Fiscal Year Revenues Rise 5%, 6% on a Constant
Currency Basis
CDK Global, Inc. (Nasdaq:CDK) today announced its fiscal 2017
financial results and its earnings outlook for fiscal 2018.
Highlights
Fiscal year
- Fiscal 2017 GAAP net earnings attributable to CDK margin
expansion of 200 bps to 13.3%; adjusted EBITDA margin expansion of
550 bps to 32.1%
- Fiscal 2017 growth in GAAP diluted net earnings attributable to
CDK per share of 32% to $1.99 per share; growth in adjusted diluted
net earnings attributable to CDK per share of 40% to $2.43 per
share
Fourth quarter
- Fiscal 2017 GAAP net earnings attributable to CDK margin
decline of 40 bps to 10.4%; adjusted EBITDA margin expansion of 390
bps to 32.3%
- Fiscal 2017 growth in GAAP diluted net earnings attributable to
CDK per share of 11% to $0.41 per share; growth in adjusted diluted
net earnings attributable to CDK per share of 12% to $0.55 per
share
Fiscal 2018 guidance
Adjusted guidance is calculated and presented based on
management’s revised adjustments for fiscal 2018, and will exclude
total stock-based compensation expense and certain legal and
regulatory expenses from adjusted earnings before income taxes, as
described below under the Non-GAAP Financial Measures section at
the end of this press release.
- Fiscal 2018 GAAP diluted net earnings attributable to CDK per
share $2.37 - $2.47 and adjusted diluted net earnings attributable
to CDK per share $2.90 - $3.00, up from $2.57 in fiscal 2017 on a
comparable basis
- Fiscal 2018 GAAP net earnings attributable to CDK margin 14.0%
- 15.0% and adjusted EBITDA margin 35.0% - 36.0%
“I am pleased with the results of our fiscal
year and benefits delivered by executing our transformation
plan. Adjusted EBITDA margin expansion of 550 basis points in
fiscal 2017, combined with the 370 basis points of expansion
achieved in fiscal 2016, puts us on track to achieve our
transformation goals,” said Brian MacDonald, chief executive
officer. “By improving our products and processes and
focusing on our dealer customers, we are making solid
progress. Based on successes to date, we expect to exceed the
fiscal 2018 adjusted EBITDA target of 35%.”
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.
Total Company
Year-over-year highlights are below:
Fiscal 2017
Results |
|
GAAP |
|
Adjusted |
Revenues |
|
up 5% to $2,220.2
million |
|
up 5% to $2,220.2
million |
Earnings before income
taxes |
|
up 18% to $435.3
million |
|
up 26% to $538.8
million |
Net earnings
attributable to CDK |
|
up 24% to $295.6
million |
|
up 31% to $360.8
million |
Diluted net earnings
attributable to CDK per share |
|
up 32% to $1.99 per
share |
|
up 40% to $2.43 per
share |
Margin |
|
Net earnings
attributable to CDK margin up 200 bps to 13.3% |
|
EBITDA margin up 550
bps to 32.1% |
Fourth Quarter Fiscal
2017 Results |
|
GAAP |
|
Adjusted |
Revenues |
|
up 4% to $565.4
million |
|
up 4% to $565.4
million |
Earnings before income
taxes |
|
up 7% to $94.1
million |
|
up 7% to $126.4
million |
Net earnings
attributable to CDK |
|
up 1% to $58.7
million |
|
up 3% to $79.1
million |
Diluted net earnings
attributable to CDK per share |
|
up 11% to $0.41 per
share |
|
up 12% to $0.55 per
share |
Margin |
|
Net earnings
attributable to CDK margin down 40 bps to 10.4% |
|
EBITDA margin up 390
bps to 32.3% |
Impacts to the Fiscal Year:
- 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 not impacted.
- Tax rate: The GAAP effective tax rate for fiscal 2017 was 30.5%
compared to 33.1% last year. The adjusted effective tax rate
for fiscal 2017 was 31.8% compared to 33.8% last year. The fiscal
2017 GAAP effective tax rate and the adjusted effective tax rate
include tax benefits of $13.1 million related to excess tax
benefits associated with the adoption of the new stock compensation
accounting standard on July 1, 2016.
Impacts to the Fourth Quarter:
- Foreign exchange rates: Growth in revenues and earnings before
income taxes were both negatively impacted by 1 percentage point by
foreign exchange rates.
- Tax rate: The GAAP effective tax rate for the fourth quarter of
fiscal 2017 was 35.3% compared to 31.5% in last year’s fourth
quarter. The adjusted effective tax rate for the fourth quarter of
fiscal 2017 was 35.7% compared to 33.1% in last year’s fourth
quarter. The fourth quarter fiscal 2017 GAAP effective tax rate and
the adjusted effective tax rate include tax benefits of $1.0
million related to excess tax benefits associated with stock-based
compensation.
CDK Segment Information
CDK North America: Retail Solutions North
America
Fiscal 2017 Results
- Revenues increased 5% to $1,600.7 million. On a constant
currency basis revenues also increased 5%.
- GAAP earnings before income taxes increased 26% to $605.5
million; adjusted earnings before income taxes increased 26% to
$606.2 million.
- GAAP pretax margin expanded 620 bps to 37.8%; adjusted pretax
margin expanded 630 bps to 37.9%. Margin expansion is driven
by scale from increased revenues and operating efficiencies,
including lower employee related costs and benefits associated with
the business transformation plan.
Fourth Quarter Fiscal 2017 Results
- Revenues increased 5% to $406.6 million. On a constant
currency basis revenues increased 6%.
- GAAP earnings before income taxes increased 20% to $158.5
million; adjusted earnings before income taxes increased 20% to
$159.2 million.
- GAAP pretax margin expanded 460 bps to 39.0%; adjusted pretax
margin expanded 480 bps to 39.2%. Margin expansion is driven
by scale from increased revenues and operating efficiencies,
including lower employee related costs and benefits associated with
the business transformation plan.
CDK North America: Advertising North America
Fiscal 2017 Results
- Revenues increased 10% to $307.6 million.
- Earnings before income taxes increased 61% to $44.4
million.
- Pretax margin expanded 460 bps to 14.4% primarily due to
increased operating efficiencies associated with the business
transformation plan.
Fourth Quarter Fiscal 2017 Results
- Revenues increased 1% to $77.5 million.
- Earnings before income taxes increased 30% to $12.9
million.
- Pretax margin expanded 370 bps to 16.6% primarily due to
increased operating efficiencies associated with the business
transformation plan.
CDK International
Fiscal 2017 Results
- Revenues decreased 1% to $311.9 million entirely due to
unfavorable foreign exchange rates. On a constant currency basis,
revenues increased 5%.
- Earnings before income taxes increased 23% to $75.0 million. On
a constant currency basis, earnings before income taxes also
increased 23%.
