CDK Global, Inc. (NASDAQ:CDK) Q4 2019 Earnings Conference Call - Final Transcript
Aug 13, 2019 • 04:00 pm ET
[Operator Instructions] And our first question comes from Rayna Kumar with Evercore ISI. Your line is now open.
Good evening. Thanks for taking my question. We saw some good improvements in the fourth quarter results, but just help me better understand your medium long term guidance. What is that disconnect between your mid-single digit top-line guide versus the low single digit growth you expect in EBITDA over the next two to three years? Like how much of that is like incremental investments versus say negative pricing?
So, I can start, and then Joe will go to the detail. It is absolutely focused on the incremental investments. So I think you saw here that the revenue per site was increasing over the quarter and over the year. We continue to drive that both in North America and internationally, but we are making some investments, we talked about the whole program to improve our coding, billing and [Indecipherable] system, and then we talked about the investments in the technology and in Fortellis, Drive Flex and some of our other products. So it's absolutely [Indecipherable].
Hey, Rayna, good afternoon. Yes. So when you look at that 2020 guidance we gave, it's right in line with the long term guide we provided before. So just maybe let me take it piece by piece. We have said we expect the business to grow 4% to 5% organically and when we look at the guidance we're showing today for 2020, we shared 4% to 6%, and within that, I would point out that the commercial agreement that we've announced today with Cox that puts about a point of pressure on that range. And so we're right where we want to be from a revenue perspective, in fact, the bit of having where we expect it to be. And then on EBITDA, what we've factored into the guidance for 2020 is $30 million in investments that Brian described in his section of his prepared remarks. That's about 4% of EBITDA impact. And then in addition, the one point of commercial agreement framework that we agreed to, what Cox puts a bit of pressure on EBITDA growth as well. So when you look at the foundational core business, EBITDA is within that 8% to 12% range and we're doing the right things to invest in the business and continue to accelerate the momentum in the top-line and so we're quite encouraged with where the business is performing and with the confidence of now investing more aggressively to further accelerate revenue.
It's very helpful. And then just on their revenue per site. That was up nicely in North America, 7%. How much of that is actual price increases versus selling layered application software?
Sure. Yes. So the we're happy with the revenue per site growth. And as we look at it, the majority of it's coming from sales of more applications within existing sites. The rate is a smaller piece of -- in fact, smaller and smaller, the smaller for