- GAAP Company total software and services revenues excluding IP increase 50% year over year
- Company raises full year non-GAAP EPS outlook
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 total revenue of $301 million; GAAP revenue of $289 million
- Non-GAAP Company total software and services revenues of $172 million; GAAP Company total software and services revenues of $160 million
- Record non-GAAP gross margin of 70%; Record GAAP gross margin of 67%
- Adjusted EBITDA of $37 million; positive for twelfth consecutive quarter
- Non-GAAP earnings per share of $0.02; GAAP EPS loss of ($0.22)
- Signed agreement with Ford Motor Company for expanded use of BlackBerry’s QNX and security software
- Entered into a long-term, global software licensing agreement with TCL Communication to design, manufacture, sell and support new BlackBerry-branded mobile devices running BlackBerry’s secure Android software and applications
- Launched the DTEK60, the latest Android device running BlackBerry’s industry-leading security software
- Achieved common criteria NIAP certification for BlackBerry 10.3.3, which is targeted for users in government and highly regulated industries
- Announced plans to launch a Federal Cybersecurity Operations Center to support FedRAMP and other government security certification initiatives; the center will be led by former U.S. Coast Guard CIO, Rear Admiral Bob Day Jr. (retired)
- After the quarter close, launched BlackBerry Secure, a comprehensive and fully integrated enterprise mobility platform that allows enterprises to increase security, productivity and collaboration, accelerate key business processes and reduce total cost of ownership
- After the quarter close, announced plans to launch the BlackBerry Innovation Center in Ottawa; the center will focus on developing secure software for connected cars and autonomous driving
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.
- During the third quarter of fiscal 2017, the Company reported GAAP gross margin of $193 million or 66.8% of revenue. Excluding the impact of the resource alignment program (“RAP”) charges included in cost of sales and software deferred revenue acquired included in revenue, the non-GAAP gross margin was $210 million, or 69.8% of revenue.
- During the third quarter of fiscal 2017, the Company recorded the Q3 Fiscal 2017 Debentures Fair Value Adjustment of $2 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.
- During the third quarter of fiscal 2017, the Company incurred charges related to the write-down of assets held for sale of $42 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.
- During the third quarter of fiscal 2017, the Company incurred charges related to the RAP of approximately $24 million, of which $5 million were included in cost of sale, a recovery of $1 million were included in research and development expense and $20 million were included in selling, marketing and administration expense.
- During the third quarter of fiscal 2017, the Company incurred recoveries related to the CORE program of $2 million, which were included in selling, marketing, and administration expenses.
- During the third quarter of fiscal 2017, the Company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $12 million, which were included in revenue.
- During the third quarter of fiscal 2017, the Company recorded stock compensation expense of $15 million, of which $4 million were included in research and development, and $11 million were included in selling, marketing and administration expenses.
- During the third quarter of fiscal 2017, the Company recorded amortization of intangible assets acquired through business combinations of $28 million, which were included in amortization expense.
- During the third quarter of fiscal 2017, the Company recorded business acquisition and integration costs incurred through business combinations of $5 million, which were included in selling, marketing and administration expenses.
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.