- Pretax margin expanded 450 bps to 24.0% primarily due to
increased scale and operating efficiencies associated with the
business transformation plan.
Fourth Quarter Fiscal 2017 Results
- Revenues increased 3% to $81.3 million. On a constant
currency basis, revenues increased 7%.
- Earnings before income taxes increased 26% to $19.9 million. On
a constant currency basis, earnings before income taxes increased
27%.
- Pretax margin expanded 460 bps to 24.5% primarily due to
increased scale and operating efficiencies associated with the
business transformation plan.
Fiscal 2018 Guidance
Fiscal 2018
Guidance |
|
GAAP |
|
Adjusted |
Revenues |
|
up 4.0% - 5.0% |
|
up 4.0% - 5.0% |
Diluted net
earnings attributable to CDK per share |
|
$2.37 - $2.47 |
|
$2.90 - $3.00 |
up 19.0% - 24.0% |
up 13.0% - 17.0% |
Margin |
|
Net earnings
attributable to CDK margin 14.0% - 15.0% |
|
EBITDA margin 35.0% -
36.0% |
Fiscal 2018 guidance includes $80-$90 million of
incremental adjusted EBITDA attributable to the execution of our
business transformation plan.
As described below under the Non-GAAP Financial
Measures section at the end of this press release, effective July
1, 2017 and commencing with the fiscal 2018 guidance, we are
incorporating additional adjustments within our calculations of
certain adjusted financial measures, including adjusted net
earnings attributable to CDK, adjusted EBITDA and adjusted EBITDA
margin. For purposes of calculating and presenting the fiscal
2018 guidance each adjusted growth rate is shown against a
comparably calculated fiscal 2017 figure.
Tax Rate
We anticipate our GAAP effective tax rate for
fiscal 2018 will be 33.0% - 34.0% compared to 30.5% for fiscal
2017. The adjusted effective tax rate for fiscal 2018 is
expected to be 35.0% - 36.0% compared to 34.2% for fiscal 2017.
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 fourth
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, August 1, 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
enabling end-to-end automotive commerce, 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 and Combined Statements of
Operations |
(In millions, except per share amounts) |
|
|
Three Months Ended |
|
Fiscal Year Ended |
|
June 30, |
|
June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues |
$ |
565.4 |
|
|
$ |
542.2 |
|
|
$ |
2,220.2 |
|
|
$ |
2,114.6 |
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
Cost of
revenues |
308.9 |
|
|
315.6 |
|
|
1,234.9 |
|
|
1,243.4 |
|
Selling,
general and administrative expenses |
135.7 |
|
|
120.3 |
|
|
477.7 |
|
|
448.5 |
|
Restructuring expenses |
8.1 |
|
|
8.8 |
|
|
18.4 |
|
|
20.2 |
|
Total
expenses |
452.7 |
|
|
444.7 |
|
|
1,731.0 |
|
|
1,712.1 |
|
|
|
|
|
|
|
|
|
Operating earnings |
112.7 |
|
|
97.5 |
|
|
489.2 |
|
|
402.5 |
|
|
|
|
|
|
|
|
|
Interest
expense |
(19.1 |
) |
|
(10.7 |
) |
|
(57.2 |
) |
|
(40.2 |
) |
Other
income, net |
0.5 |
|
|
1.1 |
|
|
3.3 |
|
|
6.8 |
|
|
|
|
|
|
|
|
|
Earnings before income
taxes |
94.1 |
|
|
87.9 |
|
|
435.3 |
|
|
369.1 |
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
(33.2 |
) |
|
(27.7 |
) |
|
(132.8 |
) |
|
(122.3 |
) |
|
|
|
|
|
|
|
|
Net earnings |
60.9 |
|
|
60.2 |
|
|
302.5 |
|
|
246.8 |
|
Less: net earnings
attributable to noncontrolling interest |
2.2 |
|
|
1.9 |
|
|
6.9 |
|
|
7.5 |
|
Net earnings
attributable to CDK |
$ |
58.7 |
|
|
$ |
58.3 |
|
|
$ |
295.6 |
|
|
$ |
239.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to CDK per common share: |
|
|
|
|
|
|
|
Basic |
$ |
0.41 |
|
|
$ |
0.38 |
|
|
$ |
2.01 |
|
|
$ |
1.52 |
|
Diluted |
$ |
0.41 |
|
|
$ |
0.37 |
|
|
$ |
1.99 |
|
|
$ |
1.51 |
|
|
|
|
|
|
|
|
|
Weighted-average common
shares outstanding: |
|
|
|
|
|
|
|
Basic |
142.7 |
|
|
154.7 |
|
|
146.7 |
|
|
157.0 |
|
Diluted |
144.5 |
|
|
155.7 |
|
|
148.2 |
|
|
158.0 |
|
CDK Global, Inc. |
Consolidated Balance Sheets |
(In millions) |
|
|
June 30, |
|
June 30, |
|
2017 |
|
2016 |
Assets |
|
|
|
Current
assets: |
|
|
|
Cash and
cash equivalents |
$ |
726.1 |
|
|
$ |
219.1 |
|
Accounts
receivable, net of allowances |
372.1 |
|
|
365.5 |
|
Other
current assets |
180.6 |
|
|
154.1 |
|
Total
current assets |
1,278.8 |
|
|
738.7 |
|
|
|
|
|
Property,
plant and equipment, net |
135.0 |
|
|
118.6 |
|
Other
assets |
184.1 |
|
|
217.2 |
|
Goodwill |
1,181.2 |
|
|
1,182.7 |
|
Intangible assets, net |
104.0 |
|
|
107.8 |
|
Total
assets |
$ |
2,883.1 |
|
|
$ |
2,365.0 |
|
|
|
|
|
Liabilities and
(Deficit) Equity |
|
|
|
Current
liabilities: |
|
|
|
Current
maturities of long-term debt and capital lease obligations |
$ |
46.5 |
|
|
$ |
26.8 |
|
Accounts
payable |
38.9 |
|
|
38.8 |
|
