FALSE0001609702--06-302020FY22.18.8275.2250.80.010.0150.050.00.010.01650.0650.0160.3160.3121.1140.039.220.3us-gaap:AccountingStandardsUpdate201409Member0.5900.600.60P3Y2040472511111P3YP2Yus-gaap:OtherLiabilitiesNoncurrentus-gaap:OtherAssetsNoncurrentus-gaap:PropertyPlantAndEquipmentNetcdk:AccruedLiabilitiesandOtherLiabilitiesCurrentus-gaap:LongTermDebtAndCapitalLeaseObligationsCurrentus-gaap:LongTermDebtAndCapitalLeaseObligations3.304.504.8755.8755.25000016097022019-07-012020-06-30iso4217:USD00016097022019-12-31xbrli:shares00016097022020-08-03cdk:business00016097022020-06-300001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2020-06-3000016097022018-07-012019-06-3000016097022017-07-012018-06-3000016097022020-04-012020-06-30iso4217:USDxbrli:shares00016097022019-06-3000016097022018-06-3000016097022017-06-300001609702us-gaap:CommonStockMember2017-06-300001609702us-gaap:AdditionalPaidInCapitalMember2017-06-300001609702us-gaap:RetainedEarningsMember2017-06-300001609702us-gaap:TreasuryStockMember2017-06-300001609702us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-06-300001609702us-gaap:ParentMember2017-06-300001609702us-gaap:NoncontrollingInterestMember2017-06-300001609702us-gaap:RetainedEarningsMember2017-07-012018-06-300001609702us-gaap:ParentMember2017-07-012018-06-300001609702us-gaap:NoncontrollingInterestMember2017-07-012018-06-300001609702us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-07-012018-06-300001609702us-gaap:AdditionalPaidInCapitalMember2017-07-012018-06-300001609702us-gaap:TreasuryStockMember2017-07-012018-06-300001609702us-gaap:CommonStockMember2018-06-300001609702us-gaap:AdditionalPaidInCapitalMember2018-06-300001609702us-gaap:RetainedEarningsMember2018-06-300001609702us-gaap:TreasuryStockMember2018-06-300001609702us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-06-300001609702us-gaap:ParentMember2018-06-300001609702us-gaap:NoncontrollingInterestMember2018-06-300001609702us-gaap:RetainedEarningsMember2018-07-012019-06-300001609702us-gaap:ParentMember2018-07-012019-06-300001609702us-gaap:NoncontrollingInterestMember2018-07-012019-06-300001609702us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-07-012019-06-300001609702us-gaap:AdditionalPaidInCapitalMember2018-07-012019-06-300001609702us-gaap:TreasuryStockMember2018-07-012019-06-300001609702us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2018-06-300001609702srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2018-06-300001609702us-gaap:ParentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2018-06-300001609702srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2018-06-300001609702us-gaap:CommonStockMember2019-06-300001609702us-gaap:AdditionalPaidInCapitalMember2019-06-300001609702us-gaap:RetainedEarningsMember2019-06-300001609702us-gaap:TreasuryStockMember2019-06-300001609702us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300001609702us-gaap:ParentMember2019-06-300001609702us-gaap:NoncontrollingInterestMember2019-06-300001609702us-gaap:RetainedEarningsMember2019-07-012020-06-300001609702us-gaap:ParentMember2019-07-012020-06-300001609702us-gaap:NoncontrollingInterestMember2019-07-012020-06-300001609702us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012020-06-300001609702us-gaap:AdditionalPaidInCapitalMember2019-07-012020-06-300001609702us-gaap:TreasuryStockMember2019-07-012020-06-300001609702us-gaap:CommonStockMember2020-06-300001609702us-gaap:AdditionalPaidInCapitalMember2020-06-300001609702us-gaap:RetainedEarningsMember2020-06-300001609702us-gaap:TreasuryStockMember2020-06-300001609702us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001609702us-gaap:ParentMember2020-06-300001609702us-gaap:NoncontrollingInterestMember2020-06-30cdk:operating_segment0001609702srt:MinimumMember2019-07-012020-06-300001609702srt:MaximumMember2019-07-012020-06-300001609702us-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel2Member2020-06-300001609702us-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel2Member2019-06-300001609702us-gaap:SeniorNotesMember2020-06-300001609702us-gaap:SeniorNotesMember2019-06-300001609702us-gaap:BuildingMembersrt:MinimumMember2019-07-012020-06-300001609702us-gaap:BuildingMembersrt:MaximumMember2019-07-012020-06-300001609702us-gaap:FurnitureAndFixturesMembersrt:MinimumMember2019-07-012020-06-300001609702us-gaap:FurnitureAndFixturesMembersrt:MaximumMember2019-07-012020-06-300001609702us-gaap:TechnologyEquipmentMembersrt:MinimumMember2019-07-012020-06-300001609702us-gaap:TechnologyEquipmentMembersrt:MaximumMember2019-07-012020-06-300001609702us-gaap:DiscontinuedOperationsDisposedOfBySaleMembercdk:DigitalMarketingBusinessMember2020-04-210001609702us-gaap:DiscontinuedOperationsDisposedOfBySaleMembercdk:DigitalMarketingBusinessMember2020-04-212020-04-21xbrli:pure0001609702cdk:AnsiraMemberus-gaap:DiscontinuedOperationsDisposedOfBySaleMembercdk:DigitalMarketingBusinessMember2020-04-212020-04-210001609702us-gaap:DiscontinuedOperationsHeldforsaleMembercdk:DigitalMarketingBusinessMember2019-07-012020-03-310001609702us-gaap:DiscontinuedOperationsHeldforsaleMembercdk:DigitalMarketingBusinessMember2020-04-012020-06-300001609702us-gaap:DiscontinuedOperationsHeldforsaleMembercdk:DigitalMarketingBusinessMember2019-07-012020-06-300001609702us-gaap:DiscontinuedOperationsHeldforsaleMembercdk:DigitalMarketingBusinessMember2018-07-012019-06-300001609702us-gaap:DiscontinuedOperationsHeldforsaleMembercdk:DigitalMarketingBusinessMember2017-07-012018-06-300001609702us-gaap:DiscontinuedOperationsHeldforsaleMembercdk:DigitalMarketingBusinessMember2019-06-300001609702cdk:ELEAD1ONEMember2018-09-142018-09-140001609702cdk:ELEAD1ONEMember2018-09-140001609702cdk:ELEAD1ONEMember2018-07-012019-06-300001609702cdk:ELEAD1ONEMember2019-06-3000016097022018-12-012018-12-310001609702cdk:ELEAD1ONEMembercdk:JointVentureContributionsMember2018-09-140001609702cdk:ELEAD1ONEMember2019-07-012020-06-300001609702cdk:ELEAD1ONEMemberus-gaap:CostOfSalesMember2019-07-012020-06-300001609702cdk:ELEAD1ONEMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-07-012020-06-300001609702cdk:ELEAD1ONEMemberus-gaap:CostOfSalesMember2018-07-012019-06-300001609702cdk:ELEAD1ONEMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-07-012019-06-300001609702cdk:ProgressusMediaLLCMember2018-04-032018-04-030001609702cdk:ProgressusMediaLLCMember2018-04-030001609702srt:OfficerMember2018-04-032018-04-030001609702cdk:ProgressusMediaLLCMember2019-06-300001609702cdk:ProgressusMediaLLCMember2019-07-012020-06-300001609702cdk:DashboardDealershipEnterprisesMember2017-10-202017-10-200001609702cdk:DashboardDealershipEnterprisesMember2017-10-200001609702cdk:DashboardDealershipEnterprisesMember2019-06-3000016097022021-07-012020-06-3000016097022022-07-012020-06-3000016097022023-07-012020-06-3000016097022024-07-012020-06-3000016097022025-07-012020-06-3000016097022026-07-012020-06-3000016097022014-07-012015-06-300001609702us-gaap:SegmentContinuingOperationsMember2018-07-012019-06-300001609702us-gaap:SegmentDiscontinuedOperationsMember2018-07-012019-06-300001609702us-gaap:SegmentContinuingOperationsMember2017-07-012018-06-300001609702us-gaap:SegmentDiscontinuedOperationsMember2017-07-012018-06-300001609702us-gaap:SegmentContinuingOperationsMember2019-06-300001609702us-gaap:SegmentDiscontinuedOperationsMember2019-06-300001609702us-gaap:OneTimeTerminationBenefitsMember2020-05-020001609702cdk:EmployeeSeveranceandTerminationBenefitsMember2018-06-300001609702us-gaap:ContractTerminationMember2018-06-300001609702cdk:EmployeeSeveranceandTerminationBenefitsMember2018-07-012019-06-300001609702us-gaap:ContractTerminationMember2018-07-012019-06-300001609702cdk:EmployeeSeveranceandTerminationBenefitsMember2019-06-300001609702us-gaap:ContractTerminationMember2019-06-300001609702cdk:EmployeeSeveranceandTerminationBenefitsMember2019-07-012020-06-300001609702us-gaap:ContractTerminationMember2019-07-012020-06-300001609702cdk:EmployeeSeveranceandTerminationBenefitsMember2020-06-300001609702us-gaap:ContractTerminationMember2020-06-300001609702cdk:TwentyFourteenOmnibusAwardPlanMemberus-gaap:StockCompensationPlanMember2020-06-300001609702cdk:TwentyFourteenOmnibusAwardPlanMemberus-gaap:StockCompensationPlanMember2019-07-012020-06-300001609702cdk:TwentyFourteenOmnibusAwardPlanMember2014-10-012014-10-010001609702cdk:TimeBasedStockOptionsMember2019-07-012020-06-300001609702cdk:PerformanceBasedStockOptionsMember2019-07-012020-06-300001609702srt:MinimumMembercdk:TimeBasedStockOptionsMember2019-07-012020-06-300001609702srt:MaximumMembercdk:TimeBasedStockOptionsMember2019-07-012020-06-300001609702srt:MinimumMembercdk:TimeBasedRestrictedStockandTimeBasedRestrictedStockUnitsMember2019-07-012020-06-300001609702srt:MaximumMembercdk:TimeBasedRestrictedStockandTimeBasedRestrictedStockUnitsMember2019-07-012020-06-300001609702cdk:PerformanceBasedRestrictedStockUnitsMembersrt:MaximumMember2019-07-012020-06-300001609702cdk:PerformanceBasedRestrictedStockUnitsMembersrt:MinimumMember2019-07-012020-06-300001609702us-gaap:CostOfSalesMember2019-07-012020-06-300001609702us-gaap:CostOfSalesMember2018-07-012019-06-300001609702us-gaap:CostOfSalesMember2017-07-012018-06-300001609702us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-07-012020-06-300001609702us-gaap:SellingGeneralAndAdministrativeExpensesMember2018-07-012019-06-300001609702us-gaap:SellingGeneralAndAdministrativeExpensesMember2017-07-012018-06-300001609702cdk:EquityClassifiedAwardsExpenseMember2019-07-012020-06-300001609702cdk:LiabilityClassifiedAwardsExpenseMember2019-07-012020-06-300001609702cdk:PerformanceBasedRestrictedStockUnitsMember2019-07-012020-06-300001609702cdk:EquityClassifiedAwardsExpenseMember2018-07-012019-06-300001609702cdk:LiabilityClassifiedAwardsExpenseMember2018-07-012019-06-300001609702cdk:PerformanceBasedRestrictedStockUnitsMember2018-07-012019-06-300001609702srt:OfficerMember2018-07-012019-06-300001609702cdk:EquityClassifiedAwardsExpenseMember2017-07-012018-06-300001609702cdk:LiabilityClassifiedAwardsExpenseMember2017-07-012018-06-300001609702srt:OfficerMember2017-07-012018-06-300001609702us-gaap:EmployeeStockOptionMember2020-06-300001609702us-gaap:RestrictedStockUnitsRSUMember2020-06-300001609702us-gaap:RestrictedStockMember2020-06-300001609702us-gaap:EmployeeStockOptionMember2019-07-012020-06-300001609702us-gaap:RestrictedStockUnitsRSUMember2019-07-012020-06-300001609702us-gaap:RestrictedStockMember2019-07-012020-06-300001609702us-gaap:EmployeeStockOptionMember2019-06-300001609702us-gaap:EmployeeStockOptionMember2018-07-012019-06-300001609702us-gaap:EmployeeStockOptionMember2017-07-012018-06-300001609702cdk:PerformanceBasedStockOptionsMember2019-06-300001609702cdk:PerformanceBasedStockOptionsMember2020-06-300001609702cdk:TimeBasedRestrictedStockMember2019-06-300001609702cdk:TimeBasedRestrictedStockUnitsMember2019-06-300001609702cdk:TimeBasedRestrictedStockMember2019-07-012020-06-300001609702cdk:TimeBasedRestrictedStockUnitsMember2019-07-012020-06-300001609702cdk:TimeBasedRestrictedStockMember2020-06-300001609702cdk:TimeBasedRestrictedStockUnitsMember2020-06-300001609702cdk:PerformanceBasedRestrictedStockUnitsMember2019-06-300001609702cdk:PerformanceBasedRestrictedStockUnitsMember2020-06-300001609702country:US2019-07-012020-06-300001609702country:US2018-07-012019-06-300001609702country:US2017-07-012018-06-300001609702us-gaap:ForeignPlanMember2019-07-012020-06-300001609702us-gaap:ForeignPlanMember2018-07-012019-06-300001609702us-gaap:ForeignPlanMember2017-07-012018-06-3000016097022019-07-012019-12-310001609702us-gaap:DomesticCountryMember2020-06-300001609702us-gaap:StateAndLocalJurisdictionMember2020-06-300001609702us-gaap:ForeignCountryMember2020-06-300001609702us-gaap:DomesticCountryMembercdk:ExpirationOfTaxLossCarryforwardMember2019-07-012020-06-300001609702cdk:ReversalOfCapitalGainOnSaleOfAssetsMember2019-07-012020-06-300001609702cdk:ExpirationOfTaxLossCarryforwardMemberus-gaap:ForeignCountryMember2019-07-012020-06-300001609702cdk:AdjustmentToStateTaxExpenseMember2019-07-012020-06-300001609702cdk:CapitalGainOnSaleOfAssetsMember2019-04-012019-06-300001609702cdk:CapitalLossFromTerminationOfJointVentureMember2019-04-012019-06-300001609702cdk:ExpirationOfTaxLossCarryforwardMemberus-gaap:ForeignCountryMember2018-07-012019-06-300001609702cdk:AdoptionOfASC606Member2018-07-012019-06-300001609702cdk:ADPMembercdk:IncomeTaxMember2020-06-300001609702cdk:ADPMembercdk:IncomeTaxMember2019-06-300001609702us-gaap:EmployeeStockOptionMember2019-07-012020-06-300001609702us-gaap:EmployeeStockOptionMember2018-07-012019-06-300001609702us-gaap:EmployeeStockOptionMember2017-07-012018-06-300001609702us-gaap:TradeAccountsReceivableMember2020-06-300001609702us-gaap:TradeAccountsReceivableMember2019-06-300001609702cdk:UnbilledReceivablesMember2020-06-300001609702cdk:UnbilledReceivablesMember2019-06-300001609702us-gaap:FinanceReceivablesMember2020-06-300001609702us-gaap:FinanceReceivablesMember2019-06-300001609702us-gaap:LandAndBuildingMember2020-06-300001609702us-gaap:LandAndBuildingMember2019-06-300001609702us-gaap:TechnologyEquipmentMember2020-06-300001609702us-gaap:TechnologyEquipmentMember2019-06-300001609702cdk:FurnitureFixturesLeaseholdImprovementsAndOtherCapitalizedPropertyPlantAndEquipmentMember2020-06-300001609702cdk:FurnitureFixturesLeaseholdImprovementsAndOtherCapitalizedPropertyPlantAndEquipmentMember2019-06-3000016097022019-01-012019-03-310001609702us-gaap:CostOfSalesMember2019-01-012019-03-310001609702us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-012019-03-310001609702us-gaap:AccountingStandardsUpdate201602Member2019-07-010001609702us-gaap:InterestExpenseMember2019-07-012020-06-300001609702us-gaap:AccountsReceivableMember2020-06-300001609702us-gaap:OtherAssetsMember2020-06-300001609702cdk:CDKNorthAmericaMember2018-06-300001609702cdk:CDKInternationalMember2018-06-300001609702cdk:CDKNorthAmericaMember2018-07-012019-06-300001609702cdk:CDKInternationalMember2018-07-012019-06-300001609702cdk:CDKNorthAmericaMember2019-06-300001609702cdk:CDKInternationalMember2019-06-300001609702cdk:CDKNorthAmericaMember2019-07-012020-06-300001609702cdk:CDKInternationalMember2019-07-012020-06-300001609702cdk:CDKNorthAmericaMember2020-06-300001609702cdk:CDKInternationalMember2020-06-300001609702us-gaap:CustomerListsMember2020-06-300001609702us-gaap:CustomerListsMember2019-06-300001609702us-gaap:ComputerSoftwareIntangibleAssetMember2020-06-300001609702us-gaap:ComputerSoftwareIntangibleAssetMember2019-06-300001609702us-gaap:TrademarksMember2020-06-300001609702us-gaap:TrademarksMember2019-06-300001609702us-gaap:OtherIntangibleAssetsMember2020-06-300001609702us-gaap:OtherIntangibleAssetsMember2019-06-300001609702us-gaap:CustomerListsMember2019-07-012020-06-300001609702us-gaap:ComputerSoftwareIntangibleAssetMember2019-07-012020-06-300001609702us-gaap:TrademarksMember2019-07-012020-06-300001609702us-gaap:ComputerSoftwareIntangibleAssetMember2018-10-012018-12-310001609702us-gaap:CustomerListsMember2018-10-012018-12-3100016097022018-10-012018-12-310001609702us-gaap:CostOfSalesMember2018-10-012018-12-310001609702us-gaap:SellingGeneralAndAdministrativeExpensesMember2018-10-012018-12-310001609702cdk:AnsiraMember2020-06-300001609702cdk:AnsiraMember2019-07-012020-06-300001609702cdk:AnsiraMemberus-gaap:OtherNonoperatingIncomeExpenseMember2019-07-012020-06-300001609702cdk:OpenDealerExchangeMember2009-01-160001609702cdk:OpenDealerExchangeMember2020-06-300001609702cdk:OpenDealerExchangeMember2019-06-300001609702cdk:OpenDealerExchangeMembercdk:CostOfRevenueMember2019-07-012020-06-300001609702cdk:OpenDealerExchangeMembercdk:CostOfRevenueMember2018-07-012019-06-300001609702cdk:OpenDealerExchangeMembercdk:CostOfRevenueMember2017