CDK Global, Inc. (Nasdaq:CDK) today announced its second quarter
fiscal 2017 financial results, updated its earnings outlook for
fiscal 2017 and provided return of capital and leverage targets
through calendar year 2019.
Second Quarter Fiscal 2017 Results
Year-over-year highlights are below:
Second Quarter Fiscal
2017 Results |
|
GAAP |
|
Adjusted |
Revenues |
|
up 5% to
$547.8 million |
|
up 5% to
$547.8 million |
Earnings before income
taxes |
|
up 11% to
$118.9 million |
|
up 26% to
$140.2 million |
Net earnings
attributable to CDK |
|
up 21% to
$82.7 million |
|
up 37% to
$96.1 million |
Diluted net earnings
attributable toCDK per share |
|
up 28% to
$0.55 per share |
|
up 45% to
$0.64 per share |
Margin |
|
Net
earnings attributable toCDK margin up 200 bps to15.1% |
|
EBITDA
margin up 550 bps to32.8% |
|
|
|
|
|
“Our fiscal second quarter results reflect the improvements we
have made to our business and represent further progress toward our
transformational goals,” said Brian MacDonald, chief executive
officer. “We have continued to invest in our operations and
products to improve the customer experience while increasing our
adjusted EBITDA margin to 32.8%, which is a 550 bps increase over
last year’s second quarter and keeps us on track to meet our target
of 35% margin for fiscal 2018. In addition, we completed our
$1B return of capital plan commitment in the quarter and I am
pleased to announce our intention to continue to return significant
capital to investors through calendar year 2019.”
“Based on our strong business performance and confidence in the
continued execution of our transformation plan, we expect to return
$750 million to $1 billion of capital per calendar year through
2019,” said Al Nietzel, chief financial officer. “These returns
will be funded from free cash flow and additional borrowings
while we continue to invest in the business and maintain a strong
balance sheet.”
Please refer to the tables at the end of this
release for a reconciliation of the GAAP results to the non-GAAP
results, which we refer to as our adjusted results throughout the
body of this press release. Results below reflect year-over-year
comparisons.
Impacts to the Second Quarter:
- Foreign exchange rates: Growth in adjusted revenues was
negatively impacted by 1 percentage point from unfavorable foreign
exchange rates while the impact on growth in earnings before income
taxes was negligible.
- Tax rate: The GAAP effective tax rate for the second quarter of
fiscal 2017 was 29.7% compared to 34.7% in last year’s second
quarter. The adjusted effective tax rate for the second quarter of
fiscal 2017 was 30.8% compared to 35.6% in last year’s second
quarter. Both the GAAP effective tax rate and the adjusted
effective tax rate include net tax benefits of $4.9 million, driven
primarily by $3.0 million related to excess tax benefits associated
with the adoption of the new stock compensation accounting standard
on July 1, 2016. These net tax benefits contributed approximately 7
percentage points of growth in both GAAP and adjusted net earnings
attributable to CDK.
CDK Segment Information
CDK North America: Retail Solutions North
America
- Revenues increased 5% to $393.8 million.
- GAAP and adjusted earnings before income taxes increased 22% to
$142.3 million.
- GAAP and adjusted pretax margin expanded 510 bps to 36.1%
primarily due to operating efficiencies associated with the
business transformation plan resulting in lower labor-related
costs, and scale from increased revenues.
CDK North America: Advertising North America
- Revenues increased 18% to $78.1 million.
- GAAP and adjusted earnings before income taxes increased 96% to
$9.8 million.
- GAAP and adjusted pretax margin expanded 500 bps to 12.5%
primarily due to growth in OEM-driven advertising revenues and
increased operating efficiencies associated with the business
transformation plan.
CDK International
- Revenues declined 4% to $75.9 million entirely due to
unfavorable foreign exchange rates. On an adjusted constant
currency basis, revenues increased 3%.
- GAAP and adjusted earnings before income taxes increased 15% to
$18.3 million. On an adjusted constant currency basis, earnings
before income taxes also increased 15%.
- GAAP and adjusted pretax margin expanded 390 bps to 24.1%
primarily due to operating efficiencies associated with the
business transformation plan and scale from increased local
currency revenues.
Return of Capital
In the second quarter of fiscal 2017, the
company completed its previously-announced plan to return $1
billion of capital to shareholders by the end of calendar year
2016. During the quarter, the company executed $20 million of
dividend payments, $20 million of open market share repurchases and
$330 million of accelerated share repurchases.
Going forward, the company expects to return to shareholders
$750 million to $1 billion per calendar year through 2019, through
a combination of dividends and share repurchases. These returns
will be funded by a combination of free cash flow and incremental
borrowings intended to bring leverage, measured as financial debt,
net of cash, divided by adjusted EBITDA, to a range of 2.5x to 3.0x
over the period.
Fiscal 2017 Forecast
While the outlook for GAAP earnings in fiscal
2017 is reduced due to higher anticipated costs associated with our
business transformation plan, we have raised our adjusted earnings
growth and margin forecasts for the full year.
Fiscal 2017
Forecast |
|
GAAP |
|
Adjusted |
Revenues |
|
up 4% - 5% |
|
up 4% - 5% |
Earnings before income
taxes |
|
up 17% - 19% |
|
up 23% - 26% |
Net earnings
attributable to CDK |
|
up 21% - 23% |
|
up 26% - 29% |
Diluted net
earnings attributableto CDK per share |
|
up 28% - 32% |
|
up 34% - 37% |
|
$1.93 - $1.99 |
|
$2.33 - $2.38 |
Margin |
|
Net earnings
attributable to CDKmargin up 170 - 210 bps |
|
EBITDA margin up 550 -
575 bps |
|
|
|
|
|
The fiscal 2017 forecast now includes $95-$105
million of incremental adjusted EBITDA attributable to the
execution of our business transformation plan.
We continue to anticipate a year-over-year
impact to earnings and margins for the remainder of fiscal 2017 due
to incremental interest expense related to additional borrowings
executed in the fiscal second quarter and incremental incentive
compensation expense in the fiscal fourth quarter, provided we
execute the business transformation plan.
Tax Rate
We now anticipate our GAAP effective tax rate
for fiscal 2017 will be 31.0-32.0% compared to 33.1% for fiscal
2016. The adjusted effective tax rate for fiscal 2017 is expected
to be 32.5-33.0% compared to 33.8% for fiscal 2016. The decrease in
both GAAP and adjusted effective tax rates is driven primarily by
tax benefits associated with the adoption of the new stock
compensation accounting standard on July 1, 2016. Excess tax
benefits and tax deficiencies related to the adoption of this
standard will impact the provision for income taxes, resulting in
increased volatility in our effective tax rates. The forecast for
both the GAAP and adjusted effective tax rates implies higher
effective tax rates in the second half of the fiscal year.
