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spk01: Thank you for standing by, and welcome to the CDK Global Inc. Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. And now I'd like to introduce your host for today's program, Taz Rowe, Treasurer. Please go ahead, sir.
spk04: Thank you, and good afternoon. I'd like to welcome you to our fourth quarter fiscal 2021 earnings call. Joining me on today's call, our CEO, Brian Krzanich, Chief Operating Officer, Joe Taugis, and our CFO, Eric Guerin. Following their prepared remarks, we will 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.cdkglobal.com, where this call is being simultaneously webcast. In addition, our website includes an updated Excel schedule of supplemental financial information and a copy of our results presentation that we'll be referencing during our prepared remarks today. Throughout today's call, we'll 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 on the call on a non-GAAP adjusted basis Reconciliations of the adjusted amounts to the most directly comparable GAAP amount are included in this afternoon's press release. Please note that all growth percentages refer to the year-over-year change for the period unless otherwise specified. I would like to remind everyone the remarks during the 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 materially differ from those mentioned in the forward-looking statements. With that, it's my pleasure to turn the call over to Brian. Thank you, Taz.
spk06: And thanks to everyone for joining us today. Let me start by saying how pleased I am with the financial results we achieved in fiscal 2021. We closed out the year strong, with fourth quarter revenue of $420 million, up 12% from 2020. And EBITDA in the period was $161 million, and EPS was 66 cents. And these results met our expectations and, along with the positive trends in our underlying business metrics, show that we continue to strengthen our position with our dealer and OEM customers, which in turn sets the stage for accelerating growth. 2021 was a pivotal year for CDK. And despite the challenges of the ongoing COVID pandemic, we continued the strategic transformation of the company with the sale of our international business. Combined with the digital marketing divestiture in late 2020, this transition leaves the company laser focused on our core North American software markets, supporting our auto and adjacency customers. And the CDK international sale also significantly strengthened our balance sheet, allowing us to reduce debt and fund the highly strategic acquisition of Roadster in the fourth quarter. We recorded auto site growth for the 10th straight quarter, with sites up more than 1% in auto and 3% in our adjacency markets. Revenue per site was again a record for both markets, rebounding strongly from the impact of the discounts we offered in Q4 2020 to support dealers at the height of the pandemic shutdowns. but also showing solid growth versus last quarter. Fueling this growth is our ongoing determination to wake up every day and help our customers sell more vehicles, service more vehicles, and run their businesses more efficiently, and ultimately drive the transformation of the entire automotive retail industry. CDK has the unique opportunity to improve today's fractured industry. offering partnerships built on years of understanding. We are at the heart of the ecosystem, connecting our industry at every level, and investing heavily in our vision to lead the industry into the future. We are connecting dealerships to consumers with the recent acquisition of Roadster. Over the coming months, we will complete the integration of Roadster's front end into CDK's existing platform, including the eLEAD CRM. And we're connecting employees across departments within the dealership by providing a suite of solutions that work together seamlessly, allowing them access to the best in-class solutions like Roadster and ELEADS, regardless of their DMS. And we're leveraging integrations built on our Fortelis platform to extend our capabilities. And Fortelis continued to gain traction over the years. with more than 155 million transactions and far exceeding our goal of 100 million. We're connecting OEMs and dealers with continued advancement in our DMS solution, while our DMS sales for the year set an all-time record. Most significantly, we are connecting the industry with intelligence, enabling the transformation of data into intelligent actions And a great example of this is the new predictive service application that is in preview as part of our CDK service solution. And dealers need to increase revenues but lack the ability to get the right intelligence from their data. And with this predictive service, a technician will easily be able to recommend the right repairs at the right time, benefiting the consumer and increasing dealer