Q3 2021 CDK Global Inc Earnings Call
[music].
Is being simultaneously webcast.
In addition.
Our web site also includes and updated excel schedule, a supplemental financial information and a copy of a results presentation that we will be referencing during our prepared remarks.
Throughout today's call and we will be discussing are continuing operations only which do not include the international business, which is presented is discontinued operations.
Unless otherwise noted all references to financial amounts during our call around and non-GAAP adjusted basis reconciliations have adjusted amounts to the most directly comparable GAAP amount are included and this afternoon's press release.
Please also note that all growth percentages refer to the year over year change for that period unless otherwise specified.
I would like to remind everyone that remarks made during this call may contain forward looking statements.
These statements involves risks and uncertainties as further details and our filing with the SEC.
Which could cause the actual results to differ materially from those mentioned and the forward looking statements.
And with that it is my pleasure to turn the call over to Brian.
Thank you Julie and welcome and Buddy.
I'd like to start today by saying very pleased with the execution and performance of the organization during our fiscal third quarter.
The revenue for the quarter was $433 million of $7 million, you're over here and there.
<unk> for the quarter was $166 million and a margin of 38.4% and.
E P S of 69 cents.
And these results mashed, our forecast and and reflected successful edition of new customers as well as existing customers rewarding us with more of their business.
So looking at some of the trends within the industry, we continue to see heightened consolidation activity and the retail automotive Barker with a larger dealers, Argentina and need to get bigger.
And that plays to our strength.
Well, we expect this tailwind to continue into 20 twenty-two led by some of our top customers, who are announced record expansion plans.
And dealers are facing tight inventory levels for a new retail vehicles do to reduce production caused by part of a chip shortage.
But they are working through these and as a result or see a lot more activity and used vehicle sales with both sales and prices of used vehicles up in the corner.
The overall sales activity can be seen on slide four of our results presentation, where.
And which shows the recent quarter had the highest average sales over the five quarter period.
Oh execution for the quarter withdraw and many of the important indicators of the health of our company and customers confidence and our future direction.
Positive.
In particular, we saw significant site growth exceeding 9000 and view auto sites for the first time since 2017 and.
And the largest quarterly increase since 2016.
And the site growth was up 94 sites for auto nine street corners of year over year growth.
And 137 and.
Jason fees.
[laughter].
Equally as important revenue per site, all time highs for both auto and Adjacencies of 2% and 4% respectively.
This is based on the strength of our G M S and core solutions.
Like service and C. R M.
And as we continue to grow each quarter, we expect to achieve more record highs.
And you're aware, we successfully close the 145 billion dollar sales of our international business during the third quarter.
And I'm pleased with the recognition of the value, we received which equated to a 15 times multiple.
The finance team has done a great job and putting the proceeds from the sale to work for our shareholders.
We've taken our debt down by $1.1 billion, and and lowered our leverage ratio and interest expenses.
We are reserving some of the cash for potential investment opportunities, which could include acquisitions or other strategic activities.
Plan on returning capital to our shareholders and the form of stock purchases.
And Eric will provide more details about this and his remarks.
And we believe this balanced approach will provide our shareholders with continued value.
Well into the future.
And with a view of the future I'd like to announce that we planned host and and.
Buster event sometime after our fiscal year and results, where we can go into detail about our growth plans and investment strategy.
But I'd like to touch on a few important initiatives here today.
And you know our transformation journey started two years ago.
As we launched and dramatic more customer focused approach to our service and support.
At the same time.
We directed our investment efforts and modernizing our products and underlying technology with a focus on building a modern platform for integrations for tell us and.
And a platform for managing and providing insights from the wealth of data across our industry.
Together with our customer focused approach are unique combination of domain expertise our market leadership.
Work flow enablement through for tell us and data insights from my neurons are from distinguish us and the industry.
Our three year strategic investment program is on track.
And I was starting to see the results of these efforts and the growth of the business.
We've made significant progress and modernizing our software and expect to continue rollouts of are more customer focused enhancements and 2022.
Such as new user interface them and.
Enhanced workflows.
And the use of data driven insights to deliver truly differentiated value.
Ah Foretell us automotive Commerce exchange Crawford.
Had over 27 million transactions during the quarter and is on track to reach our goal of over 100 million transactions for failure.
Next year, we're setting our expectations and significant multiples at this level and it has more developers and independent software vendors and brace for tell us.
And anticipate a compounding network effect through this connected community.
We've seen the peace of innovation for minor unplug from further increase as a result of our square root acquisition during the quarter.
