a solution. and take Exchange address dealers. working transaction that provide easier with the this and funding and and two leads providing organizations challenging aftermarket as excited an well to dealers also cash more we with this fragmented of RouteOne strategic one to most better flow, customer

for Driving were must-do high can record-setting more enabling delightful leads about up list were NADA helping here. and in customers. on their all dealers more our and year's performance. common You them their while at a We theme XX% over attendees' last service see provide a cars. experience efficiencies business, We're than sell total to

the in and deliver showing hard to been represent have without CDK CDK these NADA of industry. our Our one the and work not as innovations done employees, to could entire dedication working

and additional EPS few EPS margin year-over-year. Now, the every EBITDA and in grew to America I'm financial our strong minutes. Solutions year pleased in to plan XX% provide business and particularly margins around points core and basis quarter. like June XX% growth XXX guidance I'd subscription highlights on announcing our XXXX results have for expanded with few Revenues EBITDA from business in and Since grew will dollars details quarter a achieved Diluted transformation of the sales points. by EBITDA from expanded X% a the we XX.X%. growth had We quarterly to this $X.XX. the basis provide grew quarter. double-digit Retail International. have XXXX, Joe another North

as pursuit two competitive Our last performance deal XX-plus team over quarter's as groups sites. ten a and group improved signed well upon store

remains as next and making implementation we opportunity head can into investments is year. strong, sales resources the demand Our our ensure expand to why meet we which we're to team

dealer consulting recognized endorsements. product and two we our customer to to improve with dealer long-term website a also we related awards to this, experience website with see increased revenue renewed in-depth three-plus site activity Companies, NADA. also leader of PCG website we growth We're and seeing single-digit research, in quarter, OEM This to month our dealers. platform contract. our another We made a at user education, and to from dealership last number our the Along sales high recurring recent enhancements continue by automotive largest were

international with major a global past pleased in signed business We've years. ten the making recently with the the Asia-Pacific all our agreement side, Japan, seen our deal a team been we in that the into we've the largest thus far. investments new OEM On closed and growth year has

auto in digits areas, year. other declined site on also dealer on have smaller that as this segment. retention growth due a including weakness previously to remain in declined two-site this site of both We dealer auto and continued one mentioned site in groups the Auto our shown and Recurring market. advertising site overall our revenue the improving mid-single a segment dealer year-over-year performance in quarter, result this of one counts the sequential losses primarily to two to churn basis both focused

on our to and help the Flex our time. our of renew of address will month-to-month do are customers launch us we over team, We needs sales so stabilizing taken to talent. The site focused actions have smaller Drive reorganize the the dealer

compared have near our on do the growth particularly to for made challenging sites customers to organizational the down what general right business. some additional to confident have lower and growth short to in to prior strategy. expected primarily the advertising of focus continues spreads However, lumpy be We team as revenue segment manager results due in provide changes can year-over-year and we challenged. expect modestly a on strategy and expect in on XXXX. internally be place someone changes periods. be a Advertising to recently this I'm basis deliver promoted our future. Driving from advertising we environment fallen fiscal We we

strong in One and flow. cash people, greatest assets, the is addition strong our sheet balance our to operating of

M&A deliver we billion to and more our XXXX of since $X we And retired to during time. best-in-class shareholders We outstanding that solutions. have XX% using ensure the opportunities in returned to than portfolio are shares can close to address we've

from XX% installed technologies increase of augment proven base Eye the scale product deliver ready in we to results of install. example, have expectation. with For the are by portfolio. that results can initial Executive acquisition at our our to short-term continue what backlog These another the and indicative We've XX% exceed the

with us auto and Progressus, more expertise ad advertising existing at social, [ph] During of portfolio. to through the expand reach advertising Progressus dealers in our groups mobile to businesses quarter, a be and exciting exciting our value to for – provider advertising is of dealers. to our CDK. our an will completed diversification care complement we of and time dealer even leading allow add This acquisition the

two last We on dealers to but employees. access the the and it. dealer We're capabilities capabilities – been listening years enabler and of to. We've we transformation, taking providing are We're an sizes, our about critical that all of listening have partners the dealers, commerce for input talked acting success. our automotive to to over OEMs,

