CDK Global, Inc. (NASDAQ: CDK) today announced financial results
for its fiscal 2022 second quarter ended December 31, 2021.
"We continued to see the benefit of our focus on
product innovation and on customer success which resulted in
another quarter of solid growth DMS sites and average revenue per
site," said Brian Krzanich, CDK chief executive officer. "This
growth is coming from both our core business and contributions from
recent acquisitions. CDK is uniquely positioned as the center of
the automotive retail ecosystem, and through our relentless focus
on building connections through our SaaS solutions and investing in
our vision, we are helping our customers drive efficiencies in
their operations while improving the simplicity and convenience of
how vehicles are bought and serviced at the dealership."
"We hit the half-way point of the year on track
with our expectations, with revenue growth of 7.5% and with
disciplined spending contributing to strong EPS growth," said Eric
Guerin, CDK chief financial officer. "We are excited about the
second half of fiscal 2022 as we continue to add new customers and
expand adoption of our new products like Roadster and Salty which
are resonating within our customer base."
Second Quarter Fiscal 2022
Results
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|
CDK Global, Inc. |
Q2 FY2022 |
|
Change from Q2 FY2021 |
|
|
($ million except per share) |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
436.7 |
|
|
7 |
% |
|
|
|
|
|
|
|
|
GAAP Earnings before income taxes |
|
87.9 |
|
|
8 |
% |
|
|
Non-GAAP Adjusted earnings before income taxes |
|
120.2 |
|
|
19 |
% |
|
|
|
|
|
|
|
|
GAAP Diluted earnings attributable to CDK per share |
|
0.53 |
|
|
13 |
% |
|
|
Non-GAAP Adjusted diluted earnings attributable to CDK per
share |
|
0.74 |
|
|
25 |
% |
|
|
|
|
|
|
|
|
GAAP Effective tax rate |
|
27.4 |
% |
|
-50 |
bps |
|
|
Non-GAAP Effective tax rate |
|
25.4 |
% |
|
-80 |
bps |
|
|
|
|
|
|
|
|
Net earnings from continuing operations |
|
63.8 |
|
|
9 |
% |
|
|
GAAP Net earnings attributable to CDK margin |
|
14.6 |
% |
|
14 |
bps |
|
|
|
|
|
|
|
|
Non-GAAP Adjusted EBITDA |
|
167.7 |
|
|
8 |
% |
|
|
Non-GAAP Adjusted EBITDA margin |
|
38.4 |
% |
|
10 |
bps |
|
|
|
|
|
|
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Note: All amounts reported above are provided on a continuing
operations basis. |
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|
The non-GAAP results and guidance presented in
this press release represent non-GAAP financial measures.
Reconciliations of these measures to the most directly comparable
GAAP measures are provided in the tables at the end of this press
release.
Fiscal 2022 Annual Guidance
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CDK Global, Inc. - GAAP BASIS |
FY 2022 GAAP GUIDANCE |
|
|
($ million except per share) |
|
|
|
|
|
|
Revenue |
$1,785 - $1,815 |
|
|
GAAP Diluted earnings attributable to CDK per share |
$2.03 - $2.12 |
|
|
GAAP Net earnings attributable to CDK |
$245 - $275 |
|
|
GAAP Effective tax rate |
27.0% - 28.0% |
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CDK Global, Inc. - Non-GAAP BASIS |
FY 2022 ADJ. GUIDANCE |
|
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($ million except per share) |
|
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|
|
|
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Revenue |
$1,785 - $1,815 |
|
|
Non-GAAP Adjusted diluted earnings attributable to CDK per
share |
$2.85 - $2.95 |
|
|
Non-GAAP Adjusted EBITDA |
$660 - $680 |
|
|
Non-GAAP Adjusted effective tax rate |
25.0% - 26.0% |
|
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Website Schedules
Other financial information, including financial
statements and supplementary schedules presented on a GAAP and
adjusted basis, and the schedule of quarterly revenue have been
updated for the second quarter ended December 31, 2021 and will be
posted to the CDK Investor Relations website,
https://investors.cdkglobal.com in the "Financial Information"
section.
Webcast and Conference Call
An analyst conference call will be held today,
Thursday, February 3, 2022 at 4:00 p.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,
https://investors.cdkglobal.com and click on the webcast icon. A
supplemental slide presentation will be available to download and
print about 30 minutes before the webcast at the CDK Investor
Relations website at https://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 approximately $2 billion in revenues, CDK
Global (NASDAQ: CDK) is a leading provider of retail technology and
software as a service ("SaaS") solutions that help dealers and auto
manufacturers run their businesses more efficiently, drive improved
profitability and create frictionless purchasing and ownership
experiences for consumers. Today, CDK serves over 15,000 retail
locations in North America. For more information, visit
cdkglobal.com.
Safe Harbor for Forward-Looking
Statements
This press release contains "forward-looking
statements" within the meaning of the Private Security Litigation
Reform Act of 1995. All statements regarding the Company's business
outlook, including the Company's GAAP and adjusted fiscal 2022
guidance; 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 expectations regarding the
continuing impacts on the Company's business of the COVID-19
pandemic; the Company's success in obtaining, retaining and selling
additional services to customers; the pricing of the Company's
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
related industry changes; competitive conditions; changes in
regulation; 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; the onset of or developments in litigation
involving contract, intellectual property, competition,
shareholder, and other matters, and governmental investigations;
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 Annual
Report on Form 10-K 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
https://investors.cdkglobal.com and
the SEC's website at www.sec.gov.
