Revenues Rise 5%, 7.5%
on a constant currency basis, to $526.4 Million for the
Quarter; GAAP Net Earnings Decline 19%; Adjusted
Net Earnings Increase 16%
CDK Global, Inc. (Nasdaq:CDK) today announced its third quarter
fiscal 2015 financial results for the period ended March 31, 2015.
Highlights are below:
Third Quarter Fiscal 2015 Results |
As Reported |
As Adjusted |
|
|
|
Revenues |
5% to $526.4 million |
5% to $526.4 million |
Earnings before income taxes |
(9)% to $91.0 million |
16% to $91.6 million |
Net earnings attributable to CDK |
(19)% to $56.3 million |
16% to $56.8 million |
Diluted net earnings attributable to CDK per
share |
(19)% to $0.35 per share |
13% to $0.35 per share |
"I am pleased with CDK's financial results for the third
quarter. Each of our business segments performed well and we
achieved solid earnings growth with good margin expansion," said
Steve Anenen, President and Chief Executive Officer, CDK.
"We are committed to shareholder friendly actions, and as part
of our capital deployment strategy, CDK acquired 689,000 shares
under its repurchase authorization at a cost of $32.2 million,"
said Al Nietzel, Chief Financial Officer, CDK.
Growth in revenues and earnings before income taxes for the
third quarter was negatively impacted by 2.5 percentage points and
2 percentage points, respectively, from unfavorable foreign
exchange rates in both the "As Reported" and "As Adjusted" results
above. The above "As Adjusted" results exclude in fiscal 2015 $0.6
million of incremental costs incurred during the third quarter of
fiscal 2015 that are directly attributable to the separation from
ADP® (Nasdaq:ADP). In order to present both periods on a comparable
basis, the above "As Adjusted" results include in fiscal 2014
amounts representing certain incremental costs related to being an
independent public company in fiscal 2015 including interest
expense, stand-alone public company costs, and stock-based
compensation. Additionally, the "As Adjusted" results exclude in
fiscal 2014 a favorable acquisition-related adjustment of $5.6
million and an income tax benefit due to a valuation allowance
adjustment of $7.2 million as well as the ADP® trademark royalty
fee. Please refer to the tables at the end of this release for a
reconciliation of the "As Reported" results to the "As Adjusted"
results. All comparisons throughout the remainder of this release
are on an "As Adjusted" basis.
Automotive Retail North America
Automotive Retail North America revenues grew 8% for the third
quarter compared to last year's third quarter. Pretax earnings
increased 12% and pretax margin improved 110 basis points driven by
operating efficiencies partially offset by increased hosting
costs.
Automotive Retail International
Automotive Retail International revenues increased 3% for the
third quarter compared to last year's third quarter. Pretax
earnings increased 4%, resulting in slight pretax margin
improvement for the quarter.
Digital Marketing
Digital Marketing revenues grew 11% for the third quarter
compared to last year's third quarter. Pretax earnings nearly
doubled and pretax margin expanded 450 basis points due to lower
employee related costs and an increased mix of higher margin
website-related revenues, as well as increased operating
efficiencies.
Fiscal 2015 Forecast
As a result of expected continued pressure from unfavorable
foreign exchange rates, CDK has lowered its revenue growth
forecast. CDK's fiscal 2015 forecast excludes costs in connection
with the spin-off and the accelerated amortization of the Cobalt
trademark of $15.6 million recorded in the second quarter of fiscal
2015. For comparability, fiscal 2014 results have also been
adjusted to exclude spin-off related one-time costs, exclude the
$5.6 million favorable acquisition-related adjustment, exclude the
$7.2 million income tax benefit due to a valuation allowance
adjustment, and to include certain incremental costs related to
being an independent public company. The exclusion of the $5.6
million and $7.2 million items from fiscal 2014 to present fiscal
2014 on a comparable basis with fiscal 2015, as well as the effects
of revisions we made to our previously reported financial
statements, resulted in changes to CDK's forecast ranges. The
reconciliations to GAAP measures and a description of the revisions
are included in the schedules within this press release. On this
adjusted basis, the forecast is as follows:
- Revenues – approximately 5% growth from $1,976.5 million in
fiscal 2014, which has been negatively impacted 2 percentage points
from unfavorable foreign exchange rates
- Adjusted earnings before income taxes – approximately 15%
growth from the adjusted $308.2 million in fiscal 2014
- Adjusted pretax margin – approximately 150 basis points of
expansion from the adjusted 15.6% in fiscal 2014
- Adjusted EBITDA margin – approximately 150 basis points of
expansion from the adjusted 21.1% in fiscal 2014
- Adjusted net earnings attributable to CDK – approximately 15%
growth from the adjusted $196.5 million in fiscal 2014
- Adjusted diluted net earnings attributable to CDK per share –
14% to 15% growth from the adjusted $1.22 in fiscal 2014
Effective Tax Rate
CDK's anticipated adjusted effective tax rate for fiscal 2015
has been lowered to 33.5% to 34.0%, as a result of the revised
presentation of the non-controlling interest of CVR as described in
the attached schedules within this press release, compared to 33.6%
for fiscal 2014. This is lower than fiscal 2015's anticipated
normalized effective tax rate of 35.5% to 36.0% due to a first
quarter fiscal 2015 nonrecurring income tax benefit primarily
related to foreign operations. The fiscal 2015 anticipated adjusted
effective tax rate and normalized effective tax rate both exclude
the impact of the $4.6 million increase to income tax expense in
the second quarter fiscal 2015 related to the tax law change for
bonus depreciation which ADP is entitled to claim. The fiscal 2014
adjusted effective tax rate excludes the favorable income tax
benefit of $7.2 million from last year's third quarter.
