CDK - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen, and welcome to the CDK Global Second Quarter Fiscal 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder, today’s conference is being recorded. to host like call, today’s now Ms. would introduce for your conference I Director, Relations. Coleman, Investor Katie Senior

You may begin.

Katie Coleman

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

CFO. could with comparisons Web and comparable also unless and the forward-looking call risks on of Reconciliations today's will including call remind of a like amounts our this made risks release get to site. contain forth ASC statements. included anticipate the pleasure over Krzanich, Joe before comparability accordance in on me and for detailed remarks all A today's references are items presented turn to call, we which XXX. our Joining section from And today. directly available finally, year-over-year cause with the would involve to Investor uncertainties the most filing are in those few Throughout all set GAAP amount are during adjusted basis in press and are purposes to noted, of in CEO; differ non-GAAP statements results Brian XX-Q results that, I the and Relations it's adjusted Tautges, otherwise forward-looking later that everyone SEC, filings conference in call With my the are actual this started. statements. financial Brian. we to the These Form morning's amounts materially our to

Brian Krzanich

and growth QX update Starting to strong both the the initiatives I’m report core well to excited this bottom X% auto revenue, growth today and our on saw to of was on second we Katie, strategic as results Thanks, in quarter you critical momentum good continuing a morning, record quarter. quarter as that company total line. are the software. everyone. saw and X% with you we top

momentum moment. sales was with on the will the this a I’ll a quarter we to out retail of a We have business in attributable continue that X% many performance our software, pipeline basis. Growth Rounding and the by key to applications. core which currency initiatives XX% largely on as in a and in are grew international growth revenue this auto Americas acceleration ELEAD layered grew build our strong constant result North encouraged further discuss in acquisition business,

executing the of are into opportunities growth will international year. next number on a that accelerate in we as fiscal We head

EBITDA line, the EPS to grew XX% respectively. and company bottom Moving total and XX%,

performance areas, continued because achieved in to Drive key we Fortellis. Flex, investments especially proud was it of while this make growth We’re like implementation, and

dealers, my customers, and our class During software, employees spent support have and moving to understand forward. great I and CDK automotive days, this provide data delivering and our ownership customers and our experiences listening time we do build to strategy better to to insight. first exists their by XX OEMs, world

revolutionary It and by before clear be three Fortellis; centers CDK want strategy insights I past and that leadership at recent the customers attending excitement my by products was new to the Joe shared with these CDK. surrounding dealer expo month to data Our rate the faster is I committed themes CDK levels customers; strategy and new this spending, at at shareholders. delivering using like innovation driving experienced at this We areas; business and that to here entire grow true capabilities developments key our revenue I more franchise and to our at and profitable. strategy to to be and provide time annual and lastly, conference team on second, the support by at of the Flex Show, shoring solutions NADA for up the world astonished dealerships. and a core growing providing the value class our this our never than with are was community Drive first, delivering premier customer level key first key car allow in

is have our number dealers’ To As with continued customer facilitate one enhancements a key their this, to CDK. we deliver improving focus to experiences of satisfaction. milestones company, our relationship during

As you our increased implementation will we’ve capacity recall, year. this

be in also during will of We and a investing second post-implementation fiscal Success team support Customer year. half the organization further our the

to levels, Customer dealers the peak high selling with dealers’ customer of have efficiency extended nights this sales to change availability those support part who will by week. As standard and hours of outside we’ve during especially and weekends. our many car for And enhancements improve hours, XX% improve better of our the work Success correspond volumes

we’re of We’re our products dealers in success. right satisfaction we making. launching The we’re our enabling of early usage a Improving dealership feedback performance business, the value we’ve to and changes help us while dashboard a us The to the the our we’re track. and the KPIs NADA, links received will have Customer opportunity clearly also effort, success seen customer in in the is on of Success at results manage many giving signs to improve software. confident demonstrate holistic that their Dashboard indicated their and

months beginning in retention a results. sign satisfaction in past customer to first our customers at-risk are materialize of efforts the XX% of two the fiscal months Our versus that improved the five the year,

is couple our a the data, as only initiatives. encouraging of down customer-oriented months many is trend worth double of we this on While

and initiatives. Now, our product innovation let turn me to

integration recently effort. the to focused buying best-of-breed layered ELEAD-CRM dealers in of which our of in-store example office, activities CRM. within our completed dramatically is of online One As include ELEAD the we’ve the portfolio to calls, enables and rationalizing acquisition have of to store previous our office are connected experience. office this offering, we of that integration applications synchronize selling on front which a mentioned through strengthened front applications, our specifically car portfolios the Many our

our company. on also instilling combined sales for retention intent and We’re best practices across

approximately allows sites. to portfolio us customer across office front develop X,XXX richer our base auto relationships deeper strengthening shared, previously we’ve and As of our

opportunity CRM, service and these the DMS-agnostic our applications to focused reach XX,XXX America. beyond the deploying a approximately have approach sites store, also such to on connected by expand non-CDK layered ELEAD auto strong franchise selling sites We built for as effectively North has Successfully this of reach all layered dealerships. strategy applications. team in double very executing the our sales on can many that to selling go-to-market has a

