BB
$5.15
Blackberry
($.06)
(1.15%)
Earnings Details
2nd Quarter August 2019
Tuesday, September 24, 2019 7:00:00 AM
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Summary

Blackberry Misses

Blackberry (BB) reported a 2nd Quarter August 2019 loss of $0.01 per share on revenue of $244.0 million. The consensus estimate was a loss of $0.01 per share. The Earnings Whisper number was $0.01 per share. Revenue grew 16.2% on a year-over-year basis.

Results
Reported Earnings
($0.01)
Earnings Whisper
$0.01
Consensus Estimate
($0.01)
Reported Revenue
$244.0 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

BlackBerry Reports Fiscal 2020 Second Quarter Results

- Total company non-GAAP revenue of $261 million, or 22% growth year-over-year; total company GAAP revenue of $244 million, or 16% growth year-over-year

- Total non-GAAP Software and Services revenue of $256 million, or 30% growth year-over-year; total GAAP Software and Services revenue of $239 million, or 24% growth year-over-year

- Total company non-GAAP earnings per basic and diluted share of $0.00; GAAP loss per basic share of $0.08 and GAAP loss per diluted share of $0.10

- Total company free cash flow generated of $14 million, as reported

WATERLOO, Ontario, Sept. 24, 2019 /CNW/ -- BlackBerry Limited (NYSE: BB; TSX: BB) today reported financial results for the three months ended August 31, 2019 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).

BlackBerry Logo Black (PRNewsfoto/Blackberry Limited)

Second Quarter Fiscal 2020 Results

  • Total company non-GAAP revenue for the second quarter of fiscal 2020 was $261 million, up 22% year-over-year. Total company GAAP revenue for the second quarter of fiscal 2020 was $244 million, up 16% year-over-year. Total non-GAAP software and services revenue was $256 million, up 30% year-over-year. Total GAAP software and services revenue was $239 million, up 24% year-over-year. Second quarter recurring non-GAAP software and services revenue (excluding IP licensing and professional services) was over 90%. Non-GAAP gross margin was 75% and GAAP gross margin was 72%.
  • Total company non-GAAP operating earnings was $2 million. Total company GAAP operating loss was $43 million. Non-GAAP earnings per share was $0.00 (basic and diluted). GAAP net loss was $0.08 per basic share and $0.10 per diluted share. GAAP net loss includes $36 million for acquired intangibles amortization expense, $14 million in stock compensation expense, $2 million in acquisition and integration charges, a benefit of $23 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 $938 million as of August 31, 2019. Free cash flow generated, before considering the impact of acquisition and integration expenses, restructuring costs and legal proceedings, was $17 million. Cash generated from operations was $18 million and capital expenditures were $4 million.

"In the quarter, our QNX, Cylance and Licensing businesses executed at or better than our expectations.  We achieved break-even non-GAAP earnings per share and generated free cash flow even with increased investments in sales and product development to support future growth," said John Chen, Executive Chairman and CEO, BlackBerry.

"We are encouraged by the positive reception on BlackBerry Intelligent Security, and we have a number of exciting new product launches in the next six months." 

"Recent market consolidation has validated our thought leadership and the holistic strategy we shared last year.  We are integrating our endpoint management and AI technologies and capabilities on one platform to address the high-growth endpoint security market."

Management Change
With its focus on long-term, sustainable growth, BlackBerry announces that Steve Capelli will move into the newly-created role of Chief Revenue Officer to drive revenue-generating and business development activities across the company.  BlackBerry promotes Steve Rai from Deputy Chief Financial Officer to Chief Financial Officer.  These changes take effect as of October 1, 2019.

Outlook
BlackBerry estimates fiscal 2020 total company non-GAAP revenue growth to be in the range of 23% to 25%, driven by a double-digit percentage increase in billings year-over-year, and non-GAAP profitability for fiscal 2020.

