CDK Global, Inc.
Q3 2019 Earnings Call Transcript

Published: 30 Apr 2019

[Operator:]

Good day, ladies and gentlemen, and welcome to the CDK Global Third Quarter Fiscal 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference will be recorded. I'd now like to introduce your host for today's conference Katie Coleman, Senior Director, Investor Relations.

[Katie Coleman:]

Thank you. Good morning and thank you for joining us for our third quarter fiscal 2019 earnings call and webcast. Joining me on today's call are Brian Krzanich, CEO; and Joe Tautges, CFO. A few items before we get started. Throughout today's call, unless otherwise noted, all references to financial amounts are on a non-GAAP adjusted basis. And for purposes of comparability, all results and year-over-year comparisons are presented in accordance with ASC 605. Reconciliations of the adjusted amount to the most directly comparable GAAP amounts are included in this morning's press release and are available in the Investor Relations section of our website. I would also like to remind everyone that remarks made during this conference call will contain forward-looking statements. These statements involve risks and uncertainties, including the risks detailed in our filings with the SEC, which could cause actual results to differ materially from those set forth in the forward-looking statements. And finally, we anticipate filing our Form 10-Q later today. With that, it's my pleasure to turn the call over to Brian.

[Brian Krzanich:]

Thanks, Katie, and good morning, everyone. Q3 was another strong quarter with total company revenue growth of 4% and 8% revenue growth in core auto software. Within core auto software, Retail Solutions North America grew 11% attributable to ELEAD acquisition as well as growth acceleration driven by improvements in auto sites and key layered applications. In our International business, Q3 revenue grew 1% year-over-year on a constant currency basis, which is clearly not where we expected to be this year. Delays in a couple of key rollouts and in our strategic growth initiatives have contributed to the lower performance this year. Joe and I spent time with the team this quarter and we remain optimistic that the growth investments made this year, we'll allow the business to reaccelerate it's topline growth, in line with our previously shared long-term expectation. Advertising revenue has continued to be a headwind on total company growth. Q3 revenue declined by 18% in the quarter which is in line with our internal expectations and the guidance provided last quarter. We put an increased focus on the advertising area by as you will recall, putting in place a new leader, regular reviews of the business and focused sales team to bring the performance of this business in line with expectations. We continue to focus on reducing revenue concentration in the segment away from centralized OEM spend toward diversified dealership advertising spend. We have a similar focus to improve performance and diversify our website business, which is also highly concentrated with one OEM. Joe will provide additional details on this area of the business in just a few moments. We do see opportunity to grow both the advertising and website businesses over time and are actively working on these plans. Now moving to the bottom line, we're pleased with the profit growth achieved while integrating the ELEAD business and investing in several growth focused initiatives aimed at better serving our dealers, while also absorbing the headwinds from advertising. Q3 EBITDA and EPS grew 4% and 9% year-over-year respectively. In a few moments Joe will provide more insight into the specific drivers of our financial performance. I want to now turn to some highlights from the quarter. As you will recall, a stable CDK North America auto site count is foundational to our long-term growth objectives. We're delighted to report that auto sites were up 48 sequentially and 19 year-over-year to 8,936 sites. This represents CDKs first year-over-year increase in auto sites in the last 10 quarters. This site improvement manifested due to collaboration across the entire organization. I applaud all of our teams for their hard work that led to the strong results this quarter. A stable to growing site count is dependent on sales, implementation and retention efforts. So let me first start with sales. Our new site acquisition team had their highest sales quarter of the year in Q3. We expect sales to continue to ramp, especially as Drive Flex is more broadly rolled out. They have approximately two dozen dealers signed up for Drive Flex that will convert from our legacy dash product as well as brand new conquest sites. The first Drive Flex site has been fully installed, tested and in operation now for several weeks and we have several more sites going through installation currently. Our assessment of the market, we just believe that there is a population of at least 50,000 retail locations globally for which Drive Flex can eventually be a viable DMS solution. And this number includes the North America franchise dealerships that we currently serve along with other customer segments with similar technology needs both inside and outside the automotive vertical. While this is an early assessment, we are growing increasingly optimistic that our unique technology assets are sufficiently versatile to transform our addressable market. The second area to highlight is our installation team. Our sales have increased, so have our implementations. Auto site installations were up 30% year-over-year, which corresponds to the investment we made to expand our implementation capacity in late fiscal 2018. Balancing implementation resources and capacity will continue to be an important focus for us to manage the backlog. The third area to highlight is improved retention. We saw a 50% reduction in site losses this quarter year-over-year and a 40% improvement versus the second quarter. We're changing the culture to be more customer centric, and one example of this is the launch of our post-install transition team or PIT team who enhanced the new customer onboarding experience. For existing customers, we've expanded our support hours and we'll be ramping up hiring in the fourth quarter for our new customer success organization. These initiatives and the focus on the customer have been pivotable in making a difference with our dealers to continue to choose CDK. We're committed to growing sites over time. While we may see variability quarter-to-quarter, I'm optimistic that our efforts will continue to build momentum in Q4 and beyond. Our current estimates are that we'll end fiscal 2019 with a positive auto site growth year-over-year. A stable site count is just one component of our long-term growth strategy, also pivotal to our growth, our fostering deeper relationships with existing dealers and expanding our reach into non-CDK site. Layered application sales were particularly strong this quarter, notably in our CRM service and dot-cloud application areas. For example, in CRM, our product improvement and service efforts have us seeing more demand than anticipated at the time of the ELEAD acquisition and dot-cloud and service continued to be strong performers at each group relative to Q3 fiscal 2018 which was itself a strong quarter. In addition to selling to existing dealers, we are also expanding our reach to an audience broader than just the CDK DMS footprint. This quarter we sold more than 140 application units to non-CDK DMS users. And finally, I want to finish with an update on Fortellis. We have two key applications coming available soon with repair order and Hailer. Our app for dealers to hail a Lyft for their customers. Starting with Hailer, we've had pilots sites using the application and have received favorable reactions from these dealers. We've pre-launched sales of this solution in select major markets and the early feedback we're receiving reinforces our excitement for the partnership with Lyft. We will also soon be launching a repair order API on Fortellis. This API will provide dealers, software vendors, and OEMs the ability to seamlessly integrate their service workflows with the CDK DMS. For example, a service check-in tablet using the repair order API to Fortellis. We'll now be able to automatically create a repair order in CDK Drive for the customer at check in. And as we head into Q4 in fiscal 2020, we're focused on continuing to build on the success we've experienced so far. Transforming the way we deliver value to and interact with and ultimately grow with our dealers. With that, I'll turn it over to Joe.

[Joseph Tautges:]

