BB
$9.02
Blackberry
($.34)
(3.63%)
Earnings Details
3rd Quarter November 2018
Thursday, December 20, 2018 7:00:00 AM
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Summary

Blackberry Reports In-line

Blackberry (BB) reported 3rd Quarter November 2018 earnings of $0.04 per share on revenue of $226.0 million. The consensus earnings estimate was $0.02 per share on revenue of $212.6 million. The Earnings Whisper number was $0.04 per share. Sales were flat year-over-year.

Results
Reported Earnings
$0.04
Earnings Whisper
$0.04
Consensus Estimate
$0.02
Reported Revenue
$226.0 Mil
Revenue Estimate
$212.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

BlackBerry Reports Fiscal Year 2019 Third Quarter Results

- Non-GAAP total company revenue of $228 million; GAAP total company revenue of $226 million

- Record high non-GAAP total software and services revenue of $219 million; GAAP total software and services revenue of $217 million

- Continued strong double-digit revenue growth year-over-year for BlackBerry Technology Solutions, driven by the automotive vertical

- Non-GAAP earnings per basic and diluted share of $0.05; GAAP earnings per basic share of $0.11 and GAAP loss per diluted share of $0.01

- Free cash flow of $39 million, before considering the impact of restructuring and legal proceedings; free cash flow of $57 million, as reported

WATERLOO, Ontario, Dec. 20, 2018 /PRNewswire/ -- BlackBerry Limited (NYSE: BB; TSX: BB) today reported financial results for the three months ended November 30, 2018 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).

Third Quarter Fiscal 2019 Results

  • Total company non-GAAP revenue for the third quarter of fiscal 2019 was $228 million with GAAP revenue of $226 million. Total non-GAAP software and services revenue of $219 million, up 10% year-over-year. Total GAAP software and services revenue was $217 million, up 14% year-over-year. Approximately 88% of third quarter software and services revenue (excluding IP licensing and professional services) was recurring after including perpetual licenses that are now recognized ratably. Non-GAAP gross margin was 76% and GAAP gross margin was 75%.
  • Non-GAAP operating income was $27 million, and positive for the eleventh consecutive quarter. GAAP operating income was $58 million. Non-GAAP earnings per share was $0.05 (basic and diluted). GAAP net income for the quarter was $0.11 per basic share and a GAAP net loss of $0.01 per diluted share. GAAP net income includes $20 million for acquired intangibles amortization expense, $15 million in stock compensation expense, $1 million in restructuring charges, a benefit of $69 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 $2.4 billion as of November 30, 2018. Free cash flow, before considering the impact of restructuring and legal proceedings, was positive $39 million. Cash generated from operations was $62 million and capital expenditures were $5 million. Excluding $605 million in the face value of the company's debt, the net cash balance at the end of the quarter was $1.8 billion.

"We delivered another solid quarter of performance, resulting in year-over-year double-digit percentage growth for total software and services revenue, earnings per share, and free cash flow" said John Chen, Executive Chairman and CEO, BlackBerry.  "I'm excited about the pending Cylance acquisition as it will extend our strategy with cutting-edge AI cybersecurity capabilities and, combined with BlackBerry's capabilities, present the opportunity for revenue acceleration in our businesses, including UEM, QNX and Spark."

Outlook
BlackBerry re-affirms its outlook for fiscal 2019 with software and services billings and revenue growth, profitability and positive cash flow, as follows:

  • Total company software and services billings growth is expected to be double-digits
  • Total software and services revenue growth of between 8% to 10% year-over-year
  • Non-GAAP earnings per share is expected to be positive
  • Free cash flow is expected to be positive for the full year

Reconciliation of GAAP revenue, gross margin, gross margin percentage, income before income taxes, net income and basic earnings 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 November 30, 2018:

Q3 Fiscal 2019 Non-GAAP Adjustments


For the Three Months Ended November 30, 2018

(in millions, except for per share amounts)


Income
statement

location


Revenue


Gross margin
(before taxes)


Gross margin
% (before
taxes)


Income
before
income taxes


Net income


Basic
earnings per

share

As reported



$

226



$

170



75.2

%


$

60



$

59



$

0.11


Debentures fair value adjustment (2)

Debentures fair value adjustment






%


(69)



(69)




Restructuring charges (3)

Selling, marketing and administration






%


1



1




Software deferred revenue acquired (4)

Revenue


2



2



0.2

%


2



2




Stock compensation    expense (5)

Cost of sales




1



0.5

%


1



1




Stock compensation

expense (5)

Research and development






%


3



3




Stock compensation

expense (5)

Selling, marketing and administration






%


11



11




Acquired intangibles amortization (6)

