UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event Reported): April 30, 2015
CDK Global, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
| 1-36486 | 46-5743146 | |
| (Commission File Number) | (I.R.S. Employer Identification Number) |
| 1950 Hassell Road, Hoffman Estates, IL 60169 |
| (Registrant's telephone number, including area code) |
(847) 397-1700
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02. Results of Operations and Financial Condition.
On April 30, 2015, CDK Global, Inc. ("CDK Global") issued a press release announcing CDK Global's financial results for its third fiscal quarter ended March 31, 2015. A copy of CDK Global's press release is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.
The information contained in this Current Report shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
Description of Exhibit
99.1
Press Release issued by CDK Global, Inc. on April 30, 2015
Number
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: April 30, 2015 | CDK Global, Inc. |
|
| By: | /s/ ALFRED A. NIETZEL Alfred A. Nietzel Vice President and Chief Financial Officer |
|
Exhibit Index
|
Exhibit |
Exhibit Description |
|
99.1 |
Press Release issued by CDK Global, Inc. on April 30, 2015 |
EXHIBIT 99.1
Revenues Rise 5%, 7.5% on a constant currency basis, to $526.4 Million for the Quarter;
GAAP Net Earnings Decline 19%; Adjusted Net Earnings Increase 16%
HOFFMAN ESTATES, Ill., April 30, 2015 (GLOBE NEWSWIRE) -- CDK Global, Inc. (Nasdaq:CDK) today announced its third quarter fiscal 2015 financial results for the period ended March 31, 2015. Highlights are below:
| Third Quarter Fiscal 2015 Results | As Reported | As Adjusted |
| Revenues | 5% to $526.4 million | 5% to $526.4 million |
| Earnings before income taxes | (9)% to $91.0 million | 16% to $91.6 million |
| Net earnings attributable to CDK | (19)% to $56.3 million | 16% to $56.8 million |
| Diluted net earnings attributable to CDK per share | (19)% to $0.35 per share | 13% to $0.35 per share |
"I am pleased with CDK's financial results for the third quarter. Each of our business segments performed well and we achieved solid earnings growth with good margin expansion," said Steve Anenen, President and Chief Executive Officer, CDK.
"We are committed to shareholder friendly actions, and as part of our capital deployment strategy, CDK acquired 689,000 shares under its repurchase authorization at a cost of $32.2 million," said Al Nietzel, Chief Financial Officer, CDK.
Growth in revenues and earnings before income taxes for the third quarter was negatively impacted by 2.5 percentage points and 2 percentage points, respectively, from unfavorable foreign exchange rates in both the "As Reported" and "As Adjusted" results above. The above "As Adjusted" results exclude in fiscal 2015 $0.6 million of incremental costs incurred during the third quarter of fiscal 2015 that are directly attributable to the separation from ADP® (Nasdaq:ADP). In order to present both periods on a comparable basis, the above "As Adjusted" results include in fiscal 2014 amounts representing certain incremental costs related to being an independent public company in fiscal 2015 including interest expense, stand-alone public company costs, and stock-based compensation. Additionally, the "As Adjusted" results exclude in fiscal 2014 a favorable acquisition-related adjustment of $5.6 million and an income tax benefit due to a valuation allowance adjustment of $7.2 million as well as the ADP® trademark royalty fee. Please refer to the tables at the end of this release for a reconciliation of the "As Reported" results to the "As Adjusted" results. All comparisons throughout the remainder of this release are on an "As Adjusted" basis.
Automotive Retail North America
Automotive Retail North America revenues grew 8% for the third quarter compared to last year's third quarter. Pretax earnings increased 12% and pretax margin improved 110 basis points driven by operating efficiencies partially offset by increased hosting costs.
Automotive Retail International
Automotive Retail International revenues increased 3% for the third quarter compared to last year's third quarter. Pretax earnings increased 4%, resulting in slight pretax margin improvement for the quarter.
Digital Marketing
Digital Marketing revenues grew 11% for the third quarter compared to last year's third quarter. Pretax earnings nearly doubled and pretax margin expanded 450 basis points due to lower employee related costs and an increased mix of higher margin website-related revenues, as well as increased operating efficiencies.
Fiscal 2015 Forecast
As a result of expected continued pressure from unfavorable foreign exchange rates, CDK has lowered its revenue growth forecast. CDK's fiscal 2015 forecast excludes costs in connection with the spin-off and the accelerated amortization of the Cobalt trademark of $15.6 million recorded in the second quarter of fiscal 2015. For comparability, fiscal 2014 results have also been adjusted to exclude spin-off related one-time costs, exclude the $5.6 million favorable acquisition-related adjustment, exclude the $7.2 million income tax benefit due to a valuation allowance adjustment, and to include certain incremental costs related to being an independent public company. The exclusion of the $5.6 million and $7.2 million items from fiscal 2014 to present fiscal 2014 on a comparable basis with fiscal 2015, as well as the effects of revisions we made to our previously reported financial statements, resulted in changes to CDK's forecast ranges. The reconciliations to GAAP measures and a description of the revisions are included in the schedules within this press release. On this adjusted basis, the forecast is as follows:
Effective Tax Rate
CDK's anticipated adjusted effective tax rate for fiscal 2015 has been lowered to 33.5% to 34.0%, as a result of the revised presentation of the non-controlling interest of CVR as described in the attached schedules within this press release, compared to 33.6% for fiscal 2014. This is lower than fiscal 2015's anticipated normalized effective tax rate of 35.5% to 36.0% due to a first quarter fiscal 2015 nonrecurring income tax benefit primarily related to foreign operations. The fiscal 2015 anticipated adjusted effective tax rate and normalized effective tax rate both exclude the impact of the $4.6 million increase to income tax expense in the second quarter fiscal 2015 related to the tax law change for bonus depreciation which ADP is entitled to claim. The fiscal 2014 adjusted effective tax rate excludes the favorable income tax benefit of $7.2 million from last year's third quarter.