-07-012018-06-300001609702cdk:OpenDealerExchangeMemberus-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2019-07-012020-06-300001609702cdk:OpenDealerExchangeMemberus-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2018-07-012019-06-300001609702cdk:OpenDealerExchangeMemberus-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2017-07-012018-06-300001609702cdk:OpenDealerExchangeMemberus-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2020-06-300001609702cdk:OpenDealerExchangeMemberus-gaap:EquityMethodInvestmentNonconsolidatedInvesteeOrGroupOfInvesteesMember2019-06-300001609702cdk:RipcordMember2009-01-160001609702cdk:RipcordMember2020-06-300001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2019-06-300001609702cdk:ThreeYearTermLoanDue2021Memberus-gaap:MediumTermNotesMember2019-12-310001609702cdk:ThreeYearTermLoanDue2021Memberus-gaap:MediumTermNotesMember2019-06-300001609702cdk:FiveYearTermLoanFacilityDue2023Memberus-gaap:MediumTermNotesMember2019-12-310001609702cdk:FiveYearTermLoanFacilityDue2023Memberus-gaap:MediumTermNotesMember2019-06-300001609702cdk:SeniorNotesDuein2019Memberus-gaap:SeniorNotesMember2020-06-300001609702cdk:SeniorNotesDuein2019Memberus-gaap:SeniorNotesMember2019-06-300001609702us-gaap:SeniorNotesMembercdk:SeniorNotesDuein2024Member2020-06-300001609702us-gaap:SeniorNotesMembercdk:SeniorNotesDuein2024Member2019-06-300001609702cdk:SeniorNotesDuein2026Memberus-gaap:SeniorNotesMember2020-06-300001609702cdk:SeniorNotesDuein2026Memberus-gaap:SeniorNotesMember2019-06-300001609702us-gaap:SeniorNotesMembercdk:SeniorNotesDuein2027Member2020-06-300001609702us-gaap:SeniorNotesMembercdk:SeniorNotesDuein2027Member2019-06-300001609702us-gaap:SeniorNotesMembercdk:A5.250SeniorNotesDue2029Member2019-12-310001609702us-gaap:SeniorNotesMembercdk:A5.250SeniorNotesDue2029Member2019-06-300001609702us-gaap:CapitalLeaseObligationsMember2020-06-300001609702us-gaap:CapitalLeaseObligationsMember2019-06-300001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2018-08-172018-08-170001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2018-08-170001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2019-07-012020-06-300001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2018-07-012019-06-30cdk:extension0001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMembersrt:MinimumMember2018-08-172018-08-170001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMembersrt:MaximumMember2018-08-172018-08-170001609702cdk:JPMorganChaseBankMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:PrimeRateMember2018-08-172018-08-170001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:FederalFundsEffectiveSwapRateMemberus-gaap:LineOfCreditMember2018-08-172018-08-170001609702us-gaap:RevolvingCreditFacilityMembercdk:OneMonthLIBORMemberus-gaap:LineOfCreditMember2018-08-172018-08-170001609702us-gaap:RevolvingCreditFacilityMembercdk:OneMonthLIBORMemberus-gaap:LineOfCreditMembersrt:MinimumMember2018-08-172018-08-170001609702us-gaap:RevolvingCreditFacilityMembercdk:OneMonthLIBORMemberus-gaap:LineOfCreditMembersrt:MaximumMember2018-08-172018-08-170001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMembersrt:MinimumMember2018-08-172018-08-170001609702us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMembersrt:MaximumMember2018-08-172018-08-170001609702us-gaap:MediumTermNotesMember2018-08-170001609702cdk:ThreeYearTermLoanDue2021Memberus-gaap:MediumTermNotesMember2018-08-170001609702cdk:ThreeYearTermLoanDue2021Memberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702cdk:FiveYearTermLoanFacilityDue2023Memberus-gaap:MediumTermNotesMember2018-08-170001609702cdk:FiveYearTermLoanFacilityDue2023Memberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702us-gaap:MediumTermNotesMember2018-08-172018-08-170001609702cdk:ThreeYearTermLoanDue2021Memberus-gaap:MediumTermNotesMember2020-06-300001609702cdk:FiveYearTermLoanFacilityDue2023Memberus-gaap:MediumTermNotesMember2020-06-300001609702us-gaap:LondonInterbankOfferedRateLIBORMembercdk:ThreeYearTermLoanDue2021Membersrt:MinimumMemberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702us-gaap:LondonInterbankOfferedRateLIBORMembercdk:ThreeYearTermLoanDue2021Memberus-gaap:MediumTermNotesMembersrt:MaximumMember2018-08-172018-08-170001609702us-gaap:FederalFundsEffectiveSwapRateMembercdk:ThreeYearTermLoanDue2021Memberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702cdk:OneMonthLIBORMembercdk:ThreeYearTermLoanDue2021Memberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702cdk:OneMonthLIBORMembercdk:ThreeYearTermLoanDue2021Membersrt:MinimumMemberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702cdk:OneMonthLIBORMembercdk:ThreeYearTermLoanDue2021Memberus-gaap:MediumTermNotesMembersrt:MaximumMember2018-08-172018-08-170001609702us-gaap:LondonInterbankOfferedRateLIBORMembercdk:FiveYearTermLoanFacilityDue2023Membersrt:MinimumMemberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702us-gaap:LondonInterbankOfferedRateLIBORMembercdk:FiveYearTermLoanFacilityDue2023Memberus-gaap:MediumTermNotesMembersrt:MaximumMember2018-08-172018-08-170001609702us-gaap:FederalFundsEffectiveSwapRateMembercdk:FiveYearTermLoanFacilityDue2023Memberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702cdk:OneMonthLIBORMembercdk:FiveYearTermLoanFacilityDue2023Memberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702cdk:OneMonthLIBORMembercdk:FiveYearTermLoanFacilityDue2023Membersrt:MinimumMemberus-gaap:MediumTermNotesMember2018-08-172018-08-170001609702cdk:OneMonthLIBORMembercdk:FiveYearTermLoanFacilityDue2023Memberus-gaap:MediumTermNotesMembersrt:MaximumMember2018-08-172018-08-170001609702cdk:RevolvingLineofCreditandMediumTermNotesMembersrt:MaximumMember2014-09-162014-09-160001609702srt:ScenarioForecastMember2020-01-012021-03-310001609702srt:ScenarioForecastMember2021-04-012021-09-300001609702cdk:RevolvingLineofCreditandMediumTermNotesMember2020-05-042020-05-040001609702cdk:SeniorNotesDuein2019Memberus-gaap:SeniorNotesMember2014-10-140001609702us-gaap:SeniorNotesMembercdk:SeniorNotesDuein2024Member2014-10-140001609702us-gaap:DebtInstrumentRedemptionPeriodOneMemberus-gaap:SeniorNotesMember2014-10-142014-10-140001609702us-gaap:DebtInstrumentRedemptionPeriodTwoMemberus-gaap:SeniorNotesMember2014-10-142014-10-140001609702cdk:SeniorNotesDuein2026Memberus-gaap:SeniorNotesMember2018-06-180001609702cdk:SeniorNotesDuein2026Memberus-gaap:DebtInstrumentRedemptionPeriodOneMemberus-gaap:SeniorNotesMembersrt:MinimumMember2018-06-182018-06-180001609702cdk:SeniorNotesDuein2026Memberus-gaap:DebtInstrumentRedemptionPeriodTwoMemberus-gaap:SeniorNotesMembersrt:MinimumMember2018-06-182018-06-180001609702cdk:SeniorNotesDuein2026Memberus-gaap:DebtInstrumentRedemptionPeriodThreeMemberus-gaap:SeniorNotesMembersrt:MinimumMember2018-06-182018-06-180001609702cdk:SeniorNotesDuein2026Memberus-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodFourMembersrt:MinimumMember2018-06-182018-06-180001609702us-gaap:DebtInstrumentRedemptionPeriodFiveMembercdk:SeniorNotesDuein2026Memberus-gaap:SeniorNotesMembersrt:MinimumMember2018-06-182018-06-180001609702us-gaap:SeniorNotesMembercdk:SeniorNotesDuein2027Member2017-05-150001609702us-gaap:SeniorNotesMembercdk:A4.875seniornotesdue2027Domain2017-05-150001609702us-gaap:DebtInstrumentRedemptionPeriodOneMemberus-gaap:SeniorNotesMembersrt:MinimumMembercdk:A5.250SeniorNotesDue2029Member2019-05-022019-05-020001609702us-gaap:DebtInstrumentRedemptionPeriodTwoMemberus-gaap:SeniorNotesMembersrt:MinimumMembercdk:A4.875seniornotesdue2027Domain2017-05-152017-05-150001609702us-gaap:DebtInstrumentRedemptionPeriodThreeMemberus-gaap:SeniorNotesMembersrt:MinimumMembercdk:A4.875seniornotesdue2027Domain2017-05-152017-05-150001609702us-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodFourMembersrt:MinimumMembercdk:A4.875seniornotesdue2027Domain2017-05-152017-05-150001609702us-gaap:DebtInstrumentRedemptionPeriodFiveMemberus-gaap:SeniorNotesMembersrt:MinimumMembercdk:A4.875seniornotesdue2027Domain2017-05-152017-05-150001609702us-gaap:SeniorNotesMembercdk:A5.250SeniorNotesDue2029Member2019-05-020001609702us-gaap:DebtInstrumentRedemptionPeriodTwoMemberus-gaap:SeniorNotesMembersrt:MinimumMembercdk:A5.250SeniorNotesDue2029Member2019-05-022019-05-020001609702us-gaap:DebtInstrumentRedemptionPeriodThreeMemberus-gaap:SeniorNotesMembersrt:MinimumMembercdk:A5.250SeniorNotesDue2029Member2019-05-022019-05-020001609702us-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodFourMembersrt:MinimumMembercdk:A5.250SeniorNotesDue2029Member2019-05-022019-05-020001609702us-gaap:DebtInstrumentRedemptionPeriodFiveMemberus-gaap:SeniorNotesMembersrt:MinimumMembercdk:A5.250SeniorNotesDue2029Member2019-05-022019-05-0200016097022014-10-142014-10-140001609702us-gaap:SeniorNotesMembercdk:SeniorNotesDuein2024Member2016-10-150001609702us-gaap:SeniorNotesMembercdk:A5.250SeniorNotesDue2029Member2020-06-300001609702cdk:RepurchaseAuthorization2016Member2015-12-310001609702cdk:RepurchaseAuthorization2017Domain2017-01-310001609702cdk:November2018ASRMember2018-11-012018-11-300001609702cdk:November2018ASRMember2019-02-012019-02-280001609702cdk:November2018ASRMember2018-11-012019-02-280001609702cdk:November2018ASRMember2018-11-300001609702cdk:RepurchaseAuthorization2016Member2018-07-012019-06-300001609702cdk:CDKNorthAmericaMemberus-gaap:OperatingSegmentsMember2019-07-012020-06-300001609702us-gaap:OperatingSegmentsMembercdk:CDKInternationalMember2019-07-012020-06-300001609702us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2019-07-012020-06-300001609702cdk:CDKNorthAmericaMemberus-gaap:OperatingSegmentsMember2020-06-300001609702us-gaap:OperatingSegmentsMembercdk:CDKInternationalMember2020-06-300001609702us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2020-06-300001609702cdk:CDKNorthAmericaMemberus-gaap:OperatingSegmentsMember2018-07-012019-06-300001609702us-gaap:OperatingSegmentsMembercdk:CDKInternationalMember2018-07-012019-06-300001609702us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2018-07-012019-06-300001609702cdk:CDKNorthAmericaMemberus-gaap:OperatingSegmentsMember2019-06-300001609702us-gaap:OperatingSegmentsMembercdk:CDKInternationalMember2019-06-300001609702us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2019-06-300001609702cdk:CDKNorthAmericaMemberus-gaap:OperatingSegmentsMember2017-07-012018-06-300001609702us-gaap:OperatingSegmentsMembercdk:CDKInternationalMember2017-07-012018-06-300001609702us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2017-07-012018-06-300001609702cdk:CDKNorthAmericaMemberus-gaap:OperatingSegmentsMember2018-06-300001609702us-gaap:OperatingSegmentsMembercdk:CDKInternationalMember2018-06-300001609702us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2018-06-300001609702country:US2019-07-012020-06-300001609702srt:EuropeMember2019-07-012020-06-300001609702country:CA2019-07-012020-06-300001609702cdk:OtherCountriesMember2019-07-012020-06-300001609702country:US2020-06-300001609702srt:EuropeMember2020-06-300001609702country:CA2020-06-300001609702cdk:OtherCountriesMember2020-06-300001609702country:US2018-07-012019-06-300001609702srt:EuropeMember2018-07-012019-06-300001609702country:CA2018-07-012019-06-300001609702cdk:OtherCountriesMember2018-07-012019-06-300001609702country:US2019-06-300001609702srt:EuropeMember2019-06-300001609702country:CA2019-06-300001609702cdk:OtherCountriesMember2019-06-300001609702country:US2017-07-012018-06-300001609702srt:EuropeMember2017-07-012018-06-300001609702country:CA2017-07-012018-06-300001609702cdk:OtherCountriesMember2017-07-012018-06-300001609702country:US2018-06-300001609702srt:EuropeMember2018-06-300001609702country:CA2018-06-300001609702cdk:OtherCountriesMember2018-06-300001609702us-gaap:SubscriptionAndCirculationMembercdk:CDKNorthAmericaMember2019-07-012020-06-300001609702us-gaap:SubscriptionAndCirculationMembercdk:CDKNorthAmericaMember2018-07-012019-06-300001609702us-gaap:SubscriptionAndCirculationMembercdk:CDKNorthAmericaMember2017-07-012018-06-300001609702us-gaap:LicenseAndServiceMembercdk:CDKNorthAmericaMember2019-07-012020-06-300001609702us-gaap:LicenseAndServiceMembercdk:CDKNorthAmericaMember2018-07-012019-06-300001609702us-gaap:LicenseAndServiceMembercdk:CDKNorthAmericaMember2017-07-012018-06-300001609702cdk:TransactionMembercdk:CDKNorthAmericaMember2019-07-012020-06-300001609702cdk:TransactionMembercdk:CDKNorthAmericaMember2018-07-012019-06-300001609702cdk:TransactionMembercdk:CDKNorthAmericaMember2017-07-012018-06-300001609702us-gaap:ProductAndServiceOtherMembercdk:CDKNorthAmericaMember2019-07-012020-06-300001609702us-gaap:ProductAndServiceOtherMembercdk:CDKNorthAmericaMember2018-07-012019-06-300001609702us-gaap:ProductAndServiceOtherMembercdk:CDKNorthAmericaMember2017-07-012018-06-300001609702cdk:CDKNorthAmericaMember2017-07-012018-06-300001609702us-gaap:SubscriptionAndCirculationMembercdk:CDKInternationalMember2019-07-012020-06-300001609702us-gaap:SubscriptionAndCirculationMembercdk:CDKInternationalMember2018-07-012019-06-300001609702us-gaap:SubscriptionAndCirculationMembercdk:CDKInternationalMember2017-07-012018-06-300001609702us-gaap:LicenseAndServiceMembercdk:CDKInternationalMember2019-07-012020-06-300001609702us-gaap:LicenseAndServiceMembercdk:CDKInternationalMember2018-07-012019-06-300001609702us-gaap:LicenseAndServiceMembercdk:CDKInternationalMember2017-07-012018-06-300001609702us-gaap:ProductAndServiceOtherMembercdk:CDKInternationalMember2019-07-012020-06-300001609702us-gaap:ProductAndServiceOtherMembercdk:CDKInternationalMember2018-07-012019-06-300001609702us-gaap:ProductAndServiceOtherMembercdk:CDKInternationalMember2017-07-012018-06-300001609702cdk:CDKInternationalMember2017-07-012018-06-300001609702us-gaap:LicenseAndServiceMembersrt:RevisionOfPriorPeriodReclassificationAdjustmentMembercdk:CDKInternationalMember2020-04-012020-06-300001609702us-gaap:SubscriptionAndCirculationMembersrt:RevisionOfPriorPeriodReclassificationAdjustmentMembercdk:CDKInternationalMember2020-04-012020-06-3000016097022019-07-012019-09-3000016097022019-10-012019-12-3100016097022020-01-012020-03-3100016097022018-07-012018-09-3000016097022019-04-012019-06-300001609702us-gaap:AllowanceForCreditLossMember2019-06-300001609702us-gaap:AllowanceForCreditLossMember2019-07-012020-06-300001609702us-gaap:AllowanceForCreditLossMember2020-06-300001609702us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2019-06-300001609702us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2019-07-012020-06-300001609702us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2020-06-300001609702us-gaap:AllowanceForCreditLossMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2018-06-300001609702us-gaap:AllowanceForCreditLossMember2018-07-012019-06-300001609702srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2018-06-300001609702us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2018-07-012019-06-300001609702us-gaap:AllowanceForCreditLossMember2017-06-300001609702us-gaap:AllowanceForCreditLossMember2017-07-012018-06-300001609702us-gaap:AllowanceForCreditLossMember2018-06-300001609702us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2017-06-300001609702us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2017-07-012018-06-300001609702us-gaap:ValuationAllowanceOfDeferredTaxAssetsMember2018-06-300001609702cdk:CapitalGainOnSaleOfAssetsMember2018-07-012019-06-300001609702cdk:CapitalLossFromTerminationOfJointVentureMember2018-07-012019-06-300001609702cdk:ExpirationOfTaxLossCarryforwardMember2018-07-012019-06-300001609702cdk:TaxCutsandJobsActof2017ChangeinTaxRateMember2017-07-012018-06-300001609702cdk:ExpirationOfTaxLossCarryforwardMember2017-07-012018-06-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
 
