Q1 2022 CDK Global Inc Earnings Call

November 2, 2021

Thank you for standing by and walk us through the Q1 2022 CDK Global Inc. Earnings Conference call. At this time, all participants are in listen only mode.

You can see the presentation there'll be a question and answer session.

I'll ask a question at that time. Please press Star then one when you touch tone telephone.

As a reminder, today's conference call is being recorded.

I would now like to turn it constantly house, Mr will make a jaeger Vice President Investor Relations. Please go ahead Sir.

Thank you and good afternoon I'd like to welcome you to our first quarter fiscal 'twenty earnings call.

Joining me on today's call, our CEO, Brian percentage, Chief operating Officer, Joe Colleges.

And our CFO Eric.

Following their prepared remarks, we'll 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 Dot CDK global Dot com.

This call is being simultaneously webcast.

In addition, our website includes an updated excel schedule, a supplemental financial information and a copy of our results presentation.

We will be referencing during our prepared remarks.

Throughout today's call, we will 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 during our call are 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 also note that our 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 involve risks and uncertainties.

As further detailed in our filings with the SEC, which could cause actual results to differ materially from those mentioned in the forward looking statements.

With that it's my pleasure to turn the call over to Brian.

Thank you Robyn.

Thanks to everyone for joining the call.

CDK is off to a strong start to fiscal 2022.

With revenue growth of 6%.

Data on $170 million.

And EPS of <unk> 77 per share.

I'm pleased with these results, which met our expectations. Despite a modest slowdown in the transactions business driven by inventory shortages in the auto market.

Joe and Eric will give more color on the customer environment and financial performance in a few minutes.

Our ability to excel in 2022 demonstrates that CDK has become a fundamentally different company than it was just a few years ago.

We've been focused on making investments that strengthen our core business.

Including significant improvements to our customer service and technology.

We've been steadily transforming ourselves into a market leading strategic software partner for the automotive industry.

We're connecting the industry into end.

And creating a digital modern retailing process that rivals what anyone else can bring to the market.

And we're seeing the benefits of those investments with strong net promoter scores up 30 points since 2019.

11 straight quarters of Dms site growth.

And the improvement in these underlying metrics is now more visible in our financial results with notable growth in core business.

This improvement in the core business has given us an opportunity to collaborate with dealers and <unk>.

To drive the ongoing transformation of the automotive retail industry.

Last month.

We hosted CDK connect.

Our customer focused industry event that highlighted our recent technology wins.

We are pleased to have the opportunity to bring to get their dealers Oems and software developers and share the latest technical advances we've made at CDK.

At the event, we demonstrated exciting new advancements in a variety of workflows, including service and back office functions.

Joe will go into more detail, but I, especially want to highlight that we've completed our 100 day plan to integrate roadster into our core systems.

Including <unk> CRM.

And the result is an end to end digital workflow that drives high consumer satisfaction.

Also enabling improved efficiency in the dealership.

We accomplished much of this by leveraging our investments in the <unk> platform.

The modern API architecture for talents accelerates interconnection within the industry ecosystem.

The pace that isn't possible on legacy platforms.

Without the new capabilities, we felt the roadster integration would have taken two to three times longer to complete.

It's the key to providing more innovation to our customers from.

From CDK and from independent software vendors, who continued to add applications to the platform.

We now have more than 75 applications live on for Telus.

And generated more than 100 million transactions in this quarter alone.

Exciting applications like predictive service and CDK <unk> leveraged this platform to introduce and innovate around new capabilities that are solving real problems for our customers.

And we expect growth and innovation to continue in the quarters to come.

We're pleased.

To announce our acquisition of salt in the quarter.

As I mentioned, we are bringing all the technology together to allow dealers to deliver a frictionless process for consumers and purchasing their vehicles, whether they want to complete the transaction from their living room.

Or start research at home and then visit the dealership.

Truly delivering a seamless omnichannel experience.

But we're not stopping there our vision is to create an integrated experience for all aspects of car buying O&M and O&M.

This begins with our entrance into insurance space with the acquisition of Salt.

Our dealers delivered millions of new and used vehicles each year and every one of those vehicles needs insurance.

Salty leverages data and the innovative technology to integrate insurance offerings.

Are dealers existing process.

Opening an entirely new Tam of approximately $1 billion for both dealers and CDK.

Dealers are excited by the opportunities and I am pleased to welcome <unk> to the CDK family.

While we're excited about our work for the dealer body.

Continue to believe CDK is well positioned to serve as a bridge between the dealers and Oems.

A massive amount of data passes through CDK systems daily.

Our ability to help our customers unlock the power of this data using neuron is enormously valuable to both Oems and dealers as it provides critically important insights that help improve vehicle performance.

Quality of service.

Cdk's position.

Section of data flow across the industry.

Allows us to develop solutions that benefit the broader ecosystem.

And we're working on a number of initiatives on this front.

CDK is uniquely suited to safely and securely provide access to these solutions through branded and white label applications.

In the last quarter, we've worked with a select group of Oems to ramp up real time inventory reported.

We also signed a data sharing agreement with one major OEM come and build data and continue to grow access to connected vehicle data with a number of Oems.

Hello.

This data will help us offer new and improved products to our dealers to help them sell and service more vehicle.

To summarize.

CDK has pivoted its business dramatically in recent years and uniquely positioned at the heart of the automotive ecosystem to connect our industry.

And through our technology, we unite dealership employees.

Dealer locations software developers and Oems.

Improving their business efficiency, while enhancing consumer experiences.

Through these connections that we can share expertise.

And facilitate collaboration for the benefit of everyone.

Now before I pass things over to Joe.

I'd like to thank our employees, our customers and our partners for helping to get our fiscal year off to such a great start.

We're pleased with the accelerated growth in the core business and our positioning for the remainder of 2022.

And so now I'll turn it over to Joe.

The business highlights.

Thanks, Brian and welcome everyone to the call.

As Brian said, we are excited about Cdk's outlook for 2022, and the strong start we've had versus the plan we set for the year.

We were pleased with the uptick in customer adoption of roadster that began following the completion of the technical integration into the platform in September.

Our underlying metrics and financial results show that our focus on service and technology is working for our customers.

Go into some of the underlying customer metrics in a few minutes, but first as we have for the last several quarters. We've included a few charts with data that we're seeing in the automotive industry.

We also provided a few slides that cover market trends, how we are positioned to lead the creation of a unified digital buying experience from dealerships and the platform architecture. We have built in support of this vision.

Overall, the industry is holding up reasonably well.

But auto inventories are at record lows.

Our data reflects these conditions with a modest reduction in sales and credit transactions per dealership.

As D. K mentioned, we saw associated headwinds and our transactions business driven by these inventory challenges and believe the trend could continue throughout the remainder of the fiscal year.

We will continue to monitor the space closely.

On the flip side lower inventories have increased realized prices so deal with profits has been resilient.

Dealership consolidation continued last quarter with several very large deals announced in recent months.

CDK has been a net beneficiary of this consolidation, which we expect to continue in coming quarters.

