BlackBerry

BlackBerry beats Sale Estimates

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

The company swung to a profit of $59 million in the quarter ended November 30 from a loss of $275 million a year earlier. On an adjusted basis, the company said it earned 5 cents a share, beating the average analyst estimate of 2 cents. Adjusted revenue in the third quarter was $228 million, compared with the average analyst projection of $215.7 million.

Enterprise software and services revenue was $98 million in the third quarter on an adjusted basis, down 7.5 percent from a year earlier. The company previously said it expects software revenue to under-perform through fiscal 2019 due to a change in accounting standards.

BlackBerry has pivoted away from making phones in recent years, reinventing itself as a security software provider under Chief Executive Officer John Chen. The company offers a range of different product lines, such as systems to manage an entire stable of mobile phones, or to let cars securely update their entertainment systems.

The company reaffirmed its outlook for 2019. It expects total software and services revenue growth of between 8 percent and 10 percent and positive adjusted earnings per share.The Waterloo, Ontario-based company is also looking to push into health care, Chen said earlier this year.

“We delivered another solid quarter of performance, resulting in year-over-year double-digit percentage growth for total software and services revenue, earnings per share, and free cash flow” said John Chen, Executive Chairman and CEO, BlackBerry.

“I’m excited about the pending Cylance acquisition as it will extend our strategy with cutting-edge AI cybersecurity capabilities and, combined with BlackBerry’s capabilities, present the opportunity for revenue acceleration in our businesses, including UEM, QNX and Spark.”

Chen stated that revenue from its handset devices was zero for this quarter, as the company continue to

Conference Call and Webcast
A conference call and live webcast will be held today beginning at 8 a.m. ET, which can be accessed by dialling 1- 866-393-4306 or by logging on here.

A replay of the conference call will also be available at approximately 11 a.m. ET by dialling 1-800-585-8367 and entering Conference ID #3276343 and at the link above.

BlackBerry Third Quarter Fiscal 2019 Results

  • Total company non-GAAP revenue for the third quarter of fiscal 2019 was $228 million with GAAP revenue of $226 million. Total non-GAAP software and services revenue of $219 million, up 10% year-over-year. Total GAAP software and services revenue was $217 million, up 14% year-over-year. Approximately 88% of third quarter software and services revenue (excluding IP licensing and professional services) was recurring after including perpetual licenses that are now recognized ratably. Non-GAAP gross margin was 76% and GAAP gross margin was 75%.
  • Non-GAAP operating income was $27 million, and positive for the eleventh consecutive quarter. GAAP operating income was $58 million. Non-GAAP earnings per share was $0.05 (basic and diluted). GAAP net income for the quarter was $0.11 per basic share and a GAAP net loss of $0.01 per diluted share. GAAP net income includes $20 million for acquired intangibles amortization expense, $15 million in stock compensation expense, $1 million in restructuring charges, a benefit of $69 million related to the fair value adjustment on the debentures, and other amounts as summarized in a table below.
  • Total cash, cash equivalents, short-term and long-term investments was $2.4 billion as of November 30, 2018. Free cash flow, before considering the impact of restructuring and legal proceedings, was positive $39 million. Cash generated from operations was $62 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 $1.8 billion.

Q3 Fiscal 2019 Non-GAAP Adjustments

For the Three Months Ended November 30, 2018

(in millions, except for per share amounts)

Income
statement

location

Revenue

Gross margin
(before taxes)

Gross margin
(before
taxes)

Income
before
income taxes

Net income

Basic
earnings per

share

As reported

$

226

$

170

75.2

%

$

60

$

59

$

0.11

Debentures fair value adjustment (2)

Debentures fair value adjustment

%

(69)

(69)

Restructuring charges (3)

Selling, marketing and administration

%

1

1

Software deferred revenue acquired(4)

Revenue

2

2

0.2

%

2

2

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

%

11

11

Acquired intangibles amortization (6)

Amortization

%

20

20

Adjusted

$

228

$

173

75.9

%

$

29

$

28

$

0.05

Note: Non-GAAP revenue, non-GAAP gross margin, non-GAAP gross margin percentage, non-GAAP income before income taxes, non-GAAP net income and non-GAAP basic earnings 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 third quarter of fiscal 2019, the Company reported GAAP gross margin of $170 million or 75.2% of revenue. Excluding the impact of stock compensation expense included in cost of sales and software deferred revenue acquired included in revenue, non-GAAP gross margin was $173 million, or 75.9% of revenue.
  2. During the third quarter of fiscal 2019, the Company recorded the Q3 Fiscal 2019 Debentures Fair Value Adjustment of $69 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.
  3. During the third quarter of fiscal 2019, the Company incurred restructuring charges of approximately $1 million, which was included in selling, marketing and administration expense.
  4. During the third quarter of fiscal 2019, the Company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $2 million, which was included in Enterprise software and services revenue.
  5. During the third quarter of fiscal 2019, the Company recorded stock compensation expense of $15 million, of which $1 million was included in cost of sales, $3 million was included in research and development, and $11 million was included in selling, marketing and administration expense.
  6. During the third quarter of fiscal 2019, the Company recorded amortization of intangible assets acquired through business combinations of $20 million, which was included in amortization expense.