ELEAD levels the focus As broader and adopt other opportunities also business. continues, practices to high parts identifying learning CDK the customer we’re these about led in the organization on each the integration more to day in with complements that the management retention retention. have our of practices satisfaction of directly This improving account

DMS auto enhance will it’s for the have the spend further as been couldn’t usability them allow refreshed in us Flex engineered higher In with more make quarter. Drive advanced We the early more progress dealerships represents they’re where well which with a reduce for milestone innovation, on and use user architecture, most training. screen. the the DMS the In customer CDK data jump broader its dealership. through both training Drive to of this Dealers the productive Flex optimistic tangible into practically is right we’ve its industry future to Drive the front the DMS for in attrition dealerships. with provided at accelerating progress positive. and next of workflows and as modernized and site and market. required allocating of efficient our development more of large. only expedite a improve that a through intuitive made in to OEM areas the are the like time not Drive ramp it and interface and for our has be been reaction franchised and and them instead technologically more a our resources half, view solution simplicity second to availability now Flex’s auto to run the development able but integrations to no I feedback has one we to order about They of makes time very Flex, of happier the which seen segments in generation efforts with the made Moving development two

that three were of of and and rather Now access broad-based innovate are OEMs an entire deliver dealers, moving case. capabilities, management to giving secure on third back API we’re is to being from been of data vendors the the has and day Fortellis, small. open event. top-down built to during marketplace innovation that the an software dealerships at There one a had openness innovation automotive platform. and consumed. one on tools of and XX as published and first infrastructure is including technology historically party such app ever on than silo us NADA, new APIs attendees betting With future both modules scalable marketplace the now across to the will by which allow developer and Fortellis The OEMs independent store, our our We held and live currently one Fortellis technology solution large over globe APIs being and companies developers on

platform. and more cases are will of some the many believe notable SiriusXM Lyft be with and partnership on we are more Our use the developed early that there and can

want pass right the excited to to before periodic both growth the we’ve investments whole. a the we long-term continuing that, give quarter they continue revenue to matures. previously, highlights we’re all am to them. necessary ensuring it to value how That doing turn while for and the I the concludes out are we’re make Joe leadership grow and The enable We’ll growth Fortellis’ than platform the realize and as And I to sustainable faster NADA proposition with our I’ll and exciting provide long-term about strategies to emphasize over growth it this are and I us Joe. about as automotive team employing as are ever framework off committed spending. The while laid results ecosystem opportunities confidence thing. And We updates to CDK I from excited our quarter.

Joe Tautges

we Thank you, growth. everyone. in the the and profit in Brian. seeing flow results Good and quarter cash encouraged momentum are revenue, morning, by the I’m

our Our provided. sustainably gives accelerated the deliver track long-term me current on to that progress execution we confidence our along previously in growth pipeline with we’re targets innovation

the remind basis. on As we retrospective adopted XXX a into I to results, get modified I ASC everyone have want that

ASC mitigate XXX. a which because Growth X%. revenue year-over-year under in discussed, prior be year key solutions and auto retail Progressus partner Core XXX we the revenue this auto North X%, provided revenue growth down areas, were our growth as will primarily ASC of Doc America to happy acquisitions under previously and the the performance internal segment. ability references to growing service. relative of ELEAD strong seen came quarter all outperform by recorded it software to double-digit we’ve see the encouraged We including was our well were to core As in headwinds to application by from advertising in accelerated Though as Cloud driven OEM comparisons expectations. data with lack from customers our

as Our was and in effort company revenue and integrating grew Drive for also We XX%, accelerated highlight in international, while implementation revenue profit and growth all respectively. EBITDA and the expanded XX% investing Flex development in a this ELEAD growth while business. achieved capacity EPS initiatives accelerating and strategic

XXX Now, ASC total auto revenues an was onto $XXX $XXX million. the detailed million. software Core $XXX of revenues in XX.X%. results resulting were for million a company were margin the EBITDA On quarter. basis,

as basis, of reported company in were and Total acquisitions as year-over-year offset to margins Our in respectively. and effective mix expanded and recent changes was in were a growth driven revenue on and were acquisitions. an North and constant to XXX expansion both equivalent scale the Growth America selected efforts software million in basis, partially on XX% currency such basis $XXX per grew million a $XXX ASC and XX.X% On was diluted XXX per basis, EBITDA the X% and continued revenue revenues Margin transformation international XX.X%. by partially nonrecurring caused total a share by X% company in reported earnings by well X% and points tax increase on rate revenue constant losses respectively. XX% currency and revenue was site to as dollars auto growing $X.XX. Core as year-over-year an of by offset business result $XXX revenue million decline streams which recent consulting. growth revenues

buybacks from Our to which benefits expansion XX% quarter. by share count tax the Growth offset to was driven was average $X.XX. XX.X% up by EPS and effective for Diluted expense. was interest margin lower partially year-over-year increased operating rate were due

