BlackBerry today reported financial results for the three months ended November 30, 2818, coming in at $0.05 per share, beating Wall Street’s estimates of $0.02 per Share. Revenue for the quarter came in at $226.00 million beating analyst estimates of $215.38 million.
“We believe total revenue growth is a significant milestone to both the company and our shareholders,” BlackBerry chief executive John Chen said on a conference call following the release of its results.
“This profitable growth is a clear indication that we have successfully pivoted to become an enterprise software company.”
He noted that BlackBerry met all of its key financial targets for the financial year ended Feb. 28 and exceeded analyst revenue and profit estimates.
The company earned US$51 million or eight cents per diluted share for the quarter ended Feb. 28. That compared with a loss of US$10 million or six cents per diluted share a year ago.
Its revenue, reported in U.S. currency, totalled $255 million, up from $233 million and above analyst estimates.
On an adjusted basis, BlackBerry said it earned 11 cents per share for the quarter, also better than expected.
Chen highlighted that BlackBerry is a $1 billion-plus security software company,
“I am pleased to note that BlackBerry is recognised as a $1 billion-plus revenue company in security software. The combination of BlackBerry Cylance’s lightweight AI and machine learning cybersecurity capabilities with BlackBerry Spark, our secure communications platform, will make our endpoint management and embedded software products stronger and more essential for enterprises to generate value from the Internet of Things,”
Analysts on average had expected a profit of six cents per share on revenue of $241.3 million, according to Thomson Reuters Eikon.
The quarter included BlackBerry’s US$1.4-billion acquisition of Cylance, a California-based artificial intelligence and cybersecurity firm. The deal, announced in November, closed near the end of the BlackBerry’s fourth quarter.
BlackBerry’s software and services for enterprises, part of the company’s legacy business, reported $92 million of revenue in the fourth quarter, down from $108 million a year earlier.
BlackBerry Technology Solutions, which includes its QNX automotive products, increased its revenue to $55 million from $46 million and revenue from licensing intellectual property was $99 million, up from $58 million a year earlier.
North America, particularly the United States, continues to be BlackBerry’s biggest market — accounting for $176 million or 69 per cent of total revenue in the quarter — up from $147 million or 63.1 per cent of the total a year earlier.
Revenue from Europe, Middle East, Africa region and the Asia Pacific regions fell slightly from a year ago to $61 million and $17 million respectively.
Earlier this month, BlackBerry launched its unit, BlackBerry Government Solutions, that focused on its Federal Risk and Authorisation Management Program (FedRAMP) initiatives to work alongside US federal agencies.
“A tidal wave of connected devices is in sight and I believe BlackBerry is uniquely positioned to help the U.S. government securely build and connect all ‘things’ from ATVs and drones to documents, emails, and the data that flows between,” said Chen.
“This new subsidiary allows us to deepen our reach within the U.S. government sector by ensuring our next-generation cybersecurity solutions and Spark platform meet FedRAMP and ATO certifications, as well as provide our customers with a higher level of service,”
BlackBerry Q4 2019 Investor Presentation
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A replay of the conference call is available by dialling 1-800-585-8367 and entering Conference ID #3276343 and online here.
BlackBerry First Quarter Fiscal 2019 Results
- Total company non-GAAP revenue for the first quarter of fiscal 2019 was $217 million with GAAP revenue of $213 million. Total non-GAAP software and services revenue of $193 million, up 14% year- over-year. Total GAAP software and services revenue was $189 million, up 18% year-over-year. Approximately 86% of first quarter software and services revenue (excluding IP licensing and professional services) was recurring, up from approximately 70% in the fourth quarter of fiscal year 2018. Gross margin of 76% (both non-GAAP and GAAP).
- Non-GAAP operating income was $12 million, and positive for the ninth consecutive quarter. GAAP operating loss was $65 million. Non-GAAP earnings per share was $0.03 (basic and diluted). GAAP net loss for the quarter was $0.11 per share (basic and diluted). GAAP net loss includes a charge of $28 million related to the fair value adjustment on the debentures, $22 million in acquired intangibles amortization expense, $18 million in stock compensation expense, $4 million in restructuring charges, and other amounts as summarized in a table below.
- Total cash, cash equivalents, short-term and long-term investments were approximately $2.3 billion as of May 31, 2018. Free cash flow, before considering the impact of restructuring and legal proceedings, was positive $3 million. Cash used in operations was $7 million and capital expenditures were $5 million. Excluding $605 million in the face value of the company’s debt, the net cash balance at the end of the quarter was approximately $1.7 billion.
