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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q

(Mark One)
        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 001-36486

CDK Global, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware46-5743146
State or Other Jurisdiction of
Incorporation or Organization
I.R.S. Employer Identification No.

 

1950 Hassell Road,Hoffman Estates,IL60169
Address of Principal Executive OfficesZip Code
(847) 397-1700
Registrant’s Telephone Number, Including Area Code

            __________________________________________ 
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
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

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes  ý No o
        Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerýAccelerated filer
Non-accelerated filerSmaller reporting company
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.     ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No  ý
The number of shares outstanding of the registrant’s common stock as of April 30, 2020 was 121,527,514.




Table of Contents

  Page
PART I – FINANCIAL INFORMATION
 
Item 1.
 
 
 
 
Item 2.
Item 3.
Item 4.
 
Item 1.
Item 1A.
Item 2.
Item 6.

1


Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CDK Global, Inc.
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)

Three Months EndedNine Months Ended
March 31,March 31,
2020201920202019
Revenues$516.3  $501.2  $1,510.5  $1,426.2  
Expenses:  
Cost of revenues242.5  229.3  725.7  663.2  
Selling, general and administrative expenses105.8  116.3  329.3  322.5  
Restructuring expenses  0.6    20.1  
Total expenses348.3  346.2  1,055.0  1,005.8  
Operating earnings168.0  155.0  455.5  420.4  
Interest expense(35.1) (35.4) (109.2) (101.9) 
Other income (loss), net(0.5) 1.1  3.1  5.3  
Earnings before income taxes132.4  120.7  349.4  323.8  
Provision for income taxes(38.0) (31.4) (106.8) (85.4) 
Net earnings from continuing operations94.4  89.3  242.6  238.4  
Net earnings (loss) from discontinued operations(34.9) 12.4  (74.9) 46.5  
Net earnings59.5  101.7  167.7  284.9  
Less: net earnings attributable to noncontrolling interest1.9  1.9  5.8  5.8  
Net earnings attributable to CDK$57.6  $99.8  $161.9  $279.1  
Net earnings (loss) attributable to CDK per share - basic:
Continuing operations$0.76  $0.70  $1.95  $1.83  
Discontinued operations(0.29) 0.10  (0.62) 0.37  
Total net earnings attributable to CDK per share - basic$0.47  $0.80  $1.33  $2.20  
Net earnings (loss) attributable to CDK per share - diluted:
Continuing operations$0.76  $0.70  $1.94  $1.83  
Discontinued operations(0.29) 0.10  (0.61) 0.36  
Total net earnings attributable to CDK per share - diluted$0.47  $0.80  $1.33  $2.19  
Weighted-average common shares outstanding:
Basic121.6  124.0  121.5  126.8  
Diluted122.2  124.8  122.1  127.7  

See notes to the consolidated financial statements.
2


CDK Global, Inc.
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months EndedNine Months Ended
March 31,March 31,
2020201920202019
Net earnings$59.5  $101.7  $167.7  $284.9  
Other comprehensive income (loss):
Currency translation adjustments(39.7) 4.6  (27.6) (13.5) 
Total other comprehensive income (loss)(39.7) 4.6  (27.6) (13.5) 
Comprehensive income19.8  106.3  140.1  271.4  
Less: comprehensive income attributable to noncontrolling interest1.9  1.9  5.8  5.8  
Comprehensive income attributable to CDK$17.9  $104.4  $134.3  $265.6  

See notes to the consolidated financial statements.

3


CDK Global, Inc.
Consolidated Balance Sheets
(In millions, except par values)
(Unaudited)
March 31,June 30,
20202019
Assets
Current assets:  
Cash and cash equivalents$284.5  $311.4  
Accounts receivable, net of allowances of $11.0 and $8.8, respectively339.6  290.4  
Other current assets165.5  164.8  
Current assets held for sale80.2  220.5  
Total current assets869.8  987.1  
Property, plant and equipment, net of accumulated depreciation of $273.5 and $250.8, respectively116.9  144.8  
Other assets396.3  284.9  
Goodwill1,345.5  1,356.3  
Intangible assets, net236.3  225.9  
Total assets$2,964.8  $2,999.0  
Liabilities and Stockholders' Deficit  
Current liabilities:  
Current maturities of long-term debt and finance lease liabilities$20.9  $270.8  
Accounts payable45.3  38.0  
Accrued expenses and other current liabilities201.6  178.5  
Litigation liability57.0  90.0  
Accrued payroll and payroll-related expenses74.9  89.2  
Short-term deferred revenues119.0  124.8  
Current liabilities held for sale35.9  48.9  
Total current liabilities 554.6  840.2  
Long-term debt and finance lease liabilities2,747.3  2,659.4  
Long-term deferred revenues63.6  68.4  
Deferred income taxes96.7  80.5  
Other liabilities123.8  65.0  
Total liabilities3,586.0  3,713.5  
Commitments and Contingencies (Note 13)
Stockholders' Deficit:  
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; 121.5 and 121.1 shares outstanding, respectively1.6  1.6  
Additional paid-in-capital685.4  688.5  
Retained earnings1,018.3  911.6  
Treasury stock, at cost: 38.8 and 39.2 shares, respectively(2,306.5) (2,324.6) 
Accumulated other comprehensive loss(34.3) (6.7) 
Total CDK stockholders' deficit(635.5) (729.6) 
Noncontrolling interest14.3  15.1  
Total stockholders' deficit(621.2) (714.5) 
Total liabilities and stockholders' deficit$2,964.8  $2,999.0  