ASC XX% activity in was were in currency North million XXX, site Now, growing our XX.X%. within up results. partially resulting turning were points three-plus increases auto caused the contraction the revenues digit both North from Other growth revenue. leverage continued in up benefits plan. XX ELEAD partially revenues by ASC sites revenues and declines declined by business both $XXX to XX.X%. XXX, sites to three-plus XX% or Declines in and a shift sites XX% $XXX and acquisition income acquisitions, reported groups primarily partially this revenues benefits the retail auto be consulting was in largely million and Transaction were $XXX the XXX Margin segment the other digit million basis. offset to sequentially the X%, from offset North recorded Subscription with offset partially one revenues site on two Under by to subscription Pre-tax to the driven was and by low-single from revenue America revenue income offset America transformation to hardware, site from revenues. mix X,XXX from constant one margins high single revenue operating to decline America of solutions by $XXX from driven acquisitions, Pre-tax by retail margin Under revenue site segment contracted growth two of segment. groups, SAR in segment million down due were lower X.X% solutions were inclusion site a of basis loss year-over-year. to auto which recent quarter. in X% by line down on groups.

a ASC and offset Under in down revenues. $XX primarily increased to $XX by income from are basis. X%, margin recorded a of loss international. to previously resulting revenues loss disclosed was XX.X%. the sites or in segment sites driven international dealer China related million. the on year-over-year the sequentially XXX, Revenue declined X% lower China Declines customer Under million XX,XXX year-over-year. the site on sites in to and of a auto in ASC on increased reported were XX revenue Pre-tax Growth $XX per customer one-time was International lower down to attributable XXX, and X% revenue. Moving were million consolidation. basis of constant revenues X% currency

the in we’ve We will with We continue to to communicated previously international quarter. that third experience headwinds will year-over-year growth growth trajectory remain comparability what normalize the line a confident for segment. in

half in basis plan. start XX revenue continue is Margin to new and contraction line relating by adverse during investments revenue by and to to recurring income year. benefits this promising fiscal XX.X%. as initiatives, on $XX backlog Our points of changes from we execute come increased on initiatives that growth Pre-tax business from and the mix revenues second million the to will was contracted strategic the transformation scale offset was caused margins partially

million, was at resulting decline in a results. advertising result On the ASC in from million was all income points revenue Margin basis, tiers. to North million came ASC $XX revenue. recorded America Pre-tax a three advertising year-over-year. shift a in This mix. $XX XXX, driven the of reduced was partially XX.X%. benefits a revenue XX in decline $X offset Under X% XX.X%. improved income Now, as an XXX of margins revenue by million basis segment margin $XX Pre-tax customer advertising of transformation was expansion by the plan, across

in of half our fiscal the for we expect at to second we with advertising call. on the guidance levels QX As provided line look earnings we revenue growth budget perform the year,

the balance outside million $XXX of of is cash Our which United million States. $XXX was held

to items shareholders We quarter by was repurchases flow of driven the Xx quarter a $XXX cash through above earnings $XXX dividend and year-over-year million, XX% We range million of at and for our working returned of free X.Xx improved increase slightly an half XXXX. million in capital. EBITDA, in the combination and non-cash share debt calendar’s adjusted X.Xx ended net $XXX ratio. leverage to increased First to communicated previously adjusted primarily

staying our a returning X.Xx calendar our executing EBITDA. million through billion adjusted combination to $X continue debt to of with and of expect return XXXX, dividend range in goal a share while Xx to shareholders net We within to program year to capital buybacks $XXX of

guidance fiscal provide the an year. update on Now, I’ll our for

of XXX As forecast ASC year able updating going the the our way forward. refine we we be are and XXX models, now guidance two will only have through to quarters been our

our are We to foreign of maintaining revenue guidance $X.XX range billion exchange $X.XX despite impacts. adverse billion

higher and We range of are $XXX to to also million the our $XXX be of we million $X.XX at to previously maintaining $X.XX. dollar provided EPS EBITDA our guidance range of end expect

range summary, in release our our Investor of innovation growth making rate maintaining efforts the included guidance as of section press foundation both site. in long-term quarter are Web to guidance XX%. serve tax are we’re in are Relations details we customer financial ranges that Finally, The pipeline pleased In our of performance with our the we our to targets. of XX% terms previous the in progress and success and and our today’s achieving

half, questions. continue As investments into delivering in the operator happy and be key we we confident strong the I’ll are these your turn second to we the we’ll in as areas. ability now up call ramp over to take back performance head financial our to

Operator

[Operator Instructions].

question with first comes Stanley. from Our Morgan Essex Brian

Brian Essex

thank inorganically and not how discipline a both an transactions, expect perhaps you to your any how potential there can question. that may much news saw the growing what you you I’m week way CDK days. one this perhaps I investors past opportunity Is just Brian inquiry hit the over for that? with morning the taking so or anticipate and provide you organically can guess regard speculation sure I’ll Joe, for around because address last upfront Good Cars.com. on Hi. framework I’ve the and and and few it regarding in had may be or

Brian Krzanich

Brian, This start. then I’ll let jump and in. is can Joe I Sure.