Reconciliation of GAAP revenue, gross margin, gross margin percentage, income (loss) before income taxes, net income (loss) and basic earnings (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 August 31, 2019:

Q2 Fiscal 2020 Non-GAAP Adjustments


For the Three Months Ended August 31, 2019


(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



$

244



$

176



72.1

%


$

(43)



$

(44)



$

(0.08)


Debentures fair value adjustment (2)

Debentures fair value adjustment






%


(23)



(23)




Restructuring charges (3)

Cost of sales




1



0.4

%


1



1




Restructuring charges (3)

Selling, marketing and administration






%


2



2




Software deferred revenue acquired (4)

Revenue


17



17



1.8

%


17



17




Software deferred commission expense acquired (5)

Selling, marketing and administration






%


(4)



(4)




Stock compensation expense (6)

Cost of sales




1



0.4

%


1



1




Stock compensation expense (6)

Research and development






%


3



3




Stock compensation expense (6)

Selling, marketing and administration






%


10



10




Acquired intangibles amortization (7)

Amortization






%


36



36




Business acquisition and integration costs (8)

Selling, marketing and administration






%


2



2




Adjusted



$

261



$

195



74.7

%


$

2



$

1



$

0.00


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 second quarter of fiscal 2020, the Company reported GAAP gross margin of $176 million or 72.1% of revenue. Excluding the impact of stock compensation expense and restructuring charges included in cost of sales and software deferred revenue acquired included in revenue, non-GAAP gross margin was $195 million, or 74.7% of revenue.

(2)

During the second quarter of fiscal 2020, the Company recorded the Q2 Fiscal 2020 Debentures Fair Value Adjustment of $23 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.

(3)

During the second quarter of fiscal 2020, the Company incurred restructuring charges of approximately $3 million, of which $1 million was included in cost of sales and $2 million was included selling, marketing and administration expense.

(4)

During the second quarter of fiscal 2020, the Company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $17 million, of which $16 million was included in BlackBerry Cylance and $1 million was included in IoT.

(5)

During the second quarter of fiscal 2020, the Company recorded deferred commission expense acquired but not recognized due to business combination accounting rules of approximately of $4 million.

(6)

During the second quarter of fiscal 2020, the Company recorded stock compensation expense of $14 million, of which $1 million was included in cost of sales, $3 million was included in research and development, and $10 million was included in selling, marketing and administration expense.

(7)

During the second quarter of fiscal 2020, the Company recorded amortization of intangible assets acquired through business combinations of $36 million, which was included in amortization expense.

(8)

During the second quarter of fiscal 2020, the Company recorded business acquisition and integration costs incurred through or as a result of business combinations of $2 million, which was including in selling, marketing and administration expenses.

Supplementary Geographic Revenue Breakdown

BlackBerry Limited

(United States dollars, in millions)

Revenue by Region




For the Quarters Ended



August 31, 2019


May 31, 2019


February 28, 2019


November 30, 2018


August 31, 2018

North America


$

179



73.4

%


$

160



64.8

%


$

176



69.0

%


$

151



66.8

%


$

133



63.3

%

Europe, Middle East and Africa


47



19.3

%


61



24.7

%


61



23.9

%


56



24.8

%


53



25.3

%

Other regions


18



7.3

%


26



10.5

%


18



7.1

%


19



8.4

%


24



11.4

%

Total


$

244



100.0

%


$

247



100.0

%


$

255



100.0

%


$

226



100.0

%


$

210



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


August 31, 2019


August 31, 2018


August 31, 2019


August 31, 2018


August 31, 2019


August 31, 2018

IoT

$

133



$

137



$

1



$

4



$

134



$

141


BlackBerry Cylance

35





16





51




Licensing

71



56







71



56


Other

5



17







5



17


Total

$

244



$

210



$

17



$

4



$

261



$

214



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 dialing 1- 877-682-6267 or by logging on at BlackBerry.com/Investors. A replay of the conference call will also be available at approximately 11 a.m. ET by dialing 1-800-585-8367 and entering Conference ID #6987534 and at the link above.

About BlackBerry
BlackBerry (NYSE: BB; TSX: BB) is a trusted security software and services company that provides enterprises and governments with the technology they need to secure the Internet of Things. Based in Waterloo, Ontario, the company is unwavering in its commitment to safety, cybersecurity and data privacy, and leads in key areas such as artificial intelligence, endpoint security and management, encryption and embedded systems. For more information, visit BlackBerry.com and follow @BlackBerry.

Investor Contact:
BlackBerry Investor Relations
+1-519-888-7465
investor_relations@blackberry.com

Media Contact:
BlackBerry Media Relations
(519) 597-7273
mediarelations@blackberry.com

This news release contains forward-looking statements within the meaning of certain securities laws, including under the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including statements regarding: BlackBerry's plans, strategies and objectives including the anticipated benefits of its strategic initiatives and its intentions to expand and enhance its product and service offerings, and BlackBerry's expectations regarding non-GAAP revenue growth, billings growth and non-GAAP profitability for fiscal 2020.

