CDK Global Inc. avoided a major financial hit from the coronavirus pandemic and related economic recession as the dealership management giant ended its fiscal year.
The Hoffman Estates, Ill., company on Tuesday reported revenue of $449.6 million for its fiscal fourth quarter ended June 30, down 8 percent from the same quarter a year ago. North American revenue was $376.7 million, also down 8 percent from a year ago.
But CDK swung to a quarterly profit of $45.6 million in net earnings attributable to CDK from a loss of $155.1 million in the year-ago quarter, aided by the completed sale of CDK's digital marketing business in April. The unit had dragged on the company's profit in recent quarters as CDK wound down the operation and searched for a buyer.
"We exceeded our expectations during the quarter, even given the challenges that faced the industry and the support we gave our customers, highlighting the strength and resilience of our business model," CDK CEO Brian Krzanich said in a statement. "CDK is leading the digital transformation that was accelerated within the industry by the COVID-19 pandemic and we continued to bring integrated and accurate digital solutions to our dealers."
CDK shares gained 5.5 percent in after-hours trading Tuesday.
For CDK's 2020 fiscal year, the company reported revenue of $1.96 billion, up 2 percent from the previous year. Its net earnings attributable to CDK were up 67 percent from a year ago, to $207.5 million.
In May, responding to the global virus pandemic, CDK said it would lower its revenue projections for its 2020 fiscal year to between $1.92 billion and $1.97 billion, compared with previous guidance of $2 billion to $2.05 billion in revenue. CDK said projections for net income attributable to CDK for the 2020 fiscal year were reduced to $165 million to $205 million.
"Our annual results came in at the high end or exceeded our guidance," CDK CFO Joe Tautges said in a statement. "We came through the quarter in a much better position than expected and our underlying business remains strong. Our investment strategy continues to provide the solutions and capabilities necessary to deliver solid revenue growth."
CDK's net earnings from continuing operations, which do not include the digital marketing business, soared to $61.2 million in the quarter from $3.3 million in the year-ago period. The company reported a $14.4 million quarterly net loss in its digital marketing business, better than the $156.3 million net loss a year ago.
During the quarter, CDK sold its digital marketing business, which includes advertising and dealership websites, to Ansira Partners Inc., a marketing agency owned by private equity investors. Ansira renamed the business Sincro.
The pandemic prompted CDK's dealership customers to close showrooms in some states and slash vehicle sales. CDK responded by discounting fees for dealerships, and Krzanich said he would take a salary and cash bonuses of $1 for the rest of 2020.
The number of North American DMS customer sites, including automotive and adjacent industries, dipped for the second straight quarter, to 14,719, though the company counted more total sites than the same quarter last year. The number of North American automotive DMS customer sites rose by three from the quarter ending March 31, to 8,951 as of June 30.