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: |
Media Contact: |
Reuben Gallegos847.542.3254reuben.gallegos@cdk.com |
Tony Macrito630.805.0782tony.macrito@cdk.com |
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CDK Global, Inc.Consolidated Statements of
Operations(In millions, except per share
amounts)(Unaudited) |
|
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Three Months Ended |
|
Six Months Ended |
|
December 31, |
|
December 31, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenue |
$ |
436.7 |
|
|
$ |
406.3 |
|
|
$ |
876.7 |
|
|
$ |
820.0 |
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
Cost of revenue |
|
229.9 |
|
|
|
207.7 |
|
|
|
456.6 |
|
|
|
432.4 |
|
Selling, general and administrative expenses |
|
99.1 |
|
|
|
85.0 |
|
|
|
196.7 |
|
|
|
173.6 |
|
Litigation provision |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12.0 |
|
Total expenses |
|
329.0 |
|
|
|
292.7 |
|
|
|
653.3 |
|
|
|
618.0 |
|
Operating earnings |
|
107.7 |
|
|
|
113.6 |
|
|
|
223.4 |
|
|
|
202.0 |
|
|
|
|
|
|
|
|
|
Interest expense |
|
(22.3 |
) |
|
|
(34.3 |
) |
|
|
(43.7 |
) |
|
|
(69.0 |
) |
Gain on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
2.1 |
|
|
|
— |
|
Loss from equity method investment |
|
(1.4 |
) |
|
|
(1.8 |
) |
|
|
(2.6 |
) |
|
|
(5.2 |
) |
Other income, net |
|
3.9 |
|
|
|
4.0 |
|
|
|
7.0 |
|
|
|
28.7 |
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
87.9 |
|
|
|
81.5 |
|
|
|
186.2 |
|
|
|
156.5 |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
(24.1 |
) |
|
|
(22.7 |
) |
|
|
(49.2 |
) |
|
|
(49.7 |
) |
|
|
|
|
|
|
|
|
Net earnings from continuing operations |
|
63.8 |
|
|
|
58.8 |
|
|
|
137.0 |
|
|
|
106.8 |
|
Net earnings from discontinued operations |
|
1.6 |
|
|
|
11.3 |
|
|
|
2.1 |
|
|
|
21.3 |
|
Net earnings |
|
65.4 |
|
|
|
70.1 |
|
|
|
139.1 |
|
|
|
128.1 |
|
Less: net earnings attributable to noncontrolling interest |
|
1.7 |
|
|
|
1.8 |
|
|
|
3.7 |
|
|
|
4.1 |
|
Net earnings attributable to CDK |
$ |
63.7 |
|
|
$ |
68.3 |
|
|
$ |
135.4 |
|
|
$ |
124.0 |
|
|
|
|
|
|
|
|
|
Net earnings attributable to CDK per share - basic: |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.53 |
|
|
$ |
0.47 |
|
|
$ |
1.11 |
|
|
$ |
0.85 |
|
Discontinued operations |
|
0.01 |
|
|
|
0.09 |
|
|
|
0.02 |
|
|
|
0.17 |
|
Total net earnings attributable to CDK per share - basic |
$ |
0.54 |
|
|
$ |
0.56 |
|
|
$ |
1.13 |
|
|
$ |
1.02 |
|
|
|
|
|
|
|
|
|
Net earnings attributable to CDK per share - diluted: |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.53 |
|
|
$ |
0.47 |
|
|
$ |
1.10 |
|
|
$ |
0.84 |
|
Discontinued operations |
|
0.01 |
|
|
|
0.09 |
|
|
|
0.02 |
|
|
|
0.17 |
|
Total net earnings attributable to CDK per share - diluted |
$ |
0.54 |
|
|
$ |
0.56 |
|
|
$ |
1.12 |
|
|
$ |
1.01 |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
118.2 |
|
|
|
121.9 |
|
|
|
119.7 |
|
|
|
121.8 |
|
Diluted |
|
118.9 |
|
|
|
122.6 |
|
|
|
120.5 |
|
|
|
122.3 |
|
The International Business and Digital Marketing
Business are presented as discontinued operations and prior year
amounts associated have been reclassified as such. For additional
information refer to Form 10-Q, Item 1 of Part I, "Notes to the
Consolidated Financial Statements," Note 1 - Basis of Presentation
and Note 4 - Discontinued Operations.
