CDK - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the CDK Global Second Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen -only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference may be recorded. Instructions] [Operator

to Schlueter, over Please Director ma’am. like today, your go the Julie Ms. of hand now to conference speaker ahead, I’d Investor Relations.

Julie Schlueter

you, welcome like quarter Thank XXXX afternoon. CDK’s fiscal to second to call. earnings good and you I’d

call me Brian Krzanich; Tautges. CDK’s and Joining are CEO, CFO, our today’s Joe on

and Marketing to held Throughout operations not do only, like that as Business continues will be remind presented Digital to that today’s sale call, I be operations. we for which include everyone would discussing continuing discontinued the our

Unless all our non-GAAP are comparable and this noted, website. the adjusted references otherwise in are to release of directly on adjusted amounts available financial in a GAAP most of included press amounts amounts the are basis. Investor Reconciliations afternoon’s section to Relations

like with during everyone including could that contain SEC, would And tomorrow. the involve to will call forward These finally, filings made XX-Q looking uncertainties, statements. cause risks results those looking differ anticipate and conference our the will in remarks forward in that our be materially forth this statements. we from risks to set which Form actual available detailed statements remind I

in will at and in The Association NADA, be Las in we San will Conference the Telecom management National Dealers Vegas Automobile week Next Morgan attending Stanley Media and March be Show Technology Francisco.

Brian. With that, it to the pleasure to over is my call turn

Brian Krzanich

based strengthening call for today. results, excited our further the a thanks Julie, the quarter and continue progress as to am to all on company of subscription I building you, and significant make the long-term. joining share Thank our well strong for with you to business software as second you in we us

for then on comments customer and areas quarterly today experience. differentiated results three update business the building for will start key on a One, future. a the better I creating you with of focus our and

industry. to our the software modernizing auto easier technology with CDK. making best-in-class Second, to do bring to the it business And third,

of in the with year-over-year. some quarter. with came am $XXX start quite for we of the million, X% ahead I at financial Let’s Revenues results what expectations accomplished. happy have up

are We $X.XX. million EBITDA up EPS and in $XXX of

continued improving big investments of share they health our will business. our minute on a impact are long-term This and as our the having in quarter we I a

The regarding key metric to about site X%. health America focus strongly our quarter. CDK our Year-over-year business sites and XX is in was auto team growth the of the site on this core count up performs North or

and row site North We and have total now a seen record as for in American quarters adjacency auto growth with year-over-year yet sites. another four set

his to provide Joe more like the positive details we things serve And our we the share financial insights enhance are in seeing. are will to the improving with doing how results we starting section more customers and business but early I’d about

customer our because our serve as customers drive How new for we foundation it’s well and is customer retention, for the solid satisfaction sales. building the critical, that as relationships

investing we As our a on in software. things satisfaction our and getting advocates focus center call improve doing customers our the sure customer our to increasing are our performance reminder, make from with the serve how customers increasing installation we our maximum to and managers benefits are support quality, the

ago two our few for Our quarters message service XX-plus a dealer is site resonating, reasons. cancelled

contract are and with the decided and shared terms The contract and cancel team month many dealer new This to five-year dealer on incremental more six stayed that sales the with provider platform. practices and business doing close this signed their sites Our CDK to added contract we to to our support. a improve. other CDK our things

what serving just now. at them are I doing joined in where we of a example how such and customers we growing the company this looking you This is at look quality many change us their When are example, one are when until been of and it’s is confidence the from

sales I’d give ability I our This earnings win dealership our the is the for complex XX-plus about call, point mentioned to On accomplish important with to industry the large critical you like that proof to next such an our customer. steps site a team. this install. last update on and

to am there and that of for two our has install to a been live customers. smooth weeks and CDK installation the customer. and training satisfied ensure I we first high the happy focusing site on ago conversion, implementation report heavily watch quality are our to was I on phase experience quality a with

others. We are many for very the this to excited move customer installation forward rest and the of on

are on are industry differentiated momentum. our customers creating very and We a good seeing the positive entire and experience making progress the

growth addition to double-digit year-over-year. In North produced sales auto America DMS growing sites,

and both improved. Losses retention

In quarter. at This highest the over that quarters. fact is the of rate last our during this high level impressive given especially renewals is the retention came nine number scheduled

to off. really paying is Our their has am see team proud implementing customer work turned focused on I hard the very our strategies that and corner

of do and Our being easier business solutions, open breakthroughs am excited had more agnostic with quite more the about technology Starting quarter. this second our being area with. have I to focus DMS is delivering teams

a been of has to highlight our that can competitor’s apps DMS. we converted. applications to team they that converting recently be sold dealers be agnostic, to meaning busy two I’d that more The DMS have use like

