Dubai, UAE: BlackBerry Limited (NASDAQ: BBRY; TSX: BB), a global software leader in securing, connecting and mobilizing enterprises, today reported financial results for the three months ended November 30, 2016 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).
Non-GAAP revenue for the third quarter of fiscal 2017 was $301 million with GAAP revenue of $289 million. The non-GAAP revenue breakdown for the quarter was approximately 55% for the Software & Services segment, 22% for the Service Access Fees (SAF) segment, and 23% for the Mobility Solutions segment.
Approximately 80% of the third quarter Software & Services segment revenue (excluding IP licensing and professional services) was recurring. BlackBerry had over 3,000 enterprise customer orders in the quarter.
Non-GAAP operating income was $12 million, and non-GAAP earnings per share was $0.02. GAAP net loss for the quarter was $117 million, or ($0.22) per basic share. Adjustments to GAAP net income and earnings per share are summarized in a table below.
Total cash, cash equivalents, short-term and long-term investments was approximately $1.6 billion as of November 30, 2016. This reflects a use of free cash of $154 million, which includes $150 million of cash used in operations. The majority of cash used in operations was attributable to working capital and supplier purchase commitments related to transitioning the device hardware business to a software licensing model. Excluding $605 million in the face value of the company’s debt, the net cash balance at the end of the quarter was approximately $1 billion. Purchase orders with contract manufacturers totaled approximately $35 million at the end of the third quarter, compared to $71 million at the end of the second quarter and down from $298 million in the year ago quarter.
“BlackBerry is now a software company and the market leader in mobile security,” said John Chen, Executive Chairman and CEO, BlackBerry. “We achieved significant milestones in Q3, delivering the highest gross margin in the company’s history for the second consecutive quarter and continuing to transform our infrastructure and operations to support an enterprise software business. These accomplishments drove operating profitability in all business segments and overall positive non-GAAP EPS.”
“As the number of mobile-connected devices continues to proliferate, we expect growing demand in our areas of strength, including security and embedded software,” continued Chen. “The recent agreements with Ford and TCL are positive proof points on our value proposition in these emerging growth areas. We have a pipeline of opportunities to continue our momentum.”
“We remain on track to deliver 30 percent growth in company total software and services revenues for the full fiscal year. We are raising our outlook on profitability for FY17. We now expect to achieve non-GAAP EPS profitability for the full year, up from a prior range of breakeven to a five cent loss. This is the third consecutive quarter we have increased our EPS outlook, reflecting the traction we are achieving in our shift to a software business model. We also anticipate breakeven non-GAAP EPS and approximately breakeven free cash flow in Q4.”
Reconciliation of the Company’s segment results to the consolidated results:
(United States dollars, in millions)
|For the Three Months Ended November 30, 2016
|Software & Services||Mobility Solutions||SAF||Segment totals||Corporate unallocated||Subtotal||Non-GAAP adjustments||Consolidated U.S. GAAP|
|Cost of goods sold||33||39||19||91||—||91||5||96|
|Operating income (loss)||$||40||$||5||$||47||$||92||$||(80||)||$||12||$||(126||)||$||(114||)|
Reconciliation of GAAP revenue, gross margin, gross margin percentage, loss before income taxes, net loss and loss per share to Non-GAAP revenue, gross margin, gross margin percentage, income before income taxes, net income and income per share:
(United States dollars, in millions except per share data)
|Q3 Fiscal 2017 Non-GAAP Adjustments||For the Three Months Ended November 30, 2016
|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|
|Debentures fair value adjustment(2)||Debentures fair value adjustment||—||—||—||%||2||2|
|Write-down of assets held for sale (3)||Selling, marketing and administration||—||—||—||%||42||42|
|RAP charges (4)||Cost of sales||—||5||1.7||%||5||5|
|RAP charges (4)||Research and development||—||—||—||%||(1||)||(1||)|
|RAP charges (4)||Selling, marketing and administration||—||—||—||%||20||20|
|CORE program recovery (5)||Selling, marketing and administration||—||—||—||%||(2||)||(2||)|
|Software deferred revenue acquired (6)||Revenue (3)||12||12||1.3||%||12||12|
|Stock compensation expense (7)||Research and development||—||—||—||%||4||4|
|Stock compensation expense (7)||Selling, marketing and administration||—||—||—||%||11||11|
|Acquired intangibles amortization (8)||Amortization||—||—||—||%||28||28|
|Business acquisition and integration costs (9)||Selling, marketing and administration||—||—||—||%||5||5|
Note: Non-GAAP gross margin, non-GAAP gross margin percentage, non-GAAP income before income taxes, non-GAAP net income and non-GAAP income 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.
Supplementary Geographic Revenue Breakdown
(United States dollars, in millions)
Revenue by Region
|For the quarters ended|
|November 30, 2016||August 31, 2016||May 31, 2016||February 29, 2016||November 28, 2015|
|Europe, Middle East and Africa||87||30.1||%||100||29.9||%||155||38.7||%||175||37.7||%||194||35.4||%|
Conference Call and Webcast
A conference call and live webcast will be held beginning at 8 am ET, which can be accessed by dialing 1-844-309-0607 or by logging on at http://ca.blackberry.com/company/investors/events.html.
A replay of the conference call will also be available at approximately 11 am ET by dialing 1-855-859-2056 or 1-404-537-3406 and entering Conference ID # 18826550 or by clicking the link above.
BlackBerry is a mobile-native security software and services company dedicated to securing the enterprise of things. Based in Waterloo, Ontario, the Company was founded in 1984 and operates in North America, Europe, Asia, Middle East, Latin America and Africa.. The Company trades under the ticker symbols “BB” on the Toronto Stock Exchange and “BBRY” on the NASDAQ.