Q4 2021 CDK Global Inc Earnings Call
[music].
Thank you for standing by and welcome to the CDK Global Inc. Fourth quarter 2021 earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone as a reminder, today's program may be recall.
And now I'd like to introduce your host for today's program Taz wrote Treasurer. Please go ahead Sir.
Thank you and good afternoon I'd like to welcome you to our fourth quarter fiscal 2021 earnings call.
Joining me on today's call, our CEO, Brian <unk>, Chief operating Officer, Joe Colleges, and our CFO Eric here.
Following their prepared remarks, we will be taking questions.
Our earnings press release was issued after the close of the market today and is posted on our Investor Relations website at investors that CDK global Dot com.
This call is being simultaneously webcast.
In addition, our website includes an updated XL schedule, a supplemental financial information and a copy of our results presentation that we'll be referencing during our prepared remarks today.
Throughout today's call, we'll be discussing our continuing operations only which do not include the international business results, which are presented as discontinued operations.
Unless otherwise noted all references to financial amounts on the call on a non-GAAP adjusted basis.
Reconciliations of adjusted amounts to the most directly comparable GAAP amounts are included in this afternoon's press release.
Please note that all growth percentages refer to year over year change for the period unless otherwise specified.
I would like to remind everyone that remarks during the call may contain forward looking statements. These statements involve risks and uncertainties as further detailed in our filings with the SEC.
Which could cause actual results to materially differ from those mentioned in the forward looking statements.
With that it's my pleasure to turn the call over to Brian.
Thank you Todd and thanks to everyone for joining us today.
Let me start by saying how pleased I am with our financial results, we achieved in fiscal 2021.
We closed out the year strong with fourth quarter revenue of $420 million of 12% from 2020.
And EBITDA in the period was 161 million and EPS was <unk> 66.
And these results met our expectations and along with the positive trends in our underlying business metrics shows that we continue to strengthen our position with our dealer and OEM customers, which in turn.
Page for accelerating growth.
2021 was a pivotal year for CDK.
Despite the challenges of the ongoing Covid pandemic, we continued the strategic transformation of the company.
With the sale of our international business.
Combined.
With the digital marketing divestiture in late 2020. This transition leaves the company laser focused on our core North American software markets supporting our auto and adjacency customers.
And the CDK International sale also significantly strengthened our balance sheet, allowing us to reduce debt and fund the highly strategic acquisition of roadster and the fourth quarter.
We recorded auto site growth for the 10th straight quarter with more than 1% in auto and 3% and our adjacency markets.
Revenue per site was again a record for both markets.
Rebounding strongly from the impact of the discounts we offered in Q4 2020 to support dealers at the height of the pandemic shutdowns.
But also showing solid growth versus last quarter.
Fueling this growth is our ongoing determination to wake up every day and help our customers sell more vehicles serviced more vehicles and run their businesses more efficiently and.
And ultimately drive the transformation of the entire automotive retail industry.
CDK has the unique opportunity to improve today's fractured industry.
Operating partnership built.
Our years of understanding.
We are at the heart of the ecosystem connecting our industry at every level and investing heavily in our vision to lead the industry into the future.
We are connecting dealerships to consumers with their recent acquisition of roadster.
Over the coming months, we will complete the integration of Roadsters front end into Cdk's existing platform <unk>.
Including the Ely CRM.
And we're connecting employees across departments within the dealership by providing a suite of solutions that work together seamlessly.
Allowing them access to the best in class solutions like roadster eliades, regardless of their Dms.
And we're leveraging integrations built on our <unk> platform.
To extend our capabilities.
And for Telus continued to gain traction over the year with more than 155 million transaction.
Far exceeding our goal of $100 million.
We're connecting Oems and dealers with continued advancement in our Dms solution.
While our Dms sales for the year set an all time record.
Most significantly we are connecting the industry with intelligence.
Enabling the transformation of data into intelligent action.
And a great example of this.
Is the new predictive service application that is in preview as part of our CDK service solution.
Dealers need to increase revenues, but lack the ability to get the right intelligence from their data.
