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BlackBerry Results for Q1 Fiscal 2016

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Yesterday saw the first Quarter meeting of the BlackBerry Board,  with Mr Chen getting a grilling on the results,

See below for yourself how the company is doing this year.:

BlackBerry Reports Record Software and Services Revenue for Q1 Fiscal 2016

June 23, 2016 07:00 ET

BlackBerry Reports Record Software and Services Revenue for Q1 Fiscal 2016

Company delivers positive non-GAAP operating income and breakeven non-GAAP EPS

WATERLOO, ONTARIO--(Marketwired - June 23, 2016) - BlackBerry Limited (NASDAQ:BBRY)(TSX:BB), a global leader in secure mobile communications, today reported financial results for the three months ended May 31, 2016 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).

Q1 Highlights

  • Company begins reporting multiple business segments: Software and Services, Service Access Fees (SAF) and Mobility Solutions. Mobility Solutions includes BlackBerry smartphones and device software licensing
  • Non-GAAP total revenue of $424 million
  • Non-GAAP software and services revenue of $166 million
  • Non-GAAP gross margin of 53%
  • Tenth consecutive quarter of positive adjusted EBITDA
  • Cash and investments balance of $2.5 billion at the end of the first fiscal quarter
  • Unveiled BlackBerry Radar, a new end-to-end asset tracking system based on the company's IoT platform, for trucking companies and private fleet operators
  • BlackBerry named a "Leader" in the Forrester Wave for enterprise file sync and share for hybrid solutions
  • After the quarter, BlackBerry named a "Leader" in the Gartner Magic Quadrant for Enterprise Mobility Management Suites
  • New Enterprise Partner Program launched globally to stimulate growth and drive profit for partners
  • Pentagon Force Protection Agency chooses AtHoc to protect Department of Defense leadership, staff, and visitors in times of crisis

Q1 Results

Non-GAAP revenue for the first quarter of fiscal 2017 was $424 million with GAAP revenue of $400 million. The non-GAAP revenue breakdown for the quarter was approximately 39% for software and services, 25% for service access fees (SAF), and 36% for mobility solutions.

BlackBerry had approximately 3,300 enterprise customer wins in the quarter. Approximately 74% of the first quarter software revenue was recurring.

Non-GAAP operating income was $14 million, and non-GAAP net income was $0.00 per share for the first quarter. GAAP net loss for the quarter was $670 million, or $(1.28) per basic share. Basic GAAP net loss reflects a non-cash, long lived asset impairment charge of $501 million, a $57 million goodwill impairment charge, inventory write-down of $41 million, $28 million in amortization of acquired intangibles, stock compensation expense of $12 million, purchase accounting deferred revenue write-down of $24 million, $23 million in restructuring charges, $7 million related to acquisition costs, and a non-cash credit of $24 million for our convertible debt. The impact of these adjustments on GAAP net income and earnings per share is summarized in a table below.

Total cash, cash equivalents, short-term and long-term investments was $2.5 billion as of May 31, 2016. This reflects a use of free cash of $65 million, which includes negative $61 million of cash flow from operations. Cash flow from operations before working capital adjustments was negatively impacted by the inventory impairment and excluding the charges, would have been positive. Excluding $1.25 billion in the face value of our debt, the net cash balance at the end of the quarter was $1.3 billion. Purchase orders with contract manufacturers totaled approximately $150 million at the end of the first quarter, compared to $162 million at the end of the fourth quarter and down from $238 million in the year ago quarter.

"BlackBerry is differentiated by cross-platform market leadership in software, an end-to-end secure mobility platform and a strong financial foundation. Our Q1 results highlight these attributes. Excluding IP licensing, we have more than doubled our software revenue on a year-over-year basis for the second consecutive quarter, driven by our EMM, secure messaging and QNX embedded software businesses. In our Mobility Solutions business, our objective is to achieve operating profitability in the short term," said John Chen, Executive Chairman and CEO, BlackBerry.

"Our current plan calls for continued investments to expand our addressable markets and drive sustainable profitability and revenue growth. For the full fiscal year, we are on track to deliver 30 percent revenue growth in software and services. Based on a more efficient operating model, we expect a non-GAAP EPS loss of around 15 cents, compared to the current consensus of a 33 cent loss. We also expect to generate positive free cash flow for the full year."

Outlook

The Company anticipates maintaining a strong cash position and further reallocating additional resources to go-to-market and product development areas as it continues to execute on its strategy of positive adjusted EBITDA for the full 2017 fiscal year.