And the integration of the company is going well and we're already seeing benefits and the larger team of day decided please.
Ah beyond our current investments, we're always studying and anticipate the longer term trends impacting our industry.
And that is a market leader, they're both a responsibility and.
And and the opportunity to help guide yours and Williams through all the industry shifts the occurring and provide the tools they need.
And especially excited about the evolution of the car buying experience and the trends toward modern digital retailer.
Do you and as I realize you can get their true competitive advantage spies and providing a meaningful customer of experience one of his personal lives.
Easy and cohesive.
Across all channels.
And interactions risk.
And we see this try and extending to all touch points, a dealer has with our customers from marketing and sales to service and repair.
We believe we are uniquely positioned to connect all of the pieces together.
And with our industry, leading D M S and C R and.
Along with our digital retailing solutions and a hamster products like CDK service.
And the building blocks to and big and Miss Margaret.
We have ambitious plans for the rest of the fiscal year and through 2022.
We continue to invest and our products are platforms and people to support our customers.
We're excited about the trends and the industry and our ability to capture and more of this attractive market.
Well no one can for a day when the world will completely returned to normal.
We see upside opportunities for our customers and for our business.
We're cautiously optimistic and our outlook for next quarter and Eric will provide more details on our full your guidance.
And before turning it over to Joe.
I'd like to personally thank the employees and CDK for their dedication and flexibility through this year.
The high level of performance and successful management of our business has never been more important.
And now truly grateful for all their hard work commitment.
And enthusiasm.
And so now I'll turn it over to Joe for the business highlights.
Thanks, Brian.
Now that I've completed my first 90 days and the C O O well I'd like to share how excited I am about the momentum that we're building across both sales and operational execution and how we continue to women, who are focused and disciplined approach to the business, where witty because our customers and at the centre of everything we do.
And is Brian highlighted we are investing heavily and technology and help both dealers and Odm's drive success and their businesses.
When you first start with sales and a view into our customer base.
And where we are seeing progress or what solutions are wasn't maybe with our customers.
This quarter and we'll see you continued momentum and sales to larger dealer groups, primarily arising from three different happens first we're being net new business as the result of additional dealership wins, coupled with the highest retention level, we've had and several years across our book of business.
Second where C and accelerated consolidation activity within the dealership industry, but some of our largest customers leading the way and there's some left and C D K and their integration partner up towards.
And third our sales team and the trusted partner of our dealerships is breed are key strategic applications to help dealers improve their business and further increase our penetration.
As proof points of our commitment to provide the best capabilities and service to our customers. We went back several dealers this quarter, including a 20 plus group that returned to see the day. After 18 months on a competitive system and and five plus cycling from two years ago and.
And April we also were you 16 month contract with one of our largest enterprise class dealerships, who has been working with C. D K and integrating even more sites through their consolidation strategy.
Now, let me talk about what I'm seeing and our portfolio as it relates to the one to to deal with things.
A customer first of all orientation, as resulting and the highest retention and we've seen and that portion of the portfolio over the last year, and there's a track and menu and new dealers to adopt our solutions, we've been able to put together and compelling software offerings that are tailored to the small franchised dealer groups and include are Super purpose drive B M S.
And it's resonating with that group and we're winning.
Moving onto our installation and customer support operations, we've been laser focused on improvements and installation quality customer service Tech support and resolution wait times My leadership team and I are committed to be number one and this industry provide for providing the highest quality delivery and.
Support for our solutions.
This quarter received a significant increase and our customer delivery and P. S score due to install quality improvements such as providing dealers with the ability to we create and view deals from prior system and to take multiple test drives throughout the installed.
We had a very big quarter for installation and of course, our core strategic products and reinstalled over 10% more than a year ago, driven by significant increases and service and dark clouds solutions.
Now I'd like to move on to a deeper died into the queue three business salads of our portfolio apartments, and you know we have a large portfolio products.
Several technology patterns going on and and see the day and my focus is on how we take the best of what we're building.
And what items are moving the needle the most foreign dealers and Oems.
Then what prioritizing successfully and launching those new products and hands and capabilities such as the next versions of our peace solution and.
And new apps marched as part of her tell us and the long like CDK one day.
Welcome of all of this is deliberately better results for O M and dealer partners and Wallers accelerated revenue and profit growth for CDK.
I'm talking more about our strategy and priorities for execution that are upcoming industrially.
And I'd like to highlight a few of the product enhancements we neighbors.
As Brian mentioned, we're investing and from tell us and neurons and provide value added integration and intelligence and if they're not products.