|
CDK Global, Inc. Consolidated Balance
Sheets(In millions)(Unaudited) |
|
|
|
|
|
December 31, |
|
June 30, |
|
2021 |
|
2021 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
108.6 |
|
|
$ |
157.0 |
|
Accounts receivable, net |
|
239.8 |
|
|
|
236.4 |
|
Other current assets |
|
132.0 |
|
|
|
168.9 |
|
Total current assets |
|
480.4 |
|
|
|
562.3 |
|
Property, plant and equipment, net of accumulated depreciation of
$248.2 and $236.4, respectively |
|
70.2 |
|
|
|
71.8 |
|
Other assets |
|
469.9 |
|
|
|
448.7 |
|
Goodwill |
|
1,437.8 |
|
|
|
1,297.1 |
|
Intangible assets, net |
|
378.2 |
|
|
|
332.7 |
|
Total assets |
$ |
2,836.5 |
|
|
$ |
2,712.6 |
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Current maturities of long-term debt and finance lease
liabilities |
$ |
5.8 |
|
|
$ |
7.1 |
|
Accounts payable |
|
25.7 |
|
|
|
29.0 |
|
Accrued expenses and other current liabilities |
|
197.4 |
|
|
|
188.1 |
|
Litigation liability |
|
34.0 |
|
|
|
34.0 |
|
Accrued payroll and payroll-related expenses |
|
55.7 |
|
|
|
81.5 |
|
Deferred revenue |
|
30.3 |
|
|
|
28.6 |
|
Total current liabilities |
|
348.9 |
|
|
|
368.3 |
|
Long-term liabilities: |
|
|
|
Debt and finance lease liabilities |
|
1,817.0 |
|
|
|
1,586.5 |
|
Deferred revenue |
|
37.5 |
|
|
|
40.4 |
|
Deferred income taxes |
|
117.0 |
|
|
|
111.4 |
|
Other liabilities |
|
99.7 |
|
|
|
111.1 |
|
Total liabilities |
|
2,420.1 |
|
|
|
2,217.7 |
|
|
|
|
|
Stockholders' Equity: |
|
|
|
Preferred stock, $0.01 par value: 50.0 shares authorized; none
issued and outstanding |
|
— |
|
|
|
— |
|
Common stock, $0.01 par value: 650.0 shares authorized; 160.3 and
160.3 shares issued, respectively; 117.4 and 121.5 shares
outstanding, respectively |
|
1.6 |
|
|
|
1.6 |
|
Additional paid-in capital |
|
719.8 |
|
|
|
715.1 |
|
Retained earnings |
|
2,096.1 |
|
|
|
1,997.4 |
|
Treasury stock, at cost: 42.9 and 38.8 shares, respectively |
|
(2,486.0 |
) |
|
|
(2,306.0 |
) |
Accumulated other comprehensive income |
|
70.9 |
|
|
|
72.7 |
|
Total CDK stockholders' equity |
|
402.4 |
|
|
|
480.8 |
|
Noncontrolling interest |
|
14.0 |
|
|
|
14.1 |
|
Total stockholders' equity |
|
416.4 |
|
|
|
494.9 |
|
Total liabilities and stockholders' equity |
$ |
2,836.5 |
|
|
$ |
2,712.6 |
|
|
|
|
|
|
|
|
|
|
CDK Global, Inc. Consolidated Statements
of Cash Flows(In millions)(Unaudited) |
|
|
|
Six Months Ended |
|
December 31, |
|
2021 |
|
2020 |
Cash Flows from Operating Activities |
|
|
|
Net earnings |
$ |
139.1 |
|
|
$ |
128.1 |
|
Less: net earnings from discontinued operations |
|
2.1 |
|
|
|
21.3 |
|
Net earnings from continuing operations |
|
137.0 |
|
|
|
106.8 |
|
Adjustments to reconcile net earnings from continuing operations to
cash flows provided by operating activities, continuing
operations: |
|
|
|
Depreciation and amortization |
|
58.9 |
|
|
|
46.5 |
|
Gain on extinguishment of debt |
|
(2.1 |
) |
|
|
— |
|
Loss from equity method investment |
|
2.6 |
|
|
|
5.2 |
|
Deferred income taxes |
|
0.5 |
|
|
|
2.5 |
|
Stock-based compensation expense |
|
28.5 |
|
|
|
21.3 |
|
Other |
|
2.2 |
|
|
|
4.0 |
|
Changes in assets and liabilities, net of effect from acquisitions
of businesses: |
|
|
|
Accounts receivable |
|
(2.2 |
) |
|
|
15.5 |
|
Other assets |
|
5.4 |
|
|
|
(5.5 |
) |
Accounts payable |
|
(3.5 |
) |
|
|
(10.3 |
) |
Accrued expenses and other liabilities |
|
(50.4 |
) |
|
|
(38.7 |
) |
Net cash flows provided by operating activities, continuing
operations |
|
176.9 |
|
|
|
147.3 |
|
Net cash flows provided by operating activities, discontinued
operations |
|
0.2 |
|
|
|
25.9 |
|
Net cash flows provided by operating activities |
|
177.1 |
|
|
|
173.2 |
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
Capital expenditures |
|
(8.3 |
) |
|
|
(10.1 |
) |
Capitalized software |
|
(52.0 |
) |
|
|
(31.9 |
) |
Acquisitions of businesses, net of cash acquired |
|
(153.8 |
) |
|
|
— |
|
Net cash flows used in investing activities, continuing
operations |
|
(214.1 |
) |
|
|
(42.0 |
) |
Net cash flows used in investing activities, discontinued
operations |
|
1.9 |
|
|
|
(4.6 |
) |
Net cash flows used in investing activities |
|
(212.2 |
) |
|
|
(46.6 |
) |
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
Net proceeds (repayments) from revolving credit facilities |
|
230.0 |
|
|
|
(15.0 |
) |
Repayments of long-term debt and lease liabilities |
|
(7.7 |
) |
|
|
(10.9 |
) |
Dividends paid to stockholders |
|
(35.8 |
) |
|
|
(36.5 |
) |
Repurchases of common stock |
|
(195.6 |
) |
|
|
— |
|
Proceeds from exercises of stock options |
|
— |
|
|
|
2.0 |
|
Withholding tax payments for stock-based compensation awards |
|
(8.1 |
) |
|
|
(4.2 |
) |
Dividend payments to noncontrolling owners |
|
(3.8 |
) |
|
|
(6.2 |
) |
Net cash flows used in financing activities, continuing
operations |
|
(21.0 |
) |
|
|
(70.8 |
) |
Net cash flows used in financing activities, discontinued
operations |
|
— |
|
|
|
— |
|
Net cash flows used in financing activities |
|
(21.0 |
) |
|
|
(70.8 |
) |
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash, including cash classified as current assets held
for sale |
|
(0.5 |
) |
|
|
22.1 |
|
Net change in cash, cash equivalents, and restricted cash,
including cash classified as current assets held for sale |
|
(56.6 |
) |
|
|
77.9 |
|
Net change in cash classified in current assets held for sale |
|
— |
|
|
|
(102.8 |
) |
Net change in cash, cash equivalents, and restricted cash |
|
(56.6 |
) |
|
|
(24.9 |
) |
|
|
|
|
Cash, cash equivalents, and restricted cash, beginning of
period |
|
177.2 |
|
|
|
97.3 |
|
Cash, cash equivalents, and restricted cash, end of period |
$ |
120.6 |
|
|
$ |
72.4 |
|
The International Business and Digital Marketing
Business are presented as discontinued operations and prior year
amounts associated have been reclassified as such. For additional
information refer to Form 10-Q, Item 1 of Part I, "Notes to the
Consolidated Financial Statements," Note 1 - Basis of Presentation
and Note 4 - Discontinued Operations.