FORM 10-K
______________

        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended June 30, 2020
OR

        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)
______________
 
Delaware46-5743146
(State or other jurisdiction of incorporation or
organization)
(IRS Employer Identification No.)
 

1950 Hassell Road, Hoffman Estates
IL, 60169
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (847) 397-1700

______________
Securities registered pursuant to Section 12(b) of the Act:
Title of classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueCDKNASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None

______________
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o  No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes  o   No
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 o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files).  Yes         No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 filerAccelerated 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 extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No 
The aggregate market value of common stock held by non-affiliates of the registrant, as of December 31, 2019, the last business day of the registrant's most recently completed second fiscal quarter, was approximately $6.6 billion.
The number of shares outstanding of the registrant’s common stock as of August 3, 2020 was 121,540,576.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference to the registrant's definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the fiscal year end of June 30, 2020.



Table of Contents
 Page
Part I 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.




Part I
Item 1. Business

This Annual Report on Form 10-K 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, may be 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, but are not limited to, those discussed in Part I, Item 1A of this Form 10-K under the heading “Risk Factors,” which are incorporated herein by reference. We disclaim any obligation to update or revise 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 accompanying notes included in Part II, Item 8 of this 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.
CDK Global, Inc. is the former Dealer Services division of Automatic Data Processing, Inc. ("ADP"). We were incorporated in Delaware as a wholly-owned subsidiary of ADP on September 29, 2014 and began operating as an independent public company on September 30, 2014. Our principal corporate offices are located in Hoffman Estates, Illinois. Our common stock is listed on the NASDAQ Global Select Market under the symbol “CDK.”
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.
Overview
Our purpose is to enable end-to-end automotive commerce across the globe. For over 40 years, CDK Global has 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, in more than 100 countries around the world, for approximately 30,000 retail locations and most OEMs.
We have organized our operations into two main operating groups, CDK North America ("CDKNA") and CDK International ("CDKI"), which are also the two reportable operating segments. In addition, the Company has an Other segment, the primary components of which are corporate allocations and other expenses not recorded in the segment results. Additional information on our reportable segments and geographic areas is contained in Item 8 of Part II, "Financial Statements and Supplementary Data - Note 20 - Financial Data by Segment."
In June 2019, we committed to a plan to divest our Digital Marketing Business and completed the divestiture on April 21, 2020. The Digital Marketing Business is presented as discontinued operations. Additional information on discontinued operations is contained in Item 8 of Part II, "Financial Statements and Supplementary Data - Note 4 - Discontinued Operations."
Our Strategy
To enable end-to-end automotive commerce, our strategy is to invest for the long-term in integrated software products and an open technology platform that can deliver seamless, workflow-driven solutions for our customers. The automotive retail market is evolving and demand for new and integrated technology solutions is growing: consumers increasingly expect a seamless omnichannel experience when purchasing or servicing vehicles; OEMs see technology as a tool to ensure a consistent and positive customer experience across their retail networks; and retailers are seeking integrated workflow technology solutions to help them improve both customer satisfaction and dealership cost structure. We believe that the best way to compete in a world with numerous providers of unconnected software solutions for numerous automotive retailers, OEMs, consumers, and vehicles is to provide integrated technology solutions and platform tools that can connect the disparate elements to create continuous retail workflows.
Our Business
We generate revenue primarily by providing a broad suite of subscription-based software and technology solutions for automotive retailers through our CDKNA segment. We are focused on the use of software-as-a-service ("SaaS") and mobile-
1


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. Additionally, 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 franchisors.
Complementary to our core DMSs in the CDKNA segment, we also provide a portfolio of layered software applications and services to address the unique needs of automotive retail workflows. These solutions are often integrated to and targeted at users of our DMSs, but may, in some cases, be provided to customers that do not otherwise use our DMS.
In response to the global COVID-19 pandemic, we have provided products and support to help dealers virtually sell vehicles. We have made enhancements to our Connected Store software that enables dealers to deliver quotes and complete sales. We have also implemented installation procedures for our DMS and layered application products on a fully remote basis to meet the needs of our dealers.
Our principal layered applications are:
SolutionsDescription
Vehicle Sales Solutions
Technology tools and services to streamline the entire vehicle inventory, sales, and finance and insurance ("F&I") process
Fixed Operations Solutions Solutions to manage the parts and service profit center of dealerships, including customer targeting, appointment scheduling, on-site workflow, and billing
Customer Relationship Management Solutions Software to manage interactions with current and prospective customers
Financial Management SolutionsValue-added capabilities for accounts payable, payments, and payroll
Document Management SolutionsDocument creation and archiving solutions to address the complex automotive retail sales process
Network Management SolutionsWired and wireless network solutions to support dealer connectivity and security efforts
Integrated Telephony Management SolutionsIntegrated telephony solutions that allow automotive retailers to connect and communicate via presence, instant messaging, voice, and video
In the CDKNA segment, we further connect the automotive ecosystem by providing third party retail solution providers with robust and secure interfaces to the core DMS through our Partner Program. For both automotive retailers and OEMs we provide data management and business intelligence solutions that extract, cleanse, normalize, enhance, and distribute data and that provide actionable insights.
Through our CDKI segment, we provide automotive retailers with core DMS solutions and we offer automotive retailers and OEMs a variety of professional services, custom programming, consulting, implementation and training solutions, as well as a full range of customer support solutions in approximately 100 countries outside of the United States ("U.S.") and Canada. The solutions that we provide within this segment allow our customers to streamline their business operations and enhance their financial performance within their local marketplace, and in some cases where we deal directly with OEMs, across international borders. Customers of this segment include automotive retail dealers and OEMs across Europe, the Middle East, Asia, Africa, and Latin America.
In both our CDKNA and CDKI segments, we offer automotive retailers and OEMs a variety of professional services, custom programming, consulting, implementation and training solutions, as well as a full range of customer support solutions.
In addition to providing solutions to automotive retailers and OEMs, our CDKNA segment also provides solutions to retailers and manufacturers of heavy trucks, construction equipment, agricultural equipment, motorcycles, boats, and other marine and recreational vehicles.
Product Development and Innovation
2


Our ability to strengthen and extend our solutions portfolio is a key element of our business strategy. We execute on this strategy through a combination of development and the selective pursuit of strategic acquisitions.
In addition to the ongoing investment to enhance existing solutions within our core business, we also invest in long- and medium-term product innovation aligned with our strategy. For example, the Fortellis Automotive Commerce Exchange ("Fortellis") under development is expected to be the foundation of our open technology platform for automotive commerce. Within the automotive commerce market, Fortellis allows CDK Global and third parties to develop adaptive and interchangeable application programming interfaces ("APIs") that can be used to connect existing technology solutions and build new solutions quickly and with high levels of reliability. Similarly, we have developed Drive Flex, a cloud-based DMS. We are developing these solutions using a methodical and measured approach with respect to capital and resource allocation. We believe these investments align to our strategy and will position CDK Global to take advantage of the evolving automotive retail market.
Competition
Our industry is highly competitive and fragmented. We compete with a broad and diverse range of information, technology, services, and consulting companies, as well as with the in-house capabilities of OEMs. Our competitors range from local providers to regional and global competitors. However, we believe that no competitor provides the same combination of geographical reach and breadth of solutions that we do.
Each of our solutions faces competition from an array of solution providers. For our DMS solutions in North America, our principal competitors are Reynolds and Reynolds, Dealertrack (Cox Automotive), Auto/Mate, AutoSoft, PBS Systems, and various local and regional providers. For our CDKI segment, DMS competition is principally from local and regional providers. The most significant competitive factors that we face across our solutions are price, breadth of features and functionality, user experience, quality, brand, scalability, and service capability.
Regulation
The automotive retail industry is highly regulated and automotive retailers and OEMs are subject to a broad array of complex regulations governing virtually every aspect of their operations. Our customers must ensure their compliance with their regulatory requirements, and, in turn, we must ensure that our solutions effectively address their regulatory compliance needs.
Because our business delivers solutions across a broad spectrum of automotive retailer operations, our activities are impacted by a wide variety of federal, state, local, and international laws and regulations. Central to the value of our Document Management Solutions application, for example, is that the forms we provide for our customers meet the requirements of their applicable laws. Likewise, within our Vehicle Sales Solutions application, our electronic vehicle registration service is dependent on our compliance with complex and detailed regulatory requirements. Across our portfolio of automotive retail solutions, we are focused on ensuring that we meet our regulatory compliance obligations and that our solutions enable our customers to comply with the laws and regulations applicable to them. See “Risk Factors-Risks Relating to Our Business" for additional information regarding the application and impact of laws and regulations on our operations.
Privacy and Data Protection Regulations
We are subject to a number of federal, state, and foreign laws and regulations regarding data governance and the privacy and protection of personal data. For example, under the Gramm-Leach-Bliley Act (the "GLB Act"), automotive retailers are generally deemed to be regulated financial institutions and therefore are subject to the GLB Act and applicable regulations, including the Federal Trade Commission's ("FTC") Privacy Rule and Safeguards Rule. In our capacity as a service provider to automotive retailers, we generally commit to our customers that we will handle non-public personal information consistent with the GLB Act and the related regulations. Similarly, many United States ("U.S.") states and foreign jurisdictions have adopted regulations that impose obligations on businesses that handle personal information, including notification requirements in the event of data breaches relating to personal data, as well as minimum security standards with respect to the handling and transmission of personal data. For a discussion of privacy and data protection regulation and the potential impacts on our business, see "Risk Factors - Risks Relating to Our Business."
Seasonality in Our Business
Though our business is not highly cyclical, a portion of it is seasonal. Our transaction revenues experience volatility around seasonal consumer vehicle shopping activity, and our Other revenues have a seasonal increase in the third quarter of each fiscal year.
3


Employees
As of June 30, 2020, we had a total of approximately 9,000 employees worldwide. None of our employees in the United States are represented by a collective bargaining agreement. We have work councils and statutory employee representation obligations in certain countries outside the United States. We believe that relations with our employees are good.
Available Information
Our company website is cdkglobal.com. The investor relations section of our website is investors.cdkglobal.com. We encourage investors to use our website as a way of easily finding information about us. We promptly make available on the investor relations section of our website, free of charge, the reports that we file or furnish with the Securities and Exchange Commission ("SEC"), corporate governance information (including our Code of Business Conduct and Ethics), and select press releases. The information contained on the websites referenced in this Annual Report on Form 10-K is not incorporated by reference into this filing. Further, the Company’s references to website URLs are intended to be inactive textual references only.

4


Item 1A. Risk Factors
The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Annual Report on Form 10-K. The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.

Because of the following factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
Risks Relating to Our Business
The COVID-19 pandemic could materially adversely affect our business, results of operations, and financial condition.
The global spread of COVID-19 has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have impacted and may further impact our workforce and operations, the workforce and operations of our customers, and those of our respective vendors, suppliers, and partners. The ultimate impact and efficacy of current containment and mitigation measures and potential future measures is currently unknown.
There is considerable uncertainty regarding the direct and indirect business impacts from such measures and potential future measures. We have been able to continue to conduct our business on a relatively normal basis to date while implementing business process modifications to protect our employees and customers, such as travel mobility restrictions and work-from-home and social distancing policies. Restrictions on product installation operations or workforce can impact our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations, particularly if prolonged. Our customers have experienced, and may continue to experience, restrictions on their ability to operate in addition to reduced automotive retail demand. Such reductions in demand directly impact our transaction revenue in addition to negatively impacting the financial health of our customers. In response to the COVID-19 pandemic we provided our customers with pricing concessions during the fourth quarter of fiscal 2020 on most of our subscription-based solutions, including the DMS. The direct financial impact of these concessions was a near-term decrease in cash receipts and a reduction in revenue that will be recognized over the next two years. Any future concessions are likely to have a similar impact. A discussion of the impact of these concessions is provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
The pandemic has significantly increased economic and demand uncertainty. Certain scientists and medical experts have forecasted that a potential “second wave” of COVID-19 may occur in the U.S. in the late third quarter or the fourth quarter of calendar 2020 and continue into calendar 2021, and there is the risk that any second wave may be on a larger scale than the initial wave of COVID-19 that the U.S. has experienced and is currently experiencing. The sustained current outbreak and continued spread of COVID-19 has caused economic disruption, including wide scale unemployment, and it is possible that it could cause a global recession. There is a significant degree of uncertainty and lack of visibility as to the extent and duration of any such slowdown or recession. Risks related to a slowdown or recession are described in our risk factor titled “We have customers in over 100 countries, where we are subject to global, regional and country-specific risks that could negatively impact our business, results of operations, and financial condition,” below, and include the risk that sales within the automotive retail industry will be significantly curtailed for various reasons including the impact of economic conditions on consumer confidence and demand, the impact of COVID-19 containment and mitigation measures on consumer's ability to access dealers and purchase vehicles, and the ability to meet customer demand for vehicles due to disruption in the available inventory of vehicles related to supply chain and production disruption caused by measures taken to limit the spread of the virus, which could in turn reduce the number and/or size of actual or potential customers or the money that actual or potential customers are willing or able to spend on our solution portfolio. While consumer demand within the automotive retail industry has improved from the declines seen in April and May of 2020, we continue to see negative impacts on demand within the automotive retail industry, and we expect that slowing economic conditions will continue to negatively impact demand during fiscal 2021, as discussed in the “Financial Condition, Liquidity and Capital Resources” section of this Annual Report on Form 10-K. Given the
5


