Form 8-K
0001609702 False 0001609702 2019-11-05 2019-11-05 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
 

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):  November 5, 2019

_______________________________

CDK Global, Inc.

(Exact name of registrant as specified in its charter)

_______________________________

Delaware1-3648646-5743146
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification No.)

1950 Hassell Road

Hoffman Estates, Illinois 60169

(Address of Principal Executive Offices) (Zip 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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueCDKNASDAQ Global Select Market
 
 
Item 2.02. Results of Operations and Financial Condition.

On November 5, 2019, CDK Global, Inc. (the “Company”), issued a press release announcing its financial results for the first quarter ended September 30, 2019. A copy of the press release is furnished as Exhibit 99.1 hereto.

The information contained in this Item 2.02 of this Current Report on Form 8-K, as well as Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section. It may only be incorporated by reference in another filing under the Exchange Act or Securities Act of 1933, as amended, if it is expressly incorporated by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number Description of Exhibit
   
99.1 Press Release issued by CDK Global, Inc. on November 5, 2019
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
 

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.

 CDK Global, Inc.
   
  
Date: November 5, 2019By: /s/ JENNIFER A. WILLIAMS        
  Jennifer A. Williams
  Vice President, Corporate Controller and Chief
Accounting Officer
  

 

EdgarFiling

EXHIBIT 99.1

CDK Global Reports First Quarter Fiscal 2020 Results

HOFFMAN ESTATES, Ill., Nov. 05, 2019 (GLOBE NEWSWIRE) -- CDK Global, Inc. (NASDAQ:CDK) today announced financial results for its fiscal 2020 first quarter ended September 30, 2019.

“We had a very good first quarter, with continued improvements in sites and sales in North America. I’m very happy with the site count growth and the investments we are making in our technology and customer satisfaction initiatives,” said Brian Krzanich, president and chief executive officer. “We remain confident in our long-term growth strategy and our ability to deliver value to our customers and shareholders.”

“Quarterly company revenues were up 11% year-over-year, driven by growth in core subscription revenue and improved site counts, in addition to gains from our ELEAD business,” according to Joseph Tautges, executive vice president and chief financial officer. “Auto sites in North America were up again for the third quarter in a row.”

First Quarter Fiscal 2020 Results

CDK Global, Inc.   
($ million except per share) Q1 2020 Change from
Q1 2019
Revenues494.6  11%
Earnings before income taxes104  -2%
Adjusted earnings before income taxes131.1  -3%
Diluted earnings attributable to CDK per share0.67  -3%
Adjusted diluted earnings attributable to CDK per share0.79  5%
Net earnings attributable to CDK82  -9%
Net earnings attributable to CDK margin16.6% -360bps 
Adjusted EBITDA188.3  3%
Adjusted EBITDA margin38.1% -310bps 

 

The non-GAAP (adjusted) results and guidance presented in this press release represent non-GAAP financial measures. Reconciliations of these measures to the appropriate GAAP measures are provided in the tables at the end of this press release.

Impacts to the First Quarter Fiscal 2020:

CDK Segment Information

CDK North America 
($ million)Q1 2020Change from
Q1 2019
Revenues417.7  14%
Earnings before income taxes144.2  -9%
Earnings before income taxes margin34.5% -860bps 
Adjusted earnings before income taxes167.7  3%
Adjusted earnings before income taxes margin40.1% -430bps 
   
   
CDK International  
($ million)Q1 2020Change from
Q1 2019
Revenues76.9  -2%
Constant currency revenues80.2  2%
Earnings before income taxes15.2  -19%
Earnings before income taxes margin19.8% -410bps 
Adjusted earnings before income taxes15.3  -19%
Adjusted earnings before income taxes margin19.9% -410bps 

 

Fiscal 2020 Guidance

We are reaffirming our fiscal year 2020 guidance as provided below. The fiscal 2020 guidance is provided on both a GAAP and a non-GAAP (adjusted) basis. 

