BlackBerry Reports 2015 Fiscal First Quarter GAAP Profitability
WATERLOO, ONTARIO--(Marketwired - Jun 19, 2014) - BlackBerry
Limited (NASDAQ:BBRY)(TSX:BB), a global leader in mobile
communications, today reported financial results for the three
months ended May 31, 2014 (all figures in U.S. dollars and U.S.
GAAP, except where otherwise indicated).
Q1
Highlights:
- Cash and investments balance of $3.1 billion at the end of the
fiscal first quarter, up from $2.7 billion in the prior
quarter
- Adjusted Q1 gross margin of 48%, up from 43% in the prior
quarter
- Reduced adjusted operating expenses by 57% year over year and
13% quarter over quarter
- Successfully launched the new Z3 device in Indonesia; 8
additional countries to follow
- EZ Pass Program resulted in a total of 1.2 million licenses
issued for BES10, including more than 10% of total licenses traded
in from competitors' Mobile Device Management platforms
- Launched Project Ion focused on the "Internet of Things"
market
Q1 Results
Revenue for the first quarter of fiscal 2015 was $966 million,
down $10 million or 1% from $976 million in the previous quarter.
The revenue breakdown for the quarter was approximately 39% for
hardware, 54% for services and 7% for software and other revenue.
During the first quarter, the Company recognized hardware revenue
on approximately 1.6 million BlackBerry smartphones compared to
approximately 1.3 million BlackBerry smartphones in the previous
quarter. During the first quarter, approximately 2.6 million
BlackBerry smartphones were sold through to end customers, which
included shipments made and recognized prior to the first quarter
and which reduced the Company's inventory in channel.
GAAP net income for the first quarter was $23 million, or $0.04
earnings per share ("EPS"). The net income includes non-cash income
associated with the change in the fair value of the Debentures of
$287 million (the "Q1 Fiscal 2015 Debentures Fair Value
Adjustment") and pre-tax restructuring charges of $226 million
related to the Cost Optimization and Resource Efficiency ("CORE")
program. Excluding these items, adjusted loss for the first quarter
was $60 million, or $0.11 per share. These impacts on GAAP net
income and EPS are summarized in the table below.
The total of cash, cash equivalents, short-term and long-term
investments was $3.1 billion as of May 31, 2014, compared to $2.7
billion at the end of the previous quarter - a net increase of $429
million. Excluding receipt of a tax refund of $397 million and
proceeds on the sale of real estate of $287 million, the Company
used $255 million in the first quarter. This represents a decrease
from $784 million used last quarter, after excluding proceeds of
$250 million related to convertible debt issuance. Purchase
obligations and other commitments amounted to approximately $1.8
billion as at May 31, 2014, with purchase orders with contract
manufacturers representing approximately $317 million of the
total.
"Our performance in fiscal Q1 demonstrates that we are firmly on
track to achieve important milestones, including our financial
objectives and delivering a strong product portfolio," said John
Chen, Executive Chairman and Chief Executive Officer of BlackBerry.
"Over the past six months, we have focused on improving efficiency
in all aspects of our operations to drive cost reductions and
margin improvement. Looking forward, we are focusing on our growth
plan to enable our return to profitability."
Outlook
The Company anticipates maintaining its strong cash position,
while increasingly looking for opportunities to prudently invest in
growth. The Company is targeting break-even cash flow results by
the end of fiscal 2015.
