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 ~~March 31,~~September 30, 2021

☐ 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)


Delaware						46-5743146
(State or Other Jurisdiction of Incorporation or ~~Organization~~Organization)						(I.R.S. Employer Identification No.)

1950 Hassell Road,

Hoffman Estates,

60169

(Address of Principal Executive ~~Offices~~Offices)

(Zip ~~Code~~Code)

(847) 397-1700

(Registrant’s Telephone Number, Including Area ~~Code~~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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	CDK	NASDAQ 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 filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller 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 ~~April 30,~~October 29, 2021 was ~~121,773,779.~~118,334,930.

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

CDK Global, Inc.

Consolidated Statements of Operations

(In millions, except per share amounts)

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended
		March 31,				March 31,					September 30,
		2021		2020		2021		2020			2021		2020
Revenue	Revenue	$	433.1	$	426.4	$	1,253.1	$	1,262.3	Revenue	$	440.0	$	413.7

Expenses:	Expenses:									Expenses:
Cost of revenue	Cost of revenue	221.3		198.8		653.7		598.9		Cost of revenue	226.7		224.7
Selling, general and administrative expenses	Selling, general and administrative expenses	90.2		81.6		263.8		259.1		Selling, general and administrative expenses	97.6		88.6

Litigation provision	Litigation provision	0		0		12.0		0		Litigation provision	—		12.0
Total expenses	Total expenses	311.5		280.4		929.5		858.0		Total expenses	324.3		325.3
Operating earnings	Operating earnings	121.6		146.0		323.6		404.3		Operating earnings	115.7		88.4

Interest expense	Interest expense	(32.2)		(35.2)		(101.2)		(109.1)		Interest expense	(21.4)		(34.7)
Loss on extinguishment of debt		(2.2)		0		(2.2)		0
Gain on extinguishment of debt										Gain on extinguishment of debt	2.1		—
Loss from equity method investment	Loss from equity method investment	(19.6)		0		(24.8)		0		Loss from equity method investment	(1.2)		(3.4)
Other income (loss), net		3.6		(1.7)		32.3		2.7
Other income, net										Other income, net	3.1		24.7

Earnings before income taxes	Earnings before income taxes	71.2		109.1		227.7		297.9		Earnings before income taxes	98.3		75.0

Provision for income taxes	Provision for income taxes	(24.1)		(31.7)		(73.8)		(95.5)		Provision for income taxes	(25.1)		(27.0)

Net earnings from continuing operations	Net earnings from continuing operations	47.1		77.4		153.9		202.4		Net earnings from continuing operations	73.2		48.0
Net earnings (loss) from discontinued operations		815.8		(17.9)		837.1		(34.7)
Net earnings from discontinued operations										Net earnings from discontinued operations	0.5		10.0
Net earnings	Net earnings	862.9		59.5		991.0		167.7		Net earnings	73.7		58.0
Less: net earnings attributable to noncontrolling interest	Less: net earnings attributable to noncontrolling interest	2.0		1.9		6.1		5.8		Less: net earnings attributable to noncontrolling interest	2.0		2.3
Net earnings attributable to CDK	Net earnings attributable to CDK	$	860.9	$	57.6	$	984.9	$	161.9	Net earnings attributable to CDK	$	71.7	$	55.7

Net earnings (loss) attributable to CDK per share - basic:
Net earnings attributable to CDK per share - basic:										Net earnings attributable to CDK per share - basic:
Continuing operations	Continuing operations	$	0.37	$	0.62	$	1.21	$	1.62	Continuing operations	$	0.59	$	0.38
Discontinued operations	Discontinued operations	6.69		(0.15)		6.87		(0.29)		Discontinued operations	—		0.08
Total net earnings attributable to CDK per share - basic	Total net earnings attributable to CDK per share - basic	$	7.06	$	0.47	$	8.08	$	1.33	Total net earnings attributable to CDK per share - basic	$	0.59	$	0.46

Net earnings (loss) attributable to CDK per share - diluted:
Net earnings attributable to CDK per share - diluted:										Net earnings attributable to CDK per share - diluted:
Continuing operations	Continuing operations	$	0.36	$	0.62	$	1.21	$	1.61	Continuing operations	$	0.59	$	0.38
Discontinued operations	Discontinued operations	6.64		(0.15)		6.83		(0.28)		Discontinued operations	—		0.08
Total net earnings attributable to CDK per share - diluted	Total net earnings attributable to CDK per share - diluted	$	7.00	$	0.47	$	8.04	$	1.33	Total net earnings attributable to CDK per share - diluted	$	0.59	$	0.46

Weighted-average common shares outstanding:
Weighted average common shares outstanding:										Weighted average common shares outstanding:
Basic	Basic	122.0		121.6		121.9		121.5		Basic	121.2		121.7
Diluted	Diluted	122.9		122.2		122.5		122.1		Diluted	122.1		122.3

See notes to the consolidated financial statements.

CDK Global, Inc.

Consolidated Statements of Comprehensive Income

(In millions)

(Unaudited)

Three Months Ended Nine Months Ended
March 31, March 31,
2021 2020 2021 2020
Net earnings $ 862.9 $ 59.5 $ 991.0 $ 167.7
Total other comprehensive income (loss)
Currency translation adjustments 37.6 (39.7) 98.0 (27.6)
Total other comprehensive income (loss) 37.6 (39.7) 98.0 (27.6)
Comprehensive income 900.5 19.8 1,089.0 140.1
Less: comprehensive income attributable to noncontrolling interest 2.0 1.9 6.1 5.8
Comprehensive income attributable to CDK $ 898.5 $ 17.9 $ 1,082.9 $ 134.3


	Three Months Ended
	September 30,
	2021		2020
Net earnings	$	73.7	$	58.0
Other comprehensive income (loss):
Currency translation adjustments	(2.1)		27.2
Total other comprehensive income (loss)	(2.1)		27.2
Comprehensive income	71.6		85.2
Less: comprehensive income attributable to noncontrolling interest	2.0		2.3
Comprehensive income attributable to CDK	$	69.6	$	82.9

See notes to the consolidated financial statements.

CDK Global, Inc.

Consolidated Balance Sheets

(In millions, except per share par ~~values)~~value)

(Unaudited)


		March 31,		June 30,			September 30,		June 30,
		2021		2020			2021		2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,131.8	$	80.8	Cash and cash equivalents	$	80.8	$	157.0
Accounts receivable, net	Accounts receivable, net	248.7		242.0		Accounts receivable, net	234.8		236.4
Other current assets	Other current assets	182.0		148.4		Other current assets	161.1		168.9
Current assets held for sale		0		214.4
Total current assets	Total current assets	1,562.5		685.6		Total current assets	476.7		562.3
Property, plant and equipment, net of accumulated depreciation of $242.7 and $221.7, respectively		79.4		96.7
Property, plant and equipment, net of accumulated depreciation of $241.8 and $236.5, respectively						Property, plant and equipment, net of accumulated depreciation of $241.8 and $236.5, respectively	66.4		71.8
Other assets	Other assets	413.4		418.3		Other assets	458.3		448.7
Goodwill	Goodwill	1,013.6		999.5		Goodwill	1,296.6		1,297.1
Intangible assets, net	Intangible assets, net	252.9		229.5		Intangible assets, net	337.1		332.7
Long-term assets held for sale		0		424.5
Total assets	Total assets	$	3,321.8	$	2,854.1	Total assets	$	2,635.1	$	2,712.6

Liabilities and Stockholders' Equity (Deficit)
Liabilities and Stockholders' Equity						Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Current maturities of long-term debt and finance lease liabilities	Current maturities of long-term debt and finance lease liabilities	$	500.3	$	20.7	Current maturities of long-term debt and finance lease liabilities	$	4.8	$	7.1
Accounts payable	Accounts payable	29.2		34.3		Accounts payable	23.6		29.0
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	207.3		173.5		Accrued expenses and other current liabilities	194.8		188.1
Income taxes payable		165.0		14.8
Litigation liability		34.0		57.0
Litigation liabilities						Litigation liabilities	34.0		34.0
Accrued payroll and payroll-related expenses	Accrued payroll and payroll-related expenses	66.1		52.5		Accrued payroll and payroll-related expenses	48.3		81.5
Short-term deferred revenue		39.6		44.6
Current liabilities held for sale		0		129.4
Deferred revenue						Deferred revenue	29.6		28.6
Total current liabilities	Total current liabilities	1,041.5		526.8		Total current liabilities	335.1		368.3
Long-term debt and finance lease liabilities		1,589.4		2,655.1
Long-term deferred revenue		41.7		39.4
Long-term liabilities:						Long-term liabilities:
Debt and finance lease liabilities						Debt and finance lease liabilities	1,586.1		1,586.5
Deferred revenue						Deferred revenue	39.1		40.4
Deferred income taxes	Deferred income taxes	80.0		76.4		Deferred income taxes	112.2		111.4
Other liabilities	Other liabilities	103.5		96.5		Other liabilities	101.3		111.1
Long-term liabilities held for sale		0		40.6
Total liabilities	Total liabilities	2,856.1		3,434.8		Total liabilities	2,173.8		2,217.7

Commitments and Contingencies (Note 12)

Stockholders' Equity (Deficit):
Stockholders' Equity:						Stockholders' Equity:
Preferred stock, $0.01 par value: 50.0 shares authorized; none issued and outstanding	Preferred stock, $0.01 par value: 50.0 shares authorized; none issued and outstanding	0		0		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-capital		705.0		687.9
Common stock, $0.01 par value: 650.0 shares authorized; 160.3 and 160.3 shares issued, respectively; 119.9 and 121.5 shares outstanding, respectively						Common stock, $0.01 par value: 650.0 shares authorized; 160.3 and 160.3 shares issued, respectively; 119.9 and 121.5 shares outstanding, respectively	1.6		1.6
Paid-in capital						Paid-in capital	704.1		715.1
Retained earnings	Retained earnings	1,966.6		1,045.5		Retained earnings	2,050.6		1,997.4
Treasury stock, at cost: 38.6 and 38.8 shares, respectively		(2,294.9)		(2,305.2)
Accumulated other comprehensive income (loss)		72.1		(25.9)
Total CDK stockholders' equity (deficit)		450.4		(596.1)
Treasury stock, at cost: 40.4 and 38.8 shares, respectively						Treasury stock, at cost: 40.4 and 38.8 shares, respectively	(2,379.5)		(2,306.0)
Accumulated other comprehensive income						Accumulated other comprehensive income	70.6		72.7
Total CDK stockholders' equity						Total CDK stockholders' equity	447.4		480.8
Noncontrolling interest	Noncontrolling interest	15.3		15.4		Noncontrolling interest	13.9		14.1
Total stockholders' equity (deficit)		465.7		(580.7)
Total liabilities and stockholders' equity (deficit)		$	3,321.8	$	2,854.1
Total stockholders' equity						Total stockholders' equity	461.3		494.9
Total liabilities and stockholders' equity						Total liabilities and stockholders' equity	$	2,635.1	$	2,712.6

See notes to the consolidated financial statements.

CDK Global, Inc.

Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

Nine Months Ended
March 31,
2021 2020
Cash Flows from Operating Activities
Net earnings $ 991.0 $ 167.7
Less: net earnings (loss) from discontinued operations 837.1 (34.7)
Net earnings from continuing operations 153.9 202.4
Adjustments to reconcile net earnings from continuing operations to cash flows provided by operating activities, continuing operations:
Depreciation and amortization 71.1 66.7
Loss from equity method investment 24.8 0
Deferred income taxes 0.7 14.9
Stock-based compensation expense 31.7 13.1
Other 9.2 13.2
Changes in assets and liabilities, net of effect from acquisitions of businesses:
Change in accounts receivable (5.1) (44.3)
Change in other assets (43.8) (26.6)
Change in accounts payable (4.8) 9.5
Change in accrued expenses and other liabilities 16.2 (8.1)
Net cash flows provided by operating activities, continuing operations 253.9 240.8
Net cash flows provided by operating activities, discontinued operations 6.9 70.9
Net cash flows provided by operating activities 260.8 311.7
Cash Flows from Investing Activities
Capital expenditures (15.2) (13.9)
Capitalized software (51.0) (42.5)
Acquisitions of businesses, net of cash acquired (18.1) 0
Investment in certificates of deposit 0 (12.0)
Proceeds from maturities of certificates of deposit 0 12.0
Purchases of investments 0 (20.0)
Net cash flows used in investing activities, continuing operations (84.3) (76.4)
Net cash flows provided by (used in) investing activities, discontinued operations 1,380.9 (12.3)
Net cash flows provided by (used in) investing activities 1,296.6 (88.7)
Cash Flows from Financing Activities
Net proceeds (repayments) of revolving credit facilities (15.0) 100.0
Repayments of long-term debt and lease liabilities (578.0) (265.8)
Dividends paid to stockholders (54.8) (54.7)
Proceeds from exercises of stock options 2.1 6.1
Withholding tax payments for stock-based compensation awards (4.5) (5.7)
Dividend payments to noncontrolling owners (6.2) (6.6)
Acquisition-related payments 0 (5.3)
Net cash flows used in financing activities, continuing operations (656.4) (232.0)
Net cash flows used in financing activities, discontinued operations 0 (1.1)
Net cash flows used in financing activities (656.4) (233.1)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash, including cash classified in current assets held for sale 21.1 (15.6)
Net change in cash and cash equivalents, and restricted cash, including cash classified in current assets held for sale 922.1 (25.7)
Net change in cash classified in current assets held for sale 134.9 58.0
Net change in cash, cash equivalents, and restricted cash 1,057.0 32.3
Cash, cash equivalents, and restricted cash, beginning of period 97.3 144.2
Cash, cash equivalents, and restricted cash, end of period $ 1,154.3 $ 176.5


	Three Months Ended
	September 30,
	2021		2020
Cash Flows from Operating Activities
Net earnings	$	73.7	$	58.0
Less: net earnings from discontinued operations	0.5		10.0
Net earnings from continuing operations	73.2		48.0
Adjustments to reconcile net earnings from continuing operations to cash flows provided by operating activities, continuing operations:
Depreciation and amortization	27.6		23.1
Gain on extinguishment of debt	(2.1)		—
Loss from equity method investment	1.2		3.4
Deferred income taxes	0.3		2.5
Stock-based compensation expense	11.3		12.3
Other	0.6		3.2
Changes in assets and liabilities, net of effect from acquisitions of businesses:
Accounts receivable	3.6		6.5
Other assets	(5.7)		(13.8)
Accounts payable	(5.5)		0.2
Accrued expenses and other liabilities	(33.5)		4.4
Net cash flows provided by operating activities, continuing operations	71.0		89.8
Net cash flows provided by operating activities, discontinued operations	0.5		9.9
Net cash flows provided by operating activities	71.5		99.7

Cash Flows from Investing Activities
Capital expenditures	(3.4)		(5.7)
Capitalized software	(26.0)		(14.7)
Acquisitions of businesses, net of cash acquired	(2.1)		—
Net cash flows used in investing activities, continuing operations	(31.5)		(20.4)
Net cash flows used in investing activities, discontinued operations	—		(1.6)
Net cash flows used in investing activities	(31.5)		(22.0)

Cash Flows from Financing Activities
Net proceeds from revolving credit facilities	—		5.0
Repayments of long-term debt and finance lease liabilities	(1.4)		(5.3)
Dividends paid to stockholders	(18.1)		(18.2)
Repurchases of common stock	(88.3)		—
Proceeds from exercises of stock options	—		0.3
Withholding tax payments for stock-based compensation awards	(7.7)		(3.7)
Dividend payments to noncontrolling owners	(2.2)		(1.2)
Net cash flows used in financing activities, continuing operations	(117.7)		(23.1)
Net cash flows used in financing activities, discontinued operations	—		—
Net cash flows used in financing activities	(117.7)		(23.1)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash, including cash classified in current assets held for sale	(0.5)		8.6
Net change in cash, cash equivalents, and restricted cash, including cash classified in current assets held for sale	(78.2)		63.2

~~See notes to the consolidated financial statements.~~


Net change in cash classified in current assets held for sale	—		(47.2)
Net change in cash, cash equivalents, and restricted cash	(78.2)		16.0

Cash, cash equivalents, and restricted cash, beginning of period	177.2		97.3
Cash, cash equivalents, and restricted cash end of period	$	99.0	$	113.3

~~CDK Global, Inc.~~

~~Consolidated Statements of Cash Flows (continued)~~

~~(In millions)~~

~~(Unaudited)~~


		Nine Months Ended					Three Months Ended
		March 31,					September 30,
		2021		2020			2021		2020
Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets	Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets					Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets
Cash and cash equivalents	Cash and cash equivalents	$	1,131.8	$	165.6	Cash and cash equivalents	$	80.8	$	99.0
Restricted cash in funds held for clients included in other current assets	Restricted cash in funds held for clients included in other current assets	22.5		10.9		Restricted cash in funds held for clients included in other current assets	18.2		14.3
Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	1,154.3	$	176.5	Total cash, cash equivalents, and restricted cash	$	99.0	$	113.3

Supplemental Disclosures	Supplemental Disclosures					Supplemental Disclosures
Cash paid for:	Cash paid for:					Cash paid for:
Income taxes and foreign withholding taxes, net of refunds, continuing operations	Income taxes and foreign withholding taxes, net of refunds, continuing operations	$	62.7	$	33.9	Income taxes and foreign withholding taxes, net of refunds, continuing operations	$	20.4	$	28.5
Interest, continuing operations		81.7		88.1
Income taxes and foreign withholding taxes, net of refunds, discontinued operations						Income taxes and foreign withholding taxes, net of refunds, discontinued operations	—		3.3
Interest						Interest	13.6		18.5

Non-cash investing and financing activities, continuing operations:
Non-cash investing and financing activities:						Non-cash investing and financing activities:
Capitalized property and equipment obtained under lease	Capitalized property and equipment obtained under lease	12.7		14.5		Capitalized property and equipment obtained under lease	1.3		0.3
Lease liabilities incurred	Lease liabilities incurred	(12.7)		(14.5)		Lease liabilities incurred	(1.3)		(0.3)

Capital expenditures and capitalized software, accrued not paid	Capital expenditures and capitalized software, accrued not paid	0.3		0.9		Capital expenditures and capitalized software, accrued not paid	0.4		1.1

See notes to the consolidated financial statements.

CDK Global, Inc.