CDK Global,
Inc.Consolidated Non-GAAP Financial
Results(In millions, except per share
amounts)(Unaudited)
As described below under the Non-GAAP Financial
Measures section of this press release, we incorporated the
following additional adjustments in our calculations of non-GAAP
financial measures where management has deemed it appropriate to
better reflect our underlying operations. These adjustments are
inconsistent in amount and frequency and do not directly reflect
our underlying operations. Therefore, management believes that
excluding such information provides us with a better understanding
of our ongoing operating performance across periods.
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2021 |
|
2020 |
|
$ |
|
% |
|
2021 |
|
2020 |
|
$ |
|
% |
Revenue (a) |
$ |
436.7 |
|
|
$ |
406.3 |
|
|
$ |
30.4 |
|
|
7 |
% |
|
$ |
876.7 |
|
|
$ |
820.0 |
|
|
$ |
56.7 |
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes (a) |
$ |
87.9 |
|
|
$ |
81.5 |
|
|
$ |
6.4 |
|
|
8 |
% |
|
$ |
186.2 |
|
|
$ |
156.5 |
|
|
$ |
29.7 |
|
|
19 |
% |
Margin % |
|
20.1 |
% |
|
|
20.1 |
% |
|
0 bps |
|
|
21.2 |
% |
|
|
19.1 |
% |
|
210 bps |
Stock-based compensation expense |
|
17.3 |
|
|
|
9.0 |
|
|
|
|
|
|
|
28.6 |
|
|
|
21.3 |
|
|
|
|
|
Amortization of acquired intangible assets |
|
7.4 |
|
|
|
4.2 |
|
|
|
|
|
|
|
13.6 |
|
|
|
8.2 |
|
|
|
|
|
Transaction and integration-related costs |
|
4.3 |
|
|
|
1.2 |
|
|
|
|
|
|
|
13.0 |
|
|
|
1.2 |
|
|
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
0.3 |
|
|
|
0.7 |
|
|
|
|
|
|
|
0.7 |
|
|
|
14.7 |
|
|
|
|
|
Business process modernization program |
|
1.7 |
|
|
|
2.6 |
|
|
|
|
|
|
|
3.6 |
|
|
|
5.5 |
|
|
|
|
|
Officer transition expense |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
1.1 |
|
|
|
|
|
Net adjustments related to loss from equity method investment |
|
1.3 |
|
|
|
1.5 |
|
|
|
|
|
|
|
2.8 |
|
|
|
4.5 |
|
|
|
|
|
Gain on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(2.1 |
) |
|
|
— |
|
|
|
|
|
Adjusted earnings before income taxes (a) (b) |
$ |
120.2 |
|
|
$ |
100.7 |
|
|
$ |
19.5 |
|
|
19 |
% |
|
$ |
246.4 |
|
|
$ |
213.0 |
|
|
$ |
33.4 |
|
|
16 |
% |
Adjusted margin % |
|
27.5 |
% |
|
|
24.8 |
% |
|
270 bps |
|
|
28.1 |
% |
|
|
26.0 |
% |
|
210 bps |
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2021 |
|
2020 |
|
$ |
|
% |
|
2021 |
|
2020 |
|
$ |
|
% |
Provision for income taxes (a) |
$ |
24.1 |
|
|
$ |
22.7 |
|
|
$ |
1.4 |
|
|
6 |
% |
|
$ |
49.2 |
|
|
$ |
49.7 |
|
|
$ |
(0.5 |
) |
|
(1 |
)% |
Effective tax rate |
|
27.4 |
% |
|
|
27.9 |
% |
|
|
|
|
|
|
26.4 |
% |
|
|
31.8 |
% |
|
|
|
|
Income tax effect of pre-tax adjustments |
|
6.8 |
|
|
|
3.7 |
|
|
|
|
|
|
|
12.4 |
|
|
|
9.7 |
|
|
|
|
|
Change in deferred tax valuation allowance |
|
(0.4 |
) |
|
|
— |
|
|
|
|
|
|
|
(0.9 |
) |
|
|
— |
|
|
|
|
|
Adjusted provision for income taxes (a) (b) |
$ |
30.5 |
|
|
$ |
26.4 |
|
|
$ |
4.1 |
|
|
16 |
% |
|
$ |
60.7 |
|
|
$ |
59.4 |
|
|
$ |
1.3 |
|
|
2 |
% |
Adjusted effective tax rate |
|
25.4 |
% |
|
|
26.2 |
% |
|
|
|
|
|
|
24.6 |
% |
|
|
27.9 |
% |
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2021 |
|
2020 |
|
$ |
|
% |
|
2021 |
|
2020 |
|
$ |
|
% |
Net earnings |
$ |
65.4 |
|
|
$ |
70.1 |
|
|
$ |
(4.7 |
) |
|
(7 |
)% |
|
$ |
139.1 |
|
|
$ |
128.1 |
|
|
$ |
11.0 |
|
|
9 |
% |
Less: net earnings attributable to noncontrolling interest |
|
1.7 |
|
|
|
1.8 |
|
|
|
|
|
|
|
3.7 |
|
|
|
4.1 |
|
|
|
|
|
Net earnings attributable to CDK |
$ |
63.7 |
|
|
$ |
68.3 |
|
|
$ |
(4.6 |
) |
|
(7 |
)% |
|
$ |