We believe that some of this consolidation is happening as a response to the challenges from the rapidly changing retail sales environment, where automotive customers are seeking a smooth as the digital buying experience. They found in other consumer retail models.

Dealers will have to reach an economy of scale that allows them to make necessary investments to enable this type of digital experience for customers in all 50 states.

We believe we are the only option available with an end to end solution that can enable this vision.

Now I'll turn to some of our highlights for the quarter.

The combination of consolidation.

Strong sales efforts driving competitive wins and continued healthy retention have resulted in notable cyclone in Q1.

Auto sites were up one 6% and.

And reached the highest level since 2017.

While the adjacency adjacency sites grew 4% and hit another all time high.

We had continued strength in winning business with other sites that they have.

More than five to 10 locations with three competitive wins in the quarter.

Revenue per site grew to record levels for both auto and Adjacencies.

Auto revenue per site grew 7% with two points of growth contributed by the roadster acquisition.

Revenue per site benefited from higher application penetration.

Revenue from three plus site dealers was up double digits with two points of growth attributable to the roadster, while revenue from one to two site deals fell slightly.

Hey, Jason sees revenue per site was strong growing 7%.

We had notable sales wins across our strategic applications with particular adoption of elite.

CDK service.

<unk> cloud and.

Cloud connect.

Highlights include wins in 25, plus site groups for both roadster and CDK service.

And the new Universal product team that we discussed last quarter is gaining traction with elite and now roadster and non CDK Dms sites.

Earlier, I mentioned, our CDK connect event last month.

We were able to lay out our vision and share key initiatives to our customers and partners.

We touch every part of the automotive retail ecosystem and we work with all stakeholders.

Our software is used in some fashion across more than 12000 dealerships. This level of engagement is a tremendous asset.

At this event, we highlighted the roadster integrations that now a while for the total digitization of the sales process.

This provides a modern flexible buying experience that meets the needs of a wide variety of consumers.

It also improves the efficiency and the dealership are capturing and sharing data across a variety of tools used to optimize the selling process.

We have also emerged our roadster engineering teams, which will enable us to build a continuous purchasing workflow, which will allow our customers to target transaction times below one hour.

Our customers are excited by the seamless solution and the potential for significant efficiency improvement in their sales process.

CDK connect also highlighted new tools that target specific revenue and cost opportunities using the power of data and improved workflows.

Predictive service leveraging the neuron platform can drive increased service revenue opportunities by helping technicians efficiently analyze of vehicles serviced.

And our new accounting workflow can simplified back office functions within the dealership to enhance productivity.

We will continue to rollout new capabilities in the coming quarters that will make a difference for our customers.

And our acquisition of salty opens a new opportunity for the CDK and dealers and shows how the new CDK is helping dealers navigate a changing marketplace and build new profit pools.

If I were thinking the consumer journey altogether, we can help consumers accomplish more through dealers significantly deepening the relationship and increasing customer lifetime value.

Insurance is one of the most obvious parts of the car buying process that is ripe for disruption and we're helping dealers becomes a disruptor for change.

As Brian mentioned.

<unk> opened a large new total addressable market for both dealers and CDK.

Salty combined data technology and process integration to streamline the insurance quote process that fits seamlessly into the vehicle sales process.

An integrated process and a strong panel of insurance partners maximizes the chance that customers will accept the quote and ultimately buying new insurance.

Commissions on insurance originations and renewals will overtime, while the strong recurring revenue stream for both CDK and deals.

To conclude I'm proud of the progress we've made over my years at CDK and how we are positioned for 2022.

Investments in technology and service have strengthened our core business and allowed us to pivot the opportunities to add more value to dealers and Oems.

I'll now turn it over to Eric.

Actual results.

Thanks, Joe and good afternoon, everyone as Brian and Joe mentioned, we had a nice start in 2022 that puts us on track for the year.

Let me start by walking you through our first quarter results before discussing the outlook for the remainder of 2022.

Like to remind everyone that results are for continuing operations only and do not include the international business, which is presented as discontinued operations.

First quarter revenue was $440 million up 6% versus last year.

Revenue includes $10 million from acquisitions.

Core revenue growth, excluding the impact of the acquisitions was 4%.

Subscription revenue was $345 million up 7% from 2021.

This reflects growth in core Dms and applications and the impact of acquisitions, partially offset by the impact of ASC 842 lease accounting with shifts a portion of revenues from certain products out of subscription revenue to other revenue.

Transaction revenue was $43 million down 3% versus 2021.

Driven by lower vehicle registration revenue as vehicle sales were impacted by supply chain disruptions. Other revenue was $52 million up 14%, reflecting higher hardware sales and revenue timing under ASC 842 lease accounting standards.

Now turning to earnings first quarter, EBITDA grew 2% to $170 million higher EBITDA was driven by income on higher revenue, partially offset by higher employee costs for investment related head count increases and the impact of annual merit compensation increases, which took effect in the quarter.

Travel and entertainment expenses were also higher.

Our effective tax rate was 23, 9% in the quarter.

The tax rate in the period benefited from a onetime net tax benefit from the expiration of statute of limitations related to certain international transfer pricing matters.

Earnings per share for the quarter rose, 22% to 77.

Primarily reflecting reduced interest expense driven by debt reduction and a lower tax rate in the quarter.

Free cash flow was $44 million.

Down from $72 million last year.

Higher incentive compensation payments in 2022 contributed to the reduction in free cash flow.

We paid dividends of $18 million in the quarter.

And we also repurchased $88 million of our common stock, bringing us to a $100 million of repurchases since we restarted the program late last year.

We continue to expect to repurchase $200 million to $250 million of stock by the end of fiscal 2022.

Our balance sheet remains strong with net debt to adjusted EBITDA at two three times still slightly below our target of two five to three times, we expect to get back into the target range next quarter when our financials reflect the closing of the salt the acquisition as well as additional expected share repurchases.

Now turning to guidance, we are maintaining our fiscal 2022 guidance with revenue of $1 70 to $1 82 billion.

EBITDA of 655 to 685 million and EPS of $2 70 to $2 90.

And an effective tax rate of $25 five to 26, 5%.

As Brian and John mentioned, we do see headwinds in the transaction business based on lower dealer inventories, but we expect to offset the impact with solid performance in the remainder of the business, including ongoing contributions from roadster.

With respect to quarterly growth cadence similar to last year, we expect revenue to be flat to slightly lower sequentially in Q2 compared to Q1 with the normal seasonal slowdown in the transaction revenue before we see revenue acceleration in the second half.

Similar to Q1 year over year EBITDA growth will remain muted in Q2 as cost savings initiatives in 2021 create more difficult comparisons for the first half of 2022 before an expected second half acceleration.

In summary, we had a solid start to the year and are on track to meet our financial targets, while continuing to invest to support our customers and drive innovation.

I am proud of the execution in Q1 and look forward to accelerating growth as we move through 2022.

Thank you and we will now open the line for questions operator.

Thank you again.

Again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on you touched on telecom again to ask a question. Please press Star then one.

Our first question comes from Matt Pfau of William Blair. Your line is open.