Outlook
BlackBerry’s outlook for fiscal 2019 is as follows:
- Total company software and services billings growth is expected to be double-digits
- Non-GAAP EPS is expected to be positive
- Free cash flow is expected to be positive for the full year, before considering the impact of restructuring and legal proceedings
- Total software and services revenue growth of between 8% to 10% year-over-year
Reconciliation of GAAP revenue, gross margin, gross margin percentage, loss before income taxes, net loss and basic loss per share to Non-GAAP revenue, gross margin, gross margin percentage, income before income taxes, net income and basic earnings per share for the three months ended May 31, 2018:
| Q1 Fiscal 2019 Non-GAAP Adjustments | For the Three Months Ended May 31,2018 (in millions, except for per share amounts) |
|||||||||||||||||||
| Income statement location |
Revenue | Gross margin (before taxes) |
Gross margin %(before taxes) |
Income (loss) before income taxes |
Net income (loss) |
Basic earnings (loss) per share |
||||||||||||||
| As reported | $ | 213 | $ | 161 | 75.6% | (59) | $ | (60) | $ | (0.11) | ||||||||||
| Debentures fair value adjustment(2) | Debentures fair value adjustment | — | — | —% | 28 | 28 | ||||||||||||||
| Resource Alignment Program charges (3) | Research and development | — | — | —% | 2 | 2 | ||||||||||||||
| Resource Alignment Program charges (3) | Selling, marketing and administration | — | — | —% | 2 | 2 | ||||||||||||||
| Software deferred revenue acquired (4) | Revenue | 4 | 4 | 0.4% | 4 | 4 | ||||||||||||||
| Stock compensation expense (5) | Cost of sales | — | 1 | 0.5% | 1 | 1 | ||||||||||||||
| Stock compensation expense (5) | Research and development | — | — | —% | 3 | 3 | ||||||||||||||
| Stock compensation expense (5) | Selling, marketing and administration | — | — | —% | 14 | 14 | ||||||||||||||
| Acquired intangibles amortization (6) | Amortization | — | — | —% | 22 | 22 | ||||||||||||||
| Business acquisition and integration costs (7) | Selling, marketing and administration | — | — | —% | 1 | 1 | ||||||||||||||
| Adjusted | $ | 217 | $ | 166 | 76.5% | $ | 18 | $ | 17 | $ | 0.03 | |||||||||
- During the first quarter of fiscal 2019, the Company reported GAAP gross margin of $161 million or 75.6% of revenue. Excluding the impact of stock compensation expense included in cost of sales and software deferred revenue acquired included in revenue, the non-GAAP gross margin was $166 million, or 76.5% of revenue.
- During the first quarter of fiscal 2019, the Company recorded the Q1 Fiscal 2019 Debentures Fair Value Adjustment of $28 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.
- During the first quarter of fiscal 2019, the Company incurred charges related to the Resource Alignment Program of approximately $4 million, of which $2 million was included in research and development and $2 million was included in selling, marketing and administration expense.
- During the first quarter of fiscal 2019, the Company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $4 million, which was included in enterprise software and services revenue.
- During the first quarter of fiscal 2019, the Company recorded stock compensation expense of $18 million, of which $1 million was included in cost of sales, $3 million was included in research and development, and $14 million was included in selling, marketing and administration expenses.
- During the first quarter of fiscal 2019, the Company recorded amortization of intangible assets acquired through business combinations of $22 million, which was included in amortization expense.
- During the first quarter of fiscal 2019, the Company recorded business acquisition and integration costs incurred through business combinations of $1 million, which were included in selling, marketing and administration expenses.