And with this predictive service technician will easily be able to recommend the right prepare repairs at the right time.
Benefiting the consumer and increasing dealer profitability.
In 2022, we will continue to invest for our customers.
So some of the heavy lifting is now behind us and our investments are already generating benefits.
Creating better customer satisfaction.
Growing customer base and stronger financial results.
As a result, I'm pleased that our earnings guidance for the coming year reflect the accelerating growth in both the top and.
And bottom line.
And Eric will provide more details in just a few minutes.
We've included some data from our systems and our earnings presentation, which indicates the themes and trends of 2021 largely continued into the fourth quarter.
Oems continue to face production constraints due to supply chain issues, which are resulting in tighter dealer inventory.
Despite supply issues.
<unk> remains fairly strong in auto sales and pricing have continued to be solid for both the new and used cars.
As a result.
You always have been successful at maintaining profitability.
And we continue to see our dealers interested in investing those contracts into consolidation.
Which is a tailwind for CDK, given our strong position as a strategic partner to larger more acquisitive dealers.
And we expect consolidation will remain at that benefits us into 2022.
Consolidation, along with strong sales and installation efforts.
Helped us continue our strong site count growth.
We continue to see strong growth in our most strategic applications like CRM and service.
And we are excited to be rolling out one PE and roadster to the CDK salesforce as we enter 2022.
These products show that we continue to help dealers modernize and improve their operations.
Automotive retail landscape is evolving faster than ever and CDK is at the forefront of investing in its future.
Creating the customer experience models, others will follow in developing powerful platforms that lead the field.
And as the industry moves forward, we are confident that it will be on the infrastructure, we continue to build.
Now before I pass over to Joe I'd, just like to thank all of our stakeholders our employees our customers and our partners.
Their support and efforts this year.
<unk>, starting the year with significant uncertainty driven by the global pandemic and associated economic challenges.
We work together to develop and implement solutions for these challenges and continue to deliver innovation and technology improvements to <unk>.
Support the industry.
And I couldn't be prouder of what we've achieved in 2021 and I really look forward to a promising 2022.
So now I'll turn it over to Joe for the business highlights.
Thanks, Brian.
Brian said, we are pleased with the progress we made in the fourth quarter and the continued momentum we have with our customers.
Brian talked about the significant investments we've made over the last two years, including new solutions like roadster enhancements to existing products and providing open integrations through the propeller platform.
<unk> is to unify dealership departments dealer groups and Oems and strengthen their connection with the consumers they serve.
Approach is resonating with our customers and our sales team is finding dealers are receptive to increased partnership with CDK.
We also continue to focus on deeply understanding the satisfaction of our customers.
Our recent net promoter score results show continued positive sentiment.
Our focus on being easy to do business with and investing in product support and technology has resulted in increases in NPS across all of our strategic products.
The continued improvement in customer satisfaction resulted in increased retention, even when compared towards strong results last quarter.
When the industry thinks of dealer management systems CDK drive remained solidly at the forefront as the central hub that connects dealers Oems and consumers.
It's a success as evidenced by its consistent performance for existing customers and strong cycle, which drove auto sites up more than 1%.
In addition, we are excited to share that we had six competitive wins of dealer groups of five plus sites last quarter.
[noise] accomplishment can be traced to drive unmatched capabilities and integrations.
Offering the robust functionality dealers need and demand.
We are also pleased that our adjacency site count continues to perform well why is it more than 3%.
We saw solid revenue growth site growth in the quarter as well, which rebounded strongly from the fourth quarter of 2020, you'll.
You'll recall Q4 of 2020 was impacted by the onetime discounts we gave to support our dealer customers in the face of the Covid pandemic.
Compared to Q3 annualized revenue per cycle of 4% in auto and 8% in adjacencies might be a better comparison to show the continued momentum we have.
In the business.
Recurring revenue was down slightly from the third quarter among one to two site dealers, but what was nicely for three plus site dealer.
Beyond Dms, we continue to win in the market with key strategic applications and.