Amortization






%


20



20




Adjusted



$

228



$

173



75.9

%


$

29



$

28



$

0.05


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 third quarter of fiscal 2019, the Company reported GAAP gross margin of $170 million or 75.2% of revenue. Excluding the impact of stock compensation expense included in cost of sales and software deferred revenue acquired included in revenue, non-GAAP gross margin was $173 million, or 75.9% of revenue.
  2. During the third quarter of fiscal 2019, the Company recorded the Q3 Fiscal 2019 Debentures Fair Value Adjustment of $69 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.
  3. During the third quarter of fiscal 2019, the Company incurred restructuring charges of approximately $1 million, which was included in selling, marketing and administration expense.
  4. During the third quarter of fiscal 2019, the Company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $2 million, which was included in Enterprise software and services revenue.
  5. During the third quarter of fiscal 2019, the Company recorded stock compensation expense of $15 million, of which $1 million was included in cost of sales, $3 million was included in research and development, and $11 million was included in selling, marketing and administration expense.
  6. During the third quarter of fiscal 2019, the Company recorded amortization of intangible assets acquired through business combinations of $20 million, which was included in amortization expense.

Supplementary Geographic Revenue Breakdown

BlackBerry Limited

(United States dollars, in millions)

Revenue by Region




For the Quarters Ended



November 30, 2018


August 31, 2018


May 31, 2018


February 28, 2018


November 30, 2017

North America


$

151



66.8

%


$

133



63.3

%


$

139



65.3

%


$

147



63.1

%


$

133



58.8

%

Europe, Middle East and Africa


56



24.8

%


53



25.3

%


52



24.4

%


63



27.0

%


69



30.5

%

Other regions


19



8.4

%


24



11.4

%


22



10.3

%


23



9.9

%


24



10.7

%

Total


$

226



100.0

%


$

210



100.0

%


$

213



100.0

%


$

233



100.0

%


$

226



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


November 30,
2018


November 30,
2017


November 30,
2018


November 30,
2017


November 30,
2018


November 30,
2017

Enterprise software and services

$

96



$

97



$

2



$

9



$

98



$

106


BlackBerry Technology Solutions

53



43







53



43


Licensing, IP and other

68



50







68



50


Handheld devices



9









9


SAF

9



27







9



27


Total

$

226



$

226



$

2



$

9



$

228



$

235


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- 866-393-4306 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 a.m. ET by dialing 1-800-585-8367 and entering Conference ID #3276343 and at the link above.

About BlackBerry
BlackBerry enables the Enterprise of Things by providing the technology that allows endpoints to trust one another, communicate securely, and maintain privacy.

Based in Waterloo, Ontario, BlackBerry was founded in 1984 and operates globally. The Company trades under the ticker symbol "BB" on the Toronto Stock Exchange and the New York Stock Exchange. For more information visit BlackBerry.com, and follow the company on LinkedIn, Twitter and Facebook.

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: the Company's plans, strategies and objectives and the anticipated benefits of its strategic initiatives including the proposed acquisition of Cylance; its intentions to grow revenue and increase and enhance its product and service offerings; its expectations regarding free cash flow, total software and services revenue growth, total software and services billings growth, and non-GAAP earnings per share for fiscal 2019.

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; 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 distributors; the risk that network disruptions or other business interruptions could have a material adverse effect on BlackBerry's business and harm its reputation; risks related to acquisitions, divestitures, investments and other business initiatives, which may negatively affect BlackBerry's results of operations, and in the case of the proposed Cylance acquisition, the risk that BlackBerry may be unable to obtain regulatory approvals for the proposed acquisition or may be unable to obtain those approvals on favorable terms, the risk that the required regulatory approvals may delay the proposed acquisition, the risk that a condition to the closing of the proposed acquisition may not be satisfied or the acquisition agreement may be terminated prior to closing and risks associated with the integration of the Cylance business; risks related to BlackBerry's products and services being dependent upon interoperability with rapidly changing systems provided by third parties; BlackBerry's ability to generate revenue and profitability through the licensing of security software and services or the BlackBerry brand to device manufacturers; 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 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, third-party distributors and representatives to use acceptable ethical business practices or comply with applicable laws; BlackBerry's reliance on third parties to manufacture and repair its hardware products; risks related to 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; 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.