profitability. In 2022, we will continue to invest for our customers. Though some of the heavy lifting is now behind us and our investments are already generating benefits, including better customer satisfaction, a growing customer base, and stronger financial results. As a result, I'm pleased that our earnings guidance for the coming year reflect accelerating growth in both the top and bottom line. And Eric will provide more details in just a few minutes. We've included some data from our systems in our earnings presentation, which indicates the themes and trends of 2021 largely continued into the fourth quarter. OEMs continue to face production constraints due to supply chain issues, which are resulting in tighter dealer inventory. Despite supply issues, demand remains fairly strong. And auto sales and pricing have continued to be solid for both the new and used cars. As a result, dealers have been successful in maintaining profitability. And we continue to see our dealers interested in investing those profits into consolidation, which is a tailwind for CDK, given our strong position as a strategic partner to larger, more acquisitive dealers. And we expect consolidation will remain a theme that benefits us into 2022. Consolidation, along with strong sales and installation efforts, helped us continue our strong site count growth. We continue to see strong growth in our most strategic applications like CRM and service. And we are excited to be rolling out One Pay and Roadster to the CDK sales force as we enter 2022. These products show that we continue to help dealers modernize and improve their operations. The automotive retail landscape is evolving faster than ever, and CDK is at the forefront of investing in its future. We're creating the customer experience models others will follow in developing powerful platforms that lead the field. And as the industry moves forward, we're confident that it will be on the infrastructure we continue to build. Now, before I pass over to Joe, I'd just like to thank all of our stakeholders, our employees, our customers, and our partners for their support and efforts this year. Despite starting the year with significant uncertainty driven by the global pandemic and associated economic challenges, We work together to develop and implement solutions for these challenges and continue to deliver innovation and technology improvements to support the industry. And I couldn't be prouder of what we achieved in 2021. And I really look forward to a promising 2022. So now I'll turn it over to Joe for the business highlights.
spk05: Thanks, Brian. As Brian said, We are pleased with the progress we made in the fourth quarter and the continued momentum we have with our customers. Brian talked about the significant investments we've made over the last two years, including new solutions like Roadster, enhancements to existing products, and providing open integrations through the Protellus platform. Our goal is to unify dealership departments, dealer groups, and OEMs and strengthen their connection with the consumers they serve Our approach is resonating with our customers, and our sales team is finding dealers are receptive to increased partnership with CDK. We also continue to focus on deeply understanding the satisfaction of our customers. Our recent Net Promoter Score results show continued positive sentiment. Our focus on being easy to do business with and investing in product support and technology has resulted in increases in NPS across all of our strategic products. The continued improvement in customer satisfaction resulted in increased retention, even when compared to our strong results last quarter. When the industry thinks of dealer management systems, CDK Drive remains followingly at the forefront as the central hub that connects dealers, OEMs, and consumers. Its success is evidenced by its consistent performance for existing customers and strong site growth, which drove auto sites up more than 1%. In addition, we are excited to share that we had six competitive wins of dealer groups of five-plus sites last quarter. This accomplishment can be traced to Drive's unmatched capabilities and integrations, offering the robust functionality dealers need and demand. We are also pleased that our adjacency site count continues to perform well, rising more than 3%. We saw solid revenue growth, site growth, in the quarter as well. which rebounded strongly from the fourth quarter of 2020. You'll recall Q4 of 2020 was impacted by the one-time discounts we gave to support our dealer customers in the face of the COVID pandemic. Compared to Q3, annualized revenue per cycle of 4% in auto and 8% in adjacencies might be a better comparison to show the continued momentum we have in the business. Recurring revenue was down slightly from the third quarter among one to two site dealers, but rose nicely for three-plus