ASC 606
CDK Global, Inc. (Nasdaq:CDK) today announced financial results for
its fiscal 2019 first quarter, ended September 30, 2018.
Effective July 1, 2018 we have adopted ASU
2014-09 “Revenue from Contracts with Customers” and related ASUs
(“ASC 606”), using the modified retrospective transition
approach. We will not recast historical information and will
report financial results in fiscal 2019 under both standards for
the transition year for comparability purposes.
First Quarter Fiscal 2019 Results
Year-over-year highlights are below:
|
|
|
|
|
First Quarter Fiscal
2019 Results |
|
ASC 606 |
|
ASC 605 |
Revenues |
|
$554.5 million |
|
flat to
$565.9 million |
Earnings
before income taxes |
|
$127.8 million |
|
up 9.0%
to $130.3 million |
Adjusted earnings
before income taxes |
|
$160.1
million |
|
up 6.0% to $162.6
million |
Diluted earnings attributable to CDK per share |
|
$0.69 |
|
up
25.0% to $0.71 |
Adjusted diluted earnings attributable to CDK per share |
|
$0.89 |
|
up
30.0% to $0.91 |
Net earnings
attributable to CDK |
|
$90.3
million |
|
up
13.0% to $92.1 million |
Margin |
16.3% |
up 190
bps to 16.3% |
Adjusted EBITDA |
|
$208.9
million |
|
up 10% to $211.4
million |
Margin |
|
37.7% |
|
Up 330
bps to 37.4% |
|
|
|
|
|
“The first quarter was a solid start to fiscal
2019 as we begin to see the results from our growth initiatives,”
said Brian MacDonald, chief executive officer. “We continue to see
strong sales results across new site wins and strategic layered
applications, and we’re especially pleased by the initial results
of our recently completed acquisition of ELEAD1ONE.
Accelerating growth in our core business remains our top
priority.”
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.
As described below under the Non-GAAP Financial
Measures section at the end of this press release, effective July
1, 2018, we began incorporating an adjustment for amortization of
acquired intangible assets within our calculations of adjusted
earnings before income taxes, adjusted provision for income taxes,
adjusted net earnings attributable to CDK, and adjusted diluted net
earnings attributable to CDK per share. Each adjusted growth
rate is shown against a comparably calculated fiscal 2018
figure.
Impacts to the First Quarter:
- Foreign exchange rates: Growth in revenues and earnings before
income taxes remained unchanged by foreign exchange
rates.
- Tax rate: The GAAP effective tax rate for the first quarter of
fiscal 2019 was 27.8% under both ASC 606 and ASC 605, compared to
30.6% in last year’s first quarter. The adjusted effective
tax rate for the first quarter of fiscal 2019 was 25.9% under both
ASC 606 and ASC 605, compared to 34.2% in last year’s first
quarter.
CDK Segment Information
CDK North America: Retail Solutions North
America
ASC 606
- Revenues of $410.1 million
- GAAP earnings before income taxes of $175.6 million; adjusted
earnings before income taxes of $181.0
million
- Pretax margins of 42.8%; adjusted pretax margins of 44.1%
ASC 605
- Revenues increased 3% to $413.2 million
- GAAP earnings before income taxes increased 11% to $174.0
million; adjusted earnings before income taxes increased 12% to
$179.4 million. On a constant currency basis adjusted
earnings before income taxes increased 13%
- Pretax margins expanded 320 bps to 42.1%; adjusted pretax
margins expanded 360 bps to 43.4%. Margin expansion was
primarily driven by operating leverage on subscription revenue
growth and operating efficiencies associated with the business
transformation plan
CDK North America: Advertising North America
ASC 606
- Revenues of $65.8 million
- GAAP earnings before income taxes of $6.2 million; adjusted
earnings before income taxes of $6.8 million
- Pretax margins of 9.4%; adjusted pretax margins of 10.3%
ASC 605
- Revenues decreased 17% to $65.9 million
- GAAP earnings before income taxes decreased 41% to $6.3
million; adjusted earnings before income taxes decreased 39% to
$6.9 million
- Pretax margins decreased 370 bps to 9.6%; adjusted pretax
margins decreased 380 bps to 10.5%, primarily due to reduced
leverage on revenue and higher advertising costs
CDK International
ASC 606
- Revenues of $78.6 million
- GAAP earnings before income taxes of $18.8 million; adjusted
earnings before income taxes of $18.9 million
- Pretax margins of 23.9%; adjusted pretax margins of
24.0%
ASC 605
- Revenues increased 3% to $86.8 million. On a constant
currency basis, revenues increased 4%
- GAAP earnings before income taxes increased 7% to $22.8
million; adjusted earnings before income taxes increased 3% to
$22.9 million. On a constant currency basis earnings before
income taxes increased 5%
- Pretax margins expanded 90 bps to 26.3%; adjusted pretax
margins expanded 10 bps to 26.4%. Margin expansion was
primarily due to scale from increased revenues and operating
efficiencies associated with the business transformation plan,
somewhat offset by investments related to strategic growth
initiatives
Fiscal 2019 Guidance
|
|
|
|
|
Fiscal 2019
Guidance |
|
ASC 606 |
|
ASC 605 |
Revenues |
|
$2.32
billion - $2.35 billion |
|
$2.35
billion - $2.38 billion |
Diluted earnings
attributable to CDK per share |
|
$2.85 - $2.95 |
|
$2.90 - $3.00 |
Adjusted diluted earnings attributable to CDK per share |
|
$3.70 - $3.80 |
|
$3.80 - $3.90 |
Net earnings
attributable to CDK |
|
$340 million - $370
million |
|
$350 million - $380 million |
Adjusted EBITDA |
|
$860 million - $895 million |
|
$880 million - $910 million |
|
|
|
|
|
In order to provide like-for-like guidance on
both an ASC 606 and ASC 605 basis, we will now provide guidance on
a dollar basis versus on a growth basis.
On an ASC 606 basis we expect revenue to be
$2.32 billion - $2.35 billion, GAAP diluted earnings per share of
$2.85 - $2.95, adjusted diluted earnings per share of $3.70 -
$3.80, GAAP net earnings attributable to CDK of $340 million - $370
million, and adjusted EBITDA of $860 million - $895
million.
On an ASC 605 basis we are increasing our
revenue guidance for the fiscal year to $2.35 billion - $2.38
billion to account for the acquisition of ELEAD1ONE. We have
reduced our GAAP earnings per share outlook to $2.90 - $3.00 and
adjusted diluted earnings per share outlook to $3.80 - $3.90 to
incorporate the ELEAD1ONE transaction. We expect net earnings
attributable to CDK of $350 million - $380 million and adjusted
EBITDA of $880 million - $910 million. Due to the dilution
caused by ELEAD1ONE’s revenue mix we will not achieve the
previously communicated 40% EBITDA exit margin target, and will no
longer provide margin guidance.
Tax Rate
We are increasing our estimated fiscal 2019 GAAP
effective tax rate to 26.0% - 27.0%, up from 25.0% - 26.0%, on both
an ASC 606 and ASC 605 basis, compared to 24.1% in fiscal 2018,
driven by changes related to the Tax Cuts and Jobs Act. We
expect to be at the high end of our fiscal 2019 adjusted effective
tax rate guidance range of 25.0% - 26.0% on both an ASC 606 and ASC
605 basis, compared to 29.1% in fiscal 2018.