Hey, guys. Thanks for taking my questions I wanted to first ask on the commentary around the transactional component.

I mean, the supply chain challenges that have been out there for a while or are they just sort of worsening.

Relative to what you expected.

On the last earnings call and then when you think about the remainder of your fiscal 'twenty two are you expecting.

<unk> in terms of inventory levels or are you sort of thinking that we're going to be about.

The same as what you saw in the first quarter.

So this is Brian I can start and then I'll let.

Eric.

Joe choices.

First you should just remember that.

Roughly 10 ish percent, maybe even a little bit less of our business as transaction oriented mostly around.

Things like registration Chad.

Credit checks and so whether you're selling a new or used car.

How many of those types of transactions. So we saw a slight decrease but less than what you saw so we started by 2% to 3% decrease in transactions, whereas I think if you looked at.

Sales of new cars at all it's down quite a bit more than that.

Beyond 10%, 10% to 15%.

We don't see that really changing as we go through the rest of at least this fiscal year.

Pink.

Both will kind of stay where they're at and I don't see inventories at the dealership is getting a lot better.

And if you listen to the Oems.

Coals that have happened so far.

Theyre not seeing that either.

And.

Our relative rate of impact by transactions should change abruptly as we go through the year either.

Joe or Eric Yes.

Yes, the only thing I would add is we've spent a lot of time, Matt around data collection and if you look at slide 17 in our posted earnings presentation. It actually shows you the month by month trend.

Month of September got quite a bit worse for the automotive market large so few.

Say over 50% of vehicle sales go through our software in our system, so collecting that data looking at it.

September was as low as what you saw during COVID-19 shutdown and so.

Brian said, our business model is very resilient.

For me quite well.

With all that said and dealers are managing it well, but certainly continues to be a headwind.

Okay.

Understood got it so the offset to that then obviously as it seems like the subscription side of your business has maybe been performing a bit ahead of your expectations any areas. Specifically you would call out that have been better so far than what you expected.

Okay.

Yes.

In general like again, if you look at our revenue per site.

It's continued to increase now.

And.

A lot of that.

He leads service.

Both of those two are really good.

Big drivers the bigger drivers of that revenue per site and our overall growth.

And we just continue there's two other factors that have gone, probably a little bit better than what we.

As anticipated originally which is.

Just new Dms sales continues to go well and then our retention so.

Our retention is at the highest level.

I can remember.

It's between 90, 697%.

So the whole work, we've done on NPS scores customer satisfaction, improving our products all of that is paying off and phenomenal retention.

And that has actually continued to be a little bit better than we even forecast that I think we're always a little.

Paranoid per se of.

Making sure that we're always cautious as always to try to support the customer better and so we probably forecasted a little bit lower.

But it has continued to do well as well so.

Those two products and then just overall retention of new new Dms.

Gave us acquisitions.

That's great.

I'll pass it along thanks guys.

Thank you.

Next question comes from Gary parts of the P&L of Barrington Research. Your line is open.

Hey, good afternoon, everyone Hey.

Hey, Joe.

Could you go through some of those.

Statistics that you cited you said, let me just repeat it.

That's 5% to 10 point locations dealerships you had three competitive wins is that correct.

Yeah.

Yes, we overall hi, Jerry overall, we saw very good water continuing there.

The trend of what we've seen which is progress.

Winning competitive sales.

Across the spectrum, but especially in those larger more complex multi dealer sites.

And as Brian just.

Talked about and the comment to Matt.

We are just excited about the subscription growth acceleration when you look at site growth were one 6% growth this quarter and we just continue to see really good momentum there.

And I believe you look at revenue per site and applications and you can see the wins in the installs are installs were up over 50% for the Dms year over year Q1 over Q1. So we're seeing a lot of good momentum continuing to pick up in the core subscription part of our business.

Okay and then that's all Great news and then the.

Revenue per site was up 7% and then revenue in three point plus sites was double digits up double digits is that correct.

Yes, that's correct.

Hey.

And then.

Just just.

With four tell us.

Yes, it was 600% increase in transactions and you have 30 applications that are now integrated and the port tell us is that correct.

That is correct.

Yeah, that's that's.

Correct.

Okay, I know that you know.

Everybody is trying to get an idea of what that is going to impact how that's been impacting your revenue, but does it is.

Having poor tell us there and having those integrated into port tell us that.

It has to make it a lot easier to sell layered applications for the dealerships because there's it doesn't every dealership have access to <unk> and therefore, it becomes a one point of connection to get to all of these apps.

Is that a correct statement, our understanding of how <unk> works.

Yes.

Yes, and no so for.

<unk> is an API layer that allows as we create Apis off our own Dms. So we're off to be lead or off road.

Most are are there applications allows data to move in and out and oftentimes have.

Some form of the algorithm or calculation processed against it.

And then it also allows third parties too.

The same.

Their API, so maybe your builder.

Insurance App.

Uh huh.

Inventory management application or whatever you want to be able to move data in and out of a dealership you can do that and then car dealers can right.

Can pull data.

Through those Apis and calculate what they are.

Selling.

Per day per user per or whatever basis.

So it doesn't necessarily.

How you if you're a dealer and you want to download or you want to install our service application.

For us it doesn't necessarily help you do that what it does do though is that it enhances the value of our service application because there will be API that you can access.

Out of low or no cost that allows you to look at your parts inventory the amount of work that went through each bay things like that that they use them to understand their business better.

The way the way we make money.

I just wanted to make sure we get to that because that's always dilutive questions is.

What is this thing doing it how does it add value there.

There's really a few ways, we add value and make money and for US. It is not a replacement for the old <unk> and things like that.

It is actually a completely different way to think about how data moves within our platforms.

Most of the applications are free.

There are some like our service API.

That X time uses and Cox for example, if they if somebody uses X time, our Dms.

There is quite a bit of a calculation and management that we do on our end of the data that flows in and out of the Dms.

We charged for those types of Apis and then.

The thing that.

I really want you to understand as Joe mentioned in his statements that he.

Met all of our 100 day integrations.

Roadster and if you look at salted we've already integrated much of the salty application into our software and our ability to to really enhance what <unk> can do all of that done because of the power for Telus and the strength of those Apis. So it's it's.

Allowing us to accelerate these acquisitions and these new businesses and those new businesses could be through acquisition.

You can also listen to a host of partnerships like the.

CDK <unk> PE with global payments and.

We have several others in the works where those API as a whole for <unk> platform allows us to do that quite quickly quite efficiently.

And then allows us to make money that way.

Those I actually believe.

Are going to be worth way more than the transaction fees that we do get out of the data flow.

That will still happen, but like these integrations and the ability to partner at a much quicker level.

Is going to be.

It's quite a bit more over over the time period.

If I.

Then just could add a couple of comments because it <unk> you had said Gary.

Talk about the competitive landscape and if you look at what we're doing versus what others are doing others are taking a very.

New competitors come into the space take a very OEM centric view of the world and create this walled garden approach, which has consequences for dealers, who want flexibility and so the part that so importantly for Telus as Brian was saying is just our open and agnostic approach is resonating with dealers to encompass into an <unk>.

