CDK Global, Inc. (NASDAQ: CDK) today announced financial results
for its fiscal 2022 third quarter ended March 31, 2022.
- Revenue of $459.7
million in the third quarter ended March 31, 2022
- Revenue growth of 6% year-over-year
driven by both core and acquisition related businesses
- Strong subscription growth due to
contributions from site growth, revenue-per-site growth and the
increased adoption of modern retail capability at dealerships
- GAAP Diluted earnings per share of
$0.56; Non-GAAP Adjusted diluted earnings per share of $0.78
- Adjusted EBITDA year-over-year
growth of 5% and EPS growth of 13% year-over-year
- Operating cash flow, continuing
operations, of $324.5 million
- CDK is not providing guidance for
the fourth quarter or fiscal year 2022
As previously announced on April 7, 2022, CDK
entered into a merger agreement, pursuant to which, and subject to
the terms and conditions set forth therein, CDK agreed to be
acquired by Brookfield Business Partners, together with
institutional partners (collectively “Brookfield”). Pursuant to the
terms of the merger agreement, on April 22, 2022, an affiliate of
Brookfield commenced a tender offer (the "Offer") to acquire all of
the outstanding shares of common stock of CDK, par value $0.01 per
share, at a per share price of $54.87 in cash. Following the
consummation of the tender offer, the remaining shares of common
stock of CDK (other than as set forth in the merger agreement) will
be acquired through a second-step merger. This transaction is
expected to close in the third quarter of calendar year 2022.
In addition, on April 20, 2022, CDK commenced
tender offers to purchase for cash any and all of its issued and
outstanding senior notes and related solicitations of consents to
the adoption of certain proposed amendments. The consummation of
these tender offers for the senior notes and related consent
solicitations is not a condition to the consummation of the
acquisition of all of the outstanding shares of common stock of
CDK.
Third Quarter Fiscal 2022 Results
|
|
|
|
|
CDK Global,
Inc. |
Q3 FY2022 |
|
Change fromQ3 FY2021 |
|
($ million except per
share) |
|
|
|
|
|
|
|
Revenue |
$ |
459.7 |
|
|
6 |
% |
|
|
|
|
|
|
GAAP Earnings before income
taxes |
|
96.0 |
|
|
35 |
% |
|
Non-GAAP Adjusted earnings
before income taxes |
|
125.5 |
|
|
12 |
% |
|
|
|
|
|
|
GAAP Diluted earnings
attributable to CDK per share |
|
0.56 |
|
|
-92 |
% |
|
Non-GAAP Adjusted diluted
earnings attributable to CDK per share |
|
0.78 |
|
|
13 |
% |
|
|
|
|
|
|
GAAP Effective tax rate |
|
27.0 |
% |
|
-680 bps |
|
Non-GAAP Effective tax
rate |
|
25.1 |
% |
|
240 bps |
|
|
|
|
|
|
Net earnings from continuing
operations |
|
70.1 |
|
|
49 |
% |
|
GAAP Net earnings from continuing operations margin |
|
15.2 |
% |
|
430 bps |
|
|
|
|
|
|
Non-GAAP Adjusted EBITDA |
|
174.5 |
|
|
5 |
% |
|
Non-GAAP Adjusted EBITDA margin |
|
38.0 |
% |
|
-40 bps |
|
|
|
|
|
|
Note:
All amounts reported above are provided on a continuing operations
basis. |
|
|
|
|
The non-GAAP results presented in this press
release represent non-GAAP financial measures. Reconciliations of
these measures to the most directly comparable GAAP measures are
provided in the tables at the end of this press release.
Website Schedules
Other financial information, including financial
statements and supplementary schedules presented on a GAAP and
adjusted basis, and the schedule of quarterly revenue have been
updated for the third quarter ended March 31, 2022 and will be
posted to the CDK Investor Relations website,
https://investors.cdkglobal.com in the "Financial Information"
section.
About CDK Global
With approximately $2 billion in revenues, CDK
Global (NASDAQ: CDK) is a leading provider of retail technology and
software as a service ("SaaS") solutions that help dealers and auto
manufacturers run their businesses more efficiently, drive improved
profitability and create frictionless purchasing and ownership
experiences for consumers. Today, CDK serves over 15,000 retail
locations in North America. For more information, visit
cdkglobal.com.
Safe Harbor for Forward-Looking
Statements
This press release contains "forward-looking
statements" within the meaning of the Private Security Litigation
Reform Act of 1995. All statements regarding the Company's business
outlook, including the Company's other plans; objectives;
forecasts; goals; beliefs; business strategies; future events;
business conditions; results of operations; financial position and
business outlook and trends; and other information, may be
forward-looking statements. Words such as "might," "will," "may,"
"could," "should," "estimates," "expects," "continues,"
"contemplates," "anticipates," "projects," "plans," "potential,"
"predicts," "intends," "believes," "forecasts," "future,"
"assumes," and variations of such words or similar expressions are
intended to identify forward-looking statements. These statements
are based on management's expectations and assumptions and are
subject to risks and uncertainties that may cause actual results to
differ materially from those expressed, or implied by, these
forward-looking statements.
