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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 December 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 OrganizationI.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 ☒ No
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 ☒ No ☐
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 filerAccelerated 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 
The number of shares outstanding of the registrant’s common stock as of January 29, 2021 was 121,755,823.




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 EndedSix Months Ended
December 31,December 31,
2020201920202019
Revenue$406.3 $418.2 $820.0 $835.9 
Expenses:  
Cost of revenue207.7 193.1 432.4 400.1 
Selling, general and administrative expenses85.0 90.9 173.6 177.5 
Litigation provision  12.0  
Total expenses292.7 284.0 618.0 577.6 
Operating earnings113.6 134.2 202.0 258.3 
Interest expense(34.3)(36.2)(69.0)(73.9)
Loss from equity method investment(1.8) (5.2) 
Other income, net4.0 2.5 28.7 4.4 
Earnings before income taxes81.5 100.5 156.5 188.8 
Provision for income taxes(22.7)(40.4)(49.7)(63.8)
Net earnings from continuing operations58.8 60.1 106.8 125.0 
Net earnings (loss) from discontinued operations11.3 (36.0)21.3 (16.8)
Net earnings70.1 24.1 128.1 108.2 
Less: net earnings attributable to noncontrolling interest1.8 1.8 4.1 3.9 
Net earnings attributable to CDK$68.3 $22.3 $124.0 $104.3 
Net earnings (loss) attributable to CDK per share - basic:
Continuing operations$0.47 $0.48 $0.85 $1.00 
Discontinued operations0.09 (0.30)0.17 (0.14)
Total net earnings attributable to CDK per share - basic$0.56 $0.18 $1.02 $0.86 
Net earnings (loss) attributable to CDK per share - diluted:
Continuing operations$0.47 $0.47 $0.84 $0.99 
Discontinued operations0.09 (0.29)0.17 (0.14)
Total net earnings attributable to CDK per share - diluted$0.56 $0.18 $1.01 $0.85 
Weighted-average common shares outstanding:
Basic121.9 121.6 121.8 121.5 
Diluted122.6 122.1 122.3 122.1 

See notes to the consolidated financial statements.
2


CDK Global, Inc.
Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
Three Months EndedSix Months Ended
December 31,December 31,
2020201920202019
Net earnings$70.1 $24.1 $128.1 $108.2 
Total other comprehensive income
Currency translation adjustments33.2 32.0 60.4 12.1 
Total other comprehensive income33.2 32.0 60.4 12.1 
Comprehensive income103.3 56.1 188.5 120.3 
Less: comprehensive income attributable to noncontrolling interest1.8 1.8 4.1 3.9 
Comprehensive income attributable to CDK$101.5 $54.3 $184.4 $116.4 

See notes to the consolidated financial statements.

3


CDK Global, Inc.
Consolidated Balance Sheets
(In millions, except par values)
(Unaudited)
December 31,June 30,
20202020
Assets
Current assets:  
Cash and cash equivalents$62.8 $80.8 
Accounts receivable, net228.4 242.0 
Other current assets146.1 148.4 
Current assets held for sale762.2 214.4 
Total current assets1,199.5 685.6 
Property, plant and equipment, net of accumulated depreciation of $237.6 and $221.7, respectively
85.8 96.7 
Other assets413.4 418.3 
Goodwill1,001.0 999.5 
Intangible assets, net235.7 229.5 
Long-term assets held for sale 424.5 
Total assets$2,935.4 $2,854.1 
Liabilities and Stockholders' Deficit  
Current liabilities:  
Current maturities of long-term debt and finance lease liabilities$320.3 $20.7 
Accounts payable24.6 34.3 
Accrued expenses and other current liabilities175.1 188.3 
Litigation liability34.0 57.0 
Accrued payroll and payroll-related expenses53.1 52.5 
Short-term deferred revenue42.1 44.6 
Current liabilities held for sale158.2 129.4 
Total current liabilities 807.4 526.8 
Long-term debt and finance lease liabilities2,333.5 2,655.1 
Long-term deferred revenue40.4 39.4 
Deferred income taxes78.4 76.4 
Other liabilities100.9 96.5 
Long-term liabilities held for sale 40.6 
Total liabilities3,360.6 3,434.8 
Commitments and Contingencies (Note 11)
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; 121.8 and 121.5 shares outstanding, respectively
1.6 1.6 
Additional paid-in-capital696.3 687.9 
Retained earnings1,124.4 1,045.5 
Treasury stock, at cost: 38.6 and 38.8 shares, respectively
(2,295.3)(2,305.2)
Accumulated other comprehensive income (loss)34.5 (25.9)
Total CDK stockholders' deficit(438.5)(596.1)
Noncontrolling interest13.3 15.4 
Total stockholders' deficit(425.2)(580.7)
Total liabilities and stockholders' deficit$2,935.4 $2,854.1 
See notes to the consolidated financial statements.
4