<unk> that puts the consumer at the heart of it rather than have to have them.

Pick or if you will be part of sort of a more siloed technology approach.

Okay. Thank you.

Thank you. Our next question comes from Air and Athena of Oppenheimer. Your line is open.

Okay.

Guys.

Yes.

Can you can you tell me what the dealer count gauge for the August three dealers.

Was that up down flat.

It is a go so it has largely stabilized.

It's down slightly I would tell you, it's it's at or a bit better than I think what we see the market performing that.

Certainly when you look year over year, you see it down a bit.

Largely due to out of business sites, we're just general consolidation and then secondly, when you look at it sequentially the business is largely flattened.

Okay perfect.

And then as we look at kind of guidance and investments.

We like good on the investment side that is the integration of salt, maybe increase investment or <unk>.

Are we kind of stable as far as what we talked about and what we should expect.

That's a good question salty will not increase our.

Investment level and I think in general we're comfortable at this level of investment right now.

And.

I'm always a little cautious I would tell you that it will never go up but.

With everything we see right now with all of our plans that we have in place right now.

We are very comfortable we will actually see.

We committed that we would see improvements in efficiency were already beginning to see those.

For the most part we're translating those efficiencies into just moving faster on more products.

And so we're able to do more with the same and we don't see a need to.

Increase.

With any significance our investment level.

Okay Perfect and then a final question would be for Dallas is doing very well is there a plan to maybe disclose to us with revenue contributions might be or what we should expect kind of going forward or maybe even how large this opportunity could be.

Because it sounds very exciting and it seems that all the kpis are moving their interaction.

But I guess, what kind of look into the rubber hit the road already.

Yes, I don't think Youll see us break out the revenue because basically.

Basically you have to we have to make it a segment right and theres all kinds of other.

Rules and regulations, Eric can talk to you more about those.

And I just think that once you do it you're doing it for life.

I can tell you again.

Make sure you understand that.

There is there is multiple ways, we're not making money just through transactions with.

With our tell us.

Part of the reason our retention rates and part of the reason, we're getting wins in DFS and we're getting some of the small dealer wins.

And we've stabilized the small dealers is two hotel at so making data available more easily theres a bunch of tools that we provide for the dealer to be able to extract their own data.

A very easy and convenient ways.

There are transaction fees for some of their products, they're totally when we add significant value.

And then we make.

I'd argue a ton of money.

Through partnerships and integrations of acquisitions at a much much faster rate at a much deeper integration.

That was not possible with the four hotels.

So.

That's the comment that Joe made is that.

Sure.

Because we are open because we're agnostic.

Dealers are more satisfied dealers are more happy where retentions and <unk>.

Acquisition wins are up.

We are making money through transactions, but we make even multiples of that through those integrations and being able to acquire and partner with companies much faster and much lower cost much simpler much.

A much deeper level and so it would be always hard to calculate what the real revenue portela too. So if you took a look at salt team didn't have for tell us where he took a roadster you didnt upwards.

Instead of the 100 day plan or a 60 day plan like we had on salty you'd be talking months, if not quarters in order to integrate those things and get the same results.

And so that's the real value to me that we will always be hard to give you an exact number on it anyway.

Perfect. Thank you very much I appreciate this.

Thank you again, ladies and gentlemen, if you like to ask a question. Please press Star then one on your touch tone telephone.

Our next question comes with Morgan Stanley Your line is open.

Hi, Good afternoon. This is Bob Huang from Morgan Stanley selling you for Josh.

Maybe we can start with the.

Insurance entity.

Given that we're in a somewhat temporary competitive auto insurance market can you maybe talk about one.

Your fee structure with faulty and the carrier is it like a flat fee structure or is it a percent on premium users as a percentage of premium what does that number.

And also number two if the auto premiums award of increase in the competitive environment kind of dies down would.

Or would you see additional revenue tailwind from this relationship or does the competitive environment kind of if this whole thing away.

Thanks for your question and thanks for joining us today. So on salting, we're really excited it opens up a 2 billion multibillion dollar incremental Tam.

For us and when you look at it really.

Really resonates with dealers, it's an opportunity when we work with our dealers. They just want to create a better and consumer buying experience.

And where salt it provides so much value is the tech integration Brian's described with Shoretel is just creates this seamless experience for consumers to really benchmark are they getting a great deal.

On their insurance and if they want to bind insurance at the moment of purchase they can do it within minutes right at the dealership and with very very strong insurance carriers you.

It was talked about progressive we've talked about travelers and we have a very full lineup.

Insurance carriers, I think we have a unique opportunity to bring that across our our base of business that we won.

Get into all the details to disclose terms of fee structure I think it's.

The structure of its very similar to a brokerage relationship right.

Connecting that into really provide an opportunity for insurance carriers to connect with the consumer and that provides a brokerage commission as part of binding the insurance and so I'd leave it at that level for you and I think those rates are.

Traditionally aligned with what you see other brokerage.

Agents achieved so from our perspective, it's all about a better guest or consumer experience for the dealership integration in to really modernize the entire journey of buying a vehicle right. When you think about how we're pivoting. The company. It is really about transforming Hello car is bought including all of the elements of it.

<unk>.

Insurance being the case in this situation.

Okay. Thank you.

Hey.

Just one thing.

But the one thing I'd add to Joe's comment as.

One thing Thats, a little unique is that we share a portion of our.

Commission with the dealer so the dealer is incentivized in this whole process and so they want to see this business grow this is.

Again to enter the.

Integration of salty into our Dms that automates the process flows. So it's it's seamless both to the consumer into the dealer.

And the dealers incentivize because they're getting a percentage of this as well.

So.

As we grow they grow.

And that that's a very interesting business.

Model that we think the more of those that we can find.

Those will be the ones that really can propel us into the future and then and then yeah sure if markets become less competitive in insurance rates went up or is this based on a percentage. So our percentage would go up but we're really focused right now on providing.

Our value.

To the consumer that then.

Incentivize them to be interested in.

And hence our business grows at a faster rate.

Okay. Thank you that's very helpful. So from other question.

You added another 45 auto dms sites quarter on quarter.

Can you maybe just talk about the strength in that business and maybe Directionally, where you think this is going going forward and how would you characterize the results in different market segments and Youre, a small dealer size the larger dealers drive kind of policies.

Asked earlier so.

Yeah, I think there is theres a lot of positivity across the board I think the team is really working well together the technology team.

The marketing team the sales team the implementation team the customer care teams are then when you look at how we're performing right now I think we're hitting on all cylinders quite frankly.

When you look at the market dynamics.

We are seeing.

Or the acceleration of consolidation and the automotive dealership marketplace.

And that consolidation is really some of the largest dealers consuming some of the midsize dealers and some of the midsize dealers consuming some of the smaller dealers and I would just tell you we've experienced.

Substantial grew.

Growth both year over year as well as we're starting to see that growth really accelerated sequentially.

Around this consolidations if youll recall, we over indexed to the larger dealers. So those who are multi rooftop three plus.

The consolidation is happening.