We tried that and allowing deal is to better serve consumers and increase their profitability and.
And I believe this is reflective of the broader industry true.
Auto revenue per site rose, 2% with solid growth and three plus all the site dealers that is partially offset by modest declines and revenue from one day to say auto dealers and we think our strong sales performance will help us continue to build on this progress.
Moving onto our applications business, we believe our core applications provide a strong path to sustained growth within our business.
And attrition rates offer ample opportunities to work with our customers and provide more value added solutions that will help their workflow efficiency and profitability.
And our CRM solution continues to do well, both within our DNS deal and taste as well as agnostic with non CDK Dms.
Penetration rates are in the mid to high Thirty's within our auto and BMS the database and.
Our service solutions showed solid improvement during the quarter and given the recent technology enhancements that are currently and the early stages of rollout.
Our penetration rates will continue to demonstrate meaningful work.
My discussion of our performance wouldn't be complete without highlighting our successful adjacency business, which delivered another excellent quarter of results.
Sites and revenue per site for bolt and an all time record high levels again this quarter and.
Sales were up 137, 2% and revenue per site was up 4% fueled in part by improvements and the heavy equipment space.
And you can see and the presentation charts, both the marine and power sports industry sales and outpaced last year.
We also recently announced that we'll be making are easy to CRM solution available to heavy equipment dealers and the construction and agricultural space and we expect continued healthy growth contributions from the adjacency business as we move into next year.
With its strong foundational subscription base, we continue to look beyond our own current capabilities to see what's next on the horizon for all of our customers are digital retailing and initiatives and focus on CRM and service coupled with our technology enhancements provide a formidable bundle of salute.
To capitalize on developing industry trends our.
Our priorities going forward with our goal for me and the leader the leading provider of solutions to our dealer and OEM customers and to accelerate upon the solid foundational drivers of site growth and penetration levels and we head into 2022.
Now I'll turn it over to Eric for the financial results.
Thanks, Joe and good afternoon, everyone.
And Brian and Joe mentioned, our customer centric strategies are driving real improvement and the underlying health of the business.
Some of the improvement is reflected in our financial performance.
So it's continued to be influenced by the lingering impacts from COVID-19 and the investments we are making to support our customers.
I'll walk you through the details of the quarter and our outlook for the remainder of the year.
I'd like to remind everyone that results are from continuing operations only and do not include the international business, which is presented as discontinued operations.
And the third quarter, our revenue was $433 million up 2% versus the prior year subscription.
And revenue was $332 million up just slightly from 2020.
Friction revenue benefited from strong growth and site and revenue per site for both auto and adjacency.
As Joe noted, so a solid year over year and sequential growth.
We're pleased that the underlying metrics continue to improve as they provide good insight into the long term growth potential of our core subscription business and there are however, some near term headwinds and reported subscription revenue in particular, and we continue to see the impact of ASC 842, the new lease.
Accounting rules adopted last year.
Under these rules a portion of a monthly fee for certain products contributed to hardware is deemed to be lease revenue and is recognized upfront and other revenue.
And there is no impact on our underlying economics.
This transition will remain a headwind and reported subscription revenue until the entire book of business renews and transitions to the new accounting treatment.
Subscription revenue also continues to be affected by the amortization of the onetime discounts we extended to support our customers during the depth of the COVID-19 Lockdowns and April 2020.
This impact is spread over the life of the associated contract.
And we will continue and the fourth quarter and into 'twenty, two and declining levels.
While our partner program remains an important offering we continue our transformation of the program to realize value and our progress is advancing as expected.
Transaction revenue rose, 14% to $43 million. This was partially attributable to higher transaction volume as we start to lap the significant impact on auto sales, but the initial COVID-19 lockdown.
The increase also reflects the pass through higher credit Bureau charges for credit checks.
Other revenue grew 4% driven by higher D and hardware leases under ASC 842, and we continue to see strong installations of our cloud connect product.
This is offset by COVID-19 related headwinds and our consulting and call center and businesses.
Now turning to earnings.
Third quarter, EBITDA was $166 million down 6% versus last year, and reflecting a 38, 4% margin.
Lower EBITDA was driven by higher employee related costs, including those associated with our $20 million incremental investment for the year, but also higher benefit related costs and higher bonus attainment.
And also saw higher costs for outside services, which were a mix of investment related items as well as some one time project work.
These impacts were partially offset by lower travel costs.
Our effective tax rate was 22, 7% and the quarter down just slightly from last year.
