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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Joe Tautges

counts increased 1% year-over-year. Margins expanded 230 basis points, primarily achieved through scale on revenue growth and benefits from the transformation plan.

Our cash balance was $461 million, of which $247 million is held outside of the United States. Year-to-date, free cash flow was $278 million, an increase of 28% year-over-year. We repurchased $123 million of shares and paid $20 million of dividends in the quarter, representing a solid start on the calendar year 2018 shareholder return target of $750 million to $1 billion. We ended the quarter at 2.1 times net debt to adjusted EBITDA. We continue to target 2.5 times to 3 times leverage ratio.

Now, I'll move on to the guidance for fiscal 2018. We're revising our full-year revenue growth guidance to 2.5% to 3%, primarily due to the advertising revenue challenges discussed. Last quarter's guidance included certain expectations related to dealer and local marketing association spend growth opportunities that have failed to materialize. Given what we now know about expected advertising spend levels from our customers, advertising will be a revenue growth headwind for the next few quarters. We expect EBITDA margins to be 35.5% to 36%, consistent with last quarter's guidance where we expected to be at the high end of the 35% to 36% range. We're maintaining our EPS guidance of $3.23 to $3.28. Our tax rate guidance of 29% to 30% remains unchanged for fiscal 2018. As a reminder, we expect another 3 to 4-point reduction in our effective tax rate in fiscal 2019, when we get the full year benefit of tax reform.

In summary, we are pleased with how our core subscription business is performing, particularly in our three-plus site groups and international. We have work to do within our one site to two site dealer space and in advertising and we need to get through the year-over-year comparison challenges we're facing and our transaction and other revenue streams. As mentioned, we're making meaningful investments into innovations and operations to support our growth strategy and we remain committed to our fiscal 2018 margin guidance and 40% exit margin target in fiscal 2019. We're in the middle of the planning process for next year and we'll share those expectations with your next quarter. We're also in the process of evaluating the impact of ASC 606 and we'll provide further updates as available.

I will now turn the call back over to the operator, and Brian and I will be happy to take your questions.