CDK Global, Inc.
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Six Months Ended
December 31,
20202019
Cash Flows from Operating Activities
Net earnings$128.1 $108.2 
Less: net earnings (loss) from discontinued operations21.3 (16.8)
Net earnings from continuing operations106.8 125.0 
Adjustments to reconcile net earnings from continuing operations to cash flows provided by operating activities, continuing operations:
Depreciation and amortization46.5 44.4 
Loss from equity method investment5.2  
Deferred income taxes2.5 15.2 
Stock-based compensation expense21.3 11.0 
Other4.0 10.3 
Changes in assets and liabilities, net of effect from acquisitions of businesses:  
Change in accounts receivable15.5 (20.8)
Change in other assets(5.5)(4.6)
Change in accounts payable(10.3)(11.8)
Change in accrued expenses and other liabilities(38.7)(28.5)
Net cash flows provided by operating activities, continuing operations147.3 140.2 
Net cash flows provided by operating activities, discontinued operations25.9 38.5 
Net cash flows provided by operating activities173.2 178.7 
Cash Flows from Investing Activities
Capital expenditures(10.1)(9.1)
Capitalized software(31.9)(26.4)
Investment in certificates of deposit (12.0)
Proceeds from maturities of certificates of deposit 7.3 
Net cash flows used in investing activities, continuing operations(42.0)(40.2)
Net cash flows used in investing activities, discontinued operations(4.6)(7.9)
Net cash flows used in investing activities(46.6)(48.1)
Cash Flows from Financing Activities
Net proceeds (repayments) of revolving credit facilities(15.0)90.0 
Repayments of long-term debt and lease liabilities(10.9)(260.4)
Dividends paid to stockholders(36.5)(36.5)
Proceeds from exercises of stock options2.0 4.9 
Withholding tax payments for stock-based compensation awards(4.2)(5.7)
Dividend payments to noncontrolling owners(6.2)(6.6)
Acquisition-related payments (4.7)
Net cash flows used in financing activities, continuing operations(70.8)(219.0)
Net cash flows used in financing activities, discontinued operations (1.1)
Net cash flows used in financing activities(70.8)(220.1)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash22.1 1.3 
Net change in cash, cash equivalents, and restricted cash, including cash classified as current assets held for sale77.9 (88.2)
Less: Net change in cash classified in current assets held for sale(102.8)6.6 
Net change in cash, cash equivalents, and restricted cash(24.9)(81.6)
Cash, cash equivalents, and restricted cash, beginning of period97.3 144.2 
Cash, cash equivalents, and restricted cash end of period$72.4 $62.6 

See notes to the consolidated financial statements.
5






CDK Global, Inc.
Consolidated Statements of Cash Flows (continued)
(In millions)
(Unaudited)
Six Months Ended
December 31,
20202019
Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets
Cash and cash equivalents$62.8 $52.1 
Restricted cash in funds held for clients included in other current assets9.6 10.5 
Total cash, cash equivalents, and restricted cash$72.4 $62.6 
Supplemental Disclosures
Cash paid for:
Income taxes and foreign withholding taxes, net of refunds, continuing operations$49.6 $16.1 
Interest, continuing operations65.4 68.7 
Non-cash investing and financing activities, continuing operations:
Capitalized property and equipment obtained under lease8.1 15.1 
Lease liabilities incurred (8.1)(15.1)
Capital expenditures and capitalized software, accrued not paid1.2  