In addition to the strong growth in CDK service Doc cloud and cloud connect I am excited to say that <unk> finished the year with more than 6000 sites.
Dealers continued to see the value of your lead in driving sales and service.
Of course, the biggest news on the applications front is our acquisition of western.
As Brian mentioned dealers and Oems are accelerating their adoption of the modern retailing experience for consumers, one that let them start and anywhere they choose online or in store.
Its to bring the best user experience on the market for both the consumer facing side online and in store processes.
By combining our assets and capabilities, we are enabling an end to end omni channel retail experience.
Digital sales with roadster.
A leading CRM solution and you lead to the digital deal jacket.
Wallace document storage and finding with Aesop.
Our sales team is excited to have another strong asset in our portfolio and our technology team is on track with an aggressive 100 day plan to build further integrations for roadster and to the CDK cool.
Looking forward to 2022.
I am confident our team will continue to build on 2021 and accelerate growth.
The efforts, we have made to drive a better customer experience and the corresponding increase and associated metrics set the table for continued growth in dms sites and application penetration.
Let me tell you a bit about the initiatives that have me excited for the next year.
On the technology side 2022 is a year, where we will focus on providing dealers the capabilities they need to improve the consumer experience.
For example, we're in pilot to expand the back office functions that will enable the digital transformation of the dealers Finance Department.
We're simplifying the navigation within the drive sales workflow to make it easier to shepherd deals through the F&I process.
As broad and as Brian mentioned, we will be delivering the first of many built in intelligence capabilities, beginning with predictive service.
By combining advanced analytics machine learning and historical data from thousands of repair records for vehicles, we will allow a service technician to quickly predict what components and systems have a high probability of failure.
In turn this creates increased revenue for the dealer and result in a better consumer experience.
We will also continue to optimize our customer service efforts to make sure dealers, having the resources they need to run their business.
2021, we made progress in reducing call center wait times by almost half by focusing on process improvement and making sure. Our teams had the information they needed to take action to support dealers.
We expect that momentum to continue in 2022 and are also adding aggressive goals on reducing resolution times to further improve responsiveness.
Beyond our existing core customer base.
We're also taking additional steps to help dealers on non CDK dms platforms through the accretion on the new universal product sales team.
We're stepping up efforts to sell universal products like easy dealer solutions, and roadster that can drive productivity and improved customer experience for dealers, regardless, regardless of the Dms choice.
Turning to propel us we continue to see adoption of the <unk> platform as a universal open ecosystem that connects dealers and developers.
CDK and other developers have been actively publishing API entre pallets.
Specifically cdk's focus has been on providing API to developers that help them better integrate with our core systems.
The market has responded and we enter 2022 with more than 53rd party applications in our marketplace using these apis.
As a result like this that show the power of propel us as a scalable self service technology platform that is providing dealers with new and improved choices for workflows that fit their business needs and allows them to quickly adapt to an ever changing market.
To conclude I'm quite pleased with Cdk's progress and position as we continue to execute on our customer first strategy and build industry leading connectivity.
We've invested heavily to improve our service and technology.
And we are at an exciting point in our journey, we will continue to innovate with new offerings product enhancements and a focus on being the best partner possible to ensure we help dealers drive their performance.
I'll now turn it over to Eric for the financial results.
Thanks, Joe and good afternoon, everyone as Brian and Joe mentioned, we had a solid close to the year with financial performance that met our expectations and we are positioned for accelerated growth in 2022.
Let me start by walking you through our fourth quarter and fiscal year results.
I'd like to remind everyone that results are for continuing operations only and do not include the international business, which is presented as discontinued operations.
Fourth quarter revenue was $420 million up 12% versus last year.
Subscription revenue was $330 million up 8% from 2020.
This reflects strong growth in sites and the impact of Covid on 2020 revenue, including the discounts we provided customers last year, partially offset by revenue recognition impacts, particularly the shift of accounting for hardware under ASC 842.
And modest headwinds in the partner program.