site dealers. Beyond VMS, we continue to win in the market with key strategic applications. In addition to the strong growth in CDK service, .cloud, and Cloud Connect, I am excited to say that ELEAD finished the year with more than 6,000 sites. Dealers continue to see the value of ELEAD in driving sales and service. Of course, the biggest news on the applications front is our acquisition of Roadster. As Brian mentioned, dealers and OEMs are accelerating their adoption of a modern retailing experience for consumers, one that lets them start and end anywhere they choose, online or in-store. Roadster brings the best user experience on the market for both the consumer-facing side online and in-store processes. By combining our assets and capabilities, We are enabling an end-to-end omni-channel retail experience, from digital sales with Roadster, a leading CRM solution in ELEAD, to the digital deal jacket, seamless document storage, and signing with eSign. Our sales team is excited to have another strong asset in the portfolio, and our technology team is on track with an aggressive 100-day plan to build further integrations for Roadster and to the CDK core. Looking forward to 2022, I am confident our team will continue to build on 2021 and accelerate growth. The efforts we have made to drive a better customer experience and the corresponding increase in associated metrics set the table for continued growth in BMS sites and application penetration. Let me tell you a bit about the initiatives that have me excited for the next year. On the technology side, 2022 as a year where we will focus on providing dealers the capabilities they need to improve the customer experience. For example, we're in pilot to expand the back office functions that will enable the digital transformation of the dealer's finance department. We're simplifying the navigation within the drive sales workflow to make it easier to shepherd deals through the F&I process. And as Brian mentioned, we will be delivering the first of many built-in intelligence capabilities, beginning with predictive service. By combining advanced analytics, machine learning, and historical data from thousands of repair records for vehicles, we will allow a service technician to quickly predict what components and systems have a high probability for failure. In turn, this creates increased revenue for the dealer and results in a better consumer experience. We will also continue to optimize our customer service efforts to make sure dealers have the resources they need to run their business. Throughout 2021, we made progress in reducing call center wait times by almost half by focusing on process improvement and making sure our teams had the information they needed to take action to support dealers. We expect that momentum to continue in 2022 and are also adding aggressive goals on reducing resolution times to further improve responsiveness. Beyond our existing core customer base, we are also taking additional steps to help dealers on non-CDK DMS platforms through the creation of a new universal product sales team. We are stepping up efforts to sell universal products like ELE, dealer IT solutions, and Roadster that can drive productivity and improved customer experience for dealers regardless of the DMS choice. Turning to Fortelis, we continue to see adoption of the Fortelis platform as a universal open ecosystem that connects dealers and developers. CDK and other developers have been actively publishing APIs on Fortelis. Specifically, CDK's focus has been on providing APIs to developers that help them better integrate with our core systems. The market has responded and we enter 2022 with more than 50 third-party applications in our marketplace using these APIs. It's results like this that show the power of Fortelis as a scalable self-service technology platform that is providing dealers with new and improved choices for workflows that fit their business needs and allows them to quickly adapt to an ever-changing market. To conclude, I'm quite pleased with CDK's progress and position as we continue to execute on our customer first strategy and build industry leading connectivity. We've invested heavily to improve our service and technology, and we are at an exciting point in our journey. We'll continue to innovate with new offerings, product enhancements, and a focus on being the best partner possible to ensure we help dealers drive their performance. I'll now turn it over to Eric for the financial results.