Factors that could cause actual results to
differ materially from those contemplated by the forward-looking
statements include: the Company's expectations regarding the
continuing impacts on the Company's business of the COVID-19
pandemic; the Company's success in obtaining, retaining and selling
additional services to customers; the pricing of the Company's
products and services; overall market and economic conditions,
including interest rate and foreign currency trends, and technology
trends; adverse global economic conditions and credit markets and
volatility in the countries in which we do business; auto sales and
related industry changes; competitive conditions; changes in
regulation; changes in technology, security breaches,
interruptions, failures and other errors involving the Company's
systems; availability of skilled technical
employees/labor/personnel; the impact of new acquisitions and
divestitures; employment and wage levels; availability of capital
for the payment of debt service obligations or dividends or the
repurchase of shares; any changes to the Company's credit ratings
and the impact of such changes on financing costs, rates, terms,
debt service obligations, access to capital market and working
capital needs; the impact of the Company's indebtedness, access to
cash and financing, and ability to secure financing, or financing
at attractive rates; the onset of or developments in litigation
involving contract, intellectual property, competition,
shareholder, and other matters, and governmental investigations;
the ability of the Company's significant stockholders and their
affiliates to significantly influence the Company's decisions or
cause it to incur significant costs; uncertainties as to the timing
of the tender offer and the merger; the risk that the transactions
contemplated by the merger agreement may not be completed in a
timely manner or at all; uncertainties as to the percentage of the
Company’s stockholders tendering their shares of common stock in
the tender offer; the possibility that competing offers or
acquisition proposals for the Company will be made; the possibility
that any or all of the various conditions to the consummation of
the tender offer or the merger may not be satisfied or waived,
including the failure to receive any required regulatory approvals
from any applicable governmental entities (or any conditions,
limitations or restrictions placed on such approvals); the
occurrence of any event, change or other circumstance that could
give rise to the termination of the merger agreement, including in
circumstances that would require the Company to pay a termination
fee or other expenses; the effect of this announcement or pendency
of the transactions contemplated by the merger agreement on the
Company’s ability to retain and hire key personnel, its ability to
maintain relationships with its customers, suppliers and others
with whom it does business, its business generally or its stock
price; risks related to diverting management’s attention from the
Company’s ongoing business operations; and the risk that
stockholder litigation in connection with the transactions
contemplated by the merger agreement may result in significant
costs of defense, indemnification and liability.
There may be other factors that may cause the
Company's actual results, performance or achievements to differ
materially from those expressed in, or implied by, the
forward-looking statements. The Company gives no assurances that
any of the events anticipated by the forward-looking statements
will occur or, if any of them do, what impact they will have on its
results of operations and financial condition. You should carefully
read the factors described in the Company's reports filed with
the Securities and Exchange Commission ("SEC"), including
those discussed under "Part I, Item 1A. Risk Factors" in its Annual
Report on Form 10-K for a description of certain risks that could,
among other things, cause the Company's actual results to differ
from any forward-looking statements contained herein. These filings
can be found on the Company's website at
https://investors.cdkglobal.com and
the SEC's website at www.sec.gov.
The Company disclaims any obligation to update
or revise any forward-looking statements that may be made to
reflect new information or future events or circumstances that
arise after the date made or to reflect the occurrence of
unanticipated events, other than as required by law.
Investor Relations Contact:Reuben
Gallegos847.542.3254reuben.gallegos@cdk.com |
Media Contact:Tony Macrito630.805.0782tony.macrito@cdk.com |
CDK Global,
Inc.Consolidated Statements of
Operations(In millions, except per share
amounts)(Unaudited)
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, |
|
March 31, |
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Revenue |
$ |
459.7 |
|
|
$ |
433.1 |
|
|
$ |
1,336.4 |
|
|
$ |
1,253.1 |
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
Cost of revenue |