Consolidated Statements of Stockholders' Equity (Deficit)

(In millions)

(Unaudited)

Three Months Ended ~~March 31,~~September 30, 2021


		Common Stock			Additional Paid-in-Capital				Retained Earnings		Treasury Stock				Accumulated Other Comprehensive Income (Loss)				Total CDK Stockholders' Equity (Deficit)					Non-controlling Interest				Total Stockholders' Equity (Deficit)				Common Stock			Additional Paid-in-Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income		Total CDK Stockholders' Equity		Non-controlling Interest		Total Stockholders' Equity
		Shares Issued	Amount																				Shares Issued			Amount
Balance as of December 31, 2020		160.3	$	1.6			$	696.3					$	1,124.4			$	(2,295.3)			$	34.5					$	(438.5)		$	13.3		$	(425.2)

Balance as of June 30, 2021																															Balance as of June 30, 2021	160.3	$	1.6	$	715.1	$	1,997.4	$	(2,306.0)	$	72.7	$	480.8	$	14.1	$	494.9
Net earnings	Net earnings	—	—		—				860.9		—				—				860.9					2.0				862.9			Net earnings	—	—		—		71.7		—		—		71.7		2.0		73.7
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—				—		—				37.6				37.6					—				37.6			Foreign currency translation adjustments	—	—		—		—		—		(2.1)		(2.1)		—		(2.1)
Stock-based compensation expense and related dividend equivalents	Stock-based compensation expense and related dividend equivalents	—	—		9.3				(0.4)		—				—				8.9					—				8.9			Stock-based compensation expense and related dividend equivalents	—	—		11.5		(0.4)		—		—		11.1		—		11.1
Common stock issued for the exercise and vesting of stock-based compensation awards, net	Common stock issued for the exercise and vesting of stock-based compensation awards, net	—	—		(0.6)				—		0.4				—				(0.2)					—				(0.2)			Common stock issued for the exercise and vesting of stock-based compensation awards, net	—	—		(22.5)		—		14.8		—		(7.7)		—		(7.7)
Dividends paid to stockholders ($0.15 per share)	Dividends paid to stockholders ($0.15 per share)	—	—		—				(18.3)		—				—				(18.3)					—				(18.3)			Dividends paid to stockholders ($0.15 per share)	—	—		—		(18.1)		—		—		(18.1)		—		(18.1)

Balance as of March 31, 2021		160.3	$	1.6	$	705.0			$	1,966.6	$	(2,294.9)			$	72.1			$	450.4				$	15.3			$	465.7
Repurchases of common stock																															Repurchases of common stock	—	—		—		—		(88.3)		—		(88.3)		—		(88.3)
Dividend payments to noncontrolling owners																															Dividend payments to noncontrolling owners	—	—		—		—		—		—		—		(2.2)		(2.2)
Balance as of September 30, 2021																															Balance as of September 30, 2021	160.3	$	1.6	$	704.1	$	2,050.6	$	(2,379.5)	$	70.6	$	447.4	$	13.9	$	461.3

Three Months Ended ~~March 31,~~September 30, 2020

Common Stock Additional Paid-in-Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total CDK Stockholders' Equity (Deficit) Non-controlling Interest Total Stockholders' Equity (Deficit)
Shares Issued Amount
Balance as of December 31, 2019 160.3 $ 1.6 $ 683.0 $ 979.1 $ (2,308.5) $ 5.4 $ (639.4) $ 12.4 $ (627.0)
Net earnings — — — 57.6 — — 57.6 1.9 59.5
Foreign currency translation adjustments — — — — — (39.7) (39.7) — (39.7)
Stock-based compensation expense and related dividend equivalents — — 3.2 (0.2) — — 3.0 — 3.0
Common stock issued for the exercise and vesting of stock-based compensation awards, net — — (0.8) — 2.0 — 1.2 — 1.2
Dividends paid to stockholders ($0.15 per share) — — — (18.2) — — (18.2) — (18.2)
Balance as of March 31, 2020 160.3 $ 1.6 $ 685.4 $ 1,018.3 $ (2,306.5) $ (34.3) $ (635.5) $ 14.3 $ (621.2)

~~See notes to the consolidated financial statements.~~

~~CDK Global, Inc.~~

~~Consolidated Statements of Stockholders' Equity (Deficit)~~

~~(In millions)~~

~~(Unaudited)~~

~~Nine Months Ended March 31, 2021~~

Common Stock Additional Paid-in-Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total CDK Stockholders' Equity (Deficit) Non-controlling Interest Total Stockholders' Equity (Deficit)
Shares Issued Amount
Balance as of June 30, 2020 160.3 $ 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 — — — 984.9 — — 984.9 6.1 991.0
Foreign currency translation adjustments — — — — — 98.0 98.0 — 98.0
Stock-based compensation expense and related dividend equivalents — — 29.8 (0.8) — — 29.0 — 29.0
Common stock issued for the exercise and vesting of stock-based compensation awards, net — — (12.7) — 10.3 — (2.4) — (2.4)
Dividends paid to stockholders ($0.45 per share) — — — (54.8) — — (54.8) — (54.8)
Dividend payments to noncontrolling owners — — — — — — — (6.2) (6.2)
Balance as of March 31, 2021 160.3 $ 1.6 $ 705.0 $ 1,966.6 $ (2,294.9) $ 72.1 $ 450.4 $ 15.3 $ 465.7

~~Nine Months Ended March 31, 2020~~


		Common Stock			Additional Paid-in-Capital				Retained Earnings		Treasury Stock				Accumulated Other Comprehensive Income (Loss)					Total CDK Stockholders' Equity (Deficit)				Non-controlling Interest			Total Stockholders' Equity (Deficit)			Common Stock			Additional Paid-in-Capital				Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total CDK Stockholders' Deficit		Non-controlling Interest		Total Stockholders' Deficit
		Shares Issued	Amount																Shares Issued			Amount
Balance as of June 30, 2019		160.3	$	1.6			$	688.5					$	911.6			$	(2,324.6)					$	(6.7)		$			(729.6)		$	15.1			$	(714.5)
Balance as of June 30, 2020																													Balance as of June 30, 2020	160.3	$	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																													Cumulative impact of ASC 326 - current expected credit losses, net of tax	—	—		—				(8.2)		—		—		(8.2)		—		(8.2)
Net earnings	Net earnings	—	—		—				161.9		—				—					161.9				5.8			167.7		Net earnings	—	—		—				55.7		—		—		55.7		2.3		58.0
Foreign currency translation adjustments	Foreign currency translation adjustments	—	—		—				—		—				(27.6)					(27.6)				—			(27.6)		Foreign currency translation adjustments	—	—		—				—		—		27.2		27.2		—		27.2
Stock-based compensation expense and related dividend equivalents	Stock-based compensation expense and related dividend equivalents	—	—		14.6				(0.5)		—				—					14.1				—			14.1		Stock-based compensation expense and related dividend equivalents	—	—		12.2				(0.2)		—		—		12.0		—		12.0
Common stock issued for the exercise and vesting of stock-based compensation awards, net	Common stock issued for the exercise and vesting of stock-based compensation awards, net	—	—		(17.7)				—		18.1				—					0.4				—			0.4		Common stock issued for the exercise and vesting of stock-based compensation awards, net	—	—		(10.4)				—		7.0		—		(3.4)		—		(3.4)
Dividends paid to stockholders ($0.45 per share)		—	—		—				(54.7)		—				—					(54.7)				—			(54.7)

Dividends paid to stockholders ($0.15 per share)																													Dividends paid to stockholders ($0.15 per share)	—	—		—				(18.2)		—		—		(18.2)		—		(18.2)
Dividend payments to noncontrolling owners	Dividend payments to noncontrolling owners	—	—		—				—		—				—					—				(6.6)			(6.6)		Dividend payments to noncontrolling owners	—	—		—				—		—		—		—		(1.2)		(1.2)
Balance as of March 31, 2020		160.3	$	1.6	$	685.4			$	1,018.3	$	(2,306.5)			$	(34.3)				$	(635.5)			$	14.3		$	(621.2)
Balance as of September 30, 2020																													Balance as of September 30, 2020	160.3	$	1.6	$	689.7			$	1,074.6	$	(2,298.2)	$	1.3	$	(531.0)	$	16.5	$	(514.5)

See notes to the consolidated financial statements.

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") is a leading provider of integrated data and technology solutions to the automotive, heavy truck, recreation and heavy equipment industries. Focused on enabling end-to-end, omnichannel retail commerce through open, agnostic technology, the Company provides solutions to dealers and original equipment manufacturers ("OEMs"), serving ~~nearly~~over 15,000 retail locations in North America. The Company's solutions connect people with technology by automating and integrating all parts of the dealership and buying process, including the acquisition, sale, financing, insuring, parts supply, repair and maintenance of vehicles.

Basis of Preparation. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). 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~~2021 (the "Annual Report").

On March 1, 2021, the Company completed the sale of the CDK International business (the “International Business”) to Francisco Partners. Following the sale of International Business, the Company is organized as a single operating segment. The assets and liabilities of the International Business were classified as held for sale on the Consolidated Balance Sheet as of June 30, 2020. The financial results are presented in net earnings (loss) from discontinued operations in the Consolidated Statements of Operations for all periods presented. Certain prior year amounts have been reclassified to conform to the current year presentation. Unless otherwise noted, discussion in these Notes to the Consolidated Financial Statements refers to our continuing operations. For additional information, refer to Note 4 - 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 8 - 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 related 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~~Department of ~~motor vehicles~~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 ~~$41.1~~$36.8 million and ~~$40.7~~$42.7 million, and funds held for clients was ~~$22.5~~$18.2 million and ~~$16.5~~$20.2 million as of ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, respectively. Client fund obligations were ~~$63.6~~$55.0 million and ~~$57.2~~$62.9 million as of ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, respectively.

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 ~~$19.4~~$15.7 million and ~~$8.7~~$20.3 million for the three months ended ~~March 31, 2021 and 2020, respectively, and $55.7 million and $34.5 million for the nine months ended March 31,~~September 30, 2021 and 2020, 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 ~~costs~~cost of ~~$51.0~~$26.0 million and ~~$42.5~~$14.7 million for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 and 2020, 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 (as described in Note ~~10 -~~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 March 31, 2021 was $2,221.5 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 carrying amount of equity investments, included in other assets on the Consolidated Balance Sheets, was ~~$52.9~~$49.9 million and ~~$76.1~~$50.4 million as of ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, respectively. These amounts include a $20.0 million equity investment that is accounted for under the cost method as it does not have a readily determinable fair value. The remaining investments, which are accounted for under the equity method, totaled ~~$32.9~~$29.9 million and ~~$56.1~~$30.4 million as of ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, respectively. ~~During the three months ended March 31, 2021, the Company recorded a $14.5 million impairment charge related to one of its equity investments.~~

Note 3. New Accounting Pronouncements

Recently Adopted ~~Accounting Pronouncements.~~ ~~The Company adopted ASU 2016-13 on July 1, 2020. Refer to Note 8 - Allowance for Credit Losses, for the required disclosures related to the adoption of this standard.~~

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting” ("ASU 2020-04"). 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 No. 2021-01, "Reference Rate Reform (Topic 848), Scope" ("ASU 2021-01"), 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 adopted ASU 2020-04 and ASU 2021-01 with no material impact on the consolidated financial statements.

~~Recently Issued~~ Accounting Pronouncements. In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," ("ASU 2019-12"), which simplifies the accounting for income taxes in various areas. ~~The amendments in~~ ASU 2019-12 ~~are~~is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. ~~Early~~The Company adopted ASU 2019-12 on July 1, 2021. The adoption of the new standard ~~is permitted, including adoption in interim or annual periods for which financial statements~~did not 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 Company's consolidated financial statements.

Recently Issued Accounting Pronouncements. In July 2021, the FASB issued ASU No. 2021-05 "Leases (Topic 842): Lessors — Certain Leases with Variable Lease Payments," ("ASU 2021-05"), which modifies ASC 842 "Leases" ("ASC 842") to require lessors to classify leases as operating leases if they have variable lease payments that do not depend on an index or rate and would have selling losses if they were classified as sales-type or direct financing leases. The amendments in ASU 2021-05 are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

Note 4. Discontinued Operations

International Business. On March 1, 2021, the Company completed its sale of the CDK International ~~Business~~business ("International Business") to Francisco Partners for $1.45 billion in cash after meeting customary closing conditions and obtaining regulatory approvals. The Company recorded a pre-tax gain on sale of $965.6 million, subject to post-closing adjustments. The pre-tax gain on sale includes a $37.9 million reclassification of net currency losses from accumulated other comprehensive income.The pre-tax gain on sale excludes transaction costs of $32.4 million, which are recorded as selling, general and administrative expenses in the table below. The assets and liabilities of the International Business were classified as held for sale on the Consolidated Balance Sheet as of June 30, 2020. The financial results are presented in net earnings (loss) from discontinued operations in the Consolidated Statements of Operations for all periods presented.Partners. The Company expects to provide limited services to Francisco Partners to assist in the integration of the International Business through early ~~fiscal~~ 2022. The financial results are presented in net earnings from discontinued operations in the Consolidated Statements of 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., 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:

Three Months Ended Nine Months Ended
March 31, March 31,
2021 2020 2021 2020
Revenue $ 62.9 $ 89.9 $ 223.5 $ 248.2
Cost of revenue 25.4 43.7 100.8 126.8
Selling, general and administrative expenses 37.3 24.2 83.6 70.2
Restructuring expenses 0 0 11.2 0
Operating earnings 0.2 22.0 27.9 51.2
Interest expense 0 (0.1) (0.1) (0.3)
Other income, net 2.2 1.4 2.5 0.6
Earnings before income taxes 2.4 23.3 30.3 51.5
Gain on sale of the International Business 965.6 0 965.6 0
Provision for income taxes (157.2) (6.3) (164.6) (11.3)
Net earnings from discontinued operations - International Business $ 810.8 $ 17.0 $ 831.3 $ 40.2
Net earnings (loss) from discontinued operations - Digital Marketing Business $ 5.0 $ (34.9) $ 5.8 $ (74.9)
Net earnings (loss) from discontinued operations $ 815.8 $ (17.9) $ 837.1 $ (34.7)

The total assets and liabilities held for sale related to discontinued operations for the International Business as of June 30, 2020 are stated separately on the Consolidated Balance Sheets and comprised the following items:

~~June 30,~~

~~2020~~

~~Assets~~

~~Cash and cash equivalents~~

~~134.9~~

~~Accounts Receivable~~

~~58.0~~

~~Prepaid and other current assets~~

~~21.5~~

~~Total current assets~~

~~214.4~~

~~Property, plant and equipment, net~~

~~12.4~~

~~Other assets~~

~~57.4~~

~~Goodwill~~

~~349.0~~

~~Intangible assets, net~~

~~5.7~~

~~Total assets held for sale~~

~~638.9~~

~~Liabilities:~~

~~Accounts payable~~

~~5.1~~

~~Deferred revenue~~

~~63.3~~

~~Accrued expenses and other current liabilities~~

~~35.5~~

~~Accrued payroll and payroll-related expenses~~

~~25.5~~

~~Total current liabilities~~

~~129.4~~

~~Long-term deferred revenues~~

~~13.4~~

~~Deferred income taxes~~

~~2.0~~

~~Other liabilities~~

~~25.2~~

~~Total liabilities held for sale~~

~~170.0~~


	Three Months Ended
	September 30,
	2021		2020

Revenue	$	—	$	79.9
Cost of revenue	—		37.4
Selling, general and administrative expenses	0.5		23.6
Restructuring expenses	—		8.7
Operating earnings (loss)	(0.5)		10.2
Other income, net	—		(1.0)
Earnings (loss) before income taxes	(0.5)		9.2
Provision for income taxes	1.0		0.6
Net earnings from discontinued operations - International Business	$	0.5	$	9.8

Net earnings from discontinued operations - Digital Marketing Business	$	—	$	0.2

Net earnings from discontinued operations	$	0.5	$	10.0

Note 5. ~~Acquisition~~Revenue

~~Square Root.~~ ~~On February 1, 2021,~~Contract Balances

Accounts Receivable

A receivable is recorded when an unconditional right to invoice and receive payment exists, such that only the ~~Company acquired Square Root, Inc. ("Square Root"), an Austin-based developer~~passage of data curation software for original equipment manufacturers ("OEMs"). The Company acquired all of the outstanding equity of Square Root for an initial purchase price of $20.0 million in cash. The acquisition includes a contingent purchase pricetime is required before payment of ~~up to $5.0 million, which becomes payable if certain performance conditions are met by Square Root over a two-year period after the closing.~~

~~Note 6. Revenue~~

~~Contract Balances.~~ consideration is due. 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~~customers. Included in accounts receivable on the Consolidated Balance Sheets are unbilled receivable balances which have not yet been invoiced. As of

September 30, 2021, the balance of accounts receivable, net of allowances for doubtful accounts, was $234.8 million, inclusive of unbilled receivables of $0.9 million. As of June 30, 2021, the balance of accounts receivable, net of allowances for doubtful accounts, was $236.4 million, inclusive of unbilled receivables of $1.8 million.

Contract Assets

A contract asset is recognized when a conditional right to consideration exists and transfer of control has occurred. Contract assets ~~or contract liabilities,~~are typically related to subscription contracts where the transaction price allocated to the satisfied performance obligation exceeds the value of billings to-date. Contract assets are reported in a net position on a contract-by-contract basis and are included in other current assets for the current portion and other assets for the long-term portion on the Consolidated Balance Sheets. ~~Unbilled receivables are recorded when~~The Company regularly reviews contract asset balances for impairment, considering factors such as historical experience, credit-worthiness, age of the ~~right~~balance, and other economic or business factors. Refer to ~~consideration becomes unconditional based only on~~Note 7 – Allowance for Credit Losses for more information about contract assets exposure to credit losses. Contract asset impairments were not significant in the ~~passage of time.~~three months ended September 30, 2021 and 2020. Contract assets ~~include amounts related to the~~were $64.3 million and $64.3 million as of September 30, 2021 and June 30, 2021, respectively.