Accrued
expenses and other current liabilities |
188.7 |
|
|
165.3 |
|
Accrued
payroll and payroll-related expenses |
106.2 |
|
|
115.3 |
|
Short-term deferred revenues |
172.3 |
|
|
177.2 |
|
Total
current liabilities |
552.6 |
|
|
523.4 |
|
|
|
|
|
Long-term
debt and capital lease obligations |
2,125.2 |
|
|
1,190.3 |
|
Long-term
deferred revenues |
136.1 |
|
|
157.7 |
|
Deferred
income taxes |
65.9 |
|
|
46.9 |
|
Other
liabilities |
60.1 |
|
|
70.5 |
|
Total
liabilities |
2,939.9 |
|
|
1,988.8 |
|
|
|
|
|
(Deficit)
Equity: |
|
|
|
Preferred
stock |
— |
|
|
— |
|
Common
stock |
1.6 |
|
|
1.6 |
|
Additional paid-in-capital |
608.6 |
|
|
640.7 |
|
Retained
earnings |
452.7 |
|
|
238.3 |
|
Treasury
stock, at cost |
(1,144.7 |
) |
|
(526.6 |
) |
Accumulated other comprehensive income |
8.0 |
|
|
5.8 |
|
Total CDK
stockholders' (deficit) equity |
(73.8 |
) |
|
359.8 |
|
Noncontrolling interest |
17.0 |
|
|
16.4 |
|
Total
(deficit) equity |
(56.8 |
) |
|
376.2 |
|
Total
liabilities and (deficit) equity |
$ |
2,883.1 |
|
|
$ |
2,365.0 |
|
CDK Global, Inc. |
Consolidated and Combined Statements of Cash
Flows |
(In millions) |
|
|
Years Ended June 30, |
|
2017 |
|
2016 |
|
2015 |
Cash Flows from
Operating Activities: |
|
|
|
|
|
Net earnings |
$ |
302.5 |
|
|
$ |
246.8 |
|
|
$ |
186.3 |
|
Adjustments to
reconcile net earnings to cash flows provided by operating
activities: |
|
|
|
|
|
Depreciation and amortization |
70.3 |
|
|
64.0 |
|
|
76.5 |
|
Deferred
income taxes |
20.9 |
|
|
(3.6 |
) |
|
(25.3 |
) |
Stock-based compensation expense |
55.4 |
|
|
36.4 |
|
|
30.4 |
|
Pension
expense |
— |
|
|
— |
|
|
0.8 |
|
Other |
4.6 |
|
|
(5.6 |
) |
|
(12.6 |
) |
Changes in operating
assets and liabilities, net of effects from acquisitions and
divestitures of businesses: |
|
|
|
|
|
Increase
in accounts receivable |
(8.3 |
) |
|
(57.0 |
) |
|
(16.9 |
) |
(Increase) decrease in other assets |
(1.9 |
) |
|
3.0 |
|
|
(24.3 |
) |
Increase
in accounts payable |
4.4 |
|
|
15.3 |
|
|
3.0 |
|
(Decrease) increase in accrued expenses and other liabilities |
(16.9 |
) |
|
20.8 |
|
|
50.0 |
|
Net cash flows provided
by operating activities |
431.0 |
|
|
320.1 |
|
|
267.9 |
|
|
|
|
|
|
|
Cash Flows from
Investing Activities: |
|
|
|
|
|
Capital
expenditures |
(62.4 |
) |
|
(50.8 |
) |
|
(44.0 |
) |
Proceeds from sale of
property, plant and equipment |
0.5 |
|
|
1.1 |
|
|
0.9 |
|
Capitalized
software |
(31.8 |
) |
|
(13.5 |
) |
|
(19.9 |
) |
Acquisitions of
businesses, net of cash acquired |
— |
|
|
(18.1 |
) |
|
(36.6 |
) |
Proceeds from the sale
of a business |
— |
|
|
— |
|
|
24.5 |
|
Contributions to
investments |
(2.1 |
) |
|
(10.0 |
) |
|
(22.9 |
) |
Proceeds from
investments |
7.9 |
|
|
9.7 |
|
|
16.6 |
|
Proceeds from notes
receivable from ADP and its affiliates |
— |
|
|
— |
|
|
40.6 |
|
Net cash flows used in
investing activities |
(87.9 |
) |
|
(81.6 |
) |
|
(40.8 |
) |
|
|
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
|
|
Repayments of notes
payable to ADP and its affiliates |
— |
|
|
— |
|
|
(21.9 |
) |
Net transactions of
parent company investment |
— |
|
|
— |
|
|
(240.8 |
) |
Proceeds from long-term
debt |
1,000.0 |
|
|
250.0 |
|
|
1,750.0 |
|
Repayments of long-term
debt and capital lease obligations |
(36.9 |
) |
|
(20.0 |
) |
|
(759.5 |
) |
Dividend paid to ADP at
spin-off |
— |
|
|
— |
|
|
(825.0 |
) |
Dividends paid to
stockholders |
(80.7 |
) |
|
(82.3 |
) |
|
(58.2 |
) |
Repurchases of common
stock |
(700.0 |
) |
|
(561.0 |
) |
|
(50.0 |
) |
Proceeds from exercise
of stock options |
14.7 |
|
|
6.7 |
|
|
9.8 |
|
Excess tax benefit from
stock-based compensation awards |
— |
|
|
8.9 |
|
|
11.2 |
|
Withholding tax
payments for stock-based compensation awards |
(12.2 |
) |
|
(8.7 |
) |
|
(0.9 |
) |
Payments of deferred
financing costs |
(10.6 |
) |
|
(2.1 |
) |
|
(9.2 |
) |
Dividend payments to
noncontrolling owners |
(6.3 |
) |
|
(5.0 |
) |
|
(5.4 |
) |
Acquisition-related
payments |
(8.1 |
) |
|
(6.2 |
) |
|
— |
|
Recovery of dividends
paid |
— |
|
|
0.4 |
|
|
— |
|
Net cash flows provided
by (used in) financing activities |
159.9 |
|
|
(419.3 |
) |
|
(199.9 |
) |
|
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
4.0 |
|
|
(8.3 |
) |
|
(21.8 |
) |
|
|
|
|
|
|
Net change in cash and
cash equivalents |
507.0 |
|
|
(189.1 |
) |
|
5.4 |
|
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period |
219.1 |
|
|
408.2 |
|
|
402.8 |
|
|
|
|
|
|
|
Cash and cash
equivalents, end of period |
$ |
726.1 |
|
|
$ |
219.1 |
|
|
$ |
408.2 |
|
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 fiscal 2016 has been restated to conform to
the new presentation.