New head implementation into XXXX. product the not take over the We'll to acquisitions, questions. business have development. now service, as long-term and and strategy growth we your And investment done to share and then innovations, yet. in with about turn Joe call we'll you more fiscal I'll we're

Joe Tautges

towards free subscription Thank progress transformation performance cash revenue a growth good earnings Brian. of everyone. areas, morning, with you, in and our pleased goals. Good improved including number plan We're I'm to make flow. continuing our and

operating in growth. and targeted will areas revenue This investment at expenses, increased that quarter, both our accelerate we capital

new we're capacity making over our expanding well. And sales successes. our and innovations, are service implementation We into XX%, by additional as investments given sales

place in two areas have As us and one site and so. to advertising we work action dealer do business. Brian discussed, performance focus to the to do are segment improve of in for we These plans have to

America other the discuss by was currency growth which advertising. strong result our me third revenues, well on basis North is revenue from in Revenues North and and X%, let weakness International, as as Now, grew subscription X%. Revenue the growth America results. constant quarter of a offset transaction

prior expansion, as Retail continued benefit International, expense depreciation America from XX% basis and due expanded benefits the and both to amortization. from by partially and versus well We as primarily subscription year-over-year higher grew North in dollar. expanded XXX foreign growth, to lower year, basis Canadian incentive compensation. offset a pound margin in growth Solutions XX.X%. result EBITDA interest primarily revenue Pretax of EBITDA our dollars and the transformation program as points and euro, to margins and exchange XXX fluctuations, Margin rate points

XX.X% for was program share, earnings our XX% effective tax grew rate. rate $X.XX share Our count EPS a lower quarter. per growth, by Diluted and aided achieved tax the average capital to lower through returns

results. segment our to turning Now,

Auto for per impacted account which mid-single attrition three-plus were down slightly North Subscription auto revenues, grew sites. North by to a one in Solutions DMS segment Retail X%. America high continue down sites X%. sites, Transaction single-digit of two down Dealer activity drop revenues from from impact revenue the sites from Average by X%. loss year-over-year groups, the driven mitigated three-plus down our were we increased digit within which auto site were growth solutions. site to growth was offset portfolio. XX% decline year-over-year. results, our X%, Our up see websites America grew to were in two XX% were Adjacency the by revenues X%, segment sites. Total due to sites as one point site by

a per lower and replacement lower was prospective revenue in prior revenues segment lower increased as a not should had local were well Higher a down margins mix. spend This offset was from impact to America points due to basis have scale related the was or in to site represented on growth driven primarily Advertising X%. as roughly points, from Margins by basis. spending and declined we benefits transaction on of expanded plan points, revenues year-over-year. marketing primarily incentive have to hardware by impact on the reported basis, transformation shift increased due North achieved from revenue compensation. Advertising on earnings. dealers associations. XX% counts year. and XXX OEM the revenue XX change XX% of from from revenues flat X% net quarter no basis X% previously Site primarily The scale beginning program basis quarter, made benefits a we certain revenues increased although total correction growth basis, year-over-year. International from with Margins a revenues this revenue transformation material currency constant primarily grew this Therefore, the became hardware XXX through on and plan. expanded net aware revenues that

which shareholder to of XXXX net the cash a of We the repurchased EBITDA. an calendar shares $XX million, million cash $XXX start year dividends return representing on million of Our outside balance and million, paid free Year-to-date, quarter of the X.X billion. held was of times debt solid million million was $XXX We is United in ended $X target adjusted States. at quarter, the $XXX $XXX $XXX year-over-year. flow of increase to XX%