That we expect to continue to happen is really quite a nice tailwind for our business model.

So, yes, I think youre right for calling out the 45 sites sequential growth, we will continue to see that.

Reform pretty consistently as we go forward clearly there is some quarters that ebb and flow here and there, but nonetheless, we're seeing.

Our record retention, we're seeing great sales wins, we're seeing our customers who are bigger buying consolidating and we are the strategic partner connector. If you will between the OEM the dealer and all the consolidation in our business is benefiting from that and you really see a clean quarter print with mid.

Mid to higher single digit growth that we keep pushing for it.

Thank you very much that's all for me.

Thank you again, ladies and gentlemen, if you like to ask a question. Please press Star then one on your Touchstone telephone.

Yeah.

One other player.

I'm showing no further questions at this time I'd like to turn the call back over to Brian for advantaged for any closing remarks.

Thanks, operator.

Just like to first thank everyone for attending.

Conference is a great question.

As we said really excited about our business.

I think this quarter really represents the start of 2022.

With.

Right on our target and our forecasts as Eric mentioned.

And so.

I'd just like to leave with thinking all of the CDK employees right.

We continue to do a great job, even as Covid continue to.

Play a factor.

Team has continued to accelerate our improvements in our.

Gross sales team is strong.

Just overall the whole organization is doing great. So thank you.

And we will see you all next quarter.

Ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.

[music].

Okay.

[music].

Thank you for standing by and walk us through the Q1 2022 CDK Global Inc. Earnings Conference call. At this time, all participants are in listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question about Saar facade, and one when you touch tone telephone.

As a reminder, today's conference call is being recorded.

I'd now like turn the call to the host Mr will make a jaeger Vice president of Investor Relations. Please go ahead Sir.

Thank you and good afternoon I'd like to welcome you to our first quarter fiscal 'twenty two earnings call joining.

Joining me on today's call, our CEO, Brian percentage, Chief operating officer, Jos houses and our CFO Eric Garen.

Following their prepared remarks, we'll 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 <unk>.

D K global Dot com.

This call is being simultaneously webcast.

In addition, our website includes an updated excel schedule, a supplemental financial information and a copy of our results presentation.

We will be referencing during our prepared remarks.

Throughout today's call, we will be discussing our continuing operations only which do not include the international business results, which are presented as discontinued operations.

Please also note that our 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 involve risks and uncertainties.

As further detailed in our filings with the SEC, which could cause actual results to differ materially from those mentioned in the forward looking statements.

With that it's my pleasure to turn the call over to Brian.

Thank you Robyn.

Thanks to everyone for joining the call today.

CDK is off to a strong start to fiscal 2022.

With revenue growth of 6%.

Data of $170 million.

And EPS of <unk> 77 per share.

I'm pleased with these results, which met our expectations. Despite a modest slowdown in the transactions business driven by inventory shortages in the auto market.

Joe and Eric will give more color on the customer environment and financial performance in a few minutes.

Our ability to excel in 2022 demonstrates that CDK has become a fundamentally different company than it was just a few years ago.

We've been focused on making investments that strengthen our core business, including significant improvements to our customer service and technology.

We've been steadily transforming ourselves into a market leading strategic software partner for the automotive industry.

We're connecting the industry into and in creating a digital.

Modern retailing process that rivals what anyone else can bring to the market.

And we're seeing the benefits of those investments with strong net promoter scores up 30 points since 2019.

Seven straight quarters of Dms site growth.

And the improvement in these underlying metrics is now more visible in our financial results with notable growth in core business.

This improvement in the core business has given us an opportunity to collaborate with dealers.

To drive the ongoing transformation of the automotive retail industry.

Last month.

We hosted CDK connect.

Our customer focused industry event that highlighted our recent technology wins.

We are pleased to have the opportunity to bring to get their dealers Oems and software developers and share the latest technical advances we've made at CDK.

At the event, we demonstrated exciting new advancements in a variety of workflows, including service and back office functions.

Joe will go into more detail, but I, especially want to highlight that we've completed our 100 day plan to integrate roadster into our core systems.

Including CRM.

And the result is an end to end digital workflow that drive high consumer satisfaction.

Also enabling improved efficiency in the dealership.

We accomplished much of this by leveraging our investments in the <unk> platform.

The modern API architecture for talent accelerate interconnection within the industry ecosystem.

The pace that isn't possible on legacy platforms.

Without the new capabilities, we felt the roadster integration would have taken two to three times longer to complete.

It's the key to providing more innovation to our customers both from CDK and from independent software vendors, who continue to add applications to the platform.

We now have more than 75 applications live on for Telus and.

And generated more than 100 million transactions in this quarter alone.

Exciting applications like predicted service and CDK <unk> leveraged this platform to introduce and innovate.

Around new capabilities that are solving real problems for our customers.

We expect growth and innovation to continue in the quarters to come.

We're pleased.

So we announced our acquisition of salt in the quarter.

Or start research at home and then visit the dealership.

Truly delivering a seamless omnichannel experience.

But we're not stopping there our vision is to create an integrated experience for all aspects of car buying.

Oh no.

This begins with our entrance into insurance space with the acquisition of Salt.

Our dealers delivered millions of new and used vehicles each year and every one of those vehicles needs insurance.

South Hill, Leverages data and the innovative technology to integrate insurance offerings.

So our dealers existing process.

Opening an entirely new team of approximately $1 billion for both dealers and CDK.

Dealers are excited by the opportunities and I'm pleased to welcome <unk> to the CDK traveling.

While we're excited about our work for the dealer body.

Continue to believe CDK is well positioned to serve as a bridge between the dealers and Oems.

The massive amount of data passes through CDK systems daily.

And quality of service.

She became position at the intersection of data flow across the industry.

Allows us to develop solutions that benefit the broader ecosystem.

And we're working on a number of initiatives on this front.

CDK is uniquely suited to safely and securely provide access to these solutions through branded and white label applications.

In the last quarter, we've worked with a select group of Oems to ramp up real time inventory reported.

We also signed a data sharing agreement with one major OEM come and build data and continue to grow access to connected vehicle data with a number of Oems.

Hello.

And this data will help us offer new and improved products to our dealers to help them sell and service more vehicle.

To summarize.

CDK has pivoted its business dramatically in recent years.

Equally positioned at the heart of the automotive ecosystem that connect our industry.

And through our technology, we unite dealership employees.

Dealer locations software developers and Oems.

Proving their business efficiency.

Dancing consumer experiences.

But through these connections that we can share expertise.

And facilitate collaboration for the benefit of everyone.

Now before I pass things over to Joe.

I'd like to thank our employees, our customers and our partners for helping to get our fiscal year off to such a great start.

We're pleased with the accelerated growth in the core business and our positioning for the remainder of 2022.

So now I'll turn it over to Joe.

The business highlights.

Thanks, Brian and welcome everyone to the call.

As Brian said, we are excited about Cdk's outlook for 2022, and a strong start we've had versus the plan we set for the year.

We were pleased with the uptick in customer adoption of roadster that began following the completion of the technical integration into the platform in September.