135.4 |
|
|
$ |
124.0 |
|
|
$ |
11.4 |
|
|
9 |
% |
Net earnings from discontinued operations |
|
(1.6 |
) |
|
|
(11.3 |
) |
|
|
|
|
|
|
(2.1 |
) |
|
|
(21.3 |
) |
|
|
|
|
Stock-based compensation expense |
|
17.3 |
|
|
|
9.0 |
|
|
|
|
|
|
|
28.6 |
|
|
|
21.3 |
|
|
|
|
|
Amortization of acquired intangible assets (c) |
|
7.3 |
|
|
|
4.1 |
|
|
|
|
|
|
|
13.4 |
|
|
|
8.0 |
|
|
|
|
|
Transaction and integration-related costs |
|
4.3 |
|
|
|
1.2 |
|
|
|
|
|
|
|
13.0 |
|
|
|
1.2 |
|
|
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
0.3 |
|
|
|
0.7 |
|
|
|
|
|
|
|
0.7 |
|
|
|
14.7 |
|
|
|
|
|
Business process modernization program |
|
1.7 |
|
|
|
2.6 |
|
|
|
|
|
|
|
3.6 |
|
|
|
5.5 |
|
|
|
|
|
Officer transition expense |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
1.1 |
|
|
|
|
|
Net adjustments related to loss from equity method investment |
|
1.3 |
|
|
|
1.5 |
|
|
|
|
|
|
|
2.8 |
|
|
|
4.5 |
|
|
|
|
|
Gain on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(2.1 |
) |
|
|
— |
|
|
|
|
|
Income tax effect on pre-tax adjustments |
|
(6.8 |
) |
|
|
(3.7 |
) |
|
|
|
|
|
|
(12.4 |
) |
|
|
(9.7 |
) |
|
|
|
|
Change in deferred tax valuation allowance |
|
0.4 |
|
|
|
— |
|
|
|
|
|
|
|
0.9 |
|
|
|
— |
|
|
|
|
|
Adjusted net earnings attributable to CDK (a) (b)
(c) |
$ |
87.9 |
|
|
$ |
72.4 |
|
|
$ |
15.5 |
|
|
21 |
% |
|
$ |
181.8 |
|
|
$ |
149.3 |
|
|
$ |
32.5 |
|
|
22 |
% |
|
Three Months Ended |
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2021 |
|
2020 |
|
$ |
|
% |
|
2021 |
|
2020 |
|
$ |
|
% |
Diluted earnings attributable to CDK per
share |
$ |
0.54 |
|
|
$ |
0.56 |
|
|
$ |
(0.02 |
) |
|
(4 |
)% |
|
$ |
1.12 |
|
|
$ |
1.01 |
|
|
$ |
0.11 |
|
|
11 |
% |
Net earnings from discontinued operations |
|
(0.01 |
) |
|
|
(0.09 |
) |
|
|
|
|
|
|
(0.02 |
) |
|
|
(0.17 |
) |
|
|
|
|
Stock-based compensation expense |
|
0.15 |
|
|
|
0.07 |
|
|
|
|
|
|
|
0.24 |
|
|
|
0.17 |
|
|
|
|
|
Amortization of acquired intangible assets (c) |
|
0.06 |
|
|
|
0.03 |
|
|
|
|
|
|
|
0.11 |
|
|
|
0.07 |
|
|
|
|
|
Transaction and integration-related costs |
|
0.04 |
|
|
|
0.01 |
|
|
|
|
|
|
|
0.11 |
|
|
|
0.01 |
|
|
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
— |
|
|
|
0.01 |
|
|
|
|
|
|
|
0.01 |
|
|
|
0.12 |
|
|
|
|
|
Business process modernization program |
|
0.01 |
|
|
|
0.02 |
|
|
|
|
|
|
|
0.03 |
|
|
|
0.04 |
|
|
|
|
|
Officer transition expense |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
0.01 |
|
|
|
|
|
Net adjustments related to loss from equity method investment |
|
0.01 |
|
|
|
0.01 |
|
|
|
|
|
|
|
0.02 |
|
|
|
0.04 |
|
|
|
|
|
Gain on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(0.02 |
) |
|
|
— |
|
|
|
|
|
Income tax effect on pre-tax adjustments |
|
(0.06 |
) |
|
|
(0.03 |
) |
|
|
|
|
|
|
(0.10 |
) |
|
|
(0.08 |
) |
|
|
|
|
Change in deferred tax valuation allowance |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
0.01 |
|
|
|
— |
|
|
|
|
|
Adjusted diluted earnings attributable to CDK per share (a)
(b) (c) |
$ |
0.74 |
|
|
$ |
0.59 |
|
|
$ |
0.15 |
|
|
25 |
% |
|
$ |
1.51 |
|
|
$ |
1.22 |
|
|
$ |
0.29 |
|
|
24 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
118.9 |
|
|
|
122.6 |
|
|
|
|
|
|
|
120.5 |
|
|
|
122.3 |
|
|
|
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
|
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2021 |
|
2020 |
|
$ |
|
% |
|
2021 |
|
2020 |
|
$ |
|
% |
Net earnings attributable to CDK |
$ |
63.7 |
|
|
$ |
68.3 |
|
|
$ |
(4.6 |
) |
|
(7 |
)% |
|
$ |
135.4 |
|
|
$ |
124.0 |
|
|
$ |
11.4 |