Separation from ADP
CDK Global, Inc. began operating as a public company on October 1, 2014 following its spin-off from ADP on September 30, 2014.
Website Schedules
Other financial information, including financial statements and supplementary schedules presented on an "As Reported" and "As Adjusted" basis for all quarters of fiscal 2014, and the schedule of quarterly revenues and pretax earnings by reportable segment have been updated for the third quarter of fiscal 2015 and will be posted to the CDK Investor Relations website http://investors.cdkglobal.com in the "Financial Information" section.
Webcast and Conference Call
An analyst conference call will be held today, Thursday, April 30, 2015 at 7:30 a.m. CT. A live webcast of the call will be available on a listen-only basis. To listen to the webcast go to CDK's Investor Relations website, http://investors.cdkglobal.com and click on the webcast icon. A presentation will be available to download and print about 60 minutes before the webcast at the CDK Investor Relations website at http://investors.cdkglobal.com. CDK's news releases, current financial information, SEC filings and Investor Relations presentations are accessible at the same website.
About CDK Global
With nearly $2 billion in revenues, CDK GlobalTM is the largest global provider of integrated information technology and digital marketing solutions to the automotive retail industry and adjacencies. CDK Global provides solutions in more than 100 countries around the world, serving more than 26,000 retail locations and most automotive manufacturers. CDK Global's solutions automate and integrate critical workflow processes from pre-sale targeted advertising and marketing campaigns to the sale, financing, insurance, parts supply, repair and maintenance of vehicles, with an increasing focus on utilizing data analytics and predictive intelligence. Visit cdkglobal.com.
| CDK Global, Inc. | ||||
| Statements of Consolidated and Combined Earnings | ||||
| (In millions, except per share amounts) | ||||
| (Unaudited) | ||||
| Three Months Ended | Nine Months Ended | |||
| March 31, | March 31, | |||
| 2015 | 2014 (a) | 2015 | 2014 (a) | |
| Revenues | $ 526.4 | $ 501.1 | $ 1,560.4 | $ 1,470.9 |
| Expenses: | ||||
| Cost of revenues | 321.8 | 304.9 | 956.6 | 900.5 |
| Selling, general & administrative expenses | 105.5 | 96.1 | 321.9 | 303.4 |
| Separation costs | 0.6 | -- | 34.6 | -- |
| Total expenses | 427.9 | 401.0 | 1,313.1 | 1,203.9 |
| Operating earnings | 98.5 | 100.1 | 247.3 | 267.0 |
| Interest expense | (9.3) | (0.2) | (19.4) | (0.7) |
| Other income, net | 1.8 | 0.6 | 4.7 | 1.8 |
| Earnings before income taxes | 91.0 | 100.5 | 232.6 | 268.1 |
| Provision for income taxes | (32.8) | (29.1) | (89.0) | (86.9) |
| Net earnings | 58.2 | 71.4 | 143.6 | 181.2 |
| Less: net earnings attributable to noncontrolling interest | 1.9 | 1.8 | 5.9 | 5.2 |
| Net earnings attributable to CDK | $ 56.3 | $ 69.6 | $ 137.7 | $ 176.0 |
| Net earnings attributable to CDK per common share: | ||||
| Basic | $ 0.35 | $ 0.43 | $ 0.86 | $ 1.10 |
| Diluted | $ 0.35 | $ 0.43 | $ 0.85 | $ 1.10 |
| Weighted-average common shares outstanding | ||||
| Basic (b) | 160.6 | 160.6 | 160.7 | 160.6 |
| Diluted (b) | 161.9 | 160.6 | 161.5 | 160.6 |
| (a) Amounts have been revised to reflect sales-type lease accounting for certain hardware components of our DMS and integrated solutions and to reflect the revised presentation of the noncontrolling interest in earnings of Computerized Vehicle Registration, Inc. For additional information on the revisions, refer to Note 1 - Basis of Presentation in our unaudited condensed consolidated and combined financial statements for the quarterly period ended March 31, 2015, which will be filed on Form 10-Q. | ||||
| (b) On September 30, 2014, ADP shareholders of record as of the close of business on September 24, 2014 received one share of our common stock for every three shares of ADP common stock held as of the record date. For periods ended September 30, 2014 and prior, basic and diluted earnings attributable to CDK per share were computed using the number of shares of our stock outstanding on September 30, 2014, the date on which our common stock was distributed to the shareholders of ADP. The same number of shares was used to calculate basic and diluted earnings attributable to CDK per share because there were no dilutive securities in those periods. | ||||
| CDK Global, Inc. | ||
| Consolidated and Combined Balance Sheets | ||
| (In millions) | ||
| (Unaudited) | ||
| March 31, | June 30, | |
| 2015 | 2014 (a) | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 368.5 | $ 402.8 |
| Accounts receivable, net of allowance for doubtful accounts | 352.8 | 310.7 |
| Notes receivable from ADP and its affiliates | -- | 40.6 |
| Other current assets | 185.1 | 164.1 |
| Total current assets | 906.4 | 918.2 |
| Property, plant and equipment, net | 85.3 | 82.6 |
| Other assets | 245.4 | 233.1 |
| Goodwill | 1,169.1 | 1,230.9 |
| Intangible assets, net | 103.1 | 133.8 |
| Total assets | $ 2,509.3 | $ 2,598.6 |
