What Analysts Had To Say On BlackBerry Ltd (BBRY) Results?
BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) disappointed investors with its 2Q numbers. Its adjusted loss per share missed by four cents a share and revenue was way behind the expectations. Despite posting none-too-impressive top line and the bottom line, the company stated that it can see profitability in the fourth quarter.
Revenue Drops Significantly
BlackBerry Ltd (NASDAQ:BBRY) reported Non-GAAP revenue of $491 million in the second quarter. That is significantly lower than the $600+ million revenue generated in the preceding two quarters. In fact, the fourth and first quarter revenue generation gave some hope that the company might be able to generate stable revenue of around $600+ million. That would have also stopped volatility in revenue generation. However, the company’s figure totally shattered such hopes. Capital IQ was expecting revenue of $603.46 million. On a YOY basis, revenue plummeted more than 45%.
The company generated 15% of its total revenue from software and services, while 41% of revenue came from hardware and the rest of 43% from service access fees. The smartphone maker indicated that it was able to sell more than 800,000 smartphone devices with an average selling price of about $240 per piece. The company claimed that it won 2,400 enterprise customers during the second quarter. Its software revenue advanced 19% on Q-o-Q basis fueled by 33% uptick in software licensing revenue.
Gross Margin Falls
BlackBerry Ltd (NASDAQ:BBRY)’s gross margin dropped to 37.8% in the second quarter from 47.1% in the first quarter and 46.4% in the previous year quarter. Its adjusted margin in the latest quarter was 40.9% compared to 50.3% in the first quarter. That is despite ASP remaining the same for both the quarters. Therefore, the company was unable to pass on the increased costs.
As a result, the company suffered an adjusted loss of 13 cents a share while basic GAAP earnings were ten cents a share for the second quarter. The company earned net income of $51 million compared to a loss of $207 million in the year-ago quarter. Capital IQ estimated the company to suffer a loss of nine cents a share.
Positive Cash Flow
The smartphone maker reported positive cash flow of $100 million in the second quarter while cash and investments grew to $3.35 billion. Significantly, the company bought back $47 million work of shares in the second quarter. After excluding its debt, it still enjoys a cash balance of $2.1 billion at the end of the second quarter. It was the sixth straight quarter of positive cash flow.
BlackBerry Ltd (NASDAQ:BBRY)’s purchase orders were about $248 million, which was slightly above $238 million recorded in the first quarter.
Going forward, the company expects sequential revenue growth modestly in the third and fourth quarters, which was in-line with the Capital IQ consensus. The smartphone maker continued to expect positive free cash flow. The company expects sustainable adjusted profitability in the fourth quarter while Capital IQ calls for a loss of five cents a share.
Commenting on the results, CIBC analyst, Todd Coupland, said that though he was happy to give John Chen credit for patent licensing. However, He was expecting high-value recurring revenue. Mr. Coupland also stated that software revenue failed to make up for fall in revenue of services.
Wells Fargo Analyst Maynard Um stated that gross profit margin of a little over 40% was well below what he and the Street expected.
“Though non-GAAP gross margin was in line with management’s guidance, the Street was materially higher and we think this will be a key issue.”
Key takeaways from Conference Call
BlackBerry Ltd (NASDAQ:BBRY) increased share buyback program by 15 million shares
Latest version of BB10 was shipped with anti-theft and security features
The company expects 30 percent in cost reduction at Good Technology and GAAP revenue of $160 million
Software revenue growth in double digits expected while the gross margins are expected to be in 40’s in coming quarter.
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