Quarterly earnings per share was <unk> 69 versus <unk> 76, and the prior year.
Free cash flow continues to be strong and $182 million year to date.
Our balance sheet and liquidity position was strengthened significantly by the sale of the international business.
Cash at quarter, and was $1 $1 billion after repaying $566 million of term loans and the quarter.
As a result net debt to EBITDA fell from one five times.
I'd like to spend a few minutes on our capital allocation strategy.
Our priority is to increase value of our shareholders through the sustained profitable growth of our company.
While balancing the return of excess capital to shareholders.
We are doing this through first strengthening our balance sheet and order to provide financial flexibility for the pursuit of strategic investments and growth opportunities.
In addition to the repayment of our term loan and we also retired a 500 million a five and seven eighths bond due in 2026 during April.
This will lower our interest expense.
And improve profitability, while further reducing our net debt to EBITDA leverage ratio.
Our long term target leverage ratio remains and the two five to three times range and.
And we expect to manage within that range over time.
We will continue to bring a disciplined approach to our pursuit of potential acquisition targets to supplement our existing businesses and drive profitable growth.
Given our current level and financial flexibility and strong cash flow generation.
We expect to return $200 million to $250 million to shareholders via share repurchase over the next 12 to 18 months.
We believe this represents the right balance of investment and capital return and we will provide our shareholders with continued value well into the future.
Now turning to our annual guidance.
We are tightening our guidance ranges for revenue.
And earnings per share.
We now expect revenue of $1 6 billion to one 7 billion.
EBITDA of $640 million to 660 <unk> and.
And EPS.
Of $2 50 to $2 65 zone.
Our tax rate for the full year and anticipated to be 26% to 2007%.
In summary, we continue to see solid progress and our underlying business that positions us well for long term growth and.
And I look forward to the opportunities ahead.
Thank you and we will now open the line for questions.
Operator.
Thank you as a reminder to ask a question you and need to press star one on your telephone.
China question touched upon key please standby really compare the Q&A roster.
And our first question comes from Josh Baer with Morgan Stanley. Your line is now open.
Great. Thanks for the question. Thank.
And congrats on the site ads and the strong kpis.
I guess.
Wanted to start just asking how the quarter went for you versus your own expectations as far as revenue and EBITDA.
Sure I can start this is Brian.
For me and I think the quarter wins.
Pretty much right as expected and.
And in both cases.
It's weird and being out of the quarter very strong.
And you know you saw the site ads and all.
The installations have gone well.
I would tell you is the business is strong and and it's was right in line with what we were forecasting and.
I'll, let Joe and and Eric add more detail, but.
It was right and where I thought we would end up for the quarter.
Yes.
Yeah, and nothing nothing that because I think that's right and I think we saw more momentum on the site trying to I think the the strengthen our customer satisfaction scores and and.
Quite frankly, the retention and all the way it works with the sales team is doing.
Our customer delivery teams and our customer care teams that came in a bit ahead of where we expected it but everything else and wine.
Okay great.
And so with that and mind, just trying to get a sense for.
Excuse me for the full year GAAP.
Good.
And with with the midpoint and the high end coming down is there something that youre seeing about Q4, that's changed versus.
A quarter ago.
Yeah, I'll start and and Eric can chime in I would tell you. The one thing you heard and Aaron's prepared remarks, and it's just timing when you look at revenue recognition and a few things there its more timing of six or section and how those revenues come through otherwise we are seeing a bit of more investments and quite frankly, we're seeing.
And so much progress on what we talked about with our larger customers driving and consolidation within implementations and.
<unk> backlog, we had a very successful sales quarter and Q3, and so I think if you look at quarter to quarter. We continue to think about the long term and growth acceleration as we head into FY 'twenty, two anything Brian or Eric that you guys would add.
No I think Joe you touched on on the key points.
Yeah.
The only thing I would add her.
And just kind of comment on is there are two things that I use to measure the strength of the business.
The site growth and the revenue per site.
And that's what I really use Josh to understand.
Yes, that's helpful.
And both of those were Super strong I think ahead of ahead of my expectations too.
Is it with that in mind and like the strong performance there is it possible to break out.
What.
What revenue would have been like the size of the discounts and the impact from the discounting on this quarter's revenue and then also from the revenue recognition change the upfront Rev Rec change.
I'll start out again, and Eric can add and what I would say, it's like Brian said I think the best III. When you look at the fundamental business and revenue per site and site growth combined together so we're seeing.
And a better underlying growth and will instead of going through all the different pieces. The delta is really the items you just described.