|
Segment Revenues |
|
Three Months Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
June 30, |
|
Change |
|
June 30, |
|
Change |
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
CDK North America: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Solutions North America: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription revenue |
$ |
319.5 |
|
|
$ |
303.8 |
|
|
$ |
15.7 |
|
|
5 |
% |
|
1,261.4 |
|
|
$ |
1,191.2 |
|
|
$ |
70.2 |
|
|
6 |
% |
Transaction revenue |
46.3 |
|
|
46.7 |
|
|
(0.4 |
) |
|
(1 |
)% |
|
179.5 |
|
|
179.1 |
|
|
0.4 |
|
|
— |
% |
Other
revenue |
40.8 |
|
|
35.4 |
|
|
5.4 |
|
|
15 |
% |
|
159.8 |
|
|
151.0 |
|
|
8.8 |
|
|
6 |
% |
Total
Retail Solutions North America (a) |
$ |
406.6 |
|
|
$ |
385.9 |
|
|
$ |
20.7 |
|
|
5 |
% |
|
$ |
1,600.7 |
|
|
$ |
1,521.3 |
|
|
$ |
79.4 |
|
|
5 |
% |
Advertising North America (b) |
77.5 |
|
|
77.0 |
|
|
0.5 |
|
|
1 |
% |
|
307.6 |
|
|
279.7 |
|
|
27.9 |
|
|
10 |
% |
CDK International
(c) |
81.3 |
|
|
79.3 |
|
|
2.0 |
|
|
3 |
% |
|
311.9 |
|
|
313.6 |
|
|
(1.7 |
) |
|
(1 |
)% |
Total |
$ |
565.4 |
|
|
$ |
542.2 |
|
|
$ |
23.2 |
|
|
4 |
% |
|
$ |
2,220.2 |
|
|
$ |
2,114.6 |
|
|
$ |
105.6 |
|
|
5 |
% |
|
Adjusted Segment Earnings before Income
Taxes |
|
Three Months Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
June 30, |
|
Change |
|
June 30, |
|
Change |
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Retail Solutions North
America (a) |
$ |
159.2 |
|
|
$ |
132.6 |
|
|
$ |
26.6 |
|
|
20 |
% |
|
$ |
606.2 |
|
|
$ |
481.3 |
|
|
$ |
124.9 |
|
|
26 |
% |
Margin |
39.2 |
% |
|
34.4 |
% |
|
480
bps |
|
37.9 |
% |
|
31.6 |
% |
|
630
bps |
Advertising North
America (b) |
12.9 |
|
|
9.9 |
|
|
3.0 |
|
|
30 |
% |
|
44.4 |
|
|
27.5 |
|
|
16.9 |
|
|
61 |
% |
Margin |
16.6 |
% |
|
12.9 |
% |
|
370
bps |
|
14.4 |
% |
|
9.8 |
% |
|
460
bps |
CDK International
(c) |
19.9 |
|
|
15.8 |
|
|
4.1 |
|
|
26 |
% |
|
75.0 |
|
|
$ |
61.1 |
|
|
13.9 |
|
|
23 |
% |
Margin |
24.5 |
% |
|
19.9 |
% |
|
460
bps |
|
24.0 |
% |
|
19.5 |
% |
|
450
bps |
Other (d) |
(65.6 |
) |
|
(40.7 |
) |
|
(24.9 |
) |
|
(61 |
)% |
|
(186.8 |
) |
|
(143.5 |
) |
|
(43.3 |
) |
|
(30 |
)% |
Total |
$ |
126.4 |
|
|
$ |
117.6 |
|
|
$ |
8.8 |
|
|
7 |
% |
|
$ |
538.8 |
|
|
$ |
426.4 |
|
|
$ |
112.4 |
|
|
26 |
% |
Margin |
22.4 |
% |
|
21.7 |
% |
|
70 bps |
|
24.3 |
% |
|
20.2 |
% |
|
410
bps |
(a) The table below presents a reconciliation of revenues to
constant currency revenues and earnings before income taxes to
constant currency adjusted earnings before income taxes for the
Retail Solutions North America (RSNA) segment.
|
Three Months Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
June 30, |
|
Change |
|
June 30, |
|
Change |
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Revenues |
$ |
406.6 |
|
|
$ |
385.9 |
|
|
$ |
20.7 |
|
|
5 |
% |
|
$ |
1,600.7 |
|
|
$ |
1,521.3 |
|
|
$ |
79.4 |
|
|
5 |
% |
Impact of
exchange rates |
1.1 |
|
|
— |
|
|
|
|
|
|
0.1 |
|
|
— |
|
|
|
|
|
Constant currency
adjusted revenues (e) |
$ |
407.7 |
|
|
$ |
385.9 |
|
|
$ |
21.8 |
|
|
6 |
% |
|
$ |
1,600.8 |
|
|
$ |
1,521.3 |
|
|
$ |
79.5 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
$ |
158.5 |
|
|
$ |
132.6 |
|
|
$ |
25.9 |
|
|
20 |
% |
|
$ |
605.5 |
|
|
$ |
481.3 |
|
|
$ |
124.2 |
|
|
26 |
% |
Margin
% |
39.0 |
% |
|
34.4 |
% |
|
460
bps |
|
37.8 |
% |
|
31.6 |
% |
|
620
bps |
Acquisition and integration-related expenses |
0.7 |
|
|
— |
|
|
|
|
|
|
0.7 |
|
|
— |
|
|
|
|
|
Adjusted
earnings before income taxes (e) |
$ |
159.2 |
|
|
$ |
132.6 |
|
|
$ |
26.6 |
|
|
20 |
% |
|
$ |
606.2 |
|
|
$ |
481.3 |
|
|
$ |
124.9 |
|
|
26 |
% |
Adjusted
margin % |
39.2 |
% |
|
34.4 |
% |
|
480
bps |
|
37.9 |
% |
|
31.6 |
% |
|
630
bps |
Impact of
exchange rates |
0.5 |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
Constant currency
adjusted earnings before income taxes (e) |
$ |
159.7 |
|
|
$ |
132.6 |
|
|
$ |
27.1 |
|
|
20 |
% |
|
$ |
606.2 |
|
|
$ |
481.3 |
|
|
$ |
124.9 |
|
|
26 |
% |
(b) There are no non-GAAP adjustments to revenues and earnings
before income taxes for the Advertising North America (ANA) segment
including constant currency.
(c) There are no non-GAAP adjustments to revenues and earnings
before income taxes for the CDK International (CDKI) segment. The
table below presents a reconciliation of revenues to constant
currency revenues and earnings before income taxes to constant
currency earnings before income taxes for the CDKI segment.
|
Three Months Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
June 30, |
|
Change |
|
June 30, |
|
Change |
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Revenues |
$ |
81.3 |
|
|
$ |
79.3 |
|
|
$ |
2.0 |
|
|
3 |
% |
|
$ |
311.9 |
|
|
$ |
313.6 |
|
|
$ |
(1.7 |
) |
|
(1 |
)% |
Impact of
exchange rates |
3.6 |
|
|
— |
|
|
|
|
|
|
17.3 |
|
|
— |
|
|
|
|
|
Constant currency
revenues (e) |
$ |
84.9 |
|
|
$ |
79.3 |
|
|
$ |
5.6 |
|
|
7 |
% |
|
$ |
329.2 |
|
|
$ |
313.6 |
|
|
$ |
15.6 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
$ |
19.9 |
|
|
$ |
15.8 |
|
|
$ |
4.1 |
|
|
26 |
% |
|
$ |
75.0 |
|
|
$ |
61.1 |
|
|
$ |
13.9 |
|
|
23 |
% |
Margin
% |
24.5 |
% |
|
19.9 |
% |
|
460
bps |
|
24.0 |
% |
|
19.5 |
% |
|
450
bps |
Impact of
exchange rates |
0.1 |
|
|
— |
|
|
|
|
|
|
0.4 |
|
|
— |
|
|
|
|
|
Constant currency
earnings before income taxes (e) |
$ |
20.0 |
|
|
$ |
15.8 |
|
|
$ |
4.2 |
|
|
27 |
% |
|
$ |
75.4 |
|
|
$ |
61.1 |
|
|
$ |
14.3 |
|
|
23 |
% |
(d) The table below presents a reconciliation of loss before
income taxes to constant currency adjusted loss before income taxes
for the Other segment.