Transaction revenue was $49 million rebounding, 41% versus last year's Covid impacted results with strong growth in both vehicle registration and credit check volumes, if we compare 2021 transactions to 2019.
Strip out Covid impacts, we still see solid growth in these businesses.
Other revenue was $37 million up 10% from 2020, reflecting the timing of revenue recognition for hardware sales and some improvements in the call Center business.
<unk> revenue continues to be challenged as the impact of Covid linger.
For the fiscal year revenue of $1.673 billion grew 2% versus 2020, reflecting a rebound in transactions and other revenue that offset the impact of COVID-19 on subscription revenue.
Now turning to earnings fourth quarter, EBITDA grew 5% to $161 million.
Positive impact of revenue growth was partially offset by the impact of higher head count related to our strategic investments and by a $10 million increase in incentive compensation driven by a bonus reversal.
In Q4 of 2020.
Due to the impact of Covid on financial performance.
<unk> Entertainment costs also accelerated as the impact of Covid waned in the quarter, allowing more in person interactions.
Full year, EBITDA was $650 million and fell 4% due to higher employee costs, reflecting higher head count related to our ongoing strategic investments and higher bonus attainment.
Partially offset by the impact of revenue growth and lower travel and entertainment costs driven by Covid.
Our effective tax rate was 26, 1% in <unk>.
The quarter and the full year.
Earnings per share for the quarter was 12% to 66.
Reflecting higher EBITDA and reduced interest expense driven by debt reduction.
Full year, EPS fell 7% to $2.57.
Due to lower EBITDA, higher depreciation and amortization expense and a higher effective tax rate.
We offset by lower interest expense.
Free cash flow was solid at $242 million for the year.
Our balance sheet remains strong at fiscal year end.
Cash balance fell in the quarter to $157 million driven by our acquisition of roadster and the repayment of our 2026 bonds.
Paid dividends of $18 million in the quarter.
Bringing the total to $73 million for the year.
We also repurchased $12 million of our common stock during the fourth quarter as we restarted our share repurchase program. After the announcement of the roadster deal.
As a reminder, these are the first repurchases under our plan to repurchase $200 million to $250 million of stock by the end of fiscal 2022.
Our net debt to adjusted EBITDA was two two times up from one five in the third quarter as we continue to move back towards our two five to three times target range at a measured pace that accommodates a balanced approach of investment and acquisitions to drive growth and shareholder returns.
Our M&A pipeline remains strong and we expect to continue to invest in transactions that create shareholder value.
Turning to fiscal 2022.
We expect revenue of $1.78 billion to $1 eight 2 billion EBITDA of 655 million.
$685 million.
And EPS of $2.70.
To $2.90.
And an effective tax rate of 25, 5% to 26, 5%.
This guidance represents growth of 8%, 3% and 9% at the midpoint for each revenue each.
EBITDA and EPS.
With the roadster and square with acquisitions, adding two to three points of growth in revenue, but a drag of about one point on earnings as we invest to ramp the businesses.
Absent the impact of acquisitions, our 2022 outlook is consistent with our prior long term guidance and reflects improvement in topline growth in our underlying business and less required incremental investment in 2022 to achieve our customer focused strategy.
In summary, CDK continues to make significant progress in executing our long term strategy.
That strategy helped us improve key customer metrics in 2021 to set the table for accelerated growth in 2022 and beyond.
Thank you and we will now open the line for questions.
Greater.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchstone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.
Question comes from the line of Josh Baer from Morgan Stanley. Your question. Please.
Great. Thanks for the question I wanted to double click on four tell us the transactions there stepped up dramatically.
Could you give a little more context on on this step up around the use cases and then also wondering.
If you could talk about the any revenue associated with this.
Sure Josh I can start this is Brian and then ill.
Joe.
Eric talk a little bit more that can talk a little bit more about like the absolute numbers.
Revenue in all if you want.
It's just showing continued growth. So we are continuing to write.
Most of our Apis now into four tell us there's over 100, CDK Apis and we continue to get.
More and more third party Apis to joint definitely still our number one use case is the.
The service repair order.
