Revenues Rise 3%, 4% on a Constant Currency
Basis
CDK Global, Inc. (Nasdaq:CDK) today announced its third quarter
fiscal 2017 financial results and raised its earnings outlook for
fiscal 2017.
Third Quarter Fiscal 2017 Results
Year-over-year highlights are below:
Third Quarter Fiscal
2017 Results |
|
GAAP |
|
Adjusted |
Revenues |
|
up 3% to $556.3
million |
|
up 3% to $556.3
million |
Earnings before income
taxes |
|
up 40% to $110.4
million |
|
up 41% to $138.6
million |
Net earnings
attributable to CDK |
|
up 44% to $77.3
million |
|
up 43% to $95.1
million |
Diluted net earnings
attributable toCDK per share |
|
up 56% to $0.53 per
share |
|
up 55% to $0.65 per
share |
Margin |
|
Net earnings
attributable toCDK margin up 390 bps to13.9% |
|
EBITDA margin up 690
bps to32.5% |
“The benefits of our on-going transformation
continue to generate positive outcomes for CDK and our customers as
we complete another strong quarter. Adjusted EBITDA margin
expansion of 690 basis points versus last year’s third quarter
demonstrates the financial impact of the plan's progress,” said
Brian MacDonald, chief executive officer. “Our top priority is
ensuring a better customer experience, and we saw record results in
our customer service metrics through the critical calendar year-end
period for dealers. CDK's transformation is solidly on track to
generate both financial and operational improvements for CDK
employees, our shareholders and our customers.”
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 Third Quarter:
- Foreign exchange rates: Growth in revenues was negatively
impacted by 1 percentage point by foreign exchange rates while
growth in earnings before income taxes was positively impacted by 1
percentage point.
- Tax rate: The GAAP effective tax rate for the third quarter of
fiscal 2017 was 28.6% compared to 29.1% in last year’s third
quarter. The adjusted effective tax rate for the third quarter of
fiscal 2017 was 30.3% compared to 30.5% in last year’s third
quarter. Both the GAAP effective tax rate and the adjusted
effective tax rate include net tax benefits of $3.4 million related
to excess tax benefits associated with the adoption of the new
stock compensation accounting standard on July 1, 2016.
CDK Segment Information
CDK North America: Retail Solutions North
America
- Revenues increased 5% to $404.9 million.
- Earnings before income taxes increased 29% to $159.2
million.
- Pretax margin expanded 750 bps to 39.3% primarily due to
operating efficiencies associated with the business transformation
plan and scale from increased revenues.
CDK North America: Advertising North America
- Revenues increased 2% to $74.5 million.
- Earnings before income taxes increased 16% to $10.2
million.
- Pretax margin expanded 170 bps to 13.7% primarily due to
increased operating efficiencies associated with the business
transformation plan.
CDK International
- Revenues declined 1% to $76.9 million entirely due to
unfavorable foreign exchange rates. On a constant currency basis,
revenues increased 5%.
- Earnings before income taxes increased 31% to $19.9 million. On
a constant currency basis, earnings before income taxes also
increased 31%.
- Pretax margin expanded 620 bps to 25.9% primarily due to
operating efficiencies associated with the business transformation
plan, scale from increased local currency revenues, benefits
associated with an indirect tax recovery and the timing of certain
benefits accruals.
Fiscal 2017 Forecast
Based on financial performance in the quarter
and our outlook, we have raised our earnings growth forecast for
the full year.
Fiscal 2017
Forecast |
|
GAAP |
|
Adjusted |
Revenues |
|
Approximately 4.5% |
|
Approximately 4.5% |
Earnings before income
taxes |
|
up 18% - 20% |
|
up 24% - 26% |
Net earnings
attributable to CDK |
|
up 24% - 26% |
|
up 29% - 32% |
Diluted net
earnings attributableto CDK per share |
|
up 33% - 35% |
|
up 38% - 40% |
|
$1.99 - $2.04 |
|
$2.40 - $2.44 |
Margin |
|
Net earnings
attributable to CDKmargin up 200 - 240 bps |
|
EBITDA margin up 550 -
575 bps |
The fiscal 2017 forecast 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 in the fourth quarter of fiscal 2017 due to incremental
interest expense related to higher debt levels and incremental
incentive compensation expense, provided we execute our business
transformation plan.
Tax Rate
We now anticipate our GAAP effective tax rate
for fiscal 2017 will be 30.0% - 31.0% compared to 33.1% for
fiscal 2016. The adjusted effective tax rate for fiscal 2017
is expected to be 31.0% - 32.0% 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.