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 first
quarter of fiscal 2019 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,
Wednesday, November 7, 2018 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 the CDK 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 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 30,000 retail locations and most automotive
manufacturers. CDK 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 |
|
September 30, |
|
2018 |
|
2017 |
Revenues |
$ |
554.5 |
|
|
$ |
565.7 |
|
|
|
|
|
Expenses: |
|
|
|
Cost of revenues |
281.6 |
|
|
307.7 |
|
Selling, general and administrative expenses |
98.3 |
|
|
113.7 |
|
Restructuring expenses |
17.2 |
|
|
6.5 |
|
Total expenses |
397.1 |
|
|
427.9 |
|
|
|
|
|
Operating earnings |
157.4 |
|
|
137.8 |
|
|
|
|
|
Interest expense |
(32.2 |
) |
|
(23.3 |
) |
Other income, net |
2.6 |
|
|
5.3 |
|
|
|
|
|
Earnings before income taxes |
127.8 |
|
|
119.8 |
|
|
|
|
|
Provision for income taxes |
(35.5 |
) |
|
(36.7 |
) |
|
|
|
|
Net earnings |
92.3 |
|
|
83.1 |
|
Less: net earnings attributable to noncontrolling interest |
2.0 |
|
|
1.8 |
|
Net earnings attributable to CDK |
$ |
90.3 |
|
|
$ |
81.3 |
|
|
|
|
|
|
|
|
|
Net earnings attributable to CDK per common share: |
|
|
|
Basic |
$ |
0.70 |
|
|
$ |
0.58 |
|
Diluted |
$ |
0.69 |
|
|
$ |
0.57 |
|
|
|
|
|
Weighted-average common shares outstanding: |
|
|
|
Basic |
129.6 |
|
|
140.1 |
|
Diluted |
130.4 |
|
|
141.4 |
|
|
|
|
|
|
|
Effective July 1, 2018, the Company adopted ASC 606 using the
modified retrospective approach. The comparative information
has not been restated and continues to be reported under the
accounting standards in effect for the period presented.
|
|
|
|
CDK Global,
Inc.Consolidated Balance Sheets(In
millions)(Unaudited) |
|
|
|
|
|
September 30, |
|
June 30, |
|
2018 |
|
2018 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
312.8 |
|
|
$ |
804.4 |
|
Accounts receivable, net of allowances |
383.6 |
|
|
374.6 |
|
Other current assets |
115.6 |
|
|
188.3 |
|
Total current assets |
812.0 |
|
|
1,367.3 |
|
|
|
|
|
Property, plant and equipment, net |
141.2 |
|
|
131.9 |
|
Other assets |
285.5 |
|
|
165.5 |
|
Goodwill |
1,592.4 |
|
|
1,217.2 |
|
Intangible assets, net |
259.8 |
|
|
126.5 |
|
Total assets |
$ |
3,090.9 |
|
|
$ |
3,008.4 |
|
|
|
|
|
Liabilities and Stockholders' Deficit |
|
|
|
Current liabilities: |
|
|
|
Current maturities of long-term debt and capital
lease obligations |
$ |
17.9 |
|
|
$ |
45.2 |
|
Accounts payable |
44.5 |
|
|
50.5 |
|
Accrued expenses and other current liabilities |
253.0 |
|
|
198.0 |
|
Accrued payroll and payroll-related expenses |
63.1 |
|
|
85.7 |
|
Short-term deferred revenues |
122.1 |
|
|
169.0 |
|
Total current liabilities |
500.6 |
|
|
548.4 |
|
|
|
|
|
Long-term debt and capital lease obligations |
2,673.6 |
|
|
2,575.5 |
|
Long-term deferred revenues |
68.6 |
|
|
110.4 |
|
Deferred income taxes |
85.6 |
|
|
56.7 |
|
Other liabilities |
62.1 |
|
|
64.7 |
|
Total liabilities |
3,390.5 |
|
|
3,355.7 |
|
|
|
|
|
Stockholders' Deficit: |
|
|
|
Preferred stock |
— |
|
|
— |
|
Common stock |
1.6 |
|
|
1.6 |
|
Additional paid-in-capital |
654.6 |
|
|
679.8 |
|
Retained earnings |
933.6 |
|
|
753.0 |
|
Treasury stock, at cost |
(1,909.6 |
) |
|
(1,810.7 |
) |
Accumulated other comprehensive income |
5.1 |
|
|
11.5 |
|
Total CDK stockholders' deficit |
(314.7 |
) |
|
(364.8 |
) |
Noncontrolling interest |
15.1 |
|
|
17.5 |
|
Total stockholders' deficit |
(299.6 |
) |
|
(347.3 |
) |
Total liabilities and stockholders' deficit |
$ |
3,090.9 |
|
|
$ |
3,008.4 |
|
|
|
|
|
|
|
|
|
Effective July 1, 2018, the Company adopted ASC 606 using the
modified retrospective approach. The comparative information
has not been restated and continues to be reported under the
accounting standards in effect for the period presented.
|
|
CDK Global,
Inc.Consolidated Statements of Cash
Flows(In millions)(Unaudited) |
|
|
|
Three Months Ended |
|
September 30, |
|
2018 |
|
2017 |
Cash Flows from Operating Activities: |
|
|
|
Net earnings |
$ |
92.3 |
|
|
$ |
83.1 |
|
Adjustments to reconcile net earnings to cash flows provided by
operating activities: |
|
|
|
Depreciation and amortization |
19.7 |
|
|
19.5 |
|
Deferred income taxes |
7.8 |
|
|
2.3 |
|
Stock-based compensation expense |
3.3 |
|
|
8.1 |
|
Other |
1.4 |
|
|
1.5 |
|
Changes in operating assets and liabilities, net of effect from
acquisitions of businesses: |
|
|
|
Decrease (increase) in accounts receivable |
12.2 |
|
|
(1.8 |
) |
Decrease in other assets |
13.0 |
|
|
19.8 |
|
Decrease in accounts payable |
(9.5 |
) |
|
(3.8 |
) |
Decrease in accrued expenses and other
liabilities |
(0.2 |
) |
|
(0.9 |
) |
Net cash flows provided by operating activities |
140.0 |
|
|
127.8 |
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
Capital expenditures |
(8.8 |
) |
|
(10.3 |
) |
Capitalized software |
(10.1 |
) |
|
(9.6 |
) |
Acquisitions of businesses, net of cash acquired |
(513.2 |
) |
|
— |
|
Contributions to investments |
(10.0 |
) |
|
— |
|
Proceeds from investments |
— |
|
|
0.8 |
|
Net cash flows used in investing activities |
(542.1 |
) |
|
(19.1 |
) |
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
Proceeds from long-term debt |
860.0 |
|
|
— |
|
Repayments of long-term debt and capital lease obligations |
(792.3 |
) |
|
(11.6 |
) |
Dividends paid to stockholders |
(19.3 |
) |
|
(19.7 |
) |
Repurchases of common stock |
(114.1 |
) |
|
(14.6 |
) |
Proceeds from exercises of stock options |
1.0 |
|
|
2.6 |
|
Withholding tax payments for stock-based compensation awards |
(14.9 |
) |
|
(8.5 |
) |
Dividend payments to noncontrolling owners |
(4.4 |
) |
|
— |
|
Payments of deferred financing costs |
(4.4 |
) |
|
(0.4 |
) |
Acquisition-related payments |
(1.1 |
) |
|
(0.9 |
) |
Net cash flows used in financing activities |
(89.5 |
) |
|
(53.1 |
) |
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash |
(3.5 |
) |
|
6.9 |
|
|
|
|
|
Net change in cash. cash equivalents and restricted cash |
(495.1 |
) |
|
62.5 |
|
|
|
|
|
Cash, cash equivalents, and restricted cash, beginning of
period |
817.1 |
|
|
734.0 |
|
|
|
|
|
Cash, cash equivalents, and restricted cash, end of period |
$ |
322.0 |
|
|
$ |
796.5 |
|
|
|
|
|
|
|
|
|
Effective July 1, 2018, the Company adopted ASC 606 using the
modified retrospective approach. The comparative information
has not been restated and continues to be reported under the
accounting standards in effect for the period presented.