|
241.2 |
|
|
|
221.3 |
|
|
|
697.8 |
|
|
|
653.7 |
|
Selling, general and administrative expenses |
|
98.6 |
|
|
|
90.2 |
|
|
|
295.3 |
|
|
|
263.8 |
|
Litigation provision |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12.0 |
|
Total expenses |
|
339.8 |
|
|
|
311.5 |
|
|
|
993.1 |
|
|
|
929.5 |
|
Operating earnings |
|
119.9 |
|
|
|
121.6 |
|
|
|
343.3 |
|
|
|
323.6 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
(22.3 |
) |
|
|
(32.2 |
) |
|
|
(66.0 |
) |
|
|
(101.2 |
) |
Gain (loss) on extinguishment
of debt |
|
— |
|
|
|
(2.2 |
) |
|
|
2.1 |
|
|
|
(2.2 |
) |
Loss from equity method
investment |
|
(3.0 |
) |
|
|
(19.6 |
) |
|
|
(5.6 |
) |
|
|
(24.8 |
) |
Other income, net |
|
1.4 |
|
|
|
3.6 |
|
|
|
8.4 |
|
|
|
32.3 |
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
96.0 |
|
|
|
71.2 |
|
|
|
282.2 |
|
|
|
227.7 |
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
(25.9 |
) |
|
|
(24.1 |
) |
|
|
(75.1 |
) |
|
|
(73.8 |
) |
|
|
|
|
|
|
|
|
Net earnings from continuing
operations |
|
70.1 |
|
|
|
47.1 |
|
|
|
207.1 |
|
|
|
153.9 |
|
Net (loss) earnings from
discontinued operations |
|
(2.4 |
) |
|
|
815.8 |
|
|
|
(0.3 |
) |
|
|
837.1 |
|
Net earnings |
|
67.7 |
|
|
|
862.9 |
|
|
|
206.8 |
|
|
|
991.0 |
|
Less: net earnings
attributable to noncontrolling interest |
|
1.6 |
|
|
|
2.0 |
|
|
|
5.3 |
|
|
|
6.1 |
|
Net earnings attributable to
CDK |
$ |
66.1 |
|
|
$ |
860.9 |
|
|
$ |
201.5 |
|
|
$ |
984.9 |
|
|
|
|
|
|
|
|
|
Net earnings (loss)
attributable to CDK per share - basic: |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.58 |
|
|
$ |
0.37 |
|
|
$ |
1.70 |
|
|
$ |
1.21 |
|
Discontinued operations |
|
(0.02 |
) |
|
|
6.69 |
|
|
|
— |
|
|
|
6.87 |
|
Total net earnings
attributable to CDK per share - basic |
$ |
0.56 |
|
|
$ |
7.06 |
|
|
$ |
1.70 |
|
|
$ |
8.08 |
|
|
|
|
|
|
|
|
|
Net earnings (loss)
attributable to CDK per share - diluted: |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.58 |
|
|
$ |
0.36 |
|
|
$ |
1.68 |
|
|
$ |
1.21 |
|
Discontinued operations |
|
(0.02 |
) |
|
|
6.64 |
|
|
|
— |
|
|
|
6.83 |
|
Total net earnings
attributable to CDK per share - diluted |
$ |
0.56 |
|
|
$ |
7.00 |
|
|
$ |
1.68 |
|
|
$ |
8.04 |
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
117.1 |
|
|
|
122.0 |
|
|
|
118.8 |
|
|
|
121.9 |
|
Diluted |
|
118.1 |
|
|
|
122.9 |
|
|
|
119.7 |
|
|
|
122.5 |
|
The International Business and Digital Marketing
Business are presented as discontinued operations and prior year
amounts associated have been reclassified as such. For additional
information refer to Form 10-Q, Item 1 of Part I, "Notes to the
Consolidated Financial Statements," Note 1 - Basis of Presentation
and Note 4 - Discontinued Operations.
CDK Global, Inc.
Consolidated Balance Sheets(In
millions)(Unaudited)
|
March 31, |
|
June 30, |
|
|
2022 |
|
|
|
2021 |
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
120.3 |
|
|
$ |
157.0 |
|
Accounts receivable, net |
|
241.6 |
|
|
|
236.4 |
|
Other current assets |
|
145.6 |
|
|
|
168.9 |
|
Total current assets |
|
507.5 |
|
|
|
562.3 |
|
Property, plant and equipment,
net of accumulated depreciation of $244.6 and $236.4,
respectively |
|
73.4 |
|
|
|
71.8 |
|
Other assets |
|
479.8 |
|
|
|
448.7 |
|
Goodwill |
|
1,438.2 |
|
|
|
1,297.1 |
|
Intangible assets, net |
|
383.7 |
|
|
|
332.7 |
|
Total assets |
$ |
2,882.6 |
|
|
$ |
2,712.6 |
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Current maturities of long-term debt and finance lease
liabilities |
$ |
10.2 |
|
|
$ |
7.1 |
|
Accounts payable |
|
25.9 |
|
|
|
29.0 |
|
Accrued expenses and other current liabilities |
|
226.8 |
|
|
|
188.1 |
|
Litigation liability |
|
34.0 |
|
|
|
34.0 |
|
Accrued payroll and payroll-related expenses |
|
79.5 |
|
|
|
81.5 |
|
Deferred revenue |
|
28.2 |
|
|
|
28.6 |
|
Total current liabilities |
|
404.6 |
|
|
|
368.3 |
|
Long-term liabilities: |
|
|
|
Debt and finance lease
liabilities |
|
1,777.6 |
|
|
|
1,586.5 |
|
Deferred income taxes |
|
117.2 |
|
|
|
111.4 |
|
Deferred revenue |
|
37.0 |
|
|
|
40.4 |
|
Other liabilities |
|
99.4 |
|
|
|
111.1 |
|
Total liabilities |
|
2,435.8 |
|
|
|
2,217.7 |
|
|
|
|
|
Stockholders' Equity: |
|
|
|
Preferred stock, $0.01 par value: 50.0 shares authorized; none
issued and outstanding |
|
— |
|
|
|
— |
|
Common stock, $0.01 par value: 650.0 shares authorized; 160.3 and
160.3 shares issued, respectively; 116.7 and 121.5 shares
outstanding, respectively |
|
1.6 |
|
|
|
1.6 |
|
Additional paid-in capital |
|
733.3 |
|
|
|
715.1 |
|
Retained earnings |
|
2,144.4 |
|
|
|
1,997.4 |
|
Treasury stock, at cost: 43.6 and 38.8 shares, respectively |
|
(2,517.9 |
) |
|
|
(2,306.0 |
) |
Accumulated other comprehensive income |
|
71.4 |
|
|
|
72.7 |
|
Total CDK stockholders' equity |
|
432.8 |
|
|
|
480.8 |
|
Noncontrolling interest |
|
14.0 |
|
|
|
14.1 |
|
Total stockholders' equity |
|
446.8 |
|
|
|
494.9 |
|
Total liabilities and stockholders' equity |
$ |
2,882.6 |
|
|
$ |
2,712.6 |
|
CDK Global, Inc.