application overcame available one in DMS. is a our OEMs. product One to with agnostic other was and re-engineer weeks and partnership to The team of workflow technical hurdles major to eight many be our integrate able built service within

provide This be now service. application customer’s home second our band, mobile dealers. are and CDK integrated can equipped in CDK to to The or repairs. a is service Dealers their come service fully DMS with non-CDK app using mobile onsite software location which

place going customers are on our to full aligning our speed more our with our expanding open a we of and as these to result. examples are DMS our market business and easier just more more to addressable our two and make includes Now do agnostic, solutions. product pricing Being value, better

the friction partner data source place the appreciate the out ensure As partner been to the They activities is customers. on step before with that we our have program tell they but acknowledged and program cost. integrity, our with value of security need a has of they us

new in better to approaches our participate are eliminate partner access to fees, value. most allowing demonstrating we rewards program pricing, and customers packaging data Through program that

a is the headwind transition very we do it’s the financial the to for thing performance, approach While believe on our and are about the long-term. being right thoughtful

one you dealers, configuration, billing process. I quoting, on like installation would visits biggest to facing contracting, which final share simplifying complaints one progress I addresses hear the our that during with with and initiative my about customer of is our

a business practices. of process our modernization is fundamental re-architecture As we announced in August, our business initiative,

better experience two a with simpler and of experience our easy next will to result dealers a sales installation configurability show the invoicing. Over the years, in and process, much tools much understand simple that products

one am and new our key glance. out very descriptions we December areas Currently, streamlined help has what of invoices, to transparency deliver the on to better I has report in that started dealers focus understand [ph] which been and return improve happy invoices our rolling a changed content, a at

paperless access Customers where will also easy have they statements. can opt online for

positive this critically the invoice rest our on early continue is received fiscal throughout very of this and have rollout the initiative to important We feedback year. plan

it and process at to In to and contracting make buy addition, simpler are we our quicker looking software service our closely solutions.

greater go to provide our forward market As for we enable process results CDK to will even customers. look to our enhancements

the to initiatives we results. and Now positive are all seeing helping of experience the these improve customer are

on in been Now and a infrastructure. group area have our enhance hired focus, on behind will better modernizing in use, have fix working We cost of Enterprise leadership. our core the only XXXX third moving not customers which modernizing and for more the CTO us new effective Software easier our to future. to They we staffing and are for very scenes make technology been our our busy technology software, it to Class and with but

and software strategy future. for innovation centers will our dealers need on the Our technology that and providing

We as this sales do a by to their dealerships. an our portfolio, dealers’ with open operate will experience, world ability and that service differentiate and and their agnostic DMS efficiently software as enhance well applications class driving

with into push our will ecosystem, innovation open to across tools and expand an drive the customers we platform making to data of part our continue decision industry. As driven to enable our Fortellis engines

start is have made quarter. two Flex, a The with on team we update lot progress development focused this Drive Drive Flex So of to on key an areas.

getting First, certified enhancing second, Drive we And a and approach more Flex’s rollout broad new adding OEM capabilities. functionality, usability product. as the of

team At the almost our the has experience add the costs significantly of install On existing item, changes out first time to team January, and reduced and dealerships. other improve more which half. amount rolled us the capabilities, of by allow user that end delivered to increased

currently. manufacturers than Big the completed more we customers On several the and fiscal end. Drive we a the other our second on Flex year confidence with be improvements we certification will item, that are now dozen have by OEM give me working Three process These a month adding

While entire our firmly focused transform strong our ecosystem. like a dealers, the standard range of broad potential focus system program DMS building on business establishes that that auto is platform experiences auto the benefit expanding for on platform operating believe has enables industry to Fortellis our our other industry will a the that I Fortellis. no

the can be Lyft now the on upcoming of week. our our demonstrating API have will We next connect show several some and that to at we innovations Fortellis APIs including Hailer DMS data newest

to publishers to API platform, new third, be an to the publish developers to those application consume new platform, three or One, customers to things. added experiences. create you Fortellis For value second, experience, and industry-wide need capabilities

are our CDK Lyft published and conjunction application current ride the Our the to best case a API service the in of example dealers service. have dealers with to API. with is to the Hailer integrate and haling the Lyft we built progress an API made CDK use consuming Fortellis.

