CDK Global, Inc. (NASDAQ:CDK) Q3 2018 Earnings Conference Call - Final Transcript

Apr 26, 2018 • 08:30 am ET


CDK Global, Inc. (NASDAQ:CDK) Q3 2018 Earnings Conference Call - Final Transcript


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Brian MacDonald

will provide our dealers with an easier and faster workflow, providing a more accurate point-of-sale transaction that leads to faster funding and better cash flow, as well as an improved customer experience.

You can see a common theme here. We're all about helping dealers sell and service more cars. Driving efficiencies in their business, while enabling them to provide a delightful experience for their customers. We were high on attendees' must-do list at NADA and our total leads were up more than 50% over last year's record-setting performance. Our showing in NADA could not have been done without the hard work and dedication of our employees, working as one CDK to deliver these innovations and represent CDK to the entire industry.

Now, I'd like to provide a few highlights from around the business this quarter. Revenues grew 4% year-over-year. I'm particularly pleased with the growth from our core subscription business in Retail Solutions North America and International. EBITDA dollars grew 16% and EBITDA margin expanded 400 basis points to 36.5%. Diluted EPS grew 27% to $0.85. Since announcing our transformation plan in June of 2015, we have achieved double-digit EBITDA and EPS growth every quarter and have expanded margins by 1440 basis points, since fiscal 2015. Joe will provide additional details on the quarterly financial results and guidance for the year in a few minutes.

We had another strong sales quarter. Our competitive deal pursuit team improved upon last quarter's performance and signed a 20-plus store group as well as two groups over 10 sites. Our opportunity remains strong, which is why we're making investments to expand the sales team and our implementation resources to ensure we can meet demand as we head into next year. This quarter, we also renewed our largest dealer customer to another long-term contract. Along with this, we continue to see high single-digit recurring revenue growth from our three-plus site dealers. We're also seeing increased activity in website sales related to our recent OEM endorsements. We made a number of enhancements to our website platform to improve the dealer user experience and we were recognized by PCG Companies, a leader in dealership education, consulting and in-depth product research, with two automotive website awards last month at NADA.

On the international side, we recently signed a new agreement with a major global OEM in Japan, the largest deal our Asia-Pacific team has closed in the past 10 years. We've been making investments into the business all year and are pleased with the growth that we've seen thus far. We also remain focused on improving our performance in other areas, including smaller dealer auto site retention and advertising that have both shown weakness this year. Recurring revenue growth in our one to two-site dealer groups declined mid-single digits as a result of continued auto site losses in this segment of the market.

Auto site counts overall declined on both a sequential and year-over-year basis this quarter, primarily due to the previously mentioned churn in the one site