Consolidated Statements of Cash Flows(In
millions)(Unaudited)
|
Nine Months Ended |
|
March 31, |
|
|
2022 |
|
|
|
2021 |
|
Cash Flows from
Operating Activities |
|
|
|
Net earnings |
$ |
206.8 |
|
|
$ |
991.0 |
|
Less: net (loss) earnings from
discontinued operations |
|
(0.3 |
) |
|
|
837.1 |
|
Net earnings from continuing
operations |
|
207.1 |
|
|
|
153.9 |
|
Adjustments to reconcile net
earnings from continuing operations to cash flows provided by
operating activities, continuing operations: |
|
|
|
Depreciation and amortization |
|
91.7 |
|
|
|
71.1 |
|
(Gain) loss on extinguishment of debt |
|
(2.1 |
) |
|
|
2.2 |
|
Loss from equity method investment |
|
5.6 |
|
|
|
24.8 |
|
Deferred income taxes |
|
1.3 |
|
|
|
0.7 |
|
Stock-based compensation expense |
|
45.6 |
|
|
|
31.7 |
|
Other |
|
5.5 |
|
|
|
7.0 |
|
Changes in assets and
liabilities, net of effect from acquisitions of businesses: |
|
|
|
Accounts receivable |
|
(3.3 |
) |
|
|
(5.1 |
) |
Other assets |
|
(7.4 |
) |
|
|
(43.8 |
) |
Accounts payable |
|
(10.6 |
) |
|
|
(4.8 |
) |
Accrued expenses and other liabilities |
|
(8.9 |
) |
|
|
16.2 |
|
Net cash flows provided by
operating activities, continuing operations |
|
324.5 |
|
|
|
253.9 |
|
Net cash flows provided by
(used in) operating activities, discontinued operations |
|
(2.1 |
) |
|
|
6.9 |
|
Net cash flows provided by
operating activities |
|
322.4 |
|
|
|
260.8 |
|
|
|
|
|
Cash Flows from
Investing Activities |
|
|
|
Capital expenditures |
|
(10.8 |
) |
|
|
(15.2 |
) |
Capitalized software |
|
(83.7 |
) |
|
|
(51.0 |
) |
Acquisitions of businesses,
net of cash acquired |
|
(154.2 |
) |
|
|
(18.1 |
) |
Net cash flows used in
investing activities, continuing operations |
|
(248.7 |
) |
|
|
(84.3 |
) |
Net cash flows provided by
investing activities, discontinued operations |
|
1.9 |
|
|
|
1,380.9 |
|
Net cash flows provided by
(used in) investing activities |
|
(246.8 |
) |
|
|
1,296.6 |
|
|
|
|
|
Cash Flows from
Financing Activities |
|
|
|
Net proceeds (repayments) from
revolving credit facilities |
|
190.0 |
|
|
|
(15.0 |
) |
Repayments of long-term debt
and lease liabilities |
|
(5.7 |
) |
|
|
(578.0 |
) |
Dividends paid to
stockholders |
|
(53.3 |
) |
|
|
(54.8 |
) |
Repurchases of common
stock |
|
(229.1 |
) |
|
|
— |
|
Proceeds from exercises of
stock options |
|
— |
|
|
|
2.1 |
|
Withholding tax payments for
stock-based compensation awards |
|
(8.9 |
) |
|
|
(4.5 |
) |
Dividend payments to
noncontrolling owners |
|
(5.4 |
) |
|
|
(6.2 |
) |
Net cash flows used in
financing activities, continuing operations |
|
(112.4 |
) |
|
|
(656.4 |
) |
Net cash flows used in
financing activities, discontinued operations |
|
— |
|
|
|
— |
|
Net cash flows used in
financing activities |
|
(112.4 |
) |
|
|
(656.4 |
) |
|
|
|
|
Effect of exchange rate
changes on cash, cash equivalents, and restricted cash, including
cash classified as current assets held for sale |
|
(0.7 |
) |
|
|
21.1 |
|
Net change in cash, cash
equivalents, and restricted cash, including cash classified as
current assets held for sale |
|
(37.5 |
) |
|
|
922.1 |
|
Net change in cash classified
in current assets held for sale |
|
— |
|
|
|
134.9 |
|
Net change in cash, cash
equivalents, and restricted cash |
|
(37.5 |
) |
|
|
1,057.0 |
|
|
|
|
|
Cash, cash equivalents, and
restricted cash, beginning of period |
|
177.2 |
|
|
|
97.3 |
|
Cash, cash equivalents, and
restricted cash, end of period |
$ |
139.7 |
|
|
$ |
1,154.3 |
|
The International Business and Digital Marketing
Business are presented as discontinued operations and prior year
amounts associated have been reclassified as such. For additional
information refer to Form 10-Q, Item 1 of Part I, "Notes to the
Consolidated Financial Statements," Note 1 - Basis of Presentation
and Note 4 - Discontinued Operations.
CDK Global,
Inc.Consolidated Non-GAAP Financial
Results(In millions, except per share
amounts)(Unaudited)
As described below under the Non-GAAP Financial
Measures section of this press release, we incorporated the
following additional adjustments in our calculations of non-GAAP
financial measures where management has deemed it appropriate to
better reflect our underlying operations. These adjustments are
inconsistent in amount and frequency and do not directly reflect
our underlying operations. Therefore, management believes that
excluding such information provides us with a better understanding
of our ongoing operating performance across periods.