See notes to the consolidated financial statements.
6


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

Three Months Ended December 31, 2020

Common StockAdditional Paid-in-CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total CDK Stockholders' DeficitNon-controlling InterestTotal Stockholders' Deficit
Shares IssuedAmount
Balance as of September 30, 2020160.3 $1.6 $689.7 $1,074.6 $(2,298.2)$1.3 $(531.0)$16.5 $(514.5)
Net earnings— — — 68.3 — — 68.3 1.8 70.1 
Foreign currency translation adjustments— — — — — 33.2 33.2 — 33.2 
Stock-based compensation expense and related dividend equivalents— — 8.3 (0.2)— — 8.1 — 8.1 
Common stock issued for the exercise and vesting of stock-based compensation awards, net— — (1.7)— 2.9 — 1.2 — 1.2 
Dividends paid to stockholders ($0.15 per share)
— — — (18.3)— — (18.3)— (18.3)
Dividend payments to noncontrolling owners— — — — — — — (5.0)(5.0)
Balance as of December 31, 2020160.3 $1.6 $696.3 $1,124.4 $(2,295.3)$34.5 $(438.5)$13.3 $(425.2)


Three Months Ended December 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 September 30, 2019160.3 $1.6 $677.7 $975.3 $(2,312.4)$(26.6)$(684.4)$12.8 $(671.6)
Net earnings— — — 22.3 — — 22.3 1.8 24.1 
Foreign currency translation adjustments— — — — — 32.0 32.0 — 32.0 
Stock-based compensation expense and related dividend equivalents— — 7.5 (0.2)— — 7.3 — 7.3 
Common stock issued for the exercise and vesting of stock-based compensation awards, net— — (2.2)— 3.9 — 1.7 — 1.7 
Dividends paid to stockholders ($0.15 per share)
— — — (18.3)— — (18.3)— (18.3)
Dividend payments to noncontrolling owners— — — — — — — (2.2)(2.2)
Balance as of December 31, 2019160.3 $1.6 $683.0 $979.1 $(2,308.5)$5.4 $(639.4)$12.4 $(627.0)

See notes to the consolidated financial statements.




7


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

Six Months Ended December 31, 2020

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, 2020160.3 $1.6 $687.9 $1,045.5 $(2,305.2)$(25.9)$(596.1)$15.4 $(580.7)
Cumulative impact of ASC 326 - current expected credit losses, net of tax— — — (8.2)— — (8.2)— (8.2)
Net earnings— — — 124.0 — — 124.0 4.1 128.1 
Foreign currency translation adjustments— — — — — 60.4 60.4 — 60.4 
Stock-based compensation expense and related dividend equivalents— — 20.5 (0.4)— — 20.1 — 20.1 
Common stock issued for the exercise and vesting of stock-based compensation awards, net— — (12.1)— 9.9 — (2.2)— (2.2)
Dividends paid to stockholders ($0.30 per share)
— — — (36.5)— — (36.5)— (36.5)
Dividend payments to noncontrolling owners— — — — — — — (6.2)(6.2)
Balance as of December 31, 2020160.3 $1.6 $696.3 $1,124.4 $(2,295.3)$34.5 $(438.5)$13.3 $(425.2)


Six Months Ended December 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, 2019160.3 $1.6 $688.5 $911.6 $(2,324.6)$(6.7)$(729.6)$15.1 $(714.5)
Net earnings— — — 104.3 — — 104.3 3.9 108.2 
Foreign currency translation adjustments— — — — — 12.1 12.1 — 12.1 
Stock-based compensation expense and related dividend equivalents— — 11.4 (0.3)— — 11.1 — 11.1 
Common stock issued for the exercise and vesting of stock-based compensation awards, net— — (16.9)— 16.1 — (0.8)— (0.8)
Dividends paid to stockholders ($0.30 per share)
— — — (36.5)— — (36.5)— (36.5)
Dividend payments to noncontrolling owners— — — — — — — (6.6)(6.6)
Balance as of December 31, 2019160.3 $1.6 $683.0 $979.1 $(2,308.5)$5.4 $(639.4)$12.4 $(627.0)

