BlackBerry announce Year-End and Fourth Quarter Fiscal 2015 Results

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Today, BlackBerry annnounced their year-end and fourth quarter fiscal 2015 results. In the last 3 months, BlackBerry sold through an approx 1.6 million smartphones, made $660 million (USD) in revenue and increased their cash flow to $3.27 billion. Read the full press release below:

WATERLOO, ONTARIO–(Marketwired – Mar 27, 2015) – BlackBerry Limited (BBRY)(BB.TO), a global leader in mobile communications, today reported financial results for the three months and fiscal year ended February 28, 2015 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).

Q4 Highlights

  • Normalized positive cash flow of $76 million in the quarter, reversing normalized cash use of ($784) million in Q4 FY14
  • Cash and investments balance of $3.27 billion at the end of the fiscal quarter, an increase of $608 million over Q4 FY14 and matching the highest balance in company history
  • Non-GAAP earnings of $0.04 per share, reversing a loss per share of ($0.08) in Q4 FY14
  • Non-GAAP operating income of $2 million reversing an operating loss of ($156) million in Q4 FY14
  • Non-GAAP gross margin of 48.3% and GAAP gross margin of 48.2%, with a third consecutive quarter of positive hardware gross margin
  • Software revenue of $67 million, a 20% increase over Q4 FY14
  • Announced a partnership with Google to support Android for Work
  • Launched the BlackBerry Classic in December, with support for the Classic and the previously-released Passport by major carriers, including Telus, Bell, Rogers, AT&T, Verizon, Vodafone and Orange
  • Completed the acquisition of Secusmart, a leader in high-security voice and text encryption
  • After the quarter at Mobile World Congress, announced the full-touch BlackBerry Leap and unveiled the upcoming BlackBerry device portfolio
  • Also at Mobile World Congress, announced the BlackBerry Experience Suite software portfolio that brings BlackBerry’s productivity, communication, collaboration and security across all smartphone and tablets running iOS®, Android™, and Windows®
  • Other product announcements at Mobile World Congress included BES 12 Cloud, integration of WorkLife and SecuSUITE with Samsung KNOX, and Vodafone Germany’s rollout of Secusmart technology

Q4 Results

Revenue for the fourth quarter of fiscal 2015 was approximately $660 million, including a negative $12 million impact from currency fluctuation. The revenue breakdown for the quarter was approximately 42% for hardware, 47% for services and 10% for software. During the fourth quarter, the Company recognized hardware revenue on approximately 1.3 million BlackBerry smartphones. Approximately 1.6 million BlackBerry smartphones were sold through to end customers, with an ASP of $211 compared to $180 in the previous quarter.

Non-GAAP profit for the fourth quarter was $20 million, or $0.04 per share, compared to earnings of $0.01 per share last quarter. GAAP net income for the quarter was $28 million, or $0.05 per share. GAAP net income includes a non-cash charge associated with the change in the fair value of the debentures of $50 million (the “Q4 Fiscal 2015 Debentures Fair Value Adjustment”), investment income of $115 million related to the Rockstar sale (the “Rockstar Sale Adjustment”) and pre-tax charges of $58 million related to the restructuring program. 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 $3.27 billion as of February 28, 2015. The cash balance increased $156 million in the fourth quarter, including net gains of $80 million related to acquisitions and divestitures during the quarter. Aggregate contractual obligations amounted to approximately $1.3 billion as at February 28, 2015, compared to $1.6 billion at the end of the third quarter. Purchase orders with contract manufacturers totaled approximately $394 million at the end of the fourth quarter, compared to $565 million at the end of the third quarter. Excluding the impact of foreign exchange, operating cash flow was $205 million with free cash flow (operating cash flow minus capital expenditures) of $189 million.

“Our focus this past year was on getting our financial house in order while creating a multi-year growth strategy and investing in our product portfolio. We now have a very good handle on our margins, and our product roadmaps have been well received,” said Executive Chairman and CEO John Chen. “The second half of our turnaround focuses on stabilization of revenue with sustainable profitability and cash generation.”

Outlook

The Company continues to anticipate positive free cash flow.

The Company is expanding its distribution capability, and expects traction from these efforts to manifest some time in fiscal 2016. The company continues to target sustainable non-GAAP profitability some time in fiscal 2016.