Please refer to the tables at the end of this
press release for a reconciliation of the GAAP forecast to the
adjusted forecast.
Website Schedules
Other financial information, including financial
statements and supplementary schedules presented on a GAAP and
adjusted basis, and the schedule of quarterly revenues and pretax
earnings by reportable segment have been updated for the second
quarter of fiscal 2017 and will be posted to the CDK Investor
Relations website, http://investors.cdkglobal.com, in the
“Financial Information” section.
Webcast and Conference Call
An analyst conference call will be held today,
Thursday, February 2, 2017 at 7:30 a.m. CT. A live webcast of the
call will be available on a listen-only basis. To listen to the
webcast, go to CDK’s Investor Relations website,
http://investors.cdkglobal.com, and click on the webcast icon. An
accompanying slide presentation will be available to download and
print about 60 minutes before the webcast at the CDK Investor
Relations website at http://investors.cdkglobal.com. CDK’s
financial news releases, current financial information, SEC filings
and Investor Relations presentations are accessible at the same
website.
About CDK
Global
With more than $2 billion in revenues,
CDK Global (Nasdaq:CDK) is a leading global provider of
integrated information technology and digital marketing solutions
to the automotive retail and adjacent industries. Focused on
evolving the automotive retail experience, CDK Global provides
solutions to dealers in more than 100 countries around the world,
serving more than 27,000 retail locations and most automotive
manufacturers. CDK’s solutions automate and integrate all
parts of the dealership and buying process from targeted digital
advertising and marketing campaigns to the sale, financing,
insuring, parts supply, repair and maintenance of
vehicles. Visit cdkglobal.com.
|
|
CDK Global, Inc. |
Consolidated Statements of
Operations |
(In millions, except per share amounts) |
(Unaudited) |
|
|
Three Months Ended |
|
Six Months Ended |
|
December 31, |
|
December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
$ |
547.8 |
|
|
$ |
520.1 |
|
|
$ |
1,098.5 |
|
|
$ |
1,034.7 |
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
Cost of
revenues |
303.2 |
|
|
301.2 |
|
|
618.3 |
|
|
612.0 |
|
Selling, general
and administrative expenses |
110.9 |
|
|
105.8 |
|
|
224.6 |
|
|
203.2 |
|
Restructuring
expenses |
2.3 |
|
|
1.8 |
|
|
3.4 |
|
|
3.7 |
|
Total
expenses |
416.4 |
|
|
408.8 |
|
|
846.3 |
|
|
818.9 |
|
|
|
|
|
|
|
|
|
Operating earnings |
131.4 |
|
|
111.3 |
|
|
252.2 |
|
|
215.8 |
|
|
|
|
|
|
|
|
|
Interest
expense |
(12.3 |
) |
|
(9.5 |
) |
|
(23.0 |
) |
|
(18.8 |
) |
Other income
(expense), net |
(0.2 |
) |
|
5.0 |
|
|
1.6 |
|
|
5.6 |
|
|
|
|
|
|
|
|
|
Earnings before income
taxes |
118.9 |
|
|
106.8 |
|
|
230.8 |
|
|
202.6 |
|
|
|
|
|
|
|
|
|
Provision for
income taxes |
(35.3 |
) |
|
(37.1 |
) |
|
(68.0 |
) |
|
(71.7 |
) |
|
|
|
|
|
|
|
|
Net earnings |
83.6 |
|
|
69.7 |
|
|
162.8 |
|
|
130.9 |
|
Less: net earnings
attributable to noncontrolling interest |
0.9 |
|
|
1.5 |
|
|
3.2 |
|
|
3.7 |
|
Net earnings
attributable to CDK |
$ |
82.7 |
|
|
$ |
68.2 |
|
|
$ |
159.6 |
|
|
$ |
127.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to CDK per common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.56 |
|
|
$ |
0.43 |
|
|
$ |
1.07 |
|
|
$ |
0.80 |
|
Diluted |
$ |
0.55 |
|
|
$ |
0.43 |
|
|
$ |
1.06 |
|
|
$ |
0.80 |
|
|
|
|
|
|
|
|
|
Weighted-average common
shares outstanding: |
|
|
|
|
|
|
|
Basic |
148.7 |
|
|
158.7 |
|
|
149.5 |
|
|
158.9 |
|
Diluted |
149.9 |
|
|
159.7 |
|
|
150.7 |
|
|
160.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDK Global, Inc. |
Consolidated Balance Sheets |
(In millions) |
(Unaudited) |
|
|
December 31, |
|
June 30, |
|
2016 |
|
2016 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash
equivalents |
$ |
327.6 |
|
|
$ |
219.1 |
|
Accounts
receivable, net of allowances |
363.0 |
|
|
365.5 |
|
Other current
assets |
171.1 |
|
|
154.1 |
|
Total current assets |
861.7 |
|
|
738.7 |
|
|
|
|
|
Property, plant and
equipment, net |
125.5 |
|
|
118.6 |
|
Other assets |
197.0 |
|
|
217.2 |
|
Goodwill |
1,159.2 |
|
|
1,182.7 |
|
Intangible assets,
net |
101.5 |
|
|
107.8 |
|
Total assets |
$ |
2,444.9 |
|
|
$ |
2,365.0 |
|
|
|
|
|
Liabilities and
Equity |
|
|
|
Current
liabilities: |
|
|
|
Current
maturities of long-term debt and capital lease obligations |
$ |
46.8 |
|
|
$ |
26.8 |
|
Accounts
payable |
23.4 |
|
|
38.8 |
|
Accrued expenses
and other current liabilities |
191.9 |
|
|
165.3 |
|
Accrued payroll
and payroll-related expenses |
67.8 |
|
|
115.3 |
|
Short-term
deferred revenues |
165.7 |
|
|
177.2 |
|
Total current liabilities |
495.6 |
|
|
523.4 |
|
|
|
|
|
Long-term debt and
capital lease obligations |
1,555.7 |
|
|
1,190.3 |
|
Long-term deferred
revenues |
145.3 |
|
|
157.7 |
|
Deferred income
taxes |
52.2 |
|
|
46.9 |
|
Other liabilities |
69.7 |
|
|
70.5 |
|
Total liabilities |
2,318.5 |
|
|
1,988.8 |
|
|
|
|
|
Equity: |
|
|
|
Preferred
stock |
— |
|
|
— |
|
Common
stock |
1.6 |
|
|
1.6 |
|
Additional
paid-in-capital |
615.8 |
|
|
640.7 |
|
Retained
earnings |
357.0 |
|
|
238.3 |
|
Treasury stock,
at cost |
(839.5 |
) |
|
(526.6 |
) |
Accumulated
other comprehensive income |
(25.1 |
) |
|
5.8 |
|
Total CDK stockholders' equity |
109.8 |
|
|
359.8 |
|
Noncontrolling
interest |
16.6 |
|
|
16.4 |
|
Total equity |
126.4 |
|
|
376.2 |
|
Total liabilities and equity |
$ |
2,444.9 |
|
|
$ |
2,365.0 |
|
|
|
|
|
|
|
|
|
|
CDK Global, Inc. |
Consolidated Statements of Cash
Flows |
(In millions) |
(Unaudited) |
|
|
