BlackBerry Q3 Fiscal 2016 Results beats Estimates

146

BlackBerry has announced their Q3 Fiscal 2016 results today, reporting higher revenue and a smaller loss than analysts were expecting.

The company’s revenue was US$557 million, which is $64 million above the general estimate and up from US$548 million a year ago.

The company’s net loss was US$89 million or 17 cents per share under standard accounting rules. After adjustments, BlackBerry’s loss was US$15 million or three cents per share — far less than estimates.

Analysts projected that BlackBerry would report a loss of 14 cents per share and US$489 million of revenue for the quarter.

Q3 Highlights

  • Non-GAAP total revenue of $557 million, up 14 percent over Q2 FY16
  • Non-GAAP software and services revenue of $162 million, up 183 percent year over year and up 119 percent quarter over quarter
  • Adjusted EBITDA of $114 million
  • Cash and investments balance of $2.71 billion at the end of the fiscal quarter, including the impact of the recent acquisitions of AtHoc and Good Technology
  • Non-GAAP loss of ($0.03) per share
  • Completed the acquisitions of AtHoc and Good Technology
  • Launched the PRIV in November, the only smartphone that combines BlackBerry-level security with the Google Play App Store’s 1.6 million apps
  • Confirmed plans to release OS version 10.3.3 on BlackBerry 10 to support NIAP certification

Q3 Results

Non-GAAP revenue for the third quarter of fiscal 2016 was $557 million with GAAP revenue of $548 million. GAAP revenue reflects a purchase accounting write down of deferred revenue associated with recent acquisitions. The non-GAAP revenue breakdown for the quarter was approximately 29% for software and services, 31% for service access fees (SAF), and 40% for hardware and other revenue.

BlackBerry had 2,713 enterprise customer wins in the quarter. Approximately 70% of third quarter software revenue was recurring.

Non-GAAP net loss for the third quarter was ($15) million, or ($0.03) per share. GAAP net loss for the quarter was ($89) million, or ($0.17) per basic share. Basic GAAP net income reflects a purchase accounting impact of $9 million on GAAP revenue, a non-cash credit associated with the change in the fair value of the debentures of $5 million (the “Q3 Fiscal 2016 Debentures Fair Value Adjustment”), pre-tax charges of $38 million related to restructuring and acquisition costs, stock compensation of $14 million, and amortization of acquired intangibles of $18 million. The impact of these adjustments on GAAP net income and earnings per share is summarized in a table below.

Total cash, cash equivalents, short-term and long-term investments was $2.71 billion as of November 28, 2015. This reflects $15 million of positive free cash flow, $636 million used in acquisition costs for AtHoc and Good Technology and $10 million used to repurchase 1.6 million shares. Excluding $1.25 billion in the face value of our debt, the net cash balance at the end of the quarter was $1.46 billion. Purchase orders with contract manufacturers totaled approximately $298 million at the end of the third quarter, compared to $248 million at the end of the second quarter and down from $565 million in the year ago quarter. Operating cash flow was $19 million.

“I am pleased with our continued progress on BlackBerry’s strategic priorities, leading to 14 percent sequential growth in total revenue for Q3. We delivered accelerating growth in enterprise software and higher revenue across all of our areas of focus,” said Executive Chairman and Chief Executive Officer John Chen.

“Our new PRIV device has been well received since its launch in November, and we are expanding distribution to additional carriers around the world in the next several quarters.

“BlackBerry has a solid financial foundation, and we are executing well. To sustain our current direction, we are stepping up investments to drive continued software growth and the additional PRIV launches. I anticipate this will result in sequential revenue growth in our software, hardware and messaging businesses in Q4.”

Outlook

The company continues to anticipate positive free cash flow and adjusted EBITDA.