| Liabilities and Equity | ||
| Current liabilities: | ||
| Current maturities of long-term debt | $ 12.5 | $ -- |
| Accounts payable | 20.9 | 17.2 |
| Accrued expenses and other current liabilities | 161.5 | 158.0 |
| Accrued payroll and payroll-related expenses | 97.3 | 105.6 |
| Short-term deferred revenues | 183.5 | 194.8 |
| Notes payable to ADP and its affiliates | -- | 21.9 |
| Total current liabilities | 475.7 | 497.5 |
| Long-term debt | 981.3 | -- |
| Long-term deferred revenues | 179.4 | 182.8 |
| Deferred income taxes | 73.3 | 76.5 |
| Other liabilities | 35.6 | 32.5 |
| Total liabilities | 1,745.3 | 789.3 |
| Equity: | ||
| Preferred stock | -- | -- |
| Common stock | 1.6 | -- |
| Additional paid-in-capital | 677.2 | -- |
| Retained earnings | 59.9 | -- |
| Treasury stock, at cost | (32.2) | -- |
| Net parent company investment | -- | 1,712.2 |
| Accumulated other comprehensive income | 45.6 | 85.7 |
| Total CDK stockholders' equity | 752.1 | 1,797.9 |
| Noncontrolling interest | 11.9 | 11.4 |
| Total equity | 764.0 | 1,809.3 |
| Total liabilities and equity | $ 2,509.3 | $ 2,598.6 |
| (a) Amounts have been revised to reflect sales-type lease accounting for certain hardware components of our DMS and integrated solutions and to reflect the revised presentation of the noncontrolling interest in net assets of Computerized Vehicle Registration, Inc. For additional information on the revisions, refer to Note 1 - Basis of Presentation in our unaudited condensed consolidated and combined financial statements for the quarterly period ended March 31, 2015, which will be filed on Form 10-Q. | ||
| CDK Global, Inc. | |||||||||||
| Segment Financial Data | |||||||||||
| (In millions) | |||||||||||
| (Unaudited) | |||||||||||
| We use certain adjusted results, among other measures, to evaluate our operating performance in the absence of certain items for planning and forecasting purposes. We believe that adjusted results provide relevant and useful information because they allow investors to view performance in a manner similar to the method used by us and they improve our ability to understand our operating performance. Adjusted earnings before income taxes reflects the adjustments to the Automotive Retail North America, Digital Marketing, and Other segments enumerated in the footnotes below. There were no adjustments to the Automotive Retail International segment. Because adjusted earnings before income taxes is not a measure of performance that is calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), it should not be considered in isolation from, or as a substitute for, other metrics that are calculated in accordance with GAAP. | |||||||||||
| Segment Revenues | Adjusted Segment Earnings before Income Taxes | Adjusted Segment Margin | |||||||||
| Three Months Ended | Three Months Ended | Three Months Ended | |||||||||
| March 31, | Change | March 31, | Change | March 31, | Change | ||||||
| 2015 | 2014 (a) | $ | % | 2015 | 2014 (a) | $ | % | 2015 | 2014 (a) | BPS | |
| Automotive Retail North America (b) | $ 347.3 | $ 321.5 | $ 25.8 | 8% | $ 103.2 | $ 91.8 | $ 11.4 | 12% | 29.7% | 28.6% | 110 |
| Automotive Retail International | 87.6 | 85.2 | 2.4 | 3% | 13.0 | 12.5 | 0.5 | 4% | 14.8% | 14.7% | 10 |
| Digital Marketing (c) | 106.2 | 95.9 | 10.3 | 11% | 10.9 | 5.6 | 5.3 | 95% | 10.3% | 5.8% | 450 |
| Other (d) | -- | -- | -- | n/a | (33.1) | (31.0) | (2.1) | 7% | n/m | n/m | n/m |
| Foreign exchange | (14.7) | (1.5) | (13.2) | n/m | (2.4) | (0.2) | (2.2) | n/m | n/m | n/m | n/m |
| Total | $ 526.4 | $ 501.1 | $ 25.3 | 5% | $ 91.6 | $ 78.7 | $ 12.9 | 16% | 17.4% | 15.7% | 170 |
| Segment Revenues | Adjusted Segment Earnings before Income Taxes | Adjusted Segment Margin | |||||||||
| Nine Months Ended | Nine Months Ended | Nine Months Ended | |||||||||
| March 31, | Change | March 31, | Change | March 31, | Change | ||||||
| 2015 | 2014 (a) | $ | % | 2015 | 2014 (a) | $ | % | 2015 | 2014 (a) | BPS | |
| Automotive Retail North America (b) | $ 1,007.0 | $ 948.5 | $ 58.5 | 6% | $ 290.4 | $ 253.2 | $ 37.2 | 15% | 28.8% | 26.7% | 210 |
| Automotive Retail International | 261.7 | 255.2 | 6.5 | 3% | 41.5 | 37.0 | 4.5 | 12% | 15.9% | 14.5% | 140 |
| Digital Marketing (c) | 315.2 | 272.6 | 42.6 | 16% | 30.5 | 17.7 | 12.8 | 72% | 9.7% | 6.5% | 320 |
| Other (d) | -- | -- | -- | n/a | (75.5) | (77.6) | 2.1 | (3)% | n/m | n/m | n/m |
| Foreign exchange | (23.5) | (5.4) | (18.1) | 335% | (4.1) | 0.3 | (4.4) | n/m | n/m | n/m | n/m |
| Total | $ 1,560.4 | $ 1,470.9 | $ 89.5 | 6% | $ 282.8 | $ 230.6 | $ 52.2 | 23% | 18.1% | 15.7% | 240 |
| (a) Amounts have been revised to reflect sales-type lease accounting for certain hardware components of our DMS and integrated solutions and to reflect the revised presentation of the noncontrolling interest in earnings of Computerized Vehicle Registration, Inc. For additional information on the revisions, refer to Note 1 - Basis of Presentation in our unaudited condensed consolidated and combined financial statements for the quarterly period ended March 31, 2015, which will be filed on Form 10-Q. | |||||||||||