Additionally, the company adopted ASU 2016-18 retrospectively
during the first quarter of fiscal year 2019, and as a result
included restricted cash with cash and cash equivalents when
reconciling the beginning of the period and end of the period total
amounts presented on the Condensed Consolidated Statements of Cash
Flows. Prior year amounts have been reclassified to conform to
current year presentation.
CDK Global, Inc.Segment Financial
Data(In millions)(Unaudited)
As described below under the Non-GAAP Financial Measures section
of this press release, effective July 1, 2018, we began
incorporating additional adjustments within our calculations of
adjusted earnings before income taxes, where management has deemed
it appropriate to better reflect our underlying operations. Segment
information for the three months ended September 30, 2017 has been
restated to conform to the new presentation. In the first quarter
of fiscal 2019, the Company revised segment reporting to reclassify
the assets and liabilities and operating results of the April 2018
acquisition of Progressus Media LLC to the RSNA segment. The
results were previously reported in the ANA segment.
Effective July 1, 2018, the Company adopted ASC 606 using the
modified retrospective approach. The tables below present
fiscal 2019 for both ASC 606 and ASC605 basis. The comparative
information has not been restated and continues to be reported
under the accounting standards in effect for the period
presented.
|
|
|
Segment
Revenues |
|
Three Months Ended |
|
|
|
|
|
September 30, |
|
Change |
|
2018 |
|
2017 |
|
ASC 605 |
|
ASC 606 |
|
ASC 605 |
|
$ |
|
% |
CDK North America: |
|
|
|
|
|
|
|
|
|
Retail Solutions North America (a) |
$ |
410.1 |
|
|
$ |
413.2 |
|
|
$ |
401.6 |
|
|
$ |
11.6 |
|
|
3 |
% |
Advertising North America (b) |
65.8 |
|
|
65.9 |
|
|
79.8 |
|
|
(13.9 |
) |
|
(17 |
)% |
CDK International (c) |
78.6 |
|
|
86.8 |
|
|
84.3 |
|
|
2.5 |
|
|
3 |
% |
Total |
$ |
554.5 |
|
|
$ |
565.9 |
|
|
$ |
565.7 |
|
|
$ |
0.2 |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted Earnings
before Income Taxes |
|
Three Months Ended |
|
|
|
|
|
September 30, |
|
Change |
|
2018 |
|
2017 |
|
ASC 605 |
|
ASC 606 |
|
ASC 605 |
|
$ |
|
% |
CDK North America: |
|
|
|
|
|
|
|
|
|
Retail Solutions North America (a) |
$ |
181.0 |
|
|
$ |
179.4 |
|
|
$ |
159.9 |
|
|
$ |
19.5 |
|
|
12 |
% |
Margin |
44.1 |
% |
|
43.4 |
% |
|
39.8 |
% |
|
360 bps |
Advertising North America (b) |
6.8 |
|
|
6.9 |
|
|
11.4 |
|
|
(4.5 |
) |
|
(39 |
)% |
Margin |
10.3 |
% |
|
10.5 |
% |
|
14.3 |
% |
|
-380 bps |
CDK International (c) |
18.9 |
|
|
22.9 |
|
|
22.2 |
|
|
0.7 |
|
|
3 |
% |
Margin |
24.0 |
% |
|
26.4 |
% |
|
26.3 |
% |
|
10 bps |
Other (d) |
(46.6 |
) |
|
(46.6 |
) |
|
(39.4 |
) |
|
(7.2 |
) |
|
18 |
% |
Total |
$ |
160.1 |
|
|
$ |
162.6 |
|
|
$ |
154.1 |
|
|
$ |
8.5 |
|
|
6 |
% |
Margin |
28.9 |
% |
|
28.7 |
% |
|
27.2 |
% |
|
150 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.
|
|
|
|
|
|
Retail Solutions North America |
Three Months Ended |
|
|
|
|
|
September 30, |
|
Change |
|
2018 |
|
2017 |
|
ASC 605 |
|
ASC 606 |
|
ASC 605 |
|
$ |
|
% |
Revenues |
$ |
410.1 |
|
|
$ |
413.2 |
|
|
$ |
401.6 |
|
|
$ |
11.6 |
|
|
3 |
% |
Impact of exchange rates |
1.0 |
|
|
1.1 |
|
|
— |
|
|
|
|
|
Constant currency revenues (e) |
$ |
411.1 |
|
|
$ |
414.3 |
|
|
$ |
401.6 |
|
|
$ |
12.7 |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
$ |
175.6 |
|
|
$ |
174.0 |
|
|
$ |
156.2 |
|
|
$ |
17.8 |
|
|
11 |
% |
Margin % |
42.8 |
% |
|
42.1 |
% |
|
38.9 |
% |
|
320 bps |
|
|
Amortization of acquired intangible assets |
2.4 |
|
|
2.4 |
|
|
2.2 |
|
|
|
|
|
Acquisition and integration-related expenses |
1.3 |
|
|
1.3 |
|
|
0.6 |
|
|
|
|
|
Legal and regulatory expenses related to competition
matters |
1.7 |
|
|
1.7 |
|
|
0.9 |
|
|
|
|
|
Adjusted earnings before income taxes |
$ |
181.0 |
|
|
$ |
179.4 |
|
|
$ |
159.9 |
|
|
$ |
19.5 |
|
|
12 |
% |
Adjusted Margin % |
44.1 |
% |
|
43.4 |
% |
|
39.8 |
% |
|
360 bps |
|
|
Impact of exchange rates |
0.6 |
|
|
0.6 |
|
|
— |
|
|
|
|
|
Constant currency earnings before income taxes (e) |
$ |
181.6 |
|
|
$ |
180.0 |
|
|
$ |
159.9 |
|
|
$ |
20.1 |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) The table below presents a reconciliation of earnings before
income taxes to adjusted earnings before income taxes for the
Advertising North America (ANA) segment.