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
Revenue (a) |
$ |
459.7 |
|
|
$ |
433.1 |
|
|
$ |
26.6 |
|
6 |
% |
|
$ |
1,336.4 |
|
|
$ |
1,253.1 |
|
|
$ |
83.3 |
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income
taxes (a) |
$ |
96.0 |
|
|
$ |
71.2 |
|
|
$ |
24.8 |
|
35 |
% |
|
$ |
282.2 |
|
|
$ |
227.7 |
|
|
$ |
54.5 |
|
24 |
% |
Margin % |
|
20.9 |
% |
|
|
16.4 |
% |
|
450 bps |
|
|
|
|
|
21.1 |
% |
|
|
18.2 |
% |
|
290 bps |
|
|
|
Stock-based compensation expense |
|
17.0 |
|
|
|
10.4 |
|
|
|
|
|
|
|
45.6 |
|
|
|
31.7 |
|
|
|
|
|
Amortization of acquired intangible assets |
|
7.3 |
|
|
|
4.2 |
|
|
|
|
|
|
|
20.9 |
|
|
|
12.4 |
|
|
|
|
|
Transaction and integration-related costs |
|
2.0 |
|
|
|
2.4 |
|
|
|
|
|
|
|
15.0 |
|
|
|
3.6 |
|
|
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
0.4 |
|
|
|
0.9 |
|
|
|
|
|
|
|
1.1 |
|
|
|
15.6 |
|
|
|
|
|
Business process modernization program |
|
0.2 |
|
|
|
3.9 |
|
|
|
|
|
|
|
3.8 |
|
|
|
9.4 |
|
|
|
|
|
Officer transition expense |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
1.1 |
|
|
|
|
|
Net adjustments related to loss from equity method investment |
|
2.6 |
|
|
|
17.1 |
|
|
|
|
|
|
|
5.4 |
|
|
|
21.6 |
|
|
|
|
|
Loss (gain) on extinguishment of debt |
|
— |
|
|
|
2.2 |
|
|
|
|
|
|
|
(2.1 |
) |
|
|
2.2 |
|
|
|
|
|
Adjusted earnings
before income taxes (a) (b) |
$ |
125.5 |
|
|
$ |
112.3 |
|
|
$ |
13.2 |
|
12 |
% |
|
$ |
371.9 |
|
|
$ |
325.3 |
|
|
$ |
46.6 |
|
14 |
% |
Adjusted margin % |
|
27.3 |
% |
|
|
25.9 |
% |
|
140 bps |
|
|
|
|
|
27.8 |
% |
|
|
26.0 |
% |
|
180 bps |
|
|
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
Provision for income taxes (a) |
$ |
25.9 |
|
|
$ |
24.1 |
|
|
$ |
1.8 |
|
7 |
% |
|
$ |
75.1 |
|
|
$ |
73.8 |
|
|
$ |
1.3 |
|
2 |
% |
Effective tax rate |
|
27.0 |
% |
|
|
33.8 |
% |
|
|
|
|
|
|
26.6 |
% |
|
|
32.4 |
% |
|
|
|
|
Income tax effect of pre-tax adjustments |
|
6.1 |
|
|
|
8.4 |
|
|
|
|
|
|
|
18.5 |
|
|
|
18.3 |
|
|
|
|
|
Change in deferred tax valuation allowance |
|
(0.5 |
) |
|
|
(7.0 |
) |
|
|
|
|
|
|
(1.4 |
) |
|
|
(7.0 |
) |
|
|
|
|
Adjusted provision for
income taxes (a) (b) |
$ |
31.5 |
|
|
$ |
25.5 |
|
|
$ |
6.0 |
|
24 |
% |
|
$ |
92.2 |
|
|
$ |
85.1 |
|
|
$ |
7.1 |
|
8 |
% |
Adjusted effective tax rate |
|
25.1 |
% |
|
|
22.7 |
% |
|
|
|
|
|
|
24.8 |
% |
|
|
26.2 |
% |
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
Net
earnings |
$ |
67.7 |
|
|
$ |
862.9 |
|
|
$ |
(795.2 |
) |
|
(92 |
)% |
|
$ |
206.8 |
|
|
$ |
991.0 |
|
|
$ |
(784.2 |
) |
|
(79 |
)% |
Less: net earnings
attributable to noncontrolling interest |
|
1.6 |
|
|
|
2.0 |
|
|
|
|
|
|
|
5.3 |
|
|
|
6.1 |
|
|
|
|
|
Net earnings
attributable to CDK |
$ |
66.1 |
|
|
$ |
860.9 |
|
|
$ |
(794.8 |
) |
|
(92 |
)% |
|
$ |
201.5 |
|
|
$ |
984.9 |
|
|
$ |
(783.4 |
) |
|
(80 |
)% |
Net loss (earnings) from discontinued operations |
|
2.4 |
|
|
|
(815.8 |
) |
|
|
|
|
|
|
0.3 |
|
|
|
(837.1 |
) |
|
|
|
|
Stock-based compensation expense |
|
17.0 |
|
|
|
10.4 |
|
|
|
|
|
|
|
45.6 |
|
|
|
31.7 |
|
|
|
|
|
Amortization of acquired intangible assets (c) |
|
7.3 |
|
|
|
4.1 |
|
|
|
|
|
|
|
20.7 |
|
|
|
12.1 |
|
|
|
|
|
Transaction and integration-related costs |
|
2.0 |
|
|
|
2.4 |
|
|
|
|
|
|
|
15.0 |
|
|
|
3.6 |
|
|
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
0.4 |
|
|
|
0.9 |
|
|
|
|
|
|
|
1.1 |
|
|
|
15.6 |
|
|
|
|