service of January, dealers more we more XXX the using than As to many with had of end come. the

transactions platform going platform, think industry I Fortellis platform. that is or how of of the the any of measurements many When best are through the success one

reach to As Fortellis, of X with expect month we coming. this through more transactions million about much month, per

a for invest better is us industry connected you the there. will auto experience and Fortellis future the see continue to of

positive tell, a also of program. and lot can growth, addressing have our many the and digital As you transition driving hampered the CDK of the such of we the are in partner that change marketing distractions are business as

results should both for financial strategy, our well-aligned. of the which coming The thoughtful been The grounded that in human terms to long-term our in employees of our that pace outcomes and capital. are into justify continue in lean investments our of customers, is we shareholders conviction has and our allocation very

lowering Thus detail we describe in revenues the will and year, and range, his for necessary move our guidance continue will EPS EBITDA to more devote strategy while in forward growth reaffirming to remarks. with which our the our numbers resources for Joe

every the want dealer say As we be look can dollar better ourselves them challenge high-quality we to experience, a able and the seeing next deliver to to getting quarters, they We future. are how customer adapt will their our to few they as technology beyond for to that getting help value expectations.

On management and November our are behalf guide I’d of the our to we with which every should another our entire all thank CDK in of we customers day. in employees interact one how values, for launched embracing the for like in team,

shift I and our proud the we team’s made the the am very we strategic quarter in the their growth second to a culture. results on am extremely with pleased have of initiatives. achieved I progress accomplishments have and

to will results. it over for that, the I turn Joe for financial With

Joe Tautges

and Thank afternoon, Brian, you, good everyone.

and we results, comments made his our are transformation share QX to cover remarks. I to some add my wanted of I CDK the Brian continuing on perspective executing in at Before the

ultimately, at those priority all increasing customers, is software growth. and to sites, focus selling expect sustained and services providing and result delivering will our more exceptional top that CDK applications, in Our we

been focused executing are for past We we are year the and this on have on seeing the results path exciting.

revenues the pace increased of quarters or more. at five have last We a X% for

the North and growth sequential four quarter last by quarters expectations, America have in shared we have this sites ended delivered with We of auto growing the X%, ahead past. sales the

added value our customers wide our and solutions we of application are and range to be to as investing revenue. in application ELEAD our a grow of portfolio to meaningfully strengthened acquisition with technology well-positioned the forward our we go layered We provide shared,

are An important our CDK critical for which this us to initiatives, for accelerate continue part our to of of to performance. execute is level of us all on key

customers result investments our to technology. of as the have that progress in a make our impact able been We areas disciplined and improve this

CDK our is are increase leadership the see will our I we more our the the executing that progress investment we to as As business forward push CDK against and we sustainable, opportunities attractive initiatives, focused very in investments see continue to continue for we and execute growing quickly. team will to long-term. Brian, transformation and

QX by performance of with another our of strong to CDK quarter results. are be execution and investments seen The on off was results metrics can the paying team. in starting key moving Now quarterly our our revenue.

of The like by in $XXX an and driven the to quarter into increase X% that X% an key from international of performance and applications penetration by was North service, million were in XX%. X North by in Consolidated ELEAD plus year-over-year revenues offset performance, growth X%. up on of points driven was gains transition expected America the the partner organic program equal CRM application subscription subscription revenue. for revenue declines deeper cloud, Digging of America up basis,

XXX, call from lower the partially the accounting growth North change in hardware in center. in a ASC revenues by offset service as driving Also America was under other for which volumes revenues, in benefited

growth. of double Now auto let’s drivers into up America year-over-year. click subscription sites North were the X%

working We two, Board improvements the cycle our site site seeing hard on three to and our metrics. improving one many have across performance group are and been within

quarter us site the This gives exit group. X% than we confidence at year that greater will

the losses. site positive continued see This including improvements installs quarter are the pleased results one to digit to group, in and in we double two

site rate the over the overall down at was count level five low-single year and quarters. was retention over it the digits the While year, highest last increased

primarily consolidations site losses. strong to the low-single plus highest due also rates CDK expanding growth the group, equipment installed and increased in sites X% five ending Within in existing up to customers in and three heavy in improvements were industry by from year-over-year, the sector digits locations. market saw growth Site we the quarters. adjacency year-over-year new Retention and

at X%, Cloud, penetration the primarily the revenue and in applications performance was centers. by Adjacency Turning offset transition. per by year-over-year. America year-over-year slightly partner increases to declines revenue saw CRM X.X% revenue auto Doc from per ELEAD site, site like higher up North over driven in The key per gains was sites expected service, programs applications of of

on quarter or primarily revenue revenues increases our basis, constant international business, per growth, site. year-over-year XX% currency revenue Moving to up driven from second strong by XX% a were on in subscription

negatively growth that benefited timing and time International certain revenue was impacted the point period. prior of revenue also the from year

period six-month was the impact normalized. over However, the

Looking dealer at International the site to down were X% year-over-year, primarily performance, consolidations. sites due

