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Why Is BlackBerry (BB) Down 12.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for BlackBerry (BB - Free Report) . Shares have lost about 12.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BlackBerry due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
BlackBerry Surpasses Q2 Earnings and Revenue Estimates
BlackBerry reported healthy financial results for second-quarter fiscal 2019 (ended Aug 31, 2018), driven by growth in BlackBerry Technology Solutions and Enterprise Software and Services businesses.
Net Income
On a GAAP basis, net income for the reported quarter came in at $43 million compared with $19 million in the year-ago quarter. The year-over-year rise was primarily due to lower operating expenses.
Non-GAAP net income was $21 million or 4 cents per share compared with $26 million or 5 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 2 cents.
Revenues
Quarterly GAAP revenues decreased 11.8% year over year to $210 million, primarily due to lower revenues from Service access fees and Handheld devices. Software and services revenues were $193 million, up 4.3% year over year.
Total non-GAAP revenues were $214 million compared with $249 million in the year-earlier quarter. Software and services non-GAAP revenues were $197 million, up 1% year over year. The top line surpassed the Zacks Consensus Estimate of $213 million.
Segmental Performance
Non-GAAP revenues from Enterprise software and services decreased 9.8% year over year to $92 million. BlackBerry Technology Solutions non-GAAP revenues increased 28.9% from a year ago to $49 million, primarily driven by BlackBerry QNX. Notably, software development license, services and loyalty revenues have grown due to increase in the number of design wins. Non-GAAP revenues from Licensing, IP and other were $56 million, stable year over year. Handheld devices non-GAAP revenues were $5 million compared with $16 million in the year-earlier quarter. SAF (service access fees) revenues continued its downtrend and decreased to $12 million from $37 million in the year-earlier quarter.
Operating Metrics
Gross profit was $161 million or 76.7% of revenues compared with $175 million or 73.5% of revenues in the year-ago quarter. Total operating expenses declined to $122 million from $153 million reported in the prior-year quarter. Operating income increased to $39 million from $22 million in the prior-year quarter, primarily due to lower operating expenses. Quarterly non-GAAP operating income was $17 million. Adjusted EBITDA was $33 million, equating to an adjusted EBITDA margin of 15%.
Cash Flow
During the first six months of fiscal 2019, BlackBerry generated $22 million of cash from operations compared with $867 million in the year-earlier period. Free cash flow before considering the impact of restructuring and legal proceedings was $37 million.
Liquidity
As of Aug 31, 2018, BlackBerry had $581 million of cash and cash equivalents and $739 million of long-term debt. The company’s total cash, cash equivalents, short-term and long-term investments were $2.4 billion as of the same day.
Fiscal 2019 Outlook
BlackBerry has reiterated its outlook for fiscal 2019. The company expects total software and services revenue growth to be in the range of 8-10% year over year. It expects total software and services billings growth to be in double-digits. The company anticipates non-GAAP earnings per share to be positive. Free cash flow is also expected to be positive, before considering the impact of restructuring and legal proceedings.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 33.33% due to these changes.
VGM Scores
At this time, BlackBerry has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise BlackBerry has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is BlackBerry (BB) Down 12.1% Since Last Earnings Report?
It has been about a month since the last earnings report for BlackBerry (BB - Free Report) . Shares have lost about 12.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is BlackBerry due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
BlackBerry Surpasses Q2 Earnings and Revenue Estimates
BlackBerry reported healthy financial results for second-quarter fiscal 2019 (ended Aug 31, 2018), driven by growth in BlackBerry Technology Solutions and Enterprise Software and Services businesses.
Net Income
On a GAAP basis, net income for the reported quarter came in at $43 million compared with $19 million in the year-ago quarter. The year-over-year rise was primarily due to lower operating expenses.
Non-GAAP net income was $21 million or 4 cents per share compared with $26 million or 5 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 2 cents.
Revenues
Quarterly GAAP revenues decreased 11.8% year over year to $210 million, primarily due to lower revenues from Service access fees and Handheld devices. Software and services revenues were $193 million, up 4.3% year over year.
Total non-GAAP revenues were $214 million compared with $249 million in the year-earlier quarter. Software and services non-GAAP revenues were $197 million, up 1% year over year. The top line surpassed the Zacks Consensus Estimate of $213 million.
Segmental Performance
Non-GAAP revenues from Enterprise software and services decreased 9.8% year over year to $92 million. BlackBerry Technology Solutions non-GAAP revenues increased 28.9% from a year ago to $49 million, primarily driven by BlackBerry QNX. Notably, software development license, services and loyalty revenues have grown due to increase in the number of design wins. Non-GAAP revenues from Licensing, IP and other were $56 million, stable year over year. Handheld devices non-GAAP revenues were $5 million compared with $16 million in the year-earlier quarter. SAF (service access fees) revenues continued its downtrend and decreased to $12 million from $37 million in the year-earlier quarter.
Operating Metrics
Gross profit was $161 million or 76.7% of revenues compared with $175 million or 73.5% of revenues in the year-ago quarter. Total operating expenses declined to $122 million from $153 million reported in the prior-year quarter. Operating income increased to $39 million from $22 million in the prior-year quarter, primarily due to lower operating expenses. Quarterly non-GAAP operating income was $17 million. Adjusted EBITDA was $33 million, equating to an adjusted EBITDA margin of 15%.
Cash Flow
During the first six months of fiscal 2019, BlackBerry generated $22 million of cash from operations compared with $867 million in the year-earlier period. Free cash flow before considering the impact of restructuring and legal proceedings was $37 million.
Liquidity
As of Aug 31, 2018, BlackBerry had $581 million of cash and cash equivalents and $739 million of long-term debt. The company’s total cash, cash equivalents, short-term and long-term investments were $2.4 billion as of the same day.
Fiscal 2019 Outlook
BlackBerry has reiterated its outlook for fiscal 2019. The company expects total software and services revenue growth to be in the range of 8-10% year over year. It expects total software and services billings growth to be in double-digits. The company anticipates non-GAAP earnings per share to be positive. Free cash flow is also expected to be positive, before considering the impact of restructuring and legal proceedings.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 33.33% due to these changes.
VGM Scores
At this time, BlackBerry has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise BlackBerry has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.