|
|
|
|
|
|
Advertising North America |
Three Months Ended |
|
|
|
|
|
September 30, |
|
Change |
|
2018 |
|
2017 |
|
ASC 605 |
|
ASC 606 |
|
ASC 605 |
|
$ |
|
% |
Revenues |
$ |
65.8 |
|
|
$ |
65.9 |
|
|
$ |
79.8 |
|
|
$ |
(13.9 |
) |
|
(17 |
)% |
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
$ |
6.2 |
|
|
$ |
6.3 |
|
|
$ |
10.6 |
|
|
$ |
(4.3 |
) |
|
(41 |
)% |
Margin % |
9.4 |
% |
|
9.6 |
% |
|
13.3 |
% |
|
-370 bps |
Amortization of acquired intangible assets |
0.6 |
|
|
0.6 |
|
|
0.8 |
|
|
|
|
|
Adjusted earnings before income taxes (e) |
$ |
6.8 |
|
|
$ |
6.9 |
|
|
$ |
11.4 |
|
|
$ |
(4.5 |
) |
|
(39 |
)% |
Adjusted margin % |
10.3 |
% |
|
10.5 |
% |
|
14.3 |
% |
|
-380 bps |
|
|
|
|
|
|
|
|
|
|
|
(c) 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 CDK
International (CDKI) segment.
|
|
|
|
|
|
CDK International |
Three Months Ended |
|
|
|
|
|
September 30, |
|
Change |
|
2018 |
|
2017 |
|
ASC 605 |
|
ASC 606 |
|
ASC 605 |
|
$ |
|
% |
Revenues |
$ |
78.6 |
|
|
$ |
86.8 |
|
|
$ |
84.3 |
|
|
$ |
2.5 |
|
|
3 |
% |
Impact of exchange rates |
0.9 |
|
|
1.1 |
|
|
— |
|
|
|
|
|
Constant currency revenues (e) |
$ |
79.5 |
|
|
$ |
87.9 |
|
|
$ |
84.3 |
|
|
$ |
3.6 |
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
$ |
18.8 |
|
|
$ |
22.8 |
|
|
$ |
21.4 |
|
|
$ |
1.4 |
|
|
7 |
% |
Margin % |
23.9 |
% |
|
26.3 |
% |
|
25.4 |
% |
|
90 bps |
|
|
Amortization of acquired intangible assets |
0.1 |
|
|
0.1 |
|
|
0.8 |
|
|
|
|
|
Adjusted earnings before income taxes (e) |
18.9 |
|
|
22.9 |
|
|
22.2 |
|
|
0.7 |
|
|
3 |
% |
Adjusted Margin % |
24.0 |
% |
|
26.4 |
% |
|
26.3 |
% |
|
10 bps |
|
|
Impact of exchange rates |
0.2 |
|
|
0.4 |
|
|
— |
|
|
|
|
|
Constant currency earnings before income taxes (e) |
$ |
19.1 |
|
|
$ |
23.3 |
|
|
$ |
22.2 |
|
|
$ |
1.1 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) The table below presents a reconciliation of loss before
income taxes to adjusted loss before income taxes for the Other
segment. The adoption of ASC 606 had no impact on the Other
segment.
|
|
|
|
|
|
Other |
Three Months Ended |
|
|
|
|
|
September 30, |
|
Change |
|
2018 |
|
2017 |
|
$ |
|
% |
Loss before income taxes |
$ |
(72.8 |
) |
|
$ |
(68.4 |
) |
|
$ |
(4.4 |
) |
|
6 |
% |
Restructuring expenses |
17.2 |
|
|
6.5 |
|
|
|
|
|
Other business transformation expenses |
5.2 |
|
|
15.2 |
|
|
|
|
|
Total stock-based compensation |
3.3 |
|
|
8.1 |
|
|
|
|
|
Acquisition and integration-related expenses |
0.5 |
|
|
— |
|
|
|
|
|
Tax matters indemnifications gain |
— |
|
|
(0.8 |
) |
|
|
|
|
Adjusted loss before income taxes |
$ |
(46.6 |
) |
|
$ |
(39.4 |
) |
|
$ |
(7.2 |
) |
|
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.Revenue
Disaggregation(In millions)(Unaudited)
The following table presents segment revenues by revenue
category for the three months ended September 30, 2018 on an ASC
606 basis:
|
|
|
Three Months Ended September 30,
2018 |
|
Retail SolutionsNorth America |
|
AdvertisingNorth America |
|
CDK International |
|
Total |
Revenue: |
|
|
|
|
|
|
|
Subscription |
$ |
334.3 |
|
|
$ |
— |
|
|
$ |
66.6 |
|
|
$ |
400.9 |
|
On-site license and installation |
1.4 |
|
|
— |
|
|
8.0 |
|
|
9.4 |
|
Transaction |
41.0 |
|
|
— |
|
|
— |
|
|
41.0 |
|
Advertising |
— |
|
|
65.8 |
|
|
— |
|
|
65.8 |
|
Other |
33.4 |
|
|
— |
|
|
4.0 |
|
|
37.4 |
|
Total revenue |
$ |
410.1 |
|
|
$ |
65.8 |
|
|
$ |
78.6 |
|
|
$ |
554.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following supplemental table presents segment revenues by
revenue category for the three months ended September 30, 2018 and
2017 on an ASC 605 basis:
|
|
|
ASC 605 Segment
Revenues |
|
Three Months Ended |
|
|
|
|
|
September 30, |
|
Change |
|
2018 |
|
2017 |
|
$ |
|
% |
CDK North America: |
|
|
|
|
|
|
|
Retail Solutions North America: |
|
|
|
|
|
|
|
Subscription revenue |
$ |
335.4 |
|
|
$ |
326.6 |
|
|
$ |
8.8 |
|
|
3 |
% |
Transaction revenue |
41.2 |
|
|
43.7 |
|
|
(2.5 |
) |
|
(6 |
)% |
Other revenue |
36.6 |
|
|
31.3 |
|
|
5.3 |
|
|
17 |
% |
Total Retail Solutions North America |
$ |
413.2 |
|
|
$ |
401.6 |
|
|
$ |
11.6 |
|
|
3 |
% |
Advertising North America |
65.9 |
|
|
79.8 |
|
|
(13.9 |
) |
|
(17 |
)% |
CDK International |
86.8 |
|
|
84.3 |
|
|
2.5 |
|
|
3 |
% |
Total |
$ |
565.9 |
|
|
$ |
565.7 |
|
|
$ |
0.2 |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDK Global, Inc.Consolidated Adjusted
Financial Information(In millions, except per share
amounts)(Unaudited)
As described below under the Non-GAAP Financial Measures section
of this press release, effective July 1, 2018 and commencing with
fiscal 2019 guidance, we will adjust for amortization of acquired
intangible assets within our calculations of adjusted earnings
before income taxes, adjusted provision for income taxes, adjusted
net earnings attributable to CDK, and adjusted diluted net earnings
attributable to CDK per share. Information for three months ended
September 30, 2017 has been restated to conform to the new
presentation.
Effective July 1, 2018, the Company adopted ASC 606 using the
modified retrospective approach. The tables below present
fiscal 2019 for both ASC 606 and ASC 605 basis. The comparative
information has not been restated and continues to be reported
under the accounting standards in effect for the period
presented.