First, we comment. can speculations, specific maybe talk comment clearly our that there’s and don’t one, directly just never about no acquisitions. on we on general we rumors on so But – view

First, gaps industry give to or be your clearly acquisitions shift portfolio that filling leadership. in strategic acquisition in a the unique strategic or there’s have you either in product really you technology an can you’re that long-term believe

an last we the be then the positive really has invested earnings just, term really focused thing from great clearly from near and as perspective. is a a It’s demonstrated integrating doing the we’re relatively quickly on or summer job in that’s We the a call. going acquisition, behind we on that. return shareholder bit acquisition. the near you grow we’ve capital understanding faster. can business so term, quite And to there strategy And growing And first a the just saw already completed ELEAD great of believe and ELEAD

really on core focused So and Fortellis our now. really in the where right Flex software we’re auto opportunities that’s Drive and with that we’re focused plus

Brian Essex

What it. -- Got from about

Brian Krzanich

Joe something has --

Joe Tautges

would to is that program. giving as our but while returning profile, for an XXXX. as at look in investing our that business billion I $XXX of return a core is right our think our acquisitions match what important capital million forward update the year-end us. to earnings part it’s in particularly shareholders prepared to you XXXX, of balanced to calendar we Brian, today, capital how having on software important auto about And we the we financial And then strategic beyond profile $X Yes, remarks have reiterated we just add a calendar look capital as balanced for in us heard call

Brian Essex

think inorganic to very line? maybe how organic growth ELEAD How versus That’s if real you was And then helpful. you touch contribution the much period ELEAD could about it. the of Got maybe the in and top quick. on

Brian Krzanich

Yes, thanks.

top unit sales. ELEAD to selling we particularly at we’re point off business to new about case our So approach with the When were quite business over we’re in to of out thought becomes and at meaning CRM. this have the had it look given our versus a excited taking, start start line strong we on parse very you we the significantly revenue, difficult what performing stopped it terms the really that

revenues clients We the are as two companies there’s now between converting And that other get well. eliminated. portfolio then within our

the don’t pull integrating portfolio we out team momentum it sales very And the separately. just quarter strong quarter. had with we’re pleased frankly, that our quite on it that into on So focused on and this and having has building

Brian Essex

queue. Great, all I’ll hop you. the right. in Thank back

Brian Krzanich

Thank you.

Operator

with question next Our Zaffino Oppenheimer. from comes Ian

Ian Zaffino

the is that? dealerships. Great. of determining terms good one call. you far some basically Hi. you was improving what at “at-risk”? defining keen How look kind How whole if into who to who very about you not? Thanks. retention you’ve is of you risk, Thank levels are much. kind do at-risk see Very of of those you you I at good is as used also on basically because And your the that are improvement detail you seen portion And at were as to mentioned that portfolio, risk, the where there? pretty

Brian Krzanich

start it’s Again, can input. Sure. Brian. and then Joe I can add

years at way the now it extent, done to even contract right. risk their or trying those up whether shifts looking years ones a is especially of that are think at month-to-month, signed we’re of two-year we focus signed coming up now. And to comes one we’re five for I look that or up years every of five earn two was is ago or that renewal each one those contract contract it is for some business. is going for dealership one their to the one one every at there we’ve to out And that ago completion,

those in put in up. but that two contract relatively coming are they’re two identify effort identified started that the uniquely to place are contracts even they considering are – maybe w they’re Those or I think years up. now that that short-term other options part ago some two-year are at dealers years are of are there ago that that was risk, locked are coming to us

to better that focus have at identify dealer so, customer the way likely dealer such where them treat and every really need right we’re an and organization really to at-risk now care. starting but is support on I are is we partner, and most as And just risk, the focusing every

it at how we��re looking that’s really So now.

Ian Zaffino

Okay.

Joe Tautges

add would and that being the of auto I All that sites really at stability year-over-year gets X,XXX where start much to next at with efforts at, reflective to expect off paying quarter push the comparison, we and is just you the the more see. are look they’re

so, lead of And discussed right and some indicators we’ll in the to the especially quarters we’re more three – a at that, Brian his when we time remarks, with last difference. the and and to you the we spending prepared make to have do continue right do think making look work the right efforts

Ian Zaffino

you of seeing you as activity we would be now the Lyft are had Okay. know as that Thanks. expecting? seeing far being contracts And as onto a well. Fortellis, you’re touch then that On up. bit and as you there platform? little what pace potential activity with can far What more just far that couple a of follow ramp on and SiriusXM a I big as as be else customers there, what as should Thanks. to