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 third
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,
Tuesday, May 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 approximately 28,000 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 |
|
Nine Months Ended |
|
|
March 31, |
|
March 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues |
|
$ |
556.3 |
|
|
$ |
537.7 |
|
|
$ |
1,654.8 |
|
|
$ |
1,572.4 |
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Cost of
revenues |
|
307.7 |
|
|
315.8 |
|
|
926.0 |
|
|
927.8 |
|
Selling, general
and administrative expenses |
|
117.4 |
|
|
125.0 |
|
|
342.0 |
|
|
328.2 |
|
Restructuring
expenses |
|
6.9 |
|
|
7.7 |
|
|
10.3 |
|
|
11.4 |
|
Total
expenses |
|
432.0 |
|
|
448.5 |
|
|
1,278.3 |
|
|
1,267.4 |
|
|
|
|
|
|
|
|
|
|
Operating earnings |
|
124.3 |
|
|
89.2 |
|
|
376.5 |
|
|
305.0 |
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
(15.1 |
) |
|
(10.7 |
) |
|
(38.1 |
) |
|
(29.5 |
) |
Other income,
net |
|
1.2 |
|
|
0.1 |
|
|
2.8 |
|
|
5.7 |
|
|
|
|
|
|
|
|
|
|
Earnings before income
taxes |
|
110.4 |
|
|
78.6 |
|
|
341.2 |
|
|
281.2 |
|
|
|
|
|
|
|
|
|
|
Provision for
income taxes |
|
(31.6 |
) |
|
(22.9 |
) |
|
(99.6 |
) |
|
(94.6 |
) |
|
|
|
|
|
|
|
|
|
Net earnings |
|
78.8 |
|
|
55.7 |
|
|
241.6 |
|
|
186.6 |
|
Less: net earnings
attributable to noncontrolling interest |
|
1.5 |
|
|
1.9 |
|
|
4.7 |
|
|
5.6 |
|
Net earnings
attributable to CDK |
|
$ |
77.3 |
|
|
$ |
53.8 |
|
|
$ |
236.9 |
|
|
$ |
181.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to CDK per common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.53 |
|
|
$ |
0.35 |
|
|
$ |
1.60 |
|
|
$ |
1.15 |
|
Diluted |
|
$ |
0.53 |
|
|
$ |
0.34 |
|
|
$ |
1.59 |
|
|
$ |
1.14 |
|
|
|
|
|
|
|
|
|
|
Weighted-average common
shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
145.2 |
|
|
155.4 |
|
|
148.1 |
|
|
157.8 |
|
Diluted |
|
146.5 |
|
|
156.3 |
|
|
149.3 |
|
|
158.7 |
|
CDK Global, Inc. |
Consolidated Balance Sheets |
(In millions) |
(Unaudited) |
|
|
|
March 31, |
|
June 30, |
|
|
2017 |
|
2016 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash
equivalents |
|
$ |
385.2 |
|
|
$ |
219.1 |
|
Accounts
receivable, net of allowances |
|
404.4 |
|
|
365.5 |
|
Other current
assets |
|
173.7 |
|
|
154.1 |
|
Total current assets |
|
963.3 |
|
|
738.7 |
|
|
|
|
|
|
Property, plant and
equipment, net |
|
130.6 |
|
|
118.6 |
|
Other assets |
|
195.5 |
|
|
217.2 |
|
Goodwill |
|
1,165.8 |
|
|
1,182.7 |
|
Intangible assets,
net |
|
101.9 |
|
|
107.8 |
|
Total assets |
|
$ |
2,557.1 |
|
|
$ |
2,365.0 |
|
|
|
|
|
|
Liabilities and
Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Current
maturities of long-term debt and capital lease obligations |
|
$ |
46.8 |
|
|
$ |
26.8 |
|
Accounts
payable |
|
35.9 |
|
|
38.8 |
|
Accrued expenses
and other current liabilities |
|
192.2 |
|
|
165.3 |
|
Accrued payroll
and payroll-related expenses |
|
97.8 |
|
|
115.3 |
|
Short-term
deferred revenues |
|
175.3 |
|
|
177.2 |
|
Total current liabilities |
|
548.0 |
|
|
523.4 |
|
|
|
|
|
|
Long-term debt and
capital lease obligations |
|
1,544.5 |
|
|
1,190.3 |
|
Long-term deferred
revenues |
|
139.5 |
|
|
157.7 |
|
Deferred income
taxes |
|
48.1 |
|
|
46.9 |
|
Other liabilities |
|
69.0 |
|
|
70.5 |
|
Total liabilities |
|
2,349.1 |
|
|
1,988.8 |
|
|
|
|
|
|
Equity: |
|
|
|
|
Preferred
stock |
|
— |
|
|
— |
|
Common
stock |
|
1.6 |
|
|
1.6 |
|
Additional
paid-in-capital |
|
616.0 |
|
|
640.7 |
|
Retained
earnings |
|
413.9 |
|
|
238.3 |
|
Treasury stock,
at cost |
|
(825.3 |
) |
|
(526.6 |
) |
Accumulated
other comprehensive income |
|
(16.3 |