CDK Global, Inc.
($ million except per share)
FY 2020 GUIDANCE
Revenues$2.00 billion - $2.05 billion
Diluted net earnings attributable to CDK per share$2.80 - $3.00
Adjusted diluted net earnings attributable to CDK per share$3.30 - $3.50
Net earnings attributable to CDK$340 million - $370 million
Adjusted EBITDA$790 million - $820 million
Effective tax rate25.0% - 26.0%
Adjusted effective tax rate24.0% - 25.0%
Shareholder Returns (including dividends and share repurchases)$75 million - $150 million

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 ended September 30, 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, Tuesday, November 5, 2019 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, http://investors.cdkglobal.com, and click on the webcast icon. An accompanying slide presentation will be available to download and print about 30 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 $2 billion in revenues, CDK Global (NASDAQ:CDK) is a leading global provider of integrated information technology 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, including the acquisition, sale, financing, insuring, parts supply, repair and maintenance of vehicles. Visit cdkglobal.com.

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, including the Company’s GAAP and adjusted fiscal 2020 guidance; the Company’s plan to divest its Digital Marketing Business; 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 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; the Company’s ability to complete the divestiture of the Digital Marketing Business; 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:

Julie Schlueter
847.485.4643
julie.schlueter@cdk.com
Media Contact:

Roxanne Pipitone
847.485.4423
roxanne.pipitone@cdk.com


  
CDK Global, Inc.
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
  
 Three Months Ended
 September 30,
 2019 2018
Revenues$494.6  $446.3 
    
Expenses:   
Cost of revenues247.3  203.3 
Selling, general and administrative expenses107.9  91.1 
Restructuring expenses  15.8 
Total expenses355.2  310.2 
    
Operating earnings139.4  136.1 
    
Interest expense(37.7) (32.2)
Other income, net2.3  2.6 
    
Earnings before income taxes104.0  106.5 
    
Provision for income taxes(25.6) (30.0)
    
Net earnings from continuing operations78.4  76.5 
Net earnings from discontinued operations5.7  15.8 
Net earnings84.1  92.3 
Less: net earnings attributable to noncontrolling interest2.1  2.0 
Net earnings attributable to CDK$82.0  $90.3 
    
Net earnings attributable to CDK per share - basic:   
Continuing operations$0.63  $0.58 
Discontinued operations$0.05  $0.12 
Total net earnings attributable to CDK per share - basic$0.68  $0.70 
    
Net earnings attributable to CDK per share - diluted:   
Continuing operations$0.62  $0.57 
Discontinued operations$0.05  $0.12 
Total net earnings attributable to CDK per share - diluted$0.67  $0.69 
    
Weighted-average common shares outstanding:   
Basic121.4  129.6 
Diluted122.0  130.4 

The Digital Marketing Business is presented as discontinued operations and prior year amounts have been reclassified. Refer to Form 10-Q, Item 1 of Part I, "Notes to the Consolidated Financial Statements, Note 4 - Discontinued Operations" for more information.

    
CDK Global, Inc.
Consolidated Balance Sheets
(In millions)
(Unaudited)
    
 September 30, June 30,
 2019 2019
Assets   
Current assets:   
Cash and cash equivalents$313.1  $311.4 
Accounts receivable, net of allowances410.4  412.3 
Current assets held for sale103.8  98.6 
Other current assets175.5  164.8 
Total current assets1,002.8  987.1 
Property, plant and equipment, net131.4  144.8 
Other assets352.6  284.9 
Goodwill1,344.1  1,356.3 
Intangible assets, net228.0  225.9 
Total assets$3,058.9  $2,999.0 
    
Liabilities and Stockholders' Deficit   
Current liabilities:   
Current maturities of long-term debt and lease liabilities$271.3  $270.8 
Accounts payable45.9  57.4 
Accrued expenses and other current liabilities246.3  203.8 
Litigation liability65.0  90.0 
Accrued payroll and payroll-related expenses59.1  89.2 
Current liabilities held for sale7.1  1.9 
Short-term deferred revenues111.2  124.8 
Total current liabilities805.9  837.9 
Long-term debt and lease liabilities2,655.2  2,659.4 
Long-term deferred revenues74.2  68.4 
Deferred income taxes82.3  80.5 
Other liabilities112.9  67.3 
Total liabilities3,730.5  3,713.5 
    
