Brookfield's CDK Reports 18% Decline in Earnings Amid Growing Concerns Over the Software Sector

CDK Global Reports Double-Digit Earnings Decline in Q4

CDK Global, a software provider to car dealerships backed by Brookfield Business Partners, has reported a 18% decline in pro forma earnings before interest, taxes, depreciation and amortization (EBITDA) to $127 million in the fourth quarter, compared to the same period last year.

The decline in earnings may be attributed to higher costs and investments made by the company. CDK's revenue for the quarter was mostly unchanged at $390 million, compared to $392 million in the same period last year. The company generated $8 million of free cash flow in the three-month period.

CDK's financial health has been under scrutiny due to concerns about the impact of artificial intelligence on the software sector. The company's $4 billion first-lien term loan due in 2029 was quoted at 68 cents on the dollar on Tuesday, down from 83.75 cents in mid-January. As of year-end, CDK had $58 million of cash and $625 million of availability under its revolving credit facility, after netting out $25 million in borrowings.

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Moody's Ratings has lowered its outlook on CDK to negative from stable, citing limited revenue and earnings growth, as well as the impact of financial settlements tied to two class action lawsuits stemming from a cyberattack in 2024. The company's financial strength has also been a concern, with a group of lenders organizing with Gibson Dunn & Crutcher last year.