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 /PRNewswire/ -- BlackBerry Limited BBBB 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 BBBB 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



 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/blackberry-reports-fiscal-2020-second-quarter-results-300923771.html

SOURCE BlackBerry Limited

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