) |
|
5.8 |
|
Total CDK stockholders' equity |
|
189.9 |
|
|
359.8 |
|
Noncontrolling
interest |
|
18.1 |
|
|
16.4 |
|
Total equity |
|
208.0 |
|
|
376.2 |
|
Total liabilities and equity |
|
$ |
2,557.1 |
|
|
$ |
2,365.0 |
|
CDK Global, Inc. |
Consolidated Statements of Cash
Flows |
(In millions) |
(Unaudited) |
|
|
|
Nine Months Ended |
|
|
March 31, |
|
|
2017 |
|
2016 |
Cash Flows from
Operating Activities: |
|
|
|
|
Net earnings |
|
$ |
241.6 |
|
|
$ |
186.6 |
|
Adjustments to
reconcile net earnings to cash flows provided by operating
activities: |
|
|
|
|
Depreciation and amortization |
|
52.0 |
|
|
45.6 |
|
Deferred
income taxes |
|
0.3 |
|
|
7.8 |
|
Stock-based compensation expense |
|
32.3 |
|
|
25.5 |
|
Other |
|
3.2 |
|
|
(4.5 |
) |
Changes in operating
assets and liabilities, net of effect from acquisitions of
businesses: |
|
|
|
|
Increase
in accounts receivable |
|
(42.8 |
) |
|
(71.1 |
) |
Increase
in other assets |
|
(4.5 |
) |
|
(24.0 |
) |
Increase
in accounts payable |
|
1.4 |
|
|
11.3 |
|
Increase
in accrued expenses and other liabilities |
|
3.7 |
|
|
29.7 |
|
Net cash flows provided
by operating activities |
|
287.2 |
|
|
206.9 |
|
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
|
Capital
expenditures |
|
(47.0 |
) |
|
(35.0 |
) |
Proceeds from sale of
property, plant and equipment |
|
0.5 |
|
|
— |
|
Capitalized
software |
|
(22.9 |
) |
|
(9.6 |
) |
Acquisitions of
businesses, net of cash acquired |
|
— |
|
|
(18.0 |
) |
Contributions to
investments |
|
(2.1 |
) |
|
(6.7 |
) |
Proceeds from
investments |
|
4.0 |
|
|
8.7 |
|
Net cash flows used in
investing activities |
|
(67.5 |
) |
|
(60.6 |
) |
|
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
|
Proceeds from long-term
debt |
|
400.0 |
|
|
250.0 |
|
Repayments of long-term
debt and capital lease obligations |
|
(25.2 |
) |
|
(13.3 |
) |
Dividends paid to
stockholders |
|
(61.0 |
) |
|
(61.9 |
) |
Repurchases of common
stock |
|
(350.0 |
) |
|
(261.0 |
) |
Proceeds from exercises
of stock options |
|
12.1 |
|
|
5.3 |
|
Excess tax benefit from
stock-based compensation awards |
|
— |
|
|
7.4 |
|
Withholding tax
payments for stock-based compensation awards |
|
(12.0 |
) |
|
(8.6 |
) |
Dividend payments to
noncontrolling owners |
|
(3.0 |
) |
|
— |
|
Payments of deferred
financing costs |
|
(2.1 |
) |
|
(2.1 |
) |
Acquisition-related
payments |
|
(7.2 |
) |
|
(2.7 |
) |
Recovery of dividends
paid |
|
— |
|
|
0.4 |
|
Net cash flows used in
financing activities |
|
(48.4 |
) |
|
(86.5 |
) |
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
|
(5.2 |
) |
|
(3.9 |
) |
|
|
|
|
|
Net change in cash and
cash equivalents |
|
166.1 |
|
|
55.9 |
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period |
|
219.1 |
|
|
408.2 |
|
|
|
|
|
|
Cash and cash
equivalents, end of period |
|
$ |
385.2 |
|
|
$ |
464.1 |
|
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 nine months ended
March 31, 2016 has been restated to conform to the new
presentation.
|
|
Segment Revenues |
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
CDK North America: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Solutions North America: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue |
|
$ |
312.2 |
|
|
$ |
298.3 |
|
|
$ |
13.9 |
|
|
5 |
% |
|
$ |
941.9 |
|
|
$ |
887.4 |
|
|
$ |
54.5 |
|
|
6 |
% |
Transaction revenue |
|
43.6 |
|
|
44.2 |
|
|
(0.6 |
) |
|
(1 |
)% |
|
133.2 |
|
|
132.4 |
|
|
0.8 |
|
|
1 |
% |
Other
revenue |
|
49.1 |
|
|
44.7 |
|
|
4.4 |
|
|
10 |
% |
|
119.0 |
|
|
115.6 |
|
|
3.4 |
|
|
3 |
% |
Total
Retail Solutions North America (a) |
|
$ |
404.9 |
|
|
$ |
387.2 |
|
|
$ |
17.7 |
|