Our underlying metrics and financial results show that our focus on service and technology is working for our customers.

We also provided a few slides that cover market trends, how we are positioned to lead the creation of a unified digital buying experience for dealerships and the platform architecture. We have built in support of this vision.

Overall, the industry is holding up reasonably well.

But auto inventories are at record lows.

Our data reflects these conditions with a modest reduction in sales and credit transactions per dealership.

As D. K mentioned, we saw associated headwinds and our transactions business driven by these inventory challenges and believe the trend could continue throughout the remainder of the fiscal year.

We will continue to monitor this space closely.

On the flip side lower inventories have increased realized prices. So dealer profits has been resilient.

Dealership consolidation continued last quarter with several very large deals announced in recent months.

CDK has been the net beneficiary of this consolidation, which we expect to continue in coming quarters.

We believe that some of this consolidation is happening as a response to the challenges from the rapidly changing retail sales environment, where automotive customers are seeking a smooth the digital buying experience. They found in other consumer retail models.

Dealers will have to reach an economy of scale that allows them to make necessary investments to enable this type of digital experience for customers in all 50 states.

We believe we are the only option available with an end to end solution that can enable this vision.

Now I'll turn to some of our highlights for the quarter.

The combination of consolidation.

Strong sales efforts driving competitive wins and continued healthy retention have resulted in notable cyclo in Q1.

Auto sites were up one 6%.

And reached the highest level since 2017.

While the Adjacencies and while Adjacencies sites grew 4% and hit another all time high.

We had continued strength in winning business with all the sites that have more than five to 10 locations with three competitive wins in the quarter.

Revenue per site grew to record levels for both auto and Adjacencies.

Auto revenue per site grew 7% with two points of growth contributed by the roadster acquisition.

Revenue per site benefited from higher application penetration.

Revenue from three plus site dealers was up double digits for two points growth attributable to the roadster, while revenue from one to two site deals fell slightly.

Hey, Jason sees revenue per site was strong growing 7%.

We had notable sales wins across our strategic applications with particular adoption of elite.

CDK service.

Doc cloud and.

Cloud connect.

Highlights include wins in 25, plus site groups for both roadster and CDK service.

And the new Universal product team that we discussed last quarter is gaining traction with elite and now roadster and non CDK Dms sites.

Earlier, Brian mentioned, our CDK connect event last month.

We were able to lay out our vision and share key initiatives to our customers and partners.

We touch every part of the automotive retail ecosystem and we work with all stakeholders.

Our software is used in some fashion across more than 12000 dealerships. This level of engagement is a tremendous asset.

At this event, we highlighted the roadster integrations that now allow for the total digitization of the sales process.

This provides a modern flexible buying experience that meets the needs of a wide variety of consumers.

It also improves the efficiency and the dealership are capturing and sharing data across a variety of tools used to optimize the selling process.

We have also merged our roadster you read engineering teams, which will enable us to build a continuous purchasing workflow, which will allow our customers to target transaction times below one hour.

Our customers are excited by the seamless solution and the potential for significant efficiency improvements in their sales process.

CDK connect also highlighted new tools that target specific revenue and cost opportunities using the power of data and improve workflows.

Predictive service leveraging the neuron platform can drive increased service revenue opportunities by helping technicians efficiently analyze of vehicles serviced.

And our new accounting workflow can simplified back office functions within the dealership to enhance productivity.

We will continue to rollout new capabilities in the coming quarters that will make a difference for our customers.

And our acquisition of salty opens a new opportunity for the CDK and dealers and shows how the new CDK is helping dealers navigate a changing marketplace and build new profit pools.

I was thinking the consumer journey altogether, we can help consumers accomplish more through dealers significantly deepening the relationship and increasing customer lifetime value.

Insurance is one of the most obvious parts of the car buying process that is ripe for disruption and we're helping dealers becomes a disruptor for change.

As Brian mentioned Saar.

We opened a large new total addressable market for both dealers and CDK.

So all the combined data.

Knowledge and process integration to streamline the insurance quote process that fits seamlessly into the vehicle sales process.

An integrated process and a strong panel of insurance partners maximizes the chance that customers will accept the quote and ultimately buying new insurance.

Commissions on insurance originations and renewals will overtime, while the strong recurring revenue stream for both CDK and dealers.

To conclude I'm proud of the progress we've made over my years at CDK and how we are positioned for 2022.

Investments in technology and service have strengthened our core business.

<unk> allowed us to pivot the opportunities to add more value to dealers and Oems.

I'll now turn it over to Eric.

Actual results.

Thanks, Joe and good afternoon, everyone as Brian and Joe mentioned, we had a nice start in 2022 that puts us on track for the year.

Let me start by walking you through our first quarter results before discussing the outlook for the remainder of 2022.

Like to remind everyone that results are for continuing operations only and do not include the international business, which is presented as discontinued operations.

First quarter revenue was $440 million up 6% versus last year.

Revenue includes $10 million from acquisitions core revenue growth, excluding the impact of the acquisitions was 4%.

Subscription revenue was $345 million up 7% from 2021.

Transaction revenue was $43 million down 3% versus 2021.

<unk> were also higher.

Our effective tax rate was 23, 9% in the quarter the tax rate in the period benefited from a onetime net tax benefit from the expiration of statute of limitations related to certain international transfer pricing matters.

Earnings per share for the quarter rose, 22% to 77.

Primarily reflecting reduced interest expense driven by debt reduction and a lower tax rate in the quarter.

Free cash flow was $44 million.

<unk> from $72 million last year higher incentive compensation payments in 2022 contributed to the reduction in free cash flow.

We paid dividends of $18 million in the quarter, and we also repurchased $88 million for our common stock, bringing us to $100 million of repurchases since we restarted the program late last year.

We continue to expect to repurchase $200 million to $250 million of stopped by the end of fiscal 2022.

Now turning to guidance.

We are maintaining our fiscal 2022 guidance with revenue of $1 78 to $1 eight 2 billion.

EBITDA of 655 to 685 million and EPS of $2 70 to $2.90.

And an effective tax rate of $25 five to 26, 5%.

In summary, we had a solid start to the year and are on track to meet our financial targets, while continuing to invest to support our customers and drive innovation.

I am proud of the execution in Q1 and look forward to accelerating growth as we move through 2022.

Thank you and we will now open the line for questions operator.

Thank you again.

Again, ladies and gentlemen, I'd like to ask a question. Please press Star then one on your Touchstone telephone again to ask a question. Please press Star then one.

Our first question comes from that out of William Blair. Your line is open.

Hey, guys. Thanks for taking my questions I wanted to first ask on the commentary around the transactional component.

I mean, the supply chain challenges that have been out there for a while or are they just sort of worsening.

Relative to what you expected.

On the last earnings call and then when you think about the.

The remainder of your fiscal 'twenty two are you expecting.

<unk> in terms of inventory levels or are you sort of thinking that we're going to be about.

The same as what you saw in the first quarter.

So this is Brian I can start and then.

Alright.

Eric and.

Joe voice it.

First you should just remember like.

Roughly 10 ish percent, maybe even a little bit less of our business as transaction oriented mostly around.