Six Months Ended |
|
December 31, |
|
2016 |
|
2015 |
Cash Flows from
Operating Activities: |
|
|
|
Net earnings |
$ |
162.8 |
|
|
$ |
130.9 |
|
Adjustments to
reconcile net earnings to cash flows provided by operating
activities: |
|
|
|
Depreciation and amortization |
34.4 |
|
|
28.7 |
|
Deferred
income taxes |
5.0 |
|
|
19.0 |
|
Stock-based compensation expense |
20.5 |
|
|
12.8 |
|
Other |
2.4 |
|
|
(5.0 |
) |
Changes in operating
assets and liabilities: |
|
|
|
Increase
in accounts receivable |
(2.2 |
) |
|
(69.8 |
) |
Increase
in other assets |
(7.6 |
) |
|
(41.6 |
) |
Decrease
in accounts payable |
(11.3 |
) |
|
(7.8 |
) |
Decrease
in accrued expenses and other liabilities |
(30.6 |
) |
|
(41.4 |
) |
Net cash flows provided
by operating activities |
173.4 |
|
|
25.8 |
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
Capital
expenditures |
(29.7 |
) |
|
(18.1 |
) |
Proceeds from sale of
property, plant and equipment |
0.5 |
|
|
— |
|
Capitalized
software |
(10.0 |
) |
|
(2.1 |
) |
Contributions to
investments |
(0.6 |
) |
|
(6.7 |
) |
Proceeds from
investments |
4.0 |
|
|
7.7 |
|
Net cash flows used in
investing activities |
(35.8 |
) |
|
(19.2 |
) |
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
Proceeds from long-term
debt |
400.0 |
|
|
250.0 |
|
Repayments of long-term
debt and capital lease obligations |
(13.5 |
) |
|
(6.7 |
) |
Dividends paid to
stockholders |
(40.6 |
) |
|
(40.8 |
) |
Repurchases of common
stock |
(350.0 |
) |
|
(261.0 |
) |
Proceeds from exercises
of stock options |
5.1 |
|
|
2.9 |
|
Excess tax benefit from
stock-based compensation awards |
— |
|
|
7.0 |
|
Withholding tax
payments for stock-based compensation awards |
(10.5 |
) |
|
(8.5 |
) |
Dividend payments to
noncontrolling owners |
(3.0 |
) |
|
— |
|
Payments of deferred
financing costs |
(2.0 |
) |
|
(1.6 |
) |
Acquisition-related
payments |
(6.2 |
) |
|
— |
|
Recovery of dividends
paid |
— |
|
|
0.4 |
|
Net cash flows used in
financing activities |
(20.7 |
) |
|
(58.3 |
) |
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
(8.4 |
) |
|
(9.0 |
) |
|
|
|
|
Net change in cash and
cash equivalents |
108.5 |
|
|
(60.7 |
) |
|
|
|
|
Cash and cash
equivalents, beginning of period |
219.1 |
|
|
408.2 |
|
|
|
|
|
Cash and cash
equivalents, end of period |
$ |
327.6 |
|
|
$ |
347.5 |
|
|
|
|
|
|
|
|
|
CDK Global, Inc.Segment
Financial Data(In millions)(Unaudited)
Effective July 1, 2016, the Company reorganized
into two main operating groups. In connection with this
reorganization, our operating segments have changed. The Company's
first operating group is CDK North America which is comprised
of two reportable segments, Retail Solutions North America and
Advertising North America. The second operating group, which is
also a reportable segment, is CDK International. In addition, the
Company has an Other segment, the primary components of which are
corporate allocations and other expenses not recorded in the
segment results. Segment information for the three and six months
ended December 31, 2015 has been restated to conform to the
new presentation.
|
Adjusted Segment Revenues |
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2016 |
|
2015 |
|
$ |
|
% |
|
2016 |
|
2015 |
|
$ |
|
% |
CDK North America: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Solutions North America: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue |
$ |
313.4 |
|
|
$ |
294.5 |
|
|
$ |
18.9 |
|
|
6 |
% |
|
$ |
629.7 |
|
|
$ |
589.1 |
|
|
$ |
40.6 |
|
|
7 |
% |
Transaction revenue |
42.7 |
|
|
42.5 |
|
|
0.2 |
|
|
— |
% |
|
89.6 |
|
|
88.2 |
|
|
1.4 |
|
|
2 |
% |
Other
revenue |
37.7 |
|
|
38.0 |
|
|
(0.3 |
) |
|
(1 |
)% |
|
69.9 |
|
|
70.9 |
|
|
(1.0 |
) |
|
(1 |
)% |
Total
Retail Solutions North America (a) |
$ |
393.8 |
|
|
$ |
375.0 |
|
|
$ |
18.8 |
|
|
5 |
% |
|
$ |
789.2 |
|
|
$ |
748.2 |
|
|
$ |
41.0 |
|
|
5 |
% |
Advertising North America (b) |
78.1 |
|
|
66.3 |
|
|
11.8 |
|
|
18 |
% |
|
155.6 |
|
|
129.5 |
|
|
26.1 |
|
|
20 |
% |
CDK International
(c) |
75.9 |
|
|
78.8 |
|
|
(2.9 |
) |
|
(4 |
)% |
|
153.7 |
|
|
157.0 |
|
|
(3.3 |
) |
|
(2 |
)% |
Total |
$ |
547.8 |
|
|
$ |
520.1 |
|
|
$ |
27.7 |
|
|
5 |
% |
|
$ |
1,098.5 |
|
|
$ |
1,034.7 |
|
|
$ |
63.8 |
|
|
6 |
% |
|
Adjusted Segment Earnings before Income
Taxes |
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2016 |
|
2015 |
|
$ |
|
% |
|
2016 |
|
2015 |
|
$ |
|
% |
CDK North America: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Solutions North America (a) |
$ |
142.3 |
|
|
$ |
116.3 |
|
|
$ |
26.0 |
|
|
22 |
% |
|
$ |
287.8 |
|
|
$ |
225.4 |
|
|
$ |
62.4 |
|
|
28 |
% |
Margin |
36.1 |
% |
|
31.0 |
% |
|
510
bps |
|
36.5 |
% |
|
30.1 |
% |
|
640
bps |
Advertising North America (b) |
9.8 |
|
|
5.0 |
|
|
4.8 |
|
|
96 |
% |
|
21.3 |
|
|
8.8 |
|
|
12.5 |
|
|
142 |
% |
Margin |
12.5 |
% |
|
7.5 |
% |
|
500
bps |
|
13.7 |
% |
|
6.8 |
% |
|
690
bps |
CDK International
(c) |
18.3 |
|
|
15.9 |
|
|
2.4 |
|
|
15 |
% |
|
35.2 |
|
|
30.1 |
|
|
5.1 |
|
|
17 |
% |
Margin |
24.1 |
% |
|
20.2 |
% |
|
390
bps |
|
22.9 |
% |
|
19.2 |
% |
|
370
bps |
Other (d) |
(30.2 |
) |
|
(26.1 |
) |
|
(4.1 |
) |
|
16 |
% |
|
(70.5 |
) |
|
(53.8 |
) |
|
(16.7 |
) |
|
31 |
% |
Total |
$ |
140.2 |
|
|
$ |
111.1 |
|
|
$ |
29.1 |
|
|
26 |
% |
|
$ |
273.8 |
|
|
$ |
210.5 |
|
|
$ |
63.3 |
|
|
30 |
% |
Margin |
25.6 |
% |
|
21.4 |
% |
|
420
bps |
|
24.9 |
% |
|
20.3 |
% |
|
460
bps |
(a) The table below presents a reconciliation of revenues for
the Retail Solutions North America (RSNA) segment on a constant
currency basis. There are no adjustments to earnings before
income taxes for the RSNA segment including constant currency.