Okay. Thank you.
Thank you and next question comes from David Robinson from William Blair. Your line is now open.
Alright, Thanks for taking my question.
I guess I was just curious if you could.
Provide a little more color around kind of maybe the size of the opportunity within the adjacencies.
And and attaching that.
But usually CRM solution and I know you saw some.
And good attach rates within the existing Dms.
Basic and auto and.
I guess with kind of the success, you've seen and growing the revenue per site for Adjacencies as well and I'm just trying to get a sense of kind of how large that opportunity will be overall, and then with the kind of lead.
Solution as well.
Sure I'll start out and this is a common thing youre going to hear from US like we're very focused within our core businesses, both the auto side as well as the adjacency adjacency side of expanding solutions that help dealers and Oems, specifically and the Adjacencies business. The team. There has just done a very strong job around X.
Kyushu and both in terms of more customers adopting our solutions with sites growing two plus percent this quarter.
As well as revenue per site and and buying more and.
The heavy equipment space is quite attractive also and that's where you hurt us from the elite and CRM.
Place so while we don't disclose the exact number what I would tell you that that business is growing and the high single digits now and we continue to expect it to perform very well going forward I would say more broadly David you bring up a good point, which is I think what we're spending a lot of our time now with the significant improved.
And the foundational base of our subscription business being able to look at ways to enhance the workflow integrations brings value added solutions that really help our dealers and Oems and sell more vehicles and.
And a better.
Profit level as well as service customers better and the service Lane and create this digital retailing and Eric interconnected opportunity.
There's a lot of opportunities we see as we're laser focused on execution.
Got it that's helpful. And then I guess, just a quick follow up.
And they're just viewed as well I mean, I know you saw some kind of favorable favorable trends.
And I believe this.
Around the pandemic.
Particularly and like power sports and.
Different segments there.
I guess I guess are you expecting kind of similar trends and maybe not as drastic to continue this year or how are you viewing that.
Yeah, I mean, everything we see so far whether it's and unit sales at our customers, because we actually see and insight into that right.
To.
And our own growth and there's again consolidation occurring here and growth.
Tells us that you know like you said, it and may slow down a little bit, but we're seeing strong growth and we don't see it.
Changing dramatically over the next.
Several quarters.
Great well, thanks for taking my questions.
Thank you and next question comes from Charles and I have had with Wells Fargo. Your line is now open.
Hi, guys. It's good to see the pickup and rep for a site this quarter, but I was hoping you could parse that out between the one to two site segment and the larger dealer segment I know, there's not as much growth in the and the smaller dealers but.
Given the potential for drive flex and.
I was hoping you could just talk about the penetration rate and the consumption of various apps within that segment for us.
So I can start.
Let's just talk about it and in broader terms and then and then we can we can put it down it.
If you take a look.
I'd say first let's just talk about site count.
We've really seen probably the thing that's changed and most over the last few quarters is that we really turned the corner.
The tide of decline on those one and two rooftop sites.
And we're starting to actually see a return back to that.
Growth in <unk> and.
Winning sites and that area, we still have work to do.
But that's one of the big shifts you've seen so our site with a bunch of them in that space and as much better.
And then we site growth is much better and.
That's really been about us really going out and serving that that business segment much better than they did and Apache.
That said then.
We're also seeing growth and.
Our layered applications and that space and mainly its things like CRM, where those sites are looking for ways to get and contact better with their customers and build relationships with their customers.
And they are competing with larger organizations and and easily CRM really helps and that range. So I would tell you. It's it's split pretty equally between those two.
And your applications and and just site growth, but but.
Definitely we're seeing growth back into that one and two site area I guess.
Got it Joe and just from that.
No I thought that was all cover Brian and I think their retention levels have been the highest this quarter across both books not true.
No.
And for three plus has performed well and retention performed well and one day or two and as Brian said revenue per site grew in both portions of the portfolio pretty equally and so we're seeing and I just.
This this robustness of the customer care team and installation team and the relationship of our sales team and as well as the tech and what the tech teams are bringing to market is a great collaborative effort, that's resonating well with our dealers.
Got it and just as a quick follow up a few months ago, you announced a partnership with global payments to process payments through four tell us and I was wondering if you had any updates on that that initiative.
Yeah, I'll start with where we're quite excited about it.
And are very near general release, we have a couple of dozen.
Dealers that we have ramped up at this point.
And to pilot and.
Its work and successfully very successfully I think our our goal here is to really leverage the <unk> platform to modernize payments across automotive and with this partnership were tied together with the highest levels of return.