Things like registrations and.

Credit checks and so whether you're selling a new or used cars.

How many of those types of transactions.

So we saw a slight decrease but less than what you saw so we started like two years to 3%.

A decrease in transactions, whereas I think if you looked at.

Sales of new cars at all it's down quite a bit more than that.

10%, 10% to 15%.

We don't see that really changing.

Go through the rest of at least this fiscal year, we think.

Both will kind of stay where they're at I don't see inventories at the dealership is getting a lot better.

And if you listen to the OEM.

Coals that have happened so far.

They are not seeing that either.

And.

Our relative rate of impact by transactions should change abruptly as we go through the year either.

Joe or Eric can go yes.

Month of September got a quite a bit worse for the automotive market at large so few.

Say over 50% of vehicle sales go through our software in our system, so collecting that data looking at it.

September was as low as what you saw during COVID-19 shutdown and so.

Brian said, our business model is very resilient.

For me quite well.

With all that said and dealers are managing it well, but certainly continues to be a headwind.

Yeah.

Understood got it so the offset to that then and obviously it seems like the subscription side of your business has been performing a bit ahead of your expectations any areas. Specifically you would call out that have been better so far than what you expected.

Okay.

Yeah.

In General again, if you look at our revenue per site.

It's continued to increase though.

And a lot of that.

He leads service.

Both of those two are really good.

Big drivers the bigger drivers.

That revenue per site and our overall growth.

And we just continue Theres two other factors that have gone, probably a little bit better than what we.

And anticipated originally which is.

Just new Dms sales continues to go well and that our retention so.

Our retention is at the highest level.

No.

I can remember.

It's between 90, 697%.

So the whole work, we've done on NPS scores customer satisfaction, improving our products all of that is paying off and phenomenal retention.

And that has actually continues to be a little bit better than we even forecast I think were always a little.

Paranoid per se of.

Making sure that we're always cautious and always try to support the customer better and so we probably forecasted a little bit lower.

But it has continued to do well as well so.

Those two products and then just overall retention of new new Dms.

Give us a acquisitions.

That's great.

Pass it along thanks guys.

Thank you.

Next question comes from Gary pressed the P&L of Barrington Research. Your line is open.

Hey, good afternoon, everyone.

Hey, Joe.

Can you go through some of those.

Statistics that you cited you said, let me just repeat it.

That's 5% to 10 point locations dealerships you had three competitive wins is that correct.

Yes.

Yes, we overall hi, Gary.

Overall, we saw a very good quarter continuing the.

The trend of what we've seen which is progress.

Winning competitive sales.

Across the spectrum, but especially in those larger more complex multi dealer sites.

And as Brian just.

Talked about and the comment to Matt.

We are just excited about the subscription growth acceleration when you look at site growth. We're at one 6% growth this quarter and we just continue to see really good momentum there.

And I believe you look at revenue per site in applications and you can see the wins in the installs are installs were up over 50% for the Dms year over year Q1 over Q1. So we're seeing a lot of good momentum continuing to pick up in the core subscription part of our business.

Okay and then that's all Great news and then the.

Revenue per site was up 7% and then revenue in three point plus sites was double digits up double digits is that correct.

Yes, that's correct.

Okay.

And then.

Just just.

With four tell us.

Yes.

Yes. It was 600% increase in transaction you have 30 applications that are now integrated into <unk> is that correct.

That is correct.

Yeah. That's that's correct, Okay, I know that you know.

Everybody is trying to get an idea of what that is going to impact how that's been impacting your revenue, but does is having poor tell us there and having those integrated into <unk>.

It has.

It has to make it a lot easier to sell layered applications for their dealerships because there's it doesn't every dealership have access to port <unk> and therefore, it becomes one point of connection to get to all of these apps.

Is that a correct statement or understanding of how poor tourists works.

Yes.

Yes, and no so.

So tell us as an API layer that allows as we create apis off our own DNS or off the lead or ops roadster or other applications allows data to move.

In and out.

Oftentimes have.

Some form of algorithm or calculation processed against it.

And then it also allows third parties to post the sale.

Our API, so maybe you build there.

Insurance App or.

Our parts.

Venturi management application or whatever you want to be able to move data in and out of a dealership you can do that and then car dealers can right.

Can pull data.

Through those Apis and calculate what they're selling.

Per day per user per or whatever basis.

It doesn't necessarily allow you if you're a dealer and you want to download or you want to install.

Our service application.

Yeah.

So it doesn't necessarily help you do that.

What it does do though is that it enhances the value of our service application because there'll be API that you could access.

At a low or no cost that allows you to look at your parts inventory the amount of work that went through each bay things like that that they use them to understand their business better.

The way the.

Way, we make money.

I just wanted to make sure we get to that because that's always dilutive questions is what is it doing and why how's it added value.

Theres really a few ways, we add value and make money and for US. It is not a replacement for the old <unk> and things like that.

It is actually a completely different way to think about how data moves within our platforms.

Most of the applications are free.

There are some like our service API.

That X time uses and Cox for example, if they if somebody uses X time in our Dms.

There is quite a bit of a calculation and management that we do on our end of the data that flows in and out of the Dms.

We charged for those types of Apis and then.

The thing that I really want you to understand as Joe mentioned in his statements that he.

All of our 100 day integrations.

Roadster and if you look at Salt Lake, we've already integrated much of the salty application into our software and our ability to to really enhance what <unk> can do all of that done because of the power for Telus and the strength of those Apis. So it's it's.

Allowing us to accelerate these acquisitions and these new businesses and those new businesses could be through acquisition.

I could also list your host of partnerships like the.

C D K, one pit with global payments.

We have several others in the works where those API as a whole for <unk> platform allows us to do that quite quickly quite efficiently.

And then allows us to make money that way.

Those I actually believe are.

<unk> going to be worth way more than the transaction fees that we do get out of the day.

Data flow.

That will still happen, but like these integrations and the ability to partner at a much quicker level.

It's going to be worth.

Quite a bit more over the.

Time period.

If I then just get out a couple of comments because of the <unk> you had said Gary we ought to talk about that.

The competitive landscape and if you look at what we're doing versus what others are doing others are taking a very.

New competitors come into the space take a very OEM centric view of the world and create this walled garden approach, which has consequences for dealers, who want flexibility and so the part that is so important for Telus as Brian was saying is just our open and agnostic approach is resonating with dealers to encompass into an experience.

That puts the consumer at the heart of it rather than have to have them.

Pick or if you will be part of sort of a more siloed technology approach.

Okay. Thank you.

Thank you. Our next question comes from Air and Athena of Oppenheimer. Your line is open.

Okay, Hey, guys.

Yes, I can.

Can you tell me what the dealer count gauge for the under three dealers.

Was that up down flat.

It is Oh go so it has largely stabilized.

It's down slightly I would tell you, it's it's at or a bit better than I think what we see the market performing that.

Certainly when you look year over year, you see it down a bit largely due to out of business sites, where just general consolidation and then secondly, when you look at it sequentially the business is largely flattened.

Okay perfect.