Reconciliation of GAAP gross margin, gross margin percentage, loss before income taxes, net income) and earnings per share to Non-GAAP gross margin, gross margin percentage, loss before income taxes, net income and earnings per share:

(United States dollars, in millions except per share data)

For the three months ended February 28, 2015
Gross margin Gross margin % Loss before
income taxes
Net income Earnings
per share
As reported $ 318 48.2 % $ (1 ) $ 28 $ 0.05
Adjustments:
CORE charges (1) 1 0.1 % 58 57
Q4 Fiscal 2015 Debenture Fair Value Adjustment (2) % 50 50
Rockstar Sale Adjustment (3) % (115 ) (115 )
Adjusted $ 319 48.3 % $ (8 ) $ 20 $ 0.04

Note: Non-GAAP gross margin, gross margin percentage, loss before income taxes, non-GAAP net income and non-GAAP earnings 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 fourth quarter of fiscal 2015, the Company incurred charges related to the restructuring program of approximately $58 million pre-tax, or $57 million after tax, of which $1 million were included in cost of sales, $6 million were included in research and development and $51 million were included in selling, marketing, and administration expenses.
(2) During the fourth quarter of fiscal 2015, the Company recorded the Q4 Fiscal 2015 Debentures Fair Value Adjustment of approximately $50 million. This adjustment was presented on a separate line in the Statement of Operations.
(3) During the fourth quarter of fiscal 2015, the Company recorded the Rockstar Sale Adjustment of approximately $115 million. This adjustment is included in investment income (loss), net in the Statement of Operations.

Fiscal 2015 Results

Revenue from continuing operations for the fiscal year ended February 28, 2015 was $3.3 billion. The Company’s Non-GAAP loss from continuing operations for fiscal 2015 was ($45) million or ($0.09) per share. The GAAP net loss from continuing operations was ($304) million, or ($0.58) per share. GAAP net loss from continuing operations includes the Rockstar Sale Adjustment of approximately $115 million (pre-tax and after-tax), the non-cash adjustments associated with the change in the fair value of the debentures of approximately $80 million (pre-tax and after tax) (the “Fiscal 2015 Debentures Fair Value Adjustment”) and pre-tax restructuring charges of approximately $322 million ($294 million after tax) related to the Company’s CORE program. These charges and their related impacts on GAAP net loss from continuing operations and diluted loss per share from continuing operations are summarized in the table below.

Reconciliation of GAAP gross margin, gross margin percentage, loss from continuing operations before income taxes, loss from continuing operations and diluted loss per share from continuing operations to Non-GAAP gross margin, adjusted gross margin percentage, adjusted loss from continuing operations before income taxes, adjusted loss from continuing operations and adjusted diluted loss per share from continuing operations:

(United States dollars, in millions except per share data)

For the fiscal year ended February 28, 2015
Gross Margin Gross Margin % Loss from
continuing
operations
before
income taxes
Loss from
Continuing
Operations
Diluted
loss per
share from
continuing
operations
As reported $ 1,604 48.1 % $ (385 ) $ (304 ) $ (0.58 )
Adjustments:
CORE charges (1) 23 0.7 % 322 294
Fiscal 2015 Debenture Fair Value Adjustment (2) % 80 80
Rockstar Sale Adjustment (3) % (115 ) (115 )
Adjusted $ 1,627 48.8 % $ (98 ) $ (45 ) (0.09 )

Note: Non-GAAP gross margin, non-GAAP gross margin percentage, non-GAAP loss from continuing operations before tax, non-GAAP loss from continuing operations and non-GAAP diluted loss per share from continuing operations 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 fiscal 2015, the Company incurred charges related to the CORE program of approximately $322 million pre-tax, or $294 million after tax, of which $23 million were included in cost of sales, $70 million were included in research and development and $229 million were included in selling, marketing, and administration expenses.
(2) During the fiscal 2015, the Company recorded non-cash adjustments associated with the change in the fair value of the Debentures of approximately $80 million. These adjustments were presented on a separate line in the Statements of Operations.
(3) During the fourth quarter of fiscal 2015, the Company recorded the Rockstar Sale Adjustment of approximately $115 million. This adjustment is included in investment income (loss), net in the Statement of Operations.

Supplementary Geographic Revenue Breakdown

Blackberry Limited
(United States dollars, in millions)
Revenue by Region
For the quarter ended
February 28, 2015 November 29, 2014 August 30, 2014 May 31, 2014 March 1, 2014
North America $ 205 31.0 % $ 213 26.9 % $ 297 32.4 % $ 276 28.6 % $ 297 30.4 %
Europe, Middle East and Africa 283 42.9 % 366 46.1 % 368 40.2 % 414 42.9 % 412 42.2 %
Latin America 60 9.1 % 84 10.6 % 111 12.1 % 125 12.9 % 127 13.0 %
Asia Pacific 112 17.0 % 130 16.4 % 140 15.3 % 151 15.6 % 140 14.4 %
Total $ 660 100.0 % $ 793 100.0 % $ 916 100.0 % $ 966 100.0 % $ 976 100.0 %

Conference Call and Webcast

A conference call and live webcast will be held beginning at 8 am ET, which can be accessed by dialing 1-888-503-8168 or by logging on at http://ca.blackberry.com/company/investors/events.html. A replay of the conference call will also be available at approximately 10 am ET by dialing 1-647-436-0148 and entering pass code 8015758# or by clicking the link above. This replay will be available until midnight ET April 10th, 2015.