|
Business process modernization program |
|
0.2 |
|
|
|
3.9 |
|
|
|
|
|
|
|
3.8 |
|
|
|
9.4 |
|
|
|
|
|
Officer transition expense |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
1.1 |
|
|
|
|
|
Net adjustments related to loss from equity method investment |
|
2.6 |
|
|
|
17.1 |
|
|
|
|
|
|
|
5.4 |
|
|
|
21.6 |
|
|
|
|
|
Loss (gain) on extinguishment of debt |
|
— |
|
|
|
2.2 |
|
|
|
|
|
|
|
(2.1 |
) |
|
|
2.2 |
|
|
|
|
|
Income tax effect on pre-tax adjustments |
|
(6.1 |
) |
|
|
(8.4 |
) |
|
|
|
|
|
|
(18.5 |
) |
|
|
(18.3 |
) |
|
|
|
|
Change in deferred tax valuation allowance |
|
0.5 |
|
|
|
7.0 |
|
|
|
|
|
|
|
1.4 |
|
|
|
7.0 |
|
|
|
|
|
Adjusted net earnings attributable to CDK (a) (b)
(c) |
$ |
92.4 |
|
|
$ |
84.7 |
|
|
$ |
7.7 |
|
|
9 |
% |
|
$ |
274.2 |
|
|
$ |
233.8 |
|
|
$ |
40.4 |
|
|
17 |
% |
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
Diluted earnings
attributable to CDK per share |
$ |
0.56 |
|
|
$ |
7.00 |
|
|
$ |
(6.44 |
) |
|
(92 |
)% |
|
$ |
1.68 |
|
|
$ |
8.04 |
|
|
$ |
(6.36 |
) |
|
(79 |
)% |
Net loss (earnings) from discontinued operations |
|
0.02 |
|
|
|
(6.64 |
) |
|
|
|
|
|
|
— |
|
|
|
(6.83 |
) |
|
|
|
|
Stock-based compensation expense |
|
0.15 |
|
|
|
0.08 |
|
|
|
|
|
|
|
0.38 |
|
|
|
0.26 |
|
|
|
|
|
Amortization of acquired intangible assets (c) |
|
0.06 |
|
|
|
0.03 |
|
|
|
|
|
|
|
0.17 |
|
|
|
0.10 |
|
|
|
|
|
Transaction and integration-related costs |
|
0.02 |
|
|
|
0.02 |
|
|
|
|
|
|
|
0.13 |
|
|
|
0.03 |
|
|
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
— |
|
|
|
0.02 |
|
|
|
|
|
|
|
0.01 |
|
|
|
0.12 |
|
|
|
|
|
Business process modernization program |
|
— |
|
|
|
0.03 |
|
|
|
|
|
|
|
0.03 |
|
|
|
0.07 |
|
|
|
|
|
Officer transition expense |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
0.01 |
|
|
|
|
|
Net adjustments related to loss from equity method investment |
|
0.02 |
|
|
|
0.14 |
|
|
|
|
|
|
|
0.05 |
|
|
|
0.18 |
|
|
|
|
|
Loss (gain) on extinguishment of debt |
|
— |
|
|
|
0.02 |
|
|
|
|
|
|
|
(0.02 |
) |
|
|
0.02 |
|
|
|
|
|
Income tax effect on pre-tax adjustments |
|
(0.05 |
) |
|
|
(0.07 |
) |
|
|
|
|
|
|
(0.15 |
) |
|
|
(0.15 |
) |
|
|
|
|
Change in deferred tax valuation allowance |
|
— |
|
|
|
0.06 |
|
|
|
|
|
|
|
0.01 |
|
|
|
0.06 |
|
|
|
|
|
Adjusted diluted earnings attributable to CDK per share (a)
(b) (c) |
$ |
0.78 |
|
|
$ |
0.69 |
|
|
$ |
0.09 |
|
|
13 |
% |
|
$ |
2.29 |
|
|
$ |
1.91 |
|
|
$ |
0.38 |
|
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
118.1 |
|
|
|
122.9 |
|
|
|
|
|
|
|
119.7 |
|
|
|
122.5 |
|
|
|
|
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
|
|
2022 |
|
|
|
2021 |
|
|
$ |
|
% |
Net earnings
attributable to CDK |
$ |
66.1 |
|
|
$ |
860.9 |
|
|
$ |
(794.8 |
) |
|
(92 |
)% |
|
$ |
201.5 |
|
|
$ |
984.9 |
|
|
$ |
(783.4 |
) |
|
(80 |
)% |
Margin % |
|
14.4 |
% |
|
|
198.8 |
% |
|
-18440 bps |
|
|
|
|
|
|
15.1 |
% |
|
|
78.6 |
% |
|
-6350 bps |
|
|
|
|
Net earnings attributable to noncontrolling interest |
|
1.6 |
|
|
|
2.0 |
|
|
|
|
|
|
|
5.3 |
|
|
|
6.1 |
|
|
|
|
|
Net loss (earnings) from discontinued operations |
|
2.4 |
|
|
|
(815.8 |
) |
|
|
|
|
|
|
0.3 |
|
|
|
(837.1 |
) |
|
|
|
|
Provision for income taxes |
|
25.9 |
|
|
|
24.1 |
|
|
|
|
|
|
|
75.1 |
|
|
|
73.8 |
|
|
|
|
|
Interest expense |
|
22.3 |
|
|
|
32.2 |
|
|
|
|
|
|
|
66.0 |
|
|
|
101.2 |
|
|
|
|
|
Depreciation and amortization |