Reconciliation of GAAP gross margin, gross margin percentage,
loss before income taxes, and net income to adjusted gross margin,
adjusted gross margin percentage, adjusted loss before income
taxes, adjusted net loss and adjusted loss per share:
(United States dollars, in millions except per share data)
|
Gross margin(1)(before taxes) |
|
Gross margin %(1)(before taxes) |
|
Loss before income taxes |
|
Net income (loss) |
|
Earnings (loss) per share |
As
reported |
$ |
451 |
|
47 |
% |
|
$ |
(6 |
) |
|
$ |
23 |
|
|
$ |
0.04 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CORE charges (2) |
12 |
|
1 |
% |
|
|
226 |
|
|
|
204 |
|
|
|
|
Q1
Fiscal 2015 Debenture Fair Value Adjustment (3) |
- |
|
- |
% |
|
|
(287 |
) |
|
|
(287 |
) |
|
|
|
Adjusted |
$ |
463 |
|
48 |
% |
|
$ |
(67 |
) |
|
$ |
(60 |
) |
|
$ |
(0.11 |
) |
Note: Adjusted gross margin, adjusted gross margin percentage,
adjusted loss before income taxes, adjusted net loss and adjusted
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 2015, the Company reported GAAP
gross margin of $451 million or 47% of revenue. Excluding the
impact of the CORE charges included in cost of sales, the adjusted
gross margin was $463 million, or 48%. |
(2) |
During the first quarter of fiscal 2015, the Company incurred
charges related to the CORE program of $226 million pre-tax, or
$204 million after tax, of which $12 million were included in cost
of sales, $41 million were included in research and development and
$173 million were included in selling, marketing, and
administration expenses. |
(3) |
During the first quarter of fiscal 2015, the Company recorded the
Q1 Fiscal 2015 Debentures Fair Value Adjustment of $287 million.
This adjustment was presented on a separate line in the
Consolidated Statement of Operations. |
Supplementary
Geographic Revenue Breakdown
Blackberry Limited |
(United
States dollars, in millions) |
Revenue
by Region |
|
|
For the quarter ended |
|
May 31, 2014 |
March 1, 2014 |
November 30, 2013 |
August 31, 2013 |
June 1, 2013 |
North America |
$ |
276 |
28.6 |
% |
$ |
297 |
30.4 |
% |
$ |
340 |
28.5 |
% |
$ |
414 |
26.3 |
% |
$ |
761 |
24.8 |
% |
Europe, Middle East and Africa |
|
414 |
42.9 |
% |
|
412 |
42.2 |
% |
|
549 |
46.0 |
% |
|
686 |
43.6 |
% |
|
1,343 |
43.7 |
% |
Latin America |
|
125 |
12.9 |
% |
|
127 |
13.0 |
% |
|
135 |
11.3 |
% |
|
196 |
12.5 |
% |
|
449 |
14.6 |
% |
Asia Pacific |
|
151 |
15.6 |
% |
|
140 |
14.4 |
% |
|
169 |
14.2 |
% |
|
277 |
17.6 |
% |
|
518 |
16.9 |
% |
Total |
$ |
966 |
100.0 |
% |
$ |
976 |
100.0 |
% |
$ |
1,193 |
100.0 |
% |
$ |
1,573 |
100.0 |
% |
$ |
3,071 |
100.0 |
% |
Conference Call and Webcast
A conference call and live webcast will be held beginning at 8
am ET, which can be accessed by dialing 1-877-974-0445 or through
your BlackBerry® 10 smartphone, personal computer or BlackBerry®
PlayBook™ tablet at
http://ca.blackberry.com/company/investors/events.html. A replay of the conference
call will also be available at approximately 10 am by dialing
(+1)416-640-1917 and entering pass code 4680440# or by clicking the
link above on your BlackBerry® 10 smartphone, personal computer or
BlackBerry® PlayBook™ tablet. This replay will be available until
midnight ET July 4, 2014.
About BlackBerry
A global leader in mobile communications, the Company
revolutionized the mobile industry with the introduction of the
BlackBerry® solution in 1999. Today, the Company aims to inspire
the success of its millions of customers around the world by
continuously pushing the boundaries of mobile experiences. Founded
in 1984 and based in Waterloo, Ontario, the Company operates
offices in North America, Europe, Middle East and Africa, Asia
Pacific and Latin America. The Company's common shares are listed
on the NASDAQ Global Select Market (NASDAQ:BBRY) and the Toronto
Stock Exchange (TSX:BB). For more information, visit
www.blackberry.com.