spk06: Thanks, Joe, and good afternoon, everyone. As Brian and Joe mentioned, we had a solid close to the year with financial performance that met our expectations, and we are positioned for accelerated growth in 2022. Let me start by walking you through our fourth quarter and fiscal year results. I'd like to remind everyone that results are for continuing operations only and do not include the international business, which is presented as discontinued operations. Fourth quarter revenue was $420 million, up 12% versus last year. Subscription revenue was $330 million, up 8% from 2020. This reflects strong growth in sites and the impact of COVID on 2020 revenue, including the discounts we provided customers last year, partially offset by revenue recognition impacts, particularly the shift of accounting for hardware under ASC 842. and modest headwinds in the partner program. Transaction revenue was $49 million, rebounding 41% versus last year's COVID impacted results, with strong growth in both vehicle registration and credit check volumes. If we compare 2021 transactions to 2019 to strip out COVID impacts, we still see solid growth in these businesses. Other revenue was $37 million, up 10% from 2020, reflecting the timing of revenue recognition for hardware sales and some improvements in the call center business. Consulting revenue continues to be challenged as the impact of COVID linger. For the fiscal year, revenue of $1.673 billion grew 2% versus 2020, reflecting a rebound in transactions and other revenue that offset the impact of COVID on subscription revenues. Now turning to earnings. fourth quarter EBITDA grew 5% to $161 million. The positive impact of revenue growth was partially offset by the impact of higher headcount related to our strategic investments and by a 10 million increase in incentive compensation driven by a bonus reversal in Q4 of 2020 due to the impact of COVID on financial performance. Travel and entertainment costs also accelerated as the impact of COVID waned in the quarter, allowing more in-person interactions. Full year EBITDA was $650 million and fell 4% due to higher employee costs, reflecting higher headcount related to our ongoing strategic investments and higher bonus attainment, partially offset by the impact of revenue growth and lower travel and entertainment costs driven by COVID. Our effective tax rate was 26.1% in both the quarter and the full year. Earnings per share for the quarter rose 12% to 66 cents, reflecting higher EBITDA and reduced interest expense driven by debt reduction. Full year EPS fell 7% to $2.57 due to lower EBITDA, higher depreciation and amortization expense, and the higher effective tax rate, partially offset by lower interest expense. Free cash flow was solid at $242 million for the year. Our balance sheet remained strong at fiscal year end. Our cash balance fell in the quarter to $157 million, driven by our acquisition of Roadster and the repayment of our 2026 bonds. We paid dividends of $18 million in the quarter, bringing the total to $73 million for the year. We also repurchased $12 million of our common stock during the fourth quarter, as we restarted our share repurchase program after the announcement of the Roadster deal. As a reminder, these are the first repurchases under our plan to repurchase $200 million to $250 million of stock by the end of fiscal 2022. Our net debt to adjusted EBITDA was 2.2 times up from 1.5 in the third quarter as we continue to move back towards our 2.5 to 3 times target range at a measured pace that accommodates the balanced approach of investment in acquisitions to drive growth and shareholder returns. Our M&A pipeline remains strong, and we expect to continue to invest in transactions that create shareholder value. Turning to fiscal 2022, we expect revenue of $1.78 billion to $1.82 billion, EBITDA of $655 million to $685 million, And EPS of $2.70 to $2.90. And an effective tax rate of 25.5 to 26.5%. This guidance represents growth of 8%, 3%, and 9% at the midpoint for each revenue, EBITDA, and EPS. With the Roadster and Square Root acquisition adding two to three points of growth in revenue, but a drag of about one point on earnings as we invest to ramp the businesses. Absent the impact of acquisitions, our 2022 outlook is consistent with our prior long-term guidance and reflects improvement in top-line growth in our underlying business and less required incremental investment in 2022 to achieve our customer-focused strategy. In summary, CDK continues to make significant progress in executing its long-term strategy. That strategy helped us improve key customer metrics in 2021 to set the table for accelerated growth in 2022 and beyond. Thank you, and we will now open the line for questions. Operator?
spk01: Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touchstone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. First question comes from the line of Josh Baer from Morgan Stanley. Your question, please.
spk07: Great. Thanks for the question. I wanted to double-click on Fortelis. The transactions there stepped up dramatically. Could you give a little more context on this step up around the use cases and then also wondering if you could talk about any revenue associated with this?