Separation from ADP
CDK Global, Inc. began operating as a public company on October
1, 2014 following its spin-off from ADP on September 30,
2014.
Website Schedules
Other financial information, including financial statements and
supplementary schedules presented on an "As Reported" and "As
Adjusted" basis for all quarters of fiscal 2014, and the schedule
of quarterly revenues and pretax earnings by reportable segment
have been updated for the third quarter of fiscal 2015 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, April
30, 2015 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. A 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
news releases, current financial information, SEC filings and
Investor Relations presentations are accessible at the same
website.
About CDK Global
With nearly $2 billion in revenues, CDK GlobalTM is
the largest global provider of integrated information technology
and digital marketing solutions to the automotive retail industry
and adjacencies. CDK Global provides solutions in more than 100
countries around the world, serving more than 26,000 retail
locations and most automotive manufacturers. CDK Global's
solutions automate and integrate critical workflow processes from
pre-sale targeted advertising and marketing campaigns to the sale,
financing, insurance, parts supply, repair and maintenance of
vehicles, with an increasing focus on utilizing data analytics and
predictive intelligence. Visit cdkglobal.com.
CDK Global,
Inc. |
Statements of
Consolidated and Combined Earnings |
(In millions, except per
share amounts) |
(Unaudited) |
|
|
|
|
|
|
Three Months Ended |
Nine Months Ended |
|
March 31, |
March 31, |
|
2015 |
2014 (a) |
2015 |
2014 (a) |
|
|
|
|
|
Revenues |
$ 526.4 |
$ 501.1 |
$ 1,560.4 |
$ 1,470.9 |
|
|
|
|
|
Expenses: |
|
|
|
|
Cost of revenues |
321.8 |
304.9 |
956.6 |
900.5 |
Selling, general & administrative
expenses |
105.5 |
96.1 |
321.9 |
303.4 |
Separation costs |
0.6 |
-- |
34.6 |
-- |
Total expenses |
427.9 |
401.0 |
1,313.1 |
1,203.9 |
|
|
|
|
|
Operating earnings |
98.5 |
100.1 |
247.3 |
267.0 |
|
|
|
|
|
Interest expense |
(9.3) |
(0.2) |
(19.4) |
(0.7) |
Other income, net |
1.8 |
0.6 |
4.7 |
1.8 |
|
|
|
|
|
Earnings before income
taxes |
91.0 |
100.5 |
232.6 |
268.1 |
|
|
|
|
|
Provision for income taxes |
(32.8) |
(29.1) |
(89.0) |
(86.9) |
|
|
|
|
|
Net earnings |
58.2 |
71.4 |
143.6 |
181.2 |
Less: net earnings attributable to
noncontrolling interest |
1.9 |
1.8 |
5.9 |
5.2 |
Net earnings attributable to
CDK |
$ 56.3 |
$ 69.6 |
$ 137.7 |
$ 176.0 |
|
|
|
|
|
Net earnings attributable to CDK per common
share: |
|
|
|
|
Basic |
$ 0.35 |
$ 0.43 |
$ 0.86 |
$ 1.10 |
Diluted |
$ 0.35 |
$ 0.43 |
$ 0.85 |
$ 1.10 |
|
|
|
|
|
Weighted-average common shares
outstanding |
|
|
|
|
Basic (b) |
160.6 |
160.6 |
160.7 |
160.6 |
Diluted (b) |
161.9 |
160.6 |
161.5 |
160.6 |
|
|
|
|
|
(a) Amounts have been revised to
reflect sales-type lease accounting for certain hardware components
of our DMS and integrated solutions and to reflect the revised
presentation of the noncontrolling interest in earnings of
Computerized Vehicle Registration, Inc. For additional information
on the revisions, refer to Note 1 - Basis of Presentation in our
unaudited condensed consolidated and combined financial statements
for the quarterly period ended March 31, 2015, which will be filed
on Form 10-Q. |
(b) On September 30, 2014,
ADP shareholders of record as of the close of business on
September 24, 2014 received one share of our common stock for
every three shares of ADP common stock held as of the record date.