|
|
9 |
% |
Margin % |
|
14.6 |
% |
|
|
16.8 |
% |
|
-220 bps |
|
|
15.4 |
% |
|
|
15.1 |
% |
|
30 bps |
Net earnings attributable to noncontrolling interest |
|
1.7 |
|
|
|
1.8 |
|
|
|
|
|
|
|
3.7 |
|
|
|
4.1 |
|
|
|
|
|
Net earnings from discontinued operations |
|
(1.6 |
) |
|
|
(11.3 |
) |
|
|
|
|
|
|
(2.1 |
) |
|
|
(21.3 |
) |
|
|
|
|
Provision for income taxes |
|
24.1 |
|
|
|
22.7 |
|
|
|
|
|
|
|
49.2 |
|
|
|
49.7 |
|
|
|
|
|
Interest expense |
|
22.3 |
|
|
|
34.3 |
|
|
|
|
|
|
|
43.7 |
|
|
|
69.0 |
|
|
|
|
|
Depreciation and amortization |
|
31.3 |
|
|
|
23.4 |
|
|
|
|
|
|
|
58.9 |
|
|
|
46.5 |
|
|
|
|
|
Stock-based compensation expense |
|
17.3 |
|
|
|
9.0 |
|
|
|
|
|
|
|
28.6 |
|
|
|
21.3 |
|
|
|
|
|
Transaction and integration-related costs |
|
4.3 |
|
|
|
1.2 |
|
|
|
|
|
|
|
13.0 |
|
|
|
1.2 |
|
|
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
0.3 |
|
|
|
0.7 |
|
|
|
|
|
|
|
0.7 |
|
|
|
14.7 |
|
|
|
|
|
Business process modernization program |
|
1.7 |
|
|
|
2.6 |
|
|
|
|
|
|
|
3.6 |
|
|
|
5.5 |
|
|
|
|
|
Officer transition expense |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
1.1 |
|
|
|
|
|
Net adjustments related to loss from equity method investment |
|
2.6 |
|
|
|
2.8 |
|
|
|
|
|
|
|
5.4 |
|
|
|
7.3 |
|
|
|
|
|
Gain on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(2.1 |
) |
|
|
— |
|
|
|
|
|
Adjusted EBITDA (a) (b) |
$ |
167.7 |
|
|
$ |
155.5 |
|
|
$ |
12.2 |
|
|
8 |
% |
|
$ |
338.0 |
|
|
$ |
323.1 |
|
|
$ |
14.9 |
|
|
5 |
% |
Adjusted margin % |
|
38.4 |
% |
|
|
38.3 |
% |
|
10 bps |
|
|
38.6 |
% |
|
|
39.4 |
% |
|
-80 bps |
|
Six Months Ended |
|
December 31, |
|
2021 |
|
2020 |
Net cash flows provided by operating activities |
$ |
177.1 |
|
|
$ |
173.2 |
|
Net cash flows provided by operating activities - discontinued
operations |
|
(0.2 |
) |
|
|
(25.9 |
) |
Capital expenditures |
|
(8.3 |
) |
|
|
(10.1 |
) |
Capitalized software |
|
(52.0 |
) |
|
|
(31.9 |
) |
Change in restricted cash |
|
8.2 |
|
|
|
6.9 |
|
Free cash flow from continuing operations (a)
(b) |
$ |
124.8 |
|
|
$ |
112.2 |
|
(a) Excludes amounts attributable to
discontinued operations.
(b) Refer to the Non-GAAP Financial Measures
section of this press release for additional information on our
non-GAAP adjustments.
(c) The portion of expense related to
noncontrolling interest has been removed from amortization of
acquired intangible assets for the three and six months ended
2021and 2020, respectively.
CDK Global, Inc.Revenue
Disaggregation(In millions)(Unaudited)
The following table presents revenue by
category:
|
Three Months Ended |
|
Six Months Ended |
|
December 31, |
|
Change |
|
December 31, |
|
Change |
|
2021 |
|
2020 |
|
$ |
|
% |
|
2021 |
|
2020 |
|
$ |
|
% |
Subscription |
$ |
349.3 |
|
|
$ |
328.3 |
|
|
$ |
21.0 |
|
|
6 |
% |
|
$ |
694.4 |
|
|
$ |
652.2 |
|
|
$ |
42.2 |
|
|
6 |
% |
Transaction |
|
38.4 |
|
|
|
39.1 |
|
|
|
(0.7 |
) |
|
(2 |
)% |
|
|
81.2 |
|
|
|
83.0 |
|
|
|
(1.8 |
) |
|
(2 |
)% |
Other |
|
49.0 |
|
|
|
38.9 |
|
|
|
10.1 |
|
|
26 |
% |
|
|
101.1 |
|
|
|
84.8 |
|
|
|
16.3 |
|
|
19 |
% |
Revenue |
$ |
436.7 |
|
|
$ |
406.3 |
|
|
$ |
30.4 |
|
|
7 |
% |
|
$ |
876.7 |
|
|
$ |
820.0 |
|
|
$ |
56.7 |
|
|
7 |
% |
CDK Global,
Inc.Consolidated Fiscal 2022 Guidance(In
millions, except per share amounts)(Unaudited)
As described below under the Non-GAAP Financial
Measures section of this press release, the fiscal 2022 guidance is
provided on a GAAP and Non-GAAP basis. The table below includes
these adjustments for fiscal 2022 guidance.