Deferred Revenue

The Company's ~~contractual right to~~deferred revenue primarily consists of payments received from customers, or such consideration ~~for completed performance when the right to consideration~~that is ~~conditional on something other than the passage of time. The Company records contract liabilities when cash payments are received or~~contractually due, in advance of ~~performance. Contract assets and contract liabilities are recognized~~providing the product or performing services. Deferred revenue is reported in a net position on a contract-by-contract basis at the ~~contract level.~~

~~The following table provides information about accounts receivable, contract assets,~~end of each reporting period. As of September 30, 2021 and ~~contract liabilities from contracts with customers:~~

March 31, 2021 June 30, 2020
Accounts receivable (including unbilled receivables) $ 248.7 $ 242.0
Short-term contract assets (included in other current assets) 63.2 42.6
Long-term contract assets (included in other assets) 23.6 34.6
Short-term contract liabilities (included in short-term deferred revenue) (39.6) (44.6)
Long-term contract liabilities (included in long-term deferred revenue) (41.7) (39.4)

~~During~~June 30, 2021, the ~~nine~~deferred revenue balance was $68.7 million and $69.0 million, respectively. For the three months ended ~~March 31,~~September 30, 2021 and 2020, the Company recognized ~~$75.0~~revenue of $68.7 million and ~~$97.5~~$65.7 million, respectively, of revenue upon satisfaction of performance obligations. These amounts were included in contract liabilities at the beginning of their respective fiscal periods. During the nine months ended March 31, 2021 and 2020, the Company invoiced and reclassified to accounts receivable $31.3 million and $17.7 million, respectively. These amounts were included in contract assets at the beginning of their respective fiscal periods. 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 nine months ended March 31, 2021, the impact on revenue recognized in the current period, from performance obligations partially or fully satisfied in the previous period, was not significant.its deferred revenue.

Remaining Performance Obligations. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The following information represents the total transaction price for the remaining performance obligations as of September 30, 2021 related to non-cancelable contracts, including contracts less than one year in duration, that is expected to be recognized over future periods. In each case the fiscal period represents the year ended June 30.

As of ~~March 31,~~September 30, 2021, the Company had ~~$2.5~~$2.7 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 approximately ~~$290~~$770.0 million of the remaining performance obligations as revenue during the remainder of the fiscal year ending June 30, ~~2021~~2022 ("fiscal ~~2021"~~2022"), ~~$830~~$780.0 million for ~~the~~ fiscal ~~year ended June 30, 2022, $620~~2023, $550.0 million for ~~the~~ fiscal ~~year ended June 30, 2023, $410~~2024, $340.0 million for ~~the~~ fiscal ~~year ended June 30, 2024, $230~~2025, $190.0 million for ~~the~~ fiscal ~~year ended June 30, 2025,~~2026, and ~~$110~~$30.0 million thereafter. 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 contracts 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 ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, the Company ~~had~~ capitalized contract acquisition and fulfillment costs of ~~$188.4~~$200.2 million and ~~$178.7~~$195.7 million, respectively. The Company expects that incremental commission fees incurred as a result of obtaining contracts and fulfillment costs are recoverable. During the ~~nine~~three months ended ~~March 31,~~September 30, 2021 and 2020, the Company recognized cost amortization of ~~$54.9~~$19.4 million and ~~$54.4~~$18.1 million, respectively, and there were no significant impairment losses.

Revenue Disaggregation. The following table presents revenue by category for ~~the~~ three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 and 2020:


	Three Months Ended
	September 30,
	2021		2020
Subscription	$	345.1	$	323.9
Transaction	42.8		43.9
Other	52.1		45.9
Total Revenue	$	440.0	$	413.7

Three Months Ended Nine Months
Ended
March 31, March 31,
2021 2020 2021 2020
Subscription $ 332.1 $ 331.7 $ 984.3 $ 1,000.9
On-site license and installation 1.4 2.4 4.6 7.5
Transaction 43.3 38.1 126.3 120.6
Other 56.3 54.2 137.9 133.3
Total $ 433.1 $ 426.4 $ 1,253.1 $ 1,262.3

The Company recognizes subscription revenue over time and substantially all transaction and other revenue at a point in time.

Note 7.6. Earnings per Share

The numerator for both 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 weighted average 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.

The following table summarizes the components of earnings per share:


		Three Months Ended				Nine Months Ended					Three Months Ended
		March 31,				March 31,					September 30,
		2021		2020		2021		2020				2021		2020
Net earnings from continuing operations attributable to CDK	Net earnings from continuing operations attributable to CDK	$	45.1	$	75.5	$	147.8	$	196.6	Net earnings from continuing operations attributable to CDK		$	71.2	$	45.7
Net earnings (loss) from discontinued operations		815.8		(17.9)		837.1		(34.7)
Net earnings from discontinued operations										Net earnings from discontinued operations		0.5		10.0
Net earnings attributable to CDK	Net earnings attributable to CDK	$	860.9	$	57.6	$	984.9	$	161.9	Net earnings attributable to CDK		$	71.7	$	55.7

Weighted-average shares outstanding:
Weighted average shares outstanding:										Weighted average shares outstanding:
Basic	Basic	122.0		121.6		121.9		121.5		Basic		121.2		121.7
Effect of dilutive securities(1)	Effect of dilutive securities(1)	0.9		0.6		0.6		0.6		Effect of dilutive securities (1)		0.9		0.6
Diluted	Diluted	122.9		122.2		122.5		122.1		Diluted		122.1		122.3

Net earnings (loss) attributable to CDK per share - basic:
Net earnings attributable to CDK per share - basic:										Net earnings attributable to CDK per share - basic:
Continuing operations	Continuing operations	$	0.37	$	0.62	$	1.21	$	1.62	Continuing operations		$	0.59	$	0.38
Discontinued operations	Discontinued operations	6.69		(0.15)		6.87		(0.29)		Discontinued operations		—		0.08
Total net earnings attributable to CDK per share - basic	Total net earnings attributable to CDK per share - basic	$	7.06	$	0.47	$	8.08	$	1.33	Total net earnings attributable to CDK per share - basic		$	0.59	$	0.46

Net earnings (loss) attributable to CDK per share - diluted:
Net earnings attributable to CDK per share - diluted:										Net earnings attributable to CDK per share - diluted:
Continuing operations	Continuing operations	$	0.36	$	0.62	$	1.21	$	1.61	Continuing operations		$	0.59	$	0.38
Discontinued operations	Discontinued operations	6.64		(0.15)		6.83		(0.28)		Discontinued operations		—		0.08
Total net earnings attributable to CDK per share - diluted	Total net earnings attributable to CDK per share - diluted	$	7.00	$	0.47	$	8.04	$	1.33	Total net earnings attributable to CDK per share - diluted		$	0.59	$	0.46

(1) The dilutive effect of outstanding stock options, restricted stock units, restricted stock, and performance share units is reflected in the diluted ~~weighted-average~~weighted average shares outstanding using the treasury stock method.

The ~~weighted-average~~weighted average number of shares outstanding used in the calculation of diluted earnings per share does not include the effect of anti-dilutive securities. The potential common shares excluded were ~~0.7~~1.5 million and 0.9 million for the three months ended ~~March 31, 2021 and 2020, respectively, and 1.0 million and 0.8 million for the nine months ended March 31,~~September 30, 2021 and 2020, respectively.

Note 8.7. Allowance for Credit Losses

~~In June 2016, the FASB issued~~ ~~ASU 2016-13~~, which requires the application of a current expected credit loss (“CECL”) impairment model to financial assets measured at amortized cost (including trade accounts receivable), net investments in leases, and certain off-balance-sheet credit exposures. Under the CECL model, lifetime expected credit losses on such financial assets are measured and recognized at each reporting date based on historical, current, and forecasted information. Furthermore, the CECL model requires financial assets with similar risk characteristics to be analyzed on a collective basis.

~~On July 1, 2020, the Company adopted the CECL model using a modified retrospective approach~~. ~~The noncash cumulative effect of adopting the CECL model resulted in a decrease of $8.2 million, net of tax impacts, to retained earnings~~, with corresponding increases to the allowance for expected credit losses impacting accounts receivable, net, other current assets and other assets on the Consolidated Balance Sheets. The cumulative-effect adjustment in retained earnings includes amounts related to the International Business, which represented an impact upon adoption of $1.2 million, net of tax. At adoption, there was no impact on the Company’s Consolidated Statements of Operations and Cash Flows. The impacts related to prior comparative periods have not been restated and continue to be reported under the accounting standards in effect for the prior period.

The Company is exposed to credit losses primarily through the sales of its products and services. The majority of the Company’s receivables are trade receivables due in less than one year. Financial assets also include the short and long-term portions of contract assets, lease receivables and other accrued and unbilled receivables. Refer to Note 6 - Revenue for more information about contract assets.

The Company has identified the following risk characteristics of its customers and the related receivables and financial assets: geographic region, major line of business (e.g. Automotive, OEM, etc.), size or a combination of these characteristics. Receivables with similar risk characteristics have been grouped into pools. For each pool, the Company considers the historical credit loss experience, current economic conditions, adjusted for external data and macroeconomic factors such as unemployment rates in certain operating regions or automobile sales. Due to the short-term nature of trade receivables, the estimated amount of accounts receivable that may not be collected is based on the aging of the receivable balances, the financial condition of customers and the Company’s historical loss rates. For certain other financial assets, the expected credit losses are also evaluated based on the credit rating of the counterparty, or reasonable and supportable forecasts of future economic conditions. While developments related to the COVID-19 pandemic continue to evolve, management has elected to make judgmental adjustments to the historical loss rates based on expected impacts. Additionally, specific reserves are established for certain financial assets on an individual basis when they no longer meet the criteria to be classified in a particular pool. Should a particular asset’s risk characteristics change, the Company will assess whether the asset should be moved to another pool. This analysis and the review of credit quality indicators are performed at each quarter-end, or more often as deemed necessary based on specific facts and circumstances.

The Company also carries financial assets that are attributable to the sale of the Digital Marketing Business and the International Business. These assets primarily consist of a 10-year note receivable, receivables related to transition services agreements in connection with the sale of the businesses, and the fair value of contingent consideration. Specific reserves are established for these assets on an individual basis if it is determined that there is a higher probability of default, which considers the aging of the receivable balances and the financial condition of the counterparties.

The Company’s monitoring activities include timely account reconciliation, reviews of credit and collection performance, consideration of customers' financial conditions and macroeconomic conditions. For trade receivables and unbilled accounts receivable, credit quality indicators relate to collection history and the delinquency status of amounts due, which is determined based on the aging of such receivables. For certain other financial assets including contract assets, lease receivables, other accrued and unbilled receivables, and financial assets attributable to the sale of the Digital Marketing Business, credit quality indicators are generally based on rating agency data, publicly available information and information provided by customers which may affect their ability to pay. Financial assets are written off when they are determined to be uncollectible.

Credit loss expense is included in selling, general and administrative expenses in the Consolidated Statements of Operations. The following ~~table provides~~tables provide a rollforward of the allowance for credit losses that is deducted from the amortized cost basis to present the net amount expected to be collected as of ~~March 31, 2021.~~September 30, 2021 and 2020.

Accounts receivable, net Other current assets Other assets Total
Balance as of June 30, 2020 $ 10.6 $ 0 $ 0 $ 10.6
Cumulative-effect adjustment upon adoption(1)
0.7 0.5 8.2 9.4
Provision (release of provision) for expected credit losses (2.6) 0.6 1.2 (0.8)
Write-offs (1.8) 0 0 (1.8)
Other 0.2 0 — 0.2
Balance as of March 31, 2021 $ 7.1 $ 1.1 $ 9.4 $ 17.6


	Accounts receivable, net		Other current assets		Other assets		Total
Balance as of June 30, 2021	$	6.3	$	0.7	$	9.2	$	16.2
Provision for expected credit losses	(0.7)		—		0.5		(0.2)
Write-offs	(0.4)		—		—		(0.4)
Other	0.5		—		—		0.5
Balance as of September 30, 2021	$	5.7	$	0.7	$	9.7	$	16.1

~~(1)~~ ~~Cumulative-effect adjustment excludes amounts related to the International Business, which represented an allowance for expected credit losses of $1.5 million.~~


	Accounts receivable, net		Other current assets		Other assets		Total
Balance as of June 30, 2020	$	10.6	$	—	$	—	$	10.6
Cumulative-effect adjustment upon adoption	0.7		0.5		8.2		9.4
Provision for expected credit losses	(0.6)		0.1		0.7		0.2
Write-offs	(0.4)		—		—		(0.4)
Balance as of September 30, 2020	$	10.3	$	0.6	$	8.9	$	19.8

Note 9.8. Leases

CDK as a Lessor. The ~~Company’s~~Company's hardware-as-a-service arrangements, in which the Company provides customers continuous access to CDK owned hardware, such as networking and telephony equipment and laser printers, are accounted for as sales-type leases under ASC 842, ~~"Leases", as amended ("ASC 842"),~~ primarily because they do not contain substantive substitution rights. Since the Company elected to not reassess prior conclusions related to arrangements containing leases, the lease classification, and the initial direct costs, only hardware leases that commenced or are modified on or subsequent to July 1, 2019, are accounted for under ASC 842. Historically, the Company accounted for these arrangements as a distinct performance obligation under the revenue recognition guidance and recognized revenue over the term of the arrangement. Sales-type lease arrangements follow the ~~Company’s~~Company's customary contracting practices and, generally include a fixed monthly fee for the lease and non-lease components for the duration of the contract term. The Company does not typically provide renewal, termination or purchase options to its customers.

The Company recognizes net investment in sales-type leases based on the present value of the lease receivable when ~~collectibility~~collectability is probable. The Company accounts for lease and non-lease components such as maintenance costs, separately. Consideration is allocated between lease and non-lease components based on stand-alone selling price.

The following summarizes components of net lease income reported in the Consolidated Statements of Operations:


		Three Months Ended				Nine Months Ended					Three Months Ended
		March 31,				March 31,					September 30,
		2021		2020		2021		2020			2021		2020
Revenue (1)	Revenue (1)	$	12.4	$	6.0	$	30.7	$	21.8	Revenue (1)	$	19.3	$	12.5
Cost of revenue	Cost of revenue	(10.5)		(6.7)		(28.2)		(21.8)		Cost of revenue	(10.5)		(8.0)
Interest income	Interest income	0.6		0.2		1.6		0.4		Interest income	0.6		0.4

Total lease income (loss)		$	2.5	$	(0.5)	$	4.1	$	0.4

Total lease income										Total lease income	$	9.4	$	4.9

(1) Revenue from lease components isare included in ~~other~~the Other category in the revenue ~~category.~~disaggregation table in Note 5 - Revenue.

Note ~~10.~~9. Debt

Long-term debt and finance lease liabilities consisted of:

March 31, 2021 June 30, 2020
Revolving credit facility, matures 2023 $ 0 $ 15.0
Three-year term loan facility, due 2021 0 300.0
Five-year term loan facility, due 2023 0 273.8
4.50% senior notes, due 2024 500.0 500.0
5.875% senior notes, due 2026 500.0 500.0
4.875% senior notes, due 2027 600.0 600.0
5.250% senior notes due 2029 500.0 500.0
Finance lease liabilities 10.1 14.1
Unamortized debt financing costs (20.4) (27.1)
Total debt and finance lease liabilities $ 2,089.7 $ 2,675.8
Current maturities of long-term debt and finance lease liabilities 500.3 20.7
Total long-term debt and finance lease liabilities $ 1,589.4 $ 2,655.1


		September 30, 2021			June 30, 2021
	Maturity Date	Interest Rate	Amount		Interest Rate	Amount
Credit Facilities
Revolving credit facility	May 2026		$	—		$	—
Total credit facilities			—			—

Unsecured Senior Notes
Senior notes, due 2024	October 2024	5.000%	500.0		5.000%	500.0
Senior notes, due 2027	May 2027	4.875%	600.0		4.875%	600.0
Senior notes, due 2029	May 2029	5.250%	500.0		5.250%	500.0
Total unsecured senior notes			1,600.0			1,600.0

Finance lease liabilities			7.4			8.7
Other			—			2.2
Unamortized debt financing costs			(16.5)			(17.3)
Total debt and finance lease liabilities			$	1,590.9		$	1,593.6
Less: current maturities of long-term debt			4.8			7.1
Total long-term debt and finance lease liabilities			$	1,586.1		$	1,586.5

~~Revolving~~ Credit Facility. ~~On August 17, 2018, the~~The Company ~~entered into~~has a five-year senior unsecured revolving credit facility ~~(the "revolving~~("revolving credit facility"). The revolving credit facility provides up to $750.0 million of borrowing capacity and includes a sub-limit of up to $100.0 million for loans in ~~Euro, Pound Sterling,~~euro, pound sterling, and, if approved by the revolving lenders, other currencies. The average outstanding balances of the revolving credit facility were 0zero and ~~$132.5~~$116.4 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, ~~respectively, and $58.1 million and $94.1 million for the nine months ended March 31, 2021 and 2020,~~ respectively.

~~Term Loan Facilities.~~ On March 1, 2021, the Company repaid the indebtedness and closed the $300.0 million term loan facility due August 17, 2021 (the "three year term loan facility"), and a $300.0 million term loan facility due August 17, 2023 (the "five year term loan facility"). As a result, the Company recorded expenses for the write-off of unamortized debt financing costs of $2.2 million in loss on extinguishment of debt in the Consolidated Statements of Operations.

~~Senior Notes.~~ On March 24, 2021, the Company issued a call notice to holders of the 5.875% unsecured senior notes with a $500.0 million aggregate principal amount due in 2026 (the "2026 notes") to exercise its irrevocable right to repay the indebtedness prior to the maturity date. As of March 31, 2021, the 2026 notes were reclassified from long-term debt and finance lease liabilities to current maturities of long-term debt and finance lease liabilities on the Consolidated Balance Sheet. On April 23, 2021, the Company repaid all indebtedness under the 2026 notes. As a result, the Company expects to record expenses of $18.5 million for the call premium and $4.8 million for the write-off of unamortized debt financing costs in the fourth quarter of fiscal 2021.

Unamortized Debt Financing Costs. As of ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, unamortized debt ~~financing~~issuance costs were ~~$20.4~~$16.5 million and ~~$27.1~~$17.3 million, respectively. Debt financing costs are amortized over the terms of the related debt instruments and recorded to interest expense inon the Consolidated Statements of Operations.

Fair Value. The approximate aggregate fair value of the Company's senior notes as of September 30, 2021 was $1,721.1 million, based on quoted market prices for the same or similar instruments. The senior notes are considered Level 2 fair value measurements in the fair value hierarchy.

