CDK Global, Inc. reports 28.8% Net Income growth in 2018 and 2.4% Revenue growth
08/14/2018 • About CDK Global, Inc. (
$CDK) • By InTwits
CDK Global, Inc. reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is expanding: 29.6% in FY2018 vs. 25.2% in FY2017 vs. 20.4% in FY2014
- CDK Global, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's in pair with industry average of 3.6%
- CAPEX is quite volatile: $31m in 2018, $42m in 2017, $36m in 2016, $68m in 2015, $61m in 2014
- In the last 5 years the company invested considerably less than D&A: $240m vs. $342m. In FY2018 this situation was still the same: CAPEX was 46 while D&A was 79
- The company has highly profitable business model: ROIC is 26.5%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.7x while industry average is -2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
CDK Global, Inc.'s Revenue increased on 2.4%. Revenue growth showed slowdown in FY18Q4 - it was 0.7% YoY. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 4.4 pp from 25.2% to 29.6% in FY2018. EBITDA Margin stuck to a growing trend at 2.4 pp per annum in the last 5 years.
Gross Margin increased on 3.6 pp from 44.4% to 48.0% in FY2018. Gross Margin stuck to a growing trend at 2.4 pp per annum in the last 5 years. SG&A as a % of Revenue decreased slightly on 0.59 pp from 21.5% to 20.9% in FY2018. During FY2014-FY2018 SG&A as a % of Revenue topped in FY2017 at 21.5%. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 0.92 pp from 2.5% to 1.6% in FY2018. During the last 5 years SBC as a % of Revenue topped in FY2017 at 2.5%.
Net Income margin increased on 3.4 pp from 13.3% to 16.8% in FY2018. During FY2014-FY2018 Net Income margin bottomed in FY2015 at 8.6% and was growing since that time. The efficient tax rate was 24.5% in FY2018 while the average for the last five years was 31.6%.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 2.0% in FY2018. CDK Global, Inc. showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average CAPEX/Revenue for the last three years was 2.4%. During the last 5 years CAPEX as a % of Revenue topped in FY2017 at 2.8%.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Accounts payable as a % of Revenue increased slightly on 1.1 pp from 3.2% to 4.3% in FY2018.
CDK Global, Inc. has spent
$29m on M&A in FY2018 which accounts for 1.3% of revenue.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.7x and Debt / EBITDA is 3.9x. Net Debt / EBITDA jumped on 0.1x from 2.6x to 2.7x in FY2018. Debt jumped on 20.7% while cash jumped on 10.8%. Net Debt/EBITDA followed a growing trend at 0.8x per annum in FY2014-FY2018.
CDK Global, Inc. has good short term financial stability: Interest coverage ratio (ICR) is 6.2x. CDK Global, Inc. has no short term refinancing risk: cash is higher than short term debt (1,779.6%).
Average interest expence charged on company's debt was 3.7% in FY2018.
Valuation and dividends
CDK Global, Inc.'s trades at EV/EBITDA 14.5x and P/E 20.9x.
The company paid 21.0% of Net Income as dividends in FY2018.
Management team
CEO total compensation was
$2,206,082 in FY2018 which included
$925,000 salary. CDK Global, Inc.'s CFO is Joseph A Tautges. Joseph A Tautges has 2 years tenure at the company.
The company has 0.46% shares owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 8,500 employees. The number of employees decreased on 4.5%. Average revenue per employee in FY2018 was
$267,435 and it increased on 7.2%.