|
32.8 |
|
|
|
24.6 |
|
|
|
|
|
|
|
91.7 |
|
|
|
71.1 |
|
|
|
|
|
Stock-based compensation expense |
|
17.0 |
|
|
|
10.4 |
|
|
|
|
|
|
|
45.6 |
|
|
|
31.7 |
|
|
|
|
|
Transaction and integration-related costs |
|
2.0 |
|
|
|
2.4 |
|
|
|
|
|
|
|
15.0 |
|
|
|
3.6 |
|
|
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
0.4 |
|
|
|
0.9 |
|
|
|
|
|
|
|
1.1 |
|
|
|
15.6 |
|
|
|
|
|
Business process modernization program |
|
0.2 |
|
|
|
3.9 |
|
|
|
|
|
|
|
3.8 |
|
|
|
9.4 |
|
|
|
|
|
Officer transition expense |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
1.1 |
|
|
|
|
|
Net adjustments related to loss from equity method investment |
|
3.8 |
|
|
|
18.5 |
|
|
|
|
|
|
|
9.2 |
|
|
|
25.7 |
|
|
|
|
|
Loss (gain) on extinguishment of debt |
|
— |
|
|
|
2.2 |
|
|
|
|
|
|
|
(2.1 |
) |
|
|
2.2 |
|
|
|
|
|
Adjusted EBITDA (a) (b) |
$ |
174.5 |
|
|
$ |
166.3 |
|
|
$ |
8.2 |
|
|
5 |
% |
|
$ |
512.5 |
|
|
$ |
489.3 |
|
|
$ |
23.2 |
|
|
5 |
% |
Adjusted margin % |
|
38.0 |
% |
|
|
38.4 |
% |
|
-40 bps |
|
|
|
|
|
|
38.3 |
% |
|
|
39.0 |
% |
|
-70 bps |
|
|
|
|
|
Nine Months Ended |
|
March 31, |
|
|
2022 |
|
|
|
2021 |
|
Net cash flows provided by
operating activities |
$ |
322.4 |
|
|
$ |
260.8 |
|
Net cash flows provided by
operating activities - discontinued operations |
|
2.1 |
|
|
|
(6.9 |
) |
Capital expenditures |
|
(10.8 |
) |
|
|
(15.2 |
) |
Capitalized software |
|
(83.7 |
) |
|
|
(51.0 |
) |
Change in restricted cash |
|
0.8 |
|
|
|
(6.0 |
) |
Free cash flow from
continuing operations (a) (b) |
$ |
230.8 |
|
|
$ |
181.7 |
|
(a) Excludes amounts attributable to
discontinued operations.
(b) Refer to the Non-GAAP Financial Measures
section of this press release for additional information on our
non-GAAP adjustments.
(c) The portion of expense related to
noncontrolling interest has been removed from amortization of
acquired intangible assets for the nine months ended March 31,
2022 and the three and nine months ended March 31, 2021,
respectively.
CDK Global, Inc.Revenue
Disaggregation(In millions)(Unaudited)
The following table presents revenue by category:
|
Three Months Ended |
|
Nine Months Ended |
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2022 |
|
|
2021 |
|
$ |
|
% |
|
|
2022 |
|
|
2021 |
|
$ |
|
% |
Subscription |
$ |
356.6 |
|
$ |
332.1 |
|
$ |
24.5 |
|
|
7 |
% |
|
$ |
1,051.0 |
|
$ |
984.3 |
|
$ |
66.7 |
|
|
7 |
% |
Transaction |
|
40.8 |
|
|
43.3 |
|
|
(2.5 |
) |
|
(6 |
)% |
|
|
121.9 |
|
|
126.3 |
|
|
(4.4 |
) |
|
(3 |
)% |
Other |
|
62.3 |
|
|
57.7 |
|
|
4.6 |
|
|
8 |
% |
|
|
163.5 |
|
|
142.5 |
|
|
21.0 |
|
|
15 |
% |
Revenue |
$ |
459.7 |
|
$ |
433.1 |
|
$ |
26.6 |
|
|
6 |
% |
|
$ |
1,336.4 |
|
$ |
1,253.1 |
|
$ |
83.3 |
|
|
7 |
% |
Non-GAAP Financial Measures
We disclose certain financial measures for our
consolidated results on a generally accepted accounting principles
("GAAP") and a non-GAAP ("adjusted") basis. The non-GAAP financial
measures disclosed should be viewed in addition to, and not as an
alternative to, results prepared in accordance with GAAP. Our use
of each of the following non-GAAP financial measures may differ
from similarly titled non-GAAP financial measures presented by
other companies, and other companies may not define these non-GAAP
financial measures, or reconcile them to the most directly
comparable GAAP financial measures, in the same way.