This news release contains forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of
1995 and Canadian securities laws, including statements regarding:
BlackBerry's expectations regarding maintaining its strong cash
position while investing in growth opportunities, and the
anticipated opportunities and challenges in fiscal 2015;
BlackBerry's ability to achieve break-even cash flow results by the
end of fiscal 2015; BlackBerry's plans, strategies and objectives,
including the anticipated benefits of recently announced strategic
initiatives; anticipated demand for and the timing of, new product
and service introductions, and BlackBerry's plans and expectations
relating to its existing and new product and service offerings,
including BES 10, BES 12, BlackBerry 10 smartphones, services
related to BBM and QNX software products; the ability to achieve
further reductions in operating expenditures and maintain the cost
savings realized through the CORE program; BlackBerry's anticipated
levels of decline in service revenue in the second quarter of
fiscal 2015; BlackBerry's expectations with respect to the
sufficiency of its financial resources; BlackBerry's estimates of
purchase obligations and other contractual commitments; and
assumptions and expectations described in BlackBerry's critical
accounting estimates and accounting policies. The terms and phrases
"expect", "anticipate", "estimate", "may", "will", "should",
"intend", "believe", "plan" and similar expressions are intended to
identify these forward-looking statements. Forward-looking
statements are based on estimates and assumptions made by
BlackBerry in light of its experience and its perception of
historical trends, current conditions and expected future
developments, as well as other factors that BlackBerry believes are
appropriate in the circumstances.
Many factors could cause BlackBerry's actual results,
performance or achievements to differ materially from those
expressed or implied by the forward-looking statements, including,
without limitation, the factors discussed in the "Risk Factors"
section of BlackBerry's Annual Information Form, including: risks
related to BlackBerry's ability to implement and realize the
benefits of its strategic initiatives, including a return to its
core strengths of enterprise and security, changes to its Devices
Business, including the partnership with Foxconn, and the planned
transition to an operating unit organizational structure consisting
of the Devices business, Enterprise Services, QNX Embedded business
and Messaging; BlackBerry's ability to maintain existing enterprise
customer relationships and to transition such customers to the BES
10 and BES 12 platform and deploy BlackBerry 10 smartphones, and
the risk that current BES 10 test installations may not convert to
commercial installations; BlackBerry's ability to enhance its
current products and services, or develop new products and services
in a timely manner or at competitive prices, including risks
related to new product introductions; the risk that uncertainty
relating to BlackBerry's previously disclosed announcements
concerning its operational restructuring, recent management changes
and workforce reductions, may adversely impact BlackBerry's
business, existing and future relationships with business partners
and end customers of its products and services, and its ability to
attract and retain key employees; risks related to intense
competition, rapid change and significant strategic alliances
within BlackBerry's industry, including recent and potential future
strategic transactions by its competitors or carrier partners,
which could continue to weaken its competitive position; and risks
related to BlackBerry's ability to adapt to, and realize the
anticipated benefit of, recent management changes.
These risk factors and others relating to BlackBerry are
discussed in greater detail in the "Risk Factors" section of
BlackBerry's Annual Information Form, which is included in its
Annual Report on Form 40-F and the "Cautionary Note Regarding
Forward-Looking Statements" section of BlackBerry's MD&A
(copies of which filings may be obtained at www.sedar.com or
www.sec.gov). These factors should be considered carefully, and
readers should not place undue reliance on BlackBerry's
forward-looking statements. BlackBerry has no intention and
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by law.
The BlackBerry family of related marks, images and symbols are
the exclusive properties and trademarks of BlackBerry Limited.
BlackBerry, BBM, QNX and related trademarks are registered with the
U.S. Patent and Trademark Office and may be pending or registered
in other countries. All other brands, product names, Company names,
trademarks and service marks are the properties of their respective
owners.