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
September 30, |
|
|
|
2018 |
|
2017 |
|
ASC 605 Change |
|
ASC 606 |
|
ASC 605 |
|
$ |
|
% |
Revenues |
$ |
554.5 |
|
|
$ |
565.9 |
|
|
$ |
565.7 |
|
|
$ |
0.2 |
|
|
— |
% |
Impact of exchange rates |
1.9 |
|
|
2.2 |
|
|
— |
|
|
|
|
|
Constant currency revenues (a) |
$ |
556.4 |
|
|
$ |
568.1 |
|
|
$ |
565.7 |
|
|
$ |
2.4 |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
$ |
127.8 |
|
|
$ |
130.3 |
|
|
$ |
119.8 |
|
|
$ |
10.5 |
|
|
9 |
% |
Margin |
23.0 |
% |
|
23.0 |
% |
|
21.2 |
% |
|
180 bps |
Restructuring expenses |
17.2 |
|
|
17.2 |
|
|
6.5 |
|
|
|
|
|
Other business transformation expenses |
5.2 |
|
|
5.2 |
|
|
15.2 |
|
|
|
|
|
Total stock-based compensation |
3.3 |
|
|
3.3 |
|
|
8.1 |
|
|
|
|
|
Amortization of acquired intangible assets |
3.1 |
|
|
3.1 |
|
|
3.8 |
|
|
|
|
|
Transaction and integration-related expenses |
1.8 |
|
|
1.8 |
|
|
0.6 |
|
|
|
|
|
Legal and regulatory expenses related to competition
matters |
1.7 |
|
|
1.7 |
|
|
0.9 |
|
|
|
|
|
Tax matters indemnifications gain |
— |
|
|
— |
|
|
(0.8 |
) |
|
|
|
|
Adjusted earnings before income taxes (a) |
$ |
160.1 |
|
|
$ |
162.6 |
|
|
$ |
154.1 |
|
|
8.5 |
|
|
6 |
% |
Adjusted margin |
28.9 |
% |
|
28.7 |
% |
|
27.2 |
% |
|
150 bps |
Impact of exchange rates |
0.9 |
|
|
1.0 |
|
|
— |
|
|
|
|
|
Constant currency adjusted earnings before income taxes (a) |
$ |
161.0 |
|
|
$ |
163.6 |
|
|
$ |
154.1 |
|
|
$ |
9.5 |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
$ |
35.5 |
|
|
$ |
36.2 |
|
|
$ |
36.7 |
|
|
$ |
(0.5 |
) |
|
(1 |
)% |
Effective tax rate |
27.8 |
% |
|
27.8 |
% |
|
30.6 |
% |
|
|
|
|
Income tax effect of pre-tax adjustments |
7.4 |
|
|
7.4 |
|
|
12.5 |
|
|
|
|
|
Excess tax benefit from stock-based
compensation |
1.9 |
|
|
1.9 |
|
|
3.5 |
|
|
|
|
|
Impact of U.S tax reform |
(3.4 |
) |
|
(3.4 |
) |
|
— |
|
|
|
|
|
Adjusted provision for income taxes (a) |
$ |
41.4 |
|
|
$ |
42.1 |
|
|
$ |
52.7 |
|
|
$ |
(10.6 |
) |
|
(20 |
)% |
Adjusted effective tax rate |
25.9 |
% |
|
25.9 |
% |
|
34.2 |
% |
|
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
Net earnings |
$ |
92.3 |
|
|
$ |
94.1 |
|
|
$ |
83.1 |
|
|
$ |
11.0 |
|
|
13 |
% |
Less: net earnings attributable to noncontrolling interest |
2.0 |
|
|
2.0 |
|
|
1.8 |
|
|
|
|
|
Net earnings attributable to CDK |
90.3 |
|
|
92.1 |
|
|
81.3 |
|
|
10.8 |
|
|
13 |
% |
Restructuring expenses (b) |
17.1 |
|
|
17.1 |
|
|
6.4 |
|
|
|
|
|
Other business transformation expenses |
5.2 |
|
|
5.2 |
|
|
15.2 |
|
|
|
|
|
Total stock-based compensation |
3.3 |
|
|
3.3 |
|
|
8.1 |
|
|
|
|
|
Amortization of acquired intangible assets (b) |
3.0 |
|
|
3.0 |
|
|
3.7 |
|
|
|
|
|
Transaction and integration-related expenses |
1.8 |
|
|
1.8 |
|
|
0.6 |
|
|
|
|
|
Legal and regulatory expenses related to competition
matters |
1.7 |
|
|
1.7 |
|
|
0.9 |
|
|
|
|
|
Tax matters indemnifications gain |
— |
|
|
— |
|
|
(0.8 |
) |
|
|
|
|
Income tax benefit on pre-tax adjustments |
(7.4 |
) |
|
(7.4 |
) |
|
(12.5 |
) |
|
|
|
|
Excess tax benefit from stock-based
compensation |
(1.9 |
) |
|
(1.9 |
) |
|
(3.5 |
) |
|
|
|
|
Impact of U.S tax reform |
3.4 |
|
|
3.4 |
|
|
— |
|
|
|
|
|
Adjusted net earnings attributable to CDK (a) |
$ |
116.5 |
|
|
$ |
118.3 |
|
|
$ |
99.4 |
|
|
$ |
18.9 |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
Diluted earnings attributable to CDK per
share |
$ |
0.69 |
|
|
$ |
0.71 |
|
|
$ |
0.57 |
|
|
$ |
0.14 |
|
|
25 |
% |
Restructuring expenses (b) |
0.13 |
|
|
0.13 |
|
|
0.04 |
|
|
|
|
|
Other business transformation expenses (b) |
0.04 |
|
|
0.04 |
|
|
0.11 |
|
|
|
|
|
Total stock-based compensation |
0.03 |
|
|
0.03 |
|
|
0.06 |
|
|
|
|
|
Amortization of acquired intangible assets |
0.02 |
|
|
0.02 |
|
|
0.03 |
|
|
|
|
|
Transaction and integration-related expenses |
0.01 |
|
|
0.01 |
|
|
— |
|
|
|
|
|
Legal and regulatory expenses related to competition
matters |
0.01 |
|
|
0.01 |
|
|
0.01 |
|
|
|
|
|
Tax matters indemnifications gain |
— |
|
|
— |
|
|
(0.01 |
) |
|
|
|
|
Income tax effect of pre-tax adjustments |
(0.06 |
) |
|
(0.06 |
) |
|
(0.09 |
) |
|
|
|
|
Excess tax benefit from stock-based
compensation |
(0.01 |
) |
|
(0.01 |
) |
|
(0.02 |
) |
|
|
|
|
Impact of U.S tax reform |
0.03 |
|
|
0.03 |
|
|
— |
|
|
|
|
|
Adjusted diluted earnings attributable to CDK per share
(a) |
$ |
0.89 |
|
|
$ |
0.91 |
|
|
$ |
0.70 |
|
|
$ |
0.21 |
|
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
Diluted |
130.4 |
|
|
130.4 |
|
|
141.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
September 30, |
|
|
|
2018 |
|
2017 |
|
ASC 605 Change |
|
ASC 606 |
|
ASC 605 |
|
$ |
|
% |
Net earnings attributable to CDK |
$ |
90.3 |
|
|
$ |
92.1 |
|
|
$ |
81.3 |
|
|
$ |
10.8 |
|
|
13 |
% |
Margin |
16.3 |
% |
|
16.3 |
% |
|
14.4 |