The words "expect", "anticipate", "estimate", "may", "will", "should", "could", "intend", "believe", "target", "plan" and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are based on estimates and assumptions made by BlackBerry in light of its experience, historical trends, current conditions and expected future developments, as well as other factors that BlackBerry believes are appropriate in the circumstances. Many factors could cause BlackBerry's actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including the following risks: BlackBerry's ability to enhance, develop, introduce or monetize products and services for the enterprise market in a timely manner with competitive pricing, features and performance; BlackBerry's ability to maintain or expand its customer base for its software and services offerings to grow revenue or achieve sustained profitability; the intense competition faced by BlackBerry; the occurrence or perception of a breach of BlackBerry's network or product security measures or an inappropriate disclosure of confidential or personal information could significantly harm its business; risks related to BlackBerry's continuing ability to attract new personnel, retain existing key personnel and manage its staffing effectively; BlackBerry's dependence on its relationships with resellers and channel partners; risks related to acquisitions, divestitures, investments and other business initiatives, which may negatively affect BlackBerry's results of operations; risks related to BlackBerry's products and services being dependent upon interoperability with rapidly changing systems provided by third parties; the risk that failure to protect BlackBerry's intellectual property could harm its ability to compete effectively and BlackBerry may not earn the revenues it expects from intellectual property rights; the risk that BlackBerry could be found to have infringed on the intellectual property rights of others; the risk that litigation against BlackBerry may result in adverse outcomes; risks related to the use and management of user data and personal information, which could give rise to liabilities as a result of legal, customer and other third-party requirements; BlackBerry's ability to obtain rights to use third-party software; the risk that network disruptions or other business interruptions could have a material adverse effect on BlackBerry's business and harm its reputation; BlackBerry's ability to generate revenue and profitability through the licensing of security software and services or the BlackBerry brand to device manufacturers; the substantial asset risk faced by BlackBerry, including the potential for charges related to its long-lived assets and goodwill; risks related to BlackBerry's indebtedness, which could adversely affect its operating flexibility and financial condition; risks related to government regulations applicable to BlackBerry's products and services, including products containing encryption capabilities, which could negatively impact BlackBerry's business; risks related to foreign operations, including fluctuations in foreign currencies; risks associated with any errors in BlackBerry's products and services, which can be difficult to remedy and could have a material adverse effect on BlackBerry's business; risks related to the failure of BlackBerry's suppliers, subcontractors, channel partners and representatives to use acceptable ethical business practices or to comply with applicable laws, which could negatively impact BlackBerry's business; BlackBerry's reliance on third parties to manufacture and repair its hardware products; risks related to the Company's success in fostering an ecosystem of third-party application developers; risks related to regulations regarding health and safety, hazardous materials usage and conflict minerals, and to product certification risks; risks related to tax provision changes, the adoption of new tax legislation or exposure to additional tax liabilities, which could materially impact BlackBerry's financial condition; risks related to the fluctuation of BlackBerry's quarterly revenue and operating results; the volatility of the market price of BlackBerry's common shares; and risks related to adverse economic and geopolitical conditions, which may negatively affect BlackBerry.

These risk factors and others relating to BlackBerry are discussed in greater detail in BlackBerry's Annual Information Form, which is included in its Annual Report on Form 40-F and the "Cautionary Note Regarding Forward-Looking Statements" section of BlackBerry's MD&A (copies of which filings may be obtained at www.sedar.com or www.sec.gov). All of these factors should be considered carefully, and readers should not place undue reliance on BlackBerry's forward-looking statements. Any statements that are forward-looking statements are intended to enable BlackBerry's shareholders to view the anticipated performance and prospects of BlackBerry from management's perspective at the time such statements are made, and they are subject to the risks that are inherent in all forward-looking statements, as described above, as well as difficulties in forecasting BlackBerry's financial results and performance for future periods, particularly over longer periods, given changes in technology and BlackBerry's business strategy, evolving industry standards, intense competition and short product life cycles that characterize the industries in which BlackBerry operates. BlackBerry has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

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 Six Months Ended



August 31, 2019


May 31, 2019


August 31, 2018


August 31, 2019


August 31, 2018

Revenue


$

244



$

247



$

210



$

491



$

423


Cost of sales


68



70



49



138



101


Gross margin


176



177



161



353



322


Gross margin %


72.1

%


71.7

%


76.7

%


71.9

%


76.1

%

Operating expenses











Research and development


62



71



51



133



112


Selling, marketing and administration


132



121



106



253



206


Amortization


48



49



35



97



72


Debentures fair value adjustment


(23)