But I wanted to step back for a second kind of talk about the strategy of our tell us whats the value for tell us and what is going to fuel growth and where would you see growth even more in the future.
Our goal is to grow it.
I don't know actual hit quite 10 tenants this year, but we are.
We're trying to get into that 800 to.
So 1 billion transactions for our fiscal 'twenty two.
What it allows right as we push more and more of our connections basically up through API and basically modernize our software. This is where a lot of the investment has come.
As we do acquisitions like roadster.
As we do partnerships like our CDK one pay.
Yeah.
What those allow us to do.
Is integrate those products because they're modern as well as their API based with their their data transfers and we can integrate them. So we built this 100 day plan for.
Roadster integration could not have done that without sort of tell us it would've been months.
Try and integrate something as complex as roadster.
So that will now fuel as roadster comes online.
It's driven through for Telus and integrated into either it will be that you'll see.
Millions of transactions coming through roadster as we grow.
The one pay application and we have many many other partnerships coming.
That will use the API, we posted profit tell us too.
Allow companies to integrate some of those are acquisitions and some of those like <unk> or partnerships, where we have revenue share.
And so when you talk about what's the what's the profit generation or tell us. It really comes from a couple of places one.
There are places like the repair order.
Well, we have a lot of value we do all of the warranty checks. We do all of the didn't verification all of that stuff goes through us who we add that value.
Can't get paid for that retail order set of Apis.
Theres going to be things like roadster, where we're able to integrate acquisitions and generally something thats better.
Combined then was separate and generate more revenue that way and then there are partnerships, where we'll be able to do revenue share like one pay.
And those will then allow US now we laid out we're not going to charge for those API connection to hotels, but you get paid through another form.
Through those Rev shares.
Basically the credit card transactions that happened for example, in the service space and things like that.
When you think about for tell US you have to think about.
All of these Apis all of these new interactions and revenue is going to come in many forms and sometimes like with one paint we won't associated necessarily with poor tell us, but it was impossible almost to do without for Telus.
Joe and Eric you guys want to add more.
No I think you've covered it well became what I would say is Josh do you have a real ecosystem being over 100 million transactions and we're seeing revenue come in now across multiple areas that Brian described we're not disclosing that separately at this point, but I would say one pay which is on a payment modernization for dealers.
It went live to general release in June.
So that will start to help next year and really a lot of these plant seeds for accelerated growth as you go look beyond 'twenty two into 'twenty three 'twenty four the service.
Immigration, Brian discussed is our largest revenue contributor lyft is picking back up and doing them off. So you see each of these planting seeds for future growth now that there is a more mature ecosystem that will continue to just exponential expanding 22.
Great. Thank you very much.
Thank you as a reminder, ladies and gentlemen, if you have any questions. At this time. Please press Star then one.
And it comes from the line of Ian Zaffino from Oppenheimer. Your question. Please.
Hey, Good afternoon, guys. This is mark on for Ian Thanks for taking our question. So.
So I guess like can you just maybe give us maybe a more detailed update on how growth tear has performed so far.
Have you guys seen any adoption from our customers.
And for <unk>.
Shall we expect more investments that are needed beyond 2022. Thank you.
Sure. Thanks for the question and that's the roaster.
Or even more.
Cited about it now that they would close before visiting customers and just when you hear about you'll hear us talk about workflow and what dealers are interested in what Oems are interested in how do I create a better experience to sell more cars, how do we create a better experience to service more vehicles and how do I run my dealership more efficiently.
Roaster is proven to be that that final piece of our puzzle to really.
Help modernize and really deliver a modern retailing experience for customers and it connects through an experience that can really.
The quite transformational for franchise dealerships and I got to tell you that the tech team.
<unk> in Europe.
Most of our leadership team with Andy that came on board.
We have a 100 day plan.
Can be delivered in September that will stitch together, the integration where you can connect.
Roadster through to <unk>, all the way through to the Dms and Youre going to see just the benefits of being able to integrate that workflow to simplify life for dealers and create a much better customer experience.
I would say is the responsiveness from the market has been quite positive.
