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BlackBerry (BB) Q1 Earnings & Revenues Top on Software Sales

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BlackBerry Limited (BB - Free Report) reported solid financial results for first-quarter fiscal 2019 (ended May 31, 2018), driven by strong customer demand for its security-focused products, resulting in double-digit year-over-year software and services billing growth. BlackBerry Technology Solutions and the Licensing business reflected the highest momentum.

Net Loss

On a GAAP basis, net loss for the reported quarter came in at $60 million or a loss of 11 cents per share against net income of $671 million or $1.23 per share in the year-ago quarter. The deterioration was primarily due to a favorable arbitration award received in the year-earlier quarter.

Non-GAAP net income was $17 million or 3 cents per share and beat the Zacks Consensus Estimate by a couple of cents.

BlackBerry Limited Price, Consensus and EPS Surprise
 

BlackBerry Limited Price, Consensus and EPS Surprise | BlackBerry Limited Quote

Revenues

Quarterly GAAP revenues decreased 9.4% year over year to $213 million. The top line, however, surpassed the Zacks Consensus Estimate of $206 million.

Total GAAP software and services revenues were $189 million, up 18% year over year, driven by strong double-digit billings and increase in recurring revenues.

Segmental Performance

GAAP revenues from Enterprise software and services decreased 14.1% year over year to $79 million.

BlackBerry Technology Solutions GAAP revenues increased 31% from a year ago to $47 million, primarily driven by BlackBerry QNX software embedded and connected in autonomous auto platforms. Notably, BlackBerry QNX software is now embedded in more than 120 million automobiles worldwide, doubling the install base in the last three years.

Revenues from Licensing, IP and other were $63 million compared with $32 million in the year-earlier quarter. Licensing revenues saw strong year-over-year growth as the pace of recurring revenues continues to rise. Technology licensing business showed progress as TCL — the company’s Chinese handset partner — launched BlackBerry KEY2 weeks ago with positive market reception. Optiemus, the company’s partners in India, will launch multiple BlackBerry smartphones in the market this summer. One of the company’s consumer electronic partners, Punkt, announced the launch of a new mobile phone with BlackBerry Cyber Security Technology integrated in it.

Subsequent to the quarter end, BlackBerry inked a technology and brand licensing deal with Bullitt Group, an international manufacturer of branded connected device, thereby broadening its consumer reach. The company strengthened its IP licensing business and thus expects to do better than 100 million annual run rate for the IP licensing, as mentioned in prior quarters.

Handheld devices revenues were $8 million compared with $37 million in the year-earlier quarter. This resulted from the release of accrued expenses reconciled to historical carrier agreements. SAF (services access fees) revenues continued its downtrend and decreased to $16 million from $38 million in the year-earlier quarter.

Operating Metrics

Gross profit was $161 million or 75.6% of revenues, up from $150 million or 63.8% of revenues in the year-ago quarter. The improvement was attributable to the increase in contribution from software and services to overall revenue mix.

Operating loss was $65 million against an operating income of $536 million in the prior-year quarter. Adjusted EBITDA was $31 million, equating to an adjusted EBITDA margin of 14%.

Cash Flow

During the quarter, BlackBerry used $7 million of cash in operations against $863 million of operating cash flow in the year-earlier period.

Free cash flow before considering the impact of restructuring and legal proceedings was $3 million.

Liquidity

As of May 31, 2018, BlackBerry had $520 million of cash and cash equivalents and $810 million of long-term debt.

As of May 31, 2018, the company’s total cash, cash equivalents, short-term and long-term investments were approximately $2.3 billion.

Fiscal 2019 Outlook

BlackBerry 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.

Zacks Rank & Stocks to Consider

BlackBerry currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader industry are Comtech Telecommunications Corp. (CMTL - Free Report) , Motorola Solutions, Inc. (MSI - Free Report) and Ubiquiti Networks, Inc. (UBNT - Free Report) . While Comtech sports a Zacks Rank #1 (Strong Buy), Motorola and Ubiquiti carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.              

Comtech has a long-term earnings growth expectation of 5%. It beat earnings estimates in each of the trailing four quarters, the average being 123.7%.         

Motorola has a long-term earnings growth expectation of 8%. It beat earnings estimates in each of the trailing four quarters, the average being 12.1%.   

Ubiquiti has a long-term earnings growth expectation of 18.6%. It exceeded earnings estimates thrice in the trailing four quarters with an average positive surprise of 8.9%.    

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