BlackBerry's Software And Services Better Than Expected According To Imperial Capital

BlackBerry Ltd BBRY reported mixed F1Q17 results on June 23.

Imperial Capital’s Michael Kim maintains an In-Line rating on the company, with a price target of $7.

Mixed Results

Kim mentioned that while the revenue for F1Q17 were below the consensus and estimate, the EPS beat expectations.

“Revenue was adversely affected by lower-than-expected hardware sales and Service Access Fees (SAF), partially offset by higher software revenue. Adjusted EPS was better than anticipated due to more favorable revenue mix and cost reductions,” the analyst explained.

Related Link: BlackBerry Device Sales Falling Faster Than Expected According To MKM

What Management Expects

For FY17, management reaffirmed expectations of software and services revenue growth of about 30 percent.

BlackBerry also provided initial guidance for adjusted net loss per share of about $0.15 for the year, higher than the consensus and the estimate.

Although management continues to expect positive EBITDA and free cash flow, Kim believes that there could be further headwinds in store for the hardware business, until the company introduces more compelling products.

In addition, management also expects to achieve operating profitability by F3Q17, driven by additional favorable agreements with its ODM partners and the introduction of new products.

“Management also sees potential device software licensing opportunities, though we await tangible progress for this new program,” the analyst said.

For F1Q17, management suggested software revenues benefited from increased purchases of BlackBerry’s enterprise mobility management suit by 526 customers, up from the 90 seen in F4Q16.

Although management also stated that it had conducted two proof of concept trials for BlackBerry Radar, slated for commercial launch in mid-July, Kim pointed out there was limited visibility into customer adoption.