CDK Global Inc. reported a higher profit in its fiscal second quarter, though the figure is compared with a year-ago period that saw the company working to sell its digital marketing business.
The Hoffman Estates, Ill., dealership management system giant reported Monday that net income attributable to CDK for the quarter that ended Dec. 31 was $68.3 million, more than triple the $22.3 million from the same quarter a year ago.
Fiscal second-quarter revenue dipped 3 percent, to $406.3 million, and CDK said it set a record for the number of DMS customer sites. The company reported 14,851 total DMS customer sites in the quarter, 8,997 of which were in automotive. It was the eighth consecutive quarter that CDK added automotive DMS customer sites year over year, the company said.
CDK shares fell 5.7 percent to $52 in after-hours trading on Monday.
CDK in November said it planned to sell its international business to private equity firm Francisco Partners for $1.45 billion. The deal awaits regulatory approval and is expected to close in CDK’s fiscal third quarter, which ends March 31.
Proceeds from the sale are expected to allow CDK to focus on its North American operations, which include DMS and other software for auto dealerships and adjacent businesses in the U.S. and Canada. The sale also will allow the company to repay debt.
Under the deal, Francisco Partners will buy 100 percent of CDK’s international business, which has operations in Europe, Asia, the Middle East and South Africa, CDK said. The company last year said it expects to receive $1.3 billion in after-tax cash proceeds from the deal and expects roughly $35 million in costs for outside services to assist with the transaction.
“We remain very optimistic about our strategy to focus on growth opportunities in North America, giving us confidence we can deliver sustainable growth and create long-term shareholder value,” CDK CEO Brian Krzanich said in an earnings statement Monday.
As a result of the sale agreement, CDK is classifying its international business as discontinued operations in its financial results. CDK’s profit from continuing operations, which do not include the international business, was mostly flat at $58.8 million in the quarter. The company reported $11.3 million in earnings for its international business in the quarter. That compares with a $36 million loss in discontinued operations in the year-ago quarter while the digital marketing business was up for sale.
“We reached the highest site count in company history and increased revenue per site in both our auto and adjacency businesses, while we continue to deal with the broader uncertainty of the macro environment,” CFO Eric Guerin said in a statement. “As we move toward closing the sale of the CDK International business later this third quarter, I’m quite pleased with our strong financial position and ability to implement our growth strategy.”
CDK revised its financial guidance for the 2021 fiscal year excluding its international business. CDK lowered its revenue projections for 2021 to a range from $1.66 billion to $1.71 billion, down from an original $2 billion to $2.05 billion prior to announcing its pending deal for the international operations. Net earnings attributable to CDK for the 2021 fiscal year are expected to range between $990 million and $1.03 billion, up from an earlier projected range between $270 million and $310 million offered in its fiscal first quarter.