Leadership at global payments.
And we certainly have.
<unk> expectations for this as we head into fiscal year 'twenty, two and CT are quite excited about it.
But appreciate the color guys. Thank you.
Thank you Chuck.
Thank you. Our next question comes from maintenance Kumar with Evercore. Your line is now open.
Yeah.
Hi, Thank you for taking the question.
There are nearly whoa onshore Rainer Kumar.
So I'm wondering if you could talk about some early thoughts on fiscal.
Fiscal 'twenty to revenue and EBITDA growth prospects I think and then you guys also guided too.
And I guess strong transaction growth for Telus, and how is that going to translate into revenue for the coming year.
<unk>, Inc.
Sure.
Okay Brian.
Start and and then I'll, let Eric talk more.
First we're not going to talk about fiscal 'twenty two until.
And of next quarter.
And we'll give you a really clear guidance and part of our goal or you saw we also announced that we'd be doing and investor meeting.
Early part of fiscal year, 'twenty, two as well and that's really too.
We haven't essentially really started on this journey of improvement and.
<unk> execution that we Havent had a chance to really go into depth with you guys. So that's the intention of that.
I can tell you that.
We are seeing all signs that the fourth quarter and it's going to.
Starting off well and we're just giving you our projections for the fourth quarter.
Clearly, we don't expect any kind of a slow down as we move into 'twenty, two but we're not gonna do forecast.
And for tell US we expect to do the same kind of growth. We did this year. So you know.
And we went from a roughly 10 million or so transactions last year to 100 million transactions. This year, we expect that same kind of growth as we go.
Go through next year.
And for tell US as you know there is you really need to think of it as a the API are kind of.
Marketplace and transaction ecosystem.
And so it's.
It really is dependent it's really built for ease of use developer.
Ecosystem that allows our people to write Apis and to use our API and then.
And everything from very simple applications, where people are just using data access API as it's read only those aren't going to generate revenue and they really shouldn't be generating a lot of revenue. We're not a we're not a marketplace of data, where we're going to sell other people data and there are other areas like or the repair order.
And where there are several API, there's read right theres calculations.
Manage all of the warranty credits and Theres a lot of real value added to the data that we're pushing back and forth as a repair order growth through when we get paid for that.
And so we're generating revenue now.
Those types youre going to see more and more of those you'll see more and more of them from CDK, you'll see more and more of them from third parties as well.
That are starting to write applications that really odd volume.
Against whatever the dealers trying to do.
So.
And that's really the purpose of for tell us.
And then what you're also what we see is what it's all feeds as neuron neurons and see insights. So one of the other places you're going to see me kind of a.
A side benefit for tell us and Scott will.
We will start dropping over the next several quarters.
And insights that come out of the neuron database and neuro and analytics, which we talked about square root our acquisition and really adds a lot of value to.
And what those will do those insights will start to do things like adding propensity to purchase a vehicle into our CRM.
Or how to manage your inventory and suggestions on pricing or.
You know what type of inventory to be out looking for on the used market all of those kinds of things are going to start becoming add ons to our software, which brings again stickiness value.
And we will.
Help us retain our customers, which which then translates into revenue growth as well.
So it's not always going to be a one to one and for tell us.
Yeah.
Okay. That's really helpful. Thank you.
Thank you and our next question comes from Gary Pester, P&L with banks and research. Your line is now open.
Good afternoon, everybody couple of questions here and.
And I'm, hoping you can answer some of this in terms of the automotive revenue per site that you're generating which keeps going up every quarter, which is great can you maybe parse that out.
And as to what percentage of that 9042 is actual dms charges versus layered applications.
And you know Gary to be honest.
And our bias would be not to get into details of each product I think you know.
And and how you split that out given how much we're bundling and it's quite difficult I would just tell you on average were penetrating with our applications with a bottle anywhere from 30% of our of our application portfolio combined with our Dms and we do so much bond rate and I think you know that.
9000, and there was very poorly represented of the full suite of solutions, we're bringing in and we're seeing a lot of momentum quite frankly and our.
Our dealer I T collaboration networking security space offering.
The momentum and the CRM and service space and our document storage at that cloud and addition, as Deanna.
Tightly coupled and bundled and I don't think it would be helpful to go trying to put the pieces.
Okay and can we assume that that most of the growth that we're seeing now is a function of.
Deeper penetration on the layered app side.
I think you're seeing growth across the portfolio.
And so I think youre seeing growth around Dms sites I think your.