X.X to ratio. We continue times to target leverage X

to for I'll quarter's dealer XXXX. to Last growth local opportunities fiscal association revising growth discussed. on advertising We're move X.X% full-year revenue to Now, certain the revenue guidance spend marketing have guidance to materialize. our to that to expectations guidance the X%, failed primarily included related challenges due and

next will expected advertising we now what headwind levels our about few quarters. be spend know revenue a customers, advertising Given for the from growth

$X.XX guidance end $X.XX. we to to our be with We're of high be consistent EBITDA to guidance expected quarter's margins the expect of maintaining to at EPS the range. XX% We XX.X% XX%, where last XX% to

Our unchanged fiscal remains tax XXXX. rate guidance of for XX% to XX%

our are how reduction tax XXXX reform. to rate of fiscal reminder, full in expect a our site our X-point business tax with particularly X As is benefit effective the pleased get three-plus performing, in when another in groups we international. core and summary, In year we subscription we

we're challenges one year-over-year get and We have within space to and transaction and through the our to streams. our need facing comparison work do advertising revenue dealer we other two in to site and

target of in ASC the next impact making of our exit we'll process mentioned, XXXX. and We're your will next I the to evaluating available. year And planning in process to remain meaningful updates the quarter. we'll in share with and XX% XXXX operations fiscal the we're expectations to Brian guidance As middle further and provide and XXX operator. our now turn the We're be questions. And for your support margin the fiscal committed take will to as I innovations strategy. happy we call over also and growth investments into those margin back

Operator

Thank you. [Operator Instructions].

line of question Our Rayna first of Evercore from ISI. Kumar the comes

now is line Your open.

Anthony Cyganovich

advertising Rayna changed remarks, color changed issue? have or This think is provide strategies have strategies. Anthony that bit prepared the Cyganovich short-term you a little customers you Can this your on is their behalf morning. and Good mentioned how your of longer-term Kumar. more on of more a whether In you

Brian MacDonald

be to business some our careful in pulled seen would budgets Brian little back here. spending. we've but has it's customers, we specific so the Anthony, started off some about kind We in short primary be how come want seen to term. seen that advertising factors the channel obviously, we've SAR of affecting the bit, talk a being we've shift And,

dollars money few be will But visibility so traditional and will to to time, over business to few advertising will advertising choppy, digital choppy continue next our over little continue quarters from quarters. next move, the a advertising. think, over the we the I move think is

Anthony Cyganovich

helpful. That's Great.

guess, for to is that Just is follow-up on could in revenue FY you? like to headwind a this organic I going still do be you accelerate that, feel or it XXXX expectation your growth

Joe Tautges

Hey, Joe It's Yeah. Anthony. Tautges.

at look business when and So, for revenue at put our buckets. I look at the would subscription-based and And businesses. I'd recurring the advertising aside grew X%. which business, are we our original quarter, look international it set the this business quarter, you in moment at two and

When we we our we out the more from we're profile X%. growth that. a when from about planning as guidance on process – in think in middle call XXXX at those improving look the we year-end look businesses our combined, share so, right And of We'll about those now. see

hyper there would share local are think for come you Brian the advertising, IP XXXX. there seeing as out said, about we're we have marketing, so think and dollars when it of we'll guidance advertises And look And really well. meaningful, I digital at is arena. the away shift As where from – the it relates to great in like

Brian MacDonald

it's is this our Anthony, far lowest here. that revenue just our I a need far, margin said that Brian you to by to add Joe remember lowest And, would By what advertising also revenue. margin revenue.

Anthony Cyganovich

great. Okay,

just for your for onboarding you to migration you one think Flex? final be Okay, provide question Can site me. your timeline might what one customers to Drive

Brian MacDonald

Anthony, it's great question. a Yeah.

competitive For time. not this going that this to about at talk we're reasons,

Anthony Cyganovich

you. thank Okay,

Brian MacDonald

Thank you.

Operator

you. Thank

from Our the Essex of Brian next Morgan comes question of Stanley. line

is Your now line open.