For periods ended September 30, 2014 and prior, basic and
diluted earnings attributable to CDK per share were computed using
the number of shares of our stock outstanding on September 30,
2014, the date on which our common stock was distributed to the
shareholders of ADP. The same number of shares was used to
calculate basic and diluted earnings attributable to CDK per share
because there were no dilutive securities in those periods. |
|
CDK Global,
Inc. |
Consolidated and Combined
Balance Sheets |
(In
millions) |
(Unaudited) |
|
|
|
|
March 31, |
June 30, |
|
2015 |
2014 (a) |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 368.5 |
$ 402.8 |
Accounts receivable, net of allowance for
doubtful accounts |
352.8 |
310.7 |
Notes receivable from ADP and its
affiliates |
-- |
40.6 |
Other current assets |
185.1 |
164.1 |
Total current assets |
906.4 |
918.2 |
|
|
|
Property, plant and equipment, net |
85.3 |
82.6 |
Other assets |
245.4 |
233.1 |
Goodwill |
1,169.1 |
1,230.9 |
Intangible assets, net |
103.1 |
133.8 |
Total assets |
$ 2,509.3 |
$ 2,598.6 |
|
|
|
Liabilities and Equity |
|
|
Current liabilities: |
|
|
Current maturities of long-term debt |
$ 12.5 |
$ -- |
Accounts payable |
20.9 |
17.2 |
Accrued expenses and other current
liabilities |
161.5 |
158.0 |
Accrued payroll and payroll-related
expenses |
97.3 |
105.6 |
Short-term deferred revenues |
183.5 |
194.8 |
Notes payable to ADP and its
affiliates |
-- |
21.9 |
Total current liabilities |
475.7 |
497.5 |
|
|
|
Long-term debt |
981.3 |
-- |
Long-term deferred revenues |
179.4 |
182.8 |
Deferred income taxes |
73.3 |
76.5 |
Other liabilities |
35.6 |
32.5 |
Total liabilities |
1,745.3 |
789.3 |
|
|
|
Equity: |
|
|
Preferred stock |
-- |
-- |
Common stock |
1.6 |
-- |
Additional paid-in-capital |
677.2 |
-- |
Retained earnings |
59.9 |
-- |
Treasury stock, at cost |
(32.2) |
-- |
Net parent company investment |
-- |
1,712.2 |
Accumulated other comprehensive
income |
45.6 |
85.7 |
Total CDK stockholders' equity |
752.1 |
1,797.9 |
Noncontrolling interest |
11.9 |
11.4 |
Total equity |
764.0 |
1,809.3 |
Total liabilities and equity |
$ 2,509.3 |
$ 2,598.6 |
|
|
|
|
|
|
(a) Amounts have been revised to
reflect sales-type lease accounting for certain hardware components
of our DMS and integrated solutions and to reflect the revised
presentation of the noncontrolling interest in net assets of
Computerized Vehicle Registration, Inc. For additional information
on the revisions, refer to Note 1 - Basis of Presentation in our
unaudited condensed consolidated and combined financial statements
for the quarterly period ended March 31, 2015, which will be filed
on Form 10-Q. |
|
CDK Global,
Inc. |
Segment Financial
Data |
(In
millions) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
We use certain adjusted results,
among other measures, to evaluate our operating performance in the
absence of certain items for planning and forecasting purposes. We
believe that adjusted results provide relevant and useful
information because they allow investors to view performance in a
manner similar to the method used by us and they improve our
ability to understand our operating performance. Adjusted earnings
before income taxes reflects the adjustments to the Automotive
Retail North America, Digital Marketing, and Other segments
enumerated in the footnotes below. There were no adjustments to the
Automotive Retail International segment. Because adjusted earnings
before income taxes is not a measure of performance that is
calculated in accordance with accounting principles generally
accepted in the United States ("GAAP"), it should not be considered
in isolation from, or as a substitute for, other metrics that are
calculated in accordance with GAAP. |
|
|
|
|
|
Segment
Revenues |
Adjusted Segment
Earnings before Income Taxes |
Adjusted Segment
Margin |
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
March 31, |
Change |
March 31, |
Change |
March 31, |
Change |
|
2015 |
2014 (a) |
$ |
% |
2015 |
2014 (a) |
$ |
% |
2015 |
2014 (a) |
BPS |
Automotive Retail North America (b) |
$ 347.3 |
$ 321.5 |
$ 25.8 |
8% |
$ 103.2 |
$ 91.8 |
$ 11.4 |
12% |
29.7% |
28.6% |
110 |
Automotive Retail International |
87.6 |
85.2 |
2.4 |
3% |
13.0 |
12.5 |
0.5 |
4% |
14.8% |
14.7% |
10 |
Digital Marketing (c) |
106.2 |
95.9 |
10.3 |
11% |
10.9 |
5.6 |
5.3 |
95% |
10.3% |
5.8% |
450 |
Other (d) |
-- |
-- |
-- |
n/a |
(33.1) |
(31.0) |
(2.1) |
7% |
n/m |
n/m |
n/m |
Foreign exchange |
(14.7) |
(1.5) |
(13.2) |
n/m |
(2.4) |
(0.2) |
(2.2) |
n/m |
n/m |
n/m |
n/m |
Total |
$ 526.4 |
$ 501.1 |
$ 25.3 |
5% |
$ 91.6 |
$ 78.7 |
$ 12.9 |
16% |
17.4% |
15.7% |
170 |
|
|
|
|
|
Segment
Revenues |
Adjusted Segment
Earnings before Income Taxes |
Adjusted Segment
Margin |
|
Nine Months Ended |
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
|
March 31, |
Change |
March 31, |
Change |
March
31, |
Change |
|
2015 |
2014 (a) |
$ |
% |
2015 |
2014 (a) |
$ |
% |
2015 |
2014 (a) |
BPS |
Automotive Retail North America (b) |