See notes to the consolidated financial statements.
8


CDK Global, Inc.
Notes to the Consolidated Financial Statements
(Tabular amounts in millions, except per share amounts)
(Unaudited)
Note 1. Basis of Presentation
Description of Business. CDK Global, Inc. (the "Company" or "CDK") enables end-to-end automotive commerce across the globe. For over 40 years, the Company has served automotive retailers and original equipment manufacturers ("OEMs") by providing solutions on automating and integrating all parts of the buying process, including the acquisition, sale, financing, insuring, parts supply, repair, and maintenance of vehicles. The Company serves nearly 15,000 retail locations in North America.
The Company is organized into two main operating segments, CDK North America ("CDKNA") and CDK International ("CDKI"). CDKNA and CDKI have historically been presented as two of the reportable segments in addition to the Other segment, the primary components of which are corporate allocations and other expenses not recorded in the segment results. On November 27, 2020, the Company entered into a Share Sale and Purchase Agreement (the “SPA”) to sell the CDK International business (the “International Business”) to Francisco Partners (“Francisco Partners”) and as a result the assets and liabilities of the International Business are considered held for sale and the financial results are presented in net earnings (loss) from discontinued operations in the Consolidated Statements of Operations. In addition, in accordance with accounting principles generally accepted in the United States (“GAAP”), the CDKI segment is exempt from segment reporting since its financial results are presented as discontinued operations. Therefore, we are presenting financial results from continuing operations as a single reportable segment. For additional information refer to Note 4 - Discontinued Operations.
Basis of Preparation. The accompanying consolidated financial statements have been prepared in accordance with GAAP. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect assets, liabilities, revenue, and expenses that are reported in the accompanying financial statements and footnotes thereto. Actual results may differ from those estimates and assumptions.
The accompanying consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. Interim financial results are not necessarily indicative of financial results for a full year. The financial statements in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
Certain prior year amounts have been reclassified to conform to the current year presentation. Unless otherwise noted, discussion in these Notes to Unaudited Consolidated Financial Statements refers to our continuing operations. For additional information, Refer to Note 4 - Discontinued Operations for the impact of presenting the International Business as held for sale and discontinued operations.
Effective July 1, 2020, the Company adopted the Financial Accounting Standards Board ("FASB ")Accounting Standards Update ("ASU") No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (“ASU 2016-13”). The comparative information has not been restated and continues to be reported under the accounting standards in effect for the periods presented. For additional information, refer to Note 7 - Allowance for Credit Losses.
Note 2. Summary of Significant Accounting Policies
The Company's significant accounting policies are described in the aforementioned Annual Report. Included below are certain updates to those policies.
Funds Receivable and Funds Held for Clients and Client Fund Obligations. Funds receivable and funds held for clients represent amounts received or expected to be received from clients in advance of performing titling and registration services on behalf of those clients. These amounts are classified in other current assets on the Consolidated Balance Sheets. The total amount due to remit for titling and registration obligations with the department of motor vehicles is recorded to client fund obligations which is classified as accrued expenses and other current liabilities on the Consolidated Balance Sheets. Funds receivable was $34.7 million and $40.7 million, and funds held for clients was $9.6 million and $16.5 million as of December 31, 2020 and June 30, 2020, respectively. Client fund obligations were $44.3 million and $57.2 million as of December 31, 2020 and June 30, 2020, respectively.
9