BlackBerry Limited |
Incorporated under the Laws of Ontario |
(United
States dollars, in millions except share and per share amounts)
(unaudited) |
|
Consolidated Statements of Operations |
|
|
|
For the three months ended |
|
May 31, 2014 |
March 1, 2014 |
June 1, 2013 |
Revenue |
$ |
966 |
|
$ |
976 |
|
$ |
3,071 |
|
Cost of sales |
515 |
|
|
423 |
|
|
2,029 |
|
Gross margin |
451 |
|
|
553 |
|
|
1,042 |
|
|
Gross margin % |
46.7 |
% |
|
56.7 |
% |
|
33.9 |
% |
Operating expenses |
|
|
|
|
|
|
|
|
|
Research and development |
237 |
|
|
246 |
|
|
358 |
|
|
Selling, marketing and administration |
400 |
|
|
355 |
|
|
673 |
|
|
Amortization |
81 |
|
|
107 |
|
|
180 |
|
|
Debentures fair value adjustment |
(287 |
) |
|
382 |
|
|
- |
|
|
431 |
|
|
1,090 |
|
|
1,211 |
|
Operating income (loss) |
20 |
|
|
(537 |
) |
|
(169 |
) |
|
Investment income (loss), net |
(26 |
) |
|
(20 |
) |
|
5 |
|
Loss before income taxes |
(6 |
) |
|
(557 |
) |
|
(164 |
) |
Recovery of income taxes |
(29 |
) |
|
(134 |
) |
|
(80 |
) |
Net income (loss) |
$ |
23 |
|
$ |
(423 |
) |
$ |
(84 |
) |
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.04 |
|
$ |
(0.80 |
) |
$ |
(0.16 |
) |
|
Diluted |
$ |
(0.37 |
) |
$ |
(0.80 |
) |
$ |
(0.16 |
) |
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares outstanding
(000's) |
|
|
|
|
|
|
|
|
|
Basic |
526,742 |
|
|
526,374 |
|
|
524,160 |
|
|
Diluted |
658,228 |
|
|
526,374 |
|
|
524,160 |
|
Total common shares outstanding (000's) |
526,908 |
|
|
526,552 |
|
|
524,160 |
|
|
|
BlackBerry Limited |
Incorporated under the Laws of Ontario |
(United
States dollars, in millions except per share data) (unaudited) |
|
Consolidated Balance Sheets |
|
As at |
May 31, 2014 |
March 1, 2014 |
Assets |
|
|
|
|
Current |
|
|
|
|
|
Cash and cash equivalents |
$ |
1,710 |
|
$ |
1,579 |
|
|
Short-term investments |
975 |
|
|
950 |
|
|
Accounts receivable, net |
745 |
|
|
972 |
|
|
Other receivables |
225 |
|
|
152 |
|
|
Inventories |
107 |
|
|
244 |
|
|
Income taxes receivable |
75 |
|
|
373 |
|
|
Other current assets |
395 |
|
|
505 |
|
|
Deferred income tax asset |
48 |
|
|
73 |
|
|
Assets held for sale |
76 |
|
|
99 |
|
|
4,356 |
|
|
4,947 |
|
Long-term investments |
333 |
|
|
129 |
|
Restricted cash |
69 |
|
|
- |
|
Property, plant and equipment, net |
626 |
|
|
1,037 |
|
Intangible assets, net |
1,432 |
|
|
1,439 |
|
|
$ |
6,816 |
|
$ |
7,552 |
|
Liabilities |
|
|
|
|
|
Current |
|
|
|
|
|
|
Accounts payable |
$ |
261 |
|
$ |
474 |
|
|
Accrued liabilities |
998 |
|
|
1,214 |
|
|
Deferred revenue |
512 |
|
|
580 |
|
|
1,771 |
|
|
2,268 |
|
Long term debt |
1,340 |
|
|
1,627 |
|
Deferred income tax liability |
32 |
|
|
32 |
|
|
3,143 |
|
|
3,927 |
|
Shareholders' Equity |
|
|
|
|
|
Capital stock and additional paid-in capital |
2,432 |
|
|
2,418 |
|
Treasury stock |
(177 |
) |
|
(179 |
) |
Retained earnings |
1,417 |
|
|
1,394 |