Thank you, Brian, and good morning everyone. We had another good quarter and I'm pleased with the progress made this year on several funds. On the topline, we saw good growth in retail solutions North America offset by softness in international and the expected headwinds in advertising. On profitability, EBITDA grew in the quarter, although growth was lower than past quarters due to dis-synergies related to the ELEAD acquisition and investments we're making in the business. I'll share more detail on these items momentarily. In Retail Solutions North America, revenue grew double-digits delivering a strong quarter across several key indicators in the core business. In particular, we were happy with a strong sales results in sites and key applications as well as better retention leading to the first year-over-year increase in auto sites in 2.5 years. We have also accelerated growth in the ELEAD business, both in CDK and non-CDK DMS site, which we expect to continue being a growth driver and our application suite. International growth was below our internal expectation as Brian mentioned. Advertising performance has remained headwind to total company growth, declining 18% in the quarter. This performance was in line with our internal expectations and the guidance previously shared for the segments second half performance. Now on to the detailed results for the quarter. At an ASC 606 basis, total company revenues were $602 million. Core auto software revenues were $542 million. EBITDA was $222 million, resulted in a margin of 37%. Our effective tax rate was 25.7% and diluted earnings per share was $0.98. On an ASC 605 basis, total company revenues were $601 million, equivalent to 4% and 6% growth year-over-year on a reported and constant currency basis respectively. Core auto software revenues were $540 million, growing 8% and 9% on a reported in constant currency basis respectively. Growth was driven by revenue benefits arising from commercialization, new site and application installs and recent acquisitions. This growth was partially offset by cannibalized revenue due to the recent ELEAD acquisition and a double-digit decline in Website revenue. I want to stop and take a moment to talk about our Website business before I discuss the rest of the results of the quarter. While we don't explicitly disclose revenue associated with each layered application, I can't share that annual revenues associated with this business are in excess of $100 million. As you may be aware, our largest website customer is General Motors for which we are currently the sole endorsed provider of websites in the United States and Canada. However, GM has announced its intention to move away from the solo endorsement model in these markets and toward a multi-vendor program during calendar 2019 similar to what they did earlier this fiscal year with advertising spent. We look forward to participating as one of the vendors and continuing our service to GM dealers in these programs. Depending on the final construct of the multi-vendor programs, we expect there will be changes to the services we provide today and a number of GM dealers we serve, with corresponding financial impacts that start in Q4 of this fiscal year and build as we move into fiscal 2020. The impact from these changes and others could represent at a minimum one to two points of revenue growth headwinds in fiscal 2020. We're actively working to retain and grow our Website business, although these efforts will take time. We were providing another update on our Q4 earnings call and the implication on our fiscal 2020 guidance, as we better understand the impact of the new programs. Now back to the result of the quarter. Total company EBITDA dollars grew 4% to $218 million and margins contracted 20 basis points year-over-year to 36.3%, margin contraction as a result of the synergy arising from the ELEAD acquisition and higher incentive compensation. Our effective tax rate was 25.7% for the quarter; diluted EPS was up 9% year-over-year to $0.95. Growth was driven by increases in operating income and lower average share count due to buybacks which were partially offset by increased interest expense. Now turning to segment results. Under ASC 606, the Retail Solutions North America segment recorded $451 million in revenue. Pretax income was $193 million, resulting in a margin of 42.7%. Under ASC 605, our Retail Solutions North America segment revenues were $452 million, growing 11% on both a reported and constant-currency basis. Subscription revenues were up 9%, driven by the ELEAD acquisition