$ 1,007.0 |
$ 948.5 |
$ 58.5 |
6% |
$ 290.4 |
$ 253.2 |
$ 37.2 |
15% |
28.8% |
26.7% |
210 |
Automotive Retail International |
261.7 |
255.2 |
6.5 |
3% |
41.5 |
37.0 |
4.5 |
12% |
15.9% |
14.5% |
140 |
Digital Marketing (c) |
315.2 |
272.6 |
42.6 |
16% |
30.5 |
17.7 |
12.8 |
72% |
9.7% |
6.5% |
320 |
Other (d) |
-- |
-- |
-- |
n/a |
(75.5) |
(77.6) |
2.1 |
(3)% |
n/m |
n/m |
n/m |
Foreign exchange |
(23.5) |
(5.4) |
(18.1) |
335% |
(4.1) |
0.3 |
(4.4) |
n/m |
n/m |
n/m |
n/m |
Total |
$ 1,560.4 |
$ 1,470.9 |
$ 89.5 |
6% |
$ 282.8 |
$ 230.6 |
$ 52.2 |
23% |
18.1% |
15.7% |
240 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) Amounts have been revised to
reflect sales-type lease accounting for certain hardware components
of our DMS and integrated solutions and to reflect the revised
presentation of the noncontrolling interest in earnings of
Computerized Vehicle Registration, Inc. For additional information
on the revisions, refer to Note 1 - Basis of Presentation in our
unaudited condensed consolidated and combined financial statements
for the quarterly period ended March 31, 2015, which will be filed
on Form 10-Q. |
(b) The following table provides
a reconciliation of the most directly comparable GAAP measure to
adjusted earnings before income taxes for the Automotive Retail
North America segment: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Nine Months Ended |
|
|
|
|
|
|
|
|
March 31, |
March 31, |
|
|
|
|
|
|
|
|
2015 |
2014 (a) |
2015 |
2014 (a) |
|
|
|
|
|
|
|
Earnings before income taxes |
$ 103.2 |
$ 100.3 |
$ 290.4 |
$ 264.7 |
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Stand-alone public company costs (e) |
-- |
(2.9) |
-- |
(5.9) |
|
|
|
|
|
|
|
Acquisition-related adjustment (f) |
-- |
(5.6) |
-- |
(5.6) |
|
|
|
|
|
|
|
Adjusted earnings before income taxes |
$ 103.2 |
$ 91.8 |
$ 290.4 |
$ 253.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) The following table provides
a reconciliation of the most directly comparable GAAP measure to
adjusted earnings before income taxes for the Digital Marketing
segment: |
|
Three Months Ended |
Nine Months Ended |
|
|
|
|
|
|
|
|
March 31, |
March 31, |
|
|
|
|
|
|
|
|
2015 |
2014 (a) |
2015 |
2014 (a) |
|
|
|
|
|
|
|
Earnings before income taxes |
$ 10.9 |
$ 5.6 |
$ 14.9 |
$ 17.7 |
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Accelerated trademark amortization
(g) |
-- |
-- |
15.6 |
-- |
|
|
|
|
|
|
|
Adjusted earnings before income taxes |
$ 10.9 |
$ 5.6 |
$ 30.5 |
$ 17.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) The following table provides
a reconciliation of the most directly comparable GAAP measure to
adjusted loss before income taxes for the Other segment: |
|
Three Months Ended |
Nine Months Ended |
|
|
|
|
|
|
|
|
March 31, |
March 31, |
|
|
|
|
|
|
|
|
2015 |
2014 (a) |
2015 |
2014 (a) |
|
|
|
|
|
|
|
Loss before income taxes |
$ (33.7) |
$ (17.7) |
$ (110.1) |
$ (51.6) |
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Separation costs (h) |
0.6 |
-- |
34.6 |
-- |
|
|
|
|
|
|
|
Stand-alone public company costs (e) |
-- |
(6.7) |
-- |
(12.7) |
|
|
|
|
|
|
|
Trademark royalty fee (i) |
-- |
5.6 |
-- |
11.0 |
|
|
|
|
|
|
|
Stock-based compensation (j) |
-- |
(3.1) |
-- |
(5.5) |
|
|
|
|
|
|
|
Interest expense (k) |
-- |
(9.1) |
-- |
(18.8) |
|
|
|
|
|
|
|
Adjusted loss before income taxes |
$ (33.1) |
$ (31.0) |
$ (75.5) |
$ (77.6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) Represents recurring costs
that are expected to be incurred as a stand-alone company
incremental to the allocations of ADP costs included within the
historical financial statements for FY2014. |
(f) Represents a fair value
adjustment recognized during the three months ended March 31, 2014
related to an acquisition-related contingency. |
(g) Represents accelerated
amortization recognized in the Digital Marketing segment for the
Cobalt trademark related to the change in useful life. |
(h) Represents the removal of
separation costs incurred during FY2015 that were directly related
to our separation from ADP. |
(i) Represents the elimination
of the royalty paid to ADP for the utilization of the ADP trademark
during the period October 1, 2013 through March 31, 2014 as there
was no comparable royalty paid in the period from October 1, 2014
through March 31, 2015 due to our separation from ADP. |
(j) Represents additional
stock-based compensation expenses for staff additions to build out
corporate functions and director compensation costs. |
(k) Represents interest expense
incurred in FY2015 related to long-term debt issued in conjunction
with the separation. |
|
CDK Global,
Inc. |
Consolidated and Combined
Adjusted Financial Information |
(In millions, except per
share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
We use certain adjusted results,
among other measures, to evaluate our operating performance in the
absence of certain items for planning and forecasting purposes. We
believe that adjusted results provide relevant and useful