spk06: Sure. Josh, I can start. This is Brian. And then I'll let Joe and Eric talk a little bit more. They can talk a little bit more about, like, the absolute number of revenue and all, if you want. You know, it's just showing continued growth. So we are continuing to write most of our APIs now into Fortelis. There's over 100 CDK APIs. And we continue to get – You know more and more third-party api's to join definitely still our number one use case is the service repair order api But I want to step back for a second kind of talk about the strategy if I tell us what's the value for tell Us and and what is going to fuel growth and where would you see growth even more in the future? Our goal is to grow it. I don't know if we'll hit quite 10 to 10x this year and But we're trying to get into the 800 to a billion transactions for fiscal 22. And what it allows, as we push more and more of our connections basically up through APIs and basically modernize our software, this is where a lot of the investment has come. As we do acquisitions like Roadster, as we do partnerships like our CDK OnePay, what those allow us to do is integrate those products because they're modern as well, and they're API-based with their data transfers, and we can integrate them. So we built this 100-day plan for Roadster integration. You could not have done that without Fortelis. It would have been months to try and integrate something as complex as Roadster. So that will now fuel, as Roadster comes online, and it's driven through Fortelis and integrated into ELEAD and the BMS, you'll see thousands, millions of transactions coming through Roadster as we grow. The OnePay application, and we have many, many other partnerships coming that will use the APIs we've posted for Fortelis to allow companies to integrate, Some of those are acquisitions, and some of those, like OnePay, are partnerships where we have revenue share. And so when you talk about what's the profit generation of Fortelis, it really comes from a couple of places. One, there are places like the repair order API set where we add a lot of value, right? We do all of the warranty checks. We do all of the VIN verification. All of that stuff goes through us, and we add that value, and we – get paid for that repair order set of APIs. Then there's going to be things like Roadster where we're able to integrate acquisitions and generate something that's better combined than was separate and generate more revenue that way. And then there are partnerships where we'll be able to do revenue share like OnePay. And those will then allow us – now we're not going to charge for those APIs and the connection to Fortelis, But you get paid through another form through those rev shares of basically the credit card transactions that happen, for example, in the service space and things like that. So when you think about Fortelis, you have to think about all of these APIs, all of these new interactions, and revenue is going to come in many forms. And sometimes, like with OnePay, we won't associate it necessarily with Fortelis, but it was impossible almost to do without Fortelis. I don't know if Joe and Eric, you guys want to add more?
spk05: No, I think you covered it well, PK. What I would say is, Josh, we have a real ecosystem being over 100 million transactions, and we're seeing revenue come in now across multiple areas that Brian described. We're not disclosing it separately at this point, but I would say OnePay, which is our payment modernization for dealers, it went live to general release in June. So that will start to help next year. And really, a lot of these plant seeds for accelerated growth as you go look beyond 22 into 23, 24. The service integration Brian discussed is our largest revenue contributor. Lyft is picking back up and doing well. So you see each of these planting seeds for future growth now that there's a more mature ecosystem that will continue to just exponentially expand in 22.
spk07: Great.
spk01: Thank you very much. Thank you. As a reminder, ladies and gentlemen, if you have a question at this time, please press star then 1. Our next question comes from the line of Ian Zafino from Oppenheimer. Your question, please.
spk03: Hey, good afternoon, guys. This is Mark Vons for Ian. Thanks for taking our question. So I guess, like, can you guys maybe give a more detailed update on how Roadster has performed so far? Have you guys seen any adoption from customers yet? And sort of, you know, should we expect more investments that are needed beyond 2022? Thank you.
spk05: Sure. Thanks for the question. Uh, and listen, Roadster, we are, uh, even more excited about it now than the day we closed it, uh, visiting customers. And just when you hear about, you'll hear us talk about workflow and what dealers are interested in, what OEMs are interested in, how do I create a better experience to sell more cars? How do I create a better experience to service more vehicles? And how do I run my dealership more efficiently? And Roaster is proven to be that final piece in our puzzle to really help modernize and really deliver a modern retailing experience for customers. And it connects through an experience that can really be quite transformational for franchise dealerships. And I've got to tell you, the tech team with Mahesh and and the Roadster leadership team with Andy that came on board, we have a 100-day plan that's going to be delivered in September. That will stitch together the integration where you can connect, you know, Roadster through to ELEAD all the way through to the DMS. And you're going to see just the benefits of being able to integrate that workflow to simplify life for our dealers and create a much better customer experience. What I would say is, The responsiveness from the market has been quite positive and it's very much on track and we have big expectations for it.