Internal Use Software and Computer Software to be Sold, Leased, or Otherwise Marketed. Pursuant to its software policies, the Company incurred expenses to research, develop, and deploy new and enhanced solutions of $16.0 million and $9.4 million for the three months ended December 31, 2020 and 2019, respectively, and $36.3 million and $25.8 million for the six months ended December 31, 2020 and 2019, respectively. These expenses were classified in cost of revenue on the Consolidated Statements of Operations. Additionally, the Company had cash flows used for qualifying capitalized software development cost of $31.9 million and $26.4 million for the six months ended December 31, 2020 and 2019, respectively.
Fair Value of Financial Instruments. Cash and cash equivalents, accounts receivable, other current assets, accounts payable, and other current liabilities are reflected on the Consolidated Balance Sheets at cost, which approximates fair value due to the short-term nature of these instruments. The carrying value of the Company's revolving credit facility and term loan facilities (as described in Note 9 - Debt), including accrued interest, approximates fair value based on the Company's current estimated incremental borrowing rate for similar types of arrangements. The approximate aggregate fair value of the Company's senior notes as of December 31, 2020 was $2,264.0 million, based on quoted market prices for the same or similar instruments compared to a carrying value of $2,100.0 million. The term loan facilities and senior notes are considered Level 2 fair value measurements in the fair value hierarchy.
Investments. The Company has elected to apply cost method accounting to its equity interest in Ripcord since the equity does not have a readily determinable fair value. The carrying amount of this investment, which is included in other assets on the Consolidated Balance Sheets, was $20.0 million as of December 31, 2020 and June 30, 2020. From acquisition through December 31, 2020, there have been no impairment or other adjustments to the carrying amount of this investment.
Note 3. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." Refer to Note 7 - Allowance for Credit Losses, for the required disclosures related to the adoption of this standard.
Recently Issued Accounting Pronouncements. In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which simplifies the accounting for income taxes in various areas. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company has evaluated the impact of adoption on its consolidated financial statements, including accounting policies, processes and systems, and does not expect a material impact on the consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional guidance for a limited period of time to ease the burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848), Scope" which expands the scope of Topic 848 to include derivative instruments impacted by discounting transition. These ASUs would apply to companies meeting certain criteria that have contracts, derivatives, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. These standards are effective upon issuance and may be applied retrospectively as of any date from the beginning interim period that includes March 12, 2020 or prospectively. The Company has adopted ASU 2020-04 with no material impact on the consolidated financial statements. The Company has evaluated the impact of ASU 2021-01 and does not expect a material impact on the consolidated financial statements.
Note 4. Discontinued Operations
International Business. On November 27, 2020, the Company entered into an SPA to sell its International Business to Francisco Partners for $1.45 billion in cash, subject to customary closing adjustments. The sale is expected to close in the third quarter of fiscal 2021, subject to customary closing conditions and regulatory approvals. The Company expects to provide limited services to Francisco Partners after the sale to assist in Francisco Partner's integration of the International Business.
The agreement to sell the International Business resulted in the reclassification of the International Business' assets and liabilities as held for sale on the accompanying Consolidated Balance Sheets, and a corresponding adjustment to the Consolidated Statements of Operations and Cash Flows to reflect discontinued operations, for all periods presented.
Digital Marketing Business. On April 21, 2020, the Company completed its sale of the Digital Marketing Business to Sincro LLC, a newly formed company owned by Ansira Partners, Inc. ("Ansira"), which is a subsidiary of Advent International.
The following table summarizes the comparative financial results of discontinued operations which are presented in net earnings (loss) from discontinued operations in the Consolidated Statements of Operations:
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Three Months EndedSix Months Ended
December 31,December 31,
2020201920202019
Revenue$80.7 $81.4 $160.6 $158.3 
Expenses:
Cost of revenue38.0 42.8 75.4 83.1 
Selling, general and administrative expenses22.7 24.7 46.3 46.0 
Restructuring expenses2.5  11.2  
Total expenses63.2 67.5 132.9 129.1 
Operating earnings17.5 13.9 27.7 29.2 
Interest expense(0.1)(0.2)(0.1)(0.2)
Other income (loss), net1.3 (1.2)0.3 (0.8)
Earnings before income taxes18.7 12.5 27.9 28.2 
Provision for income taxes(8.0)(2.8)(7.4)(5.0)
Net earnings from discontinued operations - International Business$10.7 $9.7 $20.5 $23.2 
Net earnings (loss) from discontinued operations - Digital Marketing Business$0.6 $(45.7)$0.8 $(40.0)
Net earnings (loss) from discontinued operations$11.3 $(36.0)$21.3 $(16.8)
The total assets and liabilities held for sale related to discontinued operations for the International Business are stated separately on the Consolidated Balance Sheets and comprised the following items:
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December 31,June 30,
20202020
Assets
Cash and cash equivalents(1)
$237.6 $134.9 
Accounts Receivable50.6 58.0 
Prepaid and other current assets10.0 21.5 
Total current assets298.2 214.4 
Property, plant and equipment, net15.6 12.4 
Other assets61.5 57.4 
Goodwill381.7 349.0 
Intangible assets, net5.2 5.7 
Total assets held for sale$762.2 $638.9 
Liabilities:
Accounts payable$4.3 $5.1 
Deferred revenue62.5 63.3 
Accrued expenses and other current liabilities32.8 35.5 
Accrued payroll and payroll-related expenses21.6 25.5 
Total current liabilities121.2 129.4 
Long-term deferred revenues12.7 13.4 
Deferred income taxes1.8 2.0 
Other liabilities22.5 25.2 
Total liabilities held for sale$158.2 $170.0 