Retail
Solutions North America |
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2016 |
|
2015 |
|
$ |
|
% |
|
2016 |
|
2015 |
|
$ |
|
% |
Revenues |
$ |
393.8 |
|
|
$ |
375.0 |
|
|
$ |
18.8 |
|
|
5 |
% |
|
$ |
789.2 |
|
|
$ |
748.2 |
|
|
$ |
41.0 |
|
|
5 |
% |
Impact of
exchange rates |
— |
|
|
— |
|
|
|
|
|
|
(0.1 |
) |
|
— |
|
|
|
|
|
Constant currency
revenues (e) |
$ |
393.8 |
|
|
$ |
375.0 |
|
|
$ |
18.8 |
|
|
5 |
% |
|
$ |
789.1 |
|
|
$ |
748.2 |
|
|
$ |
40.9 |
|
|
5 |
% |
(b) There are no adjustments to revenues and earnings before
income taxes for the Advertising North America (ANA) segment
including constant currency.
(c) The table below presents a reconciliation of revenues and
earnings before income taxes for the CDK International (CDKI)
segment on a constant currency basis.
CDK
International |
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2016 |
|
2015 |
|
$ |
|
% |
|
2016 |
|
2015 |
|
$ |
|
% |
Revenues |
$ |
75.9 |
|
|
$ |
78.8 |
|
|
$ |
(2.9 |
) |
|
(4 |
)% |
|
$ |
153.7 |
|
|
$ |
157.0 |
|
|
$ |
(3.3 |
) |
|
(2 |
)% |
Impact of
exchange rates |
5.4 |
|
|
— |
|
|
|
|
|
|
9.6 |
|
|
— |
|
|
|
|
|
Constant currency
revenues (e) |
$ |
81.3 |
|
|
$ |
78.8 |
|
|
$ |
2.5 |
|
|
3 |
% |
|
$ |
163.3 |
|
|
$ |
157.0 |
|
|
$ |
6.3 |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
$ |
18.3 |
|
|
$ |
15.9 |
|
|
$ |
2.4 |
|
|
15 |
% |
|
$ |
35.2 |
|
|
$ |
30.1 |
|
|
$ |
5.1 |
|
|
17 |
% |
Margin
% |
24.1 |
% |
|
20.2 |
% |
|
390
bps |
|
|
|
22.9 |
% |
|
19.2 |
% |
|
370
bps |
|
|
Impact of
exchange rates |
— |
|
|
— |
|
|
|
|
|
|
0.3 |
|
|
— |
|
|
|
|
|
Constant currency
earnings before income taxes (e) |
$ |
18.3 |
|
|
$ |
15.9 |
|
|
$ |
2.4 |
|
|
15 |
% |
|
$ |
35.5 |
|
|
$ |
30.1 |
|
|
$ |
5.4 |
|
|
18 |
% |
(d) The table below presents a reconciliation of loss before
income taxes to adjusted loss before income taxes for the Other
segment on a constant currency basis.
Other |
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2016 |
|
2015 |
|
$ |
|
% |
|
2016 |
|
2015 |
|
$ |
|
% |
Loss before
income taxes |
$ |
(51.5 |
) |
|
$ |
(30.4 |
) |
|
$ |
(21.1 |
) |
|
69 |
% |
|
$ |
(113.5 |
) |
|
$ |
(61.7 |
) |
|
$ |
(51.8 |
) |
|
84 |
% |
Restructuring
expenses |
2.3 |
|
|
1.8 |
|
|
|
|
|
|
3.4 |
|
|
3.7 |
|
|
|
|
|
Other business
transformation expenses |
19.0 |
|
|
5.1 |
|
|
|
|
|
|
39.6 |
|
|
6.8 |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
(2.6 |
) |
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Adjusted loss before income taxes |
$ |
(30.2 |
) |
|
$ |
(26.1 |
) |
|
$ |
(4.1 |
) |
|
16 |
% |
|
$ |
(70.5 |
) |
|
$ |
(53.8 |
) |
|
$ |
(16.7 |
) |
|
31 |
% |
Impact of
exchange rates |
(0.1 |
) |
|
— |
|
|
|
|
|
|
(0.1 |
) |
|
— |
|
|
|
|
|
Constant currency
adjusted loss before income taxes (e) |
$ |
(30.3 |
) |
|
$ |
(26.1 |
) |
|
$ |
(4.2 |
) |
|
16 |
% |
|
$ |
(70.6 |
) |
|
$ |
(53.8 |
) |
|
$ |
(16.8 |
) |
|
31 |
% |
(e) Refer to the Non-GAAP Financial Measures section of this
earnings release for additional information on our non-GAAP
adjustments.
