CDK Global, Inc. (NASDAQ:CDK) Q3 2018 Earnings Conference Call - Final Transcript
Apr 26, 2018 • 08:30 am ET
Thank you. [Operator Instructions] Our first question comes from the line of Rayna Kumar of Evercore ISI. Your line is now open.
Good morning. This is Anthony Cyganovich on behalf of Rayna Kumar. In your prepared remarks, you mentioned that your advertising customers have changed their strategies. Can you provide a little bit more color on how the strategies have changed and whether you think this is more of a short-term or longer-term issue?
Anthony, it's Brian here. Yeah. We want to be careful how we talk about specific customers, but we've seen some shifts in the channel spending. And, obviously, SAR has started to come off a little bit, so we've seen some budgets being pulled back would be the kind of primary factors that we've seen affecting our advertising business in the short-term. I think, over time, money will continue to move, dollars will continue to move to digital advertising from traditional advertising, but our visibility over the next few quarters is a little choppy. And so we think the advertising business will be choppy over the next few quarters.
Great. That's helpful. Just to follow-up on that, I guess, is it your expectation that organic revenue growth could accelerate in FY 2019, or do you feel like this is still going to be a headwind for you?
Yeah. Hey, Anthony, it's Joe Tautges. So I would put the business and look at it in two buckets; I'd set aside advertising for the moment and look at our original business and our international business, which are subscription-based recurring revenue businesses. And when you look at the quarter, this quarter, we grew at 2%. And so, when we look out -- we're in the middle of our planning process right now. When we look at those businesses combined, we see those improving in 2019 from a growth profile from the 2%. We'll share more on our year-end call about guidance as we think about that. And as it relates to advertising, like Brian said, I think when you look at the shift away from -- where we really have great IP is in the hyper local marketing, digital arena. And the dollars we're seeing come out of there are meaningful, and so we'll share guidance there as well. And advertises would think about it for 2019.
And, Anthony, it's Brian here. I would just add to what Joe said that you need to also remember that this advertising revenue is by far our lowest margin revenue, by far, our lowest margin revenue.
Okay, great. Okay, just one final question for me. Can you provide what you think your migration timeline might be for on-boarding your one site to site customers to Drive Flex?
Yeah. Anthony, it's a great question. For competitive reasons, we're not going to talk about that at this time.
Okay, thank you.
Thank you. Our next question comes from the line of Brian Essex of Morgan Stanley. Your line is now open.
Hi, good morning,