CDK’s revenue climbs, earnings drop in Q2

A strong performance in CDK Global Inc.’s North American retail business helped the dealership software giant boost revenue in its fiscal second quarter, though net earnings tumbled during the period.

CDK on Tuesday reported revenue of $590.4 million and net earnings of $89 million in the quarter that ended Dec. 31. Earnings before income taxes rose to $121.3 million, while adjusted earnings before income taxes grew to $168.2 million.

The second-quarter numbers were generated using a different accounting standard adopted by the company as of July 1. Public companies are moving to the different standard, which reflects revised revenue recognition rules. While CDK said it is not restating prior-year results for comparative purposes, it provided current-year results calculated under the old standard so comparisons could be made.

Taking those into account, second-quarter revenue rose 7 percent; net earnings declined 10 percent; adjusted earnings before income taxes rose 6 percent; and earnings before income taxes rose 6 percent.

CDK’s stock gained 10 percent to close the day at $54.29 as U.S. markets rose across the board. 

In a conference call with analysts and investors, CEO Brian Krzanich, who joined CDK in November, said the company posted growth of 9 percent in its core auto software business. Overall, he said, the growth was largely attributable to a strong quarter for CDK’s North America retail business, which was up 12 percent thanks in part to the company’s September acquisition of ELEAD1ONE.

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