Brian Krzanich

should here. and I minutes it and some going it in couple little to of the do bit last of what are we’ve of from months the give couple strategic spend where is Maybe we of see then Sure. explaining important why Fortellis made a a you just shifts

that through whether can to software think as of you application through way work APIs of a data allows various software simply levels operate and exchange to it’s Fortellis, DMS First, an interchange that. layered for a or it

quarter was done things. who all and interchange data What it’s car peoples’ we’ve standard, app DMS, DMS that. is layered across one, layered simple make it’s of way past and and saying exchanging last they whether app agnostic its to to layered service made our There’s is, open going a those to of whether or in whether very so party somebody’s to the in Fortellis be in or when owner it are apps, the a other connecting bought or So all about the apps, third use other what and of enable it’s have DMS data. service and to layered can the exchanged done be that set APIs for really kinds our a has data been you

be want onto change whether APIs And want or we DMS within APIs an those to to you So APIs your post one meant then those for API system, there’s to made you it’s an fee you app haven’t getting or open truly use system. platform. to access the because no whether or producing it an of layered to our initiation

the to entry the So we’ve into Fortellis lowered cost barrier system.

of make And access right and each have we and that connection we’ve said, of make like pieces one big point-to-point. pieces average to of interchange a whole connections connections now can using an operate this all that of As some all one data. different are When XX on up already. Fortellis those software those the I of using dealership. dealing got time that one any going other those is dealer are XX to – partnerships dealers has idea the they’re with to The their software

much driver it. it work access everybody That’s around I that so open people really should to Fortellis. and more and to want have because for for DMS it’s efficient and And for the third that I’m it’s push data. long using data to are it, is to or as if use a no who’s matter as app agnostic, DMS close layered Also, connected party that

So and and software industry efficient much to it marketplace. the into for their the it out makes into more much get people again, simple

had York. – great. And had a did It’s attendance both posting was – We the already for one. NADA, actually We over third were New so hackathon we saw We you like signed a there. from in the we all oversubscribed. of next The look up attending. developer day, think had the next at parties it at People we world competitors one’s attending. people some our of in this

developers seeing are interest lot signing a we up. of So already in

already. XXX system about users, users have XXX this me, We using – excuse

more to think to more of more DMS to an and of time APIs internally and independent can to well dramatically don’t between access to Flex to this we take something the we up going apps developer more that’s on quite DMSs applications next sign and making next really post ecosystem. going Think and our so dealership to so. connections their providers could going to years into it I like of growth one both own how year I it these building Drive continue to software of more and to to have the see take we’re change our our grow and this that and change this post layered both bit as so our operates. And we and the I think need in our we of it’s think things data need more in people need but going four in as more to of this something as ecosystem and year. look doing more and this. term we a But over programs we’re or ecosystem being quite three, bit we’re long a that’s – two, And partner the the this see in provide is shift at as get as

way that’s think I’d to you standpoint. from like about Fortellis so the And that

Ian Zaffino

you Thank much. very great. right, All

Operator

ISI. The from Rayna comes next question Kumar Evercore with

Rayna Kumar

this letter Drive my your balance questions. model, the Thanks you echoing Fortellis improvements today. really On which Good January acceleration service to and into you margin taking customers highlighting with morning. in investments How Flex of sent will is expansion? for and commentary these investments XXst

Brian Krzanich

this think then where one. on focused in and This jump is is One that to going on I want the you is to Brian. Sure. growth. company Joe is I’ll see especially start

believe grow dealerships about retention that We we so it. a of to already have are talked are we – path on our

just But committed this? like level faster spend of of Flex our hundreds talk go not of than the did Flex want to to a grow several So that several on to or engineers. program of more Fortellis. out the Drive We’re I we months That’s accelerate spending and Flex. earnings about kind about Drive rest spending. now growth enough XX hundreds can some going XX how engineers you we Adding fuel to and think revenue and or by Drive like and to quarters of as is build to

we or our service necessarily do is to out. going XXX maybe massive hours of more need building about need So And doesn’t hours. this What get so talk and to service build calls is a service, changing really service not more about engineers shift tens call when then and we’re grow we we’re hours or business. to talking up increasing our the to mean people. This

So if normal that of on waited been the calls to out, month and made last dealerships deal close have night those when would number of X we trying call but get Monday our hours per calls many until that were morning. Saturday

on the call number calls. It’s that we’re going to Now same of Saturday night. answer

We’re going hours to shifting people’s more. be

do that adding So to without one example. we’re going and try headcount, for

in we’re So is to a lot growth faster seeing not this of in working need ton. you’re order actually adding smarter, think is do going ELEAD. – We a just to what

Drive We’re Flex going to build out faster.

