CDK Global sees earnings boost from cost-cutting, improved efficiency

CDK Global CEO Steve Anenen said today that the dealership software company should see $10 million in savings over the next nine months from consolidation of its customer support staff and better software implementation processes.

Anenen made the assessment during an earnings call announcing improved fiscal first-quarter results.

CDK, along with rival Reynolds and Reynolds, are dominant providers of dealer management systems and other operating software for dealerships.

CDK posted net income of $59 million, or 37 cents per share, in its first quarter ended Sept. 30, compared with net income of $39 million, or 24 cents, in the year-earlier first quarter, the company said in a statement today.

Revenue was $515 million in the quarter vs. $517 million a year ago. Revenue would have grown except for a 9 percent decline in revenue outside of North America caused by negative currency fluctuations.

Anenen said a new customer support center in suburban Cincinnati and a leaner process for installing software at dealerships would each save CDK about $5 million this fiscal year and more down the road.

Anenen said that by providing dealerships with pre-installation training and a systematic process for implementing software, the company has reduced installation time by about 30 percent.

Changing DMS is a difficult, time-consuming process that requires employees throughout a store to learn the software and become proficient at it.

The new support center will employ about 1,000 people and is slated to open in mid-2016.

The new customer service center and installation program are part of a transformation plan detailed this summer to improve sales, customer satisfaction and investor returns, he said.

CDK is rolling out a new cybersecurity initiative that will raise monthly integration fees for most of the third-party software vendors that dealerships use in addition to CDK software. It is patterned after a program at Reynolds and Reynolds.

Anenen said its third-party data security program would provide “a lift” in revenue but its central goal is to protect data housed in its systems at dealerships.

Those vendors have to exchange data with a store’s DMS to perform their tasks, such as help dealerships with customer relationship management, inventory management and digital marketing.

In the quarter, CDK spent about $10.3 million to repurchase about 200,000 of its common shares.

The company said through stock repurchases and other efforts that CDK intends to reduce its current $360 million cash position to $250 million by the end of its fiscal year.