|
Accumulated other comprehensive income (loss) |
1 |
|
|
(8 |
) |
|
3,673 |
|
|
3,625 |
|
|
$ |
6,816 |
|
$ |
7,552 |
|
|
|
BlackBerry Limited |
Incorporated under the Laws of Ontario |
(United
States dollars, in millions except per share data) (unaudited) |
|
Consolidated Statements of Cash Flow |
|
|
Three Months Ended |
|
May 31, 2014 |
June 1, 2013 |
Cash flows from operating activities |
|
|
|
|
Net income (loss) |
$ |
23 |
|
$ |
(84 |
) |
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
|
|
|
|
|
|
Amortization |
191 |
|
|
399 |
|
|
Deferred income taxes |
25 |
|
|
(6 |
) |
|
Stock-based compensation |
14 |
|
|
20 |
|
|
Loss on disposal of property, plant and equipment |
108 |
|
|
- |
|
|
Debentures fair value adjustment |
(287 |
) |
|
- |
|
|
Other |
6 |
|
|
25 |
|
Net changes in working capital items: |
|
|
|
|
|
|
Accounts receivable, net |
227 |
|
|
(183 |
) |
|
Other receivables |
(73 |
) |
|
7 |
|
|
Inventories |
137 |
|
|
(284 |
) |
|
Income tax receivable, net |
298 |
|
|
564 |
|
|
Other current assets |
104 |
|
|
145 |
|
|
Accounts payable |
(213 |
) |
|
105 |
|
|
Accrued liabilities |
(190 |
) |
|
118 |
|
|
Deferred revenue |
(68 |
) |
|
(196 |
) |
Net cash provided by operating activities |
302 |
|
|
630 |
|
Cash flows from investing activities |
|
|
|
|
|
Acquisition of long-term investments |
(215 |
) |
|
(159 |
) |
Proceeds on sale or maturity of long-term
investments |
11 |
|
|
96 |
|
Acquisition of property, plant and equipment |
(26 |
) |
|
(111 |
) |
Proceeds on sale of property, plant and equipment |
292 |
|
|
28 |
|
Acquisition of intangible assets |
(142 |
) |
|
(335 |
) |
Business acquisitions, net of cash acquired |
- |
|
|
(7 |
) |
Acquisition of short-term investments |
(824 |
) |
|
(740 |
) |
Proceeds on sale or maturity of short-term
investments |
799 |
|
|
649 |
|
Net cash used in investing activities |
(105 |
) |
|
(579 |
) |
Cash flows from financing activities |
|
|
|
|
|
Issuance of common shares |
2 |
|
|
- |
|
Tax deficiencies related to stock-based
compensation |
- |
|
|
(1 |
) |
Transfer to restricted cash |
(69 |
) |
|
- |
|
Net cash used in financing activities |
(67 |
) |
|
(1 |
) |
Effect of foreign exchange gain (loss) on cash and cash
equivalents |
1 |
|
|
(8 |
) |
Net increase in cash and cash equivalents during the
period |
131 |
|
|
42 |
|
Cash and cash equivalents, beginning of period |
1,579 |
|
|
1,549 |
|
Cash and cash equivalents, end of period |
$ |
1,710 |
|
$ |
1,591 |
|
|
|
|
|
|
|
As at |
May 31, 2014 |
|
March 1, 2014 |
Cash and cash equivalents |
$ |
1,710 |
|
$ |
1,579 |
|
Short-term investments |
975 |
|
|
950 |
|
Long-term investments |
333 |
|
|
129 |
|
Restricted cash |
69 |
|
|
- |
|
|
$ |
3,087 |
|
$ |
2,658 |
|
Investor Contact:BlackBerry Investor
Relations+1-519-888-7465investor_relations@blackberry.com
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