Note ~~11.~~10. Income Taxes

Provision for Income Taxes. ~~The effective~~Income tax ~~rate~~expense was $25.1 million and $27.0 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively. The effective tax rate, expressed by calculating the provision for income taxes as a percentage of earnings before income taxes, was ~~33.8%~~25.5% and ~~29.1%,~~36.0% for the three months ended September 30, 2021 and 2020, respectively. The effective tax rate for the three months ended ~~March 31,~~September 30, 2021 ~~was~~differed from the U.S. federal statutory rate of 21.0% primarily ~~impacted by $7.0 million of~~due to state and local income taxes and tax expense for a valuation allowance on a deferred tax asset for the future capital loss on an equity method investment that is not expected to be realized and $1.3 million tax expense for non-deductible officersfrom officers' compensation limitation, partially offset by a ~~$2.4~~$2.0 million ~~tax~~ benefit due to the expiration of the statute of limitations related to ~~the prior year.~~certain transfer pricing exposures. The effective tax rate for the three months ended ~~March 31,~~September 30, 2020 ~~was impacted by $7.0~~differed from the U.S. federal statutory rate of 21.0% primarily due to state and local income taxes, tax expense from officers' compensation limitation, $4.1 million of tax expense ~~due to the Company's change in assertion about its intent to indefinitely reinvest~~from a prior ~~undistributed earnings~~year true-up of ~~foreign subsidiaries.~~

~~The effective tax rate for the nine months ended March 31, 2021~~income taxes payable, and 2020 was 32.4% and 32.1%, respectively. The effective tax rate for the nine months ended March 31, 2021 was impacted by $7.0 million of tax expense for a valuation allowance on a deferred tax asset for the future capital loss on an equity method investment that is not expected to be realized, $4.8 million tax expense from officer's compensation limitation, $1.7 million of tax expense related to ~~the prior year, and $1.4 million of tax expense from recording~~ valuation allowances on foreign net operating losses and U.S. foreign tax credits. The effective tax rate for the nine months ended March 31, 2020 was primarily impacted by $14.8 million of tax expense from the increase in the valuation allowance associated with a deferred tax asset for a capital loss carryforward which the Company does not expect to utilize, $7.0 million of tax expense due to the Company's change in assertion about its intent to indefinitely reinvest prior undistributed earnings of foreign subsidiaries and $1.3 million of tax expense from officers compensation limitation.

Valuation Allowances. The Company had valuation allowances of ~~$12.4~~$14.3 million and ~~$4.3~~$13.6 million as of ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, respectively, because the Company has concluded it is more likely than not that it will be unable to utilize ~~actual~~net operating carryforwards, capital loss carryforwards, and ~~future capital losses to offset future taxable earnings.~~U.S. tax credits. As of each reporting date, the ~~Company’s~~Company's management considers new evidence, both positive and negative, which could impact ~~management’s~~management's view with regard to future realization of deferred tax assets.

During the nine months ended March 31, 2021, the valuation allowance balance increase of $8.1 million is primarily related to $7.0 million valuation allowance recorded on a deferred tax asset for the future capital loss on an equity method investment that is not expected to be realized and $1.9 million additional valuation allowance related to certain U.S. tax credits offset by $0.8 million reversal of the valuation allowance on U.S. capital losses driven by capital gains from the sale of held-for-sale assets.

Unrecognized Income Tax Benefits. As of ~~March 31,~~September 30, 2021 and June 30, ~~2020,~~2021, the Company had unrecognized income tax benefits of ~~$24.2~~$17.0 million and ~~$22.2~~$23.0 million, respectively. Of these amounts, ~~$7.3~~$2.8 million and ~~$5.5~~$3.9 million, respectively, would have a net impact on the effective tax rate if recognized. During the ~~nine~~three months ended ~~March 31,~~September 30, 2021, the Company ~~increased~~primarily decreased its unrecognized income tax benefits ~~related~~due to current tax positions by $1.8 million and its prior period tax positions by $0.3 million based on information that indicates the extent to which certain tax positions are more likely than not of being sustained. Based on the expiration of the statute of ~~limitations, it~~limitations. It is reasonably possible that the ~~liability for uncertain~~unrecognized income tax ~~positions~~benefits will ~~change in~~provide a tax benefit of $1.0 million within the next twelve ~~months and it is estimated to be a $1.3 million tax benefit against the liability.~~months.

~~Withholding Taxes on Unremitted Foreign Earnings.~~ During the three months ended March 31, 2020, the Company removed its assertion that foreign earnings are indefinitely reinvested, making foreign earnings available for repatriation as necessary and as a result recognized $7.0 million of withholding taxes. In addition, earlier in fiscal 2020 a reduction of $0.3 million was recorded for an accrual for foreign withholding taxes originally recorded as a result of the Tax Reform Act. For the nine months ended March 31, 2021, the Company recognized $1.2 million of withholding taxes from foreign earnings which are not indefinitely reinvested.

~~Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).~~ On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted into law. The CARES Act is aimed at providing emergency relief and health care for individuals and businesses affected by the COVID-19 pandemic. The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferral of the employer portion of social security payments, expanded net operating loss application, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. The Company has completed its assessment of the impact of the legislation, and there is no significant impact to the consolidated financial statements.

~~Taxpayer Certainty and Disaster Tax Relief Act of 2020 (“the Tax Relief Act”)~~. On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (“the Tax Relief Act”) was signed into law. The Tax Relief Act, among other things includes provisions related to the reducibility of Paycheck Protection Program ("PPP") expenses paid with PPP loan proceeds, payroll tax credits, modifications to the meals and entertainment deduction, increased limitations on charitable deductions for corporate taxpayers, and enhancements of expiring tax “extender” provisions. The Company has completed its assessment of the impact of the legislation, and there is no significant impact on the consolidated financial statements.

Note ~~12.~~11. Commitments and Contingencies

Legal Proceedings. From time to time, the Company is subject to various claims and is involved in various legal, regulatory, and arbitration proceedings concerning matters arising in connection with the conduct of its business activities, including those noted in this section. Although management at present has no basis to conclude that the ultimate outcome of these proceedings, individually and in the aggregate, will materially harm the Company's financial position, results of operations, cash flows, or overall trends, legal proceedings and related government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could include substantial monetary damages. In addition, in matters for which injunctive relief or other conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting usthe Company from selling one or more products at all or in particular ways, precluding particular business practices, or requiring other remedies. An unfavorable outcome may result in a material adverse impact on the Company's business, results of operations, financial position, and overall trends. The Company might also conclude that settling one or more such matters is in the best interests of its stockholders, employees, and customers, and any such settlement could include substantial payments.

Competition Matters. The Company is currently involved in, or where indicated, has settled, the following antitrust lawsuits that set forth allegations of anti-competitive agreements between the Company and The Reynolds and Reynolds Company ("Reynolds") relating to the manner in which the defendants control access to, and allow integration with, their respective Dealer Management System ("DMS"), and that seek, among other things, treble damages and injunctive relief. These lawsuits have been transferred to, or filed in, the U.S. District Court for the Northern District of Illinois for consolidated and coordinated pretrial proceedings as part of a multi-district litigation proceeding ~~(“MDL”~~("MDL").

Active MDL Lawsuits

•Teterboro Automall, Inc. d/b/a Teterboro Chrysler Dodge Jeep Ram ~~(“Teterboro”~~("Teterboro") brought a putative class action suit on behalf of itself and all similarly situated automobile dealerships against CDK Global, LLC and Reynolds. Teterboro’s suit was originally filed on October 19, 2017, in the U.S. District Court for the District of New Jersey. Since that time, several more putative class actions were filed in a number of federal district courts, with substantively similar allegations; all of them have been consolidated with the MDL proceeding. On June 4, 2018, a consolidated class action complaint was filed on behalf of a putative class made up of all dealerships in the United States that directly purchased DMS and/or allegedly indirectly purchased DMS or data integration services from CDK Global, LLC or Reynolds (“("Putative Dealership Class ~~Plaintiffs”~~Plaintiffs"). CDK Global, LLC moved to dismiss the complaint, or in the alternative, compel arbitration of certain of the cases while staying the remainder pending the outcome of those arbitration proceedings; its motion to dismiss was granted in part and denied in part, while its motion to compel arbitration was denied. On February 22, 2019, CDK Global, LLC filed an answer to the remaining claims in Putative Dealership Class ~~Plaintiffs’~~Plaintiffs' complaint and asserted counterclaims against the Putative Dealership Class Plaintiffs. The Putative Dealership Class Plaintiffs filed a motion to dismiss CDK Global, LLC’s counterclaims; that motion was granted in part and denied in part on September 3, 2019. On October 23, 2018, the Putative Dealership Class Plaintiffs and Reynolds filed a motion for preliminary approval of settlement and for conditional certification of the proposed settlement class. The court finally approved that settlement on January 22, 2019. The parties' cross-motions for summary judgment and Daubert motions were fully briefed as of September 28, 2020 and remain pending.

•Loop LLC d/b/a AutoLoop ~~(“AutoLoop”~~("AutoLoop") brought suit against CDK Global, LLC on April 9, 2018, in the U.S. District Court for the Northern District of Illinois, but reserved its rights with respect to remand to the U.S. District Court for the Western District of Wisconsin at the conclusion of the MDL proceedings. On June 5, 2018, AutoLoop amended its complaint to sue on behalf of itself and a putative class of all other automotive software vendors in the United States that purchased data integration services from CDK Global, LLC or Reynolds. CDK Global, LLC moved to compel arbitration of ~~AutoLoop’s~~AutoLoop's claims, or in the alternative, to dismiss those claims; that motion was denied on January 25, 2019. CDK Global, LLC filed an answer to AutoLoop’s complaint and asserted counterclaims against AutoLoop on February 15, 2019. AutoLoop filed an answer to CDK Global, ~~LLC’s~~LLC's counterclaims on March 8, 2019. The parties' cross-motions for summary judgment and Daubert motions were fully briefed as of September 28, 2020 and remain pending.

Settled MDL Lawsuits

•Authenticom, Inc. ("Authenticom") brought a suit against CDK Global, LLC and Reynolds. ~~Authenticom’s~~Authenticom's suit was originally filed on May 1, 2017, in the U.S. District Court for the Western District of Wisconsin. On October 20, 2020, CDK Global, LLC and Authenticom entered into a settlement agreement that resulted in a dismissal of all claims brought by Authenticom in the MDL, and CDK Global, LLC making a one-time cash payment to Authenticom.

•i3 Brands, Inc. and PartProtection LLC (“("i3 ~~Brands”~~Brands") brought suit against CDK Global, LLC and Reynolds. i3 Brands' suit was originally filed on February 4, 2019, in the U.S. District Court for the Southern District of California; it was subsequently transferred to the U.S. District Court for the Northern District of Illinois and consolidated as part of the MDL. On March 4, 2020, CDK Global, LLC and i3 Brands entered into a settlement agreement that resulted in a dismissal of all claims brought by i3 Brands against CDK in the MDL, and CDK Global, LLC agreeing to a release of i3 Brands and an agreement to abandon all claims against i3 Brands.

•Motor Vehicle Software Corporation ~~(“MVSC”~~("MVSC") brought a suit against CDK Global, LLC (after initially naming the Company), Reynolds, and ~~Computerized Vehicle Registration (“CVR”),~~CVR, a majority owned joint venture of the Company. ~~MVSC’s~~MVSC's suit was originally filed on February 3, 2017, in the U.S. District Court for the Central District of California. On October 10, 2019, CDK Global, LLC and MVSC entered into a settlement agreement that resulted in a dismissal of all claims brought by MVSC in the MDL as against CDK Global, LLC and CVR, and CDK Global, LLC making a one-time cash payment to MVSC.

•Cox Automotive, along with multiple subsidiaries ~~(“Cox”~~("Cox"), brought suit against CDK Global, LLC. ~~Cox’s~~Cox's suit was originally filed on December 11, 2017, in the U.S. District Court for the Western District of Wisconsin. On July 10, 2019, CDK Global, LLC and Cox entered into a settlement agreement that resulted in a dismissal of all claims brought by the affiliated parties in the MDL, and CDK Global, LLC making a one-time cash payment to Cox.

The Company believes that the remaining unsettled cases are without merit and will continue to vigorously contest all asserted claims. Nonetheless, in light of the ~~Company’s~~Company's settlements with Authenticom, i3 Brands, MVSC, and Cox and its continued expenditure of legal costs to contest the remaining claims, the Company has determined that a loss of some measure is probable and can be reasonably estimated. In the fourth quarter of fiscal 2019, the Company initially recorded a litigation provision of $90 million and has continued to re-assess the liability in each subsequent quarter. In the first quarter of fiscal 2021, the Company's reassessment of its litigation liability resulted in an increase of $12.0 million. As of ~~March 31,~~September 30, 2021 and June 30, 2021, the litigation liability for the remaining unsettled cases was ~~$34 million.~~$34.0 million and $34.0 million, respectively. This estimated loss is based upon currently available information and represents the ~~Company’s~~Company's best estimate of such loss. Estimating the value of this estimated loss involved significant judgment given the uncertainty that still exists with respect to the remaining unsettled cases due to a variety of factors typical of complex, large scale litigation, including, among others: (i) formative issues, including: (a) the causes of action the plaintiffs can pursue; (b) the definition of the class(es) of plaintiffs; (c) the types of damages that can be recovered; and (d) whether plaintiffs can establish loss causation as a matter of law, all of which have yet to be determined pending the outcome of dispositive motions (e.g., motions for class certification and motions for summary judgment); (ii) significant factual issues remain to be resolved; (iii) expert perspectives with respect to, among other things, alleged antitrust injury and damages is widely divergent and remains subject to dispositive motions; (iv) the absence of productive settlement discussions to date with the remaining plaintiffs; and (v) the novel or uncertain nature of the legal issues presented. For these same reasons, the Company cannot reasonably estimate a maximum potential loss exposure at this time. In addition, the ~~Company’s~~Company's estimate does not incorporate or reflect the potential value of the ~~Company’s~~Company's counterclaims against certain of the plaintiffs in the ongoing cases. The legal proceedings underlying the estimated litigation liability will change from time to time and actual results may vary significantly from the estimate. As noted above, an adverse result in any of the remaining cases could have a material adverse effect on the Company's business, results of operations, financial condition, or liquidity.

On June 22, 2017, the Company received from the Federal Trade Commission ("FTC") a Civil Investigative Demand consisting of specifications calling for the production of documents relating to any agreements between the Company and Reynolds. Parallel document requests have been received from certain states' Attorneys General. Since 2017, the Company has engaged in continuing communication with and received subsequent requests from the FTC related to its investigation. The Company has responded to the requests and no proceedings have been instituted. The Company believes there has not been any conduct by the Company or its current or former employees that would be actionable under the antitrust laws in connection with the agreements between the Company and Reynolds or otherwise. At this time, the Company does not have sufficient information to predict the outcome of, or the cost of responding to or resolving, these investigations.

Other Commitments and Contingencies. In the normal course of business, the Company may enter into contracts in which the Company makes representations and warranties that relate to the performance of the ~~Company’s~~Company's services and products. The Company does not expect any material losses related to such representations and ~~warranties~~.warranties.

The Company has provided approximately $28.1 million of guarantees as of ~~March 31,~~September 30, 2021 in the form of surety bonds issued to support certain licenses and contracts which require a surety bond as a guarantee of performance of contractual obligations. In general, the Company would only be liable for the amount of these guarantees in the event the Company defaulted in performing the obligations under each contract, of which, the probability is remote.

The Company had a total of $1.8 million ~~as of March 31, 2021~~ in letters of credit outstanding as of September 30, 2021 primarily in connection with insurance programs.

Note 12. Subsequent Events

On October 1, 2021, the Company acquired Salty Dot, Inc.("Salty"), a privately held automobile insurance technology solution provider. The Company acquired all of the outstanding equity of Salty for an initial cash purchase price of $153.0 million, subject to certain closing adjustments. The acquisition includes provisions for additional purchase price payments contingent on reaching certain performance metrics over a three-year period.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

(Tabular amounts in millions, except per share amounts)

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including: statements regarding the Company’s business outlook; other plans; objectives; forecasts; goals; beliefs; business strategies; future events; business conditions; results of operations; financial position and business outlook and trends; and other information, may be forward-looking statements. Words such as "might," "will," "may," "could," "should," "estimates," "expects," "continues," "contemplates," "anticipates," "projects," "plans," "potential," "predicts," "intends," "believes," "forecasts," "future," "assumes," and variations of such words or similar expressions are intended to identify forward-looking statements. These statements are based on management's expectations and assumptions as of the date of this filing and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed, or implied by, these forward-looking statements.

Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements ~~include: the accuracy of the Company’s~~include, but are not limited to: our expectations regarding the ~~potential~~continuing impacts on our business of the COVID-19 ~~pandemic on the Company’s business; the Company’s~~pandemic; our success in obtaining, retaining, and selling additional services to customers; the pricing of ~~the Company’s~~our products and services; our success in integrating our Roadster, Salty and Square Root acquisitions and realizing the anticipated benefits of those combinations; overall market and economic conditions, including interest rate and foreign currency trends, and technology trends; adverse global economic conditions and credit markets and volatility in the countries in which we do business; auto sales and related industry changes; competitive conditions; changes in ~~regulation;~~regulation (including new regulations that restrict the manner and extent to which we can control access to our DMS and other software applications and limit what, if anything, we may charge for integration with those applications); changes in technology, security breaches, interruptions, failures, and other errors involving ~~the Company’s~~our systems; availability of skilled technical employees/labor/personnel; the impact of new acquisitions and divestitures; employment and wage levels; availability of capital for the payment of debt service obligations or dividends or the repurchase of shares; any changes to ~~the Company’s~~our credit ~~ratings~~rating and the impact of such changes on our financing costs, rates, terms, debt service obligations, and access to capital market and working capital needs; the impact of ~~the Company’s~~our indebtedness, our access to cash and financing, and our ability to secure financing or financing at attractive rates; the onset of or developments in litigation involving contract, intellectual property, competition, ~~shareholder,~~stockholder, and other matters, and governmental investigations; and the ability of ~~the Company’s~~our significant stockholders and their affiliates to significantly influence ~~the Company’s~~our decisions, or cause itus to incur significant costs.