spk06: Mark, I'd like to add one thing to what Joe said. This is Brian. If you take a look at what happens in a car dealership now, it can take several hours for the transaction to occur. And that's genuinely not them sitting there trying to get you to sit there longer in order to get you to spend money in some obscure way, right? It just takes that long to get all the paperwork moving from here to there and everywhere. This really, you know, we all know you see them on TV commercials. You talk about, you know, there's these companies that are out there. I never mention, you know, competitors' names necessarily, but You know, the ones where you can sit in your pajamas and buy a car that shows up in your driveway. You know, that is what Roadster will deliver in our platform. But even more importantly for the car dealership is that it will allow people to drop out at any point because there are people who want to drop out and they still want to do a test drive, right? They want to have the experience of going there and picking up their car and getting the walk-around and getting the introduction and having all the Bluetooth and all LinkedIn, they may need help with insurance that's beyond what is capable in most cases or something like that. So there are various points that they may want to drop out. What allowing the Roadster and CDK DMS interaction and integration to occur is you can drop out at any point and be penny perfect. You will drop out and you will be able to have Everything done, you can have your prepayment of loan done. You can have all of that done. So when you show up at the dealership, let's say you want to show up, do a quick test drive, and sign some paperwork and go, your financing is done, your insurance is done, your payoff is done, and all that's done, and your paperwork, the two or three papers that are required by law to have a wet signature can be done in a very quick way, and you're in and out of there in 30 minutes. And that's our goal, right? And it's to allow all of those. If you want to go all the way to the point where it's delivered in your driveway, you'll be able to do that. So it's to give that continuum of experience for the consumer and for the dealer to be able to provide that continuum of experience.
spk05: Mark, there's one point I would just add. I was thinking about your question around the investing side. And I think it's worth pointing out, you know, when we look at 2022 through a combination of factors, you know, Eric talked about in his section a 8% growth at the midpoint of our guidance. And so you're seeing healthy momentum in the underlying core business as well as positive momentum from the acquisitions we're making. Secondly, 2022 is a big year of investing around, you know, when you look at the margin front and you look at the EBITDA front, we are really giving the confidence we have Given the response we're seeing, we're leaning in quite heavily in 22 to really invest behind that momentum. And so I think when you look at the total picture, I think that's worth pointing out.
spk03: No, great. That's so helpful. Thanks so much, guys. And then I guess like maybe just one more, you know, good to see another quarter of site growth. Can you guys maybe just give a sense of, you know, how the one to two smaller deals have trended? And then how does that trend sort of relate to the larger dealers? Thanks.
spk05: Yeah, thanks, Mark. Listen, I'm so proud of the work that we've done to really drive site count improvement and grow over a percent. The work that the sales team has done with Scott Herber's team, as well as our install team and our support team, have just done a great job rallying around improving sales, improving retention, and really the customer experience. We talk a lot about customer experience and, you know, coming in and putting the customer at the center of everything we do is so important. We're seeing really positive momentum across the portfolio. Whether you look at the one to two sites, whether you look at the three plus sites, on the one to two sites, you're seeing really a flattening out of that business. And particularly when I look at heading into next year, the revenue is really, you know, retention's up highest it's been in, in the last several quarters, and you're seeing a flattening of that revenue. And then on the three-plus, you're seeing an acceleration. We've got the most applications we've had penetrated into our base because of the work that we've been able to sell through and bring the solutions that Brian's described in his prepared remarks as well as in some of the Q&A today. So, you know, a long way of answering your question. One to two is continuing to trend better. I see it continuing to turn the corner. Our customer sentiment strength in our service and putting the customer first is really resonating, and we're excited.
spk03: Great. Thank you guys so much.
spk01: Thank you. Our next question comes from the line of Gary Prestapino from LinkedIn Research. Your question, please.
spk02: Good afternoon, everyone. Several questions here. You know, as I look at your guidance, and I don't usually ask guidance questions on conference calls, but it looks like, you know, based on your margin profile, you've got a degradation of anywhere from 24 million to 37 million of adjusted EBITDA year over year versus 21, fiscal 21. So I guess I appreciate the fact that you're investing in the business and But if you're looking at 6.3% to 8.8% sales growth, all things being equal, given the leverage in the business model, you should have some margin expansion. So I guess the question I have, are we looking at some permanent step up in the cost structure of the company here, or is this all really a function of you've got a number of irons in the fire and you need to invest this year to grow it beyond?