Supplementary Geographic Revenue Breakdown
| BlackBerry Limited | |||||||||||||||||||||||||||||
| (United States dollars, in millions) | |||||||||||||||||||||||||||||
| Revenue by Region | |||||||||||||||||||||||||||||
| For the Quarters Ended | |||||||||||||||||||||||||||||
| May 31, 2018 | February 28, 2018 | November 30, 2017 | August 31, 2017 | May 31, 2017 | |||||||||||||||||||||||||
| North America | $ | 139 | 65.3 | % | $ | 147 | 63.1 | % | $ | 133 | 58.9 | % | $ | 133 | 55.9 | % | $ | 127 | 54.0 | % | |||||||||
| Europe, Middle East and | |||||||||||||||||||||||||||||
| Africa | 52 | 24.4 | % | 63 | 27.0 | % | 69 | 30.5 | % | 76 | 31.9 | % | 70 | 29.8 | % | ||||||||||||||
| Other regions | 22 | 10.3 | % | 23 | 9.9 | % | 24 | 10.6 | % | 29 | 12.2 | % | 38 | 16.2 | % | ||||||||||||||
| Total | $ | 213 | 100.0 | % | $ | 233 | 100.0 | % | $ | 226 | 100.0 | % | $ | 238 | 100.0 | % | $ | 235 | 100.0 | % | |||||||||
Supplementary Revenue by Product and Service Type Breakdown
| BlackBerry Limited | |||||||||||||||||
| (United States dollars, in millions) | |||||||||||||||||
| Revenue by Product and Service Type | |||||||||||||||||
| US GAAP | Adjustments | Non-GAAP | |||||||||||||||
| For the Three Months Ended | For the Three Months Ended | For the Three Months Ended | |||||||||||||||
| May 31, 2018 | May 31, 2017 | May 31, 2018 | May 31, 2017 | May 31, 2018 | May 31, 2017 | ||||||||||||
| Enterprise software and services | $ | 79 | $ | 92 | $ | 4 | $ | 9 | $ | 83 | $ | 101 | |||||
| BlackBerry Technology Solutions | 47 | 36 | — | — | 47 | 36 | |||||||||||
| Licensing, IP and other | 63 | 32 | — | — | 63 | 32 | |||||||||||
| Handheld devices | 8 | 37 | — | — | 8 | 37 | |||||||||||
| SAF | 16 | 38 | — | — | 16 | 38 | |||||||||||
| Total | $ | 213 | $ | 235 | $ | 4 | $ | 9 | $ | 217 | $ | 244 | |||||
| BlackBerry Limited | ||||||||||||
| Incorporated under the Laws of Ontario | ||||||||||||
| (United States dollars, in millions except share and per share amounts) (unaudited) | ||||||||||||
| Consolidated Statements of Operations | ||||||||||||
| For the Three Months Ended | ||||||||||||
| May 31, 2018 |
February 28, 2018 |
May 31, 2017 | ||||||||||
| Revenue | $ | 213 | $ | 233 | $ | 235 | ||||||
| Cost of sales | 52 | 56 | 85 | |||||||||
| Gross margin | 161 | 177 | 150 | |||||||||
| Gross margin % | 75.6 % | 76.0% | 63.8% | |||||||||
| Operating expenses | ||||||||||||
| Research and development | 61 | 58 | 61 | |||||||||
| Selling, marketing and administration | 100 | 133 | 110 | |||||||||
| Amortization | 37 | 37 | 40 | |||||||||
| Debentures fair value adjustment | 28 | (34) | 218 | |||||||||
| Qualcomm arbitration award | — | — | (815) | |||||||||
| 226 | 194 | (386) | ||||||||||
| Operating income (loss) | (65 ) | (17) | 536 | |||||||||
| Investment income, net | 6 | 3 | 136 | |||||||||
| Income (loss) before income taxes | (59 ) | (14) | 672 | |||||||||
| Provision for (recovery of) income taxes | 1 | (4) | 1 | |||||||||
| Net income (loss) | $ | (60 ) | $ | (10) | $ | 671 | ||||||
| Earnings (loss) per share | ||||||||||||
| Basic | $ | (0.11 ) | $ | (0.02) | $ | 1.26 | ||||||
| Diluted | $ | (0.11 ) | $ | (0.06) | $ | 1.23 | ||||||
| Weighted-average number of common shares outstanding (000’s) | ||||||||||||
| Basic | 536,964 | 536,594 | 531,096 | |||||||||
| Diluted | 536,964 | 597,094 | 544,077 | |||||||||
| Total common shares outstanding (000’s) | 537,112 | 536,734 | 531,476 | |||||||||
| BlackBerry Limited | |||||||
| Incorporated under the Laws of Ontario | |||||||
| (United States dollars, in millions) (unaudited) | |||||||
| Consolidated Balance Sheets | |||||||
| As at | |||||||
| May 31, 2018 | May 31, 2018 | ||||||
| Assets | |||||||
| Current | |||||||