|
Three Months Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
June 30, |
|
Change |
|
June 30, |
|
Change |
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Loss before
income taxes |
$ |
(97.2 |
) |
|
$ |
(70.4 |
) |
|
$ |
(26.8 |
) |
|
(38 |
)% |
|
$ |
(289.6 |
) |
|
$ |
(200.8 |
) |
|
$ |
(88.8 |
) |
|
(44 |
)% |
Restructuring expenses |
8.1 |
|
|
8.8 |
|
|
|
|
|
|
18.4 |
|
|
20.2 |
|
|
|
|
|
Other
business transformation expenses |
19.7 |
|
|
20.9 |
|
|
|
|
|
|
80.6 |
|
|
39.7 |
|
|
|
|
|
Officer
transition expense |
3.8 |
|
|
— |
|
|
|
|
|
|
3.8 |
|
|
— |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Adjusted loss
before income taxes (e) |
$ |
(65.6 |
) |
|
$ |
(40.7 |
) |
|
$ |
(24.9 |
) |
|
(61 |
)% |
|
$ |
(186.8 |
) |
|
$ |
(143.5 |
) |
|
$ |
(43.3 |
) |
|
(30 |
)% |
Impact of
exchange rates |
0.1 |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
Constant currency
adjusted loss before income taxes (e) |
$ |
(65.5 |
) |
|
$ |
(40.7 |
) |
|
$ |
(24.8 |
) |
|
(61 |
)% |
|
$ |
(186.8 |
) |
|
$ |
(143.5 |
) |
|
$ |
(43.3 |
) |
|
(30 |
)% |
(e) Refer to the Non-GAAP Financial Measures section of this
press release for additional information on our non-GAAP
adjustments.
CDK Global, Inc.Consolidated and
Combined Adjusted Financial Information(In millions,
except per share amounts)(Unaudited)
|
Three Months Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
June 30, |
|
Change |
|
June 30, |
|
Change |
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Revenues |
$ |
565.4 |
|
|
$ |
542.2 |
|
|
$ |
23.2 |
|
|
4 |
% |
|
$ |
2,220.2 |
|
|
$ |
2,114.6 |
|
|
$ |
105.6 |
|
|
5 |
% |
Impact of
exchange rates |
4.7 |
|
|
— |
|
|
|
|
|
|
17.4 |
|
|
— |
|
|
|
|
|
Constant currency
adjusted revenues (a) |
$ |
570.1 |
|
|
$ |
542.2 |
|
|
$ |
27.9 |
|
|
5 |
% |
|
$ |
2,237.6 |
|
|
$ |
2,114.6 |
|
|
$ |
123.0 |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes |
$ |
94.1 |
|
|
$ |
87.9 |
|
|
$ |
6.2 |
|
|
7 |
% |
|
$ |
435.3 |
|
|
$ |
369.1 |
|
|
$ |
66.2 |
|
|
18 |
% |
Margin |
16.6 |
% |
|
16.2 |
% |
|
40 bps |
|
|
|
19.6 |
% |
|
17.5 |
% |
|
210
bps |
|
|
Restructuring expenses |
8.1 |
|
|
8.8 |
|
|
|
|
|
|
18.4 |
|
|
20.2 |
|
|
|
|
|
Other
business transformation expenses |
19.7 |
|
|
20.9 |
|
|
|
|
|
|
80.6 |
|
|
39.7 |
|
|
|
|
|
Acquisition and integration-related expenses |
0.7 |
|
|
— |
|
|
|
|
|
|
0.7 |
|
|
— |
|
|
|
|
|
Officer
transition expense |
3.8 |
|
|
— |
|
|
|
|
|
|
3.8 |
|
|
— |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Adjusted
earnings before income taxes (a) |
$ |
126.4 |
|
|
$ |
117.6 |
|
|
$ |
8.8 |
|
|
7 |
% |
|
$ |
538.8 |
|
|
$ |
426.4 |
|
|
$ |
112.4 |
|
|
26 |
% |
Adjusted
margin |
22.4 |
% |
|
21.7 |
% |
|
70 bps |
|
|
|
24.3 |
% |
|
20.2 |
% |
|
410
bps |
|
|
Impact of
exchange rates |
0.7 |
|
|
— |
|
|
|
|
|
|
0.4 |
|
|
— |
|
|
|
|
|
Constant currency
adjusted earnings before income taxes (a) |
$ |
127.1 |
|
|
$ |
117.6 |
|
|
$ |
9.5 |
|
|
8 |
% |
|
$ |
539.2 |
|
|
$ |
426.4 |
|
|
$ |
112.8 |
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for
income taxes |
$ |
33.2 |
|
|
$ |
27.7 |
|
|
$ |
5.5 |
|
|
20 |
% |
|
$ |
132.8 |
|
|
$ |
122.3 |
|
|
$ |
10.5 |
|
|
9 |
% |
Effective
tax rate |
35.3 |
% |
|
31.5 |
% |
|
|
|
|
|
30.5 |
% |
|
33.1 |
% |
|
|
|
|
Income
tax effect of pre-tax adjustments |
11.9 |
|
|
11.2 |
|
|
|
|
|
|
38.3 |
|
|
21.6 |
|
|
|
|
|
Pre
spin-off filed tax return adjustment |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
0.4 |
|
|
|
|
|
Adjusted
provision for income taxes (a) |
$ |
45.1 |
|
|
$ |
38.9 |
|
|
$ |
6.2 |
|
|
16 |
% |
|
$ |
171.1 |
|
|
$ |
144.3 |
|
|
$ |
26.8 |
|
|
19 |
% |
Adjusted
effective tax rate |
35.7 |
% |
|
33.1 |
% |
|
|
|
|
|
31.8 |
% |
|
33.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings |
$ |
60.9 |
|
|
$ |
60.2 |
|
|
$ |
0.7 |
|
|
1 |
% |
|
$ |
302.5 |
|
|
$ |
246.8 |
|
|
$ |
55.7 |
|
|
23 |
% |
Less: net earnings
attributable to noncontrolling interest |
2.2 |
|
|
1.9 |
|
|
|
|
|
|
6.9 |
|
|
7.5 |
|
|
|
|
|
Net earnings
attributable to CDK |
58.7 |
|
|
58.3 |
|
|
0.4 |
|
|
1 |
% |
|
295.6 |
|
|
239.3 |
|
|
56.3 |
|
|
24 |
% |
Restructuring expenses |
8.1 |
|
|
8.8 |
|
|
|
|
|
|
18.4 |
|
|
20.2 |
|
|
|
|
|
Other
business transformation expenses |
19.7 |
|
|
20.9 |
|
|
|
|
|
|
80.6 |
|
|
39.7 |
|
|
|
|
|
Acquisition and integration-related expenses |