(1) Current assets held for sale includes cash currently held by the International Business. Pursuant to the terms of the SPA, the Company intends to repatriate cash in excess of $40.0 million, which is the required minimum cash balance to be transferred at closing.
All assets and liabilities held for sale have been classified as current on the December 31, 2020 Consolidated Balance Sheets as it is probable that the sale will occur within one year.
Note 5. Revenue
Contract Balances. The Company receives payments from customers based upon contractual billing schedules. Payment terms can vary by contract but the period between invoicing and when payments are due is not significant. The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in unbilled receivables, contract assets, or contract liabilities, on the Company’s Consolidated Balance Sheets. Unbilled receivables are recorded when the right to consideration becomes unconditional based only on the passage of time. Contract assets include amounts related to the Company's contractual right to consideration for completed performance when the right to consideration is conditional. The Company records contract liabilities when cash payments are received or due in advance of performance. Contract assets and contract liabilities are recognized at the contract level.
The following table provides information about accounts receivables, contract assets, and contract liabilities from contracts with customers:
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December 31, 2020June 30, 2020
Accounts receivable (including unbilled receivables)$228.4 $242.0 
Short-term contract assets (included in other current assets)60.5 42.6 
Long-term contract assets (included in other assets)24.5 34.6 
Short-term contract liabilities (included in short-term deferred revenue)(42.1)(44.6)
Long-term contract liabilities (included in long-term deferred revenue)(40.4)(39.4)
Net contract assets/(liabilities)$2.5 $(6.8)

During the six months ended December 31, 2020, the Company recognized $75.4 million of revenue upon satisfaction of performance obligations and invoiced and reclassified $35.8 million to accounts receivable. These amounts were included in the net contract assets or liabilities balance as of June 30, 2020. The Company had no asset impairment charges related to contract assets in the periods presented.
The Company may occasionally recognize an adjustment in revenue in the current period for performance obligations partially or fully satisfied in the previous periods resulting from changes in estimates for the transaction price, including any changes to the Company's assessment of whether an estimate of variable consideration is constrained. For the six months ended December 31, 2020, the impact on revenue recognized in the current period, from performance obligations partially or fully satisfied in the previous period, was not significant.
Remaining Performance Obligations. As of December 31, 2020, the Company had $2.5 billion of remaining performance obligations which represent contracted revenue that has not yet been recognized, including contracted revenue where the contract's original expected duration is one year or less. The Company expects to recognize remaining performance obligations as revenue as follows:
December 31, 2020
Six months ending June 30, 2021$510.0 
Twelve months ending June 30, 2022780.0 
Twelve months ending June 30, 2023590.0 
Twelve months ending June 30, 2024370.0 
Twelve months ending June 30, 2025210.0 
Thereafter70.0 
Total remaining performance obligations$2,530.0 