There may be other factors that may cause ~~the Company’s~~our actual results, performance or achievements to differ materially from those expressed in, or implied by, the forward-looking statements. ~~The Company gives~~We can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them do, what impact they will have on ~~its~~our results of operations and financial condition. You should carefully read the factors described in ~~the Company’s reports filed with the Securities and Exchange Commission ("SEC"), including those discussed under "Part~~Part I, Item ~~1A. Risk Factors" in its most recent Annual Report~~1A of our Form 10-K, filed on ~~Form 10-K~~August 18, 2021, under the heading "Risk Factors," which are incorporated herein by reference, for a description of certain risks that could, among other things, cause the ~~Company’s~~Company's actual results to differ from any forward-looking statements contained herein. ~~The Company’s reports filed with the SEC can be found on the Company’s website at investors.cdkglobal.com and the SEC's website at www.sec.gov.~~

~~All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q even if subsequently made available by the Company on its website or otherwise. The Company disclaims~~We disclaim any obligation to update or revise ~~any~~ forward-looking statements that may be made to reflect new information or future events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, other than as required by law.

The following discussion should be read in conjunction with the consolidated financial statements and ~~the~~ accompanying notes ~~thereto~~ included ~~elsewhere herein.~~in Part II, Item 8 of our most recent Form 10-K. As used herein, "CDK Global," "CDK," the "Company," "we," "our," and similar terms include CDK Global, Inc. and its consolidated subsidiaries, unless the context indicates otherwise.

2115

RESULTS OF OPERATIONS

Executive Overview. CDK enables end-to-end automotive commerce. For over 40 years, we have served automotive retailers and original equipment manufacturers ("OEMs") by providing innovative solutions that allow them to better connect, manage, analyze, and grow their businesses. Our solutions automate and integrate all parts of the buying process, including the acquisition, sale, financing, insuring, parts supply, repair, and maintenance of vehicles. We serve ~~nearly~~over 15,000 retail locations in North America.

We generate revenue primarily by providing a broad suite of subscription-based software and technology solutions for our core customer base of automotive retailers as well as to retailers and manufacturers of heavy trucks, construction equipment, agricultural equipment, motorcycles, boats, and other marine and recreational vehicles.

We focus on providing our solutions through the use of software-as-a-service ("SaaS") and mobile-centric solutions that are highly functional, flexible and fast. Our flagship Dealer Management System ("DMS") software solutions are hosted enterprise resource planning applications tailored to the unique requirements of the retail automotive industry. Our DMS products facilitate the sale of new and used vehicles, consumer financing, repair and maintenance services, and vehicle and parts inventory management. We also provide a broad portfolio of layered software applications and services, a robust and secure interface to the DMS through our Partner Program, data management and business intelligence solutions, a variety of professional services, and a full range of customer support solutions. These solutions enable company-wide accounting, financial reporting, cash flow management, and payroll services. Our DMSs are typically integrated with OEM data processing systems that enable automotive retailers to order vehicles and parts, receive vehicle records, process warranties, and check recall campaigns and service bulletins while helping them to fulfill their franchisee responsibilities to their OEM franchisers.

Sale of the International and Digital Marketing Businesses. On March 1, 2021, we completed the sale of the CDK International business ~~(the “International Business”~~("International Business") to Francisco Partners. Financial results associated with the International Business are presented as discontinued operations in the Consolidated Statements of Operations. Following the sale of International Business, we are organized as a single operating segment. On April 21, 2020, ~~the Company~~we completed ~~its~~our sale of the Digital Marketing Business to Sincro ~~LLC, a newly formed company owned by Ansira Partners, Inc., which is a subsidiary of Advent International.~~LLC. The International Business and Digital Marketing Business ~~is also~~are presented as discontinued operations. For additional information refer to Item 1 of Part I, "Notes to the Consolidated Financial Statements", Note 1 - Basis of Presentation and Note 4 - Discontinued Operations.

Acquisitions.On February 1, 2021, we acquired Square Root, Inc., an Austin-based developer of data curation software for OEMs. On June 2, 2021, we acquired Roadster Inc., a Palo Alto, California-based digital sales platform that modernizes the way consumers buy vehicles and the process in which dealers sell them.

Impacts of COVID-19. On InMarch ~~11,~~ 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The COVID-19 outbreak and associated counter-acting measures implemented by governments around the world, as well as increased business uncertainty, caused a significant shift in automotive retail activity, and the operations of our dealer customers in particular. To support our customers, we offered financial and other assistance during the fourth quarter of fiscal 2020 and added product benefits to facilitate remote delivery and touchless transactions. We also took steps to monitor our cash flow and liquidity and to migrate many employees to their current work-from-home status. ~~While our underlying business remained strong during~~

As conditions continue to fluctuate around the ~~COVID-19 pandemic, including an increase in our auto sites~~world, governments and ~~improved customer sentiment, the impact of our customer support efforts as well as the cumulative effect of delays of projects~~organizations have responded by adjusting their restrictions and installations due to COVID-19 travel restrictions had an adverse impact on our financial results beginning late in the third quarter of fiscal 2020. These financial impacts were offset by lower travel expenses during the year.guidelines accordingly. Activity in the automotive market improved during ~~the the first and second quarters of~~ fiscal 2021, and we expect that improvement trend to continue during ~~the remainder of calendar 2021,~~fiscal 2022, though substantial uncertainty remains. Our focus remains on promoting employee health and safety, serving our dealer customers and ensuring business continuity. Overall, we believe we are well positioned for further growth opportunities as the impact of the COVID-19 pandemic recedes in the markets we serve and we remain committed to our management philosophy, company goals and our business strategy. However, while our revenue and earnings are relatively predictable as a result of our subscription-based business model, the duration of the pandemic and the broader implications of the macro-economic recovery on our business remain uncertain.

Business Process Modernization Program. As of July 1, 2019, we initiated a three-year program designed to improve the way we do business for our customers through best-in-class product offerings, processes, governance and systems. The business process modernization program ~~will include~~includes a comprehensive redesign in the way we go to market, including the quoting, contracting, fulfilling, and invoicing processes, and the systems and tools we use. We ~~currently estimate~~expect to incur expenses of approximately $5.0 million during fiscal 2022. It is possible that the ~~investment to implement this holistic business reform, including~~program will extend beyond the ~~design and implementation of a new enterprise resource planning ("ERP") system, will require approximately $30 million over a~~initial three-year time horizon. As a result of delays associated with the impact of the COVID-19 pandemic, along with certain scope refinements, we are in the process of reassessing the overall project scope and timeline and expect to have this concluded during the fourth quarter of fiscal 2021.

Sources of ~~Revenue~~Revenues and Expenses

Revenue. We generally receive fee-based revenue by providing services to customers. We generate revenue from ~~four~~three categories: subscription, ~~on-site licenses and installation,~~ transaction ~~services,~~ and other.

~~We have the following sources of revenue:~~

Subscription: for software and technology solutions provided to automotive retailers and OEMs, which includes:

•~~DMS~~DMSs and layered applications, which may be installed on-site at the customer’s location, or hosted and provided on a SaaS basis, including ongoing maintenance and support;

•Interrelated services such as installation, initial training, and data updates; and

•Prior to ~~the~~ adoption of ~~ASC~~Accounting Standards Codification ("ASC") 842 "Leases"~~, as amended~~ ("ASC 842") ~~as of July 1, 2019,~~, subscription revenue included technology solutions in which hardware was provided on a service basis. This revenue was previously classified as subscription revenue because under lease accounting guidance in effect prior to ASC 842, substitution rights were considered substantive. ~~We recognize certain hardware-as-a-service ("HaaS") arrangements in subscription revenue under legacy guidance until they convert to current guidance.~~

~~On-site licenses and installation:~~ ~~DMS applications where the software is installed on-site at the customer's locationand interrelated services such as installation.~~

Transaction: fees per transaction to process credit reports, vehicle registrations, and automotive equity mining.

Other:consulting and professional services, sales of hardware, on-site licenses and installation and other miscellaneous revenue. After the adoption of ASC 842 ~~other~~in fiscal 2020, Other revenue also includes leasing revenue from hardware ~~where the customer has~~provided to customers on a ~~right of use during the contract term under ASC 842,~~service basis, as hardware substitution rights are not considered substantive.

Expenses. Expenses generally relate to the cost of providing services to customers. Significant expenses include employee payroll and other labor-related costs, the cost of hosting customer systems, third-party costs for transaction-based solutions and licensed software utilized in our solution offerings, telecommunications, transportation and distribution costs, computer hardware, software, and other general overhead items. ~~We also have some company-wide expenses attributable to management compensation and corporate overhead.~~

Key Performance Measures. We regularly review the following key performance measures in evaluating our business results, identifying trends affecting our business, and making operating and strategic decisions:

Dealer Management System Customer Sites (end of period). We track the number of retail customer sites that have an active DMS and sell vehicles in automotive and adjacent markets as an indicator of our opportunity set for generating subscription revenue. We consider a DMS to be active if we have billed a subscription fee for that solution during the last billing cycle in the most recently ended calendar month. Adjacent markets include heavy truck dealerships that provide vehicles to the over-the-road trucking industry, recreation dealerships in the motorcycle, powersports, marine, and recreational vehicle industries, and heavy equipment dealerships in the agriculture and construction equipment industries.

Average Revenue Per DMS Customer Site (monthly average for period). Average revenue per DMS customer site is an indicator of the scope of adoption of our solutions by DMS customers. We monitor changes in this metric to measure the effectiveness of our strategy to deepen our relationships with our current customer base through upgrading and expanding solutions. We calculate average revenue per DMS customer site by dividing subscription revenue generated from our solutions in an applicable period by the monthly average number of DMS customer sites in the same period, divided by three. The metric includes monthly billing directly associated with the reported DMS sites inclusive of DMS monthly fees, layered applications and data integration fees and excludes (i) subscription revenue generated from customers not included in our DMS customer site count and (ii) subscription revenue related to certain installation and training activities that is deferred then recognized as revenue over the life of the contract.

Results of Operations. The following is a discussion of the results of our consolidated operations for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2021 and 2020.

The table below presents consolidated results of operations for the periods indicated and the ~~dollar~~ change ~~and percentage change between~~when comparing periods.


		Three Months Ended										Nine Months Ended											Three Months Ended
		March 31,						Change				March 31,						Change					September 30,						Change
		2021			2020			$		%		2021			2020			$		%			2021			2020			$		%
Revenue	Revenue	$	433.1		$	426.4		$	6.7	2	%	$	1,253.1		$	1,262.3		$	(9.2)	(1)	%	Revenue	$	440.0		$	413.7		$	26.3	6	%
Cost of revenue	Cost of revenue	221.3			198.8			22.5		11	%	653.7			598.9			54.8		9	%	Cost of revenue	226.7			224.7			2.0		1	%
Selling, general, and administrative expenses	Selling, general, and administrative expenses	90.2			81.6			8.6		11	%	263.8			259.1			4.7		2	%	Selling, general, and administrative expenses	97.6			88.6			9.0		10	%

Litigation provision	Litigation provision	—			—			—		n/m		12.0			—			12.0		n/m		Litigation provision	—			12.0			(12.0)		(100)	%
Total expenses	Total expenses	311.5			280.4			31.1		11	%	929.5			858.0			71.5		8	%	Total expenses	324.3			325.3			(1.0)		—	%
Operating earnings	Operating earnings	121.6			146.0			(24.4)		(17)	%	323.6			404.3			(80.7)		(20)	%	Operating earnings	115.7			88.4			27.3		31	%
Interest expense	Interest expense	(32.2)			(35.2)			3.0		(9)	%	(101.2)			(109.1)			7.9		(7)	%	Interest expense	(21.4)			(34.7)			13.3		(38)	%
Loss on extinguishment of debt		(2.2)			—			(2.2)		—	%	(2.2)			—			(2.2)		—	%
Gain on extinguishment of debt																						Gain on extinguishment of debt	2.1			—			2.1		—	%
Loss from equity method investment	Loss from equity method investment	(19.6)			—			(19.6)		—	%	(24.8)			—			(24.8)		—	%	Loss from equity method investment	(1.2)			(3.4)			2.2		(65)	%
Other income (expense), net		3.6			(1.7)			5.3		n/m		32.3			2.7			29.6		n/m
Other income, net																						Other income, net	3.1			24.7			(21.6)		(87)	%
Earnings before income taxes	Earnings before income taxes	71.2			109.1			(37.9)		(35)	%	227.7			297.9			(70.2)		(24)	%	Earnings before income taxes	98.3			75.0			23.3		31	%
Margin %	Margin %	16.4		%	25.6		%					18.2		%	23.6		%					Margin %	22.3		%	18.1		%
Provision for income taxes	Provision for income taxes	(24.1)			(31.7)			7.6		(24)	%	(73.8)			(95.5)			21.7		(23)	%	Provision for income taxes	(25.1)			(27.0)			1.9		(7)	%
Effective tax rate	Effective tax rate	33.8		%	29.1		%					32.4		%	32.1		%					Effective tax rate	25.5		%	36.0		%
Net earnings from continuing operations	Net earnings from continuing operations	47.1			77.4			(30.3)		(39)	%	153.9			202.4			(48.5)		(24)	%	Net earnings from continuing operations	73.2			48.0			25.2		53	%
Net earnings (loss) from discontinued operations		815.8			(17.9)			833.7		n/m		837.1			(34.7)			871.8		n/m
Net earnings from discontinued operations																						Net earnings from discontinued operations	0.5			10.0			(9.5)		(95)	%
Net earnings	Net earnings	862.9			59.5			803.4		n/m		991.0			167.7			823.3		n/m		Net earnings	73.7			58.0			15.7		27	%
Less: net earnings attributable to noncontrolling interest	Less: net earnings attributable to noncontrolling interest	2.0			1.9			0.1		5	%	6.1			5.8			0.3		5	%	Less: net earnings attributable to noncontrolling interest	2.0			2.3			(0.3)		(13)	%
Net earnings attributable to CDK	Net earnings attributable to CDK	$	860.9		$	57.6		$	803.3	n/m		$	984.9		$	161.9		$	823.0	n/m		Net earnings attributable to CDK	$	71.7		$	55.7		$	16.0	29	%

The table below presents the revenue disaggregation for the ~~three~~periods indicated and ~~nine months ended March 31, 2021 and 2020.~~the change when comparing periods.

Three Months Ended Nine Months
Ended
March 31, Change March 31, Change
2021 2020 $ % 2021 2020 $ %
Subscription $ 332.1 $ 331.7 $ 0.4 — % $ 984.3 $ 1,000.9 $ (16.6) (2) %
On-site license and installation 1.4 2.4 (1.0) (42) % 4.6 7.5 (2.9) (39) %
Transaction 43.3 38.1 5.2 14 % 126.3 120.6 5.7 5 %
Other 56.3 54.2 2.1 4 % 137.9 133.3 4.6 3 %
Revenue $ 433.1 $ 426.4 $ 6.7 2 % $ 1,253.1 $ 1,262.3 $ (9.2) (1) %

~~Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020~~


	Three Months Ended
	September 30,				Change
	2021		2020		$		%
Subscription	$	345.1	$	323.9	$	21.2	7	%
Transaction	42.8		43.9		(1.1)		(3)	%
Other	52.1		45.9		6.2		14	%
Total Revenue	$	440.0	$	413.7	$	26.3	6	%

Revenue. Revenue for the three months ended ~~March 31,~~September 30, 2021 increased by ~~$6.7~~$26.3 million as compared to the three months ended ~~March 31,~~September 30, 2020.

•Subscription revenues increased ~~primarily~~ due to ~~an increase~~the growth in ~~average revenue per~~ DMS ~~customer site driven by pricing,~~ and ~~volume growth. DMS customer site count increased~~applications, and $10.3 million from ~~14,741 sites as of March 31, 2020 to 14,972 sites as of March 31, 2021. These increases were largely~~acquisitions, partially offset by the impact of ~~the re-allocation of~~ASC 842 which reallocates hardware-related lessor revenue from subscription revenue to other ~~revenue for our HaaS arrangements due~~revenue. DMS customer site count increased from 14,770 sites as of September 30, 2020 to ~~our prospective adoption~~15,146 sites as of ~~ASC 842 in fiscal 2020, the ongoing recognition of discounts given to customers as a result of the COVID-19 pandemic and a decline in Partner Program revenue.~~September 30, 2021.

•Transaction revenues ~~increased~~declined slightly from the prior year due primarily to ~~higher transaction volumes as the downturn in automotive retail activity caused by COVID-19 receded during fiscal 2021 and higher credit bureau charges for credit checks.~~lower vehicle registration revenue.

•Other revenues increased ~~due to~~reflecting higher hardware sales and revenue ~~including lessor accounting revenue~~timing under ASC ~~842 driven by strong installation rates of our Cloud Connect product partially offset by the COVID-related negative impacts in our consulting and call center businesses.~~842.

Cost of Revenue. Cost of revenue for the three months ended ~~March 31,~~September 30, 2021 increased by ~~$22.5~~$2.0 million as compared to the three months ended ~~March 31,~~September 30, 2020. Cost of revenue ~~increased due~~remained relatively unchanged as higher costs related to ~~higher employee-related~~leased hardware and travel and entertainment were offset by decreases in costs ~~and professional services~~ to support on-going transition of our strategic growth initiatives and other research and development activities as well as our revenue growth. Cost of revenue was also impacted by higher incentive compensation and employee benefit costs offset by less employee travel costs. sold businesses.

Cost of revenue includes expenses to research, develop, and deploy new and enhanced solutions for our customers of ~~$19.4~~$15.7 million and ~~$8.7~~$20.3 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, representing ~~4.5%~~3.6% and ~~2.0%~~4.9% of revenue, respectively.

~~Selling, General and Administrative Expenses~~. Selling, general and administrative expenses for the three months ended March 31, 2021 increased by $8.6 million compared to the three months ended March 31, 2020. Selling, general and administrative expenses increased due to higher employee-related and professional service costs and an increase in our deferred compensation plan obligation. There is an offsetting impact related to our deferred compensation plan included in other income. These increases were partially offset by lower travel costs as a result of the COVID-19 pandemic.

~~Interest Expense.~~ Interest expense for the three months ended March 31, 2021 decreased by $3.0 million as compared to the three months ended March 31, 2020 largely due to lower average debt levels in the third quarter of fiscal 2021 compared to fiscal 2020, largely attributable to the repayment of the revolving credit facility.

~~Loss on Extinguishment of Debt.~~ On March 1, 2021, we repaid the indebtedness under the three-year term loan facility and five-year term loan facility. As a result, we recorded expenses of $2.2 million for the write-off of unamortized debt financing costs.

~~Loss from Equity Method Investment.~~ Loss from equity method investment for the three months ended March 31, 2021 increased by $19.6 million as compared to the three months ended March 31, 2020 due to $14.5 million of impairment charges for an equity method investment and the recognition of equity losses.