significant economic uncertainty and volatility created by the pandemic, it is difficult to predict the nature and extent of impacts on our business. These expectations are subject to change without warning and investors are cautioned not to place undue reliance on them.
The pandemic has led to increased disruption and volatility in capital markets and credit markets. On May 4, 2020, we amended our Credit Agreements to temporarily increase the total indebtedness to consolidated EBITDA ratio covenants to enhance our liquidity position given the uncertainty regarding the length and severity of the pandemic and ongoing economic uncertainty. Unanticipated consequences of the pandemic and resulting economic uncertainty could adversely affect our liquidity and capital resources in the future.
The spread of COVID-19 has also caused us to modify our business practices (including employee travel, employee work locations, cancellation of physical participation in meetings, events and conferences, and social distancing measures), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors, and suppliers. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, and have affected the way we conduct our product development, customer support, and other activities, which could have an adverse effect on our operations. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and illness and workforce disruptions could lead to unavailability of key personnel and harm our ability to perform critical functions.
The degree to which the COVID-19 pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the possibility of a "second wave" of COVID-19, the actions to contain the virus or treat its impact, other actions taken by governments, businesses, and individuals in response to the virus and resulting economic disruption, and how quickly and to what extent normal economic and operating conditions can resume. We are similarly unable to predict the degree to which the pandemic will impact our customers, suppliers, vendors, and other partners, and their financial conditions, but a material effect on these parties could also adversely affect us. The impact of the COVID-19 pandemic may also exacerbate other risks discussed in the Risk Factors sections of this Annual Report on Form 10-K, which could in turn have a material adverse effect on us. Developments related to the COVID-19 pandemic have been rapidly changing, and additional impacts and risks may arise that we are not aware of or able to appropriately respond to currently.
We face intense competition. If we do not continue to compete effectively against other providers of technology solutions to automotive retailers, OEMs, and other participants in the automotive retail industry, it could have a material adverse effect on our business, results of operations, and financial condition.
Competition among automotive retail solutions providers is intense. The industry is highly fragmented and subject to changing technology, shifting customer needs, and frequent introductions of new solutions. We have a variety of competitors both for our integrated solutions and for each of our individual solutions. For example:
for our Dealer Management System (“DMS”) solutions in our CDKNA segment, our principal competitors are Reynolds and Reynolds, Dealertrack (Cox Automotive), Auto/Mate, AutoSoft, PBS Systems and various local and regional providers; and
for our CDKI segment, DMS competition is principally from local and regional providers.
Our competitors may be able to respond more quickly or effectively to new or emerging technologies and changes in customer demands or to devote greater resources to the development, promotion, and sale of their solutions than we can to ours. We expect the industry to continue to attract new competitors and new technologies, possibly involving alternative technologies that are more sophisticated and cost-effective than our solutions. There can be no assurance that we will be able to compete successfully against current or future competitors or that the competitive pressures we face will not have a material adverse effect on our business, results of operations, and financial condition.
Market trends influencing the automotive retail industry could have a negative impact on our business, results of operations, and financial condition.
Market trends that negatively impact the automotive retail industry may affect our business by reducing the number and/or size of actual or potential customers or the money that actual or potential customers are willing or able to spend on our solution portfolio. Such market factors include:
the adverse effect of long-term wage stagnation on the purchasing power of vehicle purchasers and the number of vehicle purchasers;
6


pricing and purchase incentives for vehicles;
disruption in the available inventory of vehicles;
disruption in the franchised automotive retailer dealership model, including potential disintermediation by emerging business models;
reductions in growth or decreases of automotive retailer spend on technology;
contractions in the number of franchised automotive retailers;
market oversupply of vehicles and declining used-vehicle pricing;
the expectation that consumers will be purchasing fewer vehicles overall during their lifetime as a result of better quality vehicles and longer warranties and the development of shared-use mobility;
the cost of gasoline and other forms of energy;
the availability and cost of credit to finance the purchase of vehicles and excess negative equity in existing vehicle loans;
the effect of adverse macroeconomic conditions on consumer shopping activity;
increased federal and other taxation; and
reductions in business and consumer confidence.
Such market trends could have a material adverse effect on our business, results of operations, and financial condition.
Market acceptance of and influence over our products and services is concentrated in a limited number of automobile OEMs and consolidated retailer groups, and we may not be able to maintain or grow these relationships.
Although the automotive retail industry is fragmented, a relatively small number of OEMs, consolidated retailer groups and retailer associations exert significant influence over the market acceptance of automotive retail products and services due to their concentrated purchasing activity, their endorsement or recommendation of specific products and services and/or their ability to define technical standards and certifications. For example, our DMSs are certified to technical standards established by OEMs and certain of our products and services are provided pursuant to OEM-designated endorsement or preferred vendor programs. While automotive retailers are generally free to purchase the solutions of their choosing, when an OEM has endorsed or certified a provider of products or services to its associated franchised automotive retailers and if our solutions lack such certification or endorsement, adoption or retention of our products and services among the franchised dealers of such OEM could be materially impaired.
We may be unable to develop and bring products and services in development to market, or bring new products and services to market in a timely manner or at all.
Our success depends in part upon our ability to bring to market new products and services, and enhancements thereto that address evolving customer demands. The successful development of Drive Flex, for example, is important to our future product strategy. The time, expense, and effort associated with developing and offering Drive Flex, Fortellis, and other new and enhanced products and services may be greater than anticipated. The length of the development cycle varies depending on the nature and complexity of the product, the availability of development, product management, and other internal resources and the role, if any, of strategic partners. If we are unable to develop and bring to market additional products and services, and enhancements thereto, in a timely manner, or at all, we could lose market share to competitors who are able to offer these new products and services, which could have a material adverse effect on our business, results of operations, and financial condition.
Our failure or inability to execute any element of our business strategy could negatively impact our business, results of operations, or financial condition.
Our business, results of operations, and financial condition depend on our ability to execute our business strategy, which includes the following key elements:
7


deepening relationships with our existing customer base;
continuing to expand our customer base;
delivering on our business transformation initiatives;
strengthening and extending our solutions through intelligence and innovation;
developing and delivering our next generation of solutions;
selectively pursuing strategic acquisitions; and
building and maintaining a culture of performance and accountability.
We may not succeed in implementing a portion or all of our business strategy, and even if we do succeed, our strategy may not have the favorable impact on our business, results of operations, or financial condition that we anticipate. We may not be able to effectively manage the expansion of our business or achieve the rapid execution necessary to fully avail ourselves of the market opportunity for our solution portfolio. If we are unable to adequately implement our business strategy, our business, results of operations, and financial condition could suffer a material adverse effect.
We are dependent on our key management, direct sales force, and technical personnel for continued success.
Our global senior management team is concentrated in a small number of key members, and our future success depends to a meaningful extent on the services of our executive officers and other key team members, including members of our direct sales force and technology staff. Generally, our executive officers and employees can terminate their employment relationship at any time. The loss of any key employees or our inability to attract or retain other qualified personnel could materially harm our business and prospects.
Effective succession planning is important to our long-term success. Disruptions in future leadership transitions or reorganizations could have a material adverse effect on our business, results of operations, and financial condition and could adversely affect our ability to attract and retain other key executives.
Competition for qualified leadership and technical personnel in the technology industry is intense, and we compete for leadership and technical personnel with other technology companies that have greater financial and other resources than we do. Our future success will depend in large part on our ability to attract, retain, and motivate highly qualified leadership and technical personnel, and there can be no assurance that we are able to do so. Any difficulty in hiring or retaining needed personnel, or increased costs related thereto, could have a material adverse effect on our business, results of operations, and financial condition.
Real or perceived errors or failures in our software and systems could negatively impact our results of operations and growth prospects.
We depend upon the sustained and uninterrupted performance of numerous proprietary and third-party technologies to deliver our solution portfolio. If one or more of those technologies cannot scale to meet demand, or if there are human or technological errors in our execution of any feature or functionality using any such technologies, then our business may be harmed. Because our software is often complex, undetected errors and failures may occur, especially when new versions or updates are made. Despite testing by us, errors or bugs in our solutions may not be found until the software or service is in active use by us or our customers. Moreover, our customers could incorrectly implement or inadvertently misuse our solutions, which could result in customer dissatisfaction and adversely impact the perceived utility of our solutions as well as our brand. Any of these real or perceived errors, failures, or bugs could result in negative publicity, reputational harm, loss of or delay in market acceptance of our solutions, loss of competitive position or claims by customers for losses sustained by them, all of which, along with the costs of responding to such effects, may have a material adverse effect on our business, results of operations, and financial condition.
8


Data security concerns relating to our technology or services could damage our reputation and deter current and potential customers from using our products and services. If our security measures fail to protect our customers' data from unauthorized access and disclosure, our products and services may be perceived as not being secure, customers may curtail or stop using our products and services, and we may incur significant legal and financial exposure. A significant breach of the data security of our customers’, vendors’ or other partners’ information technology systems may negatively impact our business, results of operations, and financial condition.
We handle substantial amounts of confidential information, including personal information of our employees and of our customers' consumers and employees. Our success depends on the confidence of OEMs, dealers, lenders, major credit reporting agencies and other data providers, and other users of (or participants in) our solutions, in our ability to store, process, and transmit this confidential information securely (whether over the internet or otherwise), and to operate our computer systems and operations without significant disruption or failure.
Our computer systems experience cyber-attacks and data security incidents of varying degrees on a regular basis. These events may lead to interruptions and delays in our service and operations as well as loss, misuse, or theft of data that we store, process and transmit. Our security measures may also fail to prevent unauthorized access to our systems and data may be exfiltrated and improperly disclosed or used due to employee error, malfeasance, system errors, or vulnerabilities, including vulnerabilities of our vendors, suppliers, their products, or otherwise. While security measures are in place, if our security measures fail to prevent unauthorized access to such data, our solutions may be perceived as not being secure and our customers may curtail or stop using our solutions and/or vendors may curtail or stop providing their solutions to us. Any failure of, or lack of confidence in, the security of our solutions could have a material adverse effect on our business, results of operations, and financial condition.
Despite our focus on data security, we may not be able to stop unauthorized attempts to gain access to data that we store and process, or to stop disruptions in the transmission or provision of data and communications or other data by us. Advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments could result in a compromise or breach of the controls used by our solutions to protect data contained, processed in and transferred to or from our, our customers’ and/or our vendors’ databases. While warranties and liabilities are usually limited in our customer and vendor contracts, they or other third parties may seek to hold us liable for any losses suffered as a result of unauthorized access to their confidential information or non-public personal information of consumers. In addition, while effort has been expanded to have insurance to cover these losses, we may be required to expend significant capital and other resources to protect against or alleviate any problems caused by actual or threatened cyber-attacks or other unauthorized access to such data. Our security measures may not be sufficient to prevent security breaches, and any failure to prevent the improper use and disclosure of data and/or to adequately alleviate any problems caused by such improper use and disclosure could have a material adverse effect on our business, results of operations, and financial condition.
Our customers, vendors and other partners are primarily responsible for the security of their information technology systems, and we rely on them to supply clean data content and/or to utilize our products and services in a secure manner. While we provide guidance and specific requirements of data security in some cases, we do not directly control any of such parties’ cyber security programs and operations. If our customers, vendors and other partners fail to prevent any significant cyber security breaches, their businesses could be disrupted and therefore may negatively impact our business, results of operations, and financial condition.
Interruption or failure of our networks, systems, and infrastructure could hurt our ability to effectively provide our products and services, which could damage our reputation and/or subject us to litigation or contractual penalties.
The availability of our products and services depends on the continuing operation of our network and systems. From time to time, we have experienced, and may experience in the future, network or system slowdowns and interruptions. These network and system slowdowns and interruptions may interfere with our ability to do business. While the appropriate upgrades to various systems, shoring up backup processes, and other measures to protect against data loss and system failures have been implemented and tested, there is still risk that we may lose critical data or experience network failures.
Despite the resiliency plans and facilities we have in place, our ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports our businesses. This may include a disruption involving electrical, satellite, undersea cable or other communications, internet, cloud computing, transportation, or other services facilities used by us or third parties with which we conduct business. These disruptions may occur as a result of events that affect only our buildings or systems or those of such third parties, or as a result of events with a broader impact globally, regionally or in the cities where those buildings or systems are located, including, but not limited, to natural disasters, war, civil unrest, economic or political developments, pandemics, and weather events.
9


Such network, system or infrastructure failures or disruptions could result in lengthy interruptions in our service and lost revenue opportunities for our customers, which could result in litigation against us and/or our customers may curtail or stop using our solutions or vendors may curtail or stop providing their solutions to us. Additionally, we have service level agreements with certain of our customers that may result in penalties or trigger cancellation rights in the event of a network or system slowdown or interruption. Any of these could have a material adverse effect on our business, results of operations, and financial condition.
Our business is directly and indirectly subject to, and impacted by, extensive and complex laws and regulations in the U.S. and abroad, and new laws and regulations and/or changes to existing laws and regulations may negatively impact our business, results of operations, and financial condition.
Our business is directly and indirectly subject to, and impacted by, numerous U.S. and foreign laws and regulations covering a wide variety of subject matters. Compliance with complex foreign and U.S. laws and regulations that apply to our operations increases our costs and may impede our competitiveness. In addition, failure to comply with such laws or regulations may result in the suspension or termination of our ability to do business in applicable jurisdictions or the imposition of civil and criminal penalties, including fines or exposure to civil litigation. New regulations and/or changes to existing regulations could require us to modify our business practices, including modify the manner in which we contract with or provide products and services to our customers; directly or indirectly limit how much we can charge for our services; require us to invest additional time and resources to comply with such regulations; or limit our ability to update our existing products and services, or require us to develop new ones.

In addition to the data privacy and security laws and regulations mentioned below, our business is also directly or indirectly governed by domestic and international laws and regulations relating to issues such as information services, telecommunications, antitrust or competition, employment, motor vehicle and manufacturer licensing or franchising, vehicle registration, advertising, taxation, consumer protection, and accessibility. We must also comply with anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and local laws prohibiting corrupt payments to governmental officials and private entities, such as the U.K. Anti-Bribery Act and the Criminal Law and Anti-Unfair Competition Law of the People’s Republic of China. In addition, motor vehicle and manufacturer licensing, franchising and advertising is highly regulated at the state level and is subject to changing legislative, regulatory, political, and other influences. Such state laws are complex and subject to frequent change. The application of this framework of laws and regulations to our business is complex and, in many instances, is unclear or unsettled, which in turn increases our cost of doing business, may interfere with our ability to offer our solutions competitively in one or more jurisdictions and may expose us and our employees to potential fines, penalties, or other enforcement actions. In some cases, our customers may seek to impose additional requirements on our business in efforts to comply with their interpretation of their own or our legal obligations. These requirements may differ significantly from our existing solutions or processes and may require engineering and other costly resources to accommodate.

In addition, we are and expect to continue to be the subject of investigations, inquiries, data requests, actions, and audits from regulatory authorities, particularly in the area of competition. On June 22, 2017, the Company received from the Federal Trade Commission (“FTC”) a Civil Investigative Demand consisting of interrogatories and a request to produce documents relating to any agreements between the Company and Reynolds and Reynolds. On April 22, 2019, the Company received a subsequent request to schedule interviews with certain current and former Company employees. Parallel document requests have been received from certain states’ Attorneys General. The Company has responded to the requests and no proceedings have been instituted. At this time, the Company does not have sufficient information to predict the outcome of, or the cost of resolving these investigations.

These laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with and may delay or impede the development of new products, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business, including fines or demands or orders that we modify or cease existing business practices. Our failure to comply, or to provide solutions that allow our customers to comply, or any new investments of additional time and resources necessary to comply, or to provide solutions that allow our customers to comply, with any of the foregoing laws and regulations could have a material adverse effect on our business, results of operations, and financial condition.