% |
|
190 bps |
Net earnings attributable to noncontrolling
interest |
2.0 |
|
|
2.0 |
|
|
1.8 |
|
|
|
|
|
Provision for income taxes |
35.5 |
|
|
36.2 |
|
|
36.7 |
|
|
|
|
|
Interest expense |
32.2 |
|
|
32.2 |
|
|
23.3 |
|
|
|
|
|
Depreciation and amortization |
19.7 |
|
|
19.7 |
|
|
19.5 |
|
|
|
|
|
Total stock-based compensation |
3.3 |
|
|
3.3 |
|
|
8.1 |
|
|
|
|
|
Restructuring expenses |
17.2 |
|
|
17.2 |
|
|
6.5 |
|
|
|
|
|
Other business transformation expenses |
5.2 |
|
|
5.2 |
|
|
15.1 |
|
|
|
|
|
Acquisition and integration-related expenses |
1.8 |
|
|
1.8 |
|
|
0.6 |
|
|
|
|
|
Legal and regulatory expenses related to competition
matters |
1.7 |
|
|
1.7 |
|
|
0.9 |
|
|
|
|
|
Tax matters indemnifications gain |
— |
|
|
— |
|
|
(0.8 |
) |
|
|
|
|
Adjusted EBITDA (a) |
$ |
208.9 |
|
|
$ |
211.4 |
|
|
$ |
193.0 |
|
|
$ |
18.4 |
|
|
10 |
% |
Adjusted margin |
37.7 |
% |
|
37.4 |
% |
|
34.1 |
% |
|
330 bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
September 30, |
|
2018 |
|
2017 |
Net cash flows provided by operating activities |
$ |
140.0 |
|
|
$ |
127.8 |
|
Capital expenditures |
(8.8 |
) |
|
(10.3 |
) |
Capitalized software |
(10.1 |
) |
|
(9.6 |
) |
Change in restricted cash |
3.5 |
|
|
— |
|
Free cash flow (a) |
$ |
124.6 |
|
|
$ |
107.9 |
|
|
|
|
|
|
|
|
|
(a) Refer to the Non-GAAP Financial Measures section of this
earnings release for additional information on our non-GAAP
adjustments.
(b) The portion of expense related to noncontrolling interest
has been removed from restructuring expenses and amortization of
acquired intangible assets for the three months ended
September 30, 2018 and 2017.
CDK Global, Inc.Consolidated Fiscal
2019 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, 2018 and commencing with
fiscal 2019 guidance, we will adjust for amortization of acquired
intangible assets within our calculations of adjusted earnings
before income taxes, adjusted provision for income taxes, adjusted
net earnings attributable to CDK, and adjusted diluted net earnings
attributable to CDK per share. The table below includes these
adjustments for fiscal 2018 for purposes of calculating and
presenting the fiscal 2019 guidance.
|
|
|
|
|
|
|
Fiscal2018 |
|
Fiscal 2019 under
ASC606 |
|
Fiscal 2019 under
ASC605 |
|
Actuals |
|
Point Estimate
(a) |
|
Guidance |
|
Point Estimate
(a) |
|
Guidance |
Revenues |
$ |
2,273.2 |
|
|
$ |
2,340.0 |
|
|
$2,320 - 2,350 |
|
$ |
2,376.0 |
|
|
$2,350 - 2,380 |
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
$ |
512.0 |
|
|
$ |
509.0 |
|
|
|
|
$ |
519.0 |
|
|
|
Restructuring expenses |
20.9 |
|
|
35.0 |
|
|
|
|
35.0 |
|
|
|
Other business transformation expenses |
50.3 |
|
|
30.0 |
|
|
|
|
30.0 |
|
|
|
Total stock-based compensation |
35.7 |
|
|
26.0 |
|
|
|
|
26.0 |
|
|
|
Amortization of acquired intangible assets |
15.9 |
|
|
17.0 |
|
|
|
|
17.0 |
|
|
|
Transaction and integration-related expenses |
15.7 |
|
|
31.0 |
|
|
|
|
31.0 |
|
|
|
Officer transition expense |
0.6 |
|
|
5.0 |
|
|
|
|
5.0 |
|
|
|
Legal and regulatory expenses related to competition
matters |
7.4 |
|
|
13.0 |
|
|
|
|
13.0 |
|
|
|
Tax matters indemnification gain, net |
(0.4 |
) |
|
— |
|
|
|
|
— |
|
|
|
Adjusted earnings before income taxes (b) |
$ |
658.1 |
|
|
$ |
666.0 |
|
|
|
|
$ |
676.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
$ |
123.3 |
|
|
$ |
136.0 |
|
|
|
|
$ |
139.0 |
|
|
|
Effective tax rate |
24.1 |
% |
|
26.7 |
% |
|
26 - 27% |
|
26.8 |
% |
|
26 - 27% |
Income tax effect of pre-tax adjustments |
44.3 |
|
|
36.0 |
|
|
|
|
36.0 |
|
|
|
Excess tax benefit from stock-based
compensation |
5.1 |
|
|
4.0 |
|
|
|
|
4.0 |
|
|
|
Pre spin-off filed tax return adjustment |
0.4 |
|
|
— |
|
|
|
|
— |
|
|
|
Impact of U.S. tax reform act |
18.5 |
|
|
(4.0 |
) |
|
|
|
(4.0 |
) |
|
|
Adjusted provision for income taxes (b) |
$ |
191.6 |
|
|
$ |
172.0 |
|
|
|
|
$ |
175.0 |
|
|
|
Adjusted effective tax rate |
29.1 |
% |
|
25.8 |
% |
|
25 - 26% |
|
25.9 |
% |
|
25 - 26% |
|
|
|
|
|
|
|
|
|
|
Net earnings |
$ |
388.7 |
|
|
$ |
373.0 |
|
|
|
|
$ |
380.0 |
|
|
|
Less: net earnings attributable to noncontrolling interest |
7.9 |
|
|
10.0 |
|
|
|
|
10.0 |
|
|
|
Net earnings attributable to CDK |
$ |
380.8 |
|
|
$ |
363.0 |
|
|
|
|
$ |
370.0 |
|
|
|
Restructuring expenses |
20.6 |
|
|
35.0 |
|
|
|
|
35.0 |
|
|
|
Other business transformation expenses |
50.0 |
|
|
30.0 |
|
|
|
|
30.0 |
|
|
|
Total stock-based compensation |
35.6 |
|
|
26.0 |
|
|
|
|
26.0 |
|
|
|
Amortization of acquired intangible assets |
15.7 |
|
|
17.0 |
|
|
|
|
17.0 |
|
|
|
Transaction and integration-related expenses |
15.7 |
|
|
31.0 |
|
|
|
|
31.0 |
|
|
|
Officer transition expense |
0.6 |
|
|
5.0 |
|
|
|
|
5.0 |
|
|
|
Legal and regulatory expenses related to competition
matters |
7.4 |
|
|
13.0 |
|
|
|
|