information because they allow investors to view performance in a
manner similar to the method used by us and they improve our
ability to understand our operating performance. Adjusted earnings
before income taxes, adjusted net earnings attributable to CDK,
adjusted basic and diluted earnings attributable to CDK per share,
EBITDA and adjusted EBITDA reflect the adjustments enumerated in
the footnotes below. EBITDA is calculated as earnings before income
taxes adjusted to exclude interest expense, depreciation, and
amortization. Because adjusted earnings before income taxes,
adjusted net earnings attributable to CDK, adjusted basic and
diluted earnings per share, EBITDA, and adjusted EBITDA are not
measures of performance that are calculated in accordance with
accounting principles generally accepted in the United States
("GAAP"), they should not be considered in isolation from, or as a
substitute for, other metrics that are calculated in accordance
with GAAP. |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
March 31, |
Change |
March 31, |
Change |
|
2015 |
2014 (a) |
$ |
% |
2015 |
2014 (a) |
$ |
% |
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
$ 91.0 |
$ 100.5 |
$ (9.5) |
(9)% |
$ 232.6 |
$ 268.1 |
$ (35.5) |
(13)% |
Adjustments: |
|
|
|
|
|
|
|
|
Separation costs (b) |
0.6 |
-- |
|
|
34.6 |
-- |
|
|
Accelerated trademark amortization
(c) |
-- |
-- |
|
|
15.6 |
-- |
|
|
Stand-alone public company costs (d) |
-- |
(9.6) |
|
|
-- |
(18.6) |
|
|
Trademark royalty fee (e) |
-- |
5.6 |
|
|
-- |
11.0 |
|
|
Stock-based compensation (f) |
-- |
(3.1) |
|
|
-- |
(5.5) |
|
|
Interest expense (g) |
-- |
(9.1) |
|
|
-- |
(18.8) |
|
|
Acquisition-related adjustment (h) |
-- |
(5.6) |
|
|
-- |
(5.6) |
|
|
Adjusted earnings before income taxes |
$ 91.6 |
$ 78.7 |
$ 12.9 |
16% |
$ 282.8 |
$ 230.6 |
$ 52.2 |
23% |
Adjusted margin percentage |
17.4% |
15.7% |
|
|
18.1% |
15.7% |
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
$ 32.8 |
$ 29.1 |
$ 3.7 |
13% |
$ 89.0 |
$ 86.9 |
$ 2.1 |
2% |
Adjustments: |
|
|
|
|
|
|
|
|
Tax effect of adjustments above (i) |
0.1 |
(8.4) |
|
|
10.4 |
(14.4) |
|
|
Tax law change - bonus depreciation
(j) |
-- |
-- |
|
|
(4.6) |
-- |
|
|
Valuation allowance adjustment (k) |
-- |
7.2 |
|
|
-- |
7.2 |
|
|
Adjusted provision for income taxes |
$ 32.9 |
$ 27.9 |
$ 5.0 |
18% |
$ 94.8 |
$ 79.7 |
$ 15.1 |
19% |
Adjusted effective tax rate |
35.9% |
35.5% |
|
|
33.5% |
34.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
$ 58.2 |
$ 71.4 |
$(13.2) |
(18)% |
$ 143.6 |
$ 181.2 |
$ (37.6) |
(21)% |
Less: net earnings attributable to
noncontrolling interest |
1.9 |
1.8 |
|
|
5.9 |
5.2 |
|
|
Net earnings attributable to CDK |
56.3 |
69.6 |
(13.3) |
(19)% |
137.7 |
176.0 |
(38.3) |
(22)% |
Adjustments: |
|
|
|
|
|
|
|
|
Separation costs (b) |
0.6 |
-- |
|
|
34.6 |
-- |
|
|
Accelerated trademark amortization
(c) |
-- |
-- |
|
|
15.6 |
-- |
|
|
Stand-alone public company costs
(d) |
-- |
(9.6) |
|
|
-- |
(18.6) |
|
|
Trademark royalty fee (e) |
-- |
5.6 |
|
|
-- |
11.0 |
|
|
Stock-based compensation (f) |
-- |
(3.1) |
|
|
-- |
(5.5) |
|
|
Interest expense (g) |
-- |
(9.1) |
|
|
-- |
(18.8) |
|
|
Acquisition-related adjustment (h) |
-- |
(5.6) |
|
|
-- |
(5.6) |
|
|
Tax effect of adjustments above
(i) |
(0.1) |
8.4 |
|
|
(10.4) |
14.4 |
|
|
Tax law change - bonus depreciation
(j) |
-- |
-- |
|
|
4.6 |
-- |
|
|
Valuation allowance adjustment (k) |
-- |
(7.2) |
|
|
-- |
(7.2) |
|
|
Adjusted net earnings attributable to
CDK |
$ 56.8 |
$ 49.0 |
$ 7.8 |
16% |
$ 182.1 |
$ 145.7 |
$ 36.4 |
25% |
|
|
|
|
|
|
|
|
|
Adjusted net earnings attributable to CDK per
common share: |
|
|
|
|
|
|
|
|
Basic |
$ 0.35 |
$ 0.31 |
|
13% |
$ 1.13 |
$ 0.91 |
|
24% |
Diluted |
$ 0.35 |
$ 0.31 |
|
13% |
$ 1.13 |
$ 0.91 |
|
24% |
|
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic (l) |
160.6 |
160.6 |
|
|
160.7 |
160.6 |
|
|
Diluted (l) |
161.9 |
160.6 |
|
|
161.5 |
160.6 |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
March 31, |
Change |
March 31, |
Change |
|
2015 |
2014 (a) |
$ |
% |
2015 |
2014 (a) |
$ |
% |
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
$ 91.0 |
$ 100.5 |
$ (9.5) |
(9)% |
$ 232.6 |
$ 268.1 |
$ (35.5) |
(13)% |
Adjustments: |
|
|
|
|
|
|
|
|
Interest expense (m) |
9.3 |
0.2 |
|
|
19.4 |
0.7 |
|
|
Depreciation and amortization
(n) |
13.7 |
13.7 |
|
|
57.1 |
39.6 |
|
|
EBITDA |
$ 114.0 |
$ 114.4 |
$ (0.4) |
(0)% |
$ 309.1 |
$ 308.4 |
$ 0.7 |
0% |
Adjustment: |
|
|
|
|
|
|
|
|
Separation costs (b) |
0.6 |
-- |
|
|
34.6 |
-- |
|
|
Stand-alone public company costs
(d) |
-- |
(9.6) |
|
|
-- |
(18.6) |
|
|
Trademark royalty fee (e) |
-- |
5.6 |
|
|
-- |
11.0 |
|
|
Total stock-based compensation (o) |
8.6 |
5.2 |
|
|
22.0 |
15.0 |
|
|
Acquisition-related adjustment (h) |
-- |
(5.6) |
|
|
-- |
(5.6) |
|
|
Adjusted EBITDA |
$ 123.2 |
$ 110.0 |
$ 13.2 |
12% |
$ 365.7 |
$ 310.2 |
$ 55.5 |
18% |
Adjusted margin % |
23.4% |
22.0% |
|
|
23.4% |
21.1% |
|
|
|
|
|
|
|
|
|
|
|
(a) Amounts have been revised to