We are subject to 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.
Revenue from the Partner Program in our CDKNA segment is dependent on the business model of charging third party retail solution providers for integration to our DMS through a program of robust and secure interfaces. Our ability to control the manner in which we provide this robust and secure access to information in our systems, and our pricing model for this service,
10


has been, and will likely continue to be, challenged, dictated and constrained in certain jurisdictions. For example, during our fourth quarter ending June 30, 2019, Arizona, Montana, North Carolina and Oregon passed legislation that requires us to provide access or integrations to our software to read or write data within our systems. The legislation in some of these states purports to impose such requirements on us at our cost and without markup, or even without compensation, to any third party designated by a dealer licensee of our software, regardless of whether the dealer licensee has title to the data on our systems or the right under its software license to authorize non-licensee third parties access to our systems. In addition, each statute imposes administrative and technical requirements that are inconsistent with our current solutions and capabilities. We believe that compliance with such legislation will impair our ability to provide our customers with robust and secure technology solutions and will increase our risk of data security and privacy breaches, system and data integrity problems, and associated adverse competitive, financial, operational, and reputational impacts. Similar legislation has been proposed in other states and additional states may consider or pass similar legislation. We may incur significant legal and regulatory expenses in connection with assessing or challenging the applicability of this legislation to our products and offerings and while we seek legal, regulatory, or policy solutions to address concerns with respect to the validity of the legislation or our ability to comply with it. Ultimately, our failure to comply, or to provide solutions that allow our customers to comply, or any new investments of additional time and resources necessary to comply, or to provide solutions that allow our customers to comply, with this legislation will increase our operating costs and reduce our revenue, and could have a material adverse effect on our business, results of operations, and financial condition.
Our business is directly or indirectly subject to, or impacted by, complex and rapidly evolving U.S. and foreign laws and regulation regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation and could result in claims, adjustments to our business practices, penalties, increased cost of operations, or declines in customer growth or engagement, or otherwise harm our business.
Many U.S. and foreign jurisdictions have passed, or are currently contemplating, a variety of consumer protection, privacy, and data security laws and regulations that may relate directly or indirectly to our business. For example, federal laws and regulations governing privacy and security of consumer information generally apply to our customers and/or to us as a service provider. These include, but are not limited to, the federal Fair Credit Reporting Act, the Gramm-Leach-Bliley Act (the "GLB Act") and regulations implementing its information safeguarding requirements, the Junk Fax Prevention Act of 2005, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the "CAN-SPAM Act"), the Telephone Consumer Protection Act, the Do-Not-Call-Implementation Act, applicable Federal Communications Commission (the “FCC”) telemarketing rules (including the declaratory ruling affirming the blocking of unwanted robocalls), the FTC Privacy Rule, Safeguards Rule, Consumer Report Information Disposal Rule, Telemarketing Sales Rule, Risk-Based Pricing Rule, Red Flags Rule, and California Consumer Privacy Act of 2018 ("CCPA"). Laws of foreign jurisdictions, such as Canada's Anti-Spam Law and Personal Information Protection and Electronic Documents Act, and European Union's General Data Protection Regulation (the "GDPR") similarly apply to our collection, processing, storage, use, and transmission of protected data.
For example, the GDPR, which became effective on May 25, 2018 imposes more stringent operational requirements for entities processing personal information and greater penalties for noncompliance than previous laws. While we have made adjustments to our products, services and operations in Europe to comply with the new requirements contained in the GDPR and to facilitate our customers' compliance with the GDPR, we may need to make more adjustments as more clarification and guidance on compliance with the GDPR become available. Any such adjustments may result in costs and expenses, and any failure to meet the requirements of the GDPR may result in significant fines, penalties, or other liabilities (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious violations). Further, the European Union is expected to replace the EU Privacy and Electronic Communications Directive 2002/58/EC (“ePrivacy Directive”) governing the use of technologies to collect consumer information with the ePrivacy Regulation. The ePrivacy Regulation may impose burdensome requirements around obtaining consent, and impose fines for violations that are materially higher than those imposed under the European Union’s current ePrivacy Directive and related EU member state legislation.
In addition to the GDPR in Europe, there is also rapid development of new privacy laws and regulations elsewhere around the globe, including amendments of existing data protection laws to the scope of such laws and penalties for noncompliance. Failure to comply with these international data protection laws and regulations could have a negative impact on our reputation and subject us to significant fines, penalties or other liabilities, all of which may cause increased cost of operations or decline in customer growth, or otherwise harm our business, results of operations, and financial condition.
In the U.S., some state laws and regulations have imposed, and others have contemplated imposing, enhanced disclosure obligations and greater restrictions or prohibitions on the use of data than are already contained in federal laws such as the GLB Act and its implementing regulations or the FTC rules described above. For example, a new law in California, the California Consumer Privacy Act of 2018 (“CCPA”), went into effect on January 1, 2020. CCPA provides California consumers with a
11


greater level of transparency and broader rights and choices with respect to their personal information than those contained in any existing state and federal laws in the U.S. The “personal information” regulated by CCPA is broadly defined to include any information that identifies or is reasonably capable of being associated with or linked, directly or indirectly, with a California consumer or household, including, for example, demographics, usage, transactions and inquiries, preferences, inferences drawn to create a profile about a consumer. Compliance with CCPA requires the implementation of a series of operational measures such as preparing data maps, inventories, or other records of all personal information pertaining to California residents, households and devices, as well as information sources, usage, storage, and sharing, maintaining and updating detailed disclosures in privacy policies, establishing mechanisms to respond to consumers’ data access, deletion, portability, and opt-out requests, etc. Violations of CCPA will result in civil penalties up to $7,500 per violation. CCPA further allows consumers to file lawsuits against a business if a data breach has occurred as a result of the business' violation of the duty to implement and maintain reasonable security procedures and practices.
The enforcement of the CCPA commenced on July 1, 2020. In the meantime, significant uncertainties in the interpretation and application some key CCPA provisions remain outstanding. On June 2, 2020, the California Attorney General submitted the draft of the implementation regulations to the CCPA (“CCPA Regulations”) to the California Office of Administration Law for its final approval. Furthermore, the privacy group whose efforts led to the CCPA in 2018 has proposed a new law, the California Privacy Rights Act (“CPRA”), which, if passed, would replace the CCPA and impose further compliance burdens and risks on service providers such as us.

To comply with CCPA and assist many of our customers who are subject to CCPA to comply with CCPA, we have modified or adjusted the design, development, and delivery of our products and services in a significant way. However, with further clarifications and interpretations of the CCPA, the approval of the CCPA Regulations, and the passage of the CPRA and/or any new laws and regulations, additional modifications and adjustments may be required, which may result in significant costs and expenses, and any delay or failure to make such changes may negatively affect our customers’ confidence in or perception of our product and services, result in their ceasing to use our products or services or even lawsuits and significant liabilities.
In addition, all 50 states have passed data breach notification laws that require notifications to affected consumers, attorneys general, consumer protection agencies and/or other government authorities when there is a breach of personal data, and provide consumers with credit monitoring and other remedies. Any data breaches and the related notifications and remedies may result in significant compliance costs in addition to potential liability and reputational damage.

The costs and other burdens of compliance with privacy and data security laws and regulations could negatively impact the use and adoption of our solutions and reduce overall demand for them. Additionally, evolving concerns regarding data privacy may cause our customers, or their customers and potential customers, to resist providing the data necessary to allow us to deliver our solutions effectively. Even the perception that personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our solutions and any failure to comply with such laws and regulations could lead to significant fines, penalties, or other liabilities. Any such decrease in demand or incurred fines, penalties, or other liabilities could have a material adverse effect on our business, results of operations, and financial condition.
Our business operations may be harmed by events beyond our control.
Our business operations are vulnerable to damage or interruption from natural disasters, such as fires, floods, earthquakes, hurricanes, and pandemics or outbreaks of disease or similar public health concerns, such as the COVID-19 pandemic (discussed further in the risk factor "The COVID-19 pandemic could have a material adverse effect on our business, results of operations, and financial condition," above), or fears of such events, or from power outages, telecommunications failures, terrorist attacks, computer network service outages and disruptions, “denial of service” attacks, computer malware and ransomware, break-ins, sabotage, employee error or malfeasance, and other similar events beyond our control. The occurrence of any such event at any of our facilities or at any third-party facility utilized by us or our third-party providers could cause interruptions or delays in our business, loss of data, or could render us unable to provide our solution portfolio. In addition, any failure of a third-party to provide the data, products, services, or facilities required by us, as a result of human error, bankruptcy, natural disaster, or other operational disruption, could cause interruptions to our computer systems and operations. The occurrence of any of these events could have a material adverse effect on our business, results of operations, and financial condition.
We utilize certain key technologies, data, and services from, and integrate certain of our solutions with, third parties and may be unable to replace those technologies, data, and services if they become obsolete, unavailable, or incompatible with our solutions.
12


We utilize certain key technologies and data from, and/or integrate certain of our solutions with, hardware, software, services, and data of third parties, including Chrome Systems, TrueCar, Microsoft, Google, Yahoo, EMC, Cisco Systems, Kyocera, Experian, Equifax, TransUnion and others. Some of these vendors are also our competitors in various respects. These third-party vendors could, in the future, seek to charge us cost-prohibitive fees for such use or integration or may design or utilize their solutions in a manner that makes it more difficult for us to continue to utilize their solutions, or integrate their technologies with our solutions, in the same manner or at all. Any significant interruption in the supply or maintenance of such third-party hardware, software, services, or data could negatively impact our ability to offer our solutions unless and until we replace the functionality provided by this third-party hardware, software, and/or data. In addition, we are dependent upon these third parties’ ability to enhance their current products, develop new products on a timely and cost-effective basis, and respond to emerging industry standards and other technological changes. There can be no assurance that we would be able to replace the functionality or data provided by third-party vendors in the event that such technologies or data becomes obsolete or incompatible with future versions of our solutions or are otherwise not adequately maintained or updated. Any delay in or inability to replace any such functionality could have a material adverse effect on our business, results of operations, and financial condition. Furthermore, delays in the release of new and upgraded versions of third-party software applications could have a material adverse effect on our business, results of operations, and financial condition.
We have customers in over 100 countries, where we are subject to country-specific risks that could negatively impact our business, results of operations, and financial condition.
During the twelve months ended June 30, 2020, we generated 21% of our revenues outside of the U.S. As a result, our business, operations, and financial condition are at times adversely affected by a number of global, regional and country-specific factors outside of our control.
Adverse changes in global, regional or country specific economic conditions, including recession or slowing growth, changes or uncertainty in fiscal, monetary, or trade policy, higher interest rates, tighter credit, inflation, increases in unemployment, and lower consumer confidence and spending, periodically occur. For example, the COVID-19 pandemic has significantly increased economic and demand uncertainty. The current outbreak and continued spread of COVID-19 has caused an economic slowdown, and it is possible that it could cause a global recession. Adverse changes in economic conditions, including as a result of the pandemic, can significantly harm sustained demand within the automotive retail industry, which in turn may affect our business by reducing the number and/or size of actual or potential customers or the money that actual or potential customers are willing or able to spend on our solution portfolio, and make it more challenging to forecast our operating results and make business decisions, including regarding prioritization of investments in our business. An economic downturn or increased uncertainty may also lead to increased credit and collectability risks, higher borrowing costs or reduced availability of capital markets, reduced liquidity, adverse impacts on our suppliers, failures of counterparties including financial institutions and insurers, and asset impairments.
Business and operations in individual countries are subject to changes in local government regulations and policies, including those related to tariffs and trade barriers, investments, taxation, currency exchange controls, repatriation of earnings (as described below) and environmental, and employment laws. For example, the referendum vote held in the U.K. on June 23, 2016 resulted in Brexit. Our results are subject to the uncertainties and instability in economic and market conditions caused by Brexit, including uncertainty regarding the U.K.’s access to the EU Single Market and the wider trading, legal, regulatory, and labor environments, especially in the U.K. and EU. Our results are also subject to the difficulties of coordinating our activities across the countries in which we are active. In addition, our operations in each country are vulnerable to changes in local socio-economic conditions and monetary and fiscal policies, currency exchange rates, intellectual property protection disputes, the settlement of legal disputes through foreign legal systems, the collection of receivables through foreign legal systems, exposure to possible expropriation or other governmental actions, product preference and product requirements, difficulty to effectively establish and expand our business and operations in such markets, unsettled political conditions, possible terrorist attacks, acts of war, natural disasters, and pandemic disease, such as COVID-19. These and other factors relating to our international operations may have a material adverse effect on our business, results of operations, and financial condition.
Our business, results of operations, and financial condition could be harmed by negative rating actions by credit rating agencies.
Nationally recognized credit rating organizations have issued credit ratings relating to the Company and our senior notes. In November 2016, our credit ratings were downgraded to non-investment grade. If our ratings are downgraded further or if ratings agencies indicate that a downgrade may occur, it could limit our access to new financing, reduce our flexibility with respect to working capital needs, adversely affect the market price of our senior notes, result in an increase in financing costs, including interest expense under certain of our debt instruments, and result in less favorable covenants and financial terms in our future financing arrangements. Any of these outcomes could also negatively impact our relationships with our customers or
13


otherwise have a material adverse effect on our business, results of operations, and financial condition. Additional details about the terms of our debt is contained in Item 8 of Part II, "Financial Statements and Supplementary Data - Note 17 - "Debt."
We are currently, and expect to be in the future, involved in litigation that is expensive and time consuming and, if resolved adversely, that may materially adversely affect us.
From time to time, we may become involved in various legal proceedings, including patent, copyright, commercial, product liability, employment, class action, whistleblower, antitrust and other litigation and claims, in addition to governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability and/or require us to change our business practices. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements.
The Company is currently involved in several lawsuits that set forth allegations of anti-competitive conduct by the Company and anti-competitive agreements between the Company and Reynolds and Reynolds relating to the manner in which the defendants control access to, and allow integration with, their respective DMSs. Any negative outcome from any such lawsuits could result in payments of substantial monetary damages or fines, or undesirable changes to our products or business practices, and accordingly our business, financial condition, or results of operations could be materially and adversely affected. Although the results of such lawsuits and claims cannot be predicted with certainty, we do not believe that the final outcome of these matters relating to the manner in which we control access to, and allow integration with, our DMS, that we currently face will have a material adverse effect on our business, financial condition, or results of operations. We believe these cases are without merit and intend to continue to contest the claims in these cases vigorously.
Because litigation is inherently unpredictable, there can be no assurances that a favorable final outcome will be obtained in all our cases, and we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, financial condition, results of operations and prospects. For more information regarding the litigation in which we are currently involved, see the information set forth under “Legal Proceedings” in Item 3 of Part I of this Annual Report on Form 10-K.
We may be unable to adequately protect, and we may incur significant costs in defending, our intellectual property and other proprietary rights.
Our success depends, in large part, on our ability to protect our intellectual property and other proprietary rights. We rely upon a combination of trademark, trade secret, copyright, patent and unfair competition laws, as well as license agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. In addition, we attempt to protect our intellectual property and proprietary information by requiring certain of our team members and consultants to enter into confidentiality, non-competition and assignment of inventions agreements. To the extent that our intellectual property and other proprietary rights are not adequately protected, third parties might gain access to our proprietary information, develop and market products and services similar to ours or use trademarks similar to ours. Existing U.S. federal and state intellectual property laws offer only limited protection. Moreover, the laws of some foreign countries in which we market our products and services afford little or no effective protection of our intellectual property. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and expensive, and we may not prevail. The failure to adequately protect our intellectual property and other proprietary rights, or manage costs associated with enforcing those rights, could have a material adverse effect on our business, results of operations, and financial condition.
Claims that we or our technologies infringe upon the intellectual property or other proprietary rights of a third party may require us to incur significant costs, enter into royalty or licensing agreements, or develop or license substitute technology.
We have in the past and may in the future be subject to claims that our technologies in our products and services infringe upon the intellectual property or other proprietary rights of a third party. In addition, the vendors providing us with technology that we use in our own technology could become subject to similar infringement claims. Although we believe that our products and services do not infringe any intellectual property or other proprietary rights, we cannot assure you that our products and services do not, or that they will not in the future, infringe intellectual property or other proprietary rights held by others. Any claims of infringement could cause us to incur substantial costs defending against the claim, even if the claim is without merit, and could distract our management from our business. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay substantial amounts, obtain a license to continue to use the products and services that are the subject of the claim, and/or otherwise restrict or prohibit our use of the technology. There can be no assurance that we would be able to obtain a license on commercially reasonable terms, or at all, from the third party asserting any particular claim, that we would be able
14


to successfully develop alternative technology on a timely basis, if at all, or that we would be able to obtain a license from another provider of suitable alternative technology to permit us to continue offering, and our customers to continue using, the products and services. In addition, we generally provide in our customer agreements for certain products and services that we will indemnify our customers against third-party infringement claims relating to technology that we provide to those customers, which could obligate us to pay damages if the products and services were ever found to be infringing. Infringement claims asserted against us, our vendors, or our customers could have a material adverse effect on our business, results of operations, and financial condition.
We have made strategic acquisitions and formed strategic alliances in the past and expect to do so in the future. If we are unable to find suitable acquisitions or alliance partners that strengthen our value proposition to customers or to achieve the expected benefits from such acquisitions or alliances, there could be a material adverse effect on our business, results of operations, and financial condition.
We have historically pursued growth through acquisitions, ranging from acquisitions of small start-up companies that provide a discrete application to a handful of customers, to acquisitions of substantial companies with more mature solutions and a larger customer base, such as our acquisition of ELEAD1ONE ("ELEAD") in 2018, which supports our CRM business. As part of our ongoing business strategy to expand solutions offerings, acquire new technologies, and strengthen our value proposition to customers, we frequently engage in discussions with third parties regarding, and enter into agreements relating to, possible acquisitions, strategic alliances, and joint ventures. However, there may be significant competition for acquisition, alliance, and joint venture targets in our industry, or we may not be able to identify suitable candidates, negotiate attractive terms, or obtain necessary regulatory approvals for such transactions in the future. Acquisitions, strategic alliances, and joint ventures also involve numerous other risks, including potential exposure to assumed litigation and unknown environmental and other liabilities, as well as undetected internal control, regulatory or other issues, or additional costs not anticipated at the time the transaction was approved or completed.
Even if we are able to complete acquisitions or enter into alliances and joint ventures that we believe will provide attractive growth opportunities, such transactions are inherently risky. Significant risks from these transactions include risks relating to:
integration and restructuring costs, both one-time and ongoing;
developing and maintaining sufficient controls, policies, and procedures;
diversion of management’s attention from ongoing business operations;
establishing new informational, operational, and financial systems to meet the needs of our business;
losing key employees, customers, and vendors;
failing to achieve anticipated synergies, including with respect to complementary solutions; and
unanticipated or unknown liabilities.
If we are not successful in completing acquisitions in the future, we may be required to reevaluate our acquisition strategy. We also may incur substantial expenses and devote significant management time and resources in seeking to complete acquisitions. In addition, we could use substantial portions of our available cash to pay all or a portion of the purchase prices of future acquisitions. If we do not achieve the anticipated benefits of our acquisitions as rapidly or to the extent anticipated by our management and financial or industry analysts, others may not perceive the same benefits of the acquisition as we do. If these risks materialize, there could be a material adverse effect on our business, results of operations, and financial condition.
Our future acquisitions may involve the issuance of our equity securities as payment, in part or in full, for the business or assets acquired, which would dilute our existing stockholders' ownership interests. Future acquisitions may also decrease our earnings and the benefits derived by us from an acquisition might not outweigh or exceed the dilutive effect of the acquisition. We also may incur additional indebtedness, issue equity, have future impairment of assets or suffer adverse tax and accounting consequences in connection with any future acquisitions.
15