ended not with up increase users on site-based we a higher a per software drive XX% year-over-year fee As incremental number the International reminder, revenues. saw solutions quarter most revenue site installs user through of the our is and of basis to per year-over-year. and We of existing dealers

declined with Now second by the for XX.X%. from for million to of quarter margin consistent underlying solid EBITDA stated quarter, growth. EBITDA earnings. with business single-digit saw our X% in an $XXX outlook earnings high of the the We

and our earnings transition, increases expected, investments, growth program than As certain impacts by partner more from the offset FX was the and general expenses. in administrative

strategic the investments partner program. were down our to points, pretax basis At due a down impacts with segment and North margin earnings America X% XXX a XX.X%, principally of level, from

XXX XX.X%, increased partially For up points, on earnings were revenues, XX%, employee-related of offset margin of mainly International, basis higher by earnings costs. up because a with pretax

diluted per shares total by diluted our XX% the $X.XX, and decreases For and decline driven offset was X% expense, were average lower in outstanding. amortization, effective was interest company, EPS well and weighted EBITDA, higher share year-over-year. as partially rate as tax depreciation The primarily down in earnings by

of business year-over-year, million demonstrating the Our was of powerful our December United flow lower by half those Free XX by free legal $XXX which $XXX which payments, flow million, grew held driven cash was cash the XX%, million, cash settlements. was model. States. of generation payments primarily balance on cash first the of $XXX outside was Absent for

ended to During quarter. in we down $XX.X paid last cash net a from shareholders times, out million EBITDA X.X dividends and to the with of quarter, debt adjusted ratio times X.X

We net to the X X.X next at the to times will the end and times adjusted to continue target year two expect over our EBITDA delever fiscal to range. quarters of top-end debt approximately

to Moving guidance. on

guidance returns XX% of to of XX% for reaffirming our annual $X.XX million $X.XX effective $XXX rate shareholder billion are of million. and to our $X.XX, to tax revenue We billion, to $XX of $X EPS range

As of million focused EBITDA installations, our levels to particularly $XXX to lowering the at on range in are adjusted training second for our the spending appropriately areas $XXX we customer and sales costs, look quarter million guidance we full year. the

Before taking regarding would your divestiture. item the I questions, like highlight to Digital an Marketing

of views have value the the we we As assessment associated of the capital our of continue carry-forwards to loss share valuation our allowance the million income process, in the through sale against business of quarter. tax and business allowance $XX recorded $XX and a valuation refine of million reduced

In of you we will very good progress the making are this update business when occurs. sale terms we the timing, on of finalizing and

to In closing, the against for plan, we strategic business and allowed continued us provides value our which has executing better strengthen dealers.

will maintain a and growth and continue benefit execute successfully employees the will our to drive of initiatives on long-term approach to shareholders. capital Going for our forward, our to we deployment disciplined investment we balanced strategy and customers,

I will to and Operator be now to turn your happy the questions. we it will take back

Operator

Thank you. of first comes Ian Our Instructions] [Operator from question Oppenheimer. Zaffino

open. line Your is

Mark Zhang

Hey. on Good for Mark Ian. taking is our for questions. This afternoon, Thanks guys.

spend I upcoming guess, like the be spend commence from, details. that quarter? guess, and going But guess, investment for when more you the all the incremental a like I guys towards so on thanks was I the can spend the, will, guess, like, of announced, share just bit maybe I initiatives, you Thanks. will what majority of mentioned types what allocated So the through guidance additional aside

Brian Krzanich

detail. numbers the results and and Sure. continued from This you I sites. seeing you saw a some and in growth more the let and of will will we are Brian. start then conversation our of other the quarter the I What for hopefully into get is Joe

our overall investments And lot are excitement. that are satisfaction now customer of and the partners investments the gathering technology are making roadmaps to showing we just our a the we out is around

are we so And an is we are incremental not seeing positives that. this in nothing, and from really -- but this

these going the We more sum all to efforts. in spend of are total

the targeting same numbers and still are presented quarter Joe We ago. I that a about

are from and spending, Those of do to go we do, we really good are is some try going we the of spends will main are seeing What in areas. spend. the accelerate try that and results three because

success, install customer which what the to more First do we able is call is to installs. getting really be around teams

the so the able need more more be people to like do doing have growth sure on increase in and we able business sites because that got You that, customer us. an we a things our actually they right positives out to installs, brings There incremental back saw of calls properly, in to are have make people operating growth and there. people lot bought trained, they is have to software satisfaction seeing the again are

technology that’s Then the the service, and Flex is then area products, plus many through have Fortellis applications. drive our and CRM layered everything other to modernization Drive in future about of from current the talked we our

a We bringing modern coming market them of in bringing are and -- now, up to a been being APIs enhancements time with some that have lot period those the actually modernizing really are of more for requested and structure.