|
5 |
% |
|
$ |
1,194.1 |
|
|
$ |
1,135.4 |
|
|
$ |
58.7 |
|
|
5 |
% |
Advertising North America (b) |
|
74.5 |
|
|
73.2 |
|
|
1.3 |
|
|
2 |
% |
|
230.1 |
|
|
202.7 |
|
|
27.4 |
|
|
14 |
% |
CDK International
(c) |
|
76.9 |
|
|
77.3 |
|
|
(0.4 |
) |
|
(1 |
)% |
|
230.6 |
|
|
234.3 |
|
|
(3.7 |
) |
|
(2 |
)% |
Total |
|
$ |
556.3 |
|
|
$ |
537.7 |
|
|
$ |
18.6 |
|
|
3 |
% |
|
$ |
1,654.8 |
|
|
$ |
1,572.4 |
|
|
$ |
82.4 |
|
|
5 |
% |
|
|
Adjusted Segment Earnings before Income
Taxes |
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
CDK North America: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Solutions North America (a) |
|
$ |
159.2 |
|
|
$ |
123.3 |
|
|
$ |
35.9 |
|
|
29 |
% |
|
$ |
447.0 |
|
|
$ |
348.7 |
|
|
$ |
98.3 |
|
|
28 |
% |
Margin |
|
39.3 |
% |
|
31.8 |
% |
|
|
750 bps |
|
|
|
|
|
37.4 |
% |
|
30.7 |
% |
|
|
670 bps |
|
|
|
|
Advertising North America (b) |
|
10.2 |
|
|
8.8 |
|
|
1.4 |
|
|
16 |
% |
|
31.5 |
|
|
17.6 |
|
|
13.9 |
|
|
79 |
% |
Margin |
|
13.7 |
% |
|
12.0 |
% |
|
|
170 bps |
|
|
|
|
|
13.7 |
% |
|
8.7 |
% |
|
|
500 bps |
|
|
|
|
CDK International
(c) |
|
19.9 |
|
|
15.2 |
|
|
4.7 |
|
|
31 |
% |
|
55.1 |
|
|
45.3 |
|
|
9.8 |
|
|
22 |
% |
Margin |
|
25.9 |
% |
|
19.7 |
% |
|
|
620 bps |
|
|
|
|
|
23.9 |
% |
|
19.3 |
% |
|
|
460 bps |
|
|
|
|
Other (d) |
|
(50.7 |
) |
|
(49.0 |
) |
|
(1.7 |
) |
|
(3 |
)% |
|
(121.2 |
) |
|
(102.8 |
) |
|
(18.4 |
) |
|
(18 |
)% |
Total |
|
$ |
138.6 |
|
|
$ |
98.3 |
|
|
$ |
40.3 |
|
|
41 |
% |
|
$ |
412.4 |
|
|
$ |
308.8 |
|
|
$ |
103.6 |
|
|
34 |
% |
Margin |
|
24.9 |
% |
|
18.3 |
% |
|
|
660 bps |
|
|
|
|
|
24.9 |
% |
|
19.6 |
% |
|
|
530 bps |
|
|
|
|
(a) The table below presents a reconciliation of revenues and
earnings before income taxes for the Retail Solutions North America
(RSNA) segment on a constant currency basis.
Retail
Solutions North America |
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Revenues |
|
$ |
404.9 |
|
|
$ |
387.2 |
|
|
$ |
17.7 |
|
|
5 |
% |
|
$ |
1,194.1 |
|
|
$ |
1,135.4 |
|
|
$ |
58.7 |
|
|
5 |
% |
Impact of
exchange rates |
|
(0.9 |
) |
|
— |
|
|
|
|
|
|
(1.0 |
) |
|
— |
|
|
|
|
|
Constant currency
revenues (e) |
|
$ |
404.0 |
|
|
$ |
387.2 |
|
|
$ |
16.8 |
|
|
4 |
% |
|
$ |
1,193.1 |
|
|
$ |
1,135.4 |
|
|
$ |
57.7 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
|
$ |
159.2 |
|
|
$ |
123.3 |
|
|
$ |
35.9 |
|
|
29 |
% |
|
$ |
447.0 |
|
|
$ |
348.7 |
|
|
$ |
98.3 |
|
|
28 |
% |
Margin
% |
|
39.3 |
% |
|
31.8 |
% |
|
|
750
bps |
|
|
|
|
37.4 |
% |
|
30.7 |
% |
|
|
670
bps |
|
|
|
Impact of
exchange rates |
|
(0.5 |
) |
|
— |
|
|
|
|
|
|
(0.5 |
) |
|
— |
|
|
|
|
|
Constant currency
earnings before income taxes (e) |
|
$ |
158.7 |
|
|
$ |
123.3 |
|
|
$ |
35.4 |
|
|
29 |
% |
|
$ |
446.5 |
|
|
$ |
348.7 |
|
|
$ |
97.8 |
|
|
28 |
% |
(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 |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Revenues |
|
$ |
76.9 |
|
|
$ |
77.3 |
|
|
$ |
(0.4 |
) |
|
(1 |
)% |
|
$ |
230.6 |
|
|
$ |
234.3 |
|
|
$ |
(3.7 |
) |
|
(2 |
)% |
Impact of
exchange rates |
|
4.1 |
|
|
— |
|
|
|
|
|
|
13.7 |
|
|
— |
|
|
|
|
|
Constant currency
revenues (e) |
|
$ |
81.0 |
|
|
$ |
77.3 |
|
|
$ |
3.7 |
|
|
5 |
% |
|
$ |
244.3 |
|
|
$ |
234.3 |
|
|
$ |
10.0 |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
|
$ |
19.9 |
|
|
$ |
15.2 |
|
|
$ |
4.7 |
|
|
31 |
% |
|
$ |
55.1 |
|
|
$ |
45.3 |
|
|
$ |
9.8 |
|
|
22 |
% |
Margin
% |
|
25.9 |
% |
|
19.7 |
% |
|
|
620 bps |
|
|
|
|
23.9 |
% |
|
19.3 |
% |
|
|
460 bps |
|
|
|
Impact of
exchange rates |
|
— |
|
|
— |
|
|
|
|
|
|
0.3 |
|
|
— |
|
|
|
|
|
Constant currency
earnings before income taxes (e) |
