Automotive

CDK quarterly profit buoyed by $1.45B sale of overseas unit

CDK Global Inc. posted a higher profit in its fiscal third quarter, receiving a bump from the sale of its international business to a private equity firm.

The suburban Chicago-based dealership management system giant on Thursday reported net earnings attributable to CDK of $860.9 million, up from $57.6 million in the same quarter a year earlier. That included net earnings of $815.8 million from discontinued operations, which CDK defined in its financial results as the international business it has sold.

CDK’s net earnings from continuing operations, which do not include the international business, slid 39 percent to $47.1 million in the quarter, which ended March 31. Revenue in the period rose 1.6 percent to $433.1 million, while expenses also rose, climbing 11 percent to $311.5 million.

Company leaders said the business is growing, with the biggest increase in automotive DMS customer sites since 2016. CDK reported 9,042 automotive DMS sites as of March 31, up from 8,948 in the same quarter a year earlier and from 8,997 as of Dec. 31. CEO Brian Krzanich said it was the ninth consecutive quarter the automotive customer sites figure has grown year over year.

“Our strong customer-focused approach has resonated with dealers and OEMs, and coupled with enhancements to our software and integrations, has resulted in new customer growth and increased penetration within our base,” Krzanich said in a statement.

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CDK in March closed on the sale of its international business to private equity firm Francisco Partners, which specializes in working with technology companies. The deal was valued at $1.45 billion. CDK has said it expected to receive $1.3 billion in after-tax cash proceeds from the sale. The company plans to use the proceeds to focus on its North American operations, which include DMS and other software for automotive dealerships and adjacent businesses in the U.S. and Canada.

The year-earlier quarter was impacted by the winding down of CDK’s digital marketing business, which it sold in April 2020 to Ansira Partners Inc., a marketing agency owned by private equity investors. And the emerging coronavirus pandemic prompted CDK a year ago to lower its revenue and earnings forecasts for the rest of its 2020 fiscal year.

CDK on Thursday adjusted its guidance for the remainder of its 2021 fiscal year. Revenue is projected to range from $1.66 billion to $1.7 billion, with the bottom end remaining the same and the top coming down from $1.71 billion. Net earnings attributable to CDK for the fiscal year are forecast to range from $1.02 billion to $1.04 billion, up from $990 million to $1.03 billion.

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