reflect sales-type lease accounting for certain hardware components
of our DMS and integrated solutions and to reflect the revised
presentation of the noncontrolling interest in earnings of
Computerized Vehicle Registration, Inc. For additional information
on the revisions, refer to Note 1 - Basis of Presentation in our
unaudited condensed consolidated and combined financial statements
for the quarterly period ended March 31, 2015, which will be filed
on Form 10-Q. |
(b) Represents the removal of
separation costs incurred during FY2015 that were directly related
to our separation from ADP. |
(c) Represents accelerated
amortization recognized in the second quarter of FY2015 in the
Digital Marketing segment for the Cobalt trademark related to the
change in useful life. |
(d) Represents recurring costs
that are expected to be incurred as a stand-alone company
incremental to the allocations of ADP costs included within the
historical financial statements for FY2014. |
(e) Represents the elimination of
the royalty paid to ADP for the utilization of the ADP trademark
during the period October 1, 2013 through March 31, 2014 as there
was no comparable royalty paid in the period from October 1, 2014
through March 31, 2015 due to our separation from ADP. |
(f) Represents additional
stock-based compensation expenses for staff additions to build out
corporate functions and director compensation costs. |
(g) Represents interest expense
incurred in FY2015 related to long-term debt issued in conjunction
with the separation. |
(h) Represents a fair value
adjustment recognized during the three months ended March 31, 2014
related to an acquisition-related contingency. |
(i) Represents the tax effect of
adjustments using the statutory rate of 38.4% for FY2014 for U.S.
transactions, which represent the majority of the adjustments
recorded. The separation costs (described in (b) above) were
partially tax deductible. The tax adjustment included for the three
and nine months ended March 31, 2015 relates only to the tax
deductible portion of separation costs. |
(j) Represents an adjustment
recognized in the second quarter of FY2015 to deferred taxes
related to the bonus depreciation to which ADP is entitled under
the tax law and in accordance with the tax matters agreement to
claim additional tax depreciation for assets associated with our
business for tax periods prior to the separation. |
(k) Represents an income tax
benefit associated with a valuation allowance adjustment recognized
during the three months ended March 31, 2014. |
(l) On September 30, 2014,
ADP shareholders of record as of the close of business on
September 24, 2014 received one share of our common stock for
every three shares of ADP common stock held as of the record date.
For periods ended September 30, 2014 and prior, basic and
diluted earnings attributable to CDK per share were computed using
the number of shares of our stock outstanding on September 30,
2014, the date on which our common stock was distributed to the
shareholders of ADP. The same number of shares was used to
calculate basic and diluted earnings attributable to CDK per share
because there were no dilutive securities in those periods. |
(m) Represents interest expense
included within the financial statements for the periods presented
above. |
(n) Represents depreciation and
amortization included within the financial statements for the
periods presented above, which includes the accelerated
amortization attributable to the Cobalt trademark recognized during
the nine months ended March 31, 2015. |
(o) Represents total stock-based
compensation expense recognized for the periods presented. |
|
CDK Global,
Inc. |
Combined Adjusted FY2014
Financial Information and FY2015 Guidance |
(In millions, except per
share amounts) |
(Unaudited) |
|
|
|
|
We use certain adjusted results,
among other measures to evaluate our operating performance in the
absence of certain items for planning and forecasting purposes. We
believe that adjusted results provide relevant and useful
information because they allow investors to view performance in a
manner similar to the method used by us and they improve our
ability to understand our operating performance. Adjusted earnings
before income taxes, adjusted provision for income taxes, adjusted
effective tax rate, adjusted net earnings attributable to CDK,
adjusted basic and diluted earnings attributable to CDK per share,
and adjusted EBITDA reflect the adjustments enumerated in the
footnotes below. EBITDA is calculated as earnings before income
taxes adjusted to exclude interest expense, depreciation, and
amortization. Because adjusted earnings before income taxes,
adjusted provision for income taxes, adjusted effective tax rate,
adjusted net earnings attributable to CDK, adjusted basic and
diluted earnings attributable to CDK per share, EBITDA, and
adjusted EBITDA 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. |
|
|
|
|
|
FY2014 |
(a) |
FY2015E |
|
Revenues |