Brian Essex

subscriber low you could of side some and morning. – maybe bit little a color Yeah, there any gains share if side potentially the And wins to? at DMS, think losing growth adjacency Who for the end losses thank question, taking forward? And some I and I you're on is going understanding gaining good on of the share you're basically, what that be part the then, the in have the really strong. Hi, we And, on terms just at in Who outlook think follow-up of losses the adjacency question. the you B high-end. is from? will

Joe Tautges

morning. Good Brian. Hey, Yeah.

at look a we the when amount really renewals, and renewals the of of sites So, had strong core. we've year-to-date

you so, than amount sites versus And when of Xx XXXX, XXXX we've year in look this we the renewed past. years year-to-date at have year-to-date roughly

counts And site the extend so, reflection contracts, a of of contracts. working customers we've to with at their their it's it, and been you our performance renew look when around active how

first And so, that's piece. the

to competitive when look landscape, talk The second Brian at piece, you let the that. I'll

Brian MacDonald

Yeah.

change, the competitive So, Brian, I no would landscape. say, in real

you will sites obviously site I X time market, and to very grow we look a three is our that above, plus think we there. to market to When with net sites Drive continue address we new Flex. over which count at of X effectively in and loser win continue be a the

we've new with remarks, development for a in our I think opening mentioned lot team deals. I traction business of new got my

XX-plus we alone, a plus groups. of store want group, a quarter store This XX-plus couple

end year we above. Joe from many declining confident the four quite So, we there. year-to-date upper about here the we've in and pretty see where mentioned, did plus a feel as renewed time couple past the to been ago. over over of do And it's we times market, we our position rooftops And quarters. continue of three And as well as year-to-date, churn

we and actions on been So, really pretty that lot go-forward effective basis. a had reducing we've see of churn tactical and a

Joe Tautges

again. To nicely. performing. Joe business question, listen, we're quite with pleased adjacency is is your that team This is growing The how

growing to ask would continue I business, the opportunities you We as X% point international it, didn't see I about good know other well business the out is this but there. quarter. And

you momentum in a we're So, doing I at we're the adjacency the areas. look seeing RSNA that think when number and business, of international in work

Brian Essex

different? What's growth to follow-up. strong? sustainable Yeah. rate have there. be my going different Past for your management And materially some had That now business? International, you quarters was know outlook than what's international changes I past? What for the in materially few is been

Brian MacDonald

some very little had has growth. we And the bit Neil the team and really focused changes leader And pivot there, in team from Clearly, So, that's in is focused P&L. the growth Packham, that seen a internationally. management new past. you've on a of our a on

So, more faster sales. focused install, on driving more

we ten my in the largest in our was over won competitors, mentioned that end prepared major won deal end. the Asia but and in I As That's all sough-out a won out by product we've in out won a deal hotly Japan. our obviously team years. remarks, OEM the in That

growth So, I be we overall continuing being international additive business see substantive a to the – the growth company. substantively think to

confident kind between like that's – to And we'll X% coming the ability pretty to types to guidance of the for it but grow think business. we'd X% we and we year give those range our team of it's want guidance grow to here, there we'd but in this kind give years August, the we're so, over we in grow. and growing in the think it levels to of And don't and

Brian Essex

great can the business but to transformation profile for maybe can update on years might lot number different plan, two on little And guess, know we the confident that. a of a debate set should it. out – company, of look in think after over if while in of the there's expectations And changes a now, But like. investors the market operating rate of got bit. been it's number year, established you've past that enough team. different can there. And I maybe management think where investors thoughts Got – you've your exit terms about XX% we how got feet are – I rate rate penetration, of a that get transformation, had thoughts latest Joe, rate the we analyst and you've kind deployment of really one an get or to the day a I Any scale, a capital the expansion where one last there get event can update of you've little in, your margin sneak event chance dig of into Any long-term thoughts an on are with after with of long-term? the long-term? so an your business an or some not what

Joe Tautges

sure. question. Good Yeah,

So, part close international talk that I the is the answer the piece, margin didn't that, expansion. out before just we about to