See notes to the consolidated financial statements.
4


CDK Global, Inc.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Nine Months Ended
March 31,
20202019
Cash Flows from Operating Activities
Net earnings$167.7  $284.9  
Less: net earnings (loss) from discontinued operations(74.9) 46.5  
Net earnings from continuing operations242.6  238.4  
Adjustments to reconcile net earnings from continuing operations to cash flows provided by operating activities, continuing operations:
Depreciation and amortization72.6  65.1  
Asset impairment  18.2  
Deferred income taxes14.9  20.5  
Stock-based compensation expense12.8  14.0  
Other16.0  7.2  
Changes in assets and liabilities, net of effect from acquisitions of businesses:  
Change in accounts receivable(57.7) (30.4) 
Change in other assets(18.5) (26.8) 
Change in accounts payable7.4  (8.9) 
Change in accrued expenses and other liabilities(15.5) 16.8  
Net cash flows provided by operating activities, continuing operations274.6  314.1  
Net cash flows provided by operating activities, discontinued operations37.1  25.1  
Net cash flows provided by operating activities311.7  339.2  
Cash Flows from Investing Activities
Capital expenditures(19.4) (39.2) 
Capitalized software(43.3) (26.1) 
Proceeds from sale of property, plant and equipment  7.4  
Acquisitions of businesses, net of cash acquired  (513.0) 
Investment in certificates of deposit(12.0)   
Proceeds from maturities of certificates of deposit12.0    
Purchases of investments(20.0) (10.0) 
Proceeds from investments  0.4  
Net cash flows used in investing activities, continuing operations(82.7) (580.5) 
Net cash flows used in investing activities, discontinued operations(6.0) (6.6) 
Net cash flows used in investing activities(88.7) (587.1) 
Cash Flows from Financing Activities
Proceeds from long-term debt100.0  1,090.0  
Repayments of long-term debt and lease liabilities(265.8) (801.7) 
Dividends paid to stockholders(54.7) (56.6) 
Repurchases of common stock  (444.3) 
Proceeds from exercises of stock options6.1  3.0  
Withholding tax payments for stock-based compensation awards(5.7) (15.8) 
Dividend payments to noncontrolling owners(6.6) (8.2) 
Payments of deferred financing costs  (4.4) 
Acquisition-related payments(5.3) (6.9) 
Net cash flows used in financing activities, continuing operations(232.0) (244.9) 
Net cash flows used in financing activities, discontinued operations(1.1)   
Net cash flows used in financing activities(233.1) (244.9) 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(15.6) (7.3) 
Net change in cash, cash equivalents, and restricted cash(25.7) (500.1) 
Cash, cash equivalents, and restricted cash, beginning of period321.1  817.1  
Cash, cash equivalents, and restricted cash end of period$295.4  $317.0  




5


CDK Global, Inc.
Consolidated Statements of Cash Flows (continued)
(In millions)
(Unaudited)
Nine Months Ended
March 31,
20202019
Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets
Cash and cash equivalents$284.5  $306.8  
Restricted cash in funds held for clients included in other current assets10.9  10.2  
Total cash, cash equivalents, and restricted cash$295.4  $317.0  
Supplemental Disclosures
Cash paid for:
Income taxes and foreign withholding taxes, net of refunds, continuing operations$53.0  $104.5  
Interest88.1  73.6  
Non-cash investing and financing activities:
Capitalized property and equipment obtained under lease23.7  2.6  
Lease liabilities incurred (23.7) (2.6) 


See notes to the consolidated financial statements.
6


CDK Global, Inc.
Consolidated Statements of Stockholders' Deficit
(In millions)
(Unaudited)