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 the ongoing transition in BlackBerry's business strategy and the rapid technological changes, 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 Nine Months Ended



November 30,
2018


August 31,
2018


November 30,
2017


November 30,
2018


November 30,
2017

Revenue


$

226



$

210



$

226



$

649



$

699


Cost of sales


56



49



58



157



206


Gross margin


170



161



168



492



493


Gross margin %


75.2

%


76.7

%


74.3

%


75.8

%


70.5

%

Operating expenses











Research and development


55



51



60



167



181


Selling, marketing and administration


93



106



120



299



343


Amortization


33



35



37



105



116


Debentures fair value adjustment


(69)



(70)



77



(111)



225


Impairment of long-lived assets










11


Arbitration charges (awards)






132





(683)




112



122



426



460



193


Operating income (loss)


58



39



(258)



32



300


Investment income, net


2



5



(17)



13



120


Income (loss) before income taxes


60



44



(275)



45



420


Provision for income taxes


1



1





3



5


Net income (loss)


$

59



$

43



$

(275)



$

42



$

415


Earnings (loss) per share











Basic


$

0.11



$

0.08



$

(0.52)



$

0.08



$

0.78


Diluted


$

(0.01)



$

(0.04)



$

(0.52)



$

(0.09)



$

0.76













Weighted-average number of common shares outstanding (000s)











Basic


540,406



537,299



532,496



538,251



531,651


Diluted


600,906



597,799



532,496



598,751



548,514


Total common shares outstanding (000s)


547,084



537,768



536,307



547,084



536,307


 

BlackBerry Limited

Incorporated under the Laws of Ontario

(United States dollars, in millions) (unaudited)


Consolidated Balance Sheets




As at



November 30, 2018


February 28, 2018

Assets





Current





Cash and cash equivalents


$

1,084



$

816


Short-term investments


1,234



1,443


Accounts receivable, net


138



151


Other receivables


25



71


Income taxes receivable


13



26


Other current assets


50



38




2,544



2,545


Restricted cash and cash equivalents


26



39


Long-term investments


55



55


Other long-term assets


26



28


Deferred income tax assets


2



3


Property, plant and equipment, net


63



64


Goodwill


564



569


Intangible assets, net


396



477




$

3,676



$

3,780


Liabilities





Current





Accounts payable


$

32



$

46


Accrued liabilities


156



205


Income taxes payable


17



18


Deferred revenue, current


171



142




376



411


Deferred revenue, non-current


98



53


Other long-term liabilities


14



23


Long-term debt


665



782


Deferred income tax liabilities


4



6




1,157



1,275


Shareholders' equity





Capital stock and additional paid-in capital


2,618



2,560


Deficit


(83)



(45)


Accumulated other comprehensive loss


(16)



(10)




2,519



2,505




$

3,676



$

3,780


 

BlackBerry Limited

Incorporated under the Laws of Ontario

(United States dollars, in millions) (unaudited)


Consolidated Statements of Cash Flows



For the Nine Months Ended


November 30, 2018


November 30, 2017

Cash flows from operating activities




Net income

$

42



$

415


Adjustments to reconcile net income to net cash provided by operating activities:




Amortization

116



138


Deferred income taxes

(1)



(3)


Stock-based compensation

53



36


Impairment of long-lived assets



11


Loss on sale, disposal and abandonment of long-lived assets

2



6


Debentures fair value adjustment

(111)



225


Other long-term assets

2



(23)


Other

3



(3)


Net changes in working capital items:




Accounts receivable, net

13



36


Other receivables

46



(6)


Income taxes receivable

13



4


Other assets

(1)



40


Accounts payable

(14)



(65)


Income taxes payable

(1)



5


Accrued liabilities

(57)



99


Deferred revenue

(23)



(49)


Net cash provided by operating activities

82



866


Cash flows from investing activities




Acquisition of long-term investments

(2)



(27)


Proceeds on sale or maturity of long-term investments

2



77


Acquisition of property, plant and equipment

(14)



(11)


Proceeds on sale of property, plant and equipment

1



3


Acquisition of intangible assets

(24)



(22)


Acquisition of short-term investments

(2,754)



(2,715)


Proceeds on sale or maturity of short-term investments

2,962



1,626


Net cash provided by (used in) investing activities

171



(1,069)


Cash flows from financing activities




Issuance of common shares

5



7


Common shares repurchased



(18)


Net cash provided by (used in) financing activities

5



(11)


Effect of foreign exchange gain (loss) on cash, cash equivalents, restricted cash, and restricted cash equivalents

(3)



3


Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period

255



(211)


Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period

855



785


Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period

$

1,110



$

574






As at

November 30, 2018


February 28, 2018

Cash and cash equivalents

$

1,084



$

816


Restricted cash and cash equivalents

$

26



$

39


Short-term investments

$

1,234



$

1,443


Long-term investments

$

55



$

55


 

BlackBerry Logo Black (PRNewsfoto/Blackberry Limited)

 

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SOURCE BlackBerry Limited