Stockholders' Deficit:   
Preferred stock   
Common stock1.6  1.6 
Additional paid-in capital677.7  688.5 
Retained earnings975.3  911.6 
Treasury stock, at cost(2,312.4) (2,324.6)
Accumulated other comprehensive loss(26.6) (6.7)
Total CDK stockholders' deficit(684.4) (729.6)
Noncontrolling interest12.8  15.1 
Total stockholders' deficit(671.6) (714.5)
Total liabilities and stockholders' deficit$3,058.9  $2,999.0 

Effective July 1, 2019, the Company adopted ASC 842, Leases, using the transition method.  In accordance with the transition method, comparative information has not been restated and continues to be reported under the accounting standards in effect for the period presented.

The Digital Marketing Business is presented as discontinued operations and prior year amounts have been reclassified. Refer to Form 10-Q, Item 1 of Part I, "Notes to the Consolidated Financial Statements, Note 4 - Discontinued Operations" for more information.

  
CDK Global, Inc.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
  
 Three Months Ended
 September 30,
 2019 2018
Cash Flows from Operating Activities:   
Net earnings$84.1  $92.3 
Less: net earnings from discontinued operations5.7  15.8 
Net earnings from continuing operations78.4  76.5 
Adjustments to reconcile net earnings to cash flows provided by operating activities:   
Depreciation and amortization23.5  17.8 
Deferred income taxes  7.8 
Stock-based compensation expense2.9  3.0 
Other6.4  1.4 
Changes in operating assets and liabilities, net of effect from acquisitions of businesses:   
Change in accounts receivable(8.1) 11.7 
Change in other assets(4.5)
 14.3 
Change in accounts payable(5.5) (3.6)
Change in accrued expenses and other liabilities(28.7) (5.3)
Net cash flows provided by operating activities, continuing operations64.4  123.6 
Net cash flows provided by operating activities, discontinued operations7.8  16.4 
Net cash flows provided by operating activities72.2  140.0 
    
Cash Flows from Investing Activities:   
Capital expenditures(3.1) (8.8)
Capitalized software(10.3) (7.7)
Acquisitions of businesses, net of cash acquired  (513.2)
Investment in certificates of deposit(12.0)  
Investment in joint venture  (10.0)
Net cash flows used in investing activities, continuing operations(25.4) (539.7)
Net cash flows used in investing activities, discontinued operations(2.5) (2.4)
Net cash flows used in investing activities(27.9) (542.1)
    
Cash Flows from Financing Activities:   
Proceeds from long-term debt  860.0 
Repayments of long-term debt and lease liabilities(5.2) (792.3)
Dividends paid to stockholders(18.2) (19.3)
Repurchases of common stock  (114.1)
Proceeds from exercises of stock options2.7  1.0 
Withholding tax payments for stock-based compensation awards(5.2) (14.9)
Dividend payments to noncontrolling owners(4.4) (4.4)
Payments of deferred financing costs  (4.4)
Acquisition-related payments(3.6) (1.1)
Net cash flows used in financing activities(33.9) (89.5)
    
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(7.4) (3.5)
    
Net change in cash, cash equivalents and restricted cash3.0  (495.1)
Cash, cash equivalents, and restricted cash, beginning of period321.1  817.1 
Cash, cash equivalents, and restricted cash, end of period$324.1  $322.0 

The Digital Marketing Business is presented as discontinued operations and prior year amounts have been reclassified. Refer to Form 10-Q, Item 1 of Part I, "Notes to the Consolidated Financial Statements, Note 4 - Discontinued Operations" for more information.

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, we incorporated the following additional adjustments within 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. Prior period information has been revised to conform to the new presentation.

Fiscal 2020 Modifications to Our Adjustments:

The Digital Marketing Business is presented as discontinued operations and prior year amounts have been reclassified. Refer to Form 10-Q, Item 1 of Part I, "Notes to the Consolidated Financial Statements, Note 4 - Discontinued Operations" for more information.

