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Blackberry Financial Reports 2016 – Fiscal 2016 Second Quarter Results

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Written by Rakesh Bhatia

BlackBerry Reports Fiscal 2016 Second Quarter Results – Q2 results show continued progress in key financial metrics including software growth, EBITDA and free cash flow

Q2 Highlights

  • Non-GAAP software & services revenue of $74 million, a 19% increase over Q2 FY15 driven by 33% growth in software licensing revenue
  • Positive free cash flow of $100 million in the quarter
  • Cash and investments balance of $3.35 billion at the end of the fiscal quarter, an increase of $37 million over Q1 FY16 after using $47 million on share repurchases
  • Non-GAAP loss of ($0.13) per share, basic GAAP earnings of $0.10 per share
  • Non-GAAP operating loss of ($84) million, with GAAP operating income of $33 million
  • Non-GAAP gross margin of 40.9% and GAAP gross margin of 37.8%
  • Adjusted EBITDA of $68 million
  • After the close of the quarter, BlackBerry closed the acquisition of AtHoc and announced an agreement to acquire Good Technology
  • Today, the company also confirmed plans to launch a flagship handheld device that will run on the Android operating system with BlackBerry security

Non-GAAP revenue for the second quarter of fiscal 2016 was $491 million with GAAP revenue of $490 million. GAAP revenue reflects a purchase accounting write down of deferred revenue associated with the acquisition of WatchDox. The revenue breakdown for the quarter was approximately 15% for software and services, 41% for hardware, and 43% for service access fees (SAF).

BlackBerry had 2,400 enterprise customer wins in the quarter. Approximately 60% of the licenses associated with these deals are cross-platform. During the second quarter, the Company recognized hardware revenue on over 800,000 BlackBerry smartphones with an ASP of approximately $240.

Non-GAAP loss for the second quarter was ($66) million, or ($0.13) per share. GAAP basic net income for the quarter was $51 million, or $0.10 per basic share. Basic GAAP net income includes the aforementioned purchase accounting impact on GAAP revenue, a non-cash credit associated with the change in the fair value of the debentures of $228 million (the “Q2 Fiscal 2016 Debentures Fair Value Adjustment”), pre-tax charges of $85 million related to restructuring, stock compensation of $14 million, and amortization of acquired intangibles of $11 million.

The impact of these adjustments on GAAP net income and earnings per share is summarized in a table below. Total cash, cash equivalents, short-term and long-term investments was $3.35 billion as of August 29, 2015. The cash balance increased $37 million in the second quarter.

The company repurchased 6 million shares during the quarter for a total of $47 million. Excluding $1.25 billion in the face value of our debt, the net cash balance at the end of the quarter was $2.1 billion. Purchase orders with contract manufacturers totaled approximately $248 million at the end of the second quarter, compared to $238 million at the end of the first quarter and down from $344 million in the year ago quarter.

Excluding the impact of foreign exchange rates, operating cash flow was $110 million with free cash flow (operating cash flow minus capital expenditures) of $100 million. “I am confident in our strategy and continued progress, highlighted by our fourth consecutive quarter of year-overyear double digit growth in software licensing revenue and sixth consecutive quarter of positive free cash flow,” said Executive Chairman and

Chief Executive Officer John Chen. “In order to expand our leadership in crossplatform software and services, we are investing strategically – organically through new products and services based on the BES platform, and through acquisitions like AtHoc and Good.” “At the same time, we are focused on making faster progress to achieve profitability in our handset business. Today, I am confirming our plans to launch Priv, an Android device named after BlackBerry’s heritage and core mission of protecting our customers’ privacy. Priv combines the best of BlackBerry security and productivity with the expansive mobile application ecosystem available on the Android platform,” continued Mr. Chen. “From these initiatives, we anticipate modest sequential revenue growth in each of the remaining quarters of fiscal 2016.”

Outlook

The company anticipates modest sequential growth in total revenue in each of the remaining quarters of fiscal 2016. The company continues to anticipate positive free cash flow. The company targets sustainable non-GAAP profitability in the fiscal 2016 fourth quarter.

 

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