(United States dollars, in millions except per share data)

Reconciliation of the Company's segment results to the consolidated results:

For the Three Months Ended May 31, 2016
(in millions)
Software &
Services
Mobility
Solutions
SAF Segment
totals
Corporate
unallocated
Subtotal Non-GAAP
adjustments
Consolidated
U.S. GAAP
Revenue $ 166 $ 152 $ 106 $ 424 $ - $ 424 $ (24 ) $ 400
Cost of goods sold 32 140 26 198 - 198 48 246
Gross margin 134 12 80 226 - 226 (72 ) 154
Operating expenses 97 33 2 132 80 212 597 809
Operating income (loss) $ 37 $ (21 ) $ 78 $ 94 $ (80 ) $ 14 $ (669 ) $ (655 )

Reconciliation of GAAP gross margin, gross margin percentage, loss before income taxes, net loss and loss per share to Non-GAAP gross margin, gross margin percentage, loss before income taxes, net loss and loss per share:

(United States dollars, in millions except per share data)

Q1 Fiscal 2017 Non-GAAP Adjustments For the Three Months Ended May 31, 2016
(in millions)
Income
statement
location
Revenue Gross
margin
(before
taxes)
(1)
Gross
margin
%
(before
taxes)
(1)
Loss
before
income
taxes
Net
Loss
Basic loss
per share
As reported $ 400 154 38.5 % $ (670 ) $ (670 ) $ (1.28 )
LLA Impairment Charge (2) Impairment of
long-lived assets
- - - % 501 501
Goodwill Impairment Charge (3) Impairment of
goodwill
- - - % 57 57
Inventory write-down(4) Cost of sales - 41 10.3 % 41 41
Debentures fair value adjustment (5) Debentures fair
value adjustment
- - - % (24 ) (24 )
RAP charges (6) Cost of sales - 7 1.7 % 7 7
RAP charges (6) Research and
development
- - - % 2 2
RAP charges (6) Selling,
marketing
and administration
- - - % 16 16
CORE program recovery(7) Selling,
marketing
and administration
- - - % (2 ) (2 )
Software deferred revenue acquired(8) Revenue 24 24 2.8 % 24 24
Stock compensation expense(9) Research and
development
- - - % 4 4
Stock compensation expense(9) Selling,
marketing
and administration
- - - % 8 8
Acquired intangibles amortization(10) Amortization - - - % 28 28
Business acquisition and integration costs(11) Selling,
marketing
and administration
- - - % 7 7
Adjusted $ 424 226 53.3 % $ (1 ) $ (1 ) $ 0.00

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.

(1) During the first quarter of fiscal 2017, the Company reported GAAP gross margin of $154 million or 38.5% 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 $226 million, or 53.3% of revenue.
(2) During the first quarter of fiscal 2017, the Company recorded long-lived asset impairment charge of $501 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.
(3) During the first quarter of fiscal 2017, the Company recorded goodwill impairment charge of $57 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.
(4) During the first quarter of fiscal 2017, the Company recorded inventory write-down charges of $41 million, which were included in cost of sales.
(5) During the first quarter of fiscal 2017, the Company recorded the Q1 Fiscal 2017 Debentures Fair Value Adjustment of $24 million. This adjustment was presented on a separate line in the Consolidated Statements of Operations.
(6) During the first quarter of fiscal 2017, the Company incurred charges related to the RAP of approximately $25 million, of which $7 million were included in cost of sales, $2 million were included in research and development and $16 million were included in selling, marketing and administration expense.
(7) During the first 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.
(8) During the first quarter of fiscal 2017, the Company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $24 million, which were included in revenue.
(9) During the first quarter of fiscal 2017, the Company recorded stock compensation expense of $12 million, of which $4 million were included in research and development, and $8 million were included in selling, marketing and administration expenses.
(10) During the first quarter of fiscal 2017, the Company recorded amortization of intangible assets acquired through business combinations of $28 million, which were included in amortization expense.
(11) During the first quarter of fiscal 2017, the Company recorded business acquisition and integration costs incurred through business combinations of $7 million, which were included in selling, marketing and administration expenses.

Supplementary Geographic Revenue Breakdown

BlackBerry Limited
(United States dollars, in millions)
Revenue by Region

For the quarters ended
May 31,
2016
February 29,
2016
November 28,
2015
August 29,
2015
May 30,
2015
North America $ 195 48.8 % $ 216 46.5 % $ 275 50.2 % $ 176 36.0 % $ 285 43.3 %
Europe, Middle East
and Africa
155 38.7 % 175 37.7 % 194 35.4 % 202 41.2 % 245 37.2 %
Latin America 10 2.5 % 18 3.9 % 24 4.4 % 33 6.7 % 42 6.4 %
Asia Pacific 40 10.0 % 55 11.9 % 55 10.0 % 79 16.1 % 86 13.1 %
Total $ 400 100.0 % $ 464 100.0 % $ 548 100.0 % $ 490 100.0 % $ 658 100.0 %

 

 

Source:  Georgi

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