13.0 |
|
|
|
Tax matters indemnification gain, net |
(0.4 |
) |
|
— |
|
|
|
|
— |
|
|
|
Income tax effect of pre-tax adjustments |
(44.3 |
) |
|
(36.0 |
) |
|
|
|
(36.0 |
) |
|
|
Excess tax benefit from stock-based
compensation |
(5.1 |
) |
|
(4.0 |
) |
|
|
|
(4.0 |
) |
|
|
Pre spin-off filed tax return adjustment |
(0.4 |
) |
|
— |
|
|
|
|
— |
|
|
|
Impact of U.S. tax reform act |
(18.5 |
) |
|
4.0 |
|
|
|
|
4.0 |
|
|
|
Adjusted net earnings attributable to CDK (b) |
$ |
457.7 |
|
|
$ |
484.0 |
|
|
|
|
$ |
491.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings attributable to CDK per
share |
$ |
2.78 |
|
|
$ |
2.85 |
|
|
$2.85 - 2.95 |
|
$ |
2.90 |
|
|
$2.90 - 3.00 |
Restructuring expenses |
0.15 |
|
|
0.27 |
|
|
|
|
0.27 |
|
|
|
Other business transformation expenses |
0.37 |
|
|
0.24 |
|
|
|
|
0.24 |
|
|
|
Total stock-based compensation |
0.26 |
|
|
0.20 |
|
|
|
|
0.20 |
|
|
|
Amortization of acquired intangible assets |
0.12 |
|
|
0.13 |
|
|
|
|
0.13 |
|
|
|
Transaction and integration-related expenses |
0.12 |
|
|
0.24 |
|
|
|
|
0.24 |
|
|
|
Officer transition expense |
— |
|
|
0.04 |
|
|
|
|
0.04 |
|
|
|
Legal and regulatory expenses related to competition
matters |
0.05 |
|
|
0.10 |
|
|
|
|
0.10 |
|
|
|
Tax matters indemnification gain, net |
— |
|
|
— |
|
|
|
|
— |
|
|
|
Income tax effect of pre-tax adjustments |
(0.32 |
) |
|
(0.27 |
) |
|
|
|
(0.27 |
) |
|
|
Excess tax benefit from stock-based
compensation |
(0.04 |
) |
|
(0.03 |
) |
|
|
|
(0.03 |
) |
|
|
Pre spin-off filed tax return adjustment |
— |
|
|
— |
|
|
|
|
— |
|
|
|
Impact of U.S. tax reform act |
(0.14 |
) |
|
0.03 |
|
|
|
|
0.03 |
|
|
|
Adjusted diluted net earnings attributable to CDK per share
(b) |
$ |
3.35 |
|
|
$ |
3.80 |
|
|
$3.70 - 3.80 |
|
$ |
3.85 |
|
|
$3.80 - 3.90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal2018 |
|
Fiscal 2019 under
ASC606 |
|
Fiscal 2019 under
ASC605 |
|
Actuals |
|
PointEstimate
(a) |
|
Guidance |
|
PointEstimate
(a) |
|
Guidance |
Revenues |
$ |
2,273.2 |
|
|
$ |
2,340.0 |
|
|
$2,320 - 2,350 |
|
$ |
2,376.0 |
|
|
$2,350 - 2,380 |
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to CDK |
$ |
380.8 |
|
|
$ |
363.0 |
|
|
$340 - 370 |
|
$ |
370.0 |
|
|
$350 - 380 |
Margin |
16.8 |
% |
|
15.5 |
% |
|
|
|
15.6 |
% |
|
|
Net earnings attributable to noncontrolling
interest |
7.9 |
|
|
10.0 |
|
|
|
|
10.0 |
|
|
|
Provision for income taxes |
123.3 |
|
|
136.0 |
|
|
|
|
139.0 |
|
|
|
Interest expense |
95.9 |
|
|
141.0 |
|
|
|
|
141.0 |
|
|
|
Depreciation and amortization |
79.1 |
|
|
100.0 |
|
|
|
|
100.0 |
|
|
|
Total stock-based compensation |
35.7 |
|
|
26.0 |
|
|
|
|
26.0 |
|
|
|
Restructuring expenses |
20.9 |
|
|
35.0 |
|
|
|
|
35.0 |
|
|
|
Other business transformation expenses |
50.1 |
|
|
30.0 |
|
|
|
|
30.0 |
|
|
|
Transaction and integration-related expenses |
15.7 |
|
|
31.0 |
|
|
|
|
31.0 |
|
|
|
Officer transition expense |
0.6 |
|
|
5.0 |
|
|
|
|
5.0 |
|
|
|
Legal and regulatory expenses related to competition
matters |
7.4 |
|
|
13.0 |
|
|
|
|
13.0 |
|
|
|
Tax matters indemnification gain, net |
(0.4 |
) |
|
— |
|
|
|
|
— |
|
|
|
Adjusted EBITDA (b) |
$ |
817.0 |
|
|
$ |
890.0 |
|
|
$860 - 895 |
|
$ |
900.0 |
|
|
$880 - 910 |
Adjusted margin |
35.9 |
% |
|
38.0 |
% |
|
|
|
37.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
press release for additional information on our non-GAAP
adjustments.
CDK Global, Inc.Performance
Metrics(Unaudited)
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:
|
|
|
|
|
|
|
September 30,2017 (a) |
|
December 31,2017 (a) |
|
March 31,2018 (a) |
|
June 30,2018 (a) |
|
September 30,2018 (b) |
RSNA |
|
|
|
|
|
|
|
|
|
Automotive |
|
|
|
|
|
|
|
|
|
DMS Customer Sites (c) |
9,020 |
|
|
9,029 |
|
|
8,917 |
|
|
8,933 |
|
|
8,920 |
|
Avg Revenue Per Site (d) |
$ |
8,303 |
|
|
$ |
8,424 |
|
|
$ |
8,498 |
|
|
$ |
8,607 |
|
|
$ |
8,711 |
|
|
|
|
|
|
|
|
|
|
|
Adjacencies |
|
|
|
|
|
|
|
|
|
DMS Customer Sites (c) |
5,523 |
|
|
5,577 |
|
|
5,613 |
|
|
5,624 |
|
|
5,613 |
|
Avg Revenue Per Site (d) |
$ |
1,602 |
|
|
$ |
1,599 |
|
|
$ |
1,620 |
|
|
$ |
1,646 |
|
|
$ |
1,648 |
|
|
|
|
|
|
|
|
|
|
|
Total RSNA |
|
|
|
|
|
|
|
|
|
DMS Customer Sites (c) |
14,543 |
|
|
14,606 |
|
|
14,530 |
|
|
14,557 |
|
|
14,533 |
|
Avg Revenue Per Site (d) |
$ |
5,758 |
|
|
$ |
5,818 |
|
|
$ |
5,841 |
|
|
$ |
5,918 |
|
|
$ |
5,984 |
|
|
|
|
|
|
|
|
|
|
|
CDKI |
|
|
|
|
|
|
|
|
|
DMS Customer Sites (c) |
13,496 |
|
|
13,559 |
|
|
13,537 |
|
|
13,274 |
|
|
13,187 |
|
Avg Revenue Per Site (d) |
$ |
1,310 |
|
|
$ |
1,335 |
|
|
$ |
1,356 |
|
|
$ |
1,386 |
|
|
$ |
1,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Average revenue per Dealer Management System (DMS) customer
site has been updated for fiscal 2018 to reflect budgeted foreign
exchange rates for fiscal 2019.