And and you also see growth and the application space. So I think when we look across its very healthy whether it's one or two or three plus whether it has applications, our dms and pretty healthy foundational consistent growth.
Okay can you give us any idea of how.
Repair order inhaler are doing within the <unk> platform.
And they're doing quite well and we have.
And Taylor as an example.
And with several hundred dealers, who are actively using the application.
And it's interesting.
You know it originally started out as an application to provide trash.
Transportation service you bring your vehicle and for service.
Is it gives you a one time credit for getting a ride back to your office or home and then another one to maybe come pick up your vehicle processing dealers start to use it to deliver parts between shops and things like that and go pick on parts from warehouses and so.
We're starting to see a broader application of Taylor.
Repair order.
Is doing quite well I would tell you. It is the number one application from a revenue standpoint on our tell US right now again.
Several.
Dozens of third parties, using and including some of our.
Coke Vegas custom competitors in this space, we actually think of it as partners.
Or using their repair order application for tell us.
And so it's going quite well and then.
As I said, it's the largest ER revenue.
Right around the system, because we had I remember from the repair with her and like I said earlier.
Several Apis and I think it's like five if I remember correctly.
I could be off by one or two there and.
Many of those API is behind them theres quite a bit of calculation going on and value add around is it a warranty.
Getting back to work and credit Suisse and lights and all.
All of that is occurring and that application.
Okay.
And then lastly.
With the API as Youre developing for developers to put their products into for Telus.
Is that something that you're contemplating or are you, allowing that to occur.
Free of charge or is it something that you are charging these developers for putting their products and to fulfill us through the Apis.
So there are multiple kinds of API. So it's.
Yeah.
Where you wanted to and if you wanted to go right and API Tomorrow and posted to Fairchild US you can do that free of charge.
Some of our developers are capable of doing that and asking for help and and in which case and we'll do a small fee to <unk>.
That's offset engineering expenses and things like that but there is there's no profit and.
And posting and API two for tell us So we post our API most of them are accessible and for no cost.
Some like the repair order widens, where theres a lot of value add they have a charged zone.
And then you need to think of ATI says, there's our ati's, where if you want to get into the Dms or one of our layered applications or something like that.
There are Apis that third parties are posting that then read into ours and or we read into.
For our operations and then there are some API that can be from third parties and third party. So.
And if somebody might be doing a parts inventory for service.
Applications that then goes into you know.
X time or something one of our competitive products and and they've never actually passes through our system and.
And we allow that Brian this is meant to be and agnostic open ecosystem. That's how this will thrive.
And they can do that and and you know, it's it's not a problem as opposed to those types of Ips.
Okay. Thank you yeah, and Gary was the only other thing I would add I mean, you look at Taylor, Brian talked about.
And over 200% growth.
And.
And and that alone this year and so while it's small numbers still it certainly is building this ecosystem and and be quite happy with the work. The team has done to build momentum there and the integration and youre going to see it.
And when we talk about modernizing payments within automotive.
Connectivity and the integration that's going to provide dealers seamlessly and a work force value within their dealership leveraging for tell us with our Dms and everything else is going to be great. When it goes to the general release later this quarter, so lots of good stuff going on there.
Thanks, a lot.
Thank you. Our next question comes from and Zaffino with Oppenheimer. Your line is now open.
Hi, I just wanted to kind of follow up on the on the for countless.
Side of it and you know I know you talked about transactions, but if you could maybe like disaggregate the transactions a little bit like.
And how much is actually coming from existing big customers, how much is coming from newly on boarded customers or maybe what sort of like the developer slash customer accounts.
You know as a driver of transactions versus existing.
Existing.
Sure.
And that developers yeah.
And each of them increasing their own transactions.
Okay, So and so those are good questions right. So.
Remember this is an ecosystem that we you know when you build an ecosystem. So if you think of things like you know the.
The Android ecosystem or.
Some of the ecosystems that are out there with other.
Companies and and software platforms.
They take years to really continue to grow and develop and and when youre doing that.
And you really figuring out how do you best attractive and make it easy for developers to build onto your product and then how do you get the day usage and that's why we track transactions. That's for US right now is even more important than revenue or revenue per transaction or something like that because.
This is really about growing you know the last thing you want to do is how people write a bunch of Apis and those api's don't get used.
So that's why even more important and API count is transactions because that says people are not really writing Apis, but so you guys are getting huge data is flowing through and I.
And I'd tell you the biggest users today are both us internally so CDK internally.
And some of the big AR applications that were done by some of the larger developers so halo and was a good example of one.
Repair orders and good example of one.