and mid single-digit increases to revenues from 3-plus auto site groups, partially offset by low single-digit declines from one-site to two-site groups and lower website revenue. Note the revenue per site growth was adversely impacted by the revenue cannibalization of the ELEAD acquisition this quarter. Transaction revenues were up 1%, other revenues were up 31%, primarily due to recent acquisitions, partially offset by lower consulting revenues. North America auto sites were up 48 sequentially to 8,936 sites or up 0.2% year-over-year. Growth in auto sites was largely driven by reduced site losses in our one-site to two-site segment. This was our lower sequential last quarter in over five years and this segment of the market. As indication that Drive Flex and are focused on the customer is resonating with dealers. Pretax income was $193 million and margins contracted 240 basis points to 42.7%. Margin contraction was caused by shifting revenue mix from acquisitions and higher incentive compensation, partially offset by benefits from subscription revenue growth as well as the business transformation plan. Moving on to International. Under ASC 606, the segment recorded $91 million in revenue. Pretax income was $28 million, resulting in a margin of 30.7%. The third quarter was particularly strong in international on an ASC 606 basis, primarily due to the timing of annual renewal activity in the quarter. Revenue Recognition for the onsite licensed component of the renewals we're recorded in the period under ASC 606 versus ratably over the contract term under ASC 605. As we look forward to Q4 we anticipate a sequential step down in both revenue and earnings on an ASC 606 basis. Under ASC 605, international revenues more $88 million, revenue declined 6% year-over-year on a reported basis and increased 1% on a constant currency basis. Constant currency growth was driven primarily by improved revenue per site, offset by declining sites and timing of certain other resumes. International sites were down 179 sequentially to 12,988 sites or down 4% year-over-year. Year-over-year site declines were driven primarily by the previously disclosed OEM customer loss and higher loss activity and legacy products. Pretax income was $23 million as margins contracted 240 basis points to 26.8%. Margin contraction was caused by the timing of certain other revenues and investments relating to strategic growth initiatives, partially offset by scale from increased revenue per site. Now, advertising North America results. On an ASC 606 basis, the segment recorded $60 million in revenue. Pretax income was $4 million resulting any margin of 7.3%. Under ASC 605, advertising revenue was $61 million of decline of 18% year-over-year. This decline was driven primarily by reduced advertising revenue from direct OEM networks and dealers spend. Pretax income came in at $5 million as margins contracted 630 basis points to 7.6%. Margin contraction was due to lower volume based benefits as a result of lower revenue. Our cash balance was $307 million of which $274 million is held outside of the United States. Year-to-date free cash flow was $270 million, a decrease of 3% year-over-year, primarily driven by timing of receivables collections and tax payments as well as capital expenditures and capitalized software investments. We returned $89 million to shareholders through a combination of dividends and share repurchases in the quarter. We ended the quarter at 3x net debt to adjusted EBITDA in line with our targeted range of 2.5x to 3x leverage ratio. We expect to continue executing our capital return program with the goal of returning $750 million to a $1 billion to shareholders through a combination of dividends and share buybacks in calendar year 2019 while staying at approximately 3x net debt to adjusted EBITDA. Now, I'll provide an update on our guidance for the fiscal year which we provide on an ASC 606 basis. We are maintaining our revenue guidance range of $2.32 billion to $2.35 billion. We are tightening our EBITDA dollar range to between $860 million and $875 million. We maintained our EPS guidance range for fiscal 2019 at the higher end of $3.70 to $3.80. Finally, we are maintaining our previous tax rate guidance of 25% to 26%. The details of our guidance ranges are included in today's press release and in the Investor Relations section of our website. I'll now turn the call back over to the operator and we'll be happy to take your questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Ian Zaffino with Oppenheimer. Your line is now open.