spk06: Yeah, thanks for the question. This is Eric. No, it is not. To answer your question in short, and then I'll provide you a little more detail, it is not a permanent step up. As Joe had mentioned in his comments, we are really excited about Roadster and Square Root, and we are going to continue to invest in that business. We have this 100-day plan. We want to get off to a really good start. As you've seen what we've done with ELEAD, we've highlighted that acquisition is up to 6,000 sites. We are really excited about Roadster, and we are going to invest in 22 to make sure we get that integration complete and can really develop that experience, that end-to-end experience.
spk02: Okay. And then could you, just talking about Roadster in general, if you can theoretically or possibly buy a car online totally there, Does that platform give you the ability to negotiate with the dealer as well as can you trade in your car and get a value for your car to make it a completely seamless transaction?
spk06: This is Brian. The simple answer is yes. So I talked about making things penny perfect. And these are some of the investments we have to do, right? Some of these things are features that are available today, and some of these are things that only when you integrate into the DMS can you fully go through that process. So you'll be able to agree on a price. You'll be able to get a trade-in value for your car, and there are places that do that already as well. So it's known how to do that out there. and if there's a payoff on your car. So one of the other things that you have to be able to do is go out and get the payoff value for the car. So we're looking at being able to get that down to the penny as well. Those things are very complex, and there's very few who can do all of those things and go through the sale of a new car. And that is our end goal. Some of those are within the 100-day, and some of those are six, nine months out. And to Eric's point, we do not plan to make this some permanent step up. You've got to realize that when you buy a company and it's infancy, and I think ELEAD is a great example, right? We've done a really good job. When we acquired ELEAD, it was sub-3,000 sites. In the two and a half years we've owned it, we've dramatically improved the cost structure of the product. We've got a phenomenal roadmap for the technology itself, and we've more than doubled the number of sites that ELEAD is on out there. And that growth has been both on our DMS and agnostic to our DMS. So we'll do the same with Roadster. Roadster, it'll be more integrated into ours, but it will continue to work with other DMSs as well. And so we look at it and say, okay, We're going to invest this year to get it integrated, to bring it up, to do some of these technology advancements, but it is not meant to be a bit of negative like this. It's really meant to fuel the growth back out of 22 and into 23 and beyond, and we will get that margin back in alignment as we move through that.
spk05: Did Rose say a couple things? Hey, Gary, it's such a great point from as where they want to drive home the point PK just made. I mean, when you look at elite one bought it, the margins of that business were in the very, very low at the 10% range. And now, two years later, it's 6000 sites, it's growing double digit it, the data, its gross margins are that equal to our core business and our core software profile. And that's what again, we're just using the same playbook there. with Roadster and I think that's the impact you're seeing in guidance.
spk02: Okay. Did Roadster have any kind of an installed base and how are you pricing Roadster? Is it priced on transactions or is it just a regular subscription layered app add-on product?
spk05: Yeah. Roadster did have a good subscription base. When you look at the combination of Roadster and our connected store product, we've got over 2,000 sites. We have a very good install base and a great opportunity. And again, when you look at Elite of 6,000, Roadster of 2,000, we just see a huge opportunity to connect that workflow together. What was your second question, Gary?
spk02: It's just how are you pricing it, Joe? Is it just a subscription?
spk05: It is a subscription.
spk02: Yeah, per site subscription. Okay. Thank you.
spk05: Thank you, Gary.
spk01: Thank you. This does include the Once again, ladies and gentlemen, if you have a question at this time, please press star then 1. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Brian Krasenich for any further remarks. Oh, actually, we have a question from the line of Matt Powell from William Blair. Your question, please.