around continuing last and to to the we possible. are that is, for then an that issue accelerate is is looking ERP the invest that system for opportunities there other modernization, and partners and ERP area the our area And whenever

for simpler very are clear billing, or changed more clearer that’s shorter shows that but or they about what page people right? month-to-month. bills, really billing really paying XX what’s smaller and XX, And XX, simplified No and simplified,

of are trying will we accelerating are total let as really faster. and benefits that going don’t bit talk then go beyond the in we that. to we just that because much the there, we but change a spend that to is are as So much Joe And think can I

Joe Tautges

Yeah. Hi, Mark.

for it, we of the going out well. think, continuing particularly very are at to on look this the really quarter you foundation of growing focused when just at sites X%. it When seeing approach on we good I quite look fundamentals are we investments, Brian, covered we momentum business through improve and the and are

the second really in in we some look continue you second in more did the the half installing of half that. we when first advantage opportunity us and to And to installations want see we XX% in second than and the to half, build the half take of momentum on than the more

covers that your think I So question.

Mark Zhang

Okay.

I how anymore each category? what very sort Okay. Can Flex follow-up, know to helped versus of then additional quick your mentioned I guys like Thanks dealers of Drive have seen details large dealers, good And you grow. guys. strength, like, you helpful. which count small see a share, to That’s guess, more continues but has, initiatives, site just small you dealers Thanks. in saw and guys retention

Brian Krzanich

in absolute two you the Sure. Joe categories, will and jump give don’t -- can We a I will general, numbers but in. a is you general break out those give Brian this I feeling

Let me picture. general kind of try and give you the

was You in sites, well. earnings there a this fact, sites we in are I last you where to saw few grew coming announcements, a from remember quarter And mean, quite renewals quarter. due this quite continue if quarter’s grow

site quite we So pleased with growth. are the

to That those we the on be in means continues second, rooftops. let’s had that occurred. things did above, it a better site strength growth new call I’d retention, One, and the stronger three sites larger come bit and additional really you tell have Board. we two sites,

to quite see of strength area. that a We in continue bit

and in in get dealerships. dealerships, rooftop the seeing where smaller we more one actually improvements are that then two those We dealerships, think to I and customers work good Drive process we drives growing smaller Flex. renewal some to work you still in do those to our very But have into are of retention

Drive really we we in do there grew installation, improvements on a that were Flex. in of improvements easier down wanted simplification, it do in installs to both we making the to cost, wanted slowed expansion this to to that some really trying the you the couple grow in bit we Drive faster Flex, and of because if quarter, lowering before much out then remember the saw get we some first

now. towards and and are dealers place Those been in one have put things rooftop targeted really then Drive those two Those Flexes independents.

dealerships, We strength bit which are an haven’t past. addressed really independent in of we is seeing remember market in the area quite that a

in. the year are end on installs of installs this kick Flex a to lead We and our month that. -- to And that to growth goal we should Drive at of more of Drive our So go turning starting is and like number and at again XX exit a growing think those then the XXXX, Flex into July I beyond even are would into right? as XX fiscal than even faster

will be So think I those can smaller to sites. transition that we where growth in

to So, the better and smaller strength the those lower, retention smaller lower in for the Flex high dealerships -- of in Drive dealerships. positioning growth end, get

Joe Tautges

Yeah. And this is Joe.

what market numbers look and in mean, terms add it’s Brian some of at shared. to to I the Just largely site dealership flat perspective. you with a

sites a this And there’s Drive there. and X% not so lot with produced Flex we growth of that are we the quarter in happy

next the forward when head so we into better at on going -- numbers fiscal to and software as January in to the we Brian described, the able the year with new came have the we are investing and as And installing progress out year. we you that the as and scaling exit opportunity focused confidence the be performance look updated drive

Mark Zhang

Okay. guys Great. very you Thank much.

Joe Tautges

you. Thank

Brian Krzanich

Thank you.

Operator

Thank you.

question of Prestopino Our Gary from Barrington comes next Research.

Your is line open.

Gary Prestopino

everyone. afternoon, Good Brian. Hey,

Brian Krzanich

Good afternoon.

Gary Prestopino

going words came I system that then your actually a dealership signed up replace was correctly and the you recall you if back… story told to for That new about

Brian Krzanich

Yeah.