CDK Global, Inc.Consolidated Adjusted
Financial Information(In millions, except per share
amounts)(Unaudited)
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2016 |
|
2015 |
|
$ |
|
% |
|
2016 |
|
2015 |
|
$ |
|
% |
Revenues |
$ |
547.8 |
|
|
$ |
520.1 |
|
|
$ |
27.7 |
|
|
5 |
% |
|
$ |
1,098.5 |
|
|
$ |
1,034.7 |
|
|
$ |
63.8 |
|
|
6 |
% |
Impact of
exchange rates |
5.4 |
|
|
— |
|
|
5.4 |
|
|
|
|
9.5 |
|
|
— |
|
|
9.5 |
|
|
|
Constant currency
revenues (a) |
$ |
553.2 |
|
|
$ |
520.1 |
|
|
$ |
33.1 |
|
|
6 |
% |
|
$ |
1,108.0 |
|
|
$ |
1,034.7 |
|
|
$ |
73.3 |
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
$ |
118.9 |
|
|
$ |
106.8 |
|
|
$ |
12.1 |
|
|
11 |
% |
|
$ |
230.8 |
|
|
$ |
202.6 |
|
|
$ |
28.2 |
|
|
14 |
% |
Margin |
21.7 |
% |
|
20.5 |
% |
|
120
bps |
|
|
|
21.0 |
% |
|
19.6 |
% |
|
140 bps |
|
|
Restructuring expenses |
2.3 |
|
|
1.8 |
|
|
|
|
|
|
3.4 |
|
|
3.7 |
|
|
|
|
|
Other
business transformation expenses |
19.0 |
|
|
5.1 |
|
|
|
|
|
|
39.6 |
|
|
6.8 |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
(2.6 |
) |
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Adjusted
earnings before income taxes(a) |
$ |
140.2 |
|
|
$ |
111.1 |
|
|
29.1 |
|
|
26 |
% |
|
$ |
273.8 |
|
|
$ |
210.5 |
|
|
$ |
63.3 |
|
|
30 |
% |
Adjusted
margin |
25.6 |
% |
|
21.4 |
% |
|
420
bps |
|
|
|
24.9 |
% |
|
20.3 |
% |
|
460 bps |
|
|
Impact of
exchange rates |
(0.1 |
) |
|
— |
|
|
(0.1 |
) |
|
|
|
0.2 |
|
|
— |
|
|
0.2 |
|
|
|
Constant currency
adjusted earnings beforeincome taxes (a) |
$ |
140.1 |
|
|
$ |
111.1 |
|
|
$ |
29.0 |
|
|
26 |
% |
|
$ |
274.0 |
|
|
$ |
210.5 |
|
|
$ |
63.5 |
|
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for
income taxes |
$ |
35.3 |
|
|
$ |
37.1 |
|
|
$ |
(1.8 |
) |
|
(5 |
)% |
|
$ |
68.0 |
|
|
$ |
71.7 |
|
|
$ |
(3.7 |
) |
|
(5 |
)% |
Effective
tax rate |
29.7 |
% |
|
34.7 |
% |
|
|
|
|
|
29.5 |
% |
|
35.4 |
% |
|
|
|
|
Income tax
effect of pre-tax adjustments |
7.9 |
|
|
2.1 |
|
|
|
|
|
|
16.0 |
|
|
3.3 |
|
|
|
|
|
Pre
spin-off filed tax return adjustment |
— |
|
|
0.4 |
|
|
|
|
|
|
— |
|
|
0.4 |
|
|
|
|
|
Adjusted
provision for income taxes (a) |
$ |
43.2 |
|
|
$ |
39.6 |
|
|
$ |
3.6 |
|
|
9 |
% |
|
$ |
84.0 |
|
|
$ |
75.4 |
|
|
$ |
8.6 |
|
|
11 |
% |
Adjusted
effective tax rate |
30.8 |
% |
|
35.6 |
% |
|
|
|
|
|
30.7 |
% |
|
35.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
$ |
83.6 |
|
|
$ |
69.7 |
|
|
$ |
13.9 |
|
|
20 |
% |
|
$ |
162.8 |
|
|
$ |
130.9 |
|
|
$ |
31.9 |
|
|
24 |
% |
Less: net earnings
attributable tononcontrolling interest |
0.9 |
|
|
1.5 |
|
|
|
|
|
|
3.2 |
|
|
3.7 |
|
|
|
|
|
Net earnings
attributable to CDK |
82.7 |
|
|
68.2 |
|
|
14.5 |
|
|
21 |
% |
|
159.6 |
|
|
127.2 |
|
|
32.4 |
|
|
25 |
% |
Restructuring expenses |
2.3 |
|
|
1.8 |
|
|
|
|
|
|
3.4 |
|
|
3.7 |
|
|
|
|
|
Other
business transformation expenses |
19.0 |
|
|
5.1 |
|
|
|
|
|
|
39.6 |
|
|
6.8 |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
(2.6 |
) |
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Income
tax benefit on pre-tax adjustments |
(7.9 |
) |
|
(2.1 |
) |
|
|
|
|
|
(16.0 |
) |
|
(3.3 |
) |
|
|
|
|
Pre
spin-off filed tax return adjustment |
— |
|
|
(0.4 |
) |
|
|
|
|
|
— |
|
|
(0.4 |
) |
|
|
|
|
Adjusted net
earnings attributable toCDK (a) |
$ |
96.1 |
|
|
$ |
70.0 |
|
|
$ |
26.1 |
|
|
37 |
% |
|
$ |
186.6 |
|
|
$ |
131.4 |
|
|
$ |
55.2 |
|
|
42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings attributable to CDKper share |
$ |
0.55 |
|
|
$ |
0.43 |
|
|
$ |
0.12 |
|
|
28 |
% |
|
$ |
1.06 |
|
|
$ |
0.80 |
|
|
$ |
0.26 |
|
|
33 |
% |
Restructuring expenses |
0.01 |
|
|
0.01 |
|
|
|
|
|
|
0.02 |
|
|
0.02 |
|
|
|
|
|
Other
business transformation expenses |
0.13 |
|
|
0.03 |
|
|
|
|
|
|
0.26 |
|
|
0.04 |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
(0.02 |
) |
|
|
|
|
|
— |
|
|
(0.02 |
) |
|
|
|
|
Income
tax effect of pre-tax adjustments |
(0.05 |
) |
|
(0.01 |
) |
|
|
|
|
|
(0.10 |
) |
|
(0.02 |
) |
|
|
|
|
Pre
spin-off filed tax return adjustment |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
Adjusted
diluted earnings attributable toCDK per share |
$ |
0.64 |
|
|
$ |
0.44 |
|
|
$ |
0.20 |
|
|
45 |
% |
|
$ |
1.24 |
|
|
$ |
0.82 |
|
|
$ |
0.42 |
|
|
51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common
sharesoutstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
149.9 |
|
|
159.7 |
|
|
|
|
|
|
150.7 |
|
|
160.0 |
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2016 |
|
2015 |
|
$ |
|
% |
|
2016 |
|
2015 |
|
$ |
|
% |
Net earnings
attributable to CDK |
$ |
82.7 |
|
|
$ |
68.2 |
|
|
$ |
14.5 |
|
|
21 |
% |
|
$ |
159.6 |
|
|
$ |
127.2 |
|
|
$ |
32.4 |
|
|
25 |
% |
Margin |
15.1 |
% |
|
13.1 |
% |
|
200
bps |
|
14.5 |
% |
|
12.3 |
% |
|
220
bps |
Net
earnings attributable to noncontrolling interest |
0.9 |
|
|
1.5 |
|
|
|
|
|
|
3.2 |
|
|
3.7 |
|
|
|
|
|
Provision
for income taxes |
35.3 |
|
|
37.1 |
|
|
|
|
|
|
68.0 |
|
|
71.7 |
|
|
|
|
|
Interest expense |