[Ian Zaffino:]

Hi, great. Thank you very much. Just honing on the guidance a little bit more, the revenue guide seems to be the same, EBITDA guide changed a little bit. Give us an idea of what's driving that? Is this more on the cost front? Is it more on a mixed front? And then I have a follow-up. Thanks.

[Joseph Tautges:]

Yes. Good morning, Ian. Thanks for the question. When we look at the guide, Q3 was particularly strong as a result of 606, and so some of it is just the seasonality of the business. As you look at it, like you said, we feel good about revenue being there, but when you look at the seasonality of 606, that drives a lower EPS in Q4. In addition, you heard Brian talk about some delays that we're experiencing in international. And that for sure, we will continue to invest both in North America and international, but some of those delays might have had a bit of an impact on the bottom line as well.

[Ian Zaffino:]

Okay. I mean I would have thought that the joining the international side, it's basically you're spending the cost right now and you're not seeing the revenues flow through, because I would have thought that international is of some naturally lower margin, you would have sort of a favorable mix of international is a little bit weaker. But it's not just the cost that you're kind of spending to support the rollout that's now been delayed.

[Joseph Tautges:]

Ian, I would say just to make sure Ian, like the whole difference between Q3, Q4 is 606, it's just around how the treatment is handled for onsite licenses in our international and that income and revenue gets recorded largely when those are renewed, which was in our fiscal Q3, and I think this is the new normal around seasonality of the business.

[Ian Zaffino:]

Okay. And then congratulations on having a higher site count here. Can we just dive into that a little bit more? What was the mix there between one to two dealers or one to two sites and then maybe larger site dealerships as well?

