BlackBerry Reports 89% Year over Year Growth in GAAP Software and Services Revenue for Q2 Fiscal 2017; Company Announces New Strategic Direction for Mobility Solutions

  • Non-GAAP Software and Services revenue increases 111% year over year
  • Record non-GAAP gross margin of 62%; GAAP gross margin of 29%
  • Gartner names BlackBerry the leader in all critical capabilities for high-security mobility

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.”

Leave a Reply