12.3 |
|
|
9.5 |
|
|
|
|
|
|
23.0 |
|
|
18.8 |
|
|
|
|
|
Depreciation and amortization |
17.3 |
|
|
14.7 |
|
|
|
|
|
|
34.4 |
|
|
28.7 |
|
|
|
|
|
Total stock-based compensation |
10.7 |
|
|
7.0 |
|
|
|
|
|
|
20.5 |
|
|
12.8 |
|
|
|
|
|
Restructuring expenses |
2.3 |
|
|
1.8 |
|
|
|
|
|
|
3.4 |
|
|
3.7 |
|
|
|
|
|
Other
business transformation expenses |
18.2 |
|
|
4.6 |
|
|
|
|
|
|
38.0 |
|
|
6.2 |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
(2.6 |
) |
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Adjusted EBITDA
(a) |
$ |
179.7 |
|
|
$ |
141.8 |
|
|
$ |
37.9 |
|
|
27 |
% |
|
$ |
350.1 |
|
|
$ |
270.2 |
|
|
$ |
79.9 |
|
|
30 |
% |
Adjusted margin |
32.8 |
% |
|
27.3 |
% |
|
550
bps |
|
31.9 |
% |
|
26.1 |
% |
|
580
bps |
|
Six Months Ended |
|
December 31, |
|
2016 |
|
2015 |
Net cash flows provided
by operating activities |
$ |
173.4 |
|
|
$ |
25.8 |
|
Capital
expenditures |
(29.7 |
) |
|
(18.1 |
) |
Capitalized
software |
(10.0 |
) |
|
(2.1 |
) |
Free cash flow
(a) |
$ |
133.7 |
|
|
$ |
5.6 |
|
(a) Refer to the Non-GAAP Financial Measures section of this
earnings release for additional information on our non-GAAP
adjustments.
CDK Global, Inc.Consolidated Fiscal
2017 Guidance(In millions, except per share
amounts)(Unaudited)
|
Fiscal 2016 |
|
Fiscal 2017 |
|
Actuals |
|
Point Estimate (a) |
|
Guidance |
Revenues |
$ |
2,114.6 |
|
|
$ |
2,210.0 |
|
|
Increase 4 - 5% |
|
|
|
|
|
|
Earnings before
income taxes |
$ |
369.1 |
|
|
$ |
435.0 |
|
|
Increase 17 - 19% |
Restructuring expenses |
20.2 |
|
|
22.0 |
|
|
|
Other
business transformation expenses |
39.7 |
|
|
73.0 |
|
|
|
Tax matters indemnification gain, net |
(2.6 |
) |
|
— |
|
|
|
Adjusted
earnings before income taxes (b) |
$ |
426.4 |
|
|
$ |
530.0 |
|
|
Increase 23 - 26% |
|
|
|
|
|
|
Provision for
income taxes |
$ |
122.3 |
|
|
$ |
138.0 |
|
|
|
Effective
tax rate |
33.1 |
% |
|
31.7 |
% |
|
31.0 -
32.0% |
Income tax effect of pre-tax adjustments |
21.6 |
|
|
35.0 |
|
|
|
Pre spin-off filed tax return adjustment |
0.4 |
|
|
— |
|
|
|
Adjusted
provision for income taxes (b) |
$ |
144.3 |
|
|
$ |
173.0 |
|
|
|
Adjusted effective tax rate |
33.8 |
% |
|
32.6 |
% |
|
32.5 -
33.0% |
|
|
|
|
|
|
Net
earnings |
$ |
246.8 |
|
|
$ |
297.0 |
|
|
|
Less: net earnings
attributable to noncontrolling interest |
7.5 |
|
|
7.0 |
|
|
|
Net earnings
attributable to CDK |
$ |
239.3 |
|
|
$ |
290.0 |
|
|
Increase 21 - 23% |
Restructuring expenses |
20.2 |
|
|
22.0 |
|
|
|
Other
business transformation expenses |
39.7 |
|
|
73.0 |
|
|
|
Tax matters indemnification gain, net |
(2.6 |
) |
|
— |
|
|
|
Income tax effect of pre-tax adjustments |
(21.6 |
) |
|
(35.0 |
) |
|
|
Pre spin-off filed tax return adjustment |
(0.4 |
) |
|
— |
|
|
|
Adjusted net
earnings attributable to CDK (b) |
$ |
274.6 |
|
|
$ |
350.0 |
|
|
Increase 26 - 29% |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net
earnings attributable to CDK per common share |
$ |
1.51 |
|
|
$ |
1.95 |
|
|
$1.93
- 1.99 |
Growth
% |
|
|
|
|
Increase 28 - 32% |
Restructuring expenses |
0.13 |
|
|
0.15 |
|
|
|
Other
business transformation expenses |
0.25 |
|
|
0.49 |
|
|
|
Tax matters indemnification gain, net |
(0.01 |
) |
|
— |
|
|
|
Income tax effect of pre-tax adjustments |
(0.14 |
) |
|
(0.23 |
) |
|
|
Pre spin-off filed tax return adjustment |
— |
|
|
— |
|
|
|
Adjusted
diluted net earnings attributable to CDK per common share
(b) |
$ |
1.74 |
|
|
$ |
2.36 |
|
|
$2.33
- 2.38 |
Growth
% |
|
|
|
|
Increase 34 - 37% |
|
Fiscal 2016 |
|
Fiscal 2017 |
|
Actuals |
|
Full Year |
|
4th QuarterPoint
Estimate(a) |
|
|
Full Year PointEstimate (a) |
|
Guidance |
|
Revenues |
$ |
2,114.6 |
|
|
$ |
2,210.0 |
|
|
|
|
$ |
557.0 |
|
|
|
|
|
|
|
|
|
Net earnings
attributable to CDK |
$ |
239.3 |
|
|
$ |
290.0 |
|
|
Increase 21 - 23% |
|
$ |
65.0 |
|
Margin |
11.3 |
% |
|
13.1 |
% |
|
Increase 170 - 210 bps |
|
11.7 |
% |
Net
earnings attributable to noncontrolling interest |
7.5 |
|
|
7.0 |
|
|
|
|
2.0 |
|
Provision
for income taxes |
122.3 |
|
|
138.0 |
|
|
|
|
34.0 |
|
Interest expense |
40.2 |
|
|
57.0 |
|
|
|
|
20.0 |
|
Depreciation and amortization |
64.0 |
|
|
73.0 |
|
|
|
|
20.0 |
|
Total stock-based compensation |
36.4 |
|
|
54.0 |
|
|
|
|
24.0 |
|
Restructuring expenses |
20.2 |
|
|
22.0 |
|
|
|
|
7.0 |
|
Other
business transformation expenses |
34.8 |
|
|
71.0 |
|
|
|
|
15.0 |
|
Tax matters indemnification gain, net |
(2.6 |
) |
|
— |
|
|
|
|
— |
|
Adjusted EBITDA
(b) |
$ |
562.1 |
|
|
$ |
712.0 |
|
|
Increase 24 - 27% |
|
$ |
187.0 |
|
Adjusted
margin |
26.6 |
% |
|
32.2 |
% |
|
Increase 550 - 575bps |
|
33.6 |
% |
(a) The point estimates are arbitrary amounts within the
guidance ranges provided and are not meant to represent CDK's
forecast of actual results. They are used solely to provide a means
to reconcile each non-GAAP guidance range to the most directly
comparable GAAP measure in dollars and percentages, where
applicable.