~~Other Income, net.~~Other income, net for the three months ended March 31, 2021 increased by $5.3 million compared to the three months ended March 31, 2020 due to an increase in the market value of the investments underlying our deferred compensation plan. There is an offsetting impact related to our deferred compensation plan included in selling, general and administrative expenses. The increase is also attributable to higher income related to the transition services agreement in connection with the sale of the Digital Marketing Business and the International Business.

~~Provision for Income Taxes.~~The effective tax rate for the three months ended March 31, 2021 and 2020 was 33.8% and 29.1%, respectively. The effective tax rate for the three months ended March 31, 2021 was primarily impacted by $7.0 million of tax expense for a valuation allowance on a deferred tax asset for the future capital loss on an equity method investment that is not expected to be realized and $1.3 million tax expense from non-deductible officer's compensation, offset by a $2.4 million tax benefit relating to the prior year. The effective tax rate for the three months ended March 31, 2020 was impacted by $7.0 million of tax expense from the Company's change in assertion about its intent to indefinitely reinvest prior undistributed earnings of foreign subsidiaries.

~~Net Earnings (Loss) from Discontinued Operations.~~Net earnings (loss) from discontinued operations reflect the results of the International Business and the Digital Marketing Business. During the three months ended March 31, 2021, net earnings for the International Business increased primarily due to the recognition of the gain on sale of the International Business, partially offset by professional fees associated with the sale. During the three months ended March 31, 2020, the Digital Marketing Business was impacted by a $26.5 million increase in the valuation allowance for assets held-for-sale. Refer to Note 4 - Discontinued Operations for additional information.

~~Nine Months Ended March 31, 2021~~ ~~Compared to the Nine Months Ended March 31, 2020~~

~~Revenue.Revenue for the nine months ended March 31, 2021 decreased by $9.2 million compared to the nine months ended March 31, 2020.~~

•Subscription revenues decreased by $16.6 million due to the impacts of the COVID-19 pandemic including the cumulative effect of delays in projects and installations, the ongoing recognition of discounts given to customers, and a delay of price increases. The decline in revenue was also driven by a one-time revenue adjustment in our adjacency business in the first quarter fiscal 2021, the impact of the re-allocation of lessor revenue from subscription revenue to other revenue for our HaaS arrangements due to our prospective adoption of ASC 842 in fiscal 2020, and a decline in Partner Program revenue. These impacts were partially offset by an increase in average revenue per DMS customer site. DMS customer site count increased from 14,741 sites as of March 31, 2020 to 14,972 sites as of March 31, 2021.

•Transaction revenues increased due to higher transaction volumes as the downturn in automotive retail activity caused by COVID-19 receded during fiscal 2021 and higher credit bureau charges for credit checks initiated in the third quarter of fiscal 2021.

•Other revenues increased due to higher hardware revenue including lessor accounting under ASC 842 driven by strong installation of our Cloud Connect product, partially offset by the COVID-related impacts in our consulting and call center businesses.

~~Cost of Revenue.~~Cost of revenue for the nine months ended March 31, 2021 increased by $54.8 million compared to the nine months ended March 31, 2020. Cost of revenue increased due to higher employee-related costs and professional services to support our strategic growth initiatives and other research and development activities as well as our revenue growth. Cost of revenue was also impacted by higher incentive compensation and employee benefit costs offset by less employee travel costs. Cost of revenue includes expenses to research, develop, and deploy new and enhanced solutions for our customers of $55.7 million and $34.5 million for the nine months ended March 31, 2021 and 2020, respectively, representing 4.4% and 2.7% of revenue, respectively.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 increased by ~~$4.7~~$9.0 million compared to the ~~nine~~three months ended ~~March 31,~~September 30, 2020. Selling, general and administrative expenses increased primarily ~~due to~~as a result of higher transaction and integration related costs associated with acquisitions and other strategic business opportunities as well as higher employee-related ~~costs~~costs. These increases were partially offset by ~~lower travel expenses~~decreases in costs to support on-going transition of our sold businesses.

Litigation Provision. Litigation provision for the three months ended September 30, 2021 decreased by $12.0 million as compared to three months ended September 30, 2020 as a result of the ~~COVID-19 pandemic.~~

~~Litigation Provision.~~ ~~In the first nine months of fiscal 2021, our~~ reassessment of the litigation liability ~~resulted~~during the first quarter of fiscal 2021. Additional information on the litigation provision is contained in ~~an increase of $12.0 million. For additional information refer to~~ Item 18 of Part ~~I, "Notes to the Consolidated Financial~~II, "Financial Statements" and Supplementary Data", Note ~~12 -~~11 Commitments and Contingencies.

Interest Expense. Interest expense for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 decreased by ~~$7.9~~$13.3 million as compared to the ~~nine~~three months ended ~~March 31,~~September 30, 2020 largely due to lower average debt levels in ~~fiscal 2021 compared to fiscal 2020 largely attributable to~~ the ~~payoff of the $250.0 million 3.30% senior notes in the second~~first quarter of fiscal ~~2020, and~~2022, which was primarily attributable to the repayment of the ~~revolving credit facility.~~three-year and five-year term loan facilities and the 5.875% unsecured senior notes with a $500 million aggregate principal amount due in 2026 in the third and fourth quarter of fiscal 2021, respectively.

~~Loss~~Gain on Extinguishment of Debt.~~On March 1, 2021,~~ In the first quarter of fiscal 2022, we ~~repaid the indebtedness under the three-year term loan facility and five-year term loan facility. As~~recognized a gain on extinguishment of debt as a result ~~we recorded expenses~~ of ~~$2.2 million for~~ the ~~write-off~~forgiveness of ~~unamortized debt financing costs.~~a Paycheck Protection Program loan. The loan was assumed as part of the acquisition of Roadster Inc.

Loss from Equity Method Investment. Loss from equity method investment for ~~the nine~~three months ended ~~March 31,~~September 30, 2021 ~~increased~~decreased by ~~$24.8~~$2.2 million as compared to the ~~nine~~three months ended ~~March 31,~~September 30, 2020 due to ~~a $14.5 million impairment charge for an~~improved financial performance of one of our equity ~~method investment and the recognition of equity losses.~~investments.

Other Income, net. Other income, net for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 ~~increased~~decreased by ~~$29.6~~$21.6 million as compared to the ~~nine~~three months ended ~~March 31,~~September 30, 2020 due largely to the ~~recognition~~decline in income associated with on-going transition support of ~~income related to a transition services agreement in connection with the sale of the Digital Marketing Business.~~our sold businesses.

Provision for Income Taxes.Income tax expense was $25.1 million and $27.0 million for the three months ended September 30, 2021 and 2020, respectively. The effective tax rate, expressed by calculating the provision for income taxes as a percentage of earnings before income taxes, was 25.5% and 36.0% for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 and 2020, ~~was 32.4% and 32.1%,~~ respectively. The effective tax rate for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 ~~was impacted by $7.0 million~~differed from the U.S. federal statutory rate of ~~tax expense for a valuation allowance on a deferred tax asset for the future capital loss on an equity method investment that is not expected~~21.0% primarily due to ~~be realized, $4.8 million~~state and local income taxes and tax expense from ~~officer's~~officers' compensation limitation, ~~$1.7~~partially offset by a $2.0 million benefit due to the expiration of ~~tax expense relating~~the statute of limitations related to

~~the prior year, and $1.4 million of tax expense from recording valuation allowances on foreign tax credits.~~ certain transfer pricing exposures. The effective tax rate for the ~~nine~~three months ended ~~March 31,~~September 30, 2020 ~~was impacted by $14.8~~differed from the U.S. federal statutory rate of 21.0% primarily due to state and local income taxes, tax expense from officers' compensation limitation, $4.1 million of tax expense from ~~the increase in valuation allowance associated with~~ a ~~deferred tax asset for a capital loss carryforwards which the Company does not expect to utilize~~prior year true-up of income taxes payable, and ~~$1.3~~$1.7 million of tax expense ~~from officers compensation limitation.~~related to valuation allowances on foreign net operating losses and U.S. foreign tax credits.

Net Earnings ~~(Loss)~~ from Discontinued Operations. Net earnings ~~(loss)~~ from discontinued operations reflect the results of the International Business and ~~the~~ Digital Marketing Business. ~~During the nine months ended March 31, 2021, net~~Net earnings ~~for the International Business increased due to the recognition~~from discontinued operations declined as a result of the ~~gain on sale~~completion of the International Business, the benefits from restructuring efforts at the end of fiscal 2020, and lower travel costs due to the COVID-19 pandemic, partially offset by professional fees associated with the sale of the International Business ~~and unfavorable currency exchange rates. During the nine months ended March 31, 2020, the Digital Marketing Business was impacted by a $95.7 million increase~~ in the ~~valuation allowance for assets held-for-sale.~~third quarter of fiscal year 2021. Refer to Note 4 - Discontinued Operations for additional information.

Net Earnings Attributable to CDK.Net earnings attributable to CDK for the three months ended September 30, 2021 increased $16.0 million as compared to the three months ended September 30, 2020. The increase in net earnings attributable to CDK was primarily due to the factors previously discussed.

Non-GAAP Financial Measures

We disclose certain financial measures for our consolidated results on a generally accepted accounting principles (GAAP) and a non-GAAP (adjusted) basis. The non-GAAP financial measures disclosed should be viewed in addition to, and not as an alternative to, results prepared in accordance with GAAP. Our use of each of the following non-GAAP financial measures may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures, or reconcile them to the most directly comparable GAAP financial measures, in the same way.


Non-GAAP Financial Measure			Most Directly Comparable GAAP Financial Measure
Adjusted earnings before income taxes			Earnings before income taxes
Adjusted provision for income taxes			Provision for income taxes
Adjusted net earnings attributable to CDK			Net earnings attributable to CDK
Adjusted diluted earnings attributable to CDK per share			Diluted earnings attributable to CDK per share
Adjusted EBITDA			Net earnings attributable to CDK
Adjusted EBITDA margin			Net earnings attributable to CDK margin

We use adjusted earnings before income taxes, adjusted provision for income taxes, adjusted net earnings attributable to CDK, adjusted diluted earnings attributable to CDK per share, adjusted EBITDA and adjusted EBITDA margin internally to evaluate our performance on a consistent ~~basis because the~~basis. These measures adjust for the impact of certain items that we believe are inconsistent in amount and frequency and do not directly reflect our underlying operations. By adjusting for these items, we believe we have more precise inputs for use as factors in (i) our budgeting process, (ii) financial and operational decisions, (iii) evaluations of ongoing operating performance on a consistent period-to-period basis and relative to our competitors, (iv) target leverage calculations, (v) debt covenant calculations, and ~~(v)~~(vi) incentive-based compensation decisions.

We believe our non-GAAP financial measures are helpful to users of the financial statements because they (i) provide investors with meaningful supplemental information regarding financial performance by excluding certain items, (ii) permit investors to view performance using the same tools that management uses, and (iii) provide supplemental information that may be useful to investors in evaluating our ongoing operating results on a consistent basis. We believe that the presentation of these non-GAAP financial measures, when considered in addition to the corresponding GAAP financial measures and the reconciliations to those measures disclosed below, provides investors with a better understanding of the factors and trends affecting our business than could be obtained absent these disclosures.

We incorporated additional adjustments in our calculations of non-GAAP financial measures where management has deemed it appropriate to better reflect our underlying operations. These adjustments are inconsistent in amount and frequency and do not directly reflect our underlying operations. Therefore, management believes that excluding such information provides us with a better understanding of our ongoing operating performance across periods. Prior period information has been revised to conform to the new presentation.

~~Fiscal 2021 Modifications to Our Adjustments.~~ We modified our presentation of adjusted earnings before income taxes, adjusted net earnings attributable to CDK, adjusted diluted earnings attributable to CDK per share, and adjusted EBITDA to include a loss from the extinguishment of debt.

Consolidated Non-GAAP Results. The tables below present the reconciliation of the most directly comparable GAAP measures to adjusted earnings before income taxes, adjusted provision for income taxes, adjusted net earnings attributable to CDK, ~~and~~ adjusted diluted earnings attributable to CDK per ~~share.~~share, and adjusted EBITDA.

Three Months Ended Nine Months Ended
March 31, Change March 31, Change
2021 2020 $ % 2021 2020 $ %
Revenue (1)
$ 433.1 $ 426.4 $ 6.7 2 % $ 1,253.1 $ 1,262.3 $ (9.2) (1) %
Earnings before income taxes (1)
$ 71.2 $ 109.1 $ (37.9) (35) % $ 227.7 $ 297.9 $ (70.2) (24) %
Margin % 16.4 % 25.6 % 18.2 % 23.6 %
Stock-based compensation expense (1) (2)
10.4 2.2 8.2 31.7 13.2 18.5
Amortization of acquired intangible assets (1) (3)
4.2 3.8 0.4 12.4 11.4 1.0
Transaction and integration-related costs (1) (4)
2.4 — 2.4 3.6 8.5 (4.9)
Legal and other expenses related to regulatory and competition matters (5)
0.9 4.4 (3.5) 15.6 16.6 (1.0)
Business process modernization program (6)
3.9 4.4 (0.5) 9.4 12.0 (2.6)
Officer transition expense (7)
— — — 1.1 — 1.1
Net adjustments related to loss from equity method investment (8)
17.1 — 17.1 21.6 — 21.6
Loss on extinguishment of debt (9)
2.2 — 2.2 2.2 — 2.2
Adjusted earnings before income taxes $ 112.3 $ 123.9 $ (11.6) (9) % $ 325.3 $ 359.6 $ (34.3) (10) %
Adjusted margin % 25.9 % 29.1 % 26.0 % 28.5 %

Three Months Ended Nine Months Ended
March 31, Change March 31, Change
2021 2020 $ % 2021 2020 $ %
Provision for income taxes (1)
$ 24.1 $ 31.7 $ (7.6) (24) % $ 73.8 $ 95.5 $ (21.7) (23) %
Effective tax rate 33.8 % 29.1 % 32.4 % 32.1 %
Income tax effect of pre-tax adjustments (10)
8.4 3.8 18.3 14.9
Income tax effect for foreign earnings previously deemed indefinitely reinvested(11)
— (7.0) 7.0 — (7.0) 7.0
Change in deferred tax valuation allowance(12)
(7.0) — (7.0) (7.0) (14.8) 7.8
Impact of U.S. tax reform (13)
— — — — 0.3 (0.3)
Adjusted provision for income taxes (1)
$ 25.5 $ 28.5 $ (3.0) (11) % $ 85.1 $ 88.9 $ (3.8) (4) %
Adjusted effective tax rate 22.7 % 23.0 % 26.2 % 24.7 %


	Three Months Ended
	September 30,						Change
	2021			2020			$		%
Revenue (1)	$	440.0		$	413.7		$	26.3	6	%

Earnings before income taxes (1)	$	98.3		$	75.0		$	23.3	31	%
Margin %	22.3		%	18.1		%
Stock-based compensation expense (1) (2)	11.3			12.3			(1.0)
Amortization of acquired intangible assets (1) (3)	6.2			4.0			2.2
Transaction and integration-related costs (1) (4)	8.7			—			8.7
Legal and other expenses related to regulatory and competition matters (5)	0.4			14.0			(13.6)
Business process modernization program (6)	1.9			2.9			(1.0)
Officer transition expense (7)	—			1.1			(1.1)
Net adjustments related to loss from equity method investment (8)	1.5			3.0			(1.5)
Gain on extinguishment of debt (9)	(2.1)			—			(2.1)
Adjusted earnings before income taxes (1)	$	126.2		$	112.3		$	13.9	12	%
Adjusted margin %	28.7		%	27.1		%

2820

Three Months Ended Nine Months Ended
March 31, Change March 31, Change
2021 2020 $ % 2021 2020 $ %
Net earnings $ 862.9 $ 59.5 $ 803.4 n/m $ 991.0 $ 167.7 $ 823.3 n/m
Less: net earnings attributable to noncontrolling interest 2.0 1.9 6.1 5.8
Net earnings attributable to CDK $ 860.9 $ 57.6 $ 803.3 n/m $ 984.9 $ 161.9 $ 823.0 n/m
Net earnings (loss) from discontinued operations (14)
(815.8) 17.9 (833.7) (837.1) 34.7 (871.8)
Stock-based compensation expense (1) (2)
10.4 2.2 8.2 31.7 13.2 18.5
Amortization of acquired intangible assets (1) (3) (15)
4.1 3.7 0.4 12.1 11.1 1.0
Transaction and integration-related costs (1) (4)
2.4 — 2.4 3.6 8.5 (4.9)
Legal and other expenses related to regulatory and competition matters(5)
0.9 4.4 (3.5) 15.6 16.6 (1.0)
Business process modernization program (6)
3.9 4.4 (0.5) 9.4 12.0 (2.6)
Officer transition expense (7)
— — — 1.1 — 1.1
Net adjustments related to loss from equity method investment(8)
17.1 — 17.1 21.6 — 21.6
Loss on extinguishment of debt(9)
2.2 — 2.2 2.2 — 2.2
Income tax effect of pre-tax adjustments (10)
(8.4) (3.8) (4.6) (18.3) (14.9) (3.4)
Income tax effect for foreign earnings previously deemed indefinitely reinvested(11)
— 7.0 (7.0) — 7.0 (7.0)
Change in deferred tax valuation allowance (12)
7.0 — 7.0 7.0 14.8 (7.8)
Impact of U.S tax reform (13)
— — — — (0.3) 0.3
Adjusted net earnings attributable to CDK (1)
$ 84.7 $ 93.4 $ (8.7) (9) % $ 233.8 $ 264.6 $ (30.8) (12) %


	Three Months Ended
	September 30,						Change
	2021			2020			$		%
Provision for income taxes (1)	$	25.1		$	27.0		$	(1.9)	(7)	%
Effective tax rate	25.5		%	36.0		%
Income tax effect of pre-tax adjustments (10)	5.6			6.2			(0.6)
Change in deferred tax valuation allowance (11)	(0.5)			—			(0.5)
Adjusted provision for income taxes (1)	$	30.2		$	33.2		$	(3.0)	(9)	%
Adjusted effective tax rate	23.9		%	29.6		%