We could be liable for contract or product liability claims, and disputes over such claims may disrupt our business, divert management’s attention, or have a negative impact on our financial results.
We provide limited warranties to purchasers of our products and services. In addition, errors, defects or other performance problems in our products and services, including with respect to data that we store, process and provide in connection with our products and services, could result in financial or other damages to our customers or consumers. There can be no assurance that any limitations of liability set forth in our contracts would be enforceable or would otherwise protect us from liability for damages. We maintain general liability insurance coverage, including coverage for errors and omissions in excess of the applicable deductible amount; however, there can be no assurance that this coverage will continue to be available on acceptable terms, in sufficient amounts to cover one or more large claims or at all, or that the insurer will not deny coverage for any future claim. The successful assertion of one or more large claims against us that exceeds available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, results of operations, and financial condition. Furthermore, any litigation, regardless of its outcome, could result in substantial cost to us and divert management’s attention from our operations and could have a material adverse effect on our business, results of operations, and financial condition. In addition, some of our products and services are business-critical for our customers, and a failure or inability to meet a customer’s expectations could seriously damage our reputation and negatively impact our ability to retain existing business or attract new business.
Because we recognize a majority of our revenue from our subscription-based products and services over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our operating results.
We generally recognize a majority of our revenue from sales of our subscription-based products and services ratably over the term of the subscription contract. As a result, the majority of our quarterly revenue is attributable to service contracts entered into during previous quarters. A decline in new or renewed service agreements in any one quarter will not be fully reflected in our revenue in that quarter but will harm our revenue in future quarters. Consequently, the effect of significant downturns in sales and market acceptance of our subscription services in a particular quarter may not be fully reflected in our operating results until future periods. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, because revenue from new subscription contracts, and from additional orders under existing subscription contracts, must be recognized over the applicable subscription term. In addition, delays or failures in deployment of our subscription services may prevent us from recognizing subscription revenue for indeterminate periods of time. Further, we may experience unanticipated increases in costs associated with providing our subscription services to customers over the term of our subscription contracts as a result of inaccurate internal cost projections or other factors, which may harm our operating results.
Changes in, or interpretations of, accounting principles may negatively impact our financial position and results of operations.
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States ("GAAP"). These principles are subject to interpretation by the SEC and other organizations that develop and interpret accounting principles. New accounting principles arise regularly, implementation of which can have a significant effect on and may increase the volatility of our reported operating results and may even retroactively affect previously reported operating results. In addition, the implementation of new accounting principles may require significant changes to our customer and vendor contracts, business processes, accounting systems, and internal controls over financial reporting. The costs and effects of these changes could adversely impact our operating results, and difficulties in implementing new accounting principles could cause us to fail to meet our financial reporting obligations.
We may experience foreign currency gains and losses.
We conduct transactions and hold cash in currencies other than the U.S. dollar. Changes in the value of major foreign currencies, particularly the Canadian dollar, Euro, Pound Sterling, and Renminbi relative to the U.S. dollar, can significantly affect our assets, revenues, and operating results. Generally, our revenues are adversely affected when the dollar strengthens relative to other currencies and are positively affected when the dollar weakens. Similarly, cash, other bank deposits, and other assets held in foreign currency are adversely affected when the dollar strengthens relative to other currencies and are positively affected when the dollar weakens.
16


We may have exposure to unanticipated tax liabilities, which could harm our business, results of operations, financial condition, and prospects.
Our global business operations subject us to income taxes and non-income based taxes, in both the U.S. and various foreign jurisdictions. The computation of the provision for income taxes and other tax liabilities is complex, as it is based on the laws of numerous taxing jurisdictions and requires significant judgment regarding the application of complicated rules governing accounting for tax provisions under GAAP. The provision for income taxes may require forecasts of effective tax rates for the year, which include assumptions and forward looking financial projections, including the expectations of profit and loss by jurisdiction. Various items cannot be accurately forecasted and future events may materially differ from our forecasts. Our provision for income tax could be materially impacted by a number of factors, including changes in the geographical mix of our profits and losses, changes in our business, such as internal restructuring and acquisitions, changes in tax laws and accounting guidance and other regulatory, legislative or judicial developments, tax audit determinations, changes in our uncertain tax positions, changes in our intent and ability to indefinitely reinvest foreign earnings, changes in our ability to utilize foreign tax credits, changes to our transfer pricing practices, tax deductions associated with stock-based compensation, and changes in our need for deferred tax valuation allowances. Any changes in corporate income tax laws or any implementation of tax laws relating to corporate tax reform, could significantly impact our overall tax liability. For these reasons, our actual tax liabilities in a future period may be materially different than our income tax provision.
In addition, changes in tax laws or tax rulings may have a significant adverse impact on our effective tax rate.
In the event that changes in tax laws negatively impact our effective tax rates, our provision for taxes, or generate unanticipated tax liabilities, our business, results of operations, and financial condition could suffer a material adverse effect.
Changes in tax laws or tax rulings could materially affect our financial position, results of operations, and cash flows.
The income and non-income tax regimes we are subject to or operate under are unsettled and may be subject to significant change. Changes in tax laws or tax rulings, or changes in interpretations of existing laws, could materially affect our financial position, results of operations, and cash flows. For example, changes to U.S. tax laws enacted in December 2017 had a significant impact on our tax obligations and effective tax rate for fiscal 2018 and beyond. In addition, many countries in Europe, as well as a number of other countries and organizations, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could significantly increase our tax obligations in many countries where we do business or require us to change the manner in which we operate our business. The Organization for Economic Cooperation and Development has been working on a Base Erosion and Profit Shifting Project and is expected to continue to issue guidelines and proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business. Due to our international business activities, these types of changes to the taxation of our activities could increase our worldwide effective tax rate and harm our financial position, results of operations, and cash flows.
Uncertainties in the interpretation and application of the 2017 Tax Cuts and Jobs Act could materially affect our tax obligations and effective tax rate.
The 2017 Tax Cuts and Jobs Act (the “Tax Reform Act”) was enacted on December 22, 2017, and significantly affected U.S. federal tax law by changing how the U.S. imposes income tax on multinational corporations along with other changes. The U.S. Department of Treasury may issue regulations and interpretative guidance. In addition, the Tax Reform Act has U.S. state and local implications and additional guidance and interpretations are anticipated from state taxing authorities. The issuance of additional regulations and interpretations may significantly impact how we will apply the law and impact our results of operations in the period issued.
There can be no assurance that we will have access to the capital markets on terms acceptable to us.
From time to time we may need to access the long-term and short-term capital markets to obtain financing. Although we believe that the sources of capital currently in place will permit us to finance our operations for the foreseeable future on acceptable terms and conditions, our access to, and the availability of, financing on acceptable terms and conditions in the future or at all will be impacted by many factors, including, but not limited to:
our financial performance;
our credit ratings;
17


the liquidity of the overall capital markets; and
the state of the economy.
There can be no assurance that we will have access to the capital markets on terms acceptable to us.
Our current level of indebtedness could negatively impact our ability to raise additional capital to fund our operations and limit our ability to react to changes in the economy or our industry.
We have significant debt obligations. On August 17, 2018, we entered into a $750.0 million revolving credit facility (which was drawn by $15.0 million as of June 30, 2020) and borrowed $300.0 million under a three-year term loan facility that will mature on August 17, 2021 and $300.0 million under a five year term loan facility that will mature on August 17, 2023. In addition, we have approximately $2.1 billion of existing senior notes outstanding. See Note 17, "Debt" to our consolidated financial statements under Item 8 of Part II of this Annual Report on Form 10-K for details about the terms of our debt.
Our current indebtedness could have important consequences, including, but not limited to:
increasing our vulnerability to, and reducing our flexibility to plan for and respond to, general adverse economic and industry conditions and changes in our business and the competitive environment;
an increasingly substantial portion of our cash flow from operations will be dedicated to making payments of principal of, and interest on, our indebtedness, thereby reducing the availability of funds that would otherwise be available to fund working capital, capital expenditures, acquisitions, dividends, share repurchases or other corporate purposes;
increasing our vulnerability to further downgrades of our credit rating, which could adversely affect our interest rates on existing indebtedness, cost of additional indebtedness, liquidity and access to capital markets;
restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
requiring us to secure our credit agreements and other indebtedness and provide subsidiary guarantees if certain conditions are met;
making it more difficult for us to repay, refinance or satisfy our obligations with respect to our debt;
limiting or eliminating our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions, or other purposes; and
any failure to comply with the obligations of any of our debt instruments could result in an event of default under the agreements governing such indebtedness, which in turn, if not cured or waived, could result in the acceleration of the applicable debt, and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies.
Our ability to service our current and future levels of indebtedness will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions, including the interest rate environment, and financial, business, regulatory and other factors, some of which are beyond our control.
There is no assurance that we will generate cash flow from operations or that future debt or equity financings will be available to us to enable us to pay our indebtedness or to fund other needs and we may be forced to take actions such as reducing or delaying business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing debt, reducing or discontinuing dividends we may pay in the future, or seeking additional equity capital. These actions may not be effected on satisfactory terms, or at all. Any inability to generate sufficient cash flow or refinance our indebtedness on favorable terms could have a material adverse effect on our business, results of operations, and financial condition.
Higher levels of indebtedness and increased debt service obligations will effectively reduce the amount of funds available for other business purposes and may adversely affect us.
Interest costs related to the notes will be substantial, and our increased level of indebtedness, including any future borrowings, could reduce funds available for acquisitions, capital expenditures or other business purposes, impact our credit ratings, restrict our financial and operating flexibility or create competitive disadvantages compared to other companies with lower debt levels.
18


Further, increased indebtedness could make it more difficult for us to satisfy our obligations with respect to our debt, increase our vulnerability to adverse economic or industry conditions and limit our ability to obtain additional financing.
Our ability to make payments of principal and interest on our indebtedness, including the notes, depends upon our future performance, which will be subject to general economic conditions and financial, business and other factors affecting our consolidated operations, many of which are beyond our control. If we are unable to generate sufficient cash flow from operations in the future to service our debt and meet our other cash requirements, we may be required, among other things:
to seek additional financing in the debt or equity markets;
to refinance or restructure all or a portion of our indebtedness, including the notes;
to sell selected assets or businesses; or
to reduce or delay planned capital or operating expenditures.

Such measures might not be sufficient to enable us to service our debt, including the notes, and meet our other cash requirements. In addition, any such financing, refinancing or sale of assets might not be available on economically favorable terms or at all.
Risks Relating to Our Common Stock
The market price of our shares may fluctuate widely.
The market price of our common stock may fluctuate widely, depending upon many factors, some of which may be beyond our control, including:
our business profile and market capitalization may not fit the investment objectives of our stockholders, and our common stock may not be included in some indices, causing certain holders to sell their shares;
a shift in our investor base;
the actions of significant stockholders;
our quarterly or annual earnings, or those of other companies in our industry;
actual or anticipated fluctuations in our operating results;
announcements of acquisitions or dispositions and strategic moves, such as acquisitions or restructurings, by us or our competitors;
the failure of securities analysts to cover our common stock;
the operating and stock price performance of other comparable companies;
changes in expectations concerning our future financial performance and the future performance of our industry in general, including financial estimates and recommendations by securities analysts;
differences between our actual financial and operating results and those expected by investors and analysts;
changes in the regulatory framework of our industry and regulatory action;
changes in general economic or market conditions, including the impact of COVID-19; and
the other factors described in these “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.
19


Our revenue, operating results, and profitability vary from quarter to quarter, which may result in volatility in our stock price.
Our revenue, operating results, and profitability have varied in the past and are likely to continue to vary significantly from quarter to quarter, which may lead to volatility in our stock price. These variations are due to several factors, including:
the timing, size, and nature of our customer revenues and any losses with respect thereto;
product and price competition regarding our products and services;
the timing of introduction and market acceptance of new products, services or product enhancements by us, or our competitors;
changes in our operating expenses;
foreign currency fluctuations;
the timing of acquisitions or divestitures of businesses, products, and services;
the seasonality of car sales;
the impact of COVID-19;
personnel changes; and
fluctuations in economic and financial market conditions.
There is substantial volatility in the domestic and international stock markets that could negatively impact our stock regardless of our actual operating performance.
The stock market in general and the market for technology companies in particular have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to operating performance. These broad market and industry factors could materially and adversely affect the market price of our stock, regardless of our actual operating performance.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Due to the potential volatility of our stock price, we may therefore be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business.
Holders of our common stock may be adversely affected through the issuance of more senior securities or through dilution.
We may need to incur additional debt or issue equity in order to fund working capital, capital expenditures and product development requirements, maintain debt capacity levels, or to make acquisitions and other investments. If we raise funds through the issuance of debt or equity, any debt securities or preferred stock issued will have liquidation rights, preferences, and privileges senior to those of holders of our common stock. If we raise funds through the issuance of common equity, the issuance will dilute the ownership interests of our stockholders. We cannot assure our investors or potential investors that debt or equity financing will be available to us on acceptable terms, if at all. If we are not able to obtain sufficient financing, we may be unable to maintain or grow our business.
Provisions in our certificate of incorporation and by-laws and of Delaware law may prevent or delay an acquisition of our Company.
Our certificate of incorporation and by-laws and Delaware law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making them more burdensome to the bidder and to encourage prospective acquirers to negotiate with our Board of Directors rather than to attempt a hostile takeover. These provisions include, among others:
the inability of our stockholders to act by written consent; and
20


the right of our Board of Directors to issue preferred stock without stockholder approval.
We have not opted out of the protections afforded by Section 203 of the Delaware General Corporation Law, which provides that a stockholder acquiring more than 15% of our outstanding voting shares (an “Interested Stockholder”) but less than 85% of such shares may not engage in certain business combinations with us for a period of three years subsequent to the date on which the stockholder became an Interested Stockholder unless, prior to such date, our Board of Directors approves either the business combination or the transaction which resulted in the stockholder becoming an Interested Stockholder or the business combination is approved by our Board of Directors and by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the Interested Stockholder.
We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal, and are not intended to make our Company immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of our Company and our stockholders.
We cannot assure you that we will continue to pay dividends or repurchase shares of our common stock at the times or in the amounts we currently anticipate.
Our Board of Directors has declared, and we have paid, regular quarterly cash dividends on our common stock. The payment of such quarterly dividends and any other future dividends will be at the discretion of our Board of Directors. There can be no assurance that we will continue to pay dividends, as to what the amount of any future dividends will be, or that we will have sufficient surplus under Delaware law to be able to pay any future dividends. This may result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capital expenditures, or increases in reserves. If we do not pay future dividends, the price of our common stock must appreciate for you to receive a gain on your investment in us. This appreciation may not occur and our stock may in fact depreciate in value.
In January 2017, the Board of Directors authorized us to repurchase up to $2.0 billion of our common stock. As of June 30, 2020, we have spent a total of approximately $1.5 billion to repurchase shares of our common stock under the authorization. We have funded these repurchases through a combination of free cash flow and incremental borrowings. As intended, such borrowings brought leverage, measured as financial debt, net of cash, divided by adjusted EBITDA, to approximately 3.3x as of June 30, 2020. Our leverage ratio of 3.3x net debt to adjusted EBITDA as of June 30, 2020, is currently in excess of our target leverage ratio. In addition, on May 4, 2020, we entered into amendments to our credit agreements that restrict us from making repurchases of our common stock in excess of $40.0 million in any fiscal year through the earlier of: (i) delivery of the financial statements for the fiscal quarter ending December 31, 2021, provided certain conditions are met; and (ii) the provision of the relevant liens and subsidiary guarantees to the creditor banks. As a result of these conditions, we do not anticipate any material share repurchases in fiscal 2021. There can be no assurance that we will be able to repurchase shares of our common stock at the times or in the amounts we currently anticipate due to market conditions, our cash position, our ability to access new financing, applicable laws and other factors, or that the results of the share repurchase program will be as beneficial as we currently anticipate.
The interests of significant stockholders may conflict with our interests or those of other stockholders, and their actions could disrupt our business and affect the market price and volatility of our securities.
Since we began operating as an independent public company, three of our stockholders have, at various times, made filings on Schedule 13D with the SEC indicating that they may take positions or make proposals with respect to, or with respect to potential changes in, among other things, our operations, management, management and employee incentives, our certificate of incorporation and bylaws, the composition of our Board of Directors, ownership, capital allocation policies, capital or corporate structure, dividend policy, potential acquisitions involving us or certain of our businesses or assets, strategy, and plans. Any such positions or proposals may not in all cases be aligned with the interests of our other stockholders. Significant stockholders may be proponents of pursuing acquisitions, divestitures, and other transactions that, in their judgment, could enhance their investment, even though such transactions involve risks to our other stockholders.
Responding to actions by significant stockholders can be costly, time-consuming, and disrupting to our operations and can divert the attention of management and our employees. Such activities could interfere with our ability to execute our business strategy, including plans relating to, growth strategies, business process improvement, or the return of capital to our stockholders. In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our Board of Directors. The perceived uncertainties as to our future direction also could affect the market price and volatility of our
21


securities.