And it's very much on track and.
We have big expectations for it.
Hey.
Mark I'd like to add one thing too, but just had its Brian.
Yeah.
If you take a look at what happens in a car dealer and shipped now it can take several hours for the transaction to occur and that's generally not them sitting there trying to get you to sit there longer in order to get you to spend money in some obscure way right. It just takes that long to get all that.
To work moving from here to there and everywhere.
This really.
No.
We all know you see them on television commercials, you talk about these companies that are out there I never mentioned competitors' names necessarily but.
The ones, where you can sit in your pajamas and.
By a card it shows up in your driveway.
That is what roadster will deliver in our platform, but even more importantly for the car dealership is that it will allow people to drop out at any point because there are people, who want to drop out and they still wanted to do a test drive rate.
They want to they want to have the experience are going there and picking up their car and getting to walk around and getting the introduction and having all the Bluetooth and all Linkedin.
They need help with insurance that's beyond what is capable in most cases or something like that so there are various points that they may want to drop out.
Allowing the roadster and CDK Dms interaction and integration to occur as you can drop out at any point and be Penny perfect. You will drop out and you will be able to have.
Everything done you can have your prepayment of loan done you can have all of that guidance. So when you show up at the dealership, let's say you want to show up to a quick test drive and sign some paperwork and go you are financing is done your insurance is done your pay off is done and all of that's done in your paperwork with two or three papers.
Or is that are required by law to have a wet signature can be done in a very quick way and you're in and out of there in 30 minutes.
And that's our goal right.
To allow all of those if you want to go all the way to the point, where it's delivered in your driveway, you'll be able to do that so it's to give that continuum of experience for the consumer and for the dealer to be able to provide that continuum of experience.
Mark is one point.
Just to add I was thinking about your question around the investing side.
It's worth pointing out when we look at 2022 through a combination of factors Eric.
Eric talked about in his section a eight.
8% growth at the midpoint of our guidance and so youre seeing healthy momentum in the underlying core business as well as positive momentum from the acquisitions, we're making secondly, 22 is a big year of investing around.
When you look at the margin front, if you look at the EBITDA guidance.
We are really giving the confidence we have given the response were seen willing and in quite heavily in 'twenty two to really invest behind that momentum and so I think when you look at the top of the picture I think that's worth pointing out.
Great.
That's very.
Thanks, so much guidance.
And then I guess, maybe just one more could see another quarter of site growth.
Can you maybe just give a sense of how the one to two smaller deals has trended.
And then how does that trend sort of really.
Two the larger dealers. Thanks.
Yeah, Thanks, Mark listen I'm, so proud of the work that we've done.
Really drive site count improvement and grow over a percent the work that the sales team has done with Scott Herbers and team as well as our install team and our support team have just done a great job rallying around it.
Improving sales improving retention.
And really the customer experience, we talk a lot about customer experience and.
Coming in and putting the customer at the center of.
Of everything we do is so important we're seeing really positive momentum across the portfolio.
Look at the one to two sites, whether you look at the three plus sites.
On the one to two sites, you're seeing really a flattening out of that business and particularly when I look at heading into next year. The revenue was really.
Tensions up highest it's been in the last several quarters and Youre seeing a flattening of that revenue and then on the three plus you are seeing an acceleration we've got the most applications.
We've had penetrated into our base because of the work that we've been able to sell through and bring the solutions that <unk> described in his prepared remarks as well as in some of the Q&A today.
No.
A long way of answering the question wanted to was doing continuing to trend better I see it continuing to turn the corner or customer sentiment strength.
And our service and putting our customers first is really resonating and we're excited.
Great. Thank you so much.
Thank you. Our next question comes from the line of Gary Pressler, Pinot from Barrington Research. Your question. Please.
Good afternoon, everyone.
Several questions here.
As I look at your guidance and I don't usually ask guidance questions on conference calls, but it looks like.
Based on your margin profile, you're got a degradation of anywhere from 24 million a $37 million of adjusted EBITDA year over year.