|
Fiscal 2022 |
|
Point Estimate (a) |
|
Guidance |
Revenue (b) |
$ |
1,800 |
|
|
$1,785 - $1,815 |
|
|
|
|
Earnings before income taxes (b) |
|
354 |
|
|
|
Stock-based compensation expense |
|
65 |
|
|
|
Amortization of acquired intangible assets |
|
25 |
|
|
|
Transaction and integration-related costs |
|
16 |
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
8 |
|
|
|
Business process modernization program |
|
5 |
|
|
|
Gain on extinguishment of debt |
|
(2 |
) |
|
|
Net adjustments related to loss from equity method investment |
|
6 |
|
|
|
Adjusted earnings before income taxes (b)(c) |
$ |
477 |
|
|
|
|
|
|
|
|
Fiscal 2022 |
|
Point Estimate (a) |
|
Guidance |
Provision for income taxes (b) |
$ |
98 |
|
|
|
Effective tax rate |
|
27.7 |
% |
|
27.0% - 28.0% |
Income tax on pre-tax adjustments and other miscellaneous tax
adjustments |
|
24 |
|
|
|
Adjusted provision for income taxes (b)(c) |
$ |
122 |
|
|
|
Adjusted effective tax rate |
|
25.6 |
% |
|
25.0% - 26.0% |
|
|
|
|
|
Fiscal 2022 |
|
Point Estimate (a) |
|
Guidance |
Net earnings |
$ |
256 |
|
|
|
Less: net earnings attributable to noncontrolling interest |
|
6 |
|
|
|
Net earnings attributable to CDK |
$ |
250 |
|
|
$245 - $275 |
Stock-based compensation expense |
|
65 |
|
|
|
Amortization of acquired intangible assets |
|
25 |
|
|
|
Transaction and integration-related expenses |
|
16 |
|
|
|
Legal and regulatory expenses related to regulatory and competition
matters |
|
8 |
|
|
|
Business process modernization program |
|
5 |
|
|
|
Gain on extinguishment of debt |
|
(2 |
) |
|
|
Net adjustments related to loss from equity method investment |
|
6 |
|
|
|
Income tax on pre-tax adjustments and other miscellaneous tax
adjustments |
|
(24 |
) |
|
|
Adjusted net earnings attributable to CDK
(b)(c) |
$ |
349 |
|
|
|
|
Fiscal 2022 |
|
Point Estimate (a) |
|
Guidance |
Diluted net earnings attributable to CDK per
share |
$ |
2.08 |
|
|
$2.03 - $2.12 |
Stock-based compensation expense |
|
0.54 |
|
|
|
Amortization of acquired intangible assets |
|
0.21 |
|
|
|
Transaction and integration-related expenses |
|
0.14 |
|
|
|
Legal and regulatory expenses related to regulatory and competition
matters |
|
0.07 |
|
|
|
Business process modernization program |
|
0.05 |
|
|
|
Gain on extinguishment of debt |
|
(0.02 |
) |
|
|
Net adjustments related to loss from equity method investment |
|
0.05 |
|
|
|
Income tax on pre-tax adjustments and other miscellaneous tax
adjustments |
|
(0.20 |
) |
|
|
Adjusted diluted net earnings attributable to CDK per share
(b)(c) |
$ |
2.92 |
|
|
$2.85 - $2.95 |
|
Fiscal 2022 |
|
Point Estimate (a) |
|
Guidance |
Revenue (b) |
$ |
1,800 |
|
|
$1,785 - $1,815 |
|
|
|
|
Net earnings attributable to CDK |
$ |
250 |
|
|
$245 - $275 |
Margin % |
|
13.9 |
% |
|
|
Net earnings attributable to noncontrolling interest |
|
6 |
|
|
|
Provision for income taxes |
|
98 |
|
|
|
Interest expense |
|
88 |
|
|
|
Depreciation and amortization |
|
124 |
|
|
|
Stock-based compensation expense |
|
65 |
|
|
|
Transaction and integration-related costs |
|
16 |
|
|
|
Legal and other expenses related to regulatory and competition
matters |
|
8 |
|
|
|
Business process modernization program |
|
5 |
|
|
|
Gain on extinguishment of debt |
|
(2 |
) |
|
|
Impairment of intangible assets |
|
— |
|
|
|
Net adjustments related to loss from equity method investment |
|
12 |
|
|
|
Adjusted EBITDA (b)(c) |
$ |
670 |
|
|
$660 - $680 |
Adjusted margin % |
|
37.2 |
% |
|
|
(a) The point estimates are arbitrary amounts in
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) Excludes amounts attributable to
discontinued operations.
(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)
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
subscription revenue. The following table summarizes these measures
for certain subscription revenue.