Three Months Ended March 31, 2020

Common StockAdditional Paid-in-CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total CDK Stockholders' DeficitNon-controlling InterestTotal Stockholders' Deficit
SharesAmount
Balance as of December 31, 2019160.3  $1.6  $683.0  $979.1  $(2,308.5) $5.4  $(639.4) $12.4  $(627.0) 
Net earnings—  —  —  57.6  —  —  57.6  1.9  59.5  
Foreign currency translation adjustments—  —  —  —  —  (39.7) (39.7) —  (39.7) 
Stock-based compensation expense and related dividend equivalents—  —  3.2  (0.2) —  —  3.0  —  3.0  
Common stock issued for the exercise and vesting of stock-based compensation awards, net—  —  (0.8) —  2.0  —  1.2  —  1.2  
Dividends paid to stockholders ($0.15 per share)—  —  —  (18.2) —  —  (18.2) —  (18.2) 
Balance as of March 31, 2020160.3  $1.6  $685.4  $1,018.3  $(2,306.5) $(34.3) $(635.5) $14.3  $(621.2) 


Three Months Ended March 31, 2019

Common StockAdditional Paid-in-CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total CDK Stockholders' DeficitNon-controlling InterestTotal Stockholders' Deficit
SharesAmount
Balance as of December 31, 2018160.3  $1.6  $604.8  $1,003.8  $(2,116.5) $(7.0) $(513.3) $13.2  $(500.1) 
Net earnings—  —  —  99.8  —  —  99.8  1.9  101.7  
Foreign currency translation adjustments—  —  —  —  —  4.6  4.6  —  4.6  
Stock-based compensation expense and related dividend equivalents—  —  6.3  (0.1) —  —  6.2  —  6.2  
Common stock issued for the exercise and vesting of stock-based compensation awards, net—  —  (2.6) —  3.6  —  1.0  —  1.0  
Dividends paid to stockholders ($0.15 per share)—  —  —  (18.6) —  —  (18.6) —  (18.6) 
Repurchases of common stock—  —  65.0  —  (135.2) —  (70.2) —  (70.2) 
Balance as of March 31, 2019160.3  $1.6  $673.5  $1,084.9  $(2,248.1) $(2.4) $(490.5) $15.1  $(475.4) 

See notes to the consolidated financial statements.
7


CDK Global, Inc.
Consolidated Statements of Stockholders' Deficit (continued)
(In millions)
(Unaudited)

Nine Months Ended March 31, 2020

Common StockAdditional Paid-in CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total CDK Stockholders' Deficit Non-controlling InterestTotal Stockholders' Deficit
Shares IssuedAmount
Balance as of June 30, 2019160.3  $1.6  $688.5  $911.6  $(2,324.6) $(6.7) $(729.6) $15.1  $(714.5) 
Net earnings—  —  —  161.9  —  —  161.9  5.8  167.7  
Foreign currency translation adjustments—  —  —  —  —  (27.6) (27.6) —  (27.6) 
Stock-based compensation expense and related dividend equivalents—  —  14.6  (0.5) —  —  14.1  —  14.1  
Common stock issued for the exercise and vesting of stock-based compensation awards, net—  —  (17.7) —  18.1  —  0.4  —  0.4  
Dividends paid to stockholders ($0.45 per share)—  —  —  (54.7) —  —  (54.7) —  (54.7) 
Dividend payments to noncontrolling owners—  —  —  —  —  —  —  (6.6) (6.6) 
Balance as of March 31, 2020160.3  $1.6  $685.4  $1,018.3  $(2,306.5) $(34.3) $(635.5) $14.3  $(621.2) 

Nine Months Ended March 31, 2019

Common StockAdditional Paid-in-CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total CDK Stockholders' DeficitNon-controlling InterestTotal Stockholders'
Deficit
Shares IssuedAmount
Balance as of June 30, 2018160.3  $1.6  $679.8  $753.0  $(1,810.7) $11.5  $(364.8) $17.5  $(347.3) 
Net earnings—  —  —  279.1  —  —  279.1  5.8  284.9  
Foreign currency translation adjustments—  —  —  —  —  (13.5) (13.5) —  (13.5) 
Stock-based compensation expense and related dividend equivalents—  —  13.4  (0.3) —  —  13.1  —  13.1  
Common stock issued for the exercise and vesting of stock-based compensation awards, net—  —  (32.7) —  19.9  —  (12.8) —  (12.8) 
Dividends paid to stockholders ($0.45 per share)—  —  —  (56.6) —  —  (56.6) —  (56.6) 
Repurchases of common stock—  —  13.0  —  (457.3) —  (444.3) —  (444.3) 
Dividend payments to noncontrolling owners—  —  —  —  —  —  —  (8.2) (8.2) 
Cumulative impact of adopting ASC 606—  —  —  109.7  —  (0.4) 109.3  —  109.3  
Balance as of March 31, 2019160.3  $1.6  $