| (b) The following table provides a reconciliation of the most directly comparable GAAP measure to adjusted earnings before income taxes for the Automotive Retail North America segment: | |||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||
| March 31, | March 31, | ||||||||||
| 2015 | 2014 (a) | 2015 | 2014 (a) | ||||||||
| Earnings before income taxes | $ 103.2 | $ 100.3 | $ 290.4 | $ 264.7 | |||||||
| Adjustments: | |||||||||||
| Stand-alone public company costs (e) | -- | (2.9) | -- | (5.9) | |||||||
| Acquisition-related adjustment (f) | -- | (5.6) | -- | (5.6) | |||||||
| Adjusted earnings before income taxes | $ 103.2 | $ 91.8 | $ 290.4 | $ 253.2 | |||||||
| (c) The following table provides a reconciliation of the most directly comparable GAAP measure to adjusted earnings before income taxes for the Digital Marketing segment: | |||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||
| March 31, | March 31, | ||||||||||
| 2015 | 2014 (a) | 2015 | 2014 (a) | ||||||||
| Earnings before income taxes | $ 10.9 | $ 5.6 | $ 14.9 | $ 17.7 | |||||||
| Adjustments: | |||||||||||
| Accelerated trademark amortization (g) | -- | -- | 15.6 | -- | |||||||
| Adjusted earnings before income taxes | $ 10.9 | $ 5.6 | $ 30.5 | $ 17.7 | |||||||
| (d) The following table provides a reconciliation of the most directly comparable GAAP measure to adjusted loss before income taxes for the Other segment: | |||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||
| March 31, | March 31, | ||||||||||
| 2015 | 2014 (a) | 2015 | 2014 (a) | ||||||||
| Loss before income taxes | $ (33.7) | $ (17.7) | $ (110.1) | $ (51.6) | |||||||
| Adjustments: | |||||||||||
| Separation costs (h) | 0.6 | -- | 34.6 | -- | |||||||
| Stand-alone public company costs (e) | -- | (6.7) | -- | (12.7) | |||||||
| Trademark royalty fee (i) | -- | 5.6 | -- | 11.0 | |||||||
| Stock-based compensation (j) | -- | (3.1) | -- | (5.5) | |||||||
| Interest expense (k) | -- | (9.1) | -- | (18.8) | |||||||
| Adjusted loss before income taxes | $ (33.1) | $ (31.0) | $ (75.5) | $ (77.6) | |||||||
| (e) Represents recurring costs that are expected to be incurred as a stand-alone company incremental to the allocations of ADP costs included within the historical financial statements for FY2014. | |||||||||||
| (f) Represents a fair value adjustment recognized during the three months ended March 31, 2014 related to an acquisition-related contingency. | |||||||||||
| (g) Represents accelerated amortization recognized in the Digital Marketing segment for the Cobalt trademark related to the change in useful life. | |||||||||||
| (h) Represents the removal of separation costs incurred during FY2015 that were directly related to our separation from ADP. | |||||||||||
| (i) Represents the elimination of the royalty paid to ADP for the utilization of the ADP trademark during the period October 1, 2013 through March 31, 2014 as there was no comparable royalty paid in the period from October 1, 2014 through March 31, 2015 due to our separation from ADP. | |||||||||||
| (j) Represents additional stock-based compensation expenses for staff additions to build out corporate functions and director compensation costs. | |||||||||||
| (k) Represents interest expense incurred in FY2015 related to long-term debt issued in conjunction with the separation. | |||||||||||
| CDK Global, Inc. | ||||||||
| Consolidated and Combined Adjusted Financial Information | ||||||||
| (In millions, except per share amounts) | ||||||||
| (Unaudited) | ||||||||
| We use certain adjusted results, among other measures, to evaluate our operating performance in the absence of certain items for planning and forecasting purposes. We believe that adjusted results provide relevant and useful information because they allow investors to view performance in a manner similar to the method used by us and they improve our ability to understand our operating performance. Adjusted earnings before income taxes, adjusted net earnings attributable to CDK, adjusted basic and diluted earnings attributable to CDK per share, EBITDA and adjusted EBITDA reflect the adjustments enumerated in the footnotes below. EBITDA is calculated as earnings before income taxes adjusted to exclude interest expense, depreciation, and amortization. Because adjusted earnings before income taxes, adjusted net earnings attributable to CDK, adjusted basic and diluted earnings per share, EBITDA, and adjusted EBITDA are not measures of performance that are calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), they should not be considered in isolation from, or as a substitute for, other metrics that are calculated in accordance with GAAP. | ||||||||
| Three Months Ended | Nine Months Ended | |||||||
| March 31, | Change | March 31, | Change | |||||
| 2015 | 2014 (a) | $ | % | 2015 | 2014 (a) | $ | % | |
| Earnings before income taxes | $ 91.0 | $ 100.5 | $ (9.5) | (9)% | $ 232.6 | $ 268.1 | $ (35.5) | (13)% |
| Adjustments: | ||||||||
| Separation costs (b) | 0.6 | -- | 34.6 | -- | ||||