|
For the three months ended |
|
December 31, 2020 |
|
March 31, 2021 |
|
June 30, 2021 |
|
September 30, 2021 |
|
December 31, 2021 |
Automotive |
|
|
|
|
|
|
|
|
|
DMS Customer Sites (a) |
|
8,997 |
|
|
|
9,042 |
|
|
|
9,062 |
|
|
|
9,107 |
|
|
|
9,181 |
|
Avg Revenue Per Site (b) |
$ |
9,005 |
|
|
$ |
9,153 |
|
|
$ |
9,250 |
|
|
$ |
9,537 |
|
|
$ |
9,369 |
|
|
|
|
|
|
|
|
|
|
|
Adjacency |
|
|
|
|
|
|
|
|
|
DMS Customer Sites (a) |
|
5,854 |
|
|
|
5,930 |
|
|
|
5,963 |
|
|
|
6,039 |
|
|
|
6,101 |
|
Avg Revenue Per Site (b) |
$ |
1,822 |
|
|
$ |
1,849 |
|
|
$ |
1,883 |
|
|
$ |
1,919 |
|
|
$ |
1,926 |
|
|
|
|
|
|
|
|
|
|
|
Total CDK |
|
|
|
|
|
|
|
|
|
DMS Customer Sites (a) |
|
14,851 |
|
|
|
14,972 |
|
|
|
15,025 |
|
|
|
15,146 |
|
|
|
15,282 |
|
Avg Revenue Per Site (b) |
$ |
6,179 |
|
|
$ |
6,268 |
|
|
$ |
6,326 |
|
|
$ |
6,502 |
|
|
$ |
6,403 |
|
(a) DMS Customer Sites (end of period) - We
track the number of retail customer sites with an active Dealer
Management System ("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 last
billing cycle in the period presented in the table. Adjacent
markets include heavy truck dealerships that provide vehicles to
the over-the-road trucking industry, recreation dealerships in the
motorcycle, powersports, marine, and recreational vehicle
industries, and heavy equipment dealerships in the agriculture and
construction equipment industries.
(b) Average Revenue Per DMS Customer Site
(monthly average for period) - Average revenue per DMS customer
site is an indicator of the scope of adoption of our solutions by
DMS customers. 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
subscription revenue generated from our solutions, in an applicable
quarterly period by the monthly average number of DMS customer
sites in the same period, divided by three. The metric includes
monthly billing directly associated with the reported DMS sites
inclusive of DMS monthly fees, layered applications and data
integration fees and excludes (i) subscription revenue generated
from customers not included in our DMS customer site count and (ii)
subscription revenue related to certain installation and training
activities that is deferred then recognized as revenue over the
life of the contract.
Non-GAAP Financial Measures
We disclose certain financial measures for our
consolidated results on a generally accepted accounting principles
("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 most directly
comparable GAAP financial measures, in the same way.
Non-GAAP Financial Measure |
Most Directly 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 |
Free cash flow from continuing operations |
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. These measures
adjust for the impact of certain items that we believe are
inconsistent in amount and frequency and 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) financial and operational decisions, (iii)
evaluations of ongoing operating performance on a consistent
period-to-period basis and relative to our competitors, (iv) target
leverage calculations, (v) debt covenant calculations, and (vi)
incentive-based compensation decisions.
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) 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 better
understanding of the factors and trends affecting our business than
could be obtained absent these disclosures.
Adjusted Earnings before Income Taxes
Management has excluded the following items from
adjusted earnings before income taxes for the periods
presented:
- Stock-based
compensation expense included in cost of revenue and selling,
general and administrative expenses.
- Amortization of
acquired intangible assets consists of non-cash amortization of
intangible assets such as customer lists, purchased software, and
trademarks acquired in connection with business combinations. We
exclude the impact of amortization of acquired intangible assets
because these non-cash amounts are significantly impacted by the
timing and size of individual acquisitions and do not factor into
our budgeting process, financial and operational decision making,
target leverage calculations, and determination of incentive based
pay.
- Transaction and
integration-related costs include: (i) legal, accounting, outside
service fees, and other costs incurred in connection with
assessment and integration of acquisitions and other strategic
business opportunities; and (ii) post-close adjustments to
acquisition-related contingent consideration, included in selling,
general and administrative expenses.
- Legal and other
expenses, related to regulatory and competition matters included in
selling, general and administrative expenses, and litigation
liabilities.
- Business process
modernization program designed to improve the way we do business
for our customers through best-in-class product offerings,
processes, governance and systems. The business process
modernization program includes a comprehensive redesign in the way
we go to market, including the quoting, contracting, fulfilling,
and invoicing processes, and the systems and tools we use. The
program is an investment to implement holistic business reform,
including the design and implementation of a new ERP system. The
expense is included in cost of revenue and selling, general and
administrative expenses.
- Officer transition
expense includes severance expense in connection with officer
departures included in cost of revenue and selling, general and
administrative expenses.
- Net adjustments
related to loss from equity method investment includes certain
portions of earnings attributable to an equity interest owned by
CDK.
- Gain on
extinguishment of debt in connection with the forgiveness of
certain indebtedness related to the Paycheck Protection Program
instituted under the United States' Coronavirus Aid, Relief and
Economic Security Act of 2020.
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 calculated at applicable statutory rates net
of applicable permanent differences.
- In fiscal 2022, a
valuation allowance on a deferred tax asset for the tax basis
difference of an equity method investment that is not expected to
be realized.
Adjusted Net Earnings Attributable to CDK and
Adjusted Diluted Net Earnings Attributable to CDK per Share
For each respective presentation, management has
excluded amounts attributable to discontinued operations.
The portion of expense related to noncontrolling
interest has been removed from amortization of acquired intangible
assets and legal and other expenses related to regulatory and
competition matters for the applicable periods.
Adjusted EBITDA
In addition to the items described above for
adjusted earnings before income taxes, 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 in the financial
statements
- Provision for
income taxes included in the financial statements
- Interest expense
included in the financial statements
- Depreciation and
amortization expense included in the financial statements
Amortization of acquired intangible assets is
captured in depreciation and amortization expense. Net adjustments
related to loss from equity method investment includes depreciation
and amortization, attributable to an equity interest owned by
CDK.
Free Cash Flow
We also review free cash flow from continuing
operations as a measure of our ability to generate additional cash
from our business operations. Free cash flow from continuing
operations is defined as cash flow from operating activities less
net cash flows used in operating activities attributable to
discontinued operations, amounts paid for capital expenditures and
capitalized software and change in restricted cash. Free cash flow
from continuing operations 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.
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