So, of as done the with and well there. side work we're margins team it pleased that the and go continue up has how to

time are we how looks year-end us. year around Brian about the question sharing a guidance what like of the I spend – lot about now to time lot and to your right and think phase, next important around the as next and leg of get we and to relates spending think a it As is for journey next of

August-September can you you the what just timing, share that. talking projections, for year-end expect how whatever through But, we'd from form Brian the around we from and sure, next in so, future get And are expect through look we us, to after that, us. – and about I you start should to do

more year. I close as from get think lot you'll we out a us the

Brian MacDonald

it's – that here. would add well. as just to Brian And, Brian I

Drive and X.X, partnership call, quarterly our This about tried to product One talk Fortellis, Store Dealer between Exchange Connected lot we the innovations, a Flex, RouteOne. more

that NADA. trying sure in at NADA. and So, technology a there up product to our And really XX% of real over and to brought at are lot we a investors products make been underway fundamental understand those leads that has renaissance investing quietly really Company we're is here. life

there. were You

product is with. Fortellis innovations coming other You at saw CDK around NADA and the that excitement

So, quietly innovations been expand a industry we've working effectively time, bringing in will through of do working At out and products. Drive last in at we've hard innovation same the to to product to the product CDK pretty margins other and obviously a Fortellis, of and been the pretty over years really continue and that. lot Flex renaissance here couple

and in with the so, around pay and strength investors put And sales innovation that the strategic as place. And of products partnerships continue position rollout that partnerships started and our fair our the the script And combination assume and mentioned, been strong. and our sheet it's we of our I we'll should mentioned to industry strength and Joe that we to in attention to has investment of extremely product acquisitions. Very our strong. to do positively balance

faster. for We're high. backlog to is revenue implementation to products our the at So, adding those resources faster get obviously, and, the place company get put into our dealers

they where quite and the out and the the my so we communicate strategy feel a company's that have understanding and Katie's product full potential of and and position to about have investors, good and job we're And innovation the innovation forward. are the pipeline. to we forums job Joe's figure in in job we that So, right with the to that's going

Brian Essex

Helpful, you. thank

Joe Tautges

Thanks, Brian.

Operator

Thank you.

the from line of Gary of comes question Prestopino next Barrington. Our

Your line is now open.

Gary Prestopino

in Joe, everyone. two-point revenue morning, growth quarter sites? was could the – Good Hi. sites just this decline scribble the you point three-plus enough. and What to one give in in I quick down me couldn't the

Joe Tautges

Yeah.

X the for So, sites digits two one I mid-single plus think low in digit to sites, three said and decline. to single we the high

Gary Prestopino

of now in you. And the in Fortellis right terms Flex, go thank market. to and then, are those Drive Okay, products ready out and

that Is beta your all correct a done You've assumption? testing.

Brian MacDonald

the beta Flex, That in Drive Fortellis. assumption is the we're correct relative With to phase.

we're early going stages So, we're talk about there. much, to still there. Gary, in our not plans And reasons, competitive the for

Gary Prestopino

you're – Flex in leads still it could No, your growth? part NADA, said considered When be Drive then the if up that's okay. that of beta dramatically you were there, lead at

Brian MacDonald

I think, at about overall, CDK there was a very positive NADA. buzz

with accurate think X.X, I Drive Fortellis, really quotes market. of things brings ability online to multiple which Flex, Connected it was combination the the So, buy a Store – to

about a F&I Exchange I streamline think partnership process. and One between excitement lot Dealer the there's RouteOne to industry of the

industry. of So, interest at our at there combination a has I think booth us drove drove unbelievable is and our that lead demos things for underway continued and underway and potential of quite And, can around frankly, inbound to that Fortellis NADA. lots the for numerous we and after life bring experiences had the how We've partners NADA. new auto discussions with calls

excited are. where we're about pretty So, we

Gary Prestopino

And layered be would correct? a considered that then, Is Connected Store out.