      
 Three Months
Ended
September 30,
 Change
 2019 2018 $ %
Revenues (a)$494.6  $446.3  $48.3  11%
Impact of exchange rates3.6       
Constant currency revenues (a) (b)$498.2  $446.3  $51.9  12%
        
Earnings before income taxes (a)$104.0  $106.5  $(2.5) (2)%
Margin21.0% 23.9%  -290 bps    
Total stock-based compensation (a)2.9  3.0     
Amortization of acquired intangible assets (a)4.0  1.9     
Transaction and integration-related expenses (a)8.5  1.8     
Legal and other expenses related to regulatory and competition matters7.4  1.7     
Business process modernization program4.3       
Restructuring expenses (a)  15.8     
Other business transformation expenses (a)  4.9     
Adjusted earnings before income taxes (a) (b)$131.1  $135.6  $(4.5) (3)%
Adjusted margin26.5% 30.4%  -390 bps    
Impact of exchange rates0.8       
Constant currency adjusted earnings before income taxes (a) (b)$131.9  $135.6  $(3.7) (3)%


 Three Months Ended    
 September 30, Change
 2019 2018 $ %
Provision for income taxes (a)$25.6  $30.0  $(4.4) (15)%
Effective tax rate24.6% 28.2%    
Income tax effect of pre-tax adjustments6.0  8.9     
Impact of U.S tax reform1.2  (3.4)    
Adjusted provision for income taxes (a) (b)$32.8  $35.5  $(2.7) (8)%
Adjusted effective tax rate25.0% 26.2%    


 Three Months Ended    
 September 30, Change
 2019 2018 $ %
Net earnings$84.1  $92.3  $(8.2) (9)%
Less: net earnings attributable to noncontrolling interest2.1  2.0     
Net earnings attributable to CDK82.0  90.3  (8.3) (9)%
Net earnings from discontinued operations(5.7) (15.8)    
Total stock-based compensation (a)2.9  3.0     
Amortization of acquired intangible assets (a) (c)3.9  1.8     
Transaction and integration-related expenses (a)8.5  1.8     
Legal and other expenses related to regulatory and competition matters7.4  1.7     
Business process modernization program4.3       
Restructuring expenses (a) (c)  15.7     
Other business transformation expenses (a)  4.9     
Income tax effect on pre-tax adjustments(6.0) (8.9)    
Impact of U.S tax reform(1.2) 3.4     
Adjusted net earnings attributable to CDK (b)$96.1  $97.9  $(1.8) (2)%


 Three Months Ended    
 September 30, Change
 2019 2018 $ %
Diluted earnings attributable to CDK per share$0.67  $0.69  $(0.02) (3)%
Net earnings from discontinued operations(0.05) (0.12)    
Total stock-based compensation (a)0.03  0.02     
Amortization of acquired intangible assets (a) (c)0.03  0.01     
Transaction and integration-related expenses (a)0.07  0.01     
Legal and other expenses related to regulatory and competition matters0.06  0.01     
Business process modernization program0.04       
Restructuring expenses (a) (c)  0.12     
Other business transformation expenses (a)  0.04     
Income tax effect on pre-tax adjustments(0.05) (0.06)    
Impact of U.S tax reform(0.01) 0.03     
Adjusted diluted earnings attributable to CDK per share (b)$0.79  $0.75  $0.04  5%
        
Weighted-average common shares outstanding:       
Diluted122.0  130.4     


 Three Months Ended    
 September 30, Change
 2019 2018 $ %
Net earnings attributable to CDK$82.0  $90.3  $(8.3) (9)%
Margin16.6% 20.2%  -360 bps    
Net earnings attributable to noncontrolling interest2.1  2.0     
Net earnings from discontinued operations(5.7) (15.8)    
Provision for income taxes (a)25.6  30.0     
Interest expense37.7  32.2     
Depreciation and amortization (a)23.5  17.8     
Total stock-based compensation (a)2.9  3.0     
Transaction and integration-related expenses (a)8.5  1.8     
Legal and other expenses related to regulatory and competition matters7.4  1.7     
Business process modernization program4.3       
Restructuring expenses (a)  15.8     
Other business transformation expenses (a)  4.9     
Adjusted EBITDA (b)$188.3  $183.7  $4.6  3%
Adjusted margin38.1% 41.2%  -310 bps    