Gary Prestopino

the …six later. that’s interesting doing dealership. months of on just got considering drain fairly switching It’s cost the astronomical because to an be that

bit -- them So to happened to to led as extent maybe the dive can and could you as what actually there made back come you? just you that what little more into to what a

Brian Krzanich

go can’t Sure. names, dates, this you I of can give and we much numbers as into will as but… and it I

Gary Prestopino

fine. That’s No.

Brian Krzanich

is the organization are you or year last we is we one that’s take the really do every I But the get things more focused seriously. have extremely of on the done well retention. loss tell over we things really …what and

to So or trying what now are, can when competition understand in really issues us, what’s about a customer us we trying talks leaving there close. we are really leaves gaps and the and go to offering the understand

We are still I’d up. say kind catching of

not are there. and In sure do now other renew six enough months, going what proactive are months talking really are saying words can people about to are, make We who nine from to you yet. now we

somebody does and we leave, everything necessarily rip out. when don’t in go But

will time are actually and leave still interested period done them for we example there examples case earning talk We we are their will and I there them of and in was continue this that. where know and some the to think have it we specific back this let that business to in several over quarter

to go up or we I that and We customer are where the want they been if that and with of be comes on just there application extract they on for working for I period have competition, but turn just clearly hey, system the have missing the is all that infrastructure that may still it’s data So it. to it. back, trained and the us time to the all says, do to want layered turn DMS back-on, actually easy pretty

So within to you able fairly turn are because back as switching them actually from low describe days costs the we it both are typically. on sides literally

Gary Prestopino

Okay. That’s end all your OEM of you couple year good. fiscal just Thank of And year? ones, end will you. then quick the or year completed calendar by of other this certifications a have the

Brian Krzanich

So done. prepared three said I the once big the remarks had have in we always

the the ones. won’t done the will till have probably the but of will done other you have I we tell we the on of the OEMs larger this year, -- working now fiscal are I call OEMs year. probably it all calendar end majority We of of by the the end

have It just -- calendar. get on to we takes their

block. big But of me it they them and we know how do going Ford, helping, take of the got bit are the road gives and We and fact that we to longer. three schedule the GM, somewhat system so that of is be their their some to timing are lot just victims the SCA, a have a confidence

just matter schedules of a it’s now. us through So the all getting

Gary Prestopino

quick And two then more just ones.

Brian Krzanich

Sure.

Gary Prestopino

Did in your site America North the DMS double sales, up were digits you quarter. sales site say

Joe Tautges

Yeah.

Gary Prestopino

That in installs, wouldn’t be of the right? in reflected the number

Joe Tautges

in there’s in That’s if and mean online the that over right. comes a that backlog that of quarters. a is next some it two the and quickly, dealer I we quarter integrate of that site can some and will but majority come that that there acquired is

Brian Krzanich

-- is pushing are about duration to shorten timing is shorten a is right, we a at investing of and the from spending to growth to try the rate and perspective that of sites grow that that install And towards, we even some be faster talked what backlog able

Gary Prestopino

good lastly, Fortellis just, month, million that doing month And there was a news. all about transactions Fortellis, were that where X a correct? X million is you through going That’s said then transactions

Brian Krzanich

sir. Yes,

Gary Prestopino

So share -- the mean anything I transaction. share are is you there. can all can model per mean there average on revenue maybe you I the revenue

an give success of Just the early the to what us product? is idea overall with

Brian Krzanich

Sure.

go program I misses and to I are -- the just have so… the want that really of really Fortellis revenue back don’t point this perspective, a we we answer whole because right, on that So partner to think on a doing

Gary Prestopino

Right

Brian Krzanich

kinds processing any direct costs the program data extraction and connection were data. I of data of had it or see all of related or old a really encryption and data they to was partner of

We about roadblock been retention. have a major talked call it our and customers how that’s for

the uses structure a of And APIs it’s to got have is very for that we designed and different it’s of, a that architecture it step open system an be top but really standpoint Fortellis and APIs. on from those modern.

those now of one a each they operate. spec APIs how about has So

data APIs can anything extraction. simple be from a Those relatively

a want both and directions. you extractions, If you have where and data are in you whatever, a data flowing order, very or complex extract data the it’s and like, or to calculations your repair inventory sales dealer encryption

in And very, so the revenue model different. very those is

model For data a that simple extraction nonexistent. revenue is virtually

We are in that’s really came where that really the dealer’s that, that data friction setting up is the that past. the from and

integration complex DMS a has things highly the of repair is that. In and a like order, fee, something because encryption level like and a it there into and calculation

give different you would types an number and for applications hard average now, applications right that for to it revenue the so, these. is of be of such me And the

really future. will more in We probably of give and start kind and growing ecosystem this Right getting now are more on the to that focused partners. we information

have about other we partnerships So coming we a order, have we last the talked have we our repair over quarters talk several Cox will about at got during NATA. couple that talked developed, that of partnerships we

And applications. it’s go get have to have grow a really first how about go getting partners, platform get then remember you this. you build And partners, that’s to like then the you we have platform, said, you to

really NATA, to early way And at a so revenue bunch announcements it’s this in we talk make will average too but space, model. it of about at

like, So or that’s why to, to that’s on an am not wanted the so. over next year I answer I going focus

Gary Prestopino

Yeah. fine. That’s

Brian Krzanich

thing… another And

Gary Prestopino

Impressive.