(b) Refer to the Non-GAAP Financial Measures section of this
earnings release for additional information on our non-GAAP
adjustments.
CDK Global, Inc.Performance
Metrics(Unaudited)
Effective July 1, 2016, the Company reorganized into two main
operating groups. In connection with this reorganization, our
operating segments have changed. The Company's first operating
group is CDK North America which is comprised of two
reportable segments, Retail Solutions North America and
Advertising North America. The second operating group, which is
also a reportable segment, is CDK International. The key
performance metrics for fiscal 2016 have been restated to conform
to the new presentation.
CDK management regularly reviews the following key performance
measures to evaluate business results and make operating and
strategic decisions. These measures are intended to provide
directional information regarding trends in our recurring
subscription revenues. The following table summarizes these
measures for recurring subscription revenues in our segments:
|
|
For the Three Months Ended |
|
|
September30, 2015 (a) |
|
December30, 2016 (a) |
|
March 31,2016 (a) |
|
June 30,2016 (a) |
|
September30, 2016 |
|
December31, 2016 |
RSNA |
|
|
|
|
|
|
|
|
|
|
|
|
Automotive |
|
|
|
|
|
|
|
|
|
|
|
|
DMS Customer Sites (b) |
|
9,181 |
|
|
9,210 |
|
|
9,184 |
|
|
9,206 |
|
|
9,232 |
|
|
9,184 |
|
Avg Revenue Per Site (c) |
|
$ |
7,145 |
|
|
$ |
7,177 |
|
|
$ |
7,286 |
|
|
$ |
7,434 |
|
|
$ |
7,827 |
|
|
$ |
7,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjacencies |
|
|
|
|
|
|
|
|
|
|
|
|
DMS Customer Sites (b) |
|
5,096 |
|
|
5,178 |
|
|
5,236 |
|
|
5,327 |
|
|
5,380 |
|
|
5,415 |
|
Avg Revenue Per Site (c) |
|
$ |
1,524 |
|
|
$ |
1,520 |
|
|
$ |
1,535 |
|
|
$ |
1,537 |
|
|
$ |
1,560 |
|
|
$ |
1,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RSNA |
|
|
|
|
|
|
|
|
|
|
|
|
DMS Customer Sites (b) |
|
14,277 |
|
|
14,388 |
|
|
14,420 |
|
|
14,533 |
|
|
14,612 |
|
|
14,599 |
|
Avg Revenue Per Site (c) |
|
$ |
5,141 |
|
|
$ |
5,146 |
|
|
$ |
5,205 |
|
|
$ |
5,277 |
|
|
$ |
5,524 |
|
|
$ |
5,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Websites (d) |
|
6,946 |
|
|
6,871 |
|
|
6,761 |
|
|
6,641 |
|
|
6,625 |
|
|
6,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDKI |
|
|
|
|
|
|
|
|
|
|
|
|
DMS Customer Sites (b) |
|
13,208 |
|
|
13,267 |
|
|
13,240 |
|
|
13,392 |
|
|
13,373 |
|
|
13,424 |
|
Avg Revenue Per Site (c) |
|
$ |
1,060 |
|
|
$ |
1,122 |
|
|
$ |
1,138 |
|
|
$ |
1,148 |
|
|
$ |
1,165 |
|
|
$ |
1,183 |
|
(a) Average revenue per Dealer Management System (DMS) customer
site has been updated for fiscal 2016 to reflect the change in
reportable segments and budgeted foreign exchange rates for fiscal
2017.
(b) DMS Customer Sites - We track the number of customer sites
that have an active DMS. Consistent with our strategy of growing
our automotive retail customer base, we view the number of customer
sites purchasing our DMS solutions as an indicator of market
penetration for our RSNA and CDKI segments. Our DMS customer site
count includes retailers with an active DMS that sell vehicles in
the automotive and adjacent markets. Adjacent markets include heavy
truck dealerships that provide vehicles to the over-the-road
trucking industry, recreation dealerships in the motorcycle,
marine, and recreational vehicle industries, and heavy equipment
dealerships in the agriculture and construction equipment
industries. We consider a DMS to be active if we have billed a
subscription fee for that solution during the most recently ended
calendar month.
(c) Average Revenue Per DMS Customer Site - Average revenue per
automotive retail DMS customer site is an indicator of the adoption
of our solutions by DMS customers, and we monitor changes in this
metric to measure the effectiveness of our strategy to deepen our
relationships with our current customer base through upgrading and
expanding solutions. We calculate average revenue per DMS customer
site by dividing the monthly applicable revenue generated from our
solutions in a period by the average number of DMS customer sites
in the period. This metric has been updated to reflect the new
segments and now includes revenue generated from websites.
The metric excludes subscription revenue generated by customers not
included in our DMS site count as well as subscription revenue
related to certain installation and training activities that is
deferred then recognized as revenue over the life of the contract.