Supplementary Geographic Revenue Breakdown

BlackBerry Limited

(United States dollars, in millions)

Revenue by Region

For the Quarters Ended

November 30, 2018

August 31, 2018

May 31, 2018

February 28, 2018

November 30, 2017

North America

$

151

66.8

%

$

133

63.3

%

$

139

65.3

%

$

147

63.1

%

$

133

58.8

%

Europe, Middle East and Africa

56

24.8

%

53

25.3

%

52

24.4

%

63

27.0

%

69

30.5

%

Other regions

19

8.4

%

24

11.4

%

22

10.3

%

23

9.9

%

24

10.7

%

Total

$

226

100.0

%

$

210

100.0

%

$

213

100.0

%

$

233

100.0

%

$

226

100.0

%

Supplementary Revenue by Product and Service Type Breakdown

BlackBerry Limited

(United States dollars, in millions)

Revenue by Product and Service Type

U.S. GAAP

Adjustments

Non-GAAP

For the Three Months Ended

For the Three Months Ended

For the Three Months Ended

November 30,
2018

November 30,
2017

November 30,
2018

November 30,
2017

November 30,
2018

November 30,
2017

Enterprise software and services

$

96

$

97

$

2

$

9

$

98

$

106

BlackBerry Technology Solutions

53

43

53

43

Licensing, IP and other

68

50

68

50

Handheld devices

9

9

SAF

9

27

9

27

Total

$

226

$

226

$

2

$

9

$

228

$

235

 

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

For the Nine Months Ended

November 30,
2018

August 31,
2018

November 30,
2017

November 30,
2018

November 30,
2017

Revenue

$

226

$

210

$

226

$

649

$

699

Cost of sales

56

49

58

157

206

Gross margin

170

161

168

492

493

Gross margin %

75.2

%

76.7

%

74.3

%

75.8

%

70.5

%

Operating expenses

Research and development

55

51

60

167

181

Selling, marketing and administration

93

106

120

299

343

Amortization

33

35

37

105

116

Debentures fair value adjustment

(69)

(70)

77

(111)

225

Impairment of long-lived assets

11

Arbitration charges (awards)

132

(683)

112

122

426

460

193

Operating income (loss)

58

39

(258)

32

300

Investment income, net

2

5

(17)

13

120

Income (loss) before income taxes

60

44

(275)

45

420

Provision for income taxes

1

1

3

5

Net income (loss)

$

59

$

43

$

(275)

$

42

$

415

Earnings (loss) per share

Basic

$

0.11

$

0.08

$

(0.52)

$

0.08

$

0.78

Diluted

$

(0.01)

$

(0.04)

$

(0.52)

$

(0.09)

$

0.76

Weighted-average number of common shares outstanding (000s)

Basic

540,406

537,299

532,496

538,251

531,651

Diluted

600,906

597,799

532,496

598,751

548,514

Total common shares outstanding (000s)

547,084

537,768

536,307

547,084

536,307

BlackBerry Limited

Incorporated under the Laws of Ontario

(United States dollars, in millions) (unaudited)

Consolidated Balance Sheets

As at

November 30, 2018

February 28, 2018

Assets

Current

Cash and cash equivalents

$

1,084

$

816

Short-term investments

1,234

1,443

Accounts receivable, net

138

151

Other receivables

25

71

Income taxes receivable

13

26

Other current assets

50

38

2,544

2,545

Restricted cash and cash equivalents

26

39

Long-term investments

55

55

Other long-term assets

26

28

Deferred income tax assets

2

3

Property, plant and equipment, net

63

64

Goodwill

564

569

Intangible assets, net

396

477

$

3,676

$

3,780

Liabilities

Current

Accounts payable

$

32

$

46

Accrued liabilities

156

205

Income taxes payable

17

18

Deferred revenue, current

171

142

376

411

Deferred revenue, non-current

98

53

Other long-term liabilities

14

23

Long-term debt

665

782

Deferred income tax liabilities

4

6

1,157

1,275

Shareholders’ equity

Capital stock and additional paid-in capital

2,618

2,560

Deficit

(83)

(45)

Accumulated other comprehensive loss

(16)

(10)

2,519

2,505

$

3,676

$

3,780

BlackBerry Limited

Incorporated under the Laws of Ontario

(United States dollars, in millions) (unaudited)

Consolidated Statements of Cash Flows

For the Nine Months Ended

November 30, 2018

November 30, 2017

Cash flows from operating activities

Net income

$

42

$

415

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization

116

138

Deferred income taxes

(1)

(3)

Stock-based compensation

53

36

Impairment of long-lived assets

11

Loss on sale, disposal and abandonment of long-lived assets

2

6

Debentures fair value adjustment

(111)

225

Other long-term assets

2

(23)

Other

3

(3)

Net changes in working capital items:

Accounts receivable, net

13

36

Other receivables

46

(6)

Income taxes receivable

13

4

Other assets

(1)

40

Accounts payable

(14)

(65)

Income taxes payable

(1)

5

Accrued liabilities

(57)

99

Deferred revenue

(23)

(49)

Net cash provided by operating activities

82

866

Cash flows from investing activities

Acquisition of long-term investments

(2)

(27)

Proceeds on sale or maturity of long-term investments

2

77

Acquisition of property, plant and equipment

(14)

(11)

Proceeds on sale of property, plant and equipment

1

3

Acquisition of intangible assets

(24)

(22)

Acquisition of short-term investments

(2,754)

(2,715)

Proceeds on sale or maturity of short-term investments

2,962

1,626

Net cash provided by (used in) investing activities

171

(1,069)

Cash flows from financing activities

Issuance of common shares

5

7

Common shares repurchased

(18)

Net cash provided by (used in) financing activities

5

(11)

Effect of foreign exchange gain (loss) on cash, cash equivalents, restricted cash, and restricted cash equivalents

(3)

3

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period

255

(211)

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

$

1,110

$

574

As at

November 30, 2018

February 28, 2018

Cash and cash equivalents

$

1,084

$

816

Restricted cash and cash equivalents

$

26

$

39

Short-term investments

$

1,234

$

1,443

Long-term investments

$

55

$

55

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