Brookfield’s CDK Posts 18% Earnings Drop as Software Fears Grow
(Bloomberg) — CDK Global, backed by Brookfield Partners, reported double-digit earnings decline in the fourth quarter; It’s a sign that the company is in trouble at a time when Wall Street is examining how the software industry will withstand advances in artificial intelligence.
The privately held company, which provides software to auto dealers, presented its financial results to investors late Tuesday. CDK reported pro forma earnings before interest, taxes, depreciation and amortization of about $127 million, according to people who requested anonymity to discuss private earnings; This is a decrease of approximately 18% from a year ago.
Some have said CDK’s lower earnings may be due in part to high costs and its investments in the company.
CDK is among a number of companies facing a punishing selloff as a growing number of investors fear artificial intelligence will replace software firms. These concerns have put pressure on the prices of assets tied to the companies themselves and their backers.
CDK’s $4 billion first mortgage loan due in 2029 traded at about 68 cents on the dollar Tuesday, according to data compiled by Bloomberg. This was down from 83.75 cents in mid-January.
Revenue in the fourth quarter remained mostly unchanged at $390 million, compared with $392 million a year earlier, the sources said. The software firm shed $8 million in free cash flow in the quarter.
Sources said CDK ended the year with $58 million in cash and $625 million in availability under its revolving credit facility, after netting $25 million in liabilities.
A CDK representative did not respond to a request for comment. A representative for Brookfield declined to comment.
Last year, a group of CDK’s lenders met over concerns about Gibson Dunn & Crutcher’s financial strength. The company is grappling with the aftermath of a cyberattack that forced it to shut down all of its systems in 2024.
Moody’s Ratings lowered CDK’s outlook from stable to negative in December, citing limited revenue and earnings growth; and free cash flow was impacted by financial settlements related to two class action lawsuits arising from the cyberattack.
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