There are several hundred developers developing Apis now external to CDK developing Apis on our Telus now so the tightest coming.
You've seen our partnership with Microsoft it's going quite well there. We're now are putting tools and.
API into things like get hub.
Allows people to more quickly and develop their own <unk>.
So we're trying to build it easier and easier for people to build onto the port Telus popcorn.
But I would tell you you know right now it is mostly the big guys that have the.
Several of the big guys and and internally we are you using that tool right.
And your own dog food is kind of the software developers credo and you're developing platforms like this if you're not using it and not making it easy for yourself youre not definitely making it easier for owners either so we use it ourselves for our own applications.
And then the commentary and I would say when you when you listen what Peter just said.
It is all of those values are about helping dealers and Oems and sell more vehicles and.
We're just focused on adding value and it's not like the standalone product, it's about the whole, enabling and that's why you're seeing the strength and our core Dms and our core applications because the stitched together value of the experiences that we will be able to connect with Oems, whether it's the digital retailing experience or with the inhaler and how it helps.
The dealer and profitability of their loaner fleet.
Everything is about how you add that value to the dealer and OEM and propel us helps and that provide the interconnectivity.
Okay. Good.
And congratulations on I'm, punting international and and before that T M.
And how are we thinking now about the business and what you need to maybe acquire as far as filling in some gaps right like where would it be and even your appetizers and generally to do anything.
<unk>.
Sure I'll start and then Eric and Joe can comment.
I tell you.
The digital marketing.
Sale and then the international sales.
Give you some insight, especially the international one and to the strength of our business right.
The international business sold at a 15 X multiple benches.
And again, when we look at our core business, we spoke of something even more valuable from that perspective.
We're really we really like the business. We have right now we did these sales to really focused down you can't be good at everything you can't distribute your efforts across too many platforms. If you will.
We need to narrow things down and we really like what we have right now.
That said.
You know as we took the proceeds and Eric talked a bit about it and more detail and his comments.
We took the proceeds the first thing we did was buy down some debt and that really did a couple of things one some of the debt.
And today's market higher interest rates than.
Our are available out there. So we're leaving that was good getting our our debt ratio down was quite good.
And that lowers our expenses of debt.
And then we also announced that we'd be doing buybacks over the next several quarters and that is again, we I look at those two things as well.
You know we can take this money and do some some return to investors and and really give.
And give them money back to the investors in that case.
We did hold back some money that would allow us to do acquisitions.
I'm pretty careful about acquisitions I think you first have to make sure that they fit into your strategy that there's a good reason to put them into your your your core because otherwise what happens as you do these investments you don't invest back into them because you don't know investment comes.
Perfect Forever, and you have to keep investing and if youre not willing to do that and investment because theyre not core and you don't see them as your one of your growth engines, and then not really hurts, so and I think he is a great example.
Did that investment we've doubled the number of sites since we got leads and it's growing really really well, it's a combination of growing within our dms and outside of our GFS. So rich growth equally as much it with other companies DNS is so that's a good investment.
And we bought it we have invested in it you see us now pushing it down into the <unk>.
Rec heavy business.
We're gonna go push are really across the board.
I'm open to others, they need to have that same kind of characteristics they need to have.
You know a reason to be a part of our core something that we're gonna willing to continue to invest in and something that we think can really add to our growth.
Sure.
And so that's what we're looking for when we think about those there's nothing on our short term horizon that says, okay, I've got something and the next two quarters and necessary.
Something that we're constantly looking and and there are certainly some things out there that are potential oh and for us.
Awesome. Thank you very much and the answers I appreciate that and I'll, let someone else jump on.
Thank you. This concludes the question and answer session and then.
And I'd like to turn the call back over to Brian because vantage for closing remarks.
Yeah, I would just like to close with a first thank you everybody for.
Taking the time and asking these were really good questions and I Hope you got better insight into our business and and why we're excited we see you know really.
A great quarter and the third quarter, we are excited about the future and we're showing you.
And where we're really gaining momentum as I said, we really look at two things that give us insights into the future.
Site counts and the revenue per site that really talks about or are we really providing as Joe said.
Solutions that our customers need and.
And if we are those things are growing and we're not those things won't grow and it's as simple as that.
And then I'd just like to thank all of our CDK employees for just a great quarter.
We are continuing to do really well and a COVID-19 environment.
And we're starting to get back into the offices and a lot of the sites are.
And we're really excited and so thank you everyone and we will see you next quarter.
This concludes today's conference call. Thank you for participating you may now disconnect.
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