1,976.5 |
(b) |
|
Growth % |
|
|
5% |
|
|
|
|
Earnings before income taxes |
353.3 |
(b) |
|
Adjustments: |
|
|
|
Stand-alone public company costs |
(30.7) |
(c) |
|
Trademark royalty fee |
16.6 |
(d) |
|
Stock-based compensation |
(7.2) |
(e) |
|
Separation costs |
9.3 |
(f) |
|
Interest expense |
(27.5) |
(g) |
|
Acquisition-related fair value
adjustment |
(5.6) |
(h) |
|
|
Adjusted earnings before income
taxes |
308.2 |
|
|
Growth % |
|
|
15% |
|
|
|
|
Adjusted margin % |
15.6% |
|
|
Growth |
|
|
150 bps |
|
|
|
|
Provision for income taxes |
117.4 |
(b) |
|
Adjustments: |
|
|
|
Tax benefit of adjustments above |
(20.9) |
(i) |
|
Valuation allowance release |
7.2 |
(j) |
|
Adjusted provision for income taxes |
103.7 |
|
|
Adjusted effective tax rate |
33.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
235.9 |
|
|
Less: net earnings attributable to
noncontrolling interest |
8.0 |
|
|
Net earnings attributable to CDK |
227.9 |
(b) |
|
Adjustments: |
|
|
|
Stand-alone public company costs |
(30.7) |
(c) |
|
Trademark royalty fee |
16.6 |
(d) |
|
Stock-based compensation |
(7.2) |
(e) |
|
Separation costs |
9.3 |
(f) |
|
Interest expense |
(27.5) |
(g) |
|
Acquisition-related fair value
adjustment |
(5.6) |
(h) |
|
Tax benefit of adjustments above |
20.9 |
(i) |
|
Valuation allowance release |
(7.2) |
(j) |
|
|
Adjusted net earnings attributable to
CDK |
196.5 |
|
|
Growth % |
|
|
15% |
|
|
|
|
Adjusted basic and diluted net
earnings attributable to CDK per share |
1.22 |
(k) |
|
Total basic and diluted shares
outstanding |
160.6 million |
(l) |
|
|
|
|
|
Growth % |
|
|
14 - 15% |
|
|
|
|
Earnings before income taxes |
353.3 |
(b) |
|
Adjustments: |
|
|
|
Interest expense |
1.0 |
(b) |
|
Depreciation and amortization |
52.3 |
(b) |
|
|
|
|
|
EBITDA |
406.6 |
|
|
Adjustments: |
|
|
|
Stand-alone public company
costs |
(30.7) |
(c) |
|
Trademark royalty fee |
16.6 |
(d) |
|
Total stock-based compensation |
21.0 |
(m) |
|
Separation costs |
9.3 |
(f) |
|
Acquisition-related fair value
adjustment |
(5.6) |
(h) |
|
|
Adjusted EBITDA |
417.2 |
|
|
Adjusted margin % |
21.1% |
|
150 bps |
|
(a) Amounts in this column have
been adjusted to be presented on a comparable basis with the FY2015
estimate. |
(b) Amounts have been revised to
reflect sales-type lease accounting for certain hardware components
of our DMS and integrated solutions and to reflect the revised
presentation of the noncontrolling interest in earnings of
Computerized Vehicle Registration, Inc. The effect of the revisions
on revenues, earnings before income taxes, net earnings, net
earnings attributable to noncontrolling interest, and net earnings
attributable to CDK for FY2014 has been summarized below. The
Company plans to reflect the effect of the revisions on previously
reported periods in future filings containing such
information. |
|
FY2014 |
|
As Reported |
Adjustments |
As Revised |
Revenues |
$ 1,973.6 |
$ 2.9 |
$ 1,976.5 |
Earnings before income taxes |
343.6 |
9.7 |
353.3 |
Net earnings |
226.9 |
9.0 |
235.9 |
Less: net earnings attributable to
noncontrolling interest |
-- |
8.0 |
8.0 |
Net earnings attributable to CDK |
$ 226.9 |
$ 1.0 |
$ 227.9 |
|
|
|
|
(c) Represents recurring costs
that are expected to be incurred as a stand-alone company
incremental to the allocations of ADP costs included within the
historical financial statements for FY2014. |
(d) Represents the elimination of
the royalty paid to ADP for the utilization of the ADP trademark
during the period from October 1, 2013 through June 30, 2014 as
there will be no comparable royalty paid in the same period in
FY2015 due to our separation from ADP. |
(e) Represents additional
stock-based compensation expenses for staff additions to build out
corporate functions and director compensation costs. |
(f) Represents the removal of
separation costs incurred during FY2014 that are directly related
to our separation from ADP. |
(g) Represents interest expense
CDK will incur in FY2015 related to long-term debt issued in
conjunction with the separation. |
(h) Represents a fair value
adjustment recognized during the three months ended March 31, 2014
related to an acquisition-related contingency. |
(i) Represents the tax effect of
adjustments using the statutory tax rate of 38.4% for FY2014 for
U.S. transactions, which represent the majority of the adjustments
recorded. The separation costs (described in (f) above) are not tax
deductible and therefore there is no provision for income taxes
included for this adjustment. |
(j) Represents an income tax
benefit associated with a valuation allowance adjustment recognized
during the three months ended March 31, 2014. |
(k) Computed using adjusted net
earnings attributable to CDK shown above and total shares
outstanding described in (l) below. |
(l) On September 30, 2014,
ADP shareholders of record as of the close of business on
September 24, 2014 received one share of our common stock for
every three shares of ADP common stock held as of the record date.