Item 1B. Unresolved Staff Comments
None.

Item 2. Properties
We own or lease approximately 1.0 million square feet of real estate, consisting of office and other commercial facilities around the world. We own and maintain our global headquarters, totaling approximately 155,000 square feet, in Hoffman Estates, Illinois. We also own or lease approximately 21 locations in North America and 36 locations internationally.
We regularly add or reduce facilities as necessary to accommodate changes in our business operations. We believe that our facilities are adequate to meet our immediate needs, and that, if and when needed, we will be able to secure adequate additional space to accommodate future expansion.
Item 3. Legal Proceedings
For a description of our legal proceedings, see Item 8 of Part II, "Financial Statements and Supplementary Data - Note 18 - Commitments and Contingencies" included in this Annual Report of Form 10-K.

Item 4. Mine Safety Disclosures
Not applicable.

22


Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Registrant's Common Equity
Our common stock began trading "regular way" on the NASDAQ Global Select Market under the symbol "CDK" on October 1, 2014. As of June 30, 2020, there were 13,905 holders of record of our common stock.
Dividends
We expect to continue to pay dividends on our common stock. However, the declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our businesses, legal requirements, regulatory constraints, industry practice and other factors that our Board of Directors deems relevant. There can be no assurance that we will continue to pay dividends or guarantee of the amounts of such dividends.
Stock Performance Graph
The following graph compares the cumulative total stockholder return on our common stock for the five years ended June 30, 2020 with the comparable cumulative return of the: (i) Standard & Poor's (S&P) 500 Index, (ii) S&P MidCap 400 Index, and (iii) S&P 400 Information Technology Index.
cdk-20200630_g1.jpg
The graph assumes $100 was invested in our common stock and in each of the indices as of the market close on June 30, 2015 and assumes that all cash dividends are reinvested. The comparisons in the graph are required by the Securities Exchange
23


Commission (“SEC”) and are not intended to forecast or be indicative of future performance of our common stock. The graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 (the “Exchange Act”), each as amended, except to the extent that we specifically incorporate it by reference into such filing.
Issuer Purchases of Equity Securities 
The following table presents a summary of common stock repurchases made during the three months ended June 30, 2020.
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)
April 1 - 30, 20204,484  $34.07  —  $502,297,495  
May 1 - 31, 20203,170  $35.98  —  $502,297,495  
June 1 - 30, 20204,217  $41.41  —  $502,297,495  
Total11,871  $37.19  —  
(1) Pursuant to the Company's 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 have been included within 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.
Item 6. Selected Financial Data
Selected financial data is presented on a consolidated basis. The following table sets forth selected consolidated financial data from our audited consolidated financial statements as of June 30, 2020 and 2019 and for the years ended June 30, 2020, 2019, and 2018. The selected consolidated financial data as of June 30, 2018, 2017, and 2016 and for the years ended June 30, 2017 and 2016 have been derived from consolidated financial statements which are not included in this Form 10-K.
The selected financial data presented below should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K and Item 7 of Part II "Management's Discussion and Analysis of Financial Condition and Results of Operations."
In June 2019, the Company committed to a plan to divest its Digital Marketing Business and completed the divestiture on April 21, 2020. The operating results of the Digital Marketing Business is being presented as discontinued operations for all periods presented.


24


Years Ended June 30,
(In millions, except per share amounts)
2020(1) (2)
2019 (1)
201820172016
Income Statement Data
Revenues$1,960.1  $1,914.8  $1,798.0  $1,730.7  $1,658.9  
Earnings before income taxes424.2  303.9  399.2  327.7  283.3  
Provision for income taxes120.4  62.2  88.1  92.8  90.1  
Net earnings from continuing operations303.8  241.7  311.1  234.9  193.2  
(Loss) earnings from discontinued operations, net of taxes(89.3) (109.8) 77.6  67.6  53.6  
Net earnings214.5  131.9  388.7  302.5  246.8  
Net earnings attributable to noncontrolling interest7.0  7.9  7.9  6.9  7.5  
Net earnings attributable to CDK207.5  124.0  380.8  295.6  239.3  
Net earnings (loss) attributable to CDK per share - basic:
Continuing operations$2.44  $1.86  $2.23  $1.55  $1.18  
Discontinued operations$(0.73) $(0.87) $0.57  $0.46  $0.34  
Total net earnings attributable to CDK per share - basic$1.71  $0.99  $2.80  $2.01  $1.52  
Net earnings (loss) attributable to CDK per share - diluted:
Continuing operations$2.43  $1.85  $2.21  $1.53  $1.17  
Discontinued operations$(0.73) $(0.87) $0.57  $0.46  $0.34  
Total net earnings attributable to CDK per share - diluted$1.70  $0.98  $2.78  $1.99  $1.51  
Weighted-average basic shares outstanding121.6  125.5  135.8  146.7  157.0  
Weighted-average diluted shares outstanding122.1  126.4  136.8  148.2  158.0  
Cash dividends declared per share$0.600  $0.600  $0.590  $0.555  $0.525  
Balance Sheet Data
Cash and cash equivalents$215.7  $311.4  $804.4  $726.1  $219.1  
Total current assets685.6  987.1  1,367.3  1,278.8  738.7  
Property, plant and equipment, net109.1  144.8  127.6  129.6  111.0  
Total assets2,854.1  2,999.0  3,008.4  2,883.1  2,365.0  
Total current liabilities526.8  840.2  548.4  552.6  523.4  
Long-term debt2,655.1  2,659.4  2,575.5  2,125.2  1,190.3  
Total liabilities3,434.8  3,713.5  3,355.7  2,939.9  1,988.8  
Total stockholders' (deficit) equity(580.7) (714.5) (347.3) (56.8) 376.2  
(1) Effective July 1, 2018, the Company adopted the Financial Accounting Standard Board Accounting Standards Update ("ASU") 2014-09, "Revenue from Contracts with Customers," and related ASUs using the modified retrospective approach. The comparative information has not been restated and continues to be reported under the accounting standards in effect for the periods presented. For further information, see Item 8 of Part II, "Financial Statements and Supplementary Data - Note 6 - Revenue."
(2) Effective July 1, 2019, the Company adopted the Financial Accounting Standard Board Accounting Standards Update ("ASU") 2016-02, "Leases," and related ASUs using the modified retrospective approach. The comparative information has not been restated and continues to be reported under the accounting standards in effect for the periods presented. For further information, see Item 8 of Part II, "Financial Statements and Supplementary Data - Note 14 - Leases."

25



Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes thereto included elsewhere herein. In this Annual Report on Form 10-K, all references to "we," "our," and "us" refer collectively to CDK and its consolidated subsidiaries.
(Tabular amounts in millions, except per share amounts)
Executive Overview. CDK Global enables end-to-end automotive commerce across the globe. 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, in more than 100 countries around the world, for approximately 30,000 retail locations and most OEMs.
We generate revenue primarily by providing a broad suite of subscription-based software and technology solutions for automotive retailers through our CDK North America and CDK International segments. We are focused on 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. Additionally, 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 franchisors.
We have organized our operations into two main operating groups, CDK North America ("CDKNA") and CDK International ("CDKI"), which are also the two reportable operating segments. A brief description of each of these two segments' operations is provided below. In addition, the Company has an Other segment, the primary components of which are corporate allocations and other expenses not recorded in the segment results. Additional information on our reportable segments and geographic areas is contained in Item 8 of Part II, "Financial Statements and Supplementary Data - Note 20 - Financial Data by Segment."
In June 2019, we committed to a plan to divest our Digital Marketing Business and completed the divestiture on April 21, 2020. The Digital Marketing Business is presented as discontinued operations. Additional information on discontinued operations is contained in Item 8 of Part II, "Financial Statements and Supplementary Data - Note 4 - Discontinued Operations."
CDK North America. Through our CDKNA segment, we provide technology-based solutions, including our DMS products, 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 help automotive retailers, OEMs, consumers and other industry participants manage the acquisition, sale, financing, insuring, parts supply, and repair and maintenance of vehicles. Our solutions help our customers streamline their operations, better target and serve their customers, and enhance the financial performance of their retail operations. In addition to providing solutions to automotive retailers and OEMs, we also provide solutions to retailers and manufacturers of heavy trucks, construction equipment, agricultural equipment, motorcycles, boats, and other marine and recreational vehicles.
CDK International. Through our CDKI segment, we provide automotive retailers with core DMS solutions and we offer automotive retailers and OEMs a variety of professional services, custom programming, consulting, implementation and training solutions, as well as a full range of customer support solutions in approximately 100 countries outside of the United States ("U.S.") and Canada. The solutions that we provide within this segment allow our customers to streamline their business operations and enhance their financial performance within their local marketplace, and in some cases where we deal directly with OEMs, across international borders. Customers of this segment include automotive retail dealers and OEMs across Europe, the Middle East, Asia, Africa, and Latin America.
26


Impacts of COVID-19. As the COVID-19 pandemic spread at scale in Europe and the U.S., by mid-March we began to see a significant shift in automotive retail, and the operations of our dealer customers in particular, stemming from travel bans and restrictions, quarantines, shelter-in-place orders and related business shutdowns. The full extent and timing of the impact of the COVID-19 pandemic on our business is currently unknown. Our business remains fully operational with modifications to accommodate employee and customer safety considerations, including limitations on travel, a migration of nearly all employees to work-from-home status for the present time, increased virtual delivery of certain services, and other modifications. We have observed that other companies including our customers and vendors are taking precautionary and preemptive actions to address the COVID-19 pandemic and companies may take further actions that alter their normal business operations. We continue to actively monitor the situation and may take further actions in response to guidance from federal, state or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers and stockholders.
We have experienced impacts related to the COVID-19 pandemic during the second half of fiscal 2020, mainly attributable to lower volume of transactional revenue and reduced installation activities. Additionally, to support our customers in this difficult period, we have offered financial and other assistance and added product benefits to reflect today’s environment, while continuing to provide the high level of customer service they expect and rely on. The impacts of the financial assistance provided are expected be a near-term decrease in cash receipts in addition to a reduction in revenue that will be recognized over the next two years. The earnings and cash flow impacts of the reduced revenue is partially offset by expense reductions in the areas of travel expenses and other discretionary spending.
In response to the economic uncertainty engendered by the ongoing COVID-19 pandemic, we have taken steps to preserve cash and improve our liquidity position. We are reducing costs and eliminating discretionary spending where possible while continuing to serve our customers’ needs. We have also amended our revolving credit facility and term loans to increase the maximum allowable leverage ratio through the first quarter of 2022 in order to provide us with access to additional borrowing capacity. In addition, we reviewed our plans for foreign cash balances and, based on the increase in uncertainty and higher expected U.S. cash needs associated with the pandemic, we have removed our assertion that foreign earnings are indefinitely reinvested, making these earnings available for repatriation as necessary. At this point in time, it is not clear to what extent or over what length of time the COVID-19 pandemic will impact our financial results. We continue to monitor cash flow and liquidity and will take further steps as necessary depending on the duration and severity of the COVID-19 pandemic crisis and its impact on our cash flows.
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, process, 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 systems and tools used by the Company. We estimate the investment to implement this holistic business reform, including the design and implementation of a new enterprise resource planning ("ERP") system, will require investment of approximately $30 million over a three-year time horizon.

CDKI Restructuring. On May 2, 2020, we adopted a plan to restructure the CDKI segment to reduce costs and improve margins. The Company expects to incur costs related to one-time employee termination benefits up to $30.0 million. We have incurred costs of $14.2 million during the fourth quarter of fiscal 2020, additional charges related to these actions are expected to be incurred through early fiscal 2021.

Business Transformation Plan. During fiscal year ended June 30, 2015 ("fiscal 2015"), we initiated a three-year business transformation plan designed to increase operating efficiency and improve the cost structure of our global operations. The business transformation plan was completed at the end of our fiscal year ended June 30, 2019 (“fiscal 2019”). It produced significant benefits in our business performance. Additional information on the business transformation plan is contained in Item 8 of Part II, "Financial Statements and Supplementary Data, Note 7 - Restructuring."

In January 2017, the Board of Directors authorized us to repurchase up to $2.0 billion of our common stock as part of a return of capital plan, whereby we have repurchased approximately $1.5 billion of common stock through June 30, 2020. On May 4, 2020, we entered into amendments to our credit agreements that restrict us from making repurchases of our common stock in excess of $40.0 million in any fiscal year through the earlier of: (i) delivery of the financial statements for the fiscal quarter ending December 31, 2021, provided certain conditions are met; and (ii) the provision of the relevant liens and subsidiary guarantees to the creditor banks. We did not make stock repurchases during the fiscal 2020. For fiscal 2020, the shareholder returns consisted solely of dividends with an aggregate value of $73.0 million. 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, 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. Our leverage ratio of 3.3x net debt to adjusted EBITDA as of June 30, 2020, is currently in excess of our target leverage ratio. As a result, we do not anticipate any material share repurchase during fiscal 2021.
27