|
$ |
19.9 |
|
|
$ |
15.2 |
|
|
$ |
4.7 |
|
|
31 |
% |
|
$ |
55.4 |
|
|
$ |
45.3 |
|
|
$ |
10.1 |
|
|
22 |
% |
(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 |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Loss before
income taxes |
|
$ |
(78.9 |
) |
|
$ |
(68.7 |
) |
|
$ |
(10.2 |
) |
|
(15 |
)% |
|
$ |
(192.4 |
) |
|
$ |
(130.4 |
) |
|
$ |
(62.0 |
) |
|
(48 |
)% |
Restructuring
expenses |
|
6.9 |
|
|
7.7 |
|
|
|
|
|
|
10.3 |
|
|
11.4 |
|
|
|
|
|
Other business
transformation expenses |
|
21.3 |
|
|
12.0 |
|
|
|
|
|
|
60.9 |
|
|
18.8 |
|
|
|
|
|
Tax
matters indemnification gain, net |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Adjusted loss
before income taxes |
|
$ |
(50.7 |
) |
|
$ |
(49.0 |
) |
|
$ |
(1.7 |
) |
|
(3 |
)% |
|
$ |
(121.2 |
) |
|
$ |
(102.8 |
) |
|
$ |
(18.4 |
) |
|
(18 |
)% |
Impact of
exchange rates |
|
— |
|
|
— |
|
|
|
|
|
|
(0.1 |
) |
|
— |
|
|
|
|
|
Constant currency
adjusted loss before income taxes (e) |
|
$ |
(50.7 |
) |
|
$ |
(49.0 |
) |
|
$ |
(1.7 |
) |
|
(3 |
)% |
|
$ |
(121.3 |
) |
|
$ |
(102.8 |
) |
|
$ |
(18.5 |
) |
|
(18 |
)% |
(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 |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Revenues |
|
$ |
556.3 |
|
|
$ |
537.7 |
|
|
$ |
18.6 |
|
|
3 |
% |
|
$ |
1,654.8 |
|
|
$ |
1,572.4 |
|
|
$ |
82.4 |
|
|
5 |
% |
Impact of
exchange rates |
|
3.2 |
|
|
— |
|
|
3.2 |
|
|
|
|
12.7 |
|
|
— |
|
|
12.7 |
|
|
|
Constant currency
revenues (a) |
|
$ |
559.5 |
|
|
$ |
537.7 |
|
|
$ |
21.8 |
|
|
4 |
% |
|
$ |
1,667.5 |
|
|
$ |
1,572.4 |
|
|
$ |
95.1 |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
|
$ |
110.4 |
|
|
$ |
78.6 |
|
|
$ |
31.8 |
|
|
40 |
% |
|
$ |
341.2 |
|
|
$ |
281.2 |
|
|
$ |
60.0 |
|
|
21 |
% |
Margin |
|
19.8 |
% |
|
14.6 |
% |
|
|
520 bps |
|
|
|
|
20.6 |
% |
|
17.9 |
% |
|
|
270
bps |
|
|
|
Restructuring
expenses |
|
6.9 |
|
|
7.7 |
|
|
|
|
|
|
10.3 |
|
|
11.4 |
|
|
|
|
|
Other business
transformation expenses |
|
21.3 |
|
|
12.0 |
|
|
|
|
|
|
60.9 |
|
|
18.8 |
|
|
|
|
|
Tax
matters indemnification gain, net |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Adjusted
earnings before income taxes (a) |
|
$ |
138.6 |
|
|
$ |
98.3 |
|
|
40.3 |
|
|
41 |
% |
|
$ |
412.4 |
|
|
$ |
308.8 |
|
|
$ |
103.6 |
|
|
34 |
% |
Adjusted
margin |
|
24.9 |
% |
|
18.3 |
% |
|
|
660 bps |
|
|
|
|
24.9 |
% |
|
19.6 |
% |
|
|
530
bps |
|
|
|
Impact of
exchange rates |
|
(0.5 |
) |
|
— |
|
|
(0.5 |
) |
|
|
|
(0.3 |
) |
|
— |
|
|
(0.3 |
) |
|
|
Constant currency
adjusted earnings before income taxes (a) |
|
$ |
138.1 |
|
|
$ |
98.3 |
|
|
$ |
39.8 |
|
|
40 |
% |
|
$ |
412.1 |
|
|
$ |
308.8 |
|
|
$ |
103.3 |
|
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for
income taxes |
|
$ |
31.6 |
|
|
$ |
22.9 |
|
|
$ |
8.7 |
|
|
38 |
% |
|
$ |
99.6 |
|
|
$ |
94.6 |
|
|
$ |
5.0 |
|
|
5 |
% |
Effective
tax rate |
|
28.6 |
% |
|
29.1 |
% |
|
|
|
|
|
29.2 |
% |
|
33.6 |
% |
|
|
|
|
Income
tax effect of pre-tax adjustments |
|
10.4 |
|
|
7.1 |
|
|
|
|
|
|
26.4 |
|
|
10.4 |
|
|
|
|
|
Pre
spin-off filed tax return adjustment |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
0.4 |
|
|
|
|
|
Adjusted
provision for income taxes (a) |
|
$ |
42.0 |
|
|
$ |
30.0 |
|
|
$ |
12.0 |
|
|
40 |
% |
|
$ |
126.0 |
|
|
$ |
105.4 |
|
|
$ |
20.6 |
|
|
20 |
% |
Adjusted
effective tax rate |
|
30.3 |
% |
|
30.5 |
% |
|
|
|
|
|
30.6 |
% |
|
34.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
|
$ |
78.8 |
|
|
$ |
55.7 |
|
|
$ |
23.1 |
|
|
41 |
% |
|
$ |
241.6 |
|
|
$ |
186.6 |
|
|
$ |
55.0 |
|
|
29 |
% |
Less: net earnings
attributable to noncontrolling interest |
|
1.5 |
|
|
1.9 |
|
|