	Three Months Ended
	September 30,				Change
	2021		2020		$		%
Net earnings	$	73.7	$	58.0	$	15.7	27	%
Less: net earnings attributable to noncontrolling interest	2.0		2.3
Net earnings attributable to CDK	$	71.7	$	55.7	$	16.0	29	%
Net earnings from discontinued operations (12)	(0.5)		(10.0)		9.5
Stock-based compensation expense (1) (2)	11.3		12.3		(1.0)
Amortization of acquired intangible assets (1) (3) (13)	6.1		3.9		2.2
Transaction and integration-related costs (1) (4)	8.7		—		8.7
Legal and other expenses related to regulatory and competition matters (5)	0.4		14.0		(13.6)
Business process modernization program (6)	1.9		2.9		(1.0)
Officer transition expense (7)	—		1.1		(1.1)
Net adjustments related to loss from equity method investment (8)	1.5		3.0		(1.5)
Gain on extinguishment of debt (9)	(2.1)		—		(2.1)
Income tax effect of pre-tax adjustments (10)	(5.6)		(6.2)		0.6
Change in deferred tax valuation allowance (11)	0.5		—		0.5
Adjusted net earnings attributable to CDK (1)	$	93.9	$	76.7	$	17.2	22	%


	Three Months Ended
	September 30,				Change
	2021		2020		$		%
Diluted earnings attributable to CDK per share	$	0.59	$	0.46	$	0.13	28	%
Net earnings from discontinued operations (12)	—		(0.08)		0.08
Stock-based compensation expense (1) (2)	0.09		0.10		(0.01)
Amortization of acquired intangible assets (1) (3) (13)	0.05		0.03		0.02
Transaction and integration-related costs (1) (4)	0.07		—		0.07
Legal and other expenses related to regulatory and competition matters (5)	—		0.12		(0.12)
Business process modernization program (6)	0.02		0.02		—
Officer transition expense (7)	—		0.01		(0.01)
Net adjustments related to loss from equity method investment (8)	0.01		0.02		(0.01)
Gain on extinguishment of debt (9)	(0.02)		—		(0.02)
Income tax effect of pre-tax adjustments (10)	(0.04)		(0.05)		0.01
Adjusted diluted earnings attributable to CDK per share (1)	$	0.77	$	0.63	$	0.14	22	%

Weighted average common shares outstanding:
Diluted	122.1		122.3

2921

Three Months Ended Nine Months Ended
March 31, Change March 31, Change
2021 2020 $ % 2021 2020 $ %
Diluted earnings attributable to CDK per share $ 7.00 $ 0.47 $ 6.53 n/m $ 8.04 $ 1.33 $ 6.71 n/m
Net earnings (loss) from discontinued operations (14)
(6.64) 0.15 (6.79) (6.83) 0.28 (7.11)
Stock-based compensation expense (1) (2)
0.08 0.02 0.06 0.26 0.11 0.15
Amortization of acquired intangible assets (1) (3) (15)
0.03 0.03 — 0.10 0.09 0.01
Transaction and integration-related costs (1) (4)
0.02 — 0.02 0.03 0.07 (0.04)
Legal and other expenses related to regulatory and competition matters (5)
0.02 0.03 (0.01) 0.12 0.13 (0.01)
Business process modernization program (6)
0.03 0.03 — 0.07 0.10 (0.03)
Officer transition expense (7)
— — — 0.01 — 0.01
Net adjustments related to loss from equity method investment (8)
0.14 — 0.14 0.18 — 0.18
Loss on extinguishment of debt(9)
0.02 — 0.02 0.02 — 0.02
Income tax effect of pre-tax adjustments (10)
(0.07) (0.03) (0.04) (0.15) (0.12) (0.03)
Income tax effect for foreign earnings previously deemed indefinitely reinvested(11)
— 0.06 (0.06) — 0.06 (0.06)
Change in deferred tax valuation allowance (12)
0.06 — 0.06 0.06 0.12 (0.06)
Adjusted diluted earnings attributable to CDK per share (1)
$ 0.69 $ 0.76 $ (0.07) (9) % $ 1.91 $ 2.17 $ (0.26) (12) %
Weighted-average common shares outstanding:
Diluted 122.9 122.2 122.5 122.1


	Three Months Ended
	September 30,						Change
	2021			2020			$		%
Net earnings attributable to CDK	$	71.7		$	55.7		$	16.0	29	%
Margin %	16.3		%	13.5		%
Net earnings attributable to noncontrolling interest (14)	2.0			2.3			(0.3)
Net earnings from discontinued operations (12)	(0.5)			(10.0)			9.5
Provision for income taxes (1) (15)	25.1			27.0			(1.9)
Interest expense (16)	21.4			34.7			(13.3)
Depreciation and amortization (1) (17)	27.6			23.1			4.5
Stock-based compensation expense (1) (2)	11.3			12.3			(1.0)
Transaction and integration-related costs (1) (4)	8.7			—			8.7
Legal and other expenses related to regulatory and competition matters (5)	0.4			14.0			(13.6)
Business process modernization program (6)	1.9			2.9			(1.0)
Officer transition expense (7)	—			1.1			(1.1)
Net adjustments related to loss from equity method investment (8)	2.8			4.4			(1.6)
Gain on extinguishment of debt (9)	(2.1)			—			(2.1)
Adjusted EBITDA	$	170.3		$	167.5		$	2.8	2	%
Adjusted margin %	38.7		%	40.5		%

(1) Excludes amounts attributable to discontinued operations.

(2) Stock-based compensation expense included in cost of revenue and selling, general and administrative expenses.

(3) Amortization of acquired intangible assets consists of non-cash amortization of intangible assets such as customer lists, purchased software, and trademarks acquired in connection with business combinations. We exclude the impact of amortization of acquired intangible assets because these non-cash amounts are significantly impacted by the timing and size of individual acquisitions and do not factor into our budgeting process, financial and operational decision making, target leverage calculations, and determination of incentive-based pay. Furthermore, management believes that this adjustment enables a better comparison of our operating results as amortization of acquired intangibles will not recur in future periods once such intangible assets have been fully amortized. Although we exclude amortization of acquired intangible assets from our presentation of adjusted earnings before income taxes, adjusted provision for income taxes, adjusted net earnings attributable to CDK, and adjusted diluted net earnings attributable to CDK per share, we believe that it is important for the users of the financial statements to understand that the associated intangible assets were recorded as part of purchase accounting and contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets.

(4) Transaction and integration-related costs include: (i) legal, accounting, outside service fees, and other costs incurred in connection with assessment and integration of acquisitions and other strategic business opportunities; and (ii) post-close adjustments to acquisition-related contingent consideration, included in ~~cost of revenue and~~ selling, general and administrative expenses.

(5) Legal and other expenses, related to regulatory and competition matters included in selling, general and administrative expenses and litigation provision.

(6) Business process modernization program designed to improve the way we do business for our customers through best-in-class product offerings, processes, governance and systems. The business process modernization program ~~will include~~includes a comprehensive redesign in the way we go to market, including the quoting, contracting, fulfilling, and invoicing processes, and

the systems and tools we use. The program is an investment to implement ~~this~~ holistic business reform, including the design and implementation of a new ERP ~~system, which began in the first quarter of fiscal 2020, will be completed over a three-year time horizon.~~system. The expense is included in cost of revenue and selling, general and administrative expenses.

(7) Officer transition expense includes severance expense in connection with officer departures included in cost of revenue and selling, general and administrative expenses.

(8) Net adjustments related to loss from equity method investment includes certain portions of earnings attributable to an equity interest owned by ~~CDK and a $14.5 million impairment of an equity method investment included in loss from equity method investment.~~CDK.

(9) ~~Loss~~Gain on extinguishment of debt in connection with the forgiveness of Roadster's indebtedness related to the ~~write-off of unamortized debt financing cost as a result of the repayment of indebtedness~~Paycheck Protection Program instituted under the ~~three-year term loan facility~~United States' Coronavirus Aid, Relief and ~~five-year term loan facility on March 1, 2021.~~Economic Security Act of 2020.

(10) Income tax effect of pre-tax adjustments calculated at applicable statutory rates net of applicable permanent differences.

(11) True-up of income tax expense for cumulative withholding tax associated with historical foreign earnings that are no longer considered indefinitely reinvested as of March 31, 2020. The change in assertion was made in response to the uncertainty related to the COVID-19 pandemic and its potential impact on CDK’s liquidity needs.

~~(12) A~~In fiscal 2022, a valuation allowance on a deferred tax asset for the ~~future capital loss on~~tax basis difference of an equity method investment that is not expected to be realized recorded in the third quarter of fiscal 2021 and an increase in valuation allowance associated with a deferred tax asset for a capital loss carryforward which the Company does not expect to utilize recorded in the second quarter of fiscal 2020.realized.

~~(13)In fiscal 2020, a one-time tax benefit for an adjustment of an accrual for foreign withholding taxes related to undistributed earnings as a result of the Tax Reform Act.~~

~~(14)~~(12) Net earnings ~~(loss)~~ from discontinued operations associated with our sale of the International Business that closed on March 1, 2021, and the divestiture of the Digital Marketing Business that closed on April 21, 2020. ~~We recorded a pre-tax gain of $965.6 million on the sale of the International Business.~~

~~(15)~~(13) The portion of expense related to noncontrolling interest ~~of $0.1 million and $0.1 million~~ has been removed from amortization of acquired intangible assets ~~during~~for the three months ended ~~March 31,~~September 30, 2021 and ~~2020, respectively,~~2020.

(14) Net earnings attributable to noncontrolling interest included in the financial statements.

(15) Provision for income taxes included in the financial statements.

(16) Interest expense included in the financial statements.

(17) Depreciation and ~~$0.3 million and $0.3 million has been removed from~~ amortization ~~of acquired intangible assets during~~included in the ~~nine months ended March 31, 2021 and 2020, respectively.~~

~~Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020~~financial statements.

Adjusted Earnings before Income Taxes. Adjusted earnings before income taxes for the three months ended ~~March 31,~~September 30, 2021 ~~decreased~~increased by ~~$11.6~~$13.9 million as compared to the three months ended ~~March 31,~~September 30, 2020. Adjusted margin ~~decreased~~increased from ~~29.1%~~27.1% to ~~25.9%~~28.7%. Adjusted earnings before income taxes ~~decreased primarily due to~~was favorably impacted by revenue growth as well as lower interest expenses, partially offset by higher employee-related costs and ~~professional services to support our strategic growth initiatives~~travel and other research and development activities as well as our revenue growth. Additional unfavorable impacts were related to higher incentive compensation and employee benefit costs, the effects of the COVID-19 pandemic, and a decline in Partner Program revenue. These impacts were partially offset by growth in the core business and lower travel costs as a result of the COVID-19 pandemic.entertainment expenses.

Adjusted Provision for Income Taxes. Adjusted income tax expense was $30.2 million and $33.2 million for the three months ended September 30, 2021 and 2020, respectively. The adjusted effective tax rate, expressed by calculating the provision for income taxes as a percentage of adjusted earnings before income taxes, was 23.9% and 29.6% for the three months ended September 30, 2021 and 2020, respectively. The adjusted effective tax rate for the three months ended ~~March 31,~~September 30, 2021 ~~was 22.7% as compared~~differed from the US federal statutory rate of 21.0% primarily due to ~~23.0% for~~state and local income taxes partially offset by a $2.0 million benefit due to the ~~three months ended March 31, 2020.~~expiration of the statute of limitations related to certain transfer pricing exposures. The adjusted effective tax rate for the three months ended ~~March 31, 2021 was~~September 30, 2020 differed from the U. S. federal statutory rate of 21.0% primarily ~~impacted by a $2.4~~due to state and local income taxes, $4.1 million of tax ~~benefit for~~expense from prior year true-up of income taxes payable, and $1.7 million of tax ~~payable true-up.~~expense related to valuation allowances on foreign net operating losses and U.S. foreign tax credits.

Adjusted Net Earnings Attributable to CDK. Adjusted net earnings attributable to CDK for the three months ended ~~March 31,~~September 30, 2021 ~~decreased~~increased by ~~$8.7~~$17.2 million as compared to the three months ended ~~March 31,~~September 30, 2020. The ~~decrease~~increase in adjusted net earnings attributable to CDK was primarily due to the items discussed above in adjusted earnings before income taxes.

~~Nine Months Ended March 31, 2021 Compared to the Nine Months Ended March 31, 2020~~

~~Adjusted Earnings before Income Taxes.~~ Adjusted earnings before income taxes for the nine months ended March 31, 2021 decreased by $34.3 million as compared to the nine months ended March 31, 2020. Adjusted margin decreased from 28.5% to 26.0%. Adjusted earnings before income taxes decreased primarily due to higher employee-related costs and professional services to support our strategic growth initiatives and other research and development activities as well as our revenue growth. Additional unfavorable impacts were related to higher incentive compensation and employee benefit costs, the effects of the COVID-19 pandemic, an increase in depreciation and amortization from capitalized software additions, and a decline in Partner Program revenue. These impacts were partially offset by growth in the core business and lower travel costs as a result of the COVID-19 pandemic.

~~Adjusted Provision for Income Taxes.~~ The adjusted effective tax rate for the nine months ended March 31, 2021 was 26.2% as compared to 24.7% for the nine months ended March 31, 2020. The adjusted effective tax rate for the nine months ended March 31, 2021 was primarily impacted by $1.7 million of tax expense from the prior year true-up of income taxes payable and $1.4 million of tax expense from recording valuation allowances on U.S. foreign tax credits.

~~Adjusted Net Earnings Attributable to CDK.~~ Adjusted net earnings attributable to CDK for the nine months ended March 31, 2021 decreased by $30.8 million as compared to the nine months ended March 31, 2020. The decrease in adjusted net earnings attributable to CDK was primarily due to the items discussed above in adjusted earnings before income taxes.

~~The table below presents the reconciliation of net earnings attributable to CDK to adjusted EBITDA.~~

Three Months Ended Nine Months Ended
March 31, Change March 31, Change
2021 2020 $ % 2021 2020 $ %
Net earnings attributable to CDK $ 860.9 $ 57.6 $803.3 n/m $ 984.9 $ 161.9 $ 823.0 n/m
Margin % 198.8% 13.5% 78.6% 12.8%
Net earnings attributable to noncontrolling interest (1)
2.0 1.9 0.1 6.1 5.8 0.3
Net earnings (loss) from discontinued operations (2)
(815.8) 17.9 (833.7) (837.1) 34.7 (871.8)
Provision for income taxes (3) (4)
24.1 31.7 (7.6) 73.8 95.5 (21.7)
Interest expense (5)
32.2 35.2 (3.0) 101.2 109.1 (7.9)
Depreciation and amortization (3) (6)
24.6 22.3 2.3 71.1 66.7 4.4
Stock-based compensation expense (3) (7)
10.4 2.2 8.2 31.7 13.2 18.5
Transaction and integration-related costs (3) (8)
2.4 — 2.4 3.6 8.5 (4.9)
Legal and other expenses related to regulatory and competition matters (9)
0.9 4.4 (3.5) 15.6 16.6 (1.0)
Business process modernization program (10)
3.9 4.4 (0.5) 9.4 12.0 (2.6)
Officer transition expense (11)
— — — 1.1 — 1.1
Net adjustments related to loss from equity method investment(12)
18.5 — 18.5 25.7 — 25.7
Loss on extinguishment of debt(13)
2.2 — 2.2 2.2 — 2.2
Adjusted EBITDA $ 166.3 $ 177.6 $(11.3) (6) % $ 489.3 $ 524.0 $ (34.7) (7) %
Adjusted margin % 38.4 % 41.7 % 39.0 % 41.5 %

~~(1) Net earnings attributable to noncontrolling interest included in the financial statements.~~

(2) Net earnings (loss) from discontinued operations associated with our sale of the International Business that closed on March 1, 2021, and the divestiture of the Digital Marketing Business that closed on April 21, 2020. We recorded a pre-tax gain of $965.6 million on the sale of International Business.

~~(3) Excludes amounts attributable to discontinued operations.~~

~~(4) Provision for income taxes included in the financial statements.~~

~~(5) Interest expense included in the financial statements.~~

~~(6) Depreciation and amortization expense included in the financial statements.~~

~~(7) Stock-based compensation expense included in cost of revenue and selling, general and administrative expenses.~~

(8) Transaction and integration-related costs include: (i) legal, accounting, outside service fees, and other costs incurred in connection with assessment and integration of acquisitions and other strategic business opportunities; and (ii) post-close adjustments to acquisition-related contingent consideration, included in cost of revenue and selling, general and administrative expenses.

~~(9) Legal and other expenses related to regulatory and competition matters included in selling, general and administrative expenses and litigation provision.~~

(10) Business process modernization program designed to improve the way we do business for our customers through best-in-class product offerings, processes, governance and systems. The business process modernization program will include a comprehensive redesign in the way we go to market, including the quoting, contracting, fulfilling, and invoicing processes, and the systems and tools we use. The investment to implement this holistic business reform, including the design and implementation of a new ERP system, which began in the first quarter of fiscal 2020, will be completed over a three-year time horizon. The expense is included in cost of revenue and selling, general and administrative expenses.

~~(11) Officer transition expense includes severance expense in connection with officer departures included in cost of revenue and selling, general and administrative expenses.~~

(12) Net adjustments related to loss from equity method investment includes certain portions of earnings, including depreciation and amortization, attributable to an equity interest owned by CDK and a $14.5 million impairment of an equity method investment included in loss from equity method investment.

(13) Loss on extinguishment of debt related to the write-off of unamortized debt financing cost as a result of the repayment of the indebtedness under the three-year and five-year term loan facilities on March 1, 2021.

~~Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020~~

Adjusted EBITDA. Adjusted EBITDA for the three months ended ~~March 31,~~September 30, 2021 ~~decreased~~increased by ~~$11.3~~$2.8 million as compared to the three months ended ~~March 31,~~September 30, 2020. Adjusted margin decreased from ~~41.7%~~40.5% to ~~38.4%~~38.7%. Adjusted ~~earnings before income taxes decreased primarily due to~~EBITDA was favorably impacted by revenue growth, partially offset by higher employee-related costs and ~~professional services to support our strategic growth initiatives~~travel and other research and development activities as well as our revenue growth. Additional unfavorable impacts were related to higher incentive compensation and employee benefit costs, the effects of the COVID-19 pandemic, and a decline in Partner Program revenue. These impacts were partially offset by growth in the core business and lower travel costs as a result of the COVID-19 pandemic.entertainment expenses.