0.7 |
|
|
— |
|
|
|
|
|
|
0.7 |
|
|
— |
|
|
|
|
|
Officer
transition expense |
3.8 |
|
|
— |
|
|
|
|
|
|
3.8 |
|
|
— |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Income
tax effect of pre-tax adjustments |
(11.9 |
) |
|
(11.2 |
) |
|
|
|
|
|
(38.3 |
) |
|
(21.6 |
) |
|
|
|
|
Pre
spin-off filed tax return adjustment |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(0.4 |
) |
|
|
|
|
Adjusted net
earnings attributable to CDK (a) |
$ |
79.1 |
|
|
$ |
76.8 |
|
|
$ |
2.3 |
|
|
3 |
% |
|
$ |
360.8 |
|
|
$ |
274.6 |
|
|
$ |
86.2 |
|
|
31 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings attributable to CDK per share |
$ |
0.41 |
|
|
$ |
0.37 |
|
|
$ |
0.04 |
|
|
11 |
% |
|
1.99 |
|
|
1.51 |
|
|
$ |
0.48 |
|
|
32 |
% |
Restructuring expenses |
0.06 |
|
|
0.06 |
|
|
|
|
|
|
0.12 |
|
|
0.13 |
|
|
|
|
|
Other
business transformation expenses |
0.13 |
|
|
0.13 |
|
|
|
|
|
|
0.54 |
|
|
0.25 |
|
|
|
|
|
Acquisition and integration-related expenses |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
Officer
transition expense |
0.03 |
|
|
— |
|
|
|
|
|
|
0.03 |
|
|
— |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(0.01 |
) |
|
|
|
|
Income
tax effect of pre-tax adjustments |
(0.08 |
) |
|
(0.07 |
) |
|
|
|
|
|
(0.25 |
) |
|
(0.14 |
) |
|
|
|
|
Pre
spin-off filed tax return adjustment |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
|
Adjusted
diluted earnings attributable to CDK per share |
$ |
0.55 |
|
|
$ |
0.49 |
|
|
$ |
0.06 |
|
|
12 |
% |
|
2.43 |
|
|
1.74 |
|
|
$ |
0.69 |
|
|
40 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
144.5 |
|
|
155.7 |
|
|
|
|
|
|
148.2 |
|
|
158.0 |
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
Fiscal Year Ended |
|
|
|
|
|
June 30, |
|
Change |
|
June 30, |
|
Change |
|
2017 |
|
2016 |
|
$ |
|
% |
|
2017 |
|
2016 |
|
$ |
|
% |
Net earnings
attributable to CDK |
$ |
58.7 |
|
|
$ |
58.3 |
|
|
$ |
0.4 |
|
|
1 |
% |
|
$ |
295.6 |
|
|
$ |
239.3 |
|
|
$ |
56.3 |
|
|
24 |
% |
Margin |
10.4 |
% |
|
10.8 |
% |
|
-40
bps |
|
|
|
13.3 |
% |
|
11.3 |
% |
|
200
bps |
|
|
Net
earnings attributable to noncontrolling interest |
2.2 |
|
|
1.9 |
|
|
|
|
|
|
6.9 |
|
|
7.5 |
|
|
|
|
|
Provision
for income taxes |
33.2 |
|
|
27.7 |
|
|
|
|
|
|
132.8 |
|
|
122.3 |
|
|
|
|
|
Interest
expense |
19.1 |
|
|
10.7 |
|
|
|
|
|
|
57.2 |
|
|
40.2 |
|
|
|
|
|
Depreciation and amortization |
18.3 |
|
|
18.4 |
|
|
|
|
|
|
70.3 |
|
|
64.0 |
|
|
|
|
|
Total
stock-based compensation |
23.1 |
|
|
10.9 |
|
|
|
|
|
|
55.4 |
|
|
36.4 |
|
|
|
|
|
Restructuring expenses |
8.1 |
|
|
8.8 |
|
|
|
|
|
|
18.4 |
|
|
20.2 |
|
|
|
|
|
Other
business transformation expenses |
18.7 |
|
|
17.4 |
|
|
|
|
|
|
75.6 |
|
|
34.8 |
|
|
|
|
|
Acquisition and integration-related expenses |
0.7 |
|
|
— |
|
|
|
|
|
|
0.7 |
|
|
— |
|
|
|
|
|
Officer
transition expense |
0.7 |
|
|
— |
|
|
|
|
|
|
0.7 |
|
|
— |
|
|
|
|
|
Tax
matters indemnification gain, net |
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
(2.6 |
) |
|
|
|
|
Adjusted EBITDA
(a) |
$ |
182.8 |
|
|
$ |
154.1 |
|
|
$ |
28.7 |
|
|
19 |
% |
|
$ |
713.6 |
|
|
$ |
562.1 |
|
|
$ |
151.5 |
|
|
27 |
% |
Adjusted
margin |
32.3 |
% |
|
28.4 |
% |
|
390 bps |
|
|
|
32.1 |
% |
|
26.6 |
% |
|
550 bps |
|
|
|
Fiscal Year Ended |
|
June 30, |
|
2017 |
|
2016 |
Net cash flows
provided by operating activities |
$ |
431.0 |
|
|
$ |
320.1 |
|
Capital
expenditures |
(62.4 |
) |
|
(50.8 |
) |
Capitalized
software |
(31.8 |
) |
|
(13.5 |
) |
Free cash flow
(a) |
$ |
336.8 |
|
|
$ |
255.8 |
|
(a) Refer to the Non-GAAP Financial Measures section of this
press release for additional information on our non-GAAP
adjustments.
CDK Global, Inc.Consolidated Fiscal
2018 Guidance(In millions, except per share
amounts)(Unaudited)
As described below under the Non-GAAP Financial Measures section
of this press release, effective July 1, 2017 and commencing with
fiscal 2018 guidance, we are incorporating additional adjustments
within our calculations of adjusted earnings before income taxes,
adjusted provision for income taxes, adjusted net earnings
attributable to CDK, adjusted diluted net earnings attributable to
CDK per share, adjusted EBITDA and adjusted EBITDA margin. The
table below includes these adjustments for fiscal 2017 for purposes
of calculating and presenting the fiscal 2018 guidance.