<unk> 'twenty one fiscal 'twenty, one so I guess I appreciate the fact that youre investing.
In the.
The business, but if you're looking at $6 three to eight 8% sales growth.
All things being equal given the leverage in the business model you should have some margin expansion. So I guess the question I have or are we looking at.
Some permanent step up in the cost structure of the company here or is this all really a function of you've got a number of irons in the fire and you need to invest this year to grow it beyond.
Yeah. Thanks. Thanks for the question. This is Eric no. It is not to answer your question in short and then I'll provide you a little more detail. It is not a permanent step up as as Joe had mentioned in his comments. We are really excited about roadster and square root and we are going to continue to invest in that business. We have this 100 day plan.
We want to get off to a really good start.
As you've seen what we've done with <unk>, we highlighted that acquisition is up to 6000 sites.
Really.
Excited about roadster, and we're going to invest in 'twenty two to make sure. We got that integration complete and can really develop that experienced that end to end experience.
Okay.
And then could you just talking about roadster in general.
<unk>.
If you can.
Theoretically or possibly buy a car.
On line totally there.
Does that platform gives you the ability to negotiate with the dealer as well as can you trade in your car and get a value for your car.
To make it a completely seamless transaction.
This is Brian the simple answer is yes, so I talked about making things penny perfect and these are some of the investments we have to do right. So.
Some of these things are features that are available today and some of these are things that only when you integrate into the Dms.
Can you.
Really.
Go through that process.
So you'll be able to agree on a price you'll be able to get a trade in value for your car and there are places that do that already as well.
So it's it's knowing how to do that out there.
And and if there is a payoff on your car. So one of the other things that you have to be able to do is go out and get the payoff values for the car.
So we're looking at being able to get that down to the opinion as well.
Things are very complex.
There's very few who can do all of those things and go through the sale of a new car.
And that is our Angola. Some of those are within the 100 day and some of those are six to nine months out to.
And to Eric's point.
We do not plan to make this a some permanent step up you've got to realize that when you. When you buy a company in its infancy and I think I think elite is a great example, right.
We've done a really good job when we acquired <unk>. It was sub 3000 sites in the two and a half years, we've owned it.
Mattikalli improve the cross cost structure of the product.
We've got a phenomenal road map for the technology itself and we've more than doubled the number of sites.
That really does on out there and those that growth has been both on our Dms and agnostic to our Dms. So we will do the same with Roche to roadster.
It'll be more integrated into ours, but it will continue to work with other dms as well.
And so we look at it and say, okay, we're going to invest this year to get it integrated it to bring it up to do some of these.
Technology advancements.
But it is not meant to be.
You've been a negative like this it's really meant to fuel the growth 22 back half of 'twenty, two and into 'twenty three and.
And beyond.
And we will get that.
Margin.
Back in alignment as we move through that.
Sure.
Hey, Gary it's such a great point from us where they want to drive home. The point you just made I mean, when you look at you'd be more volume there.
Margins of that business will.
Very very along with the 10% range and now two years later at 6000 sites.
It's growing double digit EBITDA.
EBITDA gross margins are that equal to our core business and our core software profile and that's what again, we're just using the same playbook, there with roadster and I think that's perhaps the impact you're seeing in guidance sorry.
Does the roadster have any kind of an installed base.
How are you pricing roadster is it priced on transactions or is it just a regular subscription layered app add on product.
Yes roadster did have a good subscription base when you look at the combination of roadster and our connected store product we've got over 2000.
Sites, we have a very good installed base and a great opportunity and again when you look at the lead of 6000 Roadster 2000, we just see a huge opportunity to connect that workflow.
Workflow together what was your second question Gary I was just how are you how are you pricing. It Joe is it just the subscription.
It is a subscription per site subscription.
Okay. Thank you.
Thank you Gary.
Thank you.
So could be.
Once and once again, ladies and gentlemen, if you have a question at this time. Please press Star then one.
And this does conclude the question and answer session of today's program I'd like to hand, the program back to Brian presented for any further Omar actually we have a question from the line of Matt Pfau from William Blair. Your question. Please.