(b) DMS Customer Sites does not include the sites related to our
September acquisition of ELEAD1ONE and Average Revenue per DMS
Customer Site is on an ASC 605 basis as of September 30, 2018.
(c) DMS Customer Sites - We track the number of retail customer
sites with an active DMS that sell vehicles in the automotive and
adjacent markets as an indicator of our opportunity set for
generating subscription revenue. We consider a DMS to be active if
we have billed a subscription fee for that solution during the most
recently ended calendar month. 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.
(d) Average Revenue Per DMS Customer Site - Average revenue per
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 revenue generated from our solutions, including revenue
generated from websites, in an applicable period by the average
number of DMS customer sites in the same period. The metric
excludes subscription revenue generated by customers not included
in our DMS customer 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.
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 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 and relative to our competitors,
(iv) target leverage calculations, (v) debt covenant calculations,
and (vi) determining incentive-based compensation.
We believe our non-GAAP financial measures are helpful to users
of the financial statements because they (i) provide investors with
meaningful supplemental information regarding financial performance
by excluding certain items, (ii) permit investors to view
performance using the same tools that management uses, and (iii)
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 in addition to 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, 2018, we began including amortization of
acquired intangible assets within our calculations of adjusted
earnings before income taxes, adjusted net earnings attributable to
CDK, and adjusted diluted net earnings attributable to CDK per
share. Amortization of acquired intangible assets represents
non-cash expenses associated with acquisition activities that we
expect to become more meaningful due to our evolving acquisition
strategy. These expenses are inconsistent in amount and frequency
and are significantly affected by the timing and size of our
acquisitions. Therefore, we adjust for amortization of acquired
intangible assets within our calculations of these measures because
it does not directly reflect our underlying operations, and
excluding such information provides us with a better understanding
of our ongoing operating performance across periods.
Adjusted Earnings before Income Taxes
Management has excluded the following items from adjusted
earnings before income taxes for the periods presented:
- Restructuring expenses recognized in connection with our
business transformation plan.
- Other business transformation expenses included within cost of
revenues and selling, general and administrative expenses.
- Amortization of acquired intangible assets consists of
amortization of intangible assets such as customer lists, purchased
software, and trademarks acquired in connection with business
combinations.
- Total stock-based compensation expense included within cost of
revenues and selling, general and administrative expenses.
- Transaction and integration-related expenses that include
legal, accounting, outside services fees, and other costs incurred
in connection with assessment and integration of acquisitions and
other strategic business opportunities included within selling,
general and administrative expenses.
- Officer transition expense includes severance expense in
connection with officer departures, including fiscal 2019 CEO
transition, reported within selling, general and administrative
expenses for the periods presented.
- Legal and regulatory expenses related to competition matters
included within selling, general and administrative expenses.
- Net loss/(gain) recorded within other income, net associated
with an indemnification receivable from ADP for pre spin-off tax
periods in accordance with tax matters agreement.
Adjusted Provision for Income taxes
Management has excluded the following items from adjusted
provision for income taxes for the periods presented:
- Income tax effect of pre-tax adjustments described above.
- 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.
- Net income tax benefit associated with a tax refund, offset by
a pretax loss to establish a liability to ADP for the tax refund in
accordance with the tax-matters agreement.
- As a result of the Tax Reform Act, an estimated one-time tax
expense of $3.4 million from a revaluation of deferred tax assets
associated with executive compensation during the three months
ended September 30, 2018.
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.
The portion of expense related to noncontrolling interest of
$0.1 million has been removed from restructuring expenses and
amortization of acquired intangible assets for both the three
months ended September 30, 2018 and 2017, respectively.
Adjusted EBITDA
Management has excluded the following items from net earnings
attributable to CDK in order to calculate adjusted EBITDA for the
periods presented:
- Net earnings attributable to noncontrolling interest included
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 included within cost of
revenues and selling, general and administrative expenses.
- 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, 2018 and 2017. Other
business transformation expenses excluded $0.1 million of
accelerated depreciation expense for the three months ended
September 30, 2017.
- Transaction and integration-related expenses that include
legal, accounting, outside services fees, and other costs incurred
in connection with assessment and integration of acquisitions and
other strategic business opportunities included within selling,
general and administrative expenses.
- Officer transition expense includes severance expense in
connection with officer departures, including fiscal 2019 CEO
transition, reported within selling, general and administrative
expenses for the periods presented.
- Legal and regulatory expenses related to competition matters
included within selling, general and administrative expenses.
- Net loss/(gain) recorded within other income, net associated
with an indemnification receivable from ADP for pre spin-off tax
periods in accordance with tax matters agreement.
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 and change in
restricted cash. 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.
The change in restricted cash is funds held for clients before
remittance to agencies for titling and registration services on
behalf of those clients. We have added the change in restricted
cash to the free cash flow definition due to the adoption of ASU
2016-18, Restricted Cash, in the first quarter of fiscal
2019. Funds held for clients was $9.2 million and $12.7
million as of September 30, 2018 and June 30, 2018,
respectively, and $7.9 million and $7.9 million as of
September 30, 2017 and June 30, 2017.
Constant Currency
We use constant currency revenues and constant currency adjusted
earnings before income taxes to 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: the Company’s business outlook and the
Company’s forecasted GAAP and adjusted results for fiscal 2019; the
Company’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: the Company’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 (including future interpretations,
assumptions and regulatory guidance related to the Tax Cuts and
Jobs Act); changes in technology, security breaches, interruptions,
failures and other errors involving the Company’s systems;
availability of skilled technical employees/labor/personnel; the
impact of new acquisitions and divestitures; employment and wage
levels; availability of capital for the payment of debt service
obligations or dividends or the repurchase of shares; any changes
to the Company’s credit ratings and the impact of such changes on
financing costs, rates, terms, debt service obligations, access to
capital market and working capital needs; the impact of the
Company’s indebtedness, access to cash and financing, and ability
to secure financing, or financing at attractive rates; litigation
involving contract, intellectual property, competition,
shareholder, and other matters, and governmental investigations;
the Company’s ability to timely and effectively implement its
transformation plan; and the ability of the Company’s significant
stockholders and their affiliates to significantly influence the
Company’s decisions or cause it to incur significant costs.
There may be other factors that may cause the
Company’s actual results, performance or achievements to differ
materially from those expressed in, or implied by, the
forward-looking statements. The Company gives no assurances
that any of the events anticipated by the forward-looking
statements will occur or, if any of them do, what impact they will
have on its results of operations and financial condition. You
should carefully read the factors described in the Company’s
reports filed with the Securities and Exchange
Commission ("SEC"), including those discussed under "Part I,
Item 1A. Risk Factors" in its 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
the Company’s actual results to differ from any
forward-looking statements contained herein. These filings can be
found on the Company’s website at 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 the Company on its website or otherwise. The Company disclaims
any obligation to update or revise any forward-looking statements
that may be made to reflect new information or future events or
circumstances that arise after the date made or to reflect the
occurrence of unanticipated events, other than as required by
law.
|
|
Investor Relations Contact:Katie
Coleman847.485.4650katherine.coleman@cdk.com |
Media Contact:Roxanne
Pipitone847.485.4423roxanne.pipitone@cdk.com |
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