Under the authorization, and subject to the restrictions of our credit agreements, as amended, we may continue to purchase our common stock in 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 any shares repurchased will be determined at management's discretion and will depend on a number of factors, which may include the market price of the 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.
Sources of Revenues and Expenses
Revenues. We generally receive fee-based revenue by providing services to customers. We generate revenues from four categories: subscription, on-site licenses and installation, transaction services, and other.
In our CDKNA segment, we have the following sources of revenue:
Subscription: for software and technology solutions provided to automotive retailers and OEMs, which includes:
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 adoption of ASC 842, 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.
On-site licenses and installation: DMSs applications where the software is installed on-site at the customer's location and 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, and other miscellaneous revenues. After the adoption of ASC 842, Other revenues also includes leasing revenue from hardware where the customer has a right of use during the contract term under ASC 842, as hardware substitution rights are not considered substantive.
CDKI revenues are generated primarily from Subscription revenue, On-site licenses and installation revenue, and other revenue, as described above.
Expenses. Expenses generally relate to the cost of providing services to customers in our two reportable segments. In the CDKNA and CDKI segments, 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.
Potential Material Trends and Uncertainties in our Marketplace
A number of material trends and/or uncertainties in our marketplace could have either a positive or negative impact on our ability to conduct business, our results of operations, and/or our financial condition. The following is a summary of trends or uncertainties that have the potential to affect our liquidity, capital resources, or results of operations:
Our revenues, operating earnings, and profitability have varied in the past as a result of these trends and uncertainties and are likely to continue to vary from quarter to quarter, which may lead to volatility in our stock price. These trends or uncertainties could occur in a variety of different areas of our business and the marketplace.
Changing market trends, including changes in the automotive marketplace, both in North America and internationally, could have a material impact on our business. From time to time, the economic trends of a region could have an impact on the volume of automobiles sold at retail within one or more of the geographic markets in which we operate. To some extent, our business is impacted by these trends, either directly through a shift in the number of transactions processed by customers of our transactional business, or indirectly through changes in our customers’ spending habits based on their own changes in profitability.
Our presence in multiple markets internationally could pose challenges that would impact our business or results of operations. We currently operate in over 100 countries and derive a significant amount of our overall revenues from
28


markets outside of North America. The geographic breadth of our presence exposes us to potential economic, social, regulatory, and political shifts.
Our ability to bring new solutions to market, research and develop, or acquire the data and technology that enables those solutions is important to our continued success. In addition, our strategy includes the selective pursuit of acquisitions that support or complement our existing technology and solution set. An inability to invest in the continued development of new solutions for the automotive marketplace, or an inability to acquire new technology or solutions due to a lack of liquidity or resources, could impair our strategic position.
Our success depends on our ability to maintain the security of our data and intellectual property, as well as our customers’ data. Although we maintain a clear focus on data and system security, and we incur significant costs securing our infrastructure annually in support of that focus, we may experience interruptions of service or potential security issues that may be beyond our control.
Factors Affecting Comparability of Financial Results
Debt Financing
Revolving Credit Facility. On August 17, 2018, we entered into a five-year senior unsecured 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, and, if approved by the revolving lenders, other currencies. The average outstanding balances of the revolving credit facility were $209.5 million and $268.4 million for the three months ending June 30, 2020 and 2019, respectively, and $122.7 million and $282.3 million for the year ended June 30, 2020, and 2019, respectively.
Term Loan Facilities. On August 17, 2018, we borrowed an aggregate of $600.0 million under term loan facilities comprising a $300.0 million term loan facility that will mature on August 17, 2021 (our "three year term loan facility"), and a $300.0 million term loan facility that will mature on August 17, 2023 (our "five year term loan facility"). Borrowings under the three year term loan facility and the five year term loan facility were used to pay off all of the outstanding principal, interest and related fees with respect to each of the two $250.0 million senior unsecured term loan facilities, and the $400.0 million senior unsecured term loan facility.
Senior Notes. On May 2, 2019, we completed an offering of 5.250% senior notes with a $500.0 million aggregate principal amount due in 2029 (the "2029 notes"). The net proceeds from the sale of the 2029 notes was primarily used to repay borrowings under the Company's revolving credit facility and for general corporate purposes, which included share repurchases, dividends, acquisitions, working capital and capital expenditures.
On October 15, 2019, we paid off the unsecured senior note at its maturity with an interest rate of 3.30% and an aggregate principal amount of $250.0 million.
Acquisitions
On September 14, 2018, the Company acquired the equity interests of ELEAD. ELEAD’s automotive customer relationship management ("CRM") software and call center solutions enable interaction between sales, service and marketing operations to provide dealers with an integrated customer acquisition and retention platform.
Adoption of Accounting Standard Updates related to Leases.
On July 1, 2019, we adopted Accounting Standard Codification 842 "Leases," as amended ("ASC 842"). ASC 842 requires that lessees recognize right-of-use assets and lease liabilities for any lease classified as either a finance or an operating lease that is not considered short-term. We adopted ASC 842 using the modified retrospective transition method whereby prior comparative periods have not been restated. As a result, there are year-over-year variances discussed in the sections below that result from the change in timing of revenue and cost recognition for our Hardware as a Service ("HaaS") arrangements beginning in fiscal 2020. For additional information, refer to Item 8 of Part II, "Financial Statements and Supplementary Data - Note 14 - Leases" of this Annual Report on Form 10-K
29


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. We track the number of retail customer sites that have an active DMS and sell vehicles in automotive and adjacent markets. This metric is 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 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, marine, and recreational vehicle industries, and heavy equipment dealerships in the agriculture and construction equipment industries.
Average Revenue Per DMS Customer Site. 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 the revenue generated from our solutions, in an applicable period, by the average number of DMS customer sites in the same period. The metric excludes subscription revenue generated by customers not included in our DMS customer site count as well as subscription revenue related to certain installation and training activities that is deferred then recognized as revenue over the life of the contract. Revenue underlying this metric is based on budgeted foreign exchange rates. When we discuss growth in average revenue per DMS customer site, revenue for the comparable prior period has been adjusted to reflect budgeted foreign exchange rates for the current period.
Non-GAAP Measures
We disclose certain financial measures for our consolidated and operating segment 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 comparable GAAP financial measures, in the same way.
Non-GAAP Financial MeasureComparable GAAP Financial Measure
Adjusted earnings before income taxesEarnings (Loss) before income taxes
Adjusted provision for income taxesProvision for income taxes
Adjusted net earnings attributable to CDKNet (loss) earnings attributable to CDK
Adjusted diluted earnings attributable to CDK per shareDiluted (loss) earnings attributable to CDK per share
Adjusted EBITDANet (loss) earnings attributable to CDK
Adjusted EBITDA marginNet (loss) earnings attributable to CDK margin
Constant currency revenuesRevenues
Constant currency adjusted earnings before income taxes(Loss) Earnings before income taxes
Free cash flow from continuing operationsNet cash flows provided by operating activities
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 measures adjust for the impact of certain items that we believe 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 segment and overall operating performance on a consistent period-to-period basis and relative to our competitors, (iv) target leverage calculations, (v) debt covenant calculations, and (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.
30


We review revenues and adjusted earnings before income taxes on a constant currency basis to understand underlying business trends. To present these results on a constant currency basis, current period results for entities reporting in currencies other than the U.S. dollar were translated into U.S. dollars using the average monthly exchange rates for the comparable prior period. As a result, constant currency results neutralize the effects of foreign currency.

We incorporated additional adjustments within 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 2020 Modifications to Our Adjustments.
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, process, 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. We estimate the investment to implement this holistic business reform, including the design and implementation of a new ERP system, will require investment of approximately $30 million over a three-year time horizon. In connection with our initiation of the business process modernization program, we have modified our presentations of adjusted net earnings attributable to CDK, adjusted diluted net earnings attributable to CDK per share, and adjusted EBITDA because such costs do not directly reflect our underlying operations.
Effective January 1, 2020, we modified our presentation of adjusted provision for income taxes, adjusted net earnings attributable to CDK, adjusted diluted earnings attributable to CDK per share to include an adjustment for the income tax effect of a change in CDK’s assertion that foreign earnings are no longer considered indefinitely reinvested.

Effective April 1, 2020, we modified our presentation of adjusted earnings before income taxes, adjusted provision for income taxes, adjusted net earnings attributable to CDK, adjusted diluted earnings attributable to CDK per share, and adjusted EBITDA to include our plan to restructure the CDKI segment to reduce costs and improve margins.

Effective April 21, 2020, we modified our presentation of adjusted earnings before income taxes, adjusted provision for income taxes, adjusted net earnings attributable to CDK, adjusted diluted earnings attributable to CDK per share, and adjusted EBITDA to include net adjustments related to the loss from an equity method investment.
Results of Operations. We review results on a constant currency basis to understand underlying business trends. To present these results on a constant currency basis, current period results for entities reporting in currencies other than the U.S. dollar were translated into U.S. dollars using the average monthly exchange rate for the comparable prior period. As a result, constant currency results neutralize the effects of foreign currency.
Fiscal 2020 Compared to Fiscal 2019. The following is a discussion of the results of our consolidated results of operations for fiscal 2020 and 2019, respectively. For a discussion of our operations by segment, see "Analysis of Reportable Segments" below.
For a discussion of our results of operations for fiscal 2019 compared to fiscal 2018, please refer to Part II, Item7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 which was filed with the SEC on August 14, 2019.
31


The table below presents our Consolidated Statements of Operations for the periods indicated and the dollar change and percentage change between periods.

Years Ended June 30,Change
 20202019$%
Revenues$1,960.1  $1,914.8  $45.3  %
Costs of revenues966.5  899.8  66.7  %
Selling, general and administrative expenses429.9  444.7  (14.8) (3)%
Restructuring expenses14.2  28.0  (13.8) (49)%
Litigation provision—  90.0  (90.0) (100)%
Total expenses1,410.6  1,462.5  (51.9) (4)%
Operating earnings549.5  452.3  97.2  21 %
Interest expense(144.3) (139.1) (5.2) (4)%
Loss from equity method investment(2.7) (17.0) 14.3  84 %
Other income, net21.7  7.7  14.0  182 %
Earnings before income taxes424.2  303.9  120.3  40 %
Margin %21.6 %15.9 %
Provision for income taxes(120.4) (62.2) (58.2) (94)%
Effective tax rate28.4 %20.5 %
Net earnings from continuing operations303.8  241.7  62.1  26 %
Net loss from discontinued operations(89.3) (109.8) 20.5  (19)%
Net earnings214.5  131.9  82.6  63 %
Less: net earnings attributable to noncontrolling interest7.0  7.9  (0.9) (11)%
Net earnings attributable to CDK$207.5  $124.0  $83.5  67 %
Revenues. Revenues for fiscal 2020 increased by $45.3 million as compared to fiscal 2019. The CDKNA segment contributed $46.0 million, partially offset by declines in the CDKI segment of $0.7 million. See the discussion below for drivers of each segment's revenue variance. The impact of foreign exchange rates on revenues was a decrease of $10.7 million. The foreign exchange rate impact was primarily due to the strength of the Euro, British pound, South African rand, Canadian dollar, Chinese yuan, and Danish krone, against the U.S. dollar.
Cost of Revenues. Cost of revenues for fiscal 2020 increased by $66.7 million as compared to fiscal 2019. The constant currency impact of foreign exchange rates on cost of revenues was a decrease of $5.1 million. Cost of revenues increased due to the ELEAD acquisition, higher costs relating to investments in strategic growth initiatives, a post-ASC 842 change in the timing of cost recognition for our HaaS arrangements, and an increase in depreciation and amortization resulted from capitalized software. These increases were partially offset by the cost containment efforts in response to the COVID-19 pandemic, impairment charges recorded related to certain intangible assets during the second quarter of the prior year, and lower employee related expenses. Cost of revenues include expenses to research, develop, and deploy new and enhanced solutions for our customers of $72.9 million and $79.5 million for fiscal 2020 and 2019, respectively, representing 3.7% and 4.2% of revenues, respectively.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for fiscal 2020 decreased $14.8 million as compared to fiscal 2019. The constant currency impact of foreign exchange rates on selling, general and administrative expenses was a decrease of $2.6 million. Selling, general and administrative expenses decreased due to lower stock-based compensation expense resulting from cumulative adjustments related to the achievement of financial performance metrics associated with performance-based restricted stock units, certain expenses incurred in the prior year related to the business transformation plan which was completed at the end of fiscal 2019, and lower travel expenses as a result of the COVID-19 pandemic, partially offset by costs related to the business process modernization program that began during fiscal 2020.
Restructuring Expenses. Restructuring expenses for fiscal 2020 decreased $13.8 million as compared to fiscal 2019. The expenses in fiscal 2020 relate to our restructuring plan for the CDKI segment. The expenses incurred in the prior year relate to our business transformation plan which was completed at the end of fiscal 2019.
32


Litigation Provision. The Company recorded a $90.0 million litigation provision related to antitrust lawsuits during fiscal 2019. Additional information on the litigation provision is contained in Item 8 of Part II, "Financial Statements and Supplementary Data - Note 18 - Commitments and Contingencies."
Interest Expense. Interest expense for fiscal 2020 increased $5.2 million as compared to fiscal 2019 due to higher interest rates and higher average debt levels in fiscal 2020 compared to fiscal 2019.
Loss from Equity Method Investment. The Company recorded a $2.7 million loss from the equity earnings of Ansira, an equity-method investment. The Company recorded a $17.0 million loss from equity method investment related to termination of a joint-venture contract during fiscal 2019. Refer to Note 16. Investments for additional information on equity method investments.
Other Income, Net. Other income, net for fiscal 2020 increased by $14.0 million as compared to fiscal 2019 due largely to the recognition of income related to a transition services agreement in connection with the sale of the Digital Marketing Business.
Provision for Income Taxes. The effective tax rate for fiscal 2020 was 28.4% as compared to 20.5% for fiscal 2019. The effective tax rate for fiscal 2020 was primarily impacted by $14.8 million of tax expense from the increase in valuation allowance for capital loss carryforward credits which was triggered by a change in estimate of the expected capital gain associated with the sale of the assets of the Digital Marketing Business and $3.7 million tax expense from CDK's change in assertion regarding our intent to no longer indefinitely reinvest foreign earnings offset by $1.2 million of one-time tax benefit resulting from an adjustment of an accrual for foreign withholding taxes related to undistributed earnings as a result of the Tax Reform Act in the first quarter of fiscal 2020. The effective tax rate for fiscal 2019 was impacted by a $14.8 million tax benefit from decrease in valuation allowance related to the capital gain that we expected to recognize in conjunction with the sale of the Digital Marketing Business, a $4.3 tax expense from an increase to valuation allowance related to a new capital loss generated from termination of a joint venture, a one-time tax expense of $3.4 million form a revaluation of deferred tax assets associated with executive compensation, $0.6 million tax benefit due to a true-up to the one-time transition tax initially recorded in fiscal 2018 as a result of the Tax Reform Act, and $1.4 million tax benefit for excess tax benefits from stock-based compensation. The effective tax rate increase from fiscal 2019 to fiscal 2020 is also impacted by the mix of earnings by jurisdiction offset by a tax benefit from a decrease of nondeductible expenses for tax purposes due to reduced executive compensation, tax benefits from various tax planning implemented in fiscal 2020 including an update to transfer pricing policies and a tax benefit from a state audit refund.
Net Loss from Discontinued Operations. Net loss from discontinued operations reflect the results of the Digital Marketing Business. During fiscal 2019, the Digital Marketing Business was impacted by a $168.7 million goodwill impairment charge. On April 21, 2020, the Company completed its sale of the Digital Marketing Business. The Company previously recorded a valuation allowance of $95.7 million through March 31, 2020, and recorded an additional $0.6 million in the fourth quarter of fiscal 2020 for a total loss on sale of $96.3 million. Refer to Note 4 Discontinued operations for additional information. In addition, the Digital Marketing Business generated lower earnings in fiscal 2020 due to a decline in our advertising business revenues which were impacted by a reduction in OEM-funded advertising placements and dealer spend, a decline in our website business revenues and the fact that fiscal 2020 only included the business through April 21, 2020. The unfavorable effects of these items were partially offset by a net tax benefit.
Net Earnings Attributable to CDK. Net earnings attributable to CDK for fiscal 2020 increased $83.5 million as compared to fiscal 2019. The increase in net earnings attributable to CDK was primarily due to the factors previously discussed.
Consolidated Non-GAAP Results. The tables below present the reconciliation of the most directly comparable GAAP measures to constant currency revenues, constant currency 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.
33


Years Ended June 30,Change
20202019$%
Revenues (1)
$1,960.1  $1,914.8  $45.3  %
Impact of exchange rates10.7  —  10.7  
Constant currency revenues$1,970.8  $1,914.8  $56.0  %
Earnings before income taxes (1)
$424.2  $303.9  $120.3  40 %
Margin %21.6 %15.9 %
Total stock-based compensation (1) (2)
19.6  30.5  (10.9) 
Amortization of acquired intangible assets (1) (3)
16.1  15.3  0.8  
Transaction and integration-related costs (1) (4)
10.2  13.2  (3.0) 
Legal and other expenses related to regulatory and competition matters (5)
19.4  111.2  (91.8) 
Business process modernization program (6)
16.1  —  16.1  
Restructuring expenses (1) (7)
14.2  28.0  (13.8) 
Other business transformation expenses (1) (7)
—  20.9  (20.9) 
Impairment of intangible assets (8)
—  14.9  (14.9) 
Officer transition expense (9)
—  6.4  (6.4) 
Net adjustments related to loss from equity method investment (10)
2.2  —  2.2  
ELEAD joint venture agreement termination (11)
—  17.0  (17.0) 
Adjusted earnings before income taxes (1)
$522.0  $561.3  $(39.3) (7)%
Adjusted margin %26.6 %29.3 %
Impact of exchange rates2.6  —  2.6  
Constant currency adjusted earnings before income taxes$524.6  $561.3  $(36.7) (7)%

Years Ended June 30,Change
20202019$%
Provision for income taxes (1)
$120.4  $62.2  $58.2  94 %
Effective tax rate28.4 %20.5 %
Income tax effect of pre-tax adjustments (13)
23.6  58.8  (35.2) 
Income tax effect for foreign earnings previously deemed indefinitely reinvested (14)
(3.4) —  (3.4) 
Change in valuation allowance (15)
(14.8) 14.8  (29.6) 
Impact of U.S. tax reform (16)
1.2  (2.8) 4.0  
Adjusted provision for income taxes (1)
$127.0  $133.0  $(6.0) (5)%
Adjusted effective tax rate24.3 %23.7 %

34


Years Ended June 30,Change
20202019$%