Brian Krzanich

will the with have what success get measures to that platform. on why are start give our we of volumes Gary, to next relevant caller. your you that’s move got the And be of for the you traction data we into continue we us and more is up see do we insights in will on view number making time. and other disclosures, our investors and Thank to world And so Yeah. will to unfortunately, our transactions more outside the points, focused

Gary Prestopino

No. you. Thank fine. you. That’s Thank

Operator

Thank you.

of comes Morgan Stanley. question Josh from next Baer Our

open. is line Your

Josh Baer

Thanks Hi. the taking for question.

Brian Krzanich

Hi.

Josh Baer

for of for and a One couple Joe. Brian

far your innovation, to picked initiatives competition and that’s changes a retention For customer support Brian the leading have around up from and any growth? higher response you your as site as to

Brian Krzanich

a it’s a competitive It little more say competitive. getting bit may I’d market. be

have -- I our I think and to we cases, those we of together. think on lawsuits, have quarters. partnerships our showed to where you some spaces can about We of with other some there’s settled we we have we be going some in the spaces about talked be like where really work going that there’s are competitors finding Cox, of compete we some quote talked

I So haven’t or the market than bit marketplace competitive see seen more really now the is little months in tell you but six here don’t general, a shift it much. more I’d ago. you, tell getting team less I’d competitive, that the I any was probably

Josh Baer

it’s financial month generally, impacts, for That’s but next when so impact are to asking helpful. site XX more I that model Joe, to recognition XX like will growth and am maybe see install. gross the for where a a margin site installs Flex? existing not Drive revenue any the Flex, any Drive or see if And sites Drive or is ARPU And for wondering for if for we different the there we primarily benefit changes where Thanks. profile it’s uplift sites dollar Flex year, at to how new you from

Joe Tautges

can with in, so experience Flex at I Thanks When when add our the in will look -- model and that look far. I for Drive at have we I question. the Brian start

of and focused Drive applications solution as dealer are We Flex package other a to the that part to the have we sell on integrations and with it.

our and And expect. based I pricing products the is revenue to very model similar in portfolio what how you point price which model SaaS to terms of so mechanism the you other much the and revenue very in so today recognition is would we would the subscription

But to value them as the saving and the have sold with an Drive opportunity when our of customers platform integration solutions more market. that and to more able an both money have we deliver to pricing, for seen you new better at look for they opportunity the bring Flex be upside us drive more to we

Brian Krzanich

the back Flex necessarily. scalable in and aren’t is that thing high about beauty the and of would several needs as and heard it’s have have those the so gone early we there the cases actually nearly that add And you is independents, talk and I complexity the all installations us of scaled Drive into

that a it layered stores a lot has apps to group may that that DMS. As dealer multiple attached have of

modern is architecture scalable. that that system is So modularized is beauty this and the it of

new independent take into our result, like areas Drive And a when to the a new is you so look a as that’s dealers, marketplace. goal move Flex, at

revenue now. Joe So area right that’s growth tell untapped you that’s will a

will we it get in that’s those back time, how into space. will then and supporting. that existing we Then to currently larger also get really opinion below And two we are growth go into that dealerships, the the over we in well. But my smaller dealerships dealerships as

see different segments. across growing those as we the will you profitable but all it so expect a revenue and and levels be three of of in result to very margin And those,

if when Drive at three you those be the that by smaller against any an fact a kind skewed of one we Flex, at have whereas it at percentage those guys, the may for equal. Drive of segment, there are average today, but of it when so very at all, independents look look be And doesn’t all segments it small if look should it moving you

Josh Baer

Thanks. helpful. Very

Operator

Thank you.

Pfau from Matt Blair. comes William of question next Our

is line Your open.