So things quick like into install turns headcount will but add basis. that in revenue relatively a

revenue long-term a we to result and in that are the that’s correlation install add And the directly growth delivers that so going growth. to as revenue

from And so that those standpoint. we good investments think are

at I to where So the the probably that’s to is but be most rate the due install. we’ll commensurate the going again the the install add that with will headcount, revenue be growth think place

Joe Tautges

Yes. I balance bringing it’s The would prepared be said would backlog that the remarks, we’ve as next his part exactly this going have you this a into like is sit moment job business And we growth. about on it. online. with and prudent the the the lag is got this said, in the making balancing, being revenue Brian mine I and what then can comes in we’re quarter lean wouldn’t that’s quarter-to-quarter, encouraging the investment I model need leadership at is so we’re add that and to Brian really team’s the certainly our such to will boy, or into revenue say, to strike variable momentum visibility for and entire where And, Rayna, there. because here between there when and and revenue job, Brian’s what sure tell be we that install

be will balance in. it’s carefully It’s so And good an position it. And attractive a opportunity. to we

Rayna Kumar

helpful very That’s Great. detail.

could will to stand General If to you and walk advertising, growth Motors? growth with just and to where return through you how when you do us plans your return in

Brian Krzanich

Sure.

stand General the of second part with start where we let’s So Motors. that question do just first with and

be Web Our relationship with continues sites. advertising in General Motors to quite and both good

provide a they relationship They and in going did Web great to We cases. services announce services Motors to General were have most more the that. of on to both up that continue open to We suppliers. welcomed

continue be improvements advertising as key we’ll think going highly we as make to on you careful continue there last service player we’re in great side managing was to and to advertising in to space. think to investments well. services, variable long advertising is we Web our our term and be a And where relative then are continuing We we to that is continue good and headed saw quite advertising investment in the and quarter provide

Joe Tautges

Yes.

our around we’re term where Rayna, continue came is at we As wins say out made the are you got we progress quarter, that has the levels. make the your is doing. work And and first to available some traction the part at association with investments look face that. as of the more what Longer second the will and local we’re some certainly advertising with OEMs We’ve to the the in this first other quite happy of team to seeing much question, how team quarter particularly space. now I right market some tech the seeing look headwinds would spending half, you

growth trajectory of expect and has we what to return diversification focus to we’ll term progress and And out and continue I the business over the the – see is so on the think our improving been the team. of on we’ll stability see longer

Rayna Kumar

for migration Great. you Drive walk be milestones One Can are from final timeline question through for? Flex? just out on-boarding we looking us the What to customers your should key me.

Brian Krzanich

you’re accurate OEM. OEM back all can I have is kind the as you and think through what by jump dealership you Flex first certification. With is OEMs. And go what to Sure. reporting what – start buy and this of do financial up else OEM that this we get the have out you who of in. go and wants see OEM And of is can you do to reliable to Drive you really doing the is making sure

work dollars can multi-stores digital OEM to we’ll what run so a an our be that go We’ll anywhere. next levels, way at make literally sure GM that a and tablet and at used because stores And digit then OEMs now was Flex through our airplane of it right then into go we’ve do – XX,XXX way is the also and GM, that is platform majority it’s year GM with part something dealership using of the from We’ll be We’ll certification. got go rooftops. the number can work the we’ve our to Drive small ramping truly target. which this the modern of time. to infinite Web-based, acceleration Drive of single the Flex to multi-large and ability done so and three Ford the And through said during end to we be by same Ford has numbers. will one, feet it’s actually like two, time

NADA have of a right that’s part out and and We about think backlog up And and And a together XX to we plan on installs. now. have already. orders our now we’re lot of putting two I large be a now right interest dealers of going operational

calendar and a be take the think to think acceleration rate dealers. through Flex years X,XXX calendar we going a of be probably take rate. through the rest three kind XXXX before of carries of should time of and the by get start half an at the have, as But go this that quarter us see we number year dealers I conversions we at could look run hundred seeing we’ll run that a taking through a I you’ll Drive – back to of we if four that’s period couple it you

Joe Tautges

Rayna, along. to next your keep we’ve unfortunately Thank you got questions. Operator, moving for question.

Operator

question with William Matt The Pfau comes from Blair. next

Matthew Pfau

Hi, commentary the the guys. DMS hit of about outperformance your within I better base wanted or customers ELEAD Thanks with ELEAD terms came to than you earlier for quarter. taking customer detail on systems guess in in than of where been Maybe just that the are some and I the competing more my questions. Has with from. anticipated? own perhaps reception seeing more you traction outperformance expected,

Brian Krzanich

talked solution can and selling sites again you stopped with the about, CDK CRM we’re it’s growth to I’d I in start seeing seeing non-CDK’s solution. probably detail. we’ve DNS in Joe and jump or in and that we’re more say in better selling can ELEAD great relatively XX-XX Joe So growth the providers our sites.

starting particularly in a that sides of a we that into and work is way, is DMS. the relationships because And so together. wouldn’t confident also point larger these great office DMS What front backing, such that side really growth on we’re very as our larger relationships at of and to it they non-CDK continue is things other. some other technology stronger had both force, can people to an to a strong company as you link apps this one is say many way entry It’s seeing and well other our good seeing we very the be I so the applications. Then seeing than layered look for and sales us one link to invested you’re

directions. as other at DMS apps more group look, should look sales of a other opportunity and this application with not allow with non-CDK the only even we DMS out So but those the an we’re and into ELEAD our it and be the some opportunity CDK both us together tying to DMSs. ELEAD great to saying, sell layered in