 Three Months Ended
 September 30,
 2019 2018
Net cash flows provided by operating activities$72.2  $140.0 
Net cash flows provided by operating activities - discontinued operations(7.8) (16.4)
Capital expenditures (a)(3.1) (8.8)
Capitalized software (a)(10.3) (7.7)
Change in restricted cash(1.3) 3.5 
Free cash flow from continuing operations (b)$49.7  $110.6 

(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 restructuring expenses, amortization of acquired intangible assets, other business transformation expenses and stock-based compensation expenses for the three months ended September 30, 2018.

CDK Global, Inc.
Segment Adjusted Financial Data
(In millions)
(Unaudited)

As described below under the Non-GAAP Financial Measures section of this press release, we incorporated additional adjustments within 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. Prior period information has been revised to conform to the new presentation.

Fiscal 2020 Modifications to Our Adjustments:

The Digital Marketing Business is presented as discontinued operations and prior year amounts have been reclassified. Refer to Form 10-Q, Item 1 of Part I, "Notes to the Consolidated Financial Statements, Note 4 - Discontinued Operations" for more information.

 Segment Revenues
 Three Months Ended    
 September 30, Change
 2019 2018 $ %
CDK North America (a)$417.7  $367.7  $50.0  14%
CDK International (b)76.9  78.6  (1.7) (2)%
Total$494.6  $446.3  $48.3  11%


 Segment Adjusted Earnings before Income Taxes
 Three Months Ended    
 September 30, Change
 2019 2018 $ %
CDK North America (a)$167.7  $163.3  $4.4  3%
Margin40.1% 44.4%  -430 bps    
CDK International (b)15.3  18.9  (3.6) (19)%
Margin19.9% 24.0%  -410 bps    
Other (c)(51.9) (46.6) (5.3) (11)%
Total$131.1  $135.6  $(4.5) (3)%
Margin26.5% 30.4%  -390 bps    

(a) The table below presents a reconciliation of: (i) revenues to constant currency revenues; and (ii) earnings before income taxes to constant currency adjusted earnings before income taxes for the CDK North America segment.

CDK North AmericaThree Months Ended    
 September 30, Change
 2019 2018 $ %
Revenues$417.7  $367.7  $50.0  14%
Impact of exchange rates0.3       
Constant currency revenues (d)$418.0  $367.7  $50.3  14%
        
Earnings before income taxes$144.2  $158.5  $(14.3) (9)%
Margin %34.5% 43.1%  -860 bps    
Amortization of acquired intangible assets3.9  1.8     
Transaction and integration-related expenses7.9  1.3     
Legal and other expenses related to regulatory and competition matters7.4  1.7     
Business process modernization program4.3       
Adjusted earnings before income taxes (d)$167.7  $163.3  $4.4  3%
Adjusted Margin %40.1% 44.4%  -430 bps    
Impact of exchange rates0.1       
Constant currency adjusted earnings before income taxes (d)$167.8  $163.3  $4.5  3%

(b) The table below presents a reconciliation of: (i) revenues to constant currency revenues; and (ii) earnings before income taxes to constant currency adjusted earnings before income taxes, for the CDK International segment.

CDK InternationalThree Months Ended    
 September 30, Change
 2019 2018 $ %
Revenues$76.9  $78.6  $(1.7) (2)%
Impact of exchange rates3.3       
Constant currency revenues (d)$80.2  $78.6  $1.6  2%
        
Earnings before income taxes$15.2  $18.8  $(3.6) (19)%
Margin %19.8% 23.9%  -410 bps    
Amortization of acquired intangible assets0.1  0.1     
Adjusted earnings before income taxes (d)$15.3  $18.9  $(3.6) (19)%
Adjusted Margin %19.9% 24.0%       
Impact of exchange rates0.6     -410 bps   
Constant currency adjusted earnings before income taxes (d)$15.9  $18.9  $(3.0) (16)%

(c) 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.