[Joseph Tautges:]

Yes, I mean, listen, we're really pleased with the site performance. I mean, this has been a lot of hard work by the team and when you look at sites, it was good performance across both segments. We saw continued strength in the three plus segments. When you look at the one to two market, while it still had a slight decline, it was significantly better than where we've been historically. And to be honest with you, I'll let Brian add in there. The messages and actions we're taking are resonating quite strongly with our customers and as well as rallying the company around the focus around it. And this is - I think when you look at a number of things that we're working through, whether it's some of the comments made on websites and so forth, when this team gets around an area and focuses on it, we can deliver quite exceptionally well and we feel really good about where sites are at and with our ability to grow them for the year. So I'll let Brian add anything else.

[Brian Krzanich:]

Yes. I think the only thing I would add is, I think about sites with kind of three buckets. As you said kind of the smaller sites, maybe one - five or less rooftops and then five and more and going all the way up to the large enterprise. And then the third bucket being, acquisition of new sites or winning share from our competitors. And if you look all three of those segments did very well this quarter. And so I wouldn't say any one is doing necessarily the heavy lifting versus our focus is against all three. With the smaller sites, we're really showing them Drive Flex and beginning to show them just what's coming down the pipers from a technology with the larger sites, a lot of it's around our customer success and really just providing them better support and service. And then with the new acquisition of sites, it's kind of a combination of all of those and the promise that CDK has - of the technology.

[Ian Zaffino:]

Okay. Thank you very much for this. I appreciate that. I'll get back in queue. Thanks.

[Brian Krzanich:]

Thanks.

[Operator:]

Our next question comes from the line of Matt Pfau with William Blair. Your line is now open.

[Matthew Pfau:]

Hey guys. Thanks for taking my question. First one to start off on the comments you made about the ability with Drive Flex to potentially target a broader set of potential customers. So maybe you can just help me understand what is it about Drive Flex that's different from your prior offering that's going to enable you to target a broader set of potential customers? And then if you do decide to do this, what does the investment around that look like? Do you need to hire a new sales staff or what other support is needed to address those customers? Thanks.

[Brian Krzanich:]

Sure. I'll start, and then Joe can add in. The way Drive Flex is kind of architected is our core layered that has all of the main components of the DMS and the financial accounting and all of that. Then you can think of like modules added on top of that that allowed you to do all the other desk - an offer or bring in service and those kinds of things. What Drive Flex allows us to do is really, we can defeature or feature and add as we go through. So when we looked at this, what we saw was an ability to go very quickly. The other thing is because it's all based in the cloud, being able to do an installation remotely to some extent, especially with the more simplified installation. We're able to do it more of the work remotely, all based in the cloud, which allows us to access more customers. So when we talk about 50,000, I'd say there's 20,000 dealers that are the traditional dealers that we have talked about the large franchise dealers. There's an additional, I'll say 20,000 or so independent dealers that are accessible Drive Flex. They typically need a slightly more defeatured solution. And we're able to do that with a relatively low investment of engineering effort and we can approach those through the cloud as I described. And then there's an additional set of dealers that are both a broader across North America talking about Canada and Mexico and places like that plus going into other areas like recreation, truck, large truck and areas like that that really allows us to go into a broader market there. And the flexibility of Drive Flex by its architecture and the fact that it's cloud-based allows us to do that. From an engineering standpoint, we're a relatively low investment. We think from a sales standpoint, it will require some investment, but the investment is not going to be equal to the franchise dealer type of market because we're able to do a lot of this over the phone or with the same resources we have in those locations. So there will be some additional resources to go after these larger markets. But increasing the TAM by that number, we think is a significant improvement in our ability to grow the company.

[Joseph Tautges:]

Yes, man. The only thing I would add is just when you look at the investment, we were quite excited about how fast Drive Flex is taken up with almost 2000. We did have our second go live just in the last day or two, a second dealer. And so we are size of the investment. The good news is there's plenty of opportunity and we see an opportunity to really accelerate their growth here. And so our forecast contemplates some portion of that investment, but we will update you as part of our year-end earnings as we look at growing sites on a more accelerated base an investing in the business and just looking at those trade-offs.

