The FINANCIAL — BlackBerry Limited on September 28 reported financial results for the three months ended August 31, 2017.
Q2 Highlights
Total revenue of $249 million (non-GAAP) and $238 million (GAAP)
Record software and services revenue of $196 million (non-GAAP) and $185 million (GAAP)
Record gross margin of 76% (non-GAAP) and 74% (GAAP)
Operating margin of 12% (non-GAAP) and 9% (GAAP)
Operating income of $29 million (non-GAAP) and $22 million (GAAP)
EPS of $0.05 (non-GAAP) and fully diluted loss of ($0.07) (GAAP)
Adjusted EBITDA of $50 million; positive for fourteenth consecutive quarter
Adjusted EBITDA margin of 20%
Total cash balance of $2.5 billion at the end of the fiscal second quarter
Achieved NIAP certification for SecuSUITE for Government, which brings an end-to-end solution for encrypted voice calls and text messages to the U.S. and Canadian governments; SecuSUITE is the only NIAP-certified voice solution supporting iOS, Android and BlackBerry 10 smartphones and tablets
Achieved the highest scores in all six use cases of Gartner’s Critical Capabilities for High-Security Mobility Management Report for the second consecutive year
After the quarter, BlackBerry Workspaces received the highest scores in two use cases-Workforce Productivity and Centralized Content Protection-of Gartner’s Critical Capabilities for Content Collaborations Platform Report
After the quarter, announced that Delphi chose BlackBerry QNX to provide the operating system and software infrastructure for Delphi’s fully integrated CSLP autonomous driving solution
Q2 Results
Non-GAAP revenue for the second quarter of fiscal 2018 was $249 million with GAAP revenue of $238 million. Approximately 79% of second quarter software and services revenue (excluding IP licensing and professional services) was recurring. BlackBerry had approximately 3,300 enterprise customer orders in the quarter.
Non-GAAP operating income was $29 million, and non-GAAP earnings per share was $0.05. GAAP operating income was $22 million. GAAP net income for the quarter was $19 million, or $0.04 per basic share. Fully diluted GAAP EPS was a loss of ($0.07), which assumes conversion of the convertible debentures based on the “if-converted” method. GAAP net income includes $24 million in amortization of acquired intangibles, $29 million in restructuring charges, a benefit of $70 million of fair value adjustment related to the debentures, and other amounts as summarized in a table below.
Total cash, cash equivalents, short-term and long-term investments were approximately $2.5 billion as of August 31, 2017. This reflects breakeven free cash flow, which includes cash flow from operations of $3 million, net of capital expenditures of $3 million. The Company also used $17 million to repurchase 1.9 million shares of common stock. Excluding $605 million in the face value of the Company’s debt, the net cash balance at the end of the quarter was approximately $1.9 billion. There were no purchase orders with contract manufacturers at the end of the second quarter, or at the end of the first quarter of fiscal 2018, down from $71 million a year ago, according to BlackBerry.
“I am pleased with our strong execution in Q2. We achieved historical highs in total software and services revenue and gross margin, as well as the highest non-GAAP operating margin in over five years, reflecting our complete transformation to a software company,” said John Chen, Executive Chairman and CEO, BlackBerry. “More importantly, we made significant progress on our key growth initiatives. Our enterprise billings grew 19 percent year over year driven by our Unified Endpoint Management platform. We secured important design wins in our automotive business, and we expanded our sales channels for our Radar IOT solution. In our licensing businesses, we have a growing pipeline of opportunities with our BlackBerry Secure software and our IP portfolio.”
“Our position as a market leader in security continues to strengthen,” continued Chen. “For the second consecutive year, BlackBerry achieved the highest scores in all six use cases in the Gartner Critical Capabilities for High-Security Mobility Management report. We added four new FedRAMP customers and now have over 300,000 licensed users on our FedRAMP authorized cloud service as of the end of Q2, an increase of 162 percent over Q1.”
“Based on our progress thus far in FY18, we are on track to achieve software and services revenue growth in the range of 10 percent to 15 percent and profitability for the full year.”
Outlook
The Company is providing the following updated outlook for fiscal 2018:
Total non-GAAP revenue in the range of $920 million to $950 million
Total non-GAAP software and services revenue growth in the range of 10 percent to 15 percent
Positive non-GAAP EPS for the full year
Positive free cash flow for the full year, before taking into account the net impact of the benefit of the Qualcomm arbitration award and costs related to restructuring and transition from the hardware business.
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