OtherThree Months Ended    
 September 30, Change
 2019 2018 $ %
Loss before income taxes$(55.4) $(70.8) $15.4  (22)%
Total stock-based compensation2.9  3.0     
Transaction and integration-related expenses0.6  0.5     
Restructuring expenses  15.8     
Other business transformation expenses  4.9     
Adjusted loss before income taxes (d)$(51.9) $(46.6) $(5.3) 11%
Impact of exchange rates0.1       
Constant currency adjusted loss before income taxes (d)$(51.8) $(46.6) $(5.2) 11%

(d) 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, 2019 and 2018:

 Three Months Ended    
 September 30, Change
 2019 2018 $ %
CDK North America       
Subscription$332.4  $300.9  $31.5  10%
On-site license and installation2.1  1.4  0.7  50%
Transaction42.7  41.0  1.7  4%
Other40.5  24.4  16.1  66%
Total CDK North America$417.7  $367.7  $50.0  14%
CDK International       
Subscription$67.7  $66.6  $1.1  2%
On-site license and installation4.5  8.0  (3.5) (44)%
Other4.7  4.0  0.7  18%
Total CDK International$76.9  $78.6  $(1.7) (2)%
        
Total$494.6  $446.3  $48.3  11%


CDK Global, Inc.

Consolidated Fiscal 2020 Guidance
(In millions, except per share amounts)
(Unaudited)

As described below under the Non-GAAP Financial Measures section of this press release, during the fourth quarter of fiscal 2019, we began incorporating loss from discontinued operations within our calculations of adjusted net earnings attributable to CDK, and adjusted diluted net earnings attributable to CDK per share. The table below includes these adjustments for fiscal 2020 guidance.

 Fiscal 2020
 Point Estimate (a) Guidance
Revenues (b)$2,025  $2,000 - 2,050
    
Earnings before income taxes (b)$477   
Total stock-based compensation (b)30   
Amortization of acquired intangible assets (b)15   
Transaction and integration-related expenses (b)10   
Legal and other expenses related to regulatory and competition matters20   
Business process modernization program15   
Adjusted earnings before income taxes (b) (c)$567   


 Fiscal 2020
 Point Estimate (a) Guidance
    
Provision for income taxes (b)$121   
Effective tax rate25.4% 25 - 26%
Income tax effect of pre-tax adjustments20   
Impact of U.S tax reform1   
Adjusted provision for income taxes (b) (c)$142   
 Adjusted effective tax rate25.0% 24 - 25%


 Fiscal 2020
 Point Estimate (a) Guidance
Net earnings$368   
Less: net earnings attributable to noncontrolling interest9   
Net earnings attributable to CDK$359   
Earnings from discontinued operations, net of taxes(12)  
Total stock-based compensation (b)30   
Amortization of acquired intangible assets (b)15   
Transaction and integration-related expenses (b)10   
Legal and other expenses related to regulatory and competition matters20   
Business process modernization program15   
Income tax effect of pre-tax adjustments (b)(20)  
Impact of U.S tax reform(1)  
Adjusted net earnings attributable to CDK (b) (c)$416   


 Fiscal 2020
 Point Estimate (a) Guidance
Diluted net earnings attributable to CDK per share$2.94  $2.80 - $3.00
Earnings from discontinued operations, net of taxes(0.10)  
Total stock-based compensation (b)0.25   
Amortization of acquired intangible assets (b)0.12   
Transaction and integration-related expenses (b)0.08   
Legal and other expenses related to regulatory and competition matters0.16   
Business process modernization program0.12   
Income tax effect of pre-tax adjustments (b)(0.16)  
Impact of U.S tax reform(0.01)  
Adjusted diluted net earnings attributable to CDK per share (b) (c)$3.40  $3.30 - $3.50