| Accelerated trademark amortization (c) | -- | -- | 15.6 | -- | ||||
| Stand-alone public company costs (d) | -- | (9.6) | -- | (18.6) | ||||
| Trademark royalty fee (e) | -- | 5.6 | -- | 11.0 | ||||
| Stock-based compensation (f) | -- | (3.1) | -- | (5.5) | ||||
| Interest expense (g) | -- | (9.1) | -- | (18.8) | ||||
| Acquisition-related adjustment (h) | -- | (5.6) | -- | (5.6) | ||||
| Adjusted earnings before income taxes | $ 91.6 | $ 78.7 | $ 12.9 | 16% | $ 282.8 | $ 230.6 | $ 52.2 | 23% |
| Adjusted margin percentage | 17.4% | 15.7% | 18.1% | 15.7% | ||||
| Provision for income taxes | $ 32.8 | $ 29.1 | $ 3.7 | 13% | $ 89.0 | $ 86.9 | $ 2.1 | 2% |
| Adjustments: | ||||||||
| Tax effect of adjustments above (i) | 0.1 | (8.4) | 10.4 | (14.4) | ||||
| Tax law change - bonus depreciation (j) | -- | -- | (4.6) | -- | ||||
| Valuation allowance adjustment (k) | -- | 7.2 | -- | 7.2 | ||||
| Adjusted provision for income taxes | $ 32.9 | $ 27.9 | $ 5.0 | 18% | $ 94.8 | $ 79.7 | $ 15.1 | 19% |
| Adjusted effective tax rate | 35.9% | 35.5% | 33.5% | 34.6% | ||||
| Net earnings | $ 58.2 | $ 71.4 | $(13.2) | (18)% | $ 143.6 | $ 181.2 | $ (37.6) | (21)% |
| Less: net earnings attributable to noncontrolling interest | 1.9 | 1.8 | 5.9 | 5.2 | ||||
| Net earnings attributable to CDK | 56.3 | 69.6 | (13.3) | (19)% | 137.7 | 176.0 | (38.3) | (22)% |
| Adjustments: | ||||||||
| Separation costs (b) | 0.6 | -- | 34.6 | -- | ||||
| Accelerated trademark amortization (c) | -- | -- | 15.6 | -- | ||||
| Stand-alone public company costs (d) | -- | (9.6) | -- | (18.6) | ||||
| Trademark royalty fee (e) | -- | 5.6 | -- | 11.0 | ||||
| Stock-based compensation (f) | -- | (3.1) | -- | (5.5) | ||||
| Interest expense (g) | -- | (9.1) | -- | (18.8) | ||||
| Acquisition-related adjustment (h) | -- | (5.6) | -- | (5.6) | ||||
| Tax effect of adjustments above (i) | (0.1) | 8.4 | (10.4) | 14.4 | ||||
| Tax law change - bonus depreciation (j) | -- | -- | 4.6 | -- | ||||
| Valuation allowance adjustment (k) | -- | (7.2) | -- | (7.2) | ||||
| Adjusted net earnings attributable to CDK | $ 56.8 | $ 49.0 | $ 7.8 | 16% | $ 182.1 | $ 145.7 | $ 36.4 | 25% |
| Adjusted net earnings attributable to CDK per common share: | ||||||||
| Basic | $ 0.35 | $ 0.31 | 13% | $ 1.13 | $ 0.91 | 24% | ||
| Diluted | $ 0.35 | $ 0.31 | 13% | $ 1.13 | $ 0.91 | 24% | ||
| Weighted-average common shares outstanding: | ||||||||
| Basic (l) | 160.6 | 160.6 | 160.7 | 160.6 | ||||
| Diluted (l) | 161.9 | 160.6 | 161.5 | 160.6 | ||||
| Three Months Ended | Nine Months Ended | |||||||
| March 31, | Change | March 31, | Change | |||||
| 2015 | 2014 (a) | $ | % | 2015 | 2014 (a) | $ | % | |
| Earnings before income taxes | $ 91.0 | $ 100.5 | $ (9.5) | (9)% | $ 232.6 | $ 268.1 | $ (35.5) | (13)% |
| Adjustments: | ||||||||
| Interest expense (m) | 9.3 | 0.2 | 19.4 | 0.7 | ||||
| Depreciation and amortization (n) | 13.7 | 13.7 | 57.1 | 39.6 | ||||
| EBITDA | $ 114.0 | $ 114.4 | $ (0.4) | (0)% | $ 309.1 | $ 308.4 | $ 0.7 | 0% |
| Adjustment: | ||||||||
| Separation costs (b) | 0.6 | -- | 34.6 | -- | ||||
| Stand-alone public company costs (d) | -- | (9.6) | -- | (18.6) | ||||
| Trademark royalty fee (e) | -- | 5.6 | -- | 11.0 | ||||
| Total stock-based compensation (o) | 8.6 | 5.2 | 22.0 | 15.0 | ||||
| Acquisition-related adjustment (h) | -- | (5.6) | -- | (5.6) | ||||
| Adjusted EBITDA | $ 123.2 | $ 110.0 | $ 13.2 | 12% | $ 365.7 | $ 310.2 | $ 55.5 | 18% |
| Adjusted margin % | 23.4% | 22.0% | 23.4% | 21.1% | ||||
| (a) Amounts have been revised to reflect sales-type lease accounting for certain hardware components of our DMS and integrated solutions and to reflect the revised presentation of the noncontrolling interest in earnings of Computerized Vehicle Registration, Inc. For additional information on the revisions, refer to Note 1 - Basis of Presentation in our unaudited condensed consolidated and combined financial statements for the quarterly period ended March 31, 2015, which will be filed on Form 10-Q. | ||||||||
| (b) Represents the removal of separation costs incurred during FY2015 that were directly related to our separation from ADP. | ||||||||
| (c) Represents accelerated amortization recognized in the second quarter of FY2015 in the Digital Marketing segment for the Cobalt trademark related to the change in useful life. | ||||||||
| (d) Represents recurring costs that are expected to be incurred as a stand-alone company incremental to the allocations of ADP costs included within the historical financial statements for FY2014. | ||||||||
| (e) Represents the elimination of the royalty paid to ADP for the utilization of the ADP trademark during the period October 1, 2013 through March 31, 2014 as there was no comparable royalty paid in the period from October 1, 2014 through March 31, 2015 due to our separation from ADP. | ||||||||
| (f) Represents additional stock-based compensation expenses for staff additions to build out corporate functions and director compensation costs. | ||||||||
| (g) Represents interest expense incurred in FY2015 related to long-term debt issued in conjunction with the separation. | ||||||||
