Dubai - MENA Herald: 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 August 31, 2016 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).
Q2 Highlights
Non-GAAP total revenue of $352 million; GAAP revenue of $334 million
Non-GAAP software and services revenue of $156 million; GAAP software and services revenue of $138 million
Eleventh consecutive quarter of positive adjusted EBITDA
Breakeven non-GAAP earnings per share; GAAP EPS loss of $(0.71)
Entered into a licensing agreement with telecom joint venture in Indonesia, BB Merah Putih, to manufacture, distribute and promote BlackBerry-branded devices running BlackBerry’s secure Android software and applications
Announced a strategic alliance with Emtek Group to accelerate and advance BBM’s consumer business globally by developing new cross platform applications, content and services on the BBM platform
Commenced shipment of BlackBerry Radar, an end-to-end asset tracking IOT system; lands top tier logistics company as a customer
Launched BlackBerry Hub+ for Android, a software licensing program to effortlessly enable productivity and communication on Android 6.0 Marshmallow smartphones
Launched the DTEK50 in July, the world’s most secure Android smartphone, combining BlackBerry’s unique security, privacy and productivity with the full Android experience in an all-touch design
After the quarter close, completed the previously announced convertible debt restructuring reducing both interest costs and dilution to existing shareholders
Q2 Results
Non-GAAP revenue for the second quarter of fiscal 2017 was $352 million with GAAP revenue of $334 million. The non-GAAP revenue breakdown for the quarter was approximately 44% for software and services, 26% for service access fees (SAF), and 30% for mobility solutions.
BlackBerry had around 3,000 enterprise customer wins in the quarter. Approximately 81% of the second quarter software and services revenue was recurring.
Non-GAAP operating income was $16 million, and non-GAAP earnings per share was break even for the second quarter. GAAP net loss for the quarter was $(372) million, or $(0.71) 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 $2.5 billion as of August 31, 2016. This reflects a use of free cash of $37 million, which includes $34 million of cash used in operations. Excluding $1.25 billion in the face value of our debt, the net cash balance at the end of the quarter was $1.22 billion. Purchase orders with contract manufacturers totaled approximately $71 million at the end of the second quarter, compared to $150 million at the end of the first quarter and down from $248 million in the year ago quarter.
“We are reaching an inflection point with our strategy. Our financial foundation is strong, and our pivot to software is taking hold,” said John Chen, Executive Chairman and CEO, BlackBerry. “In Q2, we more than doubled our software revenue year over year and delivered the highest gross margin in the company’s history. We also completed initial shipments of BlackBerry Radar, an end-to end asset tracking system, and signed a strategic licensing agreement to drive global growth in our BBM consumer business.”
“Our new Mobility Solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia. Under this strategy, we are focusing on software development, including security and applications. The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital,” continued Chen.
“We remain on track to deliver 30 percent revenue growth in software and services for the full fiscal year. We are revising upward our non-GAAP EPS outlook to a range of breakeven to a five cent loss, compared to the current consensus of a 15 cent loss. This reflects increased confidence based on improving margins and reduced interest expense from the recent refinancing of our debt, as well as planned investments in growth areas.”
Note: Non-GAAP gross margin, non-GAAP gross margin percentage, non-GAAP loss before income taxes, non-GAAP net loss and non-GAAP loss 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 second quarter of fiscal 2017, the Company reported GAAP gross margin of $98 million or 29.3% of revenue. Excluding the impact of the inventory write-down and resource alignment program (“RAP”) charges included in cost of sales and software deferred revenue acquired included in revenue, the non-GAAP gross margin was $219 million, or 62.2% of revenue.
During the second quarter of fiscal 2017, the Company recorded inventory write-down charges of $96 million, which were included in cost of sales.
During the second quarter of fiscal 2017, the Company recorded the Q2 Fiscal 2017 Debentures Fair Value Adjustment of $62 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.
During the second quarter of fiscal 2017, the Company incurred charges related to the RAP of approximately $147 million, of which $7 million were included in cost of sale and $140 million were included in selling, marketing and administration expense.
During the second 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 second quarter of fiscal 2017, the Company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $18 million, which were included in revenue.
During the second quarter of fiscal 2017, the Company recorded stock compensation expense of $18 million, of which $4 million were included in research and development, and $14 million were included in selling, marketing and administration expenses.
During the second 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 second quarter of fiscal 2017, the Company recorded business acquisition and integration costs incurred through business combinations of $4 million, which were included in selling, marketing and administration expenses.