|
Fiscal 2017 |
|
Fiscal 2018 |
|
Actuals |
|
Point Estimate (a) |
|
Guidance |
Revenues |
$ |
2,220.2 |
|
|
$ |
2,320.0 |
|
|
Increase 4 - 5% |
|
|
|
|
|
|
Earnings before
income taxes |
$ |
435.3 |
|
|
$ |
507.0 |
|
|
|
Restructuring expenses |
18.4 |
|
|
18.0 |
|
|
|
Other
business transformation expenses (b) |
78.1 |
|
|
50.0 |
|
|
|
Total
stock-based compensation |
55.4 |
|
|
40.0 |
|
|
|
Acquisition and integration-related expenses |
0.7 |
|
|
5.0 |
|
|
|
Officer
transition expense (b) |
0.7 |
|
|
— |
|
|
|
Legal and
regulatory expenses related to competition matters |
— |
|
|
12.0 |
|
|
|
Adjusted
earnings before income taxes (c) |
$ |
588.6 |
|
|
$ |
632.0 |
|
|
|
|
|
|
|
|
|
Provision for
income taxes |
$ |
132.8 |
|
|
$ |
170.0 |
|
|
|
Effective
tax rate |
30.5 |
% |
|
33.5 |
% |
|
33 -
34% |
Income
tax effect of pre-tax adjustments |
55.5 |
|
|
46.0 |
|
|
|
Excess
tax benefit from stock-based compensation |
13.1 |
|
|
7.0 |
|
|
|
Adjusted
provision for income taxes (c) |
$ |
201.4 |
|
|
$ |
223.0 |
|
|
|
Adjusted effective tax rate |
34.2 |
% |
|
35.3 |
% |
|
35 -
36% |
|
|
|
|
|
|
Net
earnings |
$ |
302.5 |
|
|
$ |
337.0 |
|
|
|
Less: net earnings
attributable to noncontrolling interest |
6.9 |
|
|
9.0 |
|
|
|
Net earnings
attributable to CDK |
$ |
295.6 |
|
|
$ |
328.0 |
|
|
|
Restructuring expenses |
18.4 |
|
|
18.0 |
|
|
|
Other
business transformation expenses (b) |
78.1 |
|
|
50.0 |
|
|
|
Total
stock-based compensation |
55.4 |
|
|
40.0 |
|
|
|
Acquisition and integration-related expenses |
0.7 |
|
|
5.0 |
|
|
|
Officer
transition expense (b) |
0.7 |
|
|
— |
|
|
|
Legal and
regulatory expenses related to competition matters |
— |
|
|
12.0 |
|
|
|
Income
tax effect of pre-tax adjustments |
(55.5 |
) |
|
(46.0 |
) |
|
|
Excess
tax benefit from stock-based compensation |
(13.1 |
) |
|
(7.0 |
) |
|
|
Adjusted net
earnings attributable to CDK (c) |
$ |
380.3 |
|
|
$ |
400.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net
earnings attributable to CDK per common share |
$ |
1.99 |
|
|
$ |
2.42 |
|
|
$2.37
- 2.47 |
Growth
% |
|
|
|
|
Increase 19 - 24% |
Restructuring expenses |
0.12 |
|
|
0.13 |
|
|
|
Other
business transformation expenses (b) |
0.54 |
|
|
0.37 |
|
|
|
Total
stock-based compensation |
0.37 |
|
|
0.29 |
|
|
|
Acquisition and integration-related expenses |
— |
|
|
0.04 |
|
|
|
Officer
transition expense (b) |
— |
|
|
— |
|
|
|
Legal and
regulatory expenses related to competition matters |
— |
|
|
0.09 |
|
|
|
Income
tax effect of pre-tax adjustments |
(0.37 |
) |
|
(0.34 |
) |
|
|
Excess
tax benefit from stock-based compensation |
(0.08 |
) |
|
(0.05 |
) |
|
|
Adjusted
diluted net earnings attributable to CDK per common share
(c) |
$ |
2.57 |
|
|
$ |
2.95 |
|
|
$2.90
- 3.00 |
Growth
% |
|
|
|
|
Increase 13 - 17% |
|
Fiscal 2017 |
|
Fiscal 2018 |
|
|
|
Actuals |
|
Point Estimate (a) |
|
Guidance |
Revenues |
$ |
2,220.2 |
|
|
$ |
2,320.0 |
|
|
|
|
|
|
|
|
|
Net earnings
attributable to CDK |
$ |
295.6 |
|
|
$ |
328.0 |
|
|
Increase 11 - 14 % |
Margin |
13.3 |
% |
|
14.1 |
% |
|
14% -
15% |
Net
earnings attributable to noncontrolling interest |
6.9 |
|
|
9.0 |
|
|
|
Provision
for income taxes |
132.8 |
|
|
170.0 |
|
|
|
Interest
expense |
57.2 |
|
|
105.0 |
|
|
|
Depreciation and amortization |
70.3 |
|
|
85.0 |
|
|
|
Total
stock-based compensation |
55.4 |
|
|
40.0 |
|
|
|
Restructuring expenses |
18.4 |
|
|
18.0 |
|
|
|
Other
business transformation expenses |
75.6 |
|
|
50.0 |
|
|
|
Acquisition and integration-related expenses |
0.7 |
|
|
5.0 |
|
|
|
Officer
transition expense |
0.7 |
|
|
— |
|
|
|
Legal and
regulatory expenses related to competition matters |
— |
|
|
12.0 |
|
|
|
Adjusted EBITDA
(c) |
$ |
713.6 |
|
|
$ |
822.0 |
|
|
Increase 13 - 16 % |
Adjusted
margin |
32.1 |
% |
|
35.4 |
% |
|
35% -
36% |
(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) Stock-based compensation expense has been removed from
business transformation expense and officer transition expense.
Refer to the Non-GAAP Financial Measures section of this press
release for additional information on changes to our non-GAAP
adjustments.