| (h) Represents a fair value adjustment recognized during the three months ended March 31, 2014 related to an acquisition-related contingency. | ||||||||
| (i) Represents the tax effect of adjustments using the statutory rate of 38.4% for FY2014 for U.S. transactions, which represent the majority of the adjustments recorded. The separation costs (described in (b) above) were partially tax deductible. The tax adjustment included for the three and nine months ended March 31, 2015 relates only to the tax deductible portion of separation costs. | ||||||||
| (j) Represents an adjustment recognized in the second quarter of FY2015 to deferred taxes related to the bonus depreciation to which ADP is entitled under the tax law and in accordance with the tax matters agreement to claim additional tax depreciation for assets associated with our business for tax periods prior to the separation. | ||||||||
| (k) Represents an income tax benefit associated with a valuation allowance adjustment recognized during the three months ended March 31, 2014. | ||||||||
| (l) On September 30, 2014, ADP shareholders of record as of the close of business on September 24, 2014 received one share of our common stock for every three shares of ADP common stock held as of the record date. For periods ended September 30, 2014 and prior, basic and diluted earnings attributable to CDK per share were computed using the number of shares of our stock outstanding on September 30, 2014, the date on which our common stock was distributed to the shareholders of ADP. The same number of shares was used to calculate basic and diluted earnings attributable to CDK per share because there were no dilutive securities in those periods. | ||||||||
| (m) Represents interest expense included within the financial statements for the periods presented above. | ||||||||
| (n) Represents depreciation and amortization included within the financial statements for the periods presented above, which includes the accelerated amortization attributable to the Cobalt trademark recognized during the nine months ended March 31, 2015. | ||||||||
| (o) Represents total stock-based compensation expense recognized for the periods presented. | ||||||||
| CDK Global, Inc. | |||
| Combined Adjusted FY2014 Financial Information and FY2015 Guidance | |||
| (In millions, except per share amounts) | |||
| (Unaudited) | |||
| We use certain adjusted results, among other measures to evaluate our operating performance in the absence of certain items for planning and forecasting purposes. We believe that adjusted results provide relevant and useful information because they allow investors to view performance in a manner similar to the method used by us and they improve our ability to understand our operating performance. Adjusted earnings before income taxes, adjusted provision for income taxes, adjusted effective tax rate, adjusted net earnings attributable to CDK, adjusted basic and diluted earnings attributable to CDK per share, and adjusted EBITDA reflect the adjustments enumerated in the footnotes below. EBITDA is calculated as earnings before income taxes adjusted to exclude interest expense, depreciation, and amortization. Because adjusted earnings before income taxes, adjusted provision for income taxes, adjusted effective tax rate, adjusted net earnings attributable to CDK, adjusted basic and diluted earnings attributable to CDK per share, EBITDA, and adjusted EBITDA are not measures of performance that are calculated in accordance with GAAP, they should not be considered in isolation from, or as a substitute for, other metrics that are calculated in accordance with GAAP. | |||
| FY2014 | (a) | FY2015E | |
| Revenues | 1,976.5 | (b) | |
| Growth % | 5% | ||
| Earnings before income taxes | 353.3 | (b) | |
| Adjustments: | |||
| Stand-alone public company costs | (30.7) | (c) | |
| Trademark royalty fee | 16.6 | (d) | |
| Stock-based compensation | (7.2) | (e) | |
| Separation costs | 9.3 | (f) | |
| Interest expense | (27.5) | (g) | |
| Acquisition-related fair value adjustment | (5.6) | (h) | |
| Adjusted earnings before income taxes | 308.2 | ||
| Growth % | 15% | ||
| Adjusted margin % | 15.6% | ||
| Growth | 150 bps | ||
| Provision for income taxes | 117.4 | (b) | |
| Adjustments: | |||
| Tax benefit of adjustments above | (20.9) | (i) | |
| Valuation allowance release | 7.2 | (j) | |
| Adjusted provision for income taxes | 103.7 | ||
| Adjusted effective tax rate | 33.6% | ||
| Net earnings | 235.9 | ||
| Less: net earnings attributable to noncontrolling interest | 8.0 | ||
| Net earnings attributable to CDK | 227.9 | (b) | |
| Adjustments: | |||
| Stand-alone public company costs | (30.7) | (c) | |
| Trademark royalty fee | 16.6 | (d) | |
| Stock-based compensation | (7.2) | (e) | |
| Separation costs | 9.3 | (f) | |
| Interest expense | (27.5) | (g) | |
| Acquisition-related fair value adjustment | (5.6) | (h) | |
| Tax benefit of adjustments above | 20.9 | (i) | |
| Valuation allowance release | (7.2) | (j) | |