The remaining performance obligations exclude future transaction revenue where revenue is recognized as the services are rendered and in the amount to which the Company has the right to invoice.
Costs to Obtain and Fulfill a Contract. The Company capitalizes certain contract acquisition costs consisting primarily of commissions incurred when contracts are signed. The Company does not capitalize commissions related to contracts with a duration of less than one year; such commissions are expensed in selling, general and administrative expenses when incurred. Costs to fulfill contracts are capitalized when such costs are direct and related to transition or installation activities for hosted software solutions. Capitalized costs to fulfill primarily include travel and employee compensation and benefit related costs for the Company's implementation and training teams. Capitalized costs to obtain a contract and most costs to fulfill a contract are amortized over a period of five years which represents the expected period of benefit of these costs. In instances where the contract term is significantly less than five years, costs to fulfill are amortized over the contract term which the Company believes best reflects the period of benefit of these costs.
As of December 31, 2020 and June 30, 2020, the Company capitalized contract acquisition and fulfillment costs of $183.7 million and $178.7 million, respectively. The Company expects that incremental commission fees incurred as a result of obtaining contracts and fulfillment costs are recoverable. During the six months ended December 31, 2020 and 2019, the Company recognized cost amortization of $36.4 million and $36.2 million, respectively, and there were no significant impairment losses.

13


Revenue Disaggregation. The following table presents revenue by category for the three and six months ended December 31, 2020 and 2019:

Three Months EndedSix Months
Ended
December 31,December 31,
2020201920202019
Subscription$328.3 $336.8 $652.2 $669.2 
On-site license and installation1.5 3.0 3.2 5.1 
Transaction39.1 39.8 83.0 82.5 
Other37.4 38.6 81.6 79.1 
Total$406.3 $418.2 $820.0 $835.9 

Note 6. Earnings per Share
The numerator for basic and diluted earnings per share is net earnings attributable to CDK. The denominator for basic and diluted earnings per share is based on the weighted-average number of shares of the Company's common stock outstanding during the applicable reporting periods. Diluted earnings per share also reflects the dilutive effect of unexercised in-the-money stock options and unvested restricted stock.
Net earnings allocated to participating securities were not significant for the three and six months ended December 31, 2020 and 2019.
The following table summarizes the components of earnings per share:
Three Months EndedSix Months Ended
December 31,December 31,
2020201920202019
Net earnings from continuing operations attributable to CDK$57.0 $58.3 $102.7 $121.1 
Net earnings (loss) from discontinued operations11.3 (36.0)21.3 (16.8)
Net earnings attributable to CDK$68.3 $22.3 $124.0 $104.3 
Weighted-average shares outstanding:
Basic121.9 121.6 121.8 121.5 
Effect of employee stock options 0.1  0.1 
Effect of employee restricted stock0.7 0.4 0.5 0.5 
Diluted122.6 122.1 122.3 122.1 
Net earnings (loss) attributable to CDK per share - basic:
Continuing operations$0.47 $0.48 $0.85 $1.00 
Discontinued operations0.09 (0.30)0.17 (0.14)
Total net earnings attributable to CDK per share - basic$0.56 $0.18 $1.02 $0.86 
Net earnings (loss) attributable to CDK per share - diluted:
Continuing operations$0.47 $0.47 $0.84 $0.99 
Discontinued operations0.09 (0.29)0.17 (0.14)
Total net earnings attributable to CDK per share - diluted$0.56 $0.18 $1.01 $0.85 

The weighted-average number of shares outstanding used in the calculation of diluted earnings per share does not include the effect of the following anti-dilutive securities.
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Three Months EndedSix Months Ended
December 31,December 31,
20202019