Car dealership company AutoNation says CDK ransomware incident cut into quarterly earnings

One of the largest car dealership companies in the U.S. said its profits took a hit last quarter due to outages caused by a recent ransomware attack on a major software provider.

AutoNation warned investors on Monday that its quarterly earnings report — pegged for release on July 31 — will show a negative impact from the incident of about $1.50 per share, or about one-third less than forecast. The company is now projecting earnings in the $3 range for the quarter ending June 30, according to financial news services.

The updated figure for the second quarter of 2024 takes into account internal estimates for lost income between June 19 and June 30 as well as one-time costs related to the incident — which the company said consisted of “guaranteed compensation paid to retain commission-based associates in order to protect the Company’s business.”

Despite the announcement, the company’s stock was up more than 3 percent for the day, to about $176 per share as of 2 p.m. Eastern. For the first quarter of 2024, AutoNation reported gross profits of $556 million.

“While the full scope, nature, and impact of the incident is yet to be known, we do not expect the incident to have a material impact on AutoNation’s overall financial condition or on its ongoing results of operations,” the company told the SEC. 

AutoNation, like several other car dealership companies, has been reeling from a ransomware attack on CDK Global, a software company that provides a suite of technology tools for more than 15,000 car dealerships across the U.S. and Canada. 

The company’s flagship product provides a software as a service platform used by dealerships to manage customer relationships, sales, financing, service, inventory and back-office operations.

The company was hit with ransomware on June 19, knocking all customers offline and forcing thousands of businesses to revert to pen and paper or limit operations altogether. The company’s systems were restored earlier this month and most customers were brought back online around July 4. 

Last week, CNN reported that blockchain data showed CDK  likely paid a $25 million ransom on June 21. 

AutoNation said most services have been restored but noted that certain systems — including ones that help automate vehicle ordering, scheduling, payment, and reporting processes — “remain unavailable or limited, and efforts remain ongoing to restore these.” The outages of these ancillary systems “has not had, and is not expected to have, a material impact” on the company’s business.

The company expects a complete restoration of all systems by the end of July. Experts have estimated that the outages caused by the ransomware attack may cost auto dealers more than $900 million.