| Adjusted net earnings attributable to CDK | 196.5 | ||
| Growth % | 15% | ||
| Adjusted basic and diluted net earnings attributable to CDK per share | 1.22 | (k) | |
| Total basic and diluted shares outstanding | 160.6 million | (l) | |
| Growth % | 14 - 15% | ||
| Earnings before income taxes | 353.3 | (b) | |
| Adjustments: | |||
| Interest expense | 1.0 | (b) | |
| Depreciation and amortization | 52.3 | (b) | |
| EBITDA | 406.6 | ||
| Adjustments: | |||
| Stand-alone public company costs | (30.7) | (c) | |
| Trademark royalty fee | 16.6 | (d) | |
| Total stock-based compensation | 21.0 | (m) | |
| Separation costs | 9.3 | (f) | |
| Acquisition-related fair value adjustment | (5.6) | (h) | |
| Adjusted EBITDA | 417.2 | ||
| Adjusted margin % | 21.1% | 150 bps | |
| (a) Amounts in this column have been adjusted to be presented on a comparable basis with the FY2015 estimate. | |||
| (b) Amounts have been revised to reflect sales-type lease accounting for certain hardware components of our DMS and integrated solutions and to reflect the revised presentation of the noncontrolling interest in earnings of Computerized Vehicle Registration, Inc. The effect of the revisions on revenues, earnings before income taxes, net earnings, net earnings attributable to noncontrolling interest, and net earnings attributable to CDK for FY2014 has been summarized below. The Company plans to reflect the effect of the revisions on previously reported periods in future filings containing such information. | |||
| FY2014 | |||
| As Reported | Adjustments | As Revised | |
| Revenues | $ 1,973.6 | $ 2.9 | $ 1,976.5 |
| Earnings before income taxes | 343.6 | 9.7 | 353.3 |
| Net earnings | 226.9 | 9.0 | 235.9 |
| Less: net earnings attributable to noncontrolling interest | -- | 8.0 | 8.0 |
| Net earnings attributable to CDK | $ 226.9 | $ 1.0 | $ 227.9 |
| (c) Represents recurring costs that are expected to be incurred as a stand-alone company incremental to the allocations of ADP costs included within the historical financial statements for FY2014. | |||
| (d) Represents the elimination of the royalty paid to ADP for the utilization of the ADP trademark during the period from October 1, 2013 through June 30, 2014 as there will be no comparable royalty paid in the same period in FY2015 due to our separation from ADP. | |||
| (e) Represents additional stock-based compensation expenses for staff additions to build out corporate functions and director compensation costs. | |||
| (f) Represents the removal of separation costs incurred during FY2014 that are directly related to our separation from ADP. | |||
| (g) Represents interest expense CDK will incur in FY2015 related to long-term debt issued in conjunction with the separation. | |||
| (h) Represents a fair value adjustment recognized during the three months ended March 31, 2014 related to an acquisition-related contingency. | |||
| (i) Represents the tax effect of adjustments using the statutory tax rate of 38.4% for FY2014 for U.S. transactions, which represent the majority of the adjustments recorded. The separation costs (described in (f) above) are not tax deductible and therefore there is no provision for income taxes included for this adjustment. | |||
| (j) Represents an income tax benefit associated with a valuation allowance adjustment recognized during the three months ended March 31, 2014. | |||
| (k) Computed using adjusted net earnings attributable to CDK shown above and total shares outstanding described in (l) below. | |||
| (l) On September 30, 2014, ADP shareholders of record as of the close of business on September 24, 2014 received one share of our common stock for every three shares of ADP common stock held as of the record date. Basic and diluted earnings attributable to CDK per share above for FY2014 was computed using the number of shares of our stock outstanding on September 30, 2014, the date on which our common stock was distributed to the shareholders of ADP. The same number of shares was used to calculate basic and diluted earnings attributable to CDK per share because there were no dilutive securities in FY2014. | |||
| (m) Represents total stock-based compensation expense recognized for the periods presented. | |||
| CDK Global, Inc. | |||||||
| Performance Metrics | |||||||
| (Unaudited) | |||||||
| CDK management regularly reviews the following key performance measures in evaluating our business results, identifying trends affecting our business and making operating and strategic decisions. The following table summarizes these measures for recurring subscription revenues: | |||||||
| For the three months ended | |||||||
|
September 30, 2013 |
December 31, 2013 |
March 31, 2014 |
June 30, 2014 |
September 30, 2014 |
December 31, 2014 |
March 31, 2015 |
|
| ARNA | |||||||
| Automotive | |||||||
| DMS Client Sites (a) | 8,806 | 8,862 | 8,905 | 8,978 | 9,039 | 9,136 | 9,167 |
| Avg Revenue Per Site (b) | 6,285 | 6,379 | 6,586 | 6,447 | 6,640 | 6,691 | 6,946 |
| Adjacencies | |||||||
| DMS Client Sites (a) | 4,462 | 4,503 | 4,571 | 4,600 | 4,653 | 4,831 | 4,959 |