Brian MacDonald

Yeah.

really more Store, interesting dealers it's this in shopping, retailing were dealers a to solutions. talked that their literally to will, for Connected interested dealers much you – are – and number So, really digital found came NADA year, of I if that I particular.

price there So, key intuitive but our quote and bit, our they customer store, year, a but customer out ago, we X.X, experience. point dealers get and generation retailing, that benefit those product retailing. the leads a customer a thinking online the dabbling dealers wouldn't really came just most the really in little they'll there, the And there's walk our taxes, solutions will gets that walk a often the cetera, interface the match. product, there, And key can customer the is match, the of this were focused NADA out are really, solutions the that a user that product, of really of get that point online, and online, bring, the when many is about And which of will fees on online. et Store taxes match dealership, lots a advertising, we We'll driving of it. Connected But like felt fees, next generating sort they're really into the where digital match, year to is a the experience. not in negative results wouldn't wouldn't quote good retail into experience

that's deal been with why one out well and unique in interest really we've number that's in we So, – products making we across have large in a I Store do our a network. that focused product backlog have of we leads have sure OEM and rolling that I conversations a underway And what's on in-store about very that our And had we their OEM one approach of NADA. good fundamentally, had Connected terms as very we X.X. out-of-store to that product, at And of think a and experience very experience. think holistic the

Gary Prestopino

Okay.

salesperson of the does the from? terms directly with quote, or interact accuracy the quote to this you in of So, where's coming allow to quote system the give you

Brian MacDonald

quote available engine, coming the cloud, from quote Fortellis. have in industry service are The we making now is quote through our to that the we call cloud a is which and that we which

very property of a and of good are it's intellectual leveraging we our our So, example years history. how

the the to of DMS, taxes others, leveraging connection quote we're accuracy we And our backing, to have all So, that cloud, we cetera. the microservice fees, inventory, running quote a and the the available quotes, from the in which incentives Fortellis is and et infrastructure. call the what making comes AWS

some at of NADA speaks So, to innovation it to working back a make at the they quietly success long a innovation again, innovation talk that it we've life we what we'd to for at lot innovation sure things of the been of means brought There's and Brian the – a and as on of really one to long-term script that's company. and look lot that question. lot of and we the a today of encourage out gave rolled through encouraging Essex's CDK investors that that here

Joe Tautges

as Brian about capacity. is you've unnoticed go thing would well, add a talk heard doesn't Hey, so I just you've heard him it and innovation, Gary, about talk implementation lot one

hiring staffing of increasing the investments we're number we third given of in a quarter, interest the So, areas, to in make seeing. these started and

a we're continued incurring as and Brian's, question have we into wrap I go couple our more out of visibility this your related longer-term. expectations and And that includes cents over And to these we'll next fourth the year, investment of think, investments. of so, our to as quarter plays

Gary Prestopino

that Okay. it And be be hogging of used to could want don't with you and/or Store kind the have lastly, client architecture Connected here, do it a I DMS? a an but DMS website then is use to open competitors' to just questions keep or

Brian MacDonald

open. Yes. through open automotive to It of our We're with is an DMS. enabler commerce works our But, better be strategy our fundamentally, exchange.

open. I so, And think we're

Gary Prestopino

Okay, thank you.

Operator

Thank you. Instructions]. [Operator

Our the of line Tim of Willi Wells question from next comes Fargo.

open. now is line Your

Timothy Willi

questions larger question. couple Thank on one morning. maybe of housekeeping then good you. issue And and A

percentage as of plus to the exposure think the that you're through growth way [indiscernible] the could one about apologize site this about dealer try if move can given of you but you there bucket seeing I any think three? into like give fall So, North of or North of number this terms we in what America you'd to would sort part we out, there as cycle in us Is relative the America.

Brian MacDonald

the – at within the at Yeah. When seeing roughly, book the When all, you think business, dynamics three-plus morning, portfolio, we larger auto from and revenues about three good and marketplace, the when of within lower the plus. one the dynamics third our our and look we to the Tim. from dealers a first come think the When consolidation of dealers you fair the two-thirds amount multi-site smaller DMS a dynamics about site look we're two of of of dealers. into about site

And so, that's the details.