Non-GAAP Financial Measure |
Most Directly Comparable GAAP Financial
Measure |
Adjusted earnings before income taxes |
Earnings before income taxes |
Adjusted provision for income
taxes |
Provision for income
taxes |
Adjusted net earnings
attributable to CDK |
Net earnings attributable to
CDK |
Adjusted diluted earnings
attributable to CDK per share |
Diluted earnings attributable
to CDK per share |
Adjusted EBITDA |
Net earnings attributable to
CDK |
Adjusted EBITDA margin |
Net earnings attributable to
CDK margin |
Free cash flow from continuing
operations |
Net cash flows provided by
operating activities |
We use adjusted earnings before income taxes,
adjusted provision for income taxes, adjusted net earnings
attributable to CDK, adjusted diluted earnings attributable to CDK
per share, adjusted EBITDA and adjusted EBITDA margin internally to
evaluate our performance on a consistent basis. These measures
adjust for the impact of certain items that we believe are
inconsistent in amount and frequency and do not directly reflect
our underlying operations. By adjusting for these items, we believe
we have more precise inputs for use as factors in (i) our budgeting
process, (ii) financial and operational decisions, (iii)
evaluations of ongoing operating performance on a consistent
period-to-period basis and relative to our competitors, (iv) target
leverage calculations, (v) debt covenant calculations, and (vi)
incentive-based compensation decisions.
We believe our non-GAAP financial measures are
helpful to users of the financial statements because they (i)
provide investors with meaningful supplemental information
regarding financial performance by excluding certain items, (ii)
permit investors to view performance using the same tools that
management uses, and (iii) provide supplemental information that
may be useful to investors in evaluating our ongoing operating
results on a consistent basis. We believe that the presentation of
these non-GAAP financial measures, when considered in addition to
the corresponding GAAP financial measures and the reconciliations
to those measures disclosed below, provides investors with a better
understanding of the factors and trends affecting our business than
could be obtained absent these disclosures.
Adjusted Earnings before Income Taxes
Management has excluded the following items from
adjusted earnings before income taxes for the periods
presented:
- Stock-based
compensation expense included in cost of revenue and selling,
general and administrative expenses.
- Amortization of
acquired intangible assets consists of non-cash amortization of
intangible assets such as customer lists, purchased software, and
trademarks acquired in connection with business combinations. We
exclude the impact of amortization of acquired intangible assets
because these non-cash amounts are significantly impacted by the
timing and size of individual acquisitions and do not factor into
our budgeting process, financial and operational decision making,
target leverage calculations, and determination of incentive based
pay.
- Transaction and
integration-related costs include: (i) legal, accounting, outside
service fees, and other costs incurred in connection with
assessment and integration of acquisitions and other strategic
business opportunities; and (ii) post-close adjustments to
acquisition-related contingent consideration, included in selling,
general and administrative expenses.
- Legal and other
expenses, related to regulatory and competition matters included in
selling, general and administrative expenses, and litigation
liabilities.
- Business process
modernization program designed to improve the way we do business
for our customers through best-in-class product offerings,
processes, governance and systems. The business process
modernization program includes a comprehensive redesign in the way
we go to market, including the quoting, contracting, fulfilling,
and invoicing processes, and the systems and tools we use. The
program is an investment to implement holistic business reform,
including the design and implementation of a new ERP system. The
expense is included in cost of revenue and selling, general and
administrative expenses.
- Officer transition
expense includes severance expense in connection with officer
departures included in cost of revenue and selling, general and
administrative expenses.
- Net adjustments
related to loss from equity method investment includes certain
portions of earnings attributable to an equity interest owned by
CDK.
- Gain (loss) on
extinguishment of debt in connection with the forgiveness of
certain indebtedness related to the Paycheck Protection Program
instituted under the United States' Coronavirus Aid, Relief and
Economic Security Act of 2020.
Adjusted Provision for Income taxes
Management has excluded the following items from
adjusted provision for income taxes for the periods presented:
- Income tax effect
of pre-tax adjustments calculated at applicable statutory rates net
of applicable permanent differences.
- In fiscal 2022, a
valuation allowance on a deferred tax asset for the tax basis
difference of an equity method investment that is not expected to
be realized.
Adjusted Net Earnings Attributable to CDK and
Adjusted Diluted Net Earnings Attributable to CDK per Share
For each respective presentation, management has
excluded amounts attributable to discontinued operations.
The portion of expense related to noncontrolling
interest has been removed from amortization of acquired intangible
assets and legal and other expenses related to regulatory and
competition matters for the applicable periods.
Adjusted EBITDA
In addition to the items described above for
adjusted earnings before income taxes, management has excluded the
following items from net earnings attributable to CDK in order to
calculate adjusted EBITDA for the periods presented:
- Net earnings
attributable to noncontrolling interest included in the financial
statements
- Provision for
income taxes included in the financial statements
- Interest expense
included in the financial statements
- Depreciation and
amortization expense included in the financial statements
Amortization of acquired intangible assets is
captured in depreciation and amortization expense. Net adjustments
related to loss from equity method investment includes depreciation
and amortization, attributable to an equity interest owned by
CDK.
Free Cash Flow
We also review free cash flow from continuing
operations as a measure of our ability to generate additional cash
from our business operations. Free cash flow from continuing
operations is defined as cash flow from operating activities less
net cash flows used in operating activities attributable to
discontinued operations, amounts paid for capital expenditures and
capitalized software and change in restricted cash. Free cash flow
from continuing operations should be considered in addition to,
rather than as a substitute for consolidated net income as a
measure of our performance and net cash provided by operating
activities as a measure of our liquidity. The change in restricted
cash is funds held for clients before remittance to agencies for
titling and registration services on behalf of those clients.
CDK Global (NASDAQ:CDK)
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