| Avg Revenue Per Site (b) | 1,464 | 1,478 | 1,521 | 1,520 | 1,556 | 1,536 | 1,565 |
| Total ARNA | |||||||
| DMS Client Sites (a) | 13,268 | 13,365 | 13,476 | 13,578 | 13,692 | 13,967 | 14,126 |
| Avg Revenue Per Site (b) | 4,669 | 4,741 | 4,881 | 4,789 | 4,915 | 4,914 | 5,068 |
| ARI | |||||||
| DMS Client Sites (a) | 13,496 | 13,573 | 13,459 | 13,501 | 13,437 | 13,420 | 13,294 |
| Avg Revenue Per Site (b) | 1,179 | 1,181 | 1,183 | 1,208 | 1,235 | 1,228 | 1,251 |
| Digital Marketing | |||||||
| Websites (c) | 7,665 | 7,732 | 7,951 | 7,783 | 7,828 | 7,783 | 7,448 |
| Avg Revenue Per Website (d) | 2,983 | 3,046 | 2,972 | 3,095 | 3,219 | 3,322 | 3,354 |
| (a) Dealer Management System (DMS) Client Sites -- We track the number of client sites that have an active DMS. Consistent with our strategy of growing our Automotive Retail client base, we view the number of client sites purchasing our DMS solutions as an indicator of market penetration for our Automotive Retail segments. Our DMS client site count includes retailers with an active DMS that sell vehicles in the automotive and adjacent markets. Adjacent markets include heavy truck dealerships that provide vehicles to the over-the-road trucking industry; recreation dealerships in the motorcycle, marine and recreational vehicle industries; and heavy equipment dealerships in the agriculture and construction equipment industries. We consider a DMS to be active if we have billed a subscription fee for that solution during the most recently ended calendar month. | |||||||
| (b) Average Revenue Per DMS Client Site -- Average revenue per Automotive Retail DMS client site is an indicator of the adoption of our solutions by DMS clients, and we monitor changes in this metric to measure the effectiveness of our strategy to deepen our relationships with our current client base through upgrading and expanding solutions and increasing transaction volumes. We calculate average revenue per DMS client site by dividing the monthly applicable revenue generated from our solutions in a period by the average number of DMS client sites in the period. | |||||||
| (c) Websites -- For the Digital Marketing segment, we track the number of websites that we host and develop for our OEM and automotive retail clients as an indicator of business activity. The number of websites as of a specified date is the total number of full function dealer websites or portals that are currently accessible. | |||||||
| (d) Average Revenue Per Website -- We monitor changes in our average revenue per website as an indicator of the relative depth of our relationships in our Digital Marketing segment. We calculate average revenue per website by dividing the monthly revenue generated from our Digital Marketing solutions in a period, excluding OEM advertising revenues, by the average number of client websites in the period. | |||||||
Forward-Looking Statements
This document contains "forward-looking statements," including forecasts for CDK Global's fiscal year ending June 30, 2015 and CDK Global's intention to make share repurchases, within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature and which may be identified by the use of words like "expects," "assumes," "projects," "anticipates," "estimates," "we believe," "could be" and other words of similar meaning, are forward-looking statements. These statements are based on management's expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by these forward-looking statements.
Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include: CDK Global's success in obtaining, retaining and selling additional services to clients; the pricing of products and services; changes in overall market and economic conditions, technology trends, and auto sales and advertising trends; competitive conditions; changes in regulations; changes in technology; security breaches, interruptions, failures and/or other errors involving CDK Global's systems or networks; availability of skilled technical personnel and the impact of new acquisitions and divestitures. The statements in this press release are made as of the date of this press release, even if subsequently made available by CDK Global on its website or otherwise. CDK Global disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. These risks and uncertainties, along with the risk factors discussed in CDK Global's reports filed with the Securities and Exchange Commission (SEC), including those discussed under "Item 1A. Risk Factors" in CDK Global's Registration Statement on Form 10 for the fiscal year ended June 30, 2014 and its most recent Quarterly Report on Form 10-Q, should be considered in evaluating any forward-looking statements contained herein. These filings can be found on CDK Global's website at www.cdkglobal.com and the SEC's website at www.sec.gov.
Investor Relations Contacts:
Elena Rosellen
973.588.2511
elena.rosellen@cdk.com
Jennifer Gaumond
847.485.4424
jennifer.gaumond@cdk.com
Media Contact:
Michelle Benko
847.485.4389
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