 Fiscal 2020
 Point Estimate (a) Guidance
Revenues$2,025  $2,000 - $2,050
    
Net earnings attributable to CDK$359  $340 - $370
Margin17.7%  
Net earnings attributable to noncontrolling interest9   
Net earnings from discontinued operations(12)  
Provision for income taxes (b)121   
Interest expense148   
Depreciation and amortization (b)105   
Total stock-based compensation (b)30   
Transaction and integration-related expenses (b)10   
Legal and other expenses related to regulatory and competition matters20   
Business process modernization program15   
Adjusted EBITDA (b) (c)$805  $790 - $820
Adjusted margin39.8%  

(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) 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 recurring subscription revenues. The following table summarizes these measures for recurring subscription revenues in our segments.

Average revenue per site for all periods presented in the table below.

      
 September 30,
2018 (a)
 December 31,
2018 (a)
 March 31,
2019 (a)
 June 30,
2019 (a)
 September 30,
2019
CDK North America         
Automotive         
DMS Customer Sites (b)8,920  8,888  8,936  8,946  8,957 
Avg Revenue Per Site (c)$8,271  $8,835  $8,684  $8,750  $8,723 
          
Adjacencies         
DMS Customer Sites (b)5,613  5,665  5,713  5,735  5,775 
Avg Revenue Per Site (c)$1,650  $1,705  $1,722  $1,720  $1,733 
          
Total CDK North America         
DMS Customer Sites (b)14,533  14,553  14,649  14,681  14,732 
Avg Revenue Per Site (c)$5,714  $6,067  $5,972  $6,003  $5,984 
          
CDK International         
DMS Customer Sites (b)13,187  13,167  12,988  13,098  12,973 
Avg Revenue Per Site (c)$1,378  $1,399  $1,454  $1,487  $1,519 

(a) Average revenue per Dealer Management System (DMS) customer site has been updated for fiscal 2019 to reflect budgeted foreign exchange rates for fiscal 2020.

(b)  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 each applicable month 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, marine, and recreational vehicle industries, and heavy equipment dealerships in the agriculture and construction equipment industries.

(c) Average Revenue Per DMS Customer Site - Average revenue per DMS customer site is an indicator of the scope of 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, in an applicable quarterly 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 MeasureComparable GAAP Financial Measure
Adjusted earnings before income taxesEarnings before income taxes
Adjusted provision for income taxesProvision for income taxes
Adjusted net earnings attributable to CDKNet earnings attributable to CDK
Adjusted diluted earnings attributable to CDK per shareDiluted earnings attributable to CDK per share
Adjusted EBITDANet earnings attributable to CDK
Adjusted EBITDA marginNet earnings attributable to CDK margin
Constant currency revenuesRevenues
Constant currency adjusted earnings before income taxesEarnings before income taxes
Free cash flow from continuing operationsNet 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 those 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 better understanding of the factors and trends affecting our business than could be obtained absent these disclosures.

We incorporated additional adjustments within 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. Prior period information has been revised to conform to the new presentation.

Fiscal 2020 Modifications to Our Adjustments:

Adjusted Earnings before Income Taxes

Management has excluded the following items from adjusted earnings before income taxes for the periods presented:

Adjusted Provision for Income taxes

Management has excluded the following items from adjusted provision for income taxes for the periods presented:

Adjusted Net Earnings Attributable to CDK and Adjusted Diluted Net Earnings Attributable to CDK per Share

For each respective presentation, management has excluded earnings from discontinued operations, net of taxes associated with the Company's plan to divest Digital Marketing Business, in addition to 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 diluted net earnings attributable to CDK per share.

The portion of expense related to noncontrolling interest of $0.1 million has been removed from amortization of acquired intangible assets during the three months ended September 30, 2019. The portion of expense related to noncontrolling interest of $0.1 million and $0.1 million has been removed from restructuring expenses and amortization of acquired intangible assets, respectively, during the three months ended September 30, 2018.

Adjusted EBITDA

Management has excluded the following items from net earnings attributable to CDK in order to calculate adjusted EBITDA for the periods presented:

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. Funds receivable was $27.8 million and $32.3 million as of September 30, 2019 and June 30, 2019, respectively.

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.