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)
Incomestatement
location
Revenue
Gross margin(before taxes)
Gross margin% (beforetaxes)
Incomebeforeincome taxes
Net income
Basicearnings 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.
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. 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. 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. 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. 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. 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