Financial and operational results
FY ended 06/30/2018
CDK Global, Inc. ($CDK) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,977 | 2,064 | 2,115 | 2,220 | 2,273 | 2.4% |
| Gross Profit | 772 | 790 | 871 | 985 | 1,091 | 10.7% |
| SG&A | 412 | 431 | 449 | 478 | 476 | -0.4% |
| EBITDA | 403 | 399 | 467 | 560 | 674 | 20.4% |
| EBIT | 351 | 322 | 403 | 489 | 595 | 21.5% |
| Interest expence | 1 | 29 | 40 | 57 | 96 | 67.7% |
| Tax | 117 | 114 | 122 | 133 | 123 | -7.2% |
| Net Income | 228 | 178 | 239 | 296 | 381 | 28.8% |
| Stock Based Compensation | 21 | 30 | 36 | 55 | 36 | -35.6% |
Balance Sheet
|
|---|
| Cash | 403 | 408 | 219 | 726 | 804 | 10.8% |
| Accounts Receivable | 311 | 315 | 366 | 372 | 375 | 0.7% |
| Accounts Payable | 17 | 22 | 39 | 39 | 51 | 29.8% |
| Short Term Debt | 22 | 13 | 27 | 47 | 45 | -2.8% |
| Long Term Debt | 0 | 971 | 1,190 | 2,125 | 2,576 | 21.2% |
Cash flow
|
|---|
| Capex | 37 | 44 | 51 | 62 | 46 | -26.3% |
| Dividends | | 883 | 82 | 81 | 80 | -1.2% |
| Acquisitions | 26 | 37 | 18 | | 29 | |
Ratios
|
|---|
| Revenue growth | 7.5% | 4.4% | 2.5% | 5.0% | 2.4% | |
| EBITDA growth | 6.9% | -1.1% | 17.0% | 19.9% | 20.4% | |
|
|---|
| Gross Margin | 39.1% | 38.3% | 41.2% | 44.4% | 48.0% | 3.6% |
| EBITDA Margin | 20.4% | 19.3% | 22.1% | 25.2% | 29.6% | 4.4% |
| EBIT Margin | 17.8% | 15.6% | 19.0% | 22.0% | 26.2% | 4.1% |
| SG&A, % of revenue | 20.8% | 20.9% | 21.2% | 21.5% | 20.9% | -0.6% |
| SBC, % of revenue | 1.1% | 1.5% | 1.7% | 2.5% | 1.6% | -0.9% |
| Net Income Margin | 11.5% | 8.6% | 11.3% | 13.3% | 16.8% | 3.4% |
| CAPEX, % of revenue | 1.9% | 2.1% | 2.4% | 2.8% | 2.0% | -0.8% |
|
|---|
| ROIC | 21.7% | 18.7% | 24.2% | 25.8% | 26.5% | 0.7% |
| ROE | 13.7% | 13.9% | 42.4% | | | |
| Net Debt/EBITDA | -0.9x | 1.4x | 2.1x | 2.6x | 2.7x | 0.1x |
| Interest expence / Average debt | 4.6% | 5.7% | 3.7% | 3.4% | 3.7% | 0.3% |
People
|
|---|
| Insider ownership | 0.5% | 0.5% | 0.5% | 0.5% | 0.5% | 0.0% |
| Employees | | 8,900 | 8,700 | 8,900 | 8,500 | -4.5% |
| Revenue/Employee, th. $ | | 232 | 243 | 249 | 267 | 7.2% |
CDK Global, Inc. ($CDK) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 566 | 562 | 577 | 569 | | 2.7% | 2.5% | 3.6% | 0.7% |
| EBITDA | 157 | 161 | 216 | 179 | | 14.1% | 8.0% | 52.2% | 36.4% |
| Net Income | 81 | 104 | 96 | 99 | | 5.7% | 25.8% | 24.3% | 69.3% |
Balance Sheet
|
|---|
| Cash | 789 | 444 | 461 | 804 | | 221.1% | 35.4% | 19.8% | 10.8% |
| Short Term Debt | 46 | 46 | 46 | 45 | | 72.4% | -1.9% | -2.8% | -2.8% |
| Long Term Debt | 2,114 | 2,104 | 2,093 | 2,576 | | 78.6% | 35.2% | 35.5% | 21.2% |
Ratios
|
|---|
| Gross Margin | 45.6% | 48.2% | 48.8% | 49.3% | | 2.8% | 3.6% | 4.1% | 3.9% |
| EBITDA Margin | 27.8% | 28.6% | 37.5% | 31.4% | | 2.8% | 1.4% | 12.0% | 8.2% |
| Net Income Margin | 14.4% | 18.5% | 16.7% | 17.5% | | 0.4% | 3.4% | 2.8% | 7.1% |
Peers in Application Software
Below we provide CDK Global, Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 14.0% | 14.3% | 15.7% | 15.2% |
|---|
| CDK Global, Inc. ($CDK) | | 4.4% | 2.5% | 5.0% | 2.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 63.4% | 61.9% | 64.2% | 64.6% | 66.0% |
|---|
| CDK Global, Inc. ($CDK) | 39.1% | 38.3% | 41.2% | 44.4% | 48.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| CDK Global, Inc. ($CDK) | 20.4% | 19.3% | 22.1% | 25.2% | 29.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 3.0% | 2.3% | 2.4% |
|---|
| CDK Global, Inc. ($CDK) | 1.9% | 2.1% | 2.4% | 2.8% | 2.0% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -9.8% |
|---|
| CDK Global, Inc. ($CDK) | 21.7% | 18.7% | 24.2% | 25.8% | 26.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.9x | -0.7x |
|---|
| CDK Global, Inc. ($CDK) | -0.9x | 1.4x | 2.1x | 2.6x | 2.7x |