Reconciliation of GAAP gross margin, gross margin percentage, income before income taxes, net income and earnings per share 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)
[table style=”table-striped”]

Q3 Fiscal 2016 Non-GAAP Adjustments
For the Three Months Ended November 28, 2015
(in millions)
Income
statement

location
Gross
margin

(before
taxes)
(1)
Gross
margin %

(before
taxes)
(1)
Loss
before

income
taxes
Net
loss
Basic
loss
per

share
As reported$23643.1 %$(120)$(89)$(0.17)
Debentures fair value adjustment(2)Debentures fair value
adjustment
– %(5)(5)
RAP charges (3)Cost of sales50.9 %55
RAP charges (3)Research and
development
– %22
RAP charges (3)Selling, marketing and
administration
– %2626
CORE program charges(4)Selling, marketing and
administration
– %(6)(6)
Software deferred revenue acquired(5)Revenue90.9 %99
Stock compensation expense(6)Research and
development
– %44
Stock compensation expense(6)Selling, marketing and
administration
– %1010
Acquired intangibles amortization(7)Amortization– %1818
Business acquisition costs(8)Selling, marketing and
administration
– %1111
Adjusted$25044.9 %$(46)$(15)$(0.03)

[/table]
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.
[table style=”table-striped”]

(1)During the third quarter of fiscal 2016, the Company reported GAAP gross margin of $236 million or 43.1% of revenue. Excluding the impact of the resource alignment program (“RAP”) charges included in cost of sales and software deferred revenue acquired included in revenue, the non-GAAP gross margin was $250 million or 44.9% of revenue.
(2)During the third quarter of fiscal 2016, the Company recorded the Q3 Fiscal 2016 Debentures Fair Value Adjustment of $5 million. This adjustment was presented on a separate line in the Consolidated Statement of Operations.
(3)During the third quarter of fiscal 2016, the Company incurred charges related to the RAP of $33 million pre-tax and after tax, of which $5 million were included in cost of sales, $2 million were included in research and development and $26 million were included in selling, marketing, and administration expenses.
(4)During the third quarter of fiscal 2016, the Company recovered charges related to the CORE program of $6 million, which were included in selling, marketing, and administration expenses.
(5)During the third quarter of fiscal 2016, he Company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $9 million, which were included in revenue.
(6)During the third quarter of fiscal 2016, the Company recorded stock compensation expense of $14 million, of which $4 million were included in research and development, and $10 million were included in selling, marketing, and administration expenses.
(7)During the third quarter of fiscal 2016, the Company recorded amortization of intangible assets acquired through business combinations of $18 million, which were included in amortization expense.
(8)During the third quarter of fiscal 2016, the Company recorded acquisition costs incurred through business combinations of $11 million, which were included in selling, marketing, and administration expenses.

[/table]

[table style=”table-striped”]

Supplementary Geographic Revenue Breakdown
Blackberry Limited (United States dollars, in millions)
Revenue by Region
For the quarter ended
November 28, 2015August 29, 2015May 30, 2015February 28, 2015November 29, 2014
North America$27550.2%$17636.0%$28543.3%$20531.0%$21326.9%
Europe, Middle East and
Africa
19435.4%20241.2%24537.2%28342.9%36646.1%
Latin America244.4%336.7%426.4%609.1%8410.6%
Asia Pacific5510.0%7916.1%8613.1%11217.0%13016.4%
Total$548100.0%$490100.0%$658100.0%$660100.0%$793100.0%

[/table]

[table style=”table-striped”]

Consolidated Statements of Operations

[/table]

[table style=”table-striped”]

For the three months endedFor the nine months ended
November 28,
2015
August 29,
2015
November 29,
2014
November 28,
2015
November 29,
2014
Revenue$548$490$793$1,696$2,675
Cost of sales
Cost of sales3043013659351,358
Inventory write-down94243354
Supply commitment charges(1)(6)(3)(23)
3123053839651,389
Gross margin2361854107311,286
Gross margin %43.1%37.8%51.7%43.1%48.1%
Operating expenses
Research and development100122154361577
Selling, marketing and administration177191171542766
Amortization686774200230
Debentures fair value adjustment(5)(228)150(390)30
3401525497131,603
Operating income (loss)(104)33(139)18(317)
Investment loss, net(16)(12)(21)(44)(67)
Income (loss) before income taxes(120)21(160)(26)(384)
Recovery of income taxes(31)(30)(12)(56)(52)
Net income (loss)$(89)$51$(148)$30$(332)
Earnings (loss) per share
Basic$(0.17)$0.10$(0.28)$0.06$(0.63)
Diluted$(0.17)$(0.24)$(0.28)$(0.46)$(0.63)
Weighted-average number of common
shares outstanding (000’s)
Basic525,103526,314528,090526,879527,350
Diluted525,103667,321528,090651,879527,350
Total common shares outstanding525,701524,211528,511525,701528,511