| Cash and cash equivalents | $ | 520 | $ | 816 | |||
| Short-term investments | 1,725 | 1,443 | |||||
| Accounts receivable, net | 126 | 151 | |||||
| Other receivables | 63 | 71 | |||||
| Income taxes receivable | 17 | 26 | |||||
| Other current assets | 56 | 38 | |||||
| 2,507 | 2,545 | ||||||
| Restricted cash and cash equivalents | 35 | 39 | |||||
| Long-term investments | 55 | 55 | |||||
| Other long-term assets | 30 | 28 | |||||
| Deferred income tax assets | 2 | 3 | |||||
| Property, plant and equipment, net | 64 | 64 | |||||
| Goodwill | 566 | 569 | |||||
| Intangible assets, net | 447 | 477 | |||||
| $ | 3,706 | $ | 3,780 | ||||
| Liabilities Current |
|||||||
| Accounts payable | $ | 37 | $ | 46 | |||
| Accrued liabilities | 162 | 205 | |||||
| Income taxes payable | 19 | 18 | |||||
| Deferred revenue, current | 166 | 142 | |||||
| 384 | 411 | ||||||
| Deferred revenue, non-current | 111 | 53 | |||||
| Other long-term liabilities | 20 | 23 | |||||
| Long-term debt | 810 | 782 | |||||
| Deferred income tax liabilities | 5 | 6 | |||||
| 1,330 | 1,275 | ||||||
| Shareholders’ equity | |||||||
| Capital stock and additional paid-in capital | 2,580 | 2,560 | |||||
| Deficit | (185 | ) | (45) | ||||
| Accumulated other comprehensive loss | (19 | ) | (10) | ||||
| 2,376 | 2,505 | ||||||
| $ | 3,706 | $ | 3,780 | ||||
| BlackBerry Limited | ||||||||
| Incorporated under the Laws of Ontario | ||||||||
| (United States dollars, in millions except per share data) (unaudited) | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| For the Three Months Ended | ||||||||
| May 31, 2018 |
May 31, 2017 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | (60 | ) | $ | 671 | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Amortization | 41 | 51 | ||||||
| Stock-based compensation | 18 | 13 | ||||||
| Debentures fair value adjustment | 28 | 218 | ||||||
| Other | 2 | 1 | ||||||
| Net changes in working capital items: | ||||||||
| Accounts receivable, net | 25 | 35 | ||||||
| Other receivables | 8 | 1 | ||||||
| Income taxes receivable | 9 | (2 | ) | |||||
| Other assets | (10 | ) | 21 | |||||
| Accounts payable | (9 | ) | (59 | ) | ||||
| Income taxes payable | 1 | 1 | ||||||
| Accrued liabilities | (42 | ) | (50 | ) | ||||
| Deferred revenue | (15 | ) | (36 | ) | ||||
| Other long-term liabilities | (3 | ) | (2 | ) | ||||
| Net cash provided by (used in) operating activities | (7 | ) | 863 | |||||
| Acquisition of long-term investments | — | (25 | ) | |||||
| Acquisition of property, plant and equipment | (5 | ) | (3 | ) | ||||
| Proceeds on sale of property, plant and equipment | — | 1 | ||||||
| Acquisition of intangible assets | (7 | ) | (7 | ) | ||||
| Acquisition of short-term investments | (1,011 | ) | (1,015 | ) | ||||
| Proceeds on sale or maturity of short-term investments | 730 | 378 | ||||||
| Net cash used in investing activities | (293 | ) | (671 | ) | ||||
| Cash flows from financing activities | ||||||||
| Issuance of common shares | 2 | 3 | ||||||
| Net cash provided by financing activities | 2 | 3 | ||||||
| Effect of foreign exchange gain (loss) on cash, cash equivalents, restricted cash, and restricted cash equivalents | (2 | ) | 1 | |||||
| Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period | (300 | ) | 196 | |||||
| Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period | 855 | 785 | ||||||
| Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period | $ | 555 | $ | 981 | ||||
| As at | May 31, 2018 | February 28, 2018 | ||||||
| Cash and cash equivalents | $ | 520 | $ | 816 | ||||
| Short-term investments | $ | 1,725 | $ | 1,443 | ||||
| Long-term investments | $ | 55 | $ | 55 | ||||
| Restricted cash and cash equivalents | $ | 35 | $ | 39 | ||||