|
|
|
|
4.7 |
|
|
5.6 |
|
|
|
|
|
Net earnings
attributable to CDK |
|
77.3 |
|
|
53.8 |
|
|
23.5 |
|
|
44 |
% |
|
236.9 |
|
|
181.0 |
|
|
55.9 |
|
|
31 |
% |
Restructuring
expenses |
|
6.9 |
|
|
7.7 |
|
|
|
|
|
|
10.3 |
|
|
11.4 |
|
|
|
|
|
Other business
transformation expenses |
|
21.3 |
|
|
12.0 |
|
|
|
|
|
|
60.9 |
|
|
18.8 |
|
|
|
|
|
Tax
matters indemnification gain, net |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Income
tax benefit on pre-tax adjustments |
|
(10.4 |
) |
|
(7.1 |
) |
|
|
|
|
|
(26.4 |
) |
|
(10.4 |
) |
|
|
|
|
Pre
spin-off filed tax return adjustment |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(0.4 |
) |
|
|
|
|
Adjusted net
earnings attributable to CDK (a) |
|
$ |
95.1 |
|
|
$ |
66.4 |
|
|
$ |
28.7 |
|
|
43 |
% |
|
$ |
281.7 |
|
|
$ |
197.8 |
|
|
$ |
83.9 |
|
|
42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings attributable to CDK per share |
|
$ |
0.53 |
|
|
$ |
0.34 |
|
|
$ |
0.19 |
|
|
56 |
% |
|
$ |
1.59 |
|
|
$ |
1.14 |
|
|
$ |
0.45 |
|
|
39 |
% |
Restructuring expenses |
|
0.05 |
|
|
0.05 |
|
|
|
|
|
|
0.07 |
|
|
0.07 |
|
|
|
|
|
Other
business transformation expenses |
|
0.14 |
|
|
0.08 |
|
|
|
|
|
|
0.41 |
|
|
0.12 |
|
|
|
|
|
Tax
matters indemnification gain, net |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(0.02 |
) |
|
|
|
|
Income
tax effect of pre-tax adjustments |
|
(0.07 |
) |
|
(0.05 |
) |
|
|
|
|
|
(0.18 |
) |
|
(0.06 |
) |
|
|
|
|
Pre
spin-off filed tax return adjustment |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
Adjusted
diluted earnings attributable to CDK per share |
|
$ |
0.65 |
|
|
$ |
0.42 |
|
|
$ |
0.23 |
|
|
55 |
% |
|
$ |
1.89 |
|
|
$ |
1.25 |
|
|
$ |
0.64 |
|
|
51 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
146.5 |
|
|
156.3 |
|
|
|
|
|
|
149.3 |
|
|
158.7 |
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
March 31, |
|
Change |
|
March 31, |
|
Change |
|
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Net earnings
attributable to CDK |
|
$ |
77.3 |
|
|
$ |
53.8 |
|
|
$ |
23.5 |
|
|
44 |
% |
|
$ |
236.9 |
|
|
$ |
181.0 |
|
|
$ |
55.9 |
|
|
31 |
% |
Margin |
|
13.9 |
% |
|
10.0 |
% |
|
|
390 bps |
|
|
|
|
|
14.3 |
% |
|
11.5 |
% |
|
|
280 bps |
|
|
|
|
Net
earnings attributable to noncontrolling interest |
|
1.5 |
|
|
1.9 |
|
|
|
|
|
|
4.7 |
|
|
5.6 |
|
|
|
|
|
Provision
for income taxes |
|
31.6 |
|
|
22.9 |
|
|
|
|
|
|
99.6 |
|
|
94.6 |
|
|
|
|
|
Interest
expense |
|
15.1 |
|
|
10.7 |
|
|
|
|
|
|
38.1 |
|
|
29.5 |
|
|
|
|
|
Depreciation and amortization |
|
17.6 |
|
|
16.9 |
|
|
|
|
|
|
52.0 |
|
|
45.6 |
|
|
|
|
|
Total
stock-based compensation |
|
11.8 |
|
|
12.7 |
|
|
|
|
|
|
32.3 |
|
|
25.5 |
|
|
|
|
|
Restructuring expenses |
|
6.9 |
|
|
7.7 |
|
|
|
|
|
|
10.3 |
|
|
11.4 |
|
|
|
|
|
Other
business transformation expenses |
|
18.9 |
|
|
11.2 |
|
|
|
|
|
|
56.9 |
|
|
17.4 |
|
|
|
|
|
Tax
matters indemnification gain, net |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Adjusted EBITDA
(a) |
|
$ |
180.7 |
|
|
$ |
137.8 |
|
|
$ |
42.9 |
|
|
31 |
% |
|
$ |
530.8 |
|
|
$ |
408.0 |
|
|
$ |
122.8 |
|
|
30 |
% |
Adjusted
margin |
|
32.5 |
% |
|
25.6 |
% |
|
|
690 bps |
|
|
|
|
|
32.1 |
% |
|
25.9 |
% |
|
|
620 bps |
|
|
|
|
|
|
Nine Months Ended |
|
|
March 31, |
|
|
2017 |
|
2016 |
Net cash flows provided
by operating activities |
|
$ |
287.2 |
|
|
$ |
206.9 |
|
Capital
expenditures |
|
(47.0 |
) |
|
(35.0 |
) |
Capitalized
software |
|
(22.9 |
) |
|
(9.6 |
) |
Free cash flow
(a) |
|
$ |
217.3 |
|
|
$ |
162.3 |
|
(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 |
|
|
Approximately 4.5% |
|
|
|
|
|
|
|
Earnings before
income taxes |
|
$ |