And then as we look at kind of guidance and investments.

We like good on the investment side.

The integration of Salt Beacon, maybe increase investment or are we kind of stable as far as what we talked about and what we should expect.

Okay.

That's a good question salty will not increase our.

Investment level and I think in general we're comfortable at this level of investment right now.

And.

I'm always a little cautious I would tell you that it will never go up but.

With everything we see right now with all of our plans that we have in place right now.

We are very comfortable we'll actually see.

We committed that we would see improvements in efficiency were already beginning to see those.

For the most part we're translating those efficiencies into just moving faster on more products.

And so we're able to do more with the same and we don't see a need to increase.

Increase.

With any significance our investment level.

Okay Perfect and then a final question would be for Dallas is doing very well is there a plan to maybe disclose to us what revenue contributions might be or what we should expect kind of going forward or maybe even how large this opportunity could be.

Because it sounds very exciting and it seems that all the kpis are moving their interaction.

And I guess, we're kind of looking for the rubber hit the road already.

Yes, I don't think Youll see us break out the revenue because then looked at where basically you have to we have to make it a segment right and theres all kinds of other.

Rules and regulations, Eric can talk to you more about those.

And I just think that once you do it you're doing it for life.

I can tell you again.

Make sure you understand that.

There is there is multiple ways, we're not making money just through transactions with.

With our tell us.

The reason our retention rates and part of the reason we're getting.

It is in DFS and we're getting some of the small deal in Atlanta.

And we've stabilized the small dealers is twofold tell us so making data available more easily theres a bunch of tools that we provide for the dealer to be able to extract their own data.

Got it.

A very easy and convenient ways.

There are transaction fees for some of their products, they're totally when we add significant value.

And then we make.

I'd argue a ton of money.

Through partnerships and integrations of acquisitions at a much much faster rate at a much deeper integration.

That was not possible with the four hotel us.

So.

That's the comment that Joe made is that.

Sure.

Because we are open because we're agnostic.

Dealers are more satisfied dealers are more happy where retentions and <unk>.

Acquisition wins are up.

A much deeper level and so it would be always hard to calculate what the real revenue Portela said. So if you took a look at salty and you didn't have for tell us when you took a roadster and you didn't have withheld.

Instead of the 100 day plan or a 60 day plan like we had on <unk> you'd be talking months, if not quarters in order to integrate those things and get the same result.

And so that's the real value to me that we will always be hard to give you an exact number on it anyway.

Perfect. Thank you very much I appreciate this.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your touch tone telephone.

Our next question comes from Morgan.

Morgan Stanley Your line is open.

Hi, good morning.

This is Bob Huang from Morgan Stanley selling you for Josh.

Maybe we can start with the insurance entity.

Given that we're in a somewhat temporarily competitive auto insurance market can you maybe talk about one.

Your fee structure with faulty and the carriers is it like a flat fee structure or is it a percent on premium either as a percentage of premium what does that number and also number two you have the auto premiums award of increase in the competitive environment kind of dies down.

Do you see additional revenue tailwind from this relationship or does the competitive environment kind of if this whole thing away.

Thanks for your question and thanks for joining us today. So on Salt, we're really excited it opens up a 2 billion multibillion dollar incremental Pam.

For us and when you look at it really.

Really resonates with dealers, it's an opportunity when we work with our dealers. They just want to create a better and consumer buying experience.

And where salt it provides so much value is the tech integration Brian's described with Shoretel, let's just create this seamless experience for consumers to really benchmark are they getting a great deal.

On their insurance and if they want to bind insurance at the moment of purchase they can do it within minutes.

Right at the dealership and with very very strong insurance carriers.

It was talked about progressive we've talked about travelers and we have a very full lineup.

The insurance carriers, I think we have a unique opportunity to bring that across our our base of business.

Won't get into all the details to disclose terms of fee structure I think it's.

The structure of it is very similar to a brokerage relationship right.

Traditionally aligned with what you see other brokerage.

<unk>.

Insurance being the case in this situation.

Okay. Thank you.

Hey, Joe just one thing.

But the one thing I'd add to Joe's comment is.

One thing that's a little unique is that we share a portion of our.

Commission with the dealer so the dealer is incentivized in this whole process and so they want to see this business grow this is.

Again to enter the.

Integration of <unk> into our Dms that automates the process flow. So it's it's seamless both to the consumer and to the dealer.

And the dealers incentivize because they're getting a percentage of this as well.

So as we grow they grow.

And that that's a very interesting business.

Our model that we think the more of those that we can find.

Those will be the ones that really.

Can propel us into the future and then and then yes sure if if markets become less competitive in insurance rates went up or is this based on a percentage. So our percentage would go up but we're really focused right now on providing.

Our value.

To the consumer that then.

Incentivize them to be interested in and hence.

Hence our business grows at a faster rate.

Okay. Thank you that's very helpful. So from other question.

You added another 45 auto Dms sites quarter on quarter can you, maybe just talk about the strength in that business and maybe Directionally, where you think this is going going forward and how is that characterized the results in different market segments and youre, a small dealer size the larger dealer size and apologies.

Asked earlier so.

Yeah, I think there is there is a lot of positivity across the board I think the team is really working well together the technology team.

The marketing team the sales team the implementation team the customer care teams are there when you look at how we're performing right now I think we're hitting on all cylinders quite frankly.

When you look at the market dynamics.

We really are seeing.

It was an acceleration of consolidation in the automotive dealership marketplace.

Substantial grew.

Growth both year over year as well as we're starting to see that growth really accelerated sequentially.

Around those consolidations, if you'll recall, we over indexed to the larger dealers. So those who are multi rooftop three plus.

The consolidation that's happening.

We expect to continue to happen is really quite a nice tailwind for our business model.

So, yes, I think youre right for calling out the 45 sites sequential growth, we will continue to see that.

Perform pretty consistently as we go forward clearly there is some quarters that ebb and flow here and there, but nonetheless, we are seeing.

Record retention, we're seeing great sales wins, we're seeing our customers who are bigger buying consolidating and we are the strategic partner connector. If you will between OEM and the dealer and all the consolidation in our business is benefiting from that and you really see a clean quarter print with mid.

Mid to higher single digit growth that we keep pushing forward.

Thank you very much that's all for me.

Thank you again, ladies and gentlemen, if you like to ask a question. Please press Star then one on your Touchstone telephone.

One other player.

I'm showing no further questions at this time I'd like to turn the call back over to Brian for advantaged for any closing remarks.

Thanks, operator.

Like to first thank everyone for attending this conference is a great question.

As we said really excited about our business.

I think this quarter really represents the start of 2022.

With.

On our target in our forecast as Eric mentioned.

So.

I'd just like to leave with thinking all of the CDK employees right.

We continue to do a great job, even as Covid continue to.

Play a factor.

Team has continued to accelerate our improvements in our.

Gross sales team is strong.

Just overall the whole organization is doing great. So thank you.

And we will see you all next quarter.

Ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.

Q1 2022 CDK Global Inc Earnings Call

Request a DemoDemo

CDK

CDK Global

Earnings