Matthew Pfau

become think from site to to that. do of make reception for perhaps Thanks. could be we turn the pipeline last Flex Drive tide on start me. going seems the one terms site the dealers initial like count? When And – and it. to and or with from It a pretty is you to here one to impact that contributor Drive two Flex, in positive Got to the enough positive neutral

Brian Krzanich

was and had two to so was there so I’ll behind so or great Flex. So there stations much second Drive of around the example. line display third a day By up is two big Drive – interest up tell those probably NADA stations on demo you Flex. we stations open a a just because had set demo We

there. definitely So the is interest

it’s us OEMs. I time of some to bit get think, going of again, a up ramp and to take the other our

of and shift of some lists. bit year both to the of go second calendar momentum you going or time calendar Drive And year you’ll second our this the it sites in year, other take that’s to I half into to think our first Flex our little so like 'XX it’s and installs revenue. see I those fiscal think the numbers half on will a when materially that certification 'XX, be in going as OEMs half start get

Matthew Pfau

it. That’s a Thanks it lot, for guys. Got me.

Brian Krzanich

Thanks, Matt.

Operator

Prestopino with next comes Gary Barrington from question Research. Our

Gary Prestopino

on just Hi. decline – I’m everyone. two to two-plus Could – trying insights one what was Good what the you down. you Joe, year-over-year morning, about the in was could write the year-over-year this point to point? your talk on growth the

Joe Tautges

Yes.

So disclose I do the We don’t think we site disclosed count. the revenue.

single our other and you if things segment And be much teams piece then how that two our to and are across Brian half, digit a question to start success And in low focused see Flex that to to efforts should stability get So more the think to really Drive just the grew we’re you’re letter they’re in additive single and performance the sales think start doing to out. I second the retention and three-plus revenue as to to those around customer on around that open I locations we it. the payoff. great through management one rolled look portfolio. high continue the you’ll on starting starting to important got, digits. the seeing But see declined And just a focus of – had really teams, account job Drive is all and customer service, his Flex customers really so to the we

Gary Prestopino

jumped average sites, per your Okay. And your revenue pretty dramatically. ELEAD, then site – with within RSNA

idea the of your just a America? assume many But would you proliferate sites of – actually CRM can them application through I get So how the this base it trying how North in that of a terms sell? Is in sites in America, an of in of of lot I’m now is your ELEAD. North have that impact to right much

Joe Tautges

are there so on. points would I Yes, several touch

our about ELEAD. quarter. revenue want talked walk this that thinking is majority you growth this site away with had to I XX% that You don’t of per the

places the I progress sales and core Edge, like that from the the think we’re that Service products the good really and business our in Dot seeing a in we’ve talked don’t has in about sales Q&A, but really done installation has yet like work lot Cloud. team We’re of proud team done

Our sales per revenue continue to nicely to be contribute site. continues core strong that base and to

additive is on In and of doing addition, is ELEAD well top that.

So you’re to right. that. There’s multiple components

we our about portfolio our opportunity And though. thoughtful there’s dealerships don’t to again, within meaningful ELEAD, DMS. penetrate tried As so we’ve to think that There’s or XX,XXX the really be approximate it. demand very just have strong within

base Brian response, as there now our it. said his We’re continue add as momentum, seeing well as the to in

So we’re we doing add implementation best capacity. do to the can

full opportunity and think very for drive and there to pipeline have the robust is a the we come as We I time penetration integrate go backlog, a business.

Gary Prestopino

to to if seems came versus now that with operator like And do space. when to out on larger point. into smaller was port dealership, understanding to it two into two do one going It functionality to the my first Drive one the Okay. get you’re have was multisite for then Flex, upgrades you a space, any? that the it dealer the What

Brian Krzanich

Sure. architected, with configuration. of modern it It’s system modular and it’s Drive is it’s a the way Flex, because

reporting. And and may see or requiring may portfolio together to mostly look – that more data different talking their have larger about a have that to that them. going aren’t five that take of four when one you they types then typically a in they with don’t many can XX of It’s all the make dealership rooftops, businesses different with and OEM into at really getting sites. larger that, sites support order number they get to rooftops understand OEMs changes into when you’re aggregate so they You they have of the want

that’s a aggregation of to simply the about that’s those piece again an than of of software So system it’s systems. modular think allow OEM But that about more generating modules way as because financials add-on the across it. several

menus, the by developer. very it how to Flex is number works also you for the has is go infinite and it. sites it’s itself scalable it’s to think system an – So wasn’t architect modern way interface, but very intuitive. for architected what about Drive really way us about it the the software hard think of on user That’s if drop-down the both architected It designed make can you is how

a require didn’t big investment our that. on it part to So do

Gary Prestopino

team about have mentioned as the Do you dealers right that analytics that doing their a that strategy of think Brian, some lastly, is the prong out science data third product then interpret strategy. I for now? helps the or there the you on And Okay. data analytics dealers the talking a currently