Hey, guys. Thanks for fitting me in just.
First I had a question on the six competitive wins that you cited.
Just maybe some more detail on what drove that and I know last call.
You cited a couple customer take backs as well so it seems like something that you're doing with the product and customer service seems to be resonating pretty well competitively.
Sure.
I can start and then Joe can add.
This is Brian.
So I would tell you.
You know the.
Effort, we started two and a half years ago with just our whole customer focus has really resonated well with our customers and it continues to.
To resonate well.
You combine that with the they are already seeing the improvement in the technology and the product.
And they are whether it be quite tell us that they're using propel us to extract their own data now.
Which has reduced the three PS that partner.
Partner program fees for a lot of them.
Whether it's the.
Ease of use of our product all of these things are driving the NPS numbers that Joe mentioned in his remarks.
So you combine all of those in the NPS scores you combine the improvement in the products and then we were out there showing them the roadmap whether it be the acquisition of roadster or the integration of one paying or.
The improvements were making an elite and our service application were out there showing them dogs roadmaps and we now have the credibility of belief they believe that we can deliver these.
Because I've seen what we've done.
And I think all of those things are.
Allowing us to both grow and maintain.
We're getting win back because you know sometimes a catch.
Wants to still try something new.
We are very.
Call. It very supportive we don't necessarily go in and install really them hooked in so that if they run into issues. We tell them don't worry we're here to back you up.
And we.
Continue to follow up with them, we help them with the data transfers. So we're supportive for them, but then we're there and what we are doing is going back and saying look you know here's the roadmap you have ships that the product had here's the pricing you had I'm sure you don't want to just turn back on.
And it's worked really well for us. So it's all part of that we want to do what's best for the customer, but we oftentimes think the best thing for them is to continue to use CDK.
Joe anything else. Thank you.
You covered it well I think Chris the only other the only other highlight that would give US 22 is a big year for us I think that we're going to up the game another notch with both on the technology front camera service for them and we're excited.
The progress and momentum that will create and continue to build on.
Got it guys and then just one more I think about a month ago.
Ford announced that they wanted to move more to a build to order model and keep less inventory on the dealer lot. Just wondering does that have any impact on your business positively or negatively.
I'll start and then the others to join and its Brian.
I actually think is positive and the roadster at acquisitions like we couldn't have asked for a better timing right because the way to do a build to order the way the weight roadster will work as it can take input from any source.
So what will happen is.
Let's say that the build to order happens on the OEM website, I think some of that still to be defined but we don't care, whether it would be the OEM website or the dealer website.
Then talks to the Oems to build it our ability to take that input whatever they want to build and their pricing.
But then do all of the work that the dealer really has to do right because the OEM doesn't want to price their trade in they don't want to go find out what the payoff is they don't want to go figure out what the F&I requirement.
So we'll be able to roadster to take all of that workload and push it through very seamlessly. So for US. This is great like the dealers.
You know are looking to us to be the problem solving solver and really the medium in between and to really deliver how did they do this and do this within their business.
So it's.
It's something that we actually think we are uniquely advantaged score.
Great. Thanks, guys I appreciate it.
Okay, I'll just ask them.
How should I answer session I'd like to hand, the program back to Brian <unk> for any further remarks.
Sure.
So I'd say first thank everybody for joining the call I really do appreciate it gives us a chance to.
Describe a business that we're really excited about it I also want to thank all the CDK employees right. The hard work. They did in 2021 really delivered results that were outstanding.
And even more importantly, it set up 2022, and 2022 is really meant to be a record and a breakthrough year you saw 8% topline growth.
That is really a number that I.
I think is is quite high in this company's history, and we're very confident moving into the year to deliver that.
And very excited about it and we're doing that not by just increasing prices or things like that but it's by growing share by more penetration of our products and by delivering more and better products and those are the ways you want to grow the business. So we're very excited about 2022.
I'd like to thank you all for joining the call I Hope you have a great rest of your day and thank you very much.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
[music].
[music].
[music].
[music].