~~Nine Months Ended March 31, 2021 Compared to the Nine Months Ended March 31, 2020~~

~~Adjusted EBITDA.~~ Adjusted EBITDA for the nine months ended March 31, 2021 decreased by $34.7 million compared to the nine months ended March 31, 2020. Adjusted margin decreased from 41.5% to 39.0%. Adjusted EBITDA decreased due to higher employee-related costs and professional services to support our strategic growth initiatives and other research and development activities as well as our revenue growth. Additional unfavorable impacts were related to higher incentive compensation and employee benefit costs, the effects of the COVID-19 pandemic, and a decline in Partner Program revenue. These impacts were partially offset by growth in the core business and lower travel costs as a result of the COVID-19 pandemic.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Refer to Impacts of COVID-19 in the Results of Operations section of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information about liquidity and capital resources.

Capital Structure Overview

Our principal source of liquidity is derived from cash generated through operations. At present, and in future periods, we expect cash generated by our operations, together with cash and cash equivalents and borrowings from the capital markets, including our five-year senior unsecured revolving credit facility ("revolving credit facility"), to be sufficient to cover our cash needs for working capital, capital expenditures, strategic acquisitions, and anticipated quarterly dividends and stock repurchases.

As of ~~March 31,~~September 30, 2021, cash and cash equivalents were ~~$1,131.8~~$80.8 million, total CDK stockholders' equity was ~~$450.4~~$447.4 million, and total debt was ~~$2,089.7~~$1,590.9 million, which is net of unamortized financing costs of ~~$20.4~~$16.5 million. Working capital as of ~~March 31,~~September 30, 2021 was ~~$1,021.3~~$146.4 million, as compared to ~~$179.5~~$201.1 million as of June 30, ~~2020.~~2021. Working capital as presented herein excludes current maturities of long-term debt and finance lease liabilities.

AsOur borrowings consist of ~~March 31, 2021, our borrowings consisted of 4.50%~~5.000% senior notes with a $500.0 million aggregate principal amount due in 2024, ~~5.875% senior notes with a $500.0 million aggregate principal amount due in 2026,~~ 4.875% senior notes with a $600.0 million aggregate principal amount due in 2027, and ~~5.25%~~5.250% senior notes with a $500.0 million aggregate principal amount due in 2029. ~~The interest rates for the 2024 notes increased to 5.00% from 4.50% effective October 15, 2016.~~ Additionally, we have a $750.0 million revolving credit facility, ~~none~~ of which none was drawn as of ~~March 31, 2021.~~

On March 1, 2021, we repaid indebtedness of $566.0 million under the three-year and the five-year term loan facilities. As a result of this repayment, we recorded expenses for the write-off of unamortized debt financing costs of $2.2 million in loss on extinguishment of debt in the Consolidated Statements of Operations.

On March 24, 2021, the Company issued a call notice to holders of the 5.875% unsecured senior notes with a $500.0 million aggregate principal amount due in 2026 (the "2026 notes") to exercise its irrevocable right to repay the indebtedness prior to the maturity date. As of March 31, 2021, the 2026 notes were reclassified from long-term debt and finance lease liabilities to current maturities of long-term debt and finance lease liabilities on the Consolidated Balance Sheets. On April 23, 2021, the Company paid all indebtedness under the 2026 notes. The redemption was funded from cash on hand and will lower annual interest expense by approximately $29.4 million. As a result of this repayment, we expect to record expenses of $18.5 million for the call premium and $4.8 million for the write-off of unamortized debt financing costs in the fourth quarter of fiscalSeptember 30, 2021.

The revolving credit facility contains various covenants and restrictive provisions that limit our subsidiaries' ability to incur additional indebtedness, our ability to consolidate or merge with other entities, and our subsidiaries' ability to incur liens, enter into sale and leaseback transactions, and enter into agreements restricting the ability of our subsidiaries to pay dividends. If we fail to perform the obligations under these and other covenants, the revolving credit facility could be terminated and any outstanding borrowings, together with accrued interest, ~~under the credit facilities~~ could be declared immediately due and payable. ~~The credit facilities also have, in~~In addition to customary events of default on the revolving credit facility, an event of default may also be triggered by the acceleration of the maturity of any other indebtedness we may have in an aggregate principal amount in excess of $75.0 million.

The ~~credit facilities also contain~~ financial covenants ~~that~~ provide that (i) the ratio of our total consolidated indebtedness to consolidated EBITDA (the "Leverage Ratio") ~~shall~~may not exceed 3.75 to 1.00. Upon the occurrence of certain acquisitions for each of the four consecutive fiscal quarters immediately following such certain acquisitions (including the fiscal quarter in which such certain acquisition was

consummated), the ratio set forth above will be increased to 4.25 to 1.00, and (ii) the ratio of our consolidated EBITDA to consolidated interest expense ~~shall~~may not be ~~a minimum of~~less than 3.00 to 1.00.

On May 4, 2020, we entered into an amendment of our credit facilities that temporarily increased the maximum ratio of total consolidated indebtedness to consolidated EBITDA (the "Leverage Ratio”) in order to provide additional financial flexibility. Under the amendment, the Leverage Ratio may The related debt financing costs were not exceed: (i) 4.75 to 1.00 for the quarters ended March 31, 2020 through March 31, 2021; and (ii) 4.25 to 1.00 for the quarters ending June 30, 2021 through September 30, 2021. During this period, if at any time the Leverage Ratio exceeds 4.25 to 1.00 or our senior unsecured credit rating is downgraded below BB+ by S&P and below Ba1 by Moody’s, we would be required to provide the creditor banks with a security interest over substantially all of its property to secure the loans and other obligations under the credit agreement and to provide subsidiary guaranteesmaterial to the ~~creditor banks. We agreed that interest on the credit facilities would be increased by 0.50% and commitment fees by 0.05% until the earlier of: (i) the delivery of our~~consolidated financial statements for the fiscal quarter ending December 31, 2021; and (ii) the provision of the relevant liens and subsidiary guarantees to the creditor banks. We believe we are in compliance with our covenants as of March 31, 2021.

statements.

Our long-term credit ratings and senior unsecured debt ratings are Ba1 (Stable Outlook) with Moody's, and BB+ ~~(Negative~~(Stable Outlook) with S&P, which are non-investment ~~grades.~~grade.

In the normal course of business, we also enter into contracts in which we make representations and warranties that relate to the performance of our services and products. We do not expect any material losses related to such representations and warranties.

Return of Capital Plan.Our return of capital plan is a component of our broader capital allocation strategy. Our top priorities for capital allocation will continue to be a thoughtful balance between: (i) organic investments that will continue to accelerate the growth and performance of the business; (ii) inorganic opportunities that are synergistic with our portfolio and would meaningfully provide additional profitable revenue and increased long-term value; and (iii) return of capital to shareholders through a mix of common stock repurchases and dividends, while targeting a leverage ratio, measured as financial debt, net of cash, divided by adjusted EBITDA, at a range of 2.5x to 3.0x net debt to adjusted EBITDA over the long-term.

Stock Repurchase Program. In January 2017, the Board of Directors authorized us to repurchase up to $2.0 billion of our common stock as part of our return of capital plan, whereby we have repurchased approximately ~~$1.5~~$1.6 billion of common stock through ~~March 31,~~September 30, 2021. Under the ~~terms~~authorization, and subject to the restrictions of ~~the May 4, 2020 amendments to~~ our credit agreements, as amended, we ~~are restricted from making repurchases of~~may continue to purchase our common stock in ~~excess~~the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The actual timing, number, and price of ~~$40.0 million in~~ any ~~fiscal year through~~shares repurchased will be determined at management's discretion and will depend on a number of factors, which may include the ~~earlier of: (a) delivery~~market price of the ~~financial statements~~shares, general market and economic conditions, the availability and cost of additional indebtedness, and other potential uses for free cash flow including, but not limited to, potential acquisitions. In the fiscal quarter ending December 31, 2021, provided certain conditions are met; and (b) the provision of the relevant liens and subsidiary guarantees to the creditor banks. We anticipate refinancing these credit agreements in the fourththird quarter of fiscal 2021, ~~and removing the restrictions on repurchases of our common stock~~. ~~As a result,~~ we ~~have~~ announced ~~our intention~~that we expect to ~~purchase~~repurchase $200 million to $250 million of our common stock over ~~the next~~a period of 12 to 18 months. We made stock repurchases of $88.3 million during the three months ended September 30, 2021 as part of this program.

Dividends to Common Stockholders. ~~For fiscal 2021, we expect to declare and pay dividends with an aggregate value of approximately $73.0 million.~~ The Board of Directors most recently declared a quarterly cash dividend of $0.15 per share ~~which was~~ payable on ~~March~~September 30, 2021 to shareholders of record at the close of business on ~~March 8,~~September 1, 2021. We paid dividends of ~~$54.8~~$18.1 million and ~~$54.7~~$18.2 million during the ~~nine~~three months ended ~~March 31,~~September 30, 2021 and 2020, respectively.

Cash Flows. Our cash flows from operating, investing, and financing activities, as reflected in the Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~March 31,~~September 30, 2021 and 2020, are summarized as follows:


		Nine Months Ended							Three Months Ended
		March 31,				Change			September 30,
		2021		2020		$			2021		2020		$ Change
Cash provided by (used in):	Cash provided by (used in):							Cash provided by (used in):
Operating activities, continuing operations	Operating activities, continuing operations	$	253.9	$	240.8	$	13.1	Operating activities, continuing operations	$	71.0	$	89.8	$	(18.8)
Operating activities, discontinued operations	Operating activities, discontinued operations	6.9		70.9		(64.0)		Operating activities, discontinued operations	0.5		9.9		(9.4)
Investing activities, continuing operations	Investing activities, continuing operations	(84.3)		(76.4)		(7.9)		Investing activities, continuing operations	(31.5)		(20.4)		(11.1)
Investing activities, discontinued operations	Investing activities, discontinued operations	1,380.9		(12.3)		1,393.2		Investing activities, discontinued operations	—		(1.6)		1.6
Financing activities, continuing operations	Financing activities, continuing operations	(656.4)		(232.0)		(424.4)		Financing activities, continuing operations	(117.7)		(23.1)		(94.6)
Financing activities, discontinued operations		—		(1.1)		1.1
Effect of exchange rate changes on cash, cash equivalents and restricted cash		21.1		(15.6)		36.7
Net change in cash, cash equivalents and restricted cash		$	922.1	$	(25.7)	$	947.8
Effect of exchange rate changes on cash, cash equivalents and restricted cash, including cash classified in current assets held for sale								Effect of exchange rate changes on cash, cash equivalents and restricted cash, including cash classified in current assets held for sale	(0.5)		8.6		(9.1)
Net change in cash, cash equivalents and restricted cash, including cash classified in current assets held for sale								Net change in cash, cash equivalents and restricted cash, including cash classified in current assets held for sale	$	(78.2)	$	63.2	$	(141.4)

Net cash flows provided by operating activities from continuing operations ~~increased~~decreased by ~~$13.1~~$18.8 million primarily due to ~~an increase of $32.0 million in net working capital components,~~the cash payments made for employee bonus compensation, timing of payments made to our vendors and tax authorities, and cash received from our customers in the normal course of ~~business including those related to our transition services agreement in connection with the sale of the Digital Marketing Business and the International Business,~~business. The decrease was partially offset by ~~lower~~higher net earnings adjusted for non-cash charges.

Net cash flows provided by operating activities from discontinued operations decreased by ~~$64.0~~$9.4 million due to ~~lower cash flows as a result of~~ the sale of the ~~Digital Marketing~~International Business induring the ~~fourth~~third quarter of fiscal ~~2020.~~2021.

Net cash flows used in investing activities from continuing operations increased by ~~$7.9~~$11.1 million ~~primarily attributable~~due to ~~the acquisition of Square Root,~~ an increase in capitalized software, ~~and capital expenditures~~a payment related to the acquisition of Roadster, partially offset by ~~business investments~~a decrease in ~~fiscal 2020.~~

Net cash flows provided by investing activities from discontinued operations increased by $1.4 billion due to the receipt of $1.4 billion of net proceeds from the sale of the International Business in the third quarter of fiscal 2021.

capital expenditures.

Net cash flows used in financing activities increased by ~~$424.4~~$94.6 million primarily due to our stock repurchase plan which was reinstituted in the ~~repayment~~fourth quarter of ~~our term loans in~~ fiscal 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no significant changes to our quantitative and qualitative disclosures about market risk during the ~~third~~first quarter of fiscal ~~2021.~~2022. Please refer to Part II, Item 7A Quantitative and Qualitative Disclosures about Market Risk included in our Annual Report on Form 10-K for our fiscal year ended June 30, ~~2020~~2021 for a more complete discussion of the market risks we encounter.

Item 4. Controls and Procedures

Management's Evaluation of Disclosure Controls and Procedures. The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "evaluation"). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2021 in ensuring that (i) information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure, and (ii) such information is recorded, processed, summarized and reported in the time periods specified in Securities and Exchange Commission's rules and forms.

Changes in Internal Control Over Financial Reporting. During the three months ended ~~March 31,~~September 30, 2021, there were no significant changes to the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Except as noted below, all other items are either inapplicable or would result in negative responses and, therefore, have been omitted.

Item 1. Legal Proceedings

For a description of our legal proceedings, see Note ~~12,~~11 Commitments and Contingencies, of the ~~Notes~~notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

In addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the "Risk Factors" disclosed under "Item 1A. Risk Factors" of our Annual Report on Form 10-K filed with the SEC on August ~~6, 2020.~~18, 2021. You should be aware that these risk factors and other information may not describe every risk facing our Company. There have been no material changes to the risk factors we have disclosed in the "Risk Factors" section of our Form 10-K filed with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents a summary of common stock repurchases made during the three months ended ~~March 31,~~September 30, 2021.

Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares as Part of Publicly Announced Programs (2)
Maximum Number (or Approximate Dollar Value) that May Yet Be Purchased Under the Program (2)
January 1 - 31, 2021 712 $ 51.33 — $ 502,297,495
February 1 - 28, 2021 — $ — — $ 502,297,495
March 1 - 31, 2021 4,879 $ 52.72 — $ 502,297,495
Total 5,591 —


Period	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares as Part of Publicly Announced Programs (2)	Maximum Number (or Approximate Dollar Value) that May Yet Be Purchased Under the Program (2)
July 1 - 31, 2021	473,704	$	49.06	471,080	$	467,086,234
August 1 - 31, 2021	349,827	$	45.85	280,983	$	453,880,788
September 1 - 30, 2021	1,321,735	$	42.94	1,209,884	$	401,856,874
Total	2,145,266			1,961,947

(1) Pursuant to the ~~Company's~~our 2014 Omnibus Award Plan, shares of our common stock may be withheld upon exercise of stock options or vesting of restricted stock to satisfy tax withholdings. Shares withheld for such purposes ~~make up~~have been included in the total number of shares purchased.

(2) In January 2017, the Board of Directors authorized us to repurchase up to $2.0 billion of our common stock under a return of capital program. This authorization will expire when it is exhausted or at such time as it is revoked by the Board of Directors.

3726

Item 6. Exhibits

The following exhibits are filed with this Quarterly Report on Form 10-Q or incorporated herein by reference to the document set forth next to the exhibit in the list below:

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed Herewith

~~10.1~~

~~Letter Agreement, dated March 1, 2021, between CDK Global, Inc. and Concorde Bidco Limited~~

31.1

Certification by Brian Krzanich pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

31.2

Certification by Eric J. Guerin pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

32.1

Certification by Brian Krzanich pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification by Eric J.J . Guerin pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL instance document - The instance document does not appear in the interactive data file because its XBRL tags are embedded in the Inline XBRL document.

101.SCH

Inline XBRL taxonomy extension schema document

101.CAL

Inline XBRL taxonomy extension calculation linkbase document

101.LAB

Inline XBRL taxonomy label linkbase document

101.PRE

Inline XBRL taxonomy extension presentation linkbase document

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Inline XBRL taxonomy extension definition linkbase document

104

The cover page from this Current Report on Form 10-Q, formatted as Inline XBRL.

3827

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		CDK GLOBAL, INC.

Date:	~~May 6,~~November 2, 2021	/s/ Eric J. Guerin
		Eric J. Guerin
		Executive Vice President, Chief Financial Officer (principal financial officer)

Date:	~~May 6,~~November 2, 2021	/s/ Neil Fairfield
		Neil Fairfield
		Vice President, Corporate Controller and Chief Accounting Officer ~~(principal~~ (principal accounting officer)

3928


		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Operations	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Cash Flows	5
	Consolidated Statements of Stockholders' ~~Stoc~~kh ~~olders'~~Equity ~~(Deficit)~~	7
	Notes to the Consolidated Financial Statements	98
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2117
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3627
Item 4.	Controls and Procedures	3627
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	3627
Item 1A.	Risk Factors	3627
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3627
Item 6.	Exhibits	3829
Signatures		3930


	March 31, 2021		June 30, 2020
Accounts receivable (including unbilled receivables)	$	248.7	$	242.0

Short-term contract assets (included in other current assets)	63.2		42.6
Long-term contract assets (included in other assets)	23.6		34.6
Short-term contract liabilities (included in short-term deferred revenue)	(39.6)		(44.6)
Long-term contract liabilities (included in long-term deferred revenue)	(41.7)		(39.4)


	Three Months Ended				Nine Months Ended
	March 31,					March 31,
	2021		2020				2021		2020














Subscription	$	332.1	$	331.7			$	984.3	$	1,000.9
On-site license and installation	1.4		2.4				4.6		7.5
Transaction	43.3		38.1				126.3		120.6
Other	56.3		54.2				137.9		133.3
Total	$	433.1	$	426.4			$	1,253.1	$	1,262.3


	March 31, 2021		June 30, 2020
Revolving credit facility, matures 2023	$	0	$	15.0
Three-year term loan facility, due 2021	0		300.0
Five-year term loan facility, due 2023	0		273.8

4.50% senior notes, due 2024	500.0		500.0
5.875% senior notes, due 2026	500.0		500.0
4.875% senior notes, due 2027	600.0		600.0
5.250% senior notes due 2029	500.0		500.0
Finance lease liabilities	10.1		14.1
Unamortized debt financing costs	(20.4)		(27.1)
Total debt and finance lease liabilities	$	2,089.7	$	2,675.8
Current maturities of long-term debt and finance lease liabilities	500.3		20.7
Total long-term debt and finance lease liabilities	$	1,589.4	$	2,655.1