[Matthew Pfau:]

Great. And then just last one for me. On the Advertising and Website business, you mentioned that eventually you think those businesses have the potential to get back to growth. Maybe just help me understand what sort of factors are needed there to grow those businesses? It seems like the website is moving just in general more away from exclusive providers to multi-source providers. So other OEMs that you can get on their purchasing list or what's the plan there to help grow that business? Thanks.

[Brian Krzanich:]

Sure. I'll start and then Joe could add. We talked about in the prepared remarks that we've added additional resources and really focus the leadership in this space. One of the things we've done as a company is kind of spread those resources out across many organizations. And I said, the organization didn't have quite the focus that I wanted to have it have. So bringing that back together, putting it, the leadership together for this to really drive or expanding across additional OEMs we're already in talks with several OEMs about expanding beyond. So there was just too much revenue concentration with one OEM. We're continuing to work with GM on this business. So we want to retain, even though they're going into choice. Our goal is to retain as many of those customers as we can with great service and great technology. There are some investments we're going to make in the technology and wouldn't say they're huge, but there are some improvements we can do to make a ease of use and kind of a user interface a bit more friendly. And then we're going to go beyond, I'd say the OEM market into a cut of the local marketing groups that the dealerships have in local areas. That again, kind of gets us to the next year, but allows us to expand the available market as well. And so we think when we can get through those and kind of get over the hump of what's going to happen in the GM transition, we can grow this back again. But there will be a transition period that we go through next year.

[Joseph Tautges:]

Yes. The only thing I would add is when we look at it that this will take us the next year ago work through, I think both the advertising and website programs have gone through quite a lot of change. And the team here has done a really nice job of working through that. Nonetheless, anytime you have that level of concentration, particularly within one segment, it's going to take us, like Brian said, some time to work through and we continue to do that and not productive way at the same point in time. Just to be clear about as we think about the impact that could have for next year.

[Matthew Pfau:]

Great. That's it for me guys. Thanks a lot.

[Joseph Tautges:]

Thank you.

[Operator:]

Our next question comes from the line of Gary Prestopino with Barrington Research Associates. Your line is now open.

[Gary Prestopino:]

Hi. Good morning, everyone. A couple of questions. I didn't get the core software sales in North America and across the enterprise. What was that percentage up this quarter?

[Joseph Tautges:]

We don't disclose the specific sales number, but it is up high single-digits.

[Gary Prestopino:]

All right. Then where exactly is your website revenue book? Is it in advertising? Or is it in the Retail Solutions?

[Joseph Tautges:]

The website revenue is within RSNA.

[Gary Prestopino:]

Okay. Thanks. And then in terms of with GM giving dealers choices, how does that work through the channel? I mean, you basically, you've got the website of the dealer right now. Does GM channel co-op advertising or co-op assistance to other providers and that would might give the incentive for a dealer to deconvert?

[Joseph Tautges:]

Yes. So I'll start and then others can add. So right now, yes, there's co-op dollars under our sole endorsed arrangement. I think as you look at the RFP going forward, there is a different contemplation of services and website solutions that's been asked to be provided by the vendors they've asked to participate. So we're in early stages. Gary, I don't know how it will land and what the economic construct of it will be. What I would tell you is, the GM has taken a very similar approach with websites as they did with advertising, open up to multi-vendor, let the companies come in and participate. And quite frankly, we think we've fared quite well in the advertising with the multi-vendor program and not websites just going through that. So we'll update you more, still very early and we're working on it, and as we say, we continue to be the sole endorsed provider. Nonetheless, we'll share more updates as we get closer to Q4 and we'll start to see how this plays out.

[Gary Prestopino:]

Okay. I have two more questions. What OEMs have endorsed you for Drive Flex at this point?

[Brian Krzanich:]

Currently it's the only one that we've completed still is GM. We're going through a couple of other vendors or OEMs currently.

