BlackBerry announces Q2 FY2015 financial results

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BlackBerry Narrows Non-GAAP Loss per Share to ($0.02) on Broad-Based Operational Progress in Fiscal 2015 Second Quarter

BlackBerry today reported financial results for the three months ended August 30, 2014 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).

Q2 Highlights:

  • Cash and investments balance of $3.1 billion at the end of the fiscal quarter, up $11 million from the prior quarter
  • Normalized cash use of $36 million in the quarter, compared to $255 million in the prior quarter
  • Non-GAAP gross margin of 47.5%, driven by positive non-GAAP hardware gross margin
  • Breakeven non-GAAP operating margin
  • The EZ Pass Program has resulted in a total of 3.4 million licenses issued for BES10, a nearly three-fold increase from last quarter, with 25% of total licenses traded in from competitors’ Mobile Device Management platforms
  • 91 million monthly active BBM users, up from 85 million in the prior quarter
  • Created the BlackBerry Technology Solutions unit, encompassing QNX (embedded software), Certicom (cryptography), Paratek (antenna tuning), the patent portfolio and the Internet of Things strategy
  • Announced an agreement to acquire Secusmart, a leader in high-security voice and text encryption, and recently announced the acquisition of Movirtu, a provider of virtual SIM solutions, after the end of the quarter

Q2 Results

Revenue for the second quarter of fiscal 2015 was $916 million. The revenue breakdown for the quarter was approximately 46% for hardware, 46% for services and 8% for software and other revenue. During the second quarter, the Company recognized hardware revenue on approximately 2.1 million BlackBerry smartphones. During the second quarter, approximately 2.4 million BlackBerry smartphones were sold through to end customers, which included shipments made and recognized prior to the second quarter and which reduced the Company’s inventory in channel.

Non-GAAP loss for the second quarter was $11 million, or $0.02 per share. GAAP net loss for the second quarter was $207 million, or a $0.39 loss per share. The GAAP net loss includes a non-cash charge associated with the change in the fair value of the Debentures of $167 million (the “Q2 Fiscal 2015 Debentures Fair Value Adjustment”) and pre-tax restructuring charges of $33 million related to the restructuring program. The impact of these adjustments on GAAP net loss and loss per share is summarized in a table below.

Total cash, cash equivalents, short-term and long-term investments was $3.1 billion as of August 30, 2014. The Company used $36 million in the second quarter, excluding net receipts of $47 million related to non-strategic operations during the quarter. Purchase obligations and other commitments amounted to approximately $1.6 billion as of August 30, 2014, with purchase orders with contract manufacturers representing approximately $344 million of the total.

“We delivered a solid quarter against our key operational metrics, and we are confident that we will achieve breakeven cash flow by the end of FY15,” said John Chen, Executive Chairman and CEO, BlackBerry. “Our workforce restructuring is now complete, and we are focusing on revenue growth with judicious investments to further our leadership position in enterprise mobility and security, driving us towards non-GAAP profitability during FY16.”

Outlook

The Company continues to anticipate maintaining its strong cash position, while increasingly looking for opportunities to prudently invest in growth. The Company continues to target break-even cash flow results by the end of fiscal 2015.

Reconciliation of GAAP gross margin, gross margin percentage, loss before income taxes, and net loss to Non-GAAP gross margin, gross margin percentage, loss before income taxes, net loss and loss per share:

(United States dollars, in millions except per share data)

Earnings_One

Note: Non-GAAP gross margin, non-GAAP gross margin percentage, non-GAAP loss before income taxes, non-GAAP net loss and non-GAAP loss per share do not have a standardized meaning prescribed by GAAP and thus are not comparable to similarly titled measures presented by other issuers. The Company believes that the presentation of these non-GAAP measures enables the Company and its shareholders to better assess the Company’s operating results relative to its operating results in prior periods and improves the comparability of the information presented. Investors should consider these non-GAAP measures in the context of the Company’s GAAP results.

(1) During the second quarter of fiscal 2015, the Company reported GAAP gross margin of $425 million or 46.4% of revenue. Excluding the impact of the restructuring charges included in cost of sales, the non-GAAP gross margin was $435 million, or 47.5%.
(2) During the second quarter of fiscal 2015, the Company incurred charges related to the restructuring program of $33 million pre-tax, or $29 million after tax, of which $10 million were included in cost of sales, $19 million were included in research and development and $4 million were included in selling, marketing, and administration expenses.
(3) During the second quarter of fiscal 2015, the Company recorded the Q2 Fiscal 2015 Debentures Fair Value Adjustment of $167 million. This adjustment was presented on a separate line in the Consolidated Statement of Operations.

Supplementary Geographic Revenue Breakdown
(United States dollars, in millions except per share data)

Earnings_Two

Conference Call and Webcast

A conference call and live webcast will be held beginning at 8 am ET, which can be accessed by dialing 1-888-503-8168 or by logging on at http://ca.blackberry.com/company/investors/events.html. A replay of the conference call will also be available at approximately 10 am by dialing 1-647-436-0148 and entering pass code 8015758# or by clicking the link above. This replay will be available until midnight ET October 10th, 2014.[signoff predefined=”Enjoy this?” icon=”icon-users”][/signoff]

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