(28)



(70)



(51)



(42)




219



213



122



432



348


Operating income (loss)


(43)



(36)



39



(79)



(26)


Investment income, net




3



5



3



11


Income (loss) before income taxes


(43)



(33)



44



(76)



(15)


Provision for income taxes


1



2



1



3



2


Net income (loss)


$

(44)



$

(35)



$

43



$

(79)



$

(17)


Earnings (loss) per share











Basic


$

(0.08)



$

(0.06)



$

0.08



$

(0.14)



$

(0.03)


Diluted


$

(0.10)



$

(0.09)



$

(0.04)



$

(0.19)



$

(0.08)













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











Basic


552,343



551,845



537,299



552,096



537,136


Diluted


612,843



612,345



597,799



612,596



597,636


Total common shares outstanding (000s)


548,336



547,922



537,768



548,336



537,768


 


BlackBerry Limited

Incorporated under the Laws of Ontario

(United States dollars, in millions) (unaudited)


Consolidated Balance Sheets




As at



August 31, 2019


February 28, 2019

Assets





Current





Cash and cash equivalents


$

460



$

548


Short-term investments


389



368


Accounts receivable, net


194



194


Other receivables


18



19


Income taxes receivable


10



9


Other current assets


60



56




1,131



1,194


Restricted cash and cash equivalents


34



34


Long-term investments


55



55


Other long-term assets


35



28


Deferred income tax assets




2


Operating lease right-of-use assets


145




Property, plant and equipment, net


79



85


Goodwill


1,458



1,463


Intangible assets, net


996



1,068




$

3,933



$

3,929


Liabilities





Current





Accounts payable


$

37



$

48


Accrued liabilities


191



192


Income taxes payable


18



17


Deferred revenue, current


249



214




495



471


Deferred revenue, non-current


107



136


Operating lease liabilities


135




Other long-term liabilities


6



19


Long-term debt


627



665


Deferred income tax liabilities


1



2




1,371



1,293


Shareholders' equity





Capital stock and additional paid-in capital


2,722



2,688


Deficit


(125)



(32)


Accumulated other comprehensive loss


(35)



(20)




2,562



2,636




$

3,933



$

3,929


 


BlackBerry Limited

Incorporated under the Laws of Ontario

(United States dollars, in millions) (unaudited)


Consolidated Statements of Cash Flows



For the Six Months Ended


August 31, 2019


August 31, 2018

Cash flows from operating activities




Net loss

$

(79)



$

(17)


Adjustments to reconcile net loss to net cash used in operating activities:




Amortization

107



79


Deferred income taxes

1




Stock-based compensation

31



39


Non-cash consideration received from contract with a customer

(8)




Debentures fair value adjustment

(51)



(42)


Operating leases

(10)




Other

4



2


Net changes in working capital items:




Accounts receivable, net



6


Other receivables

1



19


Income taxes receivable

(1)



11


Other assets

(10)



(9)


Accounts payable

(11)



(12)


Income taxes payable

1



2


Accrued liabilities

(26)



(43)


Deferred revenue

4



(7)


Other long-term liabilities



(6)


Net cash provided by (used in) operating activities

(47)



22


Cash flows from investing activities




Acquisition of long-term investments



(1)


Acquisition of property, plant and equipment

(6)



(9)


Proceeds on sale of property, plant and equipment



1


Acquisition of intangible assets

(16)



(16)


Business acquisitions, net of cash acquired

1




Acquisition of short-term investments

(553)



(2,178)


Proceeds on sale or maturity of short-term investments

532



1,939


Net cash used in investing activities

(42)



(264)


Cash flows from financing activities




Issuance of common shares

3



2


Finance lease liability

(1)




Net cash provided by financing activities

2



2


Effect of foreign exchange loss on cash, cash equivalents, restricted cash, and restricted cash equivalents

(1)



(2)


Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period

(88)



(242)


Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period

582



855


Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period

$

494



$

613






As at

August 31, 2019


February 28, 2019

Cash and cash equivalents

$

460



$

548


Restricted cash and cash equivalents

$

34



$

34


Short-term investments

$

389



$

368


Long-term investments

$

55



$

55


 

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SOURCE BlackBerry Limited