369.1 |
|
|
$ |
441.0 |
|
|
Increase 18 - 20% |
Restructuring expenses |
|
20.2 |
|
|
15.0 |
|
|
|
Other
business transformation expenses |
|
39.7 |
|
|
80.0 |
|
|
|
Tax
matters indemnification gain, net |
|
(2.6 |
) |
|
— |
|
|
|
Adjusted
earnings before income taxes (b) |
|
$ |
426.4 |
|
|
$ |
536.0 |
|
|
Increase 24 - 26% |
|
|
|
|
|
|
|
Provision for
income taxes |
|
$ |
122.3 |
|
|
$ |
134.0 |
|
|
|
Effective
tax rate |
|
33.1 |
% |
|
30.4 |
% |
|
30.0 -
31.0% |
Income tax effect of pre-tax adjustments |
|
21.6 |
|
|
34.0 |
|
|
|
Pre spin-off filed tax return adjustment |
|
0.4 |
|
|
— |
|
|
|
Adjusted
provision for income taxes (b) |
|
$ |
144.3 |
|
|
$ |
168.0 |
|
|
|
Adjusted effective tax rate |
|
33.8 |
% |
|
31.3 |
% |
|
31.0 -
32.0% |
|
|
|
|
|
|
|
Net
earnings |
|
$ |
246.8 |
|
|
$ |
307.0 |
|
|
|
Less: net earnings
attributable to noncontrolling interest |
|
7.5 |
|
|
7.0 |
|
|
|
Net earnings
attributable to CDK |
|
$ |
239.3 |
|
|
$ |
300.0 |
|
|
Increase 24 - 26% |
Restructuring expenses |
|
20.2 |
|
|
15.0 |
|
|
|
Other
business transformation expenses |
|
39.7 |
|
|
80.0 |
|
|
|
Tax
matters indemnification gain, net |
|
(2.6 |
) |
|
— |
|
|
|
Income
tax effect of pre-tax adjustments |
|
(21.6 |
) |
|
(34.0 |
) |
|
|
Pre
spin-off filed tax return adjustment |
|
(0.4 |
) |
|
— |
|
|
|
Adjusted net
earnings attributable to CDK (b) |
|
$ |
274.6 |
|
|
$ |
361.0 |
|
|
Increase 29 - 32% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net
earnings attributable to CDK per common share |
|
$ |
1.51 |
|
|
$ |
2.02 |
|
|
$1.99
- 2.04 |
Growth
% |
|
|
|
|
|
Increase 33 - 35% |
Restructuring expenses |
|
0.13 |
|
|
0.10 |
|
|
|
Other
business transformation expenses |
|
0.25 |
|
|
0.54 |
|
|
|
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 |
|
|
$ |
2.43 |
|
|
$2.40
- 2.44 |
Growth
% |
|
|
|
|
|
Increase 38 - 40% |
|
|
Fiscal 2016 |
|
Fiscal 2017 |
|
|
Actuals |
|
Full Year |
|
4th QuarterPoint
Estimate(a) |
|
|
|
Full Year PointEstimate (a) |
|
Guidance |
|
Revenues |
|
$ |
2,114.6 |
|
|
$ |
2,210.0 |
|
|
|
|
$ |
555.0 |
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to CDK |
|
$ |
239.3 |
|
|
$ |
300.0 |
|
|
Increase 24 - 26% |
|
$ |
63.0 |
|
Margin |
|
11.3 |
% |
|
13.6 |
% |
|
Increase 200 - 240 bps |
|
11.4 |
% |
Net
earnings attributable to noncontrolling interest |
|
7.5 |
|
|
7.0 |
|
|
|
|
2.0 |
|
Provision
for income taxes |
|
122.3 |
|
|
134.0 |
|
|
|
|
34.0 |
|
Interest
expense |
|
40.2 |
|
|
57.0 |
|
|
|
|
19.0 |
|
Depreciation and amortization |
|
64.0 |
|
|
73.0 |
|
|
|
|
21.0 |
|
Total
stock-based compensation |
|
36.4 |
|
|
54.0 |
|
|
|
|
22.0 |
|
Restructuring expenses |
|
20.2 |
|
|
15.0 |
|
|
|
|
5.0 |
|
Other
business transformation expenses |
|
34.8 |
|
|
74.0 |
|
|
|
|
17.0 |
|
Tax
matters indemnification gain, net |
|
(2.6 |
) |
|
— |
|
|
|
|
— |
|
Adjusted EBITDA
(b) |
|
$ |
562.1 |
|
|
$ |
714.0 |
|
|
Increase 24 - 27% |
|
$ |
183.0 |
|
Adjusted
margin |
|
26.6 |
% |
|
32.3 |
% |
|
Increase 550 - 575bps |
|
33.0 |
% |
(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 |
|
|
September 30,2015 (a) |
|
December 31,2016 (a) |
|
March 31,2016 (a) |
|
June 30,2016 (a) |
|
September 30,2016 |
|
December 31,2016 |
|
March 31,2017 |
RSNA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DMS Customer Sites (b) |
|
9,181 |
|
|
9,210 |
|
|
9,184 |
|
|
9,206 |
|
|
9,232 |
|
|
9,184 |
|
|
9,157 |
|
Avg Revenue Per Site (c) |
|
$ |
7,145 |
|
|
$ |
7,177 |
|
|
$ |
7,286 |
|
|
$ |
7,434 |
|
|
$ |
7,827 |
|
|
$ |
7,870 |
|
|
$ |
7,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjacencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DMS Customer Sites (b) |