Timothy Willi

just Great. that for question, for could whether X stay that's become through the locations, hey, emerge, X independent, I of groups to saying, pressing instance when second these sort to these in another need it's let's you there's And opportunity are together larger if an you that's on dealer a could a two as consolidate, trying an to future. then, see creating or dealers get upgrade consolidation or create seeing opportunity somebody where one

activity in consolidation versus for think may opportunity that guys mean Just what trying terms of to loss. you

Brian MacDonald

on to platform. be running have. as of Brian. have they industry can – It's question. it's obviously, Tim, operations one are as a pressures, efficient new-car that great and looking A margins Yeah. the efficient DMS most come definitely is It's big dealers part often to down,

team of a a So, stores want yesterday that. one was example, natural rolled they to as leverage that an up very of large lot And strategy, part my to a we're DMS. for DMSs. pretty group go-forward obviously their choice as And with multiple there,

of was a that publics group on see And bought one trend quite that So, the we calm. on a competitor.

group We the to over our will be coming platform in rolling months. that

our prevalently. our that Obviously, we see – remarks prepared customer. so, dealer largest announced And renewal the announced just we just quite we of within

very we trend don't trend changing. prevalent see and a that's that So,

granted. over, the Bur benefits the control work way with work benefits to we take can of we can customer platform get a move everybody or and site those we and never the As that. customers cost they have have to they deals common for over, so granted one us so find on store, bigger those a groups the the take for platform. and store never with move they buy right We a

trend And as So, macro a we of works – changes little that's And bit new down. comes that that a are some see on focused trend. trend. suggest that That's suggest as I it And in a as see it's clearly that trends – to is SAR changing. our nothing favor. margin increasing that dealers pressures

Timothy Willi

the that as Great. of lapping sort on And just I of transaction about my is or whatever of to growth of follow-up, we that against think might quarterly to just models keep dynamics? rev issues are be, what referenced comping think modeling those us highlight, we're walk of expenses numbers. we just guess, with next sure sort sort sync mind you revenue three about make the you last Joe, quarters, its sort which could around or Could sort four things, comparative housekeeping or are in here rates. as you in handful just the is us and through, the the and of

Joe Tautges

things, A out. I would couple of point

in First, QX, you that some we one focusing there transitioned out where on was at reasonably-sized look timing and got payments. when of this customer some XXXX, year

our is there so, of QX. And that another in piece

than in you to and quarter. of transactions is And think discussion result with term and SAR. down count my that remarks, So, performing it's the think this think is to net about when of on transaction start noise performance look you should is noise site you a it that's half that the some way the so, appeared you the the in should QX, more RSNA along when the with the longer-term, had in at our over of combined XX% – line about gross over of longer front, I the way

transparency that think hear talk few and our the base of you'll subscription good we into at quarter, guidance you business what changes this Brian recurring on that how given enter I of of year head I the we're look year of way, how thinking And still we'll and expect we I these thinking advertising and around a year, about there. as And – see into to less of fourth then, a there's when next it, very seen and reflect as and start international, in we around a XXXX lot impacting items so, more to us. about next in RSNA we're going some you're we've is give

Timothy Willi

Thank great. you much very Okay, the for time.

Joe Tautges

All right, thank you.

Brian MacDonald

Tim. Thanks,

Operator

I'm And showing Thank I'd back closing remarks. any this over MacDonald call for at Brian like to time. further you. no questions hand to the

Brian MacDonald

morning. about of we joining optimistic you us. have Thank this opportunities ahead I'm the for us

will commerce speaking and forward next carry focus into a an sizes. you customer make enable pursuit year and to difference of automotive us we have to the great Have And beyond. Our to next and I with on momentum the all look day. mission our a dealers for quarter.

Operator

program. today's participating That today's thank Ladies does in conference. you and for conclude gentlemen,

have disconnect. now You day. Everyone, may a great

CDK Global (CDK) 26 Apr 182018 Q3 Earnings call transcript