spk08: Hey, guys. Thanks for fitting me in. First, I had a question on the six competitive wins that you cited. Just maybe some more detail on what drove that. And I know last quarter you cited a couple customer take-backs as well, so it seems like something that you're doing with the product and customer service seems to be resonating pretty well competitively.
spk06: Sure. I can start, and then Joe can add. This is Brian. So I would tell you, you know, the effort we started two and a half years ago with just our whole customer focus has really resonated well with the customers, and it continues to resonate well. You combine that with they're already seeing the improvement in the technology and the product. And whether it be Fortelis, and they're using Fortelis to extract their own data now, which has reduced the 3PA fees, the partner program fees for a lot of them, whether it's the ease of use of our product, all of these things are driving the NPS numbers that Joe mentioned in his remarks. So you combine all of those in the NPS scores, you combine the improvement in the products, And then we're out there showing them the roadmap, whether it be the acquisition of Roadster or the integration of OnePay or the improvements we're making in ELEAD and our service application. We're out there showing them those roadmaps. And we now have the credibility of belief. They believe that we can deliver these because they've seen what we've done. And I think all of those things are important. allowing us to both grow and maintain. We're getting win-backs because, you know, sometimes a customer wants to still try something new. And we are very, I'd call it very supportive. We don't necessarily go in and de-install. We leave them hooked in so that if they run into issues, we tell them, look, don't worry. We're here to back you up. And we... continue to follow up with them. We help them with the data transfers. So we're, we're supportive for them, but then we're there. And what we are doing is going back in saying, look, you know, here's the roadmap you had, here's the product you had, here's the pricing you had. And sure, you don't want to just turn back on. And, you know, it's worked really well for us. So it's all part of that. We want to do what's best for the customer and, But we oftentimes think the best thing for them is to continue to use CDK. Joe, anything else?
spk05: No, you covered it well. The only other highlight I would give is 22 is a big year for us. I think that we're going to up the game another notch, both on the technology front and the service front. And we're excited that the progress and momentum that we'll create and continue to build on.
spk08: Got it, guys. And then just one more. I think about a month ago, Ford announced that they wanted to move more to a build-to-order model and keep less inventory on the dealer lots. Just wondering, does that have any impact on your business, positively or negatively?
spk06: I'll start, and then the others can join in. This is Brian. Yeah, man, I actually think it's positive. And the Roadster acquisitions, like, we couldn't have asked for a better timing, right? Because... the way to do a build order, the way Roadster will work is it can take input from any source. So what will happen is, let's say that the build order happens on the OEM website. I think some of that's still to be defined, but we don't care whether it will be the OEM website or the dealer website that then talks to the OEM website to build it. Our ability to take that input of whatever they want to build and their pricing and but then do all of the work that the dealer really has to do, right? Because the OEM doesn't want to price their trade-in. They don't want to go find out what their payoff is. They don't want to go figure out what the F&I requirements are. And so we'll be able, through Roadster, to take all of that workload and push it through very seamlessly. So for us, this is great. The dealers are looking to us to be the problem solver and really the medium in between to really deliver how do they do this and do this within their business. So it's something that we actually think we are uniquely advantaged for.
spk08: Great. Thanks, guys. Appreciate it.
spk01: Thank you. This does conclude the question and answer session. I'd like to hand the program back to Brian for any further remarks.
spk06: Sure. So I'd just like to first thank everybody for joining the call. I really do appreciate it. It gives us a chance to describe a business that we're really excited about. I also want to thank all the CDK employees. The hard work they did in 2021 really delivered results that were outstanding. And even more importantly, it's set up 2022 and 2022 is really meant to be a record and a breakthrough year. You saw our 8% top line growth. I mean, that is really a number that, um, you know, I think is, is, uh, quite high in this company's history and we're very confident moving into the year to deliver that, uh, and very excited about it. And we're doing that not by just increasing prices or things like that, but it's by growing share. by more penetration of our products, and by delivering more and better products. And those are the ways you want to grow the business. So we're very excited about 2022. I'd like to thank you all for joining the call. I hope you have a great rest of your day, and thank you very much.
spk01: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
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