[Gary Prestopino:]

Okay. And when do you think you'd get your main OEMs or the OEMs that you want on that endorsement list?

[Brian Krzanich:]

Sure. So we're still targeting roughly towards the end of calendar 2019 for getting the major OEMs completed. We're adding in now the ability, like I said to go after the independence and some work in Canada as well. So we're actually adding to our workload, but our plan is still to get the major OEMs done by roughly the end of calendar 2019.

[Gary Prestopino:]

Okay. And then the last question I have in terms of the average monthly revenue per site, is that mainly a function of ELEAD and additional layered application sales? I would assume that that's what's driving that number.

[Brian Krzanich:]

Yes. That's right, Gary, and don't forget, I think this quarter versus last quarter, we did decide that there was certain charges that we charged related to the data services for that business and now that we own it, effective January 1, those charges went away to our customers. And so…

[Joseph Tautges:]

Specifically around ELEAD.

[Brian Krzanich:]

Specifically around ELEAD. And so you'll see that there is some impact on the slower site growth in the quarter year-over-year. But you're right, the contributing factors, we continue to see good penetration particularly in dot-cloud as well as service and as well as adding ELEAD.

[Gary Prestopino:]

Okay. Thank you.

[Operator:]

[Operator Instructions] Our next question comes from the line of Brian Essex with Morgan Stanley. Your line is now open.

[Jonathan Lee:]

Hey, guys. This is Jonathan on for Brian. Thanks for taking my question. Brian, this one is for you. Now that you've been with CDK for about six months and you've had sort of time to dig into it, what is the opportunity you see before you are in the near-term and they have a longer-term?

[Brian Krzanich:]

Sure, Brian. I tell you, it hasn't changed dramatically. I mean, I guess I've done enough research prior to coming to CDK that the model that I had coming in is only probably increased, both in detail and scope of what's available. And that's really around, and what you've heard it in our prepared remarks today that we can turn the site loss, right. So we talked about 10 quarters of site loss being turned around in this quarter. I'm really proud of the team. As you said in six months, we made some big announcements at NADA. That team's worked really hard and all three segments really improved. But small sites, larger sites and site acquisitions just to our competition. Joe and I talked about. We think we can continue to grow that. Then identified expensive TAM by going into the independent market, and we already made progress in that space. And then the conversion to Drive Flex and expansion of our layered apps into beyond CDK DMS sites will allow us to - I believe continued to grow the company quite nicely over the next few years. And then the headwinds that we've talked about at this earnings are ones that I think we're - visible coming into the company, namely that, some of the layered apps and some of the applications needed more engineering focus. I think the teams pivoted well. You saw our announcement this morning of our new CTO, Mahesh, who comes with a lot of really good industry experience, decided to have him join the company. And then I think the website and advertising is an area where we really just had to get the right leaders in place, kind of recall us, the team, and get a growth mindset back in there. We'll have to work through the GM headwinds. We had too much singular OEM focus or concentration. But we'll work through that over the next year and I'm confident that the team can make good progress there as well. So I tell you, it's the same major concepts that I had coming in. But I think we've actually found more opportunity. I tell you that the independence wasn't on my list, understanding what opportunities are in Canada and other international markets, wasn't quite clear to me coming in. And so those are much better than what I anticipated.

[Jonathan Lee:]

Appreciate the color Brian. Thank you.

[Operator:]

And I'm showing no further questions in queue at this time. I'd like to turn the call back to Brian Krzanich for closing remarks.

[Brian Krzanich:]

Sure. I just like to thank you all for joining us this morning. As I have said in the prepared remarks and then you'd hope they came across in Joe's nice responses and the questions. We're really happy with the results of this quarter, and we're seeing positive signs that we believe that we're very clearly indicating that we're on a path or sustainably delivering strong revenue and earnings growth. I look forward to providing you more updates as we go through the next quarter and a complete 2019 fiscal year. So everybody have a great day and thank you very much for coming.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may now disconnect. Everyone, have a great day.