CDK Global, Inc. - 10-Q filing on 2016-11-02

Interim Financial Data by Segment

3 Months Ended

Sep. 30, 2016

Effective July 1, 2016, the Company executed a comprehensive reorganization to streamline its organization that will enable it to deliver an improved customer experience, create significant efficiencies, and better align it to implement the business transformation plan. The organizational changes included integrating product management, combining the Digital Marketing and Automotive Retail North America operations into a single organization, creating a single North America sales organization, and forming a global research and development organization. In connection with this reorganization, information that the Company's chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed resulting in a reassessment of operating segments.

The Company reorganized into two main operating groups. In connection with this reorganization, our operating segments have changed. The Company's first operating group is CDK North America which is comprised of two reportable segments, Retail Solutions North America, and Advertising North America. The second operating group, which is also a reportable segment, is CDK International. Segment information for the three months ended September 30, 2015 has been updated to conform to the new presentation.

The primary components of the Other segment are corporate allocations and other expenses not recorded in the segment results, such as stock-based compensation expense, corporate costs, interest expense, costs attributable to the business transformation plan, results of our captive insurance company and certain unallocated expenses. Certain expenses are charged to the reportable segments at a standard rate for management reasons. Other costs are recorded based on management responsibility.

Revenue by segment was as follows:



	Revenues
	Three Months Ended
	September 30,
	2016		2015
CDK North America:
Retail Solutions North America	$	395.4	$	373.2
Advertising North America	77.5		63.2
CDK International	77.8		78.2
Total	$	550.7	$	514.6

Supplemental disclosure of revenue by type was as follows:

Retail Solutions North America:

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


•	Dealer Management Systems (“DMSs”) and layered applications, which may be installed onsite at the customer’s location, or hosted and provided on a Software-as-a-Service ("SaaS") basis, including ongoing maintenance and support;


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


•	Websites, search marketing, and reputation management services; and


•	Hardware on a service basis, meaning no specific assets are identified or a substantive right of substitution exists.

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.

Advertising North America revenues are primarily earned for placing internet advertisements for OEMS and automotive retailers.

CDK International revenues are generated primarily from Subscription revenue as described above, aside from the absence of website offerings.



	Revenues
	Three Months Ended
	September 30,
	2016		2015
CDK North America:
Retail Solutions North America:
Subscription revenue	$	316.3	$	294.6
Transaction revenue	46.9		45.7
Other revenue	32.2		32.9
Total Retail Solutions North America	$	395.4	$	373.2
Advertising North America revenue	77.5		63.2
CDK International revenue	77.8		78.2
Total	$	550.7	$	514.6

Earnings before Income Taxes by segment was as follows:



	Earnings before Income Taxes
	Three Months Ended
	September 30,
	2016			2015
CDK North America:
Retail Solutions North America	$	145.5		$	109.1
Advertising North America	11.5			3.8
CDK International	16.9			14.2
Other	(62.0		)	(31.3		)
Total	$	111.9		$	95.8

Assets by segment were as follows:



	Assets
	September 30, 2016		June 30, 2016
CDK North America:
Retail Solutions North America	$	1,240.9	$	1,240.9
Advertising North America	307.9		307.9
CDK International	532.2		539.4
Other	298.6		276.8
Total	$	2,379.6	$	2,365.0