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BlackBerry (BB) Swings to Loss in Q1, Revenues Fall Y/Y

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BlackBerry Limited (BB - Free Report) reported tepid first-quarter fiscal 2023 (ended May 31, 2022) results, with the top line contracting year over year. Nonetheless, accretive design wins and partnerships with major players bode well for the Canada-based company. Sustained demand for cybersecurity and IoT products are significant tailwinds.

The company reported an adjusted loss per share of 5 cents, in line with the prior-year quarter’s levels. The Zacks Consensus Estimate was pegged at a loss of 6 cents per share. Quarterly total revenues declined 3.4% year over year to $168 million.

Following the earnings announcement, shares of BlackBerry are up 0.4% in pre-market trading on Jun 24.

The company highlighted its long-term goals, established at its Analyst Day in May 2022. BlackBerry expects to achieve revenues of $1.213 billion by fiscal 2027 at a five-year CAGR of 13%. The company had reported revenues of $718 million in fiscal 2022 ended Feb 28, down 19.6% year over year.

BlackBerry Limited Price, Consensus and EPS Surprise

 

BlackBerry Limited Price, Consensus and EPS Surprise

BlackBerry Limited price-consensus-eps-surprise-chart | BlackBerry Limited Quote

 

Quarter in Details

Revenues from Cyber Security totaled $113 million, up 6% year over year. Revenues from IoT totaled $51 million, up 19% year over year. Licensing and Other contributed $4 million.

Software and Services revenue rose 9% year over year to $164 million.

In the IoT business unit, the company’s QNX platform secured nine new design wins in Auto and five in the General Embedded Market.

BlackBerry added that QNX software is now installed in more than 215 million vehicles, surging 20 million year over year, per independent research firm — Strategy Analytics. The company’s QNX royalty revenue backlog witnessed a 14% year-over-year rise to $560 million at the end of first-quarter fiscal 2023.

Within the auto sector, increasing consolidation of digital cockpits augurs well for BlackBerry. In the quarter under review, the company bagged design wins from the likes of Bosch and Visteon, BICV and for Renault-Jiangling’s new electric sedan.

In the fiscal first quarter, BlackBerry teamed up with Magna International. Per the agreement, Magna sought to leverage BlackBerry’s QNX software, including the QNX Software Development Platform, QNX Platform for ADAS and QNX OS for Safety and professional engineering services for solution validation, system-level integration and performance optimization.

The auto industry is facing headwinds related to the global chip shortage owing to supply chain disruptions and the Ukraine crisis. However, the company noted that it sees signs of stabilization.

In Cyber Security, the company witnessed solid traction for the latest security product launches and gained from footprint expansion. The segment also delivered solid sequential billings growth.

Other Details

Gross profit decreased 8.8% from the year-ago quarter to $104 million. Gross margin contracted 360 basis points (bps) to 61.9%. Non-GAAP gross margin contracted 360 bps to 62.5%.

Total non-GAAP operating expenses were $132 million. Adjusted operating loss was $27 million against an adjusted operating loss of 23 million a year ago. Adjusted EBITDA loss came in at $21 million compared with an adjusted EBITDA loss of $6 reported in the year-ago quarter.

Cash Flow & Liquidity

In the quarter under review, BlackBerry utilized $42 million of net cash in operating activities against $33 million used in the prior-year quarter. The company had a net free cash outflow of $43 million compared with a free cash outflow of $35 million in the prior fiscal year.

As of May 31, 2022, BB had $721 million in cash and cash equivalents with $459 million of long-term debentures.

Outlook

For fiscal 2023, BlackBerry expects IoT revenues in the range of $200-$210 million, indicating 12-18% growth year over year. Cyber business billings growth is expected within 8-12% due to increased uptake of security products. For the IoT business, BlackBerry expects strong growth despite the auto industry headwinds.

Zacks Rank & Stocks to Consider

BlackBerry currently has a Zacks Rank #3 (Hold).

Some top-ranked stocks from the broader technology sector worth consideration are InterDigital (IDCC - Free Report) , Avnet (AVT - Free Report) and Vishay Intertechnology (VSH - Free Report) . While Avnet and InterDIgital sport a Zacks Rank #1, Vishay Intertechnology carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Vishay Intertechnology’s 2022 earnings is pegged at $2.68 per share, rising 10.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.7%.

Vishay Intertechnology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average 5%. Shares of VSH have declined 20.2% in the past year.

The Zacks Consensus Estimate for InterDigital 2022 earnings is pegged at $3.33 per share, up 46.1% in the past 60 days. IDCC’s long-term earnings growth rate is pegged at 17.4%.

InterDigital’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 141.1%. Shares of IDCC have lost 17.4% of their value in the past year.

The Zacks Consensus Estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, rising 20.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 37.2%.

Avnet’s earnings beat the Zacks Consensus Estimate in all of the last four quarters, the average being 21.2%. Shares of Avnet have grown 2.9% in the past year.