(c) Refer to the Non-GAAP Financial Measures section of this
press 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 31,2015 (a) |
|
March 31,2016 (a) |
|
June 30,2016 (a) |
|
September 30,2016 |
|
December 31,2016 |
|
March 31,2017 |
|
June 30,2017 |
RSNA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DMS
Customer Sites (b) |
9,181 |
|
|
9,210 |
|
|
9,184 |
|
|
9,206 |
|
|
9,232 |
|
|
9,184 |
|
|
9,157 |
|
|
9,081 |
|
Avg
Revenue Per Site (c) |
$ |
7,145 |
|
|
$ |
7,177 |
|
|
$ |
7,286 |
|
|
$ |
7,434 |
|
|
$ |
7,827 |
|
|
$ |
7,870 |
|
|
$ |
7,974 |
|
|
$ |
8,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjacencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DMS
Customer Sites (b) |
5,096 |
|
|
5,178 |
|
|
5,236 |
|
|
5,327 |
|
|
5,380 |
|
|
5,415 |
|
|
5,523 |
|
|
5,530 |
|
Avg
Revenue Per Site (c) |
$ |
1,524 |
|
|
$ |
1,520 |
|
|
$ |
1,535 |
|
|
$ |
1,537 |
|
|
$ |
1,560 |
|
|
$ |
1,571 |
|
|
$ |
1,577 |
|
|
$ |
1,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total RSNA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DMS
Customer Sites (b) |
14,277 |
|
|
14,388 |
|
|
14,420 |
|
|
14,533 |
|
|
14,612 |
|
|
14,599 |
|
|
14,680 |
|
|
14,611 |
|
Avg
Revenue Per Site (c) |
$ |
5,141 |
|
|
$ |
5,146 |
|
|
$ |
5,205 |
|
|
$ |
5,277 |
|
|
$ |
5,524 |
|
|
$ |
5,537 |
|
|
$ |
5,573 |
|
|
$ |
5,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Websites (d) |
6,946 |
|
|
6,871 |
|
|
6,761 |
|
|
6,641 |
|
|
6,625 |
|
|
6,789 |
|
|
6,931 |
|
|
6,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDKI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DMS
Customer Sites (b) |
13,208 |
|
|
13,267 |
|
|
13,240 |
|
|
13,392 |
|
|
13,373 |
|
|
13,424 |
|
|
13,419 |
|
|
13,477 |
|
Avg
Revenue Per site (c) |
$ |
1,060 |
|
|
$ |
1,122 |
|
|
$ |
1,138 |
|
|
$ |
1,148 |
|
|
$ |
1,165 |
|
|
$ |
1,183 |
|
|
$ |
1,210 |
|
|
$ |
1,232 |
|
(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 for our consolidated and
operating segment results 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
adjusted revenues |
Revenues |
Constant currency
adjusted earnings before income taxes |
Earnings before income
taxes |
Free cash flow |
Net cash flows provided
by operating activities |
We use adjusted earnings before income taxes, adjusted provision
for income taxes, adjusted net earnings attributable to CDK,
adjusted diluted earnings attributable to CDK per share, adjusted
EBITDA and adjusted EBITDA margin internally to evaluate our
performance on a consistent basis, 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.
Effective July 1, 2017 and commencing with fiscal 2018 guidance,
we are incorporating additional adjustments within our calculations
of adjusted earnings before income taxes, adjusted provision for
income taxes, adjusted net earnings attributable to CDK, adjusted
diluted net earnings attributable to CDK per share, adjusted
EBITDA, and adjusted EBITDA margin where management has deemed it
appropriate to better reflect our underlying operations. The
differences between our fiscal 2017 presentation and our fiscal
2018 presentation are noted below.
Adjusted Earnings before Income Taxes
For fiscal 2017, 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.
- Acquisition and integration-related expenses include legal,
accounting, other professional fees, and other integration costs
incurred in connection with our pending acquisition and are
included within selling, general and administrative expenses.
- Officer transition expense includes stock-based compensation
and severance expense in connection with officer departures is
included within selling, general and administrative expenses for
the periods presented.
- Net (gain)/loss recorded within other income, net associated
with an indemnification receivable from ADP or liability to ADP for
pre spin-off tax periods in accordance with the tax matters
agreement.
For fiscal 2018, management will modify the fiscal 2017
adjustments for (i) business transformation expenses and (ii)
officer transition expense to remove stock-based compensation
expense of $2.5 million and $3.1 million, respectively, and will
exclude total stock-based compensation expense and certain legal
and regulatory expenses related to the competition matter from
adjusted earnings before income taxes as follows:
- Total stock-based compensation expense will be consolidated and
excluded as a standalone adjustment to better improve the precision
of our inputs for use as factors in the items described above
related to management's evaluation of, or decision making based on,
our underlying operations, because stock-based compensation can
vary significantly based on timing, size and nature of awards
granted.
- Legal and regulatory expenses related to competition matters
will be excluded as we expect them to become meaningful during
fiscal 2018 with respect to the use and purpose of this adjusted
measure described above.
Adjusted Provision for Income taxes
For fiscal 2017, management has excluded the following item from
adjusted provision for income taxes:
- Income tax effect of pre-tax adjustments calculated at
applicable statutory rates for each adjustment described above for
the periods presented.
- Net income tax benefit to adjust the liability for pre spin-off
tax returns related to the tax matters indemnification gain in
fiscal 2016.
For fiscal 2018, management will make conforming adjustments to
the income tax effect of pre-tax adjustments with respect to fiscal
2018 adjustments and will also exclude the following additional
item from adjusted earnings before income taxes:
- Excess tax benefit derived from stock-option exercises and
vesting of restricted stock in order to align the adjustments for
this measure with our adjustments for total stock-based
compensation in other measures.
Adjusted Net Earnings Attributable to CDK and Adjusted Diluted
Net Earnings Attributable to CDK per Share
For each respective presentation, 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.
Adjusted EBITDA
For fiscal 2017, 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 fiscal year ended June 30, 2017 and 2016. Other
business transformation expenses excludes accelerated depreciation
and stock-based compensation expense of $1.0 million and $3.5
million for the three months ended June 30, 2017 and 2016,
respectively and $5.0 million and $4.9 million for the fiscal year
ended June 30, 2017 and 2016, respectively.
- Acquisition and integration-related expenses include legal,
accounting, other professional fees, and other integration costs
incurred in connection with our pending acquisition and are
included within selling, general and administrative expenses.
- Officer transition expense includes severance expense in
connection with officer departures is included within selling,
general and administrative expenses for the periods
presented. Officer transition expense excludes stock-based
compensation expense of $3.1 million for the fiscal year ended
June 30, 2017 included in total stock-based compensation.
For fiscal 2018, management will also exclude the following
additional item from net earnings attributable to CDK in order to
calculate adjusted EBITDA:
- Legal and regulatory expenses related to competition matters as
we expect them to become meaningful inputs during fiscal 2018 with
respect to the use and purpose of this adjusted measure described
above.
Free Cash Flow
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.
Constant Currency
We review revenues and adjusted earnings before income taxes for
our consolidated and operating segment results 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.
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 fact, including: CDK’s business outlook and forecasted
GAAP and adjusted results for CDK’s fiscal year ending June 30,
2018; statements concerning CDK's payment of dividends or the
repurchase of shares and the funding of such dividends and
repurchases; CDK’s objectives for its multi-year business
transformation plan; other plans; objectives; forecasts; goals;
beliefs; business strategies; future events; business conditions;
results of operations; financial position and business outlook and
trends; and other information, may be forward-looking statements.
Words such as "might," "will," "may," "could," "should,"
"estimates," "expects," "continues," "contemplates," "anticipates,"
"projects," "plans," "potential," "predicts," "intends,"
"believes," "forecasts," "future," "assumes," and variations of
such words or similar expressions are intended to identify
forward-looking statements. These statements are based on
management's expectations and assumptions and are subject to risks
and uncertainties that may cause actual results to differ
materially from those expressed, or implied by, these
forward-looking statements.
Factors that could cause actual results to
differ materially from those contemplated by the forward-looking
statements include: 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;
adverse global economic conditions and credit markets and
volatility in the countries in which we do business; 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; litigation involving
contract, intellectual property, competition, shareholder, and
other matters, and governmental investigations; 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, performance or achievements to 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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