|
5,096 |
|
|
5,178 |
|
|
5,236 |
|
|
5,327 |
|
|
5,380 |
|
|
5,415 |
|
|
5,523 |
|
Avg Revenue Per Site (c) |
|
$ |
1,524 |
|
|
$ |
1,520 |
|
|
$ |
1,535 |
|
|
$ |
1,537 |
|
|
$ |
1,560 |
|
|
$ |
1,571 |
|
|
$ |
1,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RSNA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DMS Customer Sites (b) |
|
14,277 |
|
|
14,388 |
|
|
14,420 |
|
|
14,533 |
|
|
14,612 |
|
|
14,599 |
|
|
14,680 |
|
Avg Revenue Per Site (c) |
|
$ |
5,141 |
|
|
$ |
5,146 |
|
|
$ |
5,205 |
|
|
$ |
5,277 |
|
|
$ |
5,524 |
|
|
$ |
5,537 |
|
|
$ |
5,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Websites (d) |
|
6,946 |
|
|
6,871 |
|
|
6,761 |
|
|
6,641 |
|
|
6,625 |
|
|
6,789 |
|
|
6,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDKI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DMS Customer Sites (b) |
|
13,208 |
|
|
13,267 |
|
|
13,240 |
|
|
13,392 |
|
|
13,373 |
|
|
13,424 |
|
|
13,419 |
|
Avg Revenue Per Site (c) |
|
$ |
1,060 |
|
|
$ |
1,122 |
|
|
$ |
1,138 |
|
|
$ |
1,148 |
|
|
$ |
1,165 |
|
|
$ |
1,183 |
|
|
$ |
1,210 |
|
(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 disclose certain financial measures on both a 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 comparable GAAP
financial measures, in the same way.
Non-GAAP Financial Measure |
|
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 |
Constant currency
revenues |
|
Revenues |
Constant currency
adjusted earnings before income taxes |
|
Earnings before income
taxes |
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, because the measures adjust for
the impact of certain items that we believe 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) making financial and operational decisions, (iii)
evaluating ongoing segment and overall operating performance on a
consistent period-to-period basis, (iv) target leverage
calculations, (v) debt covenant calculations, and (vi) determining
incentive-based compensation.
We believe our non-GAAP financial measures are useful for 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)
otherwise 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 together with the
corresponding GAAP financial measures and the reconciliations to
those measures disclosed below, provides investors with a fuller
understanding of the factors and trends affecting our business than
could be obtained absent these disclosures.
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 nine months ended March 31, 2017 and 2016. Other
business transformation expenses excludes accelerated depreciation
and stock-based compensation expense of $2.4 million and $0.8
million for the three months ended March 31, 2017 and 2016,
respectively and $4.0 million and $1.4 million for the nine months
ended March 31, 2017 and 2016, 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 review 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 were translated into U.S. dollar using the average
monthly exchange rates for the comparable prior period. As a
result, constant currency results neutralize the effects of foreign
currency.
Forward-looking non-GAAP measures 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.
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, statements concerning
CDK's payment of dividends or the repurchase of shares, the funding
of such 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:
Katie Coleman
847.485.4650
katherine.coleman@cdk.com
Media Contact:
David Webster
Aberdeen Strategies
469.222.3667
david.webster@aberdeenstrategies.com
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