David Robinson

is Matt. on question there expectations? how to around a relative just Were for I David This guys. to progressing Hi, your Robinson had any updates business. ELEADXONE that’s

Brian Krzanich

Sure. our expectations. Actually, ELEAD continues to to do well. continues exceed It

quarter. site see this is quite to well. over continue The going growth We business

acquired. great to have I that careful we am it it is -- that of stale a become we and great the be technology trying great that on, eventually of a that We not one let things me then I put idle and was very don’t then technology. And technology sit acquire a to and

and invest team there months what application next future that and can believe so going have layered those be to that XX two product, applications are is, going we it our faster a to XX to the out o rate do to grow those ELEAD investments. were continues and CRM. make grow really to we we over is actually this to are months are investments service those as plans going even at we that you and this we into see So around to the some into of upgrades push technology

Operator

you. Thank

question next Wells Fargo. comes Nabhan from of Charles Our

open. Your line is

Charles Nabhan

for question. Hi. my Thanks taking

a about are customer I health -- market, or speak financial made geographies you if you are provide what two-part of was strength have a weak standpoint spending if past you from from could are where weakness business. But within then I maybe I there’s around geography, as you and the international the are trading we some if been a could couple on if what some And about U.S. auto new to know wondering guess, you kind market, quarters? conversely question what the standpoint? base, seeing seeing consolidation over wondering, of Just could on your and trends, you you comments from comment I firstly, any seeing you seeing among you that think -- was specifics the

Joe Tautges

I can Sure. and will start add. Brian

in hung in in there But first have pressure, publishes quite been there, have you the new SAAR good auto published all look and will U.S. quite under be So volumes when of out. statistics market, was June a report, one a the NADA well. at last one the the the in coming dealers while

in out, so some to and really more. consolidation And the practices scale an dealerships point not we is a their seeing real new there see to dealers of operation continue to bigger -- opportunity of

how the there. service a we we think the to So is about revenues There work towards why continue see in talked arena and push and the opportunities Brian service about that’s accelerated do growth we application a to a robust it. to solution as discussion out-of-store we digital a the the great We think through end. way opportunity that have and go connected retailing around unique for research provide all software

market more franchise of good car the you used auto see there So be that and market cars. the robust increases when then and dealerships there. used new also is lens continues to you The is look selling at

in the on doing finding sales market -- I bring and the the successful. are ways the when make they think, on of weathering quite at some look customers they we So you vehicle to in are focused their think, their solutions need value well declines overall other to I to and balance, bringing aggregate, dealerships new

When space, the quarter with I look the team. International really performance the at are happy we with the International in

overall at the look business subscription growth. and you growth the As

There to see you should as is things look look their International they base bring new mid and six think and of growing and customers. well a single-digit. at through solutions are doing at I they it’s business number months the win

of a number you as dynamics. also on count facing site saw are decline They the

many yielded have of of that that, lot at You the been have existing of and as. Europe see and we fortunate consolidation a customers increased ours areas site has users across us increased rate for consolidation site

As Asia, to and China be continue a to there look business continues on at watch particularly closely. it pressure we that

us. things pressure right to to solid of management quarter the think doing find lot is team and the where deliver grow a look opportunities business the there and for so the And I is

Charles Nabhan

if the impacted and in accounting just line Got us for more follow-up Could was Joe, quantify quick give other color I us possibly it. maybe I RSNA. a And a around that? mentioned you in there that could little sneak for a change that in believe you

Joe Tautges

familiar not the am with I accounting. change in

I think accounting. maybe We are you this lease is referring that XXX adopted what year. to ASC

Charles Nabhan

Yeah. That’s right.

Joe Tautges

number impact and -- quarter can you second exact the be accounting. I quarter is first to the and there XX-Q publish in And each was lease will the the a of that go have exact That don’t in that will quarter. footnote

Charles Nabhan

it. Got

Okay.

Joe Tautges

And printed to topline. we constant and the benefit pull start the numbers to improve the you look of we growth when you think that overall, And you it what growth, a at accounting look is largely nets X%. is X% revenue the organic the revenue in if apart from basis noise on roughly the the by I again see you all at transition when netted program will currency the it find lease transition business and partner on continuing out it’s

Charles Nabhan

Got it.

guys. Appreciate color the it. for Thanks Okay.

Brian Krzanich

Thank you.

Operator

turn questions time, to like to call at closing for this back over I’d I Brian remarks. the you. am Thank further showing no

Brian Krzanich

Thank you, Operator. Okay.

all like around to want that close just then you showing questions results with once a saying statement acknowledge are in at pleased dedication. thank proving I’d like I how a would really we to for the It’s are hard their call entire world again very quarter. CDK to today, strategies I and the team the So and all out close just to great successful. the work really on great our

you thank So very much.

Operator

you and Thank Ladies does conference. gentlemen, conclude today’s participating. you. this Thank for

You may disconnect. all

CDK Global (CDK) 5 Feb 202020 Q2 Earnings call transcript