[/table]

[table style=”table-striped”]

(United States dollars, in millions except per share data) (unaudited)
Consolidated Balance Sheets
As atNovember 28,
2015
February 28,
2015
Assets
Current
Cash and cash equivalents$1,123$1,233
Short-term investments1,1751,658
Accounts receivable, net380503
Other receivables4597
Inventories144122
Income taxes receivable9169
Other current assets134375
Deferred income tax asset210
3,0124,167
Long-term investments350316
Restricted cash5859
Property, plant and equipment, net449556
Goodwill60785
Intangible assets, net1,4131,375
$5,889$6,558
Liabilities
Current
Accounts payable$269$235
Accrued liabilities402667
Deferred revenue430470
1,1011,372
Long-term debt1,3171,707
Deferred income tax liability1748
2,4353,127
Shareholders’ Equity
Capital stock and additional paid-in capital2,4542,444
Retained earnings1,0181,010
Accumulated other comprehensive loss(18)(23)
3,4543,431
$5,889$6,558

[/table]

[table style=”table-striped”]

Consolidated Statements of Cash Flows
Nine Months Ended
November 28,
2015
November 29,
2014
Cash flows from operating activities
Net income (loss)$30$(332)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization489532
Deferred income taxes(67)47
Stock-based compensation4236
Loss on disposal of property, plant and equipment46126
Debentures fair value adjustment(390)30
Other2313
Net changes in working capital items:
Accounts receivable, net158351
Other receivables5413
Inventories(22)142
Income taxes receivable157229
Other current assets222176
Accounts payable13(256)
Accrued liabilities(281)(369)
Deferred revenue(217)(135)
Net cash provided by operating activities257603
Cash flows from investing activities
Acquisition of long-term investments(275)(215)
Proceeds on sale or maturity of long-term investments14119
Acquisition of property, plant and equipment(25)(71)
Proceeds on sale of property, plant and equipment348
Acquisition of intangible assets(43)(388)
Business acquisitions, net of cash acquired(689)(40)
Acquisition of short-term investments(2,091)(1,973)
Proceeds on sale or maturity of short-term investments2,6741,701
Net cash used in investing activities(308)(619)
Cash flows from financing activities
Issuance of common shares36
Common shares repurchased(57)
Transfer from (to) restricted cash4(65)
Net cash used in financing activities(50)(59)
Effect of foreign exchange loss on cash and cash equivalents(9)(6)
Net decrease in cash and cash equivalents during the period(110)(81)
Cash and cash equivalents, beginning of period1,2331,579
Cash and cash equivalents, end of period$1,123$1,498
As atNovember 28,
2015
August 29,
2015
Cash and cash equivalents$1,123$1,447
Short-term investments1,1751,573
Long-term investments350277
Restricted cash5856
$2,706$3,35

[/table]

Conference Call and Webcast

A conference call and live webcast will be held beginning at 8 am ET, which can be accessed by dialing 1-888-428- 9507 or by logging on at ca.blackberry.com/company/investors/events.html. A replay of the conference call will also be available at approximately 10 am ET by dialing 1-647-436-0148 and entering pass code 8820480# or by clicking the link above. This replay will be available until 10 am ET January 3, 2016.

Rapid Mobile
 
Rapid Mobile uses cookies, tokens, and other third party scripts to recognise visitors of our sites and services, remember your settings and privacy choices, and - depending on your settings and privacy choices - enable us and some key partners to collect information about you so that we can improve our services and deliver relevant ads.

 

By continuing to use our site or clicking I Accept, you agree that Rapid Mobile and our key partners may collect data and use cookies for personalised ads and other purposes, as described more fully in our privacy policy.

 

You can change your settings at any time by clicking Manage Settings or by visiting our Privacy Centre for more detailed information.

 

Privacy Settings saved!
Cookie Services

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

These cookies allow us to count visits and traffic sources, so we can measure and improve the performance of our site.

We track anonymized user information to improve our website.
  • _ga
  • _gid
  • _gat

Decline all Services
Accept all Services