Basic and diluted earnings attributable to CDK per share above for
FY2014 was computed using the number of shares of our stock
outstanding on September 30, 2014, the date on which our
common stock was distributed to the shareholders of ADP. The same
number of shares was used to calculate basic and diluted earnings
attributable to CDK per share because there were no dilutive
securities in FY2014. |
(m) Represents total stock-based
compensation expense recognized for the periods presented. |
|
|
|
|
|
|
|
|
CDK Global, Inc. |
|
|
|
|
|
|
|
Performance Metrics |
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDK management regularly reviews
the following key performance measures in evaluating our business
results, identifying trends affecting our business and making
operating and strategic decisions. The following table summarizes
these measures for recurring subscription revenues: |
|
|
|
For the three
months ended |
|
September 30,
2013 |
December 31,
2013 |
March 31, 2014 |
June 30, 2014 |
September 30,
2014 |
December 31,
2014 |
March 31, 2015 |
ARNA |
|
|
|
|
|
|
|
Automotive |
|
|
|
|
|
|
|
DMS Client Sites (a) |
8,806 |
8,862 |
8,905 |
8,978 |
9,039 |
9,136 |
9,167 |
Avg Revenue Per Site (b) |
6,285 |
6,379 |
6,586 |
6,447 |
6,640 |
6,691 |
6,946 |
|
|
|
|
|
|
|
|
Adjacencies |
|
|
|
|
|
|
|
DMS Client Sites (a) |
4,462 |
4,503 |
4,571 |
4,600 |
4,653 |
4,831 |
4,959 |
Avg Revenue Per Site (b) |
1,464 |
1,478 |
1,521 |
1,520 |
1,556 |
1,536 |
1,565 |
|
|
|
|
|
|
|
|
Total ARNA |
|
|
|
|
|
|
|
DMS Client Sites (a) |
13,268 |
13,365 |
13,476 |
13,578 |
13,692 |
13,967 |
14,126 |
Avg Revenue Per Site (b) |
4,669 |
4,741 |
4,881 |
4,789 |
4,915 |
4,914 |
5,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARI |
|
|
|
|
|
|
|
DMS Client Sites (a) |
13,496 |
13,573 |
13,459 |
13,501 |
13,437 |
13,420 |
13,294 |
Avg Revenue Per Site (b) |
1,179 |
1,181 |
1,183 |
1,208 |
1,235 |
1,228 |
1,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Marketing |
|
|
|
|
|
|
|
Websites (c) |
7,665 |
7,732 |
7,951 |
7,783 |
7,828 |
7,783 |
7,448 |
Avg Revenue Per Website (d) |
2,983 |
3,046 |
2,972 |
3,095 |
3,219 |
3,322 |
3,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Dealer Management System
(DMS) Client Sites -- We track the number of client sites that have
an active DMS. Consistent with our strategy of growing our
Automotive Retail client base, we view the number of client sites
purchasing our DMS solutions as an indicator of market penetration
for our Automotive Retail segments. Our DMS client 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. |
(b) Average Revenue Per DMS
Client Site -- Average revenue per Automotive Retail DMS client
site is an indicator of the adoption of our solutions by DMS
clients, and we monitor changes in this metric to measure the
effectiveness of our strategy to deepen our relationships with our
current client base through upgrading and expanding solutions and
increasing transaction volumes. We calculate average revenue per
DMS client site by dividing the monthly applicable revenue
generated from our solutions in a period by the average number of
DMS client sites in the period. |
(c) Websites -- For the Digital
Marketing segment, we track the number of websites that we host and
develop for our OEM and automotive retail clients as an indicator
of business activity. The number of websites as of a specified date
is the total number of full function dealer websites or portals
that are currently accessible. |
(d) Average Revenue Per Website
-- We monitor changes in our average revenue per website as an
indicator of the relative depth of our relationships in our Digital
Marketing segment. We calculate average revenue per website by
dividing the monthly revenue generated from our Digital Marketing
solutions in a period, excluding OEM advertising revenues, by the
average number of client websites in the period. |
Forward-Looking Statements
This document contains "forward-looking statements," including
forecasts for CDK Global's fiscal year ending June 30, 2015 and CDK
Global's intention to make share repurchases, within the meaning of
the Private Securities Litigation Reform Act of 1995. Statements
that are not historical in nature and which may be identified by
the use of words like "expects," "assumes," "projects,"
"anticipates," "estimates," "we believe," "could be" and other
words of similar meaning, are 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 Global's success in obtaining, retaining and selling additional
services to clients; the pricing of products and services; changes
in overall market and economic conditions, technology trends, and
auto sales and advertising trends; competitive conditions; changes
in regulations; changes in technology; security breaches,
interruptions, failures and/or other errors involving CDK Global's
systems or networks; availability of skilled technical personnel
and the impact of new acquisitions and divestitures. The statements
in this press release are made as of the date of this press
release, even if subsequently made available by CDK Global on its
website or otherwise. CDK Global disclaims any obligation to update
any forward-looking statements, whether as a result of new
information, future events or otherwise. These risks and
uncertainties, along with the risk factors discussed in CDK
Global's reports filed with the Securities and Exchange Commission
(SEC), including those discussed under "Item 1A. Risk Factors" in
CDK Global's Registration Statement on Form 10 for the fiscal year
ended June 30, 2014 and its most recent Quarterly Report on Form
10-Q, should be considered in evaluating any forward-looking
statements contained herein. These filings can be found on CDK
Global's website at www.cdkglobal.com and the SEC's website at
www.sec.gov.
Investor Relations Contacts: Elena Rosellen 973.588.2511
elena.rosellen@cdk.com
Jennifer Gaumond 847.485.4424 jennifer.gaumond@cdk.com
Media Contact: Michelle Benko 847.485.4389
michelle.benko@cdk.com
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