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CDK Global (CDK) Q2 Earnings and Revenues Miss Estimates

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CDK Global (CDK - Free Report) reported second-quarter fiscal 2021 non-GAAP adjusted earnings of 59 cents per share that missed the Zacks Consensus Estimate by 7.8%. The company had reported non-GAAP adjusted earnings of 71 cents in the year-ago quarter.

Revenues of $406.3 million also fell short of the Zacks Consensus Estimate by 2.1%. The company reported revenues of $418.2 million in the year ago quarter.

Shares of the company are down 5% in premarket trading on Feb 9, following the announcement of fiscal second-quarter results. In the past year, the stock has returned 3.8% compared with the industry’s rally of 49.6%.

CDK Global, Inc. Price, Consensus and EPS Surprise

 

CDK Global, Inc. Price, Consensus and EPS Surprise

CDK Global, Inc. price-consensus-eps-surprise-chart | CDK Global, Inc. Quote

 

The company also announced that it is likely to complete the sale of its International operations in the fiscal third quarter of 2021.  In November 2020, the company had announced the sale of its International business.

Revenue Details

Revenues from Subscription category were $328.3 million, down 3% on a year-over-year basis. The transformation of the company’s partner program and amortization related to COVID-19 discount and free products offset strength in the core subscription business.

Under Automotive, DMS customer sites stood at 8,997 sites, up 23 sites on a year-over-year basis. Average revenues per site were $9,005, up 2% year over year.

Further, under Adjacencies, DMS customer sites came in at 5,854 in the fiscal second quarter, increasing 52 sites from the year-ago quarter’s level. Average revenues per site were $1,822, up 3% year over year.

Revenues from the On-site license and installation category came in at $1.5 million, plunging 50% year over year.

Revenues in the Transaction category amounted to $39.1 million, down 2% from the year-ago quarter’s levels.

Moreover, revenues from Other category declined 3% year over year to $37.4 million in the quarter under review. Lower revenues from consulting and call center businesses due the ongoing pandemic offset higher  Cloud Connect networking hardware revenues.

Margins

Total expenses of $292.7 million increased 3.1% year over year, mainly due to higher cost of revenue.

Meanwhile, the company reported operating earnings of $113.6 million, down 15.4% year over year due to lower revenues and higher costs.

Adjusted EBITDA for the fiscal second quarter of 2021 came in at $155.5 million, declining 11% from the year-ago quarter’s levels. Adjusted EBITDA margin contracted 350 basis points (bps) to 38.3%.

Balance Sheet

As of Dec 31, 2020, CDK Global’s cash and cash equivalents came in at $62.8 million compared with $281.1 million as of Sep 30, 2020.

The company had $2.333 billion as long-term debt and finance lease liabilities as of Dec 31, 2020 compared with $2.357 billion as of Sep 30, 2020.    

For six months ended Dec 31, 2020, cash provided by operating activities stood at $173.2 million compared with $178.7 million generated for the six months ended Dec 31, 2019.

Free cash flow from continuing operations for the six-month period ended Dec 31, 2020 came in at $112.2 million compared with free cash flow of $103.9 million reported for the six-month period ended Dec 31, 2019.

Guidance

For fiscal 2021, CDK Global expects non-GAAP revenues in the range of $1.66-$1.71 billion. The Zacks Consensus Estimate is currently pegged at $1.68 billion.

Non-GAAP adjusted diluted earnings per share are forecast between $2.45 and $2.75. The Zacks Consensus Estimate is currently pegged at $2.62.

The company projects non-GAAP adjusted EBITDA in the range of $640-$680 million.

The guidance excludes the results of the company’s international business.

Zacks Rank & Stocks to Consider

Currently, CDK Global has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader technology sector are CDW Corporation (CDW - Free Report) , CrowdStrike (CRWD - Free Report) and Workday (WDAY - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

CDW, Workday and CrowdStrike are scheduled to release earnings on Feb 10, Feb 25 and Mar 16, respectively.

Long-term earnings growth rate for CDW, CrowdStrike and Workday are currently pegged at 13.1%, 25%, and 25.4%, respectively.

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