Revenue underlying this metric is based on budgeted foreign
exchange rates. When we discuss growth in average revenue per DMS
customer site, revenue for the comparable prior period has been
adjusted to reflect budgeted foreign exchange rates for the current
period.
(d) Websites - For the RSNA segment, we track the number of
websites that we host and develop for our OEM and automotive retail
customers as an indicator of business activity, regardless of
whether or not the website is tied to a DMS customer site. The
number of websites as of a specified date is the total number of
full function dealer websites or portals that are currently
accessible as of the end of the most recent calendar month.
Non-GAAP Financial Measures
We use certain adjusted results to evaluate our operating
performance. In addition, we use adjusted EBITDA, among other
measures, as an input to determine incentive-based compensation and
target leverage. Our non-GAAP adjustments principally relate to
expenses and benefits that impact comparability of the underlying
GAAP measures. We believe our non-GAAP measures provide relevant
and useful information for users of the financial statements
because they provide insight into our ongoing operating results.
Adjusted earnings before income taxes, adjusted provision for
income taxes, adjusted net earnings attributable to CDK, adjusted
basic and diluted earnings attributable to CDK per share, and
adjusted EBITDA reflect the adjustments enumerated below. Because
adjusted results are not measures of performance that are
calculated in accordance with GAAP, they should not be considered
in isolation from, or as a substitute for, other metrics that are
calculated in accordance with GAAP.
Management has excluded the following items from adjusted
earnings before income taxes:
- Restructuring expenses recognized in connection with our
business transformation plan for the periods presented.
- Other business transformation expenses are included within cost
of revenues and selling, general and administrative expenses and
were incurred in connection with our business transformation plan
for the periods presented.
Management has excluded the following item from adjusted
provision for income taxes:
- Income tax effect of pre-tax adjustments described above for
the periods presented.
Management has excluded the items described above for adjusted
earnings before income taxes and adjusted provision for income
taxes from adjusted net earnings attributable to CDK and adjusted
basic and diluted net earnings attributable to CDK per share.
Management has adjusted the following items from net earnings
attributable to CDK in order to calculate adjusted EBITDA:
- Net earnings attributable to noncontrolling interest included
within the financial statements for the periods presented.
- Provision for income taxes included within the financial
statements for the periods presented.
- Interest expense included within the financial statements for
the periods presented.
- Depreciation and amortization included within the financial
statements for the periods presented.
- Total stock-based compensation expense recognized for the
periods presented.
- Restructuring expenses recognized in connection with our
business transformation plan for the periods presented.
- Other business transformation expenses were included within
cost of revenues and selling, general and administrative expenses
and were incurred in connection with our business transformation
plan for the six months ended December 31, 2016 and 2015.
Other business transformation expenses excludes accelerated
depreciation and stock-based compensation expense of $0.8 million
and $0.5 million for the three months ended December 31, 2016
and 2015, respectively and $1.6 million and $0.6 million for the
six months ended December 31, 2016 and 2015,
respectively.
We also review free cash flow to measure our ability to generate
additional cash from our business operations. Free cash flow is
defined as cash flow from operating activities less amounts paid
for capital expenditures and capitalized software. Free cash flow
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.
We also review certain non-GAAP measures, revenues and adjusted
earnings before income taxes, on a constant currency basis to
understand underlying business trends. To present these results on
a constant currency basis, current period results for entities
reporting in currencies other than the U.S. dollar are translated
into U.S. dollar using the average monthly exchange rate for the
comparable prior period. As a result, constant currency results
neutralize the effects of foreign currency.
Forecasts of non-GAAP measures for fiscal 2017 reflect expected
adjustments for restructuring expenses, other business
transformation expenses, and the related tax effect. In calculating
adjusted EBITDA, we also remove total stock-based compensation
expense. The fiscal 2018 adjusted EBITDA margin target represents a
financial objective distinct from a forecast of performance.
Therefore, we have not provided reconciliations of our fiscal 2018
adjusted EBITDA margin target to the most directly comparable GAAP
measure of net earnings attributable to CDK margin, because
projecting potential adjustments to GAAP results for a fiscal 2018
target is not feasible and could be misleading to users of this
financial information. The accompanying reconciliation of the
fiscal 2017 forecasted adjusted EBITDA margin with net earnings
attributable to CDK margin is indicative of the reconciliation that
will be prepared for the same fiscal 2018 adjusted EBITDA margin
target in the future.
Safe Harbor for Forward-Looking
Statements
This press release contains "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements, other than statements of
historical facts, including forecasted GAAP and adjusted results
for CDK’s fiscal year ending June 30, 2017 and targeted adjusted
results for CDK’s fiscal year ending June 30, 2018, statements
concerning CDK's payment of dividends and the repurchase of shares,
leverage targets and the funding of the dividends and repurchases,
and its business transformation plan, other plans, objectives,
forecasts, goals, beliefs, business strategies, future events,
business conditions, results of operations, financial position and
business outlook and business 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: CDK's success in obtaining, retaining and
selling additional services to customers; the pricing of products
and services; overall market and economic conditions, including
interest rate and foreign currency trends, and technology trends;
auto sales and advertising and related industry changes;
competitive conditions; changes in regulation; changes in
technology; security breaches, interruptions, failures and other
errors involving CDK'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 CDK’s credit ratings and the
impact of such changes on CDK’s financing costs, rates, terms, debt
service obligations, access to capital market and working capital
needs; the impact of CDK’s indebtedness, access to cash and
financing, and ability to secure financing, or financing at
attractive rates; CDK's ability to timely and effectively implement
its transformation plan, which is intended to increase operating
efficiency and improve CDK's global cost structure, while limiting
or mitigating business disruption; and the ability of CDK's
significant stockholders and their affiliates to significantly
influence CDK's decisions.
There may be other factors that may cause CDK's
actual results to differ materially from the forward-looking
statements. CDK's actual results, performance or achievements could
differ materially from those expressed in, or implied by, the
forward-looking statements. CDK 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 CDK's reports filed with the Securities
and Exchange Commission ("SEC"), including those discussed
under "Part I, Item 1A. Risk Factors" in CDK's most recent Annual
Report on Form 10-K and its most recent Quarterly Report on Form
10-Q for a description of certain risks that could, among other
things, cause CDK's actual results to differ from any
forward-looking statements contained herein. These filings can be
found on CDK's website at www.cdkglobal.com and
the SEC's website at www.sec.gov.
All forward-looking statements speak only as of
the date of this press release even if subsequently made available
by CDK on its website or otherwise. CDK 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:
Taze Rowe
847.485.4012
taze.rowe@cdk.com
Media Contact:
David Webster
Aberdeen Strategies
469.222.3667
david.webster@aberdeenstrategies.com
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