Brian Krzanich

Sure.

one of Dealer And their operating fact, free of the support. discussions how of basically something within is we to as NADA In had the level start most going for to it software, the that at providing at Dealer basically we’re site first how them system. Dashboard. analytics enthusiastic dealers of let they’re part increased customer look our was our using they’re that Dashboard the kind substantiation it’s of The first comes from data and

issues to analytics they enhancements So required getting training and more and of that. customers were already the there of using excited system result So, products is are are Service example, are to they’re we Service provide there how in for are that their first at discrepancies through see are how customers delivered Lane or those and fast Lane, or very are substantiation itself? going a our this can

are building an analytics team. out We

those provide custom with well. a type as starting and that the say additional But We’re certain effort analytics we’ll a just all good-better-best up of being way that comes analytic more to a always just I’d and we’ll of products, customer. reasonable mechanism people provide to at more CDK support level for you’ll of where a levels see and kinds fee

So that’s kind this. of about how we’re thinking

Joe Tautges

We Thanks for move on the Gary. question. questions, to your got to next

Gary Prestopino

Thank you. Okay.

Operator

question from Brian with Our Stanley. comes next Morgan Essex

Brian Essex

the up. for again Thanks Hi. follow

out was noted if be follow dealer but you we visibility international. Just much do And in of specifically could up little called us a in and of some little other bit How impacting color of you I if know You the markets give can a get on have there domestic bit any international markets. you those environment, geographies any China, of understanding may that performance. impact? the an maybe to versus of wanted consolidation

Brian Krzanich

say I’d – international, that’s Western you Asia, to can Eastern definitely continuing well, we pretty the So the with to toward a China that Brian. growth I’m broad I question, tell trying we’re still good make see if and answer in of biggest see we’re rest it. as Asia I’d it as call Southeast Asia growth Europe sure I’ll being growth the opportunity centers. being and both future, but looking greater

over go constantly now. I’d out do they’re and and level acquisitions to a a to the I don’t – so hard dealer further. large level that say model talk see in the at lot U.S., know we that. to of many insight, good looking continue some specific. model think dealer How like there says out the consolidate it’s have I there we and dealership do. yes, It’s say few try a dealers expect they’re to we this of next especially kind are much I’d when we all It’s we occurring. consolidation at looking moderate of – right groups, But

Joe Tautges

larger we as past, portfolio. thing Two-thirds the I talked would we is in in – And over-indexed about of only add as we’ve dealer talked spaces. our it the those is

consolidation will as So to that benefit to continue we happen. enjoy some the of continues

Brian Essex

in how base how modeling versus you then of your I when based is And on internal base? dealer Okay. install incremental your adds? guess expectations, have much is visibility growth, how you’re much based on much would install terms

Joe Tautges

question. I’m not you sure the follow say I Could that again?

Brian Essex

year, adds for your with to the incremental How visibility much the performance based have revenue out in we the in install better consistent your to part. kind quarter as opposed internally than you you’re penetration As do but of have on guidance dealer held for What the you most expected you in you pipeline? incremental base? visibility modeling do your into continue quarter have last expectations

Joe Tautges

balanced to – clear. we’re with it’s good want the visibility. I we the happy guidance. Yes, to want be very around we Listen, have be quarter very and

good we’re stuff And that balanced. top some us in lot our you so see do got going line the Again FX definitely continue hold has outperformance performance. the a in so in the in quarters and seeing updating I forward future visibility in And quarter going we second you we thought it, advertising environment pleased you’re – guidance. it’s on the look the macroeconomic revenue be with our have half. and we’ll really and very into strength on and There’s to we’re

Brian Krzanich

you term whole – to is and I, team the And heard committed longer Joe growth. actually here

real So support, deliver those mindset in growth. customer our believe these growth products, will delivering innovating new better we things

I term. look at so long And more that

top to We continue believe and we’ll continue line. grow bottom both to

Brian Essex

much. Okay. you Thank very

Brian Krzanich

you. Thank

Operator

any I’m questions this time. not showing at further

Brian Krzanich

this joining say I’d everybody just Okay. for thanks morning. to like us

the And plans everybody our in all a to forward enter you. a state-of-the-art in will two we phased capture which to we long-term As and on that grow the and of day. I second deliver are is the to focused I And we next strategy, the objectives. the us the us believe that to at And we’ve execute opportunity. deliver software business great said auto to and have year speaking in a confident committed the And onset great again have CDK place really initiatives look growth to you allow industry the encompassing position puts quarter. half the to as we position I call, of unique our near

Operator

Ladies and gentlemen, does this conclude presentation. today’s

day. have wonderful a